-CITE-
26 USC Subchapter D - Deferred Compensation, Etc. 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
-HEAD-
SUBCHAPTER D - DEFERRED COMPENSATION, ETC.
-MISC1-
Part
I. Pension, profit-sharing, stock bonus plans, etc.
II. Certain stock options.
AMENDMENTS
1964 - Pub. L. 88-272, title II, Sec. 221(d)(1), Feb. 26, 1964,
78 Stat. 75, substituted "Certain stock options" for "Miscellaneous
provisions" in heading to part II.
-SECREF-
SUBCHAPTER REFERRED TO IN OTHER SECTIONS
This subchapter is referred to in sections 6103, 7476, 7802 of
this title; title 29 sections 623, 1054.
-End-
-CITE-
26 USC PART I - PENSION, PROFIT-SHARING, STOCK BONUS
PLANS, ETC. 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
-HEAD-
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
-MISC1-
Subpart
A. General rule.
B. Special rules.
C. Special rules for multiemployer plans.
D. Treatment of welfare benefit funds.
E. Treatment of transfers to retiree health accounts.(!1)
AMENDMENTS
1984 - Pub. L. 98-369, div. A, title V, Sec. 511(d), July 18,
1984, 98 Stat. 862, added heading for subpart D.
1980 - Pub. L. 96-364, title II, Sec. 202(b), Sept. 26, 1980, 94
Stat. 1285, added heading for subpart C.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in sections 848, 6058, 7520 of this
title; title 19 section 2373; title 29 sections 1054, 1084, 1201,
1202, 1321.
-FOOTNOTE-
(!1) Editorially supplied. Subpart E of part I added by Pub. L.
101-508 without corresponding amendment of part analysis.
-End-
-CITE-
26 USC Subpart A - General Rule 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
SUBPART A - GENERAL RULE
-MISC1-
Sec.
401. Qualified pension, profit-sharing, and stock bonus
plans.
402. Taxability of beneficiary of employees' trust.
402A. Optional treatment of elective deferrals as Roth
contributions.
403. Taxation of employee annuities.
404. Deduction for contributions of an employer to an
employees' trust or annuity plan and compensation
under a deferred-payment plan.
404A. Deduction for certain foreign deferred compensation
plans.
[405. Repealed.]
406. Employees of foreign affiliates covered by section
3121(l) agreements.
407. Certain employees of domestic subsidiaries engaged in
business outside the United States.
408. Individual retirement accounts.
408A. Roth IRAs.
409. Qualifications for tax credit employee stock ownership
plans.
AMENDMENTS
2001 - Pub. L. 107-16, title VI, Sec. 617(e)(2), June 7, 2001,
115 Stat. 106, added item 402A.
1997 - Pub. L. 105-34, title III, Sec. 302(e), Aug. 5, 1997, 111
Stat. 829, added item 408A.
1986 - Pub. L. 99-514, title XVIII, Sec. 1899A(70), Oct. 22,
1986, 100 Stat. 2963, substituted "Qualifications" for
"Qualification" in item 409.
1984 - Pub. L. 98-369, div. A, title IV, Sec. 491(d)(54),
(e)(10), July 18, 1984, 98 Stat. 852, 853, struck out items 405 and
409, which read "Qualified bond purchase plans" and "Retirement
bonds", respectively, and redesignated item 409A as 409.
1983 - Pub. L. 98-21, title III, Sec. 321(e)(2)(D)(ii), Apr. 20,
1983, 97 Stat. 120, substituted "Employees of foreign affiliates
covered by section 3121(l) agreements" for "Certain employees of
foreign subsidiaries" in item 406.
1980 - Pub. L. 96-603, Sec. 2(d)(1), Dec. 28, 1980, 94 Stat.
3510, added item 404A.
Pub. L. 96-222, title I, Sec. 101(a)(7)(L)(v)(VIII), Apr. 1,
1980, 94 Stat. 200, substituted "tax credit employee stock
ownership plans" for "ESOPS" in item 409A.
1978 - Pub. L. 95-600, title I, Sec. 141(f)(8), Nov. 6, 1978, 92
Stat. 2795, added item 409A.
1974 - Pub. L. 93-406, title II, Sec. 1016(b)(1), Sept. 2, 1974,
88 Stat. 932, inserted heading "Subpart A - General Rule" and added
analysis of subparts.
Pub. L. 93-406, title II, Sec. 2002(h)(2), Sept. 2, 1974, 88
Stat. 970, added items 408 and 409.
1964 - Pub. L. 88-272, title II, Sec. 220(c)(1), Feb. 26, 1964,
78 Stat. 62, added items 406 and 407.
1962 - Pub. L. 87-792, Sec. 5(b), Oct. 10, 1962, 76 Stat. 827,
added item 405.
-End-
-CITE-
26 USC Sec. 401 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 401. Qualified pension, profit-sharing, and stock bonus plans
-STATUTE-
(a) Requirements for qualification
A trust created or organized in the United States and forming
part of a stock bonus, pension, or profit-sharing plan of an
employer for the exclusive benefit of his employees or their
beneficiaries shall constitute a qualified trust under this section
-
(1) if contributions are made to the trust by such employer, or
employees, or both, or by another employer who is entitled to
deduct his contributions under section 404(a)(3)(B) (relating to
deduction for contributions to profit-sharing and stock bonus
plans), or by a charitable remainder trust pursuant to a
qualified gratuitous transfer (as defined in section 664(g)(1)),
for the purpose of distributing to such employees or their
beneficiaries the corpus and income of the fund accumulated by
the trust in accordance with such plan;
(2) if under the trust instrument it is impossible, at any time
prior to the satisfaction of all liabilities with respect to
employees and their beneficiaries under the trust, for any part
of the corpus or income to be (within the taxable year or
thereafter) used for, or diverted to, purposes other than for the
exclusive benefit of his employees or their beneficiaries (but
this paragraph shall not be construed, in the case of a
multiemployer plan, to prohibit the return of a contribution
within 6 months after the plan administrator determines that the
contribution was made by a mistake of fact or law (other than a
mistake relating to whether the plan is described in section
401(a) or the trust which is part of such plan is exempt from
taxation under section 501(a), or the return of any withdrawal
liability payment determined to be an overpayment within 6 months
of such determination).; (!1)
(3) if the plan of which such trust is a part satisfies the
requirements of section 410 (relating to minimum participation
standards); and
(4) if the contributions or benefits provided under the plan do
not discriminate in favor of highly compensated employees (within
the meaning of section 414(q)). For purposes of this paragraph,
there shall be excluded from consideration employees described in
section 410(b)(3)(A) and (C).
(5) Special rules relating to nondiscrimination requirements. -
(A) Salaried or clerical employees. - A classification shall
not be considered discriminatory within the meaning of
paragraph (4) or section 410(b)(2)(A)(i) merely because it is
limited to salaried or clerical employees.
(B) Contributions and benefits may bear uniform relationship
to compensation. - A plan shall not be considered
discriminatory within the meaning of paragraph (4) merely
because the contributions or benefits of, or on behalf of, the
employees under the plan bear a uniform relationship to the
compensation (within the meaning of section 414(s)) of such
employees.
(C) Certain disparity permitted. - A plan shall not be
considered discriminatory within the meaning of paragraph (4)
merely because the contributions or benefits of, or on behalf
of, the employees under the plan favor highly compensated
employees (as defined in section 414(q)) in the manner
permitted under subsection (l).
(D) Integrated defined benefit plan. -
(i) In general. - A defined benefit plan shall not be
considered discriminatory within the meaning of paragraph (4)
merely because the plan provides that the employer-derived
accrued retirement benefit for any participant under the plan
may not exceed the excess (if any) of -
(I) the participant's final pay with the employer, over
(II) the employer-derived retirement benefit created
under Federal law attributable to service by the
participant with the employer.
For purposes of this clause, the employer-derived retirement
benefit created under Federal law shall be treated as
accruing ratably over 35 years.
(ii) Final pay. - For purposes of this subparagraph, the
participant's final pay is the compensation (as defined in
section 414(q)(4)) paid to the participant by the employer
for any year -
(I) which ends during the 5-year period ending with the
year in which the participant separated from service for
the employer, and
(II) for which the participant's total compensation from
the employer was highest.
(E) 2 or more plans treated as single plan. - For purposes of
determining whether 2 or more plans of an employer satisfy the
requirements of paragraph (4) when considered as a single plan
-
(i) Contributions. - If the amount of contributions on
behalf of the employees allowed as a deduction under section
404 for the taxable year with respect to such plans, taken
together, bears a uniform relationship to the compensation
(within the meaning of section 414(s)) of such employees, the
plans shall not be considered discriminatory merely because
the rights of employees to, or derived from, the employer
contributions under the separate plans do not become
nonforfeitable at the same rate.
(ii) Benefits. - If the employees' rights to benefits under
the separate plans do not become nonforfeitable at the same
rate, but the levels of benefits provided by the separate
plans satisfy the requirements of regulations prescribed by
the Secretary to take account of the differences in such
rates, the plans shall not be considered discriminatory
merely because of the difference in such rates.
(F) Social security retirement age. - For purposes of testing
for discrimination under paragraph (4) -
(i) the social security retirement age (as defined in
section 415(b)(8)) shall be treated as a uniform retirement
age, and
(ii) subsidized early retirement benefits and joint and
survivor annuities shall not be treated as being unavailable
to employees on the same terms merely because such benefits
or annuities are based in whole or in part on an employee's
social security retirement age (as so defined).
(G) State and local governmental plans. - Paragraphs (3) and
(4) shall not apply to a governmental plan (within the meaning
of section 414(d)) maintained by a State or local government or
political subdivision thereof (or agency or instrumentality
thereof).
(6) A plan shall be considered as meeting the requirements of
paragraph (3) during the whole of any taxable year of the plan if
on one day in each quarter it satisfied such requirements.
(7) A trust shall not constitute a qualified trust under this
section unless the plan of which such trust is a part satisfies
the requirements of section 411 (relating to minimum vesting
standards).
(8) A trust forming part of a defined benefit plan shall not
constitute a qualified trust under this section unless the plan
provides that forfeitures must not be applied to increase the
benefits any employee would otherwise receive under the plan.
(9) Required distributions. -
(A) In general. - A trust shall not constitute a qualified
trust under this subsection unless the plan provides that the
entire interest of each employee -
(i) will be distributed to such employee not later than the
required beginning date, or
(ii) will be distributed, beginning not later than the
required beginning date, in accordance with regulations, over
the life of such employee or over the lives of such employee
and a designated beneficiary (or over a period not extending
beyond the life expectancy of such employee or the life
expectancy of such employee and a designated beneficiary).
(B) Required distribution where employee dies before entire
interest is distributed. -
(i) Where distributions have begun under subparagraph
(A)(ii). - A trust shall not constitute a qualified trust
under this section unless the plan provides that if -
(I) the distribution of the employee's interest has begun
in accordance with subparagraph (A)(ii), and
(II) the employee dies before his entire interest has
been distributed to him,
the remaining portion of such interest will be distributed at
least as rapidly as under the method of distributions being
used under subparagraph (A)(ii) as of the date of his death.
(ii) 5-year rule for other cases. - A trust shall not
constitute a qualified trust under this section unless the
plan provides that, if an employee dies before the
distribution of the employee's interest has begun in
accordance with subparagraph (A)(ii), the entire interest of
the employee will be distributed within 5 years after the
death of such employee.
(iii) Exception to 5-year rule for certain amounts payable
over life of beneficiary. - If -
(I) any portion of the employee's interest is payable to
(or for the benefit of) a designated beneficiary,
(II) such portion will be distributed (in accordance with
regulations) over the life of such designated beneficiary
(or over a period not extending beyond the life expectancy
of such beneficiary), and
(III) such distributions begin not later than 1 year
after the date of the employee's death or such later date
as the Secretary may by regulations prescribe,
for purposes of clause (ii), the portion referred to in
subclause (I) shall be treated as distributed on the date on
which such distributions begin.
(iv) Special rule for surviving spouse of employee. - If
the designated beneficiary referred to in clause (iii)(I) is
the surviving spouse of the employee -
(I) the date on which the distributions are required to
begin under clause (iii)(III) shall not be earlier than the
date on which the employee would have attained age 70 1/2 ,
and
(II) if the surviving spouse dies before the
distributions to such spouse begin, this subparagraph shall
be applied as if the surviving spouse were the employee.
(C) Required beginning date. - For purposes of this paragraph
-
(i) In general. - The term "required beginning date" means
April 1 of the calendar year following the later of -
(I) the calendar year in which the employee attains age
70 1/2 , or
(II) the calendar year in which the employee retires.
(ii) Exception. - Subclause (II) of clause (i) shall not
apply -
(I) except as provided in section 409(d), in the case of
an employee who is a 5-percent owner (as defined in section
416) with respect to the plan year ending in the calendar
year in which the employee attains age 70 1/2 , or
(II) for purposes of section 408(a)(6) or (b)(3).
(iii) Actuarial adjustment. - In the case of an employee to
whom clause (i)(II) applies who retires in a calendar year
after the calendar year in which the employee attains age 70
1/2 , the employee's accrued benefit shall be actuarially
increased to take into account the period after age 70 1/2
in which the employee was not receiving any benefits under
the plan.
(iv) Exception for governmental and church plans. - Clauses
(ii) and (iii) shall not apply in the case of a governmental
plan or church plan. For purposes of this clause, the term
"church plan" means a plan maintained by a church for church
employees, and the term "church" means any church (as defined
in section 3121(w)(3)(A)) or qualified church-controlled
organization (as defined in section 3121(w)(3)(B)).
(D) Life expectancy. - For purposes of this paragraph, the
life expectancy of an employee and the employee's spouse (other
than in the case of a life annuity) may be redetermined but not
more frequently than annually.
(E) Designated beneficiary. - For purposes of this paragraph,
the term "designated beneficiary" means any individual
designated as a beneficiary by the employee.
(F) Treatment of payments to children. - Under regulations
prescribed by the Secretary, for purposes of this paragraph,
any amount paid to a child shall be treated as if it had been
paid to the surviving spouse if such amount will become payable
to the surviving spouse upon such child reaching majority (or
other designated event permitted under regulations).
(G) Treatment of incidental death benefit distributions. -
For purposes of this title, any distribution required under the
incidental death benefit requirements of this subsection shall
be treated as a distribution required under this paragraph.
(10) Other requirements. -
(A) Plans benefiting owner-employees. - In the case of any
plan which provides contributions or benefits for employees
some or all of whom are owner-employees (as defined in
subsection (c)(3)), a trust forming part of such plan shall
constitute a qualified trust under this section only if the
requirements of subsection (d) are also met.
(B) Top-heavy plans. -
(i) In general. - In the case of any top-heavy plan, a
trust forming part of such plan shall constitute a qualified
trust under this section only if the requirements of section
416 are met.
(ii) Plans which may become top-heavy. - Except to the
extent provided in regulations, a trust forming part of a
plan (whether or not a top-heavy plan) shall constitute a
qualified trust under this section only if such plan contains
provisions -
(I) which will take effect if such plan becomes a
top-heavy plan, and
(II) which meet the requirements of section 416.
(iii) Exemption for governmental plans. - This subparagraph
shall not apply to any governmental plan.
(11) Requirement of joint and survivor annuity and
preretirement survivor annuity. -
(A) In general. - In the case of any plan to which this
paragraph applies, except as provided in section 417, a trust
forming part of such plan shall not constitute a qualified
trust under this section unless -
(i) in the case of a vested participant who does not die
before the annuity starting date, the accrued benefit payable
to such participant is provided in the form of a qualified
joint and survivor annuity, and
(ii) in the case of a vested participant who dies before
the annuity starting date and who has a surviving spouse, a
qualified preretirement survivor annuity is provided to the
surviving spouse of such participant.
(B) Plans to which paragraph applies. - This paragraph shall
apply to -
(i) any defined benefit plan,
(ii) any defined contribution plan which is subject to the
funding standards of section 412, and
(iii) any participant under any other defined contribution
plan unless -
(I) such plan provides that the participant's
nonforfeitable accrued benefit (reduced by any security
interest held by the plan by reason of a loan outstanding
to such participant) is payable in full, on the death of
the participant, to the participant's surviving spouse (or,
if there is no surviving spouse or the surviving spouse
consents in the manner required under section 417(a)(2), to
a designated beneficiary),
(II) such participant does not elect a payment of
benefits in the form of a life annuity, and
(III) with respect to such participant, such plan is not
a direct or indirect transferee (in a transfer after
December 31, 1984) of a plan which is described in clause
(i) or (ii) or to which this clause applied with respect to
the participant.
Clause (iii)(III) shall apply only with respect to the
transferred assets (and income therefrom) if the plan
separately accounts for such assets and any income therefrom.
(C) Exception for certain ESOP benefits. -
(i) In general. - In the case of -
(I) a tax credit employee stock ownership plan (as
defined in section 409(a)), or
(II) an employee stock ownership plan (as defined in
section 4975(e)(7)),
subparagraph (A) shall not apply to that portion of the
employee's accrued benefit to which the requirements of
section 409(h) apply.
(ii) Nonforfeitable benefit must be paid in full, etc. - In
the case of any participant, clause (i) shall apply only if
the requirements of subclauses (I), (II), and (III) of
subparagraph (B)(iii) are met with respect to such
participant.
(D) Special rule where participant and spouse married less
than 1 year. - A plan shall not be treated as failing to meet
the requirements of subparagraphs (B)(iii) or (C) merely
because the plan provides that benefits will not be payable to
the surviving spouse of the participant unless the participant
and such spouse had been married throughout the 1-year period
ending on the earlier of the participant's annuity starting
date or the date of the participant's death.
(E) Exception for plans described in section 404(c). - This
paragraph shall not apply to a plan which the Secretary has
determined is a plan described in section 404(c) (or a
continuation thereof) in which participation is substantially
limited to individuals who, before January 1, 1976, ceased
employment covered by the plan.
(F) Cross reference. - For -
(i) provisions under which participants may elect to waive
the requirements of this paragraph, and
(ii) other definitions and special rules for purposes of
this paragraph,
see section 417.
(12) A trust shall not constitute a qualified trust under this
section unless the plan of which such trust is a part provides
that in the case of any merger or consolidation with, or transfer
of assets or liabilities to, any other plan after September 2,
1974, each participant in the plan would (if the plan then
terminated) receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the
benefit he would have been entitled to receive immediately before
the merger, consolidation, or transfer (if the plan had then
terminated). The preceding sentence does not apply to any
multiemployer plan with respect to any transaction to the extent
that participants either before or after the transaction are
covered under a multiemployer plan to which title IV of the
Employee Retirement Income Security Act of 1974 applies.
(13) Assignment and alienation. -
(A) In general. - A trust shall not constitute a qualified
trust under this section unless the plan of which such trust is
a part provides that benefits provided under the plan may not
be assigned or alienated. For purposes of the preceding
sentence, there shall not be taken into account any voluntary
and revocable assignment of not to exceed 10 percent of any
benefit payment made by any participant who is receiving
benefits under the plan unless the assignment or alienation is
made for purposes of defraying plan administration costs. For
purposes of this paragraph a loan made to a participant or
beneficiary shall not be treated as an assignment or alienation
if such loan is secured by the participant's accrued
nonforfeitable benefit and is exempt from the tax imposed by
section 4975 (relating to tax on prohibited transactions) by
reason of section 4975(d)(1). This paragraph shall take effect
on January 1, 1976 and shall not apply to assignments which
were irrevocable on September 2, 1974.
(B) Special rules for domestic relations orders. -
Subparagraph (A) shall apply to the creation, assignment, or
recognition of a right to any benefit payable with respect to a
participant pursuant to a domestic relations order, except that
subparagraph (A) shall not apply if the order is determined to
be a qualified domestic relations order.
(C) Special rule for certain judgments and settlements. -
Subparagraph (A) shall not apply to any offset of a
participant's benefits provided under a plan against an amount
that the participant is ordered or required to pay to the plan
if -
(i) the order or requirement to pay arises -
(I) under a judgment of conviction for a crime involving
such plan,
(II) under a civil judgment (including a consent order or
decree) entered by a court in an action brought in
connection with a violation (or alleged violation) of part
4 of subtitle B of title I of the Employee Retirement
Income Security Act of 1974, or
(III) pursuant to a settlement agreement between the
Secretary of Labor and the participant, or a settlement
agreement between the Pension Benefit Guaranty Corporation
and the participant, in connection with a violation (or
alleged violation) of part 4 of such subtitle by a
fiduciary or any other person,
(ii) the judgment, order, decree, or settlement agreement
expressly provides for the offset of all or part of the
amount ordered or required to be paid to the plan against the
participant's benefits provided under the plan, and
(iii) in a case in which the survivor annuity requirements
of section 401(a)(11) apply with respect to distributions
from the plan to the participant, if the participant has a
spouse at the time at which the offset is to be made -
(I) either such spouse has consented in writing to such
offset and such consent is witnessed by a notary public or
representative of the plan (or it is established to the
satisfaction of a plan representative that such consent may
not be obtained by reason of circumstances described in
section 417(a)(2)(B)), or an election to waive the right of
the spouse to either a qualified joint and survivor annuity
or a qualified preretirement survivor annuity is in effect
in accordance with the requirements of section 417(a),
(II) such spouse is ordered or required in such judgment,
order, decree, or settlement to pay an amount to the plan
in connection with a violation of part 4 of such subtitle,
or
(III) in such judgment, order, decree, or settlement,
such spouse retains the right to receive the survivor
annuity under a qualified joint and survivor annuity
provided pursuant to section 401(a)(11)(A)(i) and under a
qualified preretirement survivor annuity provided pursuant
to section 401(a)(11)(A)(ii), determined in accordance with
subparagraph (D).
A plan shall not be treated as failing to meet the requirements
of this subsection, subsection (k), section 403(b), or section
409(d) solely by reason of an offset described in this
subparagraph.
(D) Survivor annuity. -
(i) In general. - The survivor annuity described in
subparagraph (C)(iii)(III) shall be determined as if -
(I) the participant terminated employment on the date of
the offset,
(II) there was no offset,
(III) the plan permitted commencement of benefits only on
or after normal retirement age,
(IV) the plan provided only the minimum-required
qualified joint and survivor annuity, and
(V) the amount of the qualified preretirement survivor
annuity under the plan is equal to the amount of the
survivor annuity payable under the minimum-required
qualified joint and survivor annuity.
(ii) Definition. - For purposes of this subparagraph, the
term "minimum-required qualified joint and survivor annuity"
means the qualified joint and survivor annuity which is the
actuarial equivalent of the participant's accrued benefit
(within the meaning of section 411(a)(7)) and under which the
survivor annuity is 50 percent of the amount of the annuity
which is payable during the joint lives of the participant
and the spouse.
(14) A trust shall not constitute a qualified trust under this
section unless the plan of which such trust is a part provides
that, unless the participant otherwise elects, the payment of
benefits under the plan to the participant will begin not later
than the 60th day after the latest of the close of the plan year
in which -
(A) the date on which the participant attains the earlier of
age 65 or the normal retirement age specified under the plan,
(B) occurs the 10th anniversary of the year in which the
participant commenced participation in the plan, or
(C) the participant terminates his service with the employer.
In the case of a plan which provides for the payment of an early
retirement benefit, a trust forming a part of such plan shall not
constitute a qualified trust under this section unless a
participant who satisfied the service requirements for such early
retirement benefit, but separated from the service (with any
nonforfeitable right to an accrued benefit) before satisfying the
age requirement for such early retirement benefit, is entitled
upon satisfaction of such age requirement to receive a benefit
not less than the benefit to which he would be entitled at the
normal retirement age, actuarially, reduced under regulations
prescribed by the Secretary.
(15) a (!2) trust shall not constitute a qualified trust under
this section unless under the plan of which such trust is a part
-
(A) in the case of a participant or beneficiary who is
receiving benefits under such plan, or
(B) in the case of a participant who is separated from the
service and who has nonforfeitable rights to benefits,
such benefits are not decreased by reason of any increase in the
benefit levels payable under title II of the Social Security Act
or any increase in the wage base under such title II, if such
increase takes place after September 2, 1974, or (if later) the
earlier of the date of first receipt of such benefits or the date
of such separation, as the case may be.
(16) A trust shall not constitute a qualified trust under this
section if the plan of which such trust is a part provides for
benefits or contributions which exceed the limitations of section
415.
(17) Compensation limit. -
(A) In general. - A trust shall not constitute a qualified
trust under this section unless, under the plan of which such
trust is a part, the annual compensation of each employee taken
into account under the plan for any year does not exceed
$200,000.
(B) Cost-of-living adjustment. - The Secretary shall adjust
annually the $200,000 amount in subparagraph (A) for increases
in the cost-of-living at the same time and in the same manner
as adjustments under section 415(d); except that the base
period shall be the calendar quarter beginning July 1, 2001,
and any increase which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.
[(18) Repealed. Pub. L. 97-248, title II, Sec. 237(b), Sept. 3,
1982, 96 Stat. 511.]
(19) A trust shall not constitute a qualified trust under this
section if under the plan of which such trust is a part any part
of a participant's accrued benefit derived from employer
contributions (whether or not otherwise nonforfeitable), is
forfeitable solely because of withdrawal by such participant of
any amount attributable to the benefit derived from contributions
made by such participant. The preceding sentence shall not apply
to the accrued benefit of any participant unless, at the time of
such withdrawal, such participant has a nonforfeitable right to
at least 50 percent of such accrued benefit (as determined under
section 411). The first sentence of this paragraph shall not
apply to the extent that an accrued benefit is permitted to be
forfeited in accordance with section 411(a)(3)(D)(iii) (relating
to proportional forfeitures of benefits accrued before September
2, 1974, in the event of withdrawal of certain mandatory
contributions).
(20) A trust forming part of a pension plan shall not be
treated as failing to constitute a qualified trust under this
section merely because the pension plan of which such trust is a
part makes 1 or more distributions within 1 taxable year to a
distributee on account of a termination of the plan of which the
trust is a part, or in the case of a profit-sharing or stock
bonus plan, a complete discontinuance of contributions under such
plan. This paragraph shall not apply to a defined benefit plan
unless the employer maintaining such plan files a notice with the
Pension Benefit Guaranty Corporation (at the time and in the
manner prescribed by the Pension Benefit Guaranty Corporation)
notifying the Corporation of such payment or distribution and the
Corporation has approved such payment or distribution or, within
90 days after the date on which such notice was filed, has failed
to disapprove such payment or distribution. For purposes of this
paragraph, rules similar to the rules of section 402(a)(6)(B) (as
in effect before its repeal by section 521 of the Unemployment
Compensation Amendments of 1992) shall apply.
[(21) Repealed. Pub. L. 99-514, title XI, Sec. 1171(b)(5), Oct.
22, 1986, 100 Stat. 2513.]
(22) If a defined contribution plan (other than a
profit-sharing plan) -
(A) is established by an employer whose stock is not readily
tradable on an established market, and
(B) after acquiring securities of the employer, more than 10
percent of the total assets of the plan are securities of the
employer,
any trust forming part of such plan shall not constitute a
qualified trust under this section unless the plan meets the
requirements of subsection (e) of section 409. The requirements
of subsection (e) of section 409 shall not apply to any employees
of an employer who are participants in any defined contribution
plan established and maintained by such employer if the stock of
such employer is not readily tradable on an established market
and the trade or business of such employer consists of publishing
on a regular basis a newspaper for general circulation. For
purposes of the preceding sentence, subsections (b), (c), (m),
and (o) of section 414 shall not apply except for determining
whether stock of the employer is not readily tradable on an
established market.
(23) A stock bonus plan shall not be treated as meeting the
requirements of this section unless such plan meets the
requirements of subsections (h) and (o) of section 409, except
that in applying section 409(h) for purposes of this paragraph,
the term "employer securities" shall include any securities of
the employer held by the plan.
(24) Any group trust which otherwise meets the requirements of
this section shall not be treated as not meeting such
requirements on account of the participation or inclusion in such
trust of the moneys of any plan or governmental unit described in
section 818(a)(6).
(25) Requirement that actuarial assumptions be specified. - A
defined benefit plan shall not be treated as providing definitely
determinable benefits unless, whenever the amount of any benefit
is to be determined on the basis of actuarial assumptions, such
assumptions are specified in the plan in a way which precludes
employer discretion.
(26) Additional participation requirements. -
(A) In general. - In the case of a trust which is a part of a
defined benefit plan, such trust shall not constitute a
qualified trust under this subsection unless on each day of the
plan year such trust benefits at least the lesser of -
(i) 50 employees of the employer, or
(ii) the greater of -
(I) 40 percent of all employees of the employer, or
(II) 2 employees (or if there is only 1 employee, such
employee).
(B) Treatment of excludable employees. -
(i) In general. - A plan may exclude from consideration
under this paragraph employees described in paragraphs (3)
and (4)(A) of section 410(b).
(ii) Separate application for certain excludable employees.
- If employees described in section 410(b)(4)(B) are covered
under a plan which meets the requirements of subparagraph (A)
separately with respect to such employees, such employees may
be excluded from consideration in determining whether any
plan of the employer meets such requirements if -
(I) the benefits for such employees are provided under
the same plan as benefits for other employees,
(II) the benefits provided to such employees are not
greater than comparable benefits provided to other
employees under the plan, and
(III) no highly compensated employee (within the meaning
of section 414(q)) is included in the group of such
employees for more than 1 year.
(C) Eligibility to participate. - In the case of
contributions under section 401(k) or 401(m), employees who are
eligible to contribute (or may elect to have contributions made
on their behalf) shall be treated as benefiting under the plan.
(D) Special rule for collective bargaining units. - Except to
the extent provided in regulations, a plan covering only
employees described in section 410(b)(3)(A) may exclude from
consideration any employees who are not included in the unit or
units in which the covered employees are included.
(E) Paragraph not to apply to multiemployer plans. - Except
to the extent provided in regulations, this paragraph shall not
apply to employees in a multiemployer plan (within the meaning
of section 414(f)) who are covered by collective bargaining
agreements.
(F) Special rule for certain dispositions or acquisitions. -
Rules similar to the rules of section 410(b)(6)(C) shall apply
for purposes of this paragraph.
(G) Separate lines of business. - At the election of the
employer and with the consent of the Secretary, this paragraph
may be applied separately with respect to each separate line of
business of the employer. For purposes of this paragraph, the
term "separate line of business" has the meaning given such
term by section 414(r) (without regard to paragraph (2)(A) or
(7) thereof).
(H) Exception for state and local governmental plans. - This
paragraph shall not apply to a governmental plan (within the
meaning of section 414(d)) maintained by a State or local
government or political subdivision thereof (or agency or
instrumentality thereof).
(I) Regulations. - The Secretary may by regulation provide
that any separate benefit structure, any separate trust, or any
other separate arrangement is to be treated as a separate plan
for purposes of applying this paragraph.
(27) Determinations as to profit-sharing plans. -
(A) Contributions need not be based on profits. - The
determination of whether the plan under which any contributions
are made is a profit-sharing plan shall be made without regard
to current or accumulated profits of the employer and without
regard to whether the employer is a tax-exempt organization.
(B) Plan must designate type. - In the case of a plan which
is intended to be a money purchase pension plan or a
profit-sharing plan, a trust forming part of such plan shall
not constitute a qualified trust under this subsection unless
the plan designates such intent at such time and in such manner
as the Secretary may prescribe.
(28) Additional requirements relating to employee stock
ownership plans. -
(A) In general. - In the case of a trust which is part of an
employee stock ownership plan (within the meaning of section
4975(e)(7)) or a plan which meets the requirements of section
409(a), such trust shall not constitute a qualified trust under
this section unless such plan meets the requirements of
subparagraphs (B) and (C).
(B) Diversification of investments. -
(i) In general. - A plan meets the requirements of this
subparagraph if each qualified participant in the plan may
elect within 90 days after the close of each plan year in the
qualified election period to direct the plan as to the
investment of at least 25 percent of the participant's
account in the plan (to the extent such portion exceeds the
amount to which a prior election under this subparagraph
applies). In the case of the election year in which the
participant can make his last election, the preceding
sentence shall be applied by substituting "50 percent" for
"25 percent".
(ii) Method of meeting requirements. - A plan shall be
treated as meeting the requirements of clause (i) if -
(I) the portion of the participant's account covered by
the election under clause (i) is distributed within 90 days
after the period during which the election may be made, or
(II) the plan offers at least 3 investment options (not
inconsistent with regulations prescribed by the Secretary)
to each participant making an election under clause (i) and
within 90 days after the period during which the election
may be made, the plan invests the portion of the
participant's account covered by the election in accordance
with such election.
(iii) Qualified participant. - For purposes of this
subparagraph, the term "qualified participant" means any
employee who has completed at least 10 years of participation
under the plan and has attained age 55.
(iv) Qualified election period. - For purposes of this
subparagraph, the term "qualified election period" means the
6-plan-year period beginning with the later of -
(I) the 1st plan year in which the individual first
became a qualified participant, or
(II) the 1st plan year beginning after December 31, 1986.
For purposes of the preceding sentence, an employer may elect
to treat an individual first becoming a qualified participant
in the 1st plan year beginning in 1987 as having become a
participant in the 1st plan year beginning in 1988.
(C) Use of independent appraiser. - A plan meets the
requirements of this subparagraph if all valuations of employer
securities which are not readily tradable on an established
securities market with respect to activities carried on by the
plan are by an independent appraiser. For purposes of the
preceding sentence, the term "independent appraiser" means any
appraiser meeting requirements similar to the requirements of
the regulations prescribed under section 170(a)(1).
(29) Security required upon adoption of plan amendment
resulting in significant underfunding. -
(A) In general. - If -
(i) a defined benefit plan (other than a multiemployer
plan) to which the requirements of section 412 apply adopts
an amendment an effect of which is to increase current
liability under the plan for a plan year, and
(ii) the funded current liability percentage of the plan
for the plan year in which the amendment takes effect is less
than 60 percent, including the amount of the unfunded current
liability under the plan attributable to the plan amendment,
the trust of which such plan is a part shall not constitute a
qualified trust under this subsection unless such amendment
does not take effect until the contributing sponsor (or any
member of the controlled group of the contributing sponsor)
provides security to the plan.
(B) Form of security. - The security required under
subparagraph (A) shall consist of -
(i) a bond issued by a corporate surety company that is an
acceptable surety for purposes of section 412 of the Employee
Retirement Income Security Act of 1974,
(ii) cash, or United States obligations which mature in 3
years or less, held in escrow by a bank or similar financial
institution, or
(iii) such other form of security as is satisfactory to the
Secretary and the parties involved.
(C) Amount of security. - The security shall be in an amount
equal to the excess of -
(i) the lesser of -
(I) the amount of additional plan assets which would be
necessary to increase the funded current liability
percentage under the plan to 60 percent, including the
amount of the unfunded current liability under the plan
attributable to the plan amendment, or
(II) the amount of the increase in current liability
under the plan attributable to the plan amendment and any
other plan amendments adopted after December 22, 1987, and
before such plan amendment, over
(ii) $10,000,000.
(D) Release of security. - The security shall be released
(and any amounts thereunder shall be refunded together with any
interest accrued thereon) at the end of the first plan year
which ends after the provision of the security and for which
the funded current liability percentage under the plan is not
less than 60 percent. The Secretary may prescribe regulations
for partial releases of the security by reason of increases in
the funded current liability percentage.
(E) Definitions. - For purposes of this paragraph, the terms
"current liability", "funded current liability percentage", and
"unfunded current liability" shall have the meanings given such
terms by section 412(l), except that in computing unfunded
current liability there shall not be taken into account any
unamortized portion of the unfunded old liability amount as of
the close of the plan year.
(30) Limitations on elective deferrals. - In the case of a
trust which is part of a plan under which elective deferrals
(within the meaning of section 402(g)(3)) may be made with
respect to any individual during a calendar year, such trust
shall not constitute a qualified trust under this subsection
unless the plan provides that the amount of such deferrals under
such plan and all other plans, contracts, or arrangements of an
employer maintaining such plan may not exceed the amount of the
limitation in effect under section 402(g)(1)(A) for taxable years
beginning in such calendar year.
(31) Direct transfer of eligible rollover distributions. -
(A) In general. - A trust shall not constitute a qualified
trust under this section unless the plan of which such trust is
a part provides that if the distributee of any eligible
rollover distribution -
(i) elects to have such distribution paid directly to an
eligible retirement plan, and
(ii) specifies the eligible retirement plan to which such
distribution is to be paid (in such form and at such time as
the plan administrator may prescribe),
such distribution shall be made in the form of a direct
trustee-to-trustee transfer to the eligible retirement plan so
specified.
(B) Certain mandatory distributions. -
(i) In general. - In case of a trust which is part of an
eligible plan, such trust shall not constitute a qualified
trust under this section unless the plan of which such trust
is a part provides that if -
(I) a distribution described in clause (ii) in excess of
$1,000 is made, and
(II) the distributee does not make an election under
subparagraph (A) and does not elect to receive the
distribution directly,
the plan administrator shall make such transfer to an
individual retirement plan of a designated trustee or issuer
and shall notify the distributee in writing (either
separately or as part of the notice under section 402(f))
that the distribution may be transferred to another
individual retirement plan.
(ii) Eligible plan. - For purposes of clause (i), the term
"eligible plan" means a plan which provides that any
nonforfeitable accrued benefit for which the present value
(as determined under section 411(a)(11)) does not exceed
$5,000 shall be immediately distributed to the participant.
(C) Limitation. - Subparagraphs (A) and (B) shall apply only
to the extent that the eligible rollover distribution would be
includible in gross income if not transferred as provided in
subparagraph (A) (determined without regard to sections 402(c),
403(a)(4), 403(b)(8), and 457(e)(16)). The preceding sentence
shall not apply to such distribution if the plan to which such
distribution is transferred -
(i) is a qualified trust which is part of a plan which is a
defined contribution plan and agrees to separately account
for amounts so transferred, including separately accounting
for the portion of such distribution which is includible in
gross income and the portion of such distribution which is
not so includible, or
(ii) is an eligible retirement plan described in clause (i)
or (ii) of section 402(c)(8)(B).
(D) Eligible rollover distribution. - For purposes of this
paragraph, the term "eligible rollover distribution" has the
meaning given such term by section 402(f)(2)(A).
(E) Eligible retirement plan. - For purposes of this
paragraph, the term "eligible retirement plan" has the meaning
given such term by section 402(c)(8)(B), except that a
qualified trust shall be considered an eligible retirement plan
only if it is a defined contribution plan, the terms of which
permit the acceptance of rollover distributions.
(32) Treatment of failure to make certain payments if plan has
liquidity shortfall. -
(A) In general. - A trust forming part of a pension plan to
which section 412(m)(5) applies shall not be treated as failing
to constitute a qualified trust under this section merely
because such plan ceases to make any payment described in
subparagraph (B) during any period that such plan has a
liquidity shortfall (as defined in section 412(m)(5)).
(B) Payments described. - A payment is described in this
subparagraph if such payment is -
(i) any payment, in excess of the monthly amount paid under
a single life annuity (plus any social security supplements
described in the last sentence of section 411(a)(9)), to a
participant or beneficiary whose annuity starting date (as
defined in section 417(f)(2)) occurs during the period
referred to in subparagraph (A),
(ii) any payment for the purchase of an irrevocable
commitment from an insurer to pay benefits, and
(iii) any other payment specified by the Secretary by
regulations.
(C) Period of shortfall. - For purposes of this paragraph, a
plan has a liquidity shortfall during the period that there is
an underpayment of an installment under section 412(m) by
reason of paragraph (5)(A) thereof.
(33) Prohibition on benefit increases while sponsor is in
bankruptcy. -
(A) In general. - A trust which is part of a plan to which
this paragraph applies shall not constitute a qualified trust
under this section if an amendment to such plan is adopted
while the employer is a debtor in a case under title 11, United
States Code, or similar Federal or State law, if such amendment
increases liabilities of the plan by reason of -
(i) any increase in benefits,
(ii) any change in the accrual of benefits, or
(iii) any change in the rate at which benefits become
nonforfeitable under the plan,
with respect to employees of the debtor, and such amendment is
effective prior to the effective date of such employer's plan
of reorganization.
(B) Exceptions. - This paragraph shall not apply to any plan
amendment if -
(i) the plan, were such amendment to take effect, would
have a funded current liability percentage (as defined in
section 412(l)(8)) of 100 percent or more,
(ii) the Secretary determines that such amendment is
reasonable and provides for only de minimis increases in the
liabilities of the plan with respect to employees of the
debtor,
(iii) such amendment only repeals an amendment described in
subsection 412(c)(8), or
(iv) such amendment is required as a condition of
qualification under this part.
(C) Plans to which this paragraph applies. - This paragraph
shall apply only to plans (other than multiemployer plans)
covered under section 4021 of the Employee Retirement Income
Security Act of 1974.
(D) Employer. - For purposes of this paragraph, the term
"employer" means the employer referred to in section 412(c)(11)
(without regard to subparagraph (B) thereof).
(34) Benefits of missing participants on plan termination. - In
the case of a plan covered by title IV of the Employee Retirement
Income Security Act of 1974, a trust forming part of such plan
shall not be treated as failing to constitute a qualified trust
under this section merely because the pension plan of which such
trust is a part, upon its termination, transfers benefits of
missing participants to the Pension Benefit Guaranty Corporation
in accordance with section 4050 of such Act.
Paragraphs (11), (12), (13), (14), (15), (19), and (20) shall apply
only in the case of a plan to which section 411 (relating to
minimum vesting standards) applies without regard to subsection
(e)(2) of such section.
(b) Certain retroactive changes in plan
A stock bonus, pension, profit-sharing, or annuity plan shall be
considered as satisfying the requirements of subsection (a) for the
period beginning with the date on which it was put into effect, or
for the period beginning with the earlier of the date on which
there was adopted or put into effect any amendment which caused the
plan to fail to satisfy such requirements, and ending with the time
prescribed by law for filing the return of the employer for his
taxable year in which such plan or amendment was adopted (including
extensions thereof) or such later time as the Secretary may
designate, if all provisions of the plan which are necessary to
satisfy such requirements are in effect by the end of such period
and have been made effective for all purposes for the whole of such
period.
(c) Definitions and rules relating to self-employed individuals and
owner-employees
For purposes of this section -
(1) Self-employed individual treated as employee
(A) In general
The term "employee" includes, for any taxable year, an
individual who is a self-employed individual for such taxable
year.
(B) Self-employed individual
The term "self-employed individual" means, with respect to
any taxable year, an individual who has earned income (as
defined in paragraph (2)) for such taxable year. To the extent
provided in regulations prescribed by the Secretary, such term
also includes, for any taxable year -
(i) an individual who would be a self-employed individual
within the meaning of the preceding sentence but for the fact
that the trade or business carried on by such individual did
not have net profits for the taxable year, and
(ii) an individual who has been a self-employed individual
within the meaning of the preceding sentence for any prior
taxable year.
(2) Earned income
(A) In general
The term "earned income" means the net earnings from
self-employment (as defined in section 1402(a)), but such net
earnings shall be determined -
(i) only with respect to a trade or business in which
personal services of the taxpayer are a material
income-producing factor,
(ii) without regard to paragraphs (4) and (5) of section
1402(c),
(iii) in the case of any individual who is treated as an
employee under sections (!3) 3121(d)(3)(A), (C), or (D),
without regard to paragraph (2) of section 1402(c),
(iv) without regard to items which are not included in
gross income for purposes of this chapter, and the deductions
properly allocable to or chargeable against such items,
(v) with regard to the deductions allowed by section 404 to
the taxpayer, and
(vi) with regard to the deduction allowed to the taxpayer
by section 164(f).
For purposes of this subparagraph, section 1402, as in effect
for a taxable year ending on December 31, 1962, shall be
treated as having been in effect for all taxable years ending
before such date. For purposes of this part only (other than
sections 419 and 419A), this subparagraph shall be applied as
if the term "trade or business" for purposes of section 1402
included service described in section 1402(c)(6).
[(B) Repealed]
(C) Income from disposition of certain property
For purposes of this section, the term "earned income"
includes gains (other than any gain which is treated under any
provision of this chapter as gain from the sale or exchange of
a capital asset) and net earnings derived from the sale or
other disposition of, the transfer of any interest in, or the
licensing of the use of property (other than good will) by an
individual whose personal efforts created such property.
(3) Owner-employee
The term "owner-employee" means an employee who -
(A) owns the entire interest in an unincorporated trade or
business, or
(B) in the case of a partnership, is a partner who owns more
than 10 percent of either the capital interest or the profits
interest in such partnership.
To the extent provided in regulations prescribed by the
Secretary, such term also means an individual who has been an
owner-employee within the meaning of the preceding sentence.
(4) Employer
An individual who owns the entire interest in an unincorporated
trade or business shall be treated as his own employer. A
partnership shall be treated as the employer of each partner who
is an employee within the meaning of paragraph (1).
(5) Contributions on behalf of owner-employees
The term "contribution on behalf of an owner-employee"
includes, except as the context otherwise requires, a
contribution under a plan -
(A) by the employer for an owner-employee, and
(B) by an owner-employee as an employee.
(6) Special rule for certain fishermen
For purposes of this subsection, the term "self-employed
individual" includes an individual described in section
3121(b)(20) (relating to certain fishermen).
(d) Contribution limit on owner-employees
A trust forming part of a pension or profit-sharing plan which
provides contributions or benefits for employees some or all of
whom are owner-employees shall constitute a qualified trust under
this section only if, in addition to meeting the requirements of
subsection (a), the plan provides that contributions on behalf of
any owner-employee may be made only with respect to the earned
income of such owner-employee which is derived from the trade or
business with respect to which such plan is established.
[(e) Repealed. Pub. L. 98-369, div. A, title VII, Sec. 713(d)(3),
July 18, 1984, 98 Stat. 958]
(f) Certain custodial accounts and contracts
For purposes of this title, a custodial account, an annuity
contract, or a contract (other than a life, health or accident,
property, casualty, or liability insurance contract) issued by an
insurance company qualified to do business in a State shall be
treated as a qualified trust under this section if -
(1) the custodial account or contract would, except for the
fact that it is not a trust, constitute a qualified trust under
this section, and
(2) in the case of a custodial account the assets thereof are
held by a bank (as defined in section 408(n)) or another person
who demonstrates, to the satisfaction of the Secretary, that the
manner in which he will hold the assets will be consistent with
the requirements of this section.
For purposes of this title, in the case of a custodial account or
contract treated as a qualified trust under this section by reason
of this subsection, the person holding the assets of such account
or holding such contract shall be treated as the trustee thereof.
(g) Annuity defined
For purposes of this section and sections 402, 403, and 404, the
term "annuity" includes a face-amount certificate, as defined in
section 2(a)(15) of the Investment Company Act of 1940 (15 U.S.C.,
sec. 80a-2); but does not include any contract or certificate
issued after December 31, 1962, which is transferable, if any
person other than the trustee of a trust described in section
401(a) which is exempt from tax under section 501(a) is the owner
of such contract or certificate.
(h) Medical, etc., benefits for retired employees and their spouses
and dependents
Under regulations prescribed by the Secretary, and subject to the
provisions of section 420, a pension or annuity plan may provide
for the payment of benefits for sickness, accident,
hospitalization, and medical expenses of retired employees, their
spouses and their dependents, but only if -
(1) such benefits are subordinate to the retirement benefits
provided by the plan,
(2) a separate account is established and maintained for such
benefits,
(3) the employer's contributions to such separate account are
reasonable and ascertainable,
(4) it is impossible, at any time prior to the satisfaction of
all liabilities under the plan to provide such benefits, for any
part of the corpus or income of such separate account to be
(within the taxable year or thereafter) used for, or diverted to,
any purpose other than the providing of such benefits,
(5) notwithstanding the provisions of subsection (a)(2), upon
the satisfaction of all liabilities under the plan to provide
such benefits, any amount remaining in such separate account
must, under the terms of the plan, be returned to the employer,
and
(6) in the case of an employee who is a key employee, a
separate account is established and maintained for such benefits
payable to such employee (and his spouse and dependents) and such
benefits (to the extent attributable to plan years beginning
after March 31, 1984, for which the employee is a key employee)
are only payable to such employee (and his spouse and dependents)
from such separate account.
For purposes of paragraph (6), the term "key employee" means any
employee, who at any time during the plan year or any preceding
plan year during which contributions were made on behalf of such
employee, is or was a key employee as defined in section 416(i). In
no event shall the requirements of paragraph (1) be treated as met
if the aggregate actual contributions for medical benefits, when
added to actual contributions for life insurance protection under
the plan, exceed 25 percent of the total actual contributions to
the plan (other than contributions to fund past service credits)
after the date on which the account is established.
(i) Certain union-negotiated pension plans
In the case of a trust forming part of a pension plan which has
been determined by the Secretary to constitute a qualified trust
under subsection (a) and to be exempt from taxation under section
501(a) for a period beginning after contributions were first made
to or for such trust, if it is shown to the satisfaction of the
Secretary that -
(1) such trust was created pursuant to a collective bargaining
agreement between employee representatives and one or more
employers,
(2) any disbursements of contributions, made to or for such
trust before the time as of which the Secretary or his delegate
determined that the trust constituted a qualified trust,
substantially complied with the terms of the trust, and the plan
of which the trust is a part, as subsequently qualified, and
(3) before the time as of which the Secretary determined that
the trust constitutes a qualified trust, the contributions to or
for such trust were not used in a manner which would jeopardize
the interests of its beneficiaries,
then such trust shall be considered as having constituted a
qualified trust under subsection (a) and as having been exempt from
taxation under section 501(a) for the period beginning on the date
on which contributions were first made to or for such trust and
ending on the date such trust first constituted (without regard to
this subsection) a qualified trust under subsection (a).
[(j) Repealed. Pub. L. 97-248, title II, Sec. 238(b), Sept. 3,
1982, 96 Stat. 512]
(k) Cash or deferred arrangements
(1) General rule
A profit-sharing or stock bonus plan, a pre-ERISA money
purchase plan, or a rural cooperative plan shall not be
considered as not satisfying the requirements of subsection (a)
merely because the plan includes a qualified cash or deferred
arrangement.
(2) Qualified cash or deferred arrangement
A qualified cash or deferred arrangement is any arrangement
which is part of a profit-sharing or stock bonus plan, a
pre-ERISA money purchase plan, or a rural cooperative plan which
meets the requirements of subsection (a) -
(A) under which a covered employee may elect to have the
employer make payments as contributions to a trust under the
plan on behalf of the employee, or to the employee directly in
cash;
(B) under which amounts held by the trust which are
attributable to employer contributions made pursuant to the
employee's election -
(i) may not be distributable to participants or other
beneficiaries earlier than -
(I) severance from employment, death, or disability,
(II) an event described in paragraph (10),
(III) in the case of a profit-sharing or stock bonus
plan, the attainment of age 59 1/2 , or
(IV) in the case of contributions to a profit-sharing or
stock bonus plan to which section 402(e)(3) applies, upon
hardship of the employee, and
(ii) will not be distributable merely by reason of the
completion of a stated period of participation or the lapse
of a fixed number of years;
(C) which provides that an employee's right to his accrued
benefit derived from employer contributions made to the trust
pursuant to his election is nonforfeitable, and
(D) 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 period permitted under section 410(a)(1)
(determined without regard to subparagraph (B)(i) thereof).
(3) Application of participation and discrimination standards
(A) A cash or deferred arrangement shall not be treated as a
qualified cash or deferred arrangement unless -
(i) those employees eligible to benefit under the
arrangement satisfy the provisions of section 410(b)(1), and
(ii) the actual deferral percentage for eligible highly
compensated employees (as defined in paragraph (5)) for the
plan year bears a relationship to the actual deferral
percentage for all other eligible employees for the preceding
plan year which meets either of the following tests:
(I) The actual deferral percentage for the group of
eligible highly compensated employees is not more than the
actual deferral percentage of all other eligible employees
multiplied by 1.25.
(II) The excess of the actual deferral percentage for the
group of eligible highly compensated employees over that of
all other eligible employees is not more than 2 percentage
points, and the actual deferral percentage for the group of
eligible highly compensated employees is not more than the
actual deferral percentage of all other eligible employees
multiplied by 2.
If 2 or more plans which include cash or deferred
arrangements are considered as 1 plan for purposes of section
401(a)(4) or 410(b), the cash or deferred arrangements
included in such plans shall be treated as 1 arrangement for
purposes of this subparagraph.
If any highly compensated employee is a participant under 2 or
more cash or deferred arrangements of the employer, for
purposes of determining the deferral percentage with respect to
such employee, all such cash or deferred arrangements shall be
treated as 1 cash or deferred arrangement. An arrangement may
apply clause (ii) by using the plan year rather than the
preceding plan year if the employer so elects, except that if
such an election is made, it may not be changed except as
provided by the Secretary.
(B) For purposes of subparagraph (A), the actual deferral
percentage for a specified group of employees for a plan year
shall be the average of the ratios (calculated separately for
each employee in such group) of -
(i) the amount of employer contributions actually paid over
to the trust on behalf of each such employee for such plan
year, to
(ii) the employee's compensation for such plan year.
(C) A cash or deferred arrangement shall be treated as
meeting the requirements of subsection (a)(4) with respect to
contributions if the requirements of subparagraph (A)(ii) are
met.
(D) For purposes of subparagraph (B), the employer
contributions on behalf of any employee -
(i) shall include any employer contributions made pursuant
to the employee's election under paragraph (2), and
(ii) under such rules as the Secretary may prescribe, may,
at the election of the employer, include -
(I) matching contributions (as defined in 401(m)(4)(A))
which meet the requirements of paragraph (2)(B) and (C),
and
(II) qualified nonelective contributions (within the
meaning of section 401(m)(4)(C)).
(E) For purposes of this paragraph, in the case of the first
plan year of any plan (other than a successor plan), the amount
taken into account as the actual deferral percentage of
nonhighly compensated employees for the preceding plan year
shall be -
(i) 3 percent, or
(ii) if the employer makes an election under this
subclause, the actual deferral percentage of nonhighly
compensated employees determined for such first plan year.
(F) Special rule for early participation. - If an employer
elects to apply section 410(b)(4)(B) in determining whether a
cash or deferred arrangement meets the requirements of
subparagraph (A)(i), the employer may, in determining whether
the arrangement meets the requirements of subparagraph (A)(ii),
exclude from consideration all eligible employees (other than
highly compensated employees) who have not met the minimum age
and service requirements of section 410(a)(1)(A).
(G) A governmental plan (within the meaning of section
414(d)) maintained by a State or local government or political
subdivision thereof (or agency or instrumentality thereof)
shall be treated as meeting the requirements of this paragraph.
(4) Other requirements
(A) Benefits (other than matching contributions) must not be
contingent on election to defer
A cash or deferred arrangement of any employer shall not be
treated as a qualified cash or deferred arrangement if any
other benefit is conditioned (directly or indirectly) on the
employee electing to have the employer make or not make
contributions under the arrangement in lieu of receiving cash.
The preceding sentence shall not apply to any matching
contribution (as defined in section 401(m)) made by reason of
such an election.
(B) Eligibility of State and local governments and tax-exempt
organizations
(i) Tax-exempts eligible
Except as provided in clause (ii), any organization exempt
from tax under this subtitle may include a qualified cash or
deferred arrangement as part of a plan maintained by it.
(ii) Governments ineligible
A cash or deferred arrangement shall not be treated as a
qualified cash or deferred arrangement if it is part of a
plan maintained by a State or local government or political
subdivision thereof, or any agency or instrumentality
thereof. This clause shall not apply to a rural cooperative
plan or to a plan of an employer described in clause (iii).
(iii) Treatment of Indian tribal governments
An employer which is an Indian tribal government (as
defined in section 7701(a)(40)), a subdivision of an Indian
tribal government (determined in accordance with section
7871(d)), an agency or instrumentality of an Indian tribal
government or subdivision thereof, or a corporation chartered
under Federal, State, or tribal law which is owned in whole
or in part by any of the foregoing may include a qualified
cash or deferred arrangement as part of a plan maintained by
the employer.
(C) Coordination with other plans
Except as provided in section 401(m), any employer
contribution made pursuant to an employee's election under a
qualified cash or deferred arrangement shall not be taken into
account for purposes of determining whether any other plan
meets the requirements of section 401(a) or 410(b). This
subparagraph shall not apply for purposes of determining
whether a plan meets the average benefit requirement of section
410(b)(2)(A)(ii).
(5) Highly compensated employee
For purposes of this subsection, the term "highly compensated
employee" has the meaning given such term by section 414(q).
(6) Pre-ERISA money purchase plan
For purposes of this subsection, the term "pre-ERISA money
purchase plan" means a pension plan -
(A) which is a defined contribution plan (as defined in
section 414(i)),
(B) which was in existence on June 27, 1974, and which, on
such date, included a salary reduction arrangement, and
(C) under which neither the employee contributions nor the
employer contributions may exceed the levels provided for by
the contribution formula in effect under the plan on such date.
(7) Rural cooperative plan
For purposes of this subsection -
(A) In general
The term "rural cooperative plan" means any pension plan -
(i) which is a defined contribution plan (as defined in
section 414(i)), and
(ii) which is established and maintained by a rural
cooperative.
(B) Rural cooperative defined
For purposes of subparagraph (A), the term "rural
cooperative" means -
(i) any organization which -
(I) is engaged primarily in providing electric service on
a mutual or cooperative basis, or
(II) is engaged primarily in providing electric service
to the public in its area of service and which is exempt
from tax under this subtitle or which is a State or local
government (or an agency or instrumentality thereof), other
than a municipality (or an agency or instrumentality
thereof),
(ii) any organization described in paragraph (4) or (6) of
section 501(c) and at least 80 percent of the members of
which are organizations described in clause (i),
(iii) a cooperative telephone company described in section
501(c)(12),
(iv) any organization which -
(I) is a mutual irrigation or ditch company described in
section 501(c)(12) (without regard to the 85 percent
requirement thereof), or
(II) is a district organized under the laws of a State as
a municipal corporation for the purpose of irrigation,
water conservation, or drainage, and
(v) an organization which is a national association of
organizations described in clause (i), (ii),,(!4) (iii), or
(iv).
(C) Special rule for certain distributions
A rural cooperative plan which includes a qualified cash or
deferred arrangement shall not be treated as violating the
requirements of section 401(a) or of paragraph (2) merely by
reason of a hardship distribution or a distribution to a
participant after attainment of age 59 1/2 . For purposes of
this section, the term "hardship distribution" means a
distribution described in paragraph (2)(B)(i)(IV) (without
regard to the limitation of its application to profit-sharing
or stock bonus plans).
(8) Arrangement not disqualified if excess contributions
distributed
(A) In general
A cash or deferred arrangement shall not be treated as
failing to meet the requirements of clause (ii) of paragraph
(3)(A) for any plan year if, before the close of the following
plan year -
(i) the amount of the excess contributions for such plan
year (and any income allocable to such contributions) is
distributed, or
(ii) to the extent provided in regulations, the employee
elects to treat the amount of the excess contributions as an
amount distributed to the employee and then contributed by
the employee to the plan.
Any distribution of excess contributions (and income) may be
made without regard to any other provision of law.
(B) Excess contributions
For purposes of subparagraph (A), the term "excess
contributions" means, with respect to any plan year, the excess
of -
(i) the aggregate amount of employer contributions actually
paid over to the trust on behalf of highly compensated
employees for such plan year, over
(ii) the maximum amount of such contributions permitted
under the limitations of clause (ii) of paragraph (3)(A)
(determined by reducing contributions made on behalf of
highly compensated employees in order of the actual deferral
percentages beginning with the highest of such percentages).
(C) Method of distributing excess contributions
Any distribution of the excess contributions for any plan
year shall be made to highly compensated employees on the basis
of the amount of contributions by, or on behalf of, each of
such employees.
(D) Additional tax under section 72(t) not to apply
No tax shall be imposed under section 72(t) on any amount
required to be distributed under this paragraph.
(E) Treatment of matching contributions forfeited by reason of
excess deferral or contribution
For purposes of paragraph (2)(C), a matching contribution
(within the meaning of subsection (m)) shall not be treated as
forfeitable merely because such contribution is forfeitable if
the contribution to which the matching contribution relates is
treated as an excess contribution under subparagraph (B), an
excess deferral under section 402(g)(2)(A), or an excess
aggregate contribution under section 401(m)(6)(B).
(F) Cross reference
For excise tax on certain excess contributions, see section
4979.
(9) Compensation
For purposes of this subsection, the term "compensation" has
the meaning given such term by section 414(s).
(10) Distributions upon termination of plan
(A) In general
An event described in this subparagraph is the termination of
the plan without establishment or maintenance of another
defined contribution plan (other than an employee stock
ownership plan as defined in section 4975(e)(7)).
(B) Distributions must be lump sum distributions
(i) In general
A termination shall not be treated as described in
subparagraph (A) with respect to any employee unless the
employee receives a lump sum distribution by reason of the
termination.
(ii) Lump-sum distribution
For purposes of this subparagraph, the term "lump-sum
distribution" has the meaning given such term by section
402(e)(4)(D) (without regard to subclauses (I), (II), (III),
and (IV) of clause (i) thereof). Such term includes a
distribution of an annuity contract from -
(I) a trust which forms a part of a plan described in
section 401(a) and which is exempt from tax under section
501(a), or
(II) an annuity plan described in section 403(a).
(11) Adoption of simple plan to meet nondiscrimination tests
(A) In general
A cash or deferred arrangement maintained by an eligible
employer shall be treated as meeting the requirements of
paragraph (3)(A)(ii) if such arrangement meets -
(i) the contribution requirements of subparagraph (B),
(ii) the exclusive plan requirements of subparagraph (C),
and
(iii) the vesting requirements of section 408(p)(3).
(B) Contribution requirements
(i) In general
The requirements of this subparagraph are met if, under the
arrangement -
(I) an employee may elect to have the employer make
elective contributions for the year on behalf of the
employee to a trust under the plan in an amount which is
expressed as a percentage of compensation of the employee
but which in no event exceeds the amount in effect under
section 408(p)(2)(A)(ii),
(II) the employer is required to make a matching
contribution to the trust for the year in an amount equal
to so much of the amount the employee elects under
subclause (I) as does not exceed 3 percent of compensation
for the year, and
(III) no other contributions may be made other than
contributions described in subclause (I) or (II).
(ii) Employer may elect 2-percent nonelective contribution
An employer shall be treated as meeting the requirements of
clause (i)(II) for any year if, in lieu of the contributions
described in such clause, the employer elects (pursuant to
the terms of the arrangement) to make nonelective
contributions of 2 percent of compensation for each employee
who is eligible to participate in the arrangement and who has
at least $5,000 of compensation from the employer for the
year. If an employer makes an election under this
subparagraph for any year, the employer shall notify
employees of such election within a reasonable period of time
before the 60th day before the beginning of such year.
(iii) Administrative requirements
(I) In general
Rules similar to the rules of subparagraphs (B) and (C)
of section 408(p)(5) shall apply for purposes of this
subparagraph.
(II) Notice of election period
The requirements of this subparagraph shall not be
treated as met with respect to any year unless the employer
notifies each employee eligible to participate, within a
reasonable period of time before the 60th day before the
beginning of such year (and, for the first year the
employee is so eligible, the 60th day before the first day
such employee is so eligible), of the rules similar to the
rules of section 408(p)(5)(C) which apply by reason of
subclause (I).
(C) Exclusive plan requirement
The requirements of this subparagraph are met for any year to
which this paragraph applies if no contributions were made, or
benefits were accrued, for services during such year under any
qualified plan of the employer on behalf of any employee
eligible to participate in the cash or deferred arrangement,
other than contributions described in subparagraph (B).
(D) Definitions and special rule
(i) Definitions
For purposes of this paragraph, any term used in this
paragraph which is also used in section 408(p) shall have the
meaning given such term by such section.
(ii) Coordination with top-heavy rules
A plan meeting the requirements of this paragraph for any
year shall not be treated as a top-heavy plan under section
416 for such year if such plan allows only contributions
required under this paragraph.
(12) Alternative methods of meeting nondiscrimination
requirements
(A) In general
A cash or deferred arrangement shall be treated as meeting
the requirements of paragraph (3)(A)(ii) if such arrangement -
(i) meets the contribution requirements of subparagraph (B)
or (C), and
(ii) meets the notice requirements of subparagraph (D).
(B) Matching contributions
(i) In general
The requirements of this subparagraph are met if, under the
arrangement, the employer makes matching contributions on
behalf of each employee who is not a highly compensated
employee in an amount equal to -
(I) 100 percent of the elective contributions of the
employee to the extent such elective contributions do not
exceed 3 percent of the employee's compensation, and
(II) 50 percent of the elective contributions of the
employee to the extent that such elective contributions
exceed 3 percent but do not exceed 5 percent of the
employee's compensation.
(ii) Rate for highly compensated employees
The requirements of this subparagraph are not met if, under
the arrangement, the rate of matching contribution with
respect to any elective contribution of a highly compensated
employee at any rate of elective contribution is greater than
that with respect to an employee who is not a highly
compensated employee.
(iii) Alternative plan designs
If the rate of any matching contribution with respect to
any rate of elective contribution is not equal to the
percentage required under clause (i), an arrangement shall
not be treated as failing to meet the requirements of clause
(i) if -
(I) the rate of an employer's matching contribution does
not increase as an employee's rate of elective
contributions increase, and
(II) the aggregate amount of matching contributions at
such rate of elective contribution is at least equal to the
aggregate amount of matching contributions which would be
made if matching contributions were made on the basis of
the percentages described in clause (i).
(C) Nonelective contributions
The requirements of this subparagraph are met if, under the
arrangement, the employer is required, without regard to
whether the employee makes an elective contribution or employee
contribution, to make a contribution to a defined contribution
plan on behalf of each employee who is not a highly compensated
employee and who is eligible to participate in the arrangement
in an amount equal to at least 3 percent of the employee's
compensation.
(D) Notice requirement
An arrangement meets the requirements of this paragraph if,
under the arrangement, each employee eligible to participate
is, within a reasonable period before any year, given written
notice of the employee's rights and obligations under the
arrangement which -
(i) is sufficiently accurate and comprehensive to apprise
the employee of such rights and obligations, and
(ii) is written in a manner calculated to be understood by
the average employee eligible to participate.
(E) Other requirements
(i) Withdrawal and vesting restrictions
An arrangement shall not be treated as meeting the
requirements of subparagraph (B) or (C) of this paragraph
unless the requirements of subparagraphs (B) and (C) of
paragraph (2) are met with respect to all employer
contributions (including matching contributions) taken into
account in determining whether the requirements of
subparagraphs (B) and (C) of this paragraph are met.
(ii) Social security and similar contributions not taken into
account
An arrangement shall not be treated as meeting the
requirements of subparagraph (B) or (C) unless such
requirements are met without regard to subsection (l), and,
for purposes of subsection (l), employer contributions under
subparagraph (B) or (C) shall not be taken into account.
(F) Other plans
An arrangement shall be treated as meeting the requirements
under subparagraph (A)(i) if any other plan maintained by the
employer meets such requirements with respect to employees
eligible under the arrangement.
(l) Permitted disparity in plan contributions or benefits
(1) In general
The requirements of this subsection are met with respect to a
plan if -
(A) in the case of a defined contribution plan, the
requirements of paragraph (2) are met, and
(B) in the case of a defined benefit plan, the requirements
of paragraph (3) are met.
(2) Defined contribution plan
(A) In general
A defined contribution plan meets the requirements of this
paragraph if the excess contribution percentage does not exceed
the base contribution percentage by more than the lesser of -
(i) the base contribution percentage, or
(ii) the greater of -
(I) 5.7 percentage points, or
(II) the percentage equal to the portion of the rate of
tax under section 3111(a) (in effect as of the beginning of
the year) which is attributable to old-age insurance.
(B) Contribution percentages
For purposes of this paragraph -
(i) Excess contribution percentage
The term "excess contribution percentage" means the
percentage of compensation which is contributed by the
employer under the plan with respect to that portion of each
participant's compensation in excess of the integration
level.
(ii) Base contribution percentage
The term "base contribution percentage" means the
percentage of compensation contributed by the employer under
the plan with respect to that portion of each participant's
compensation not in excess of the integration level.
(3) Defined benefit plan
A defined benefit plan meets the requirements of this paragraph
if -
(A) Excess plans
(i) In general
In the case of a plan other than an offset plan -
(I) the excess benefit percentage does not exceed the
base benefit percentage by more than the maximum excess
allowance,
(II) any optional form of benefit, preretirement benefit,
actuarial factor, or other benefit or feature provided with
respect to compensation in excess of the integration level
is provided with respect to compensation not in excess of
such level, and
(III) benefits are based on average annual compensation.
(ii) Benefit percentages
For purposes of this subparagraph, the excess and base
benefit percentages shall be computed in the same manner as
the excess and base contribution percentages under paragraph
(2)(B), except that such determination shall be made on the
basis of benefits attributable to employer contributions
rather than contributions.
(B) Offset plans
In the case of an offset plan, the plan provides that -
(i) a participant's accrued benefit attributable to
employer contributions (within the meaning of section
411(c)(1)) may not be reduced (by reason of the offset) by
more than the maximum offset allowance, and
(ii) benefits are based on average annual compensation.
(4) Definitions relating to paragraph (3)
For purposes of paragraph (3) -
(A) Maximum excess allowance
The maximum excess allowance is equal to -
(i) in the case of benefits attributable to any year of
service with the employer taken into account under the plan,
3/4 of a percentage point, and
(ii) in the case of total benefits, 3/4 of a percentage
point, multiplied by the participant's years of service (not
in excess of 35) with the employer taken into account under
the plan.
In no event shall the maximum excess allowance exceed the base
benefit percentage.
(B) Maximum offset allowance
The maximum offset allowance is equal to -
(i) in the case of benefits attributable to any year of
service with the employer taken into account under the plan,
3/4 percent of the participant's final average compensation,
and
(ii) in the case of total benefits, 3/4 percent of the
participant's final average compensation, multiplied by the
participant's years of service (not in excess of 35) with the
employer taken into account under the plan.
In no event shall the maximum offset allowance exceed 50
percent of the benefit which would have accrued without regard
to the offset reduction.
(C) Reductions
(i) In general
The Secretary shall prescribe regulations requiring the
reduction of the 3/4 percentage factor under subparagraph
(A) or (B) -
(I) in the case of a plan other than an offset plan which
has an integration level in excess of covered compensation,
or
(II) with respect to any participant in an offset plan
who has final average compensation in excess of covered
compensation.
(ii) Basis of reductions
Any reductions under clause (i) shall be based on the
percentages of compensation replaced by the employer-derived
portions of primary insurance amounts under the Social
Security Act for participants with compensation in excess of
covered compensation.
(D) Offset plan
The term "offset plan" means any plan with respect to which
the benefit attributable to employer contributions for each
participant is reduced by an amount specified in the plan.
(5) Other definitions and special rules
For purposes of this subsection -
(A) Integration level
(i) In general
The term "integration level" means the amount of
compensation specified under the plan (by dollar amount or
formula) at or below which the rate at which contributions or
benefits are provided (expressed as a percentage) is less
than such rate above such amount.
(ii) Limitation
The integration level for any year may not exceed the
contribution and benefit base in effect under section 230 of
the Social Security Act for such year.
(iii) Level to apply to all participants
A plan's integration level shall apply with respect to all
participants in the plan.
(iv) Multiple integration levels
Under rules prescribed by the Secretary, a defined benefit
plan may specify multiple integration levels.
(B) Compensation
The term "compensation" has the meaning given such term by
section 414(s).
(C) Average annual compensation
The term "average annual compensation" means the
participant's highest average annual compensation for -
(i) any period of at least 3 consecutive years, or
(ii) if shorter, the participant's full period of service.
(D) Final average compensation
(i) In general
The term "final average compensation" means the
participant's average annual compensation for -
(I) the 3-consecutive year period ending with the current
year, or
(II) if shorter, the participant's full period of
service.
(ii) Limitation
A participant's final average compensation shall be
determined by not taking into account in any year
compensation in excess of the contribution and benefit base
in effect under section 230 of the Social Security Act for
such year.
(E) Covered compensation
(i) In general
The term "covered compensation" means, with respect to an
employee, the average of the contribution and benefit bases
in effect under section 230 of the Social Security Act for
each year in the 35-year period ending with the year in which
the employee attains the social security retirement age.
(ii) Computation for any year
For purposes of clause (i), the determination for any year
preceding the year in which the employee attains the social
security retirement age shall be made by assuming that there
is no increase in the bases described in clause (i) after the
determination year and before the employee attains the social
security retirement age.
(iii) Social security retirement age
For purposes of this subparagraph, the term "social
security retirement age" has the meaning given such term by
section 415(b)(8).
(F) Regulations
The Secretary shall prescribe such regulations as are
necessary or appropriate to carry out the purposes of this
subsection, including -
(i) in the case of a defined benefit plan which provides
for unreduced benefits commencing before the social security
retirement age (as defined in section 415(b)(8)), rules
providing for the reduction of the maximum excess allowance
and the maximum offset allowance, and
(ii) in the case of an employee covered by 2 or more plans
of the employer which fail to meet the requirements of
subsection (a)(4) (without regard to this subsection), rules
preventing the multiple use of the disparity permitted under
this subsection with respect to any employee.
For purposes of clause (i), unreduced benefits shall not
include benefits for disability (within the meaning of section
223(d) of the Social Security Act).
(6) Special rule for plan maintained by railroads
In determining whether a plan which includes employees of a
railroad employer who are entitled to benefits under the Railroad
Retirement Act of 1974 meets the requirements of this subsection,
rules similar to the rules set forth in this subsection shall
apply. Such rules shall take into account the employer-derived
portion of the employees' tier 2 railroad retirement benefits and
any supplemental annuity under the Railroad Retirement Act of
1974.
(m) Nondiscrimination test for matching contributions and employee
contributions
(1) In general
A defined contribution plan shall be treated as meeting the
requirements of subsection (a)(4) with respect to the amount of
any matching contribution or employee contribution for any plan
year only if the contribution percentage requirement of paragraph
(2) of this subsection is met for such plan year.
(2) Requirements
(A) Contribution percentage requirement
A plan meets the contribution percentage requirement of this
paragraph for any plan year only if the contribution percentage
for eligible highly compensated employees for such plan year
does not exceed the greater of -
(i) 125 percent of such percentage for all other eligible
employees for the preceding plan year, or
(ii) the lesser of 200 percent of such percentage for all
other eligible employees for the preceding plan year, or such
percentage for all other eligible employees for the preceding
plan year plus 2 percentage points.
This subparagraph may be applied by using the plan year rather
than the preceding plan year if the employer so elects, except
that if such an election is made, it may not be changed except
as provided by the Secretary.
(B) Multiple plans treated as a single plan
If two or more plans of an employer to which matching
contributions, employee contributions, or elective deferrals
are made are treated as one plan for purposes of section
410(b), such plans shall be treated as one plan for purposes of
this subsection. If a highly compensated employee participates
in two or more plans of an employer to which contributions to
which this subsection applies are made, all such contributions
shall be aggregated for purposes of this subsection.
(3) Contribution percentage
For purposes of paragraph (2), the contribution percentage for
a specified group of employees for a plan year shall be the
average of the ratios (calculated separately for each employee in
such group) of -
(A) the sum of the matching contributions and employee
contributions paid under the plan on behalf of each such
employee for such plan year, to
(B) the employee's compensation (within the meaning of
section 414(s)) for such plan year.
Under regulations, an employer may elect to take into account (in
computing the contribution percentage) elective deferrals and
qualified nonelective contributions under the plan or any other
plan of the employer. If matching contributions are taken into
account for purposes of subsection (k)(3)(A)(ii) for any plan
year, such contributions shall not be taken into account under
subparagraph (A) for such year. Rules similar to the rules of
subsection (k)(3)(E) shall apply for purposes of this subsection.
(4) Definitions
For purposes of this subsection -
(A) Matching contribution
The term "matching contribution" means -
(i) any employer contribution made to a defined
contribution plan on behalf of an employee on account of an
employee contribution made by such employee, and
(ii) any employer contribution made to a defined
contribution plan on behalf of an employee on account of an
employee's elective deferral.
(B) Elective deferral
The term "elective deferral" means any employer contribution
described in section 402(g)(3).
(C) Qualified nonelective contributions
The term "qualified nonelective contribution" means any
employer contribution (other than a matching contribution) with
respect to which -
(i) the employee may not elect to have the contribution
paid to the employee in cash instead of being contributed to
the plan, and
(ii) the requirements of subparagraphs (B) and (C) of
subsection (k)(2) are met.
(5) Employees taken into consideration
(A) In general
Any employee who is eligible to make an employee contribution
(or, if the employer takes elective contributions into account,
elective contributions) or to receive a matching contribution
under the plan being tested under paragraph (1) shall be
considered an eligible employee for purposes of this
subsection.
(B) Certain nonparticipants
If an employee contribution is required as a condition of
participation in the plan, any employee who would be a
participant in the plan if such employee made such a
contribution shall be treated as an eligible employee on behalf
of whom no employer contributions are made.
(C) Special rule for early participation
If an employer elects to apply section 410(b)(4)(B) in
determining whether a plan meets the requirements of section
410(b), the employer may, in determining whether the plan meets
the requirements of paragraph (2), exclude from consideration
all eligible employees (other than highly compensated
employees) who have not met the minimum age and service
requirements of section 410(a)(1)(A).
(6) Plan not disqualified if excess aggregate contributions
distributed before end of following plan year
(A) In general
A plan shall not be treated as failing to meet the
requirements of paragraph (1) for any plan year if, before the
close of the following plan year, the amount of the excess
aggregate contributions for such plan year (and any income
allocable to such contributions) is distributed (or, if
forfeitable, is forfeited). Such contributions (and such
income) may be distributed without regard to any other
provision of law.
(B) Excess aggregate contributions
For purposes of subparagraph (A), the term "excess aggregate
contributions" means, with respect to any plan year, the excess
of -
(i) the aggregate amount of the matching contributions and
employee contributions (and any qualified nonelective
contribution or elective contribution taken into account in
computing the contribution percentage) actually made on
behalf of highly compensated employees for such plan year,
over
(ii) the maximum amount of such contributions permitted
under the limitations of paragraph (2)(A) (determined by
reducing contributions made on behalf of highly compensated
employees in order of their contribution percentages
beginning with the highest of such percentages).
(C) Method of distributing excess aggregate contributions
Any distribution of the excess aggregate contributions for
any plan year shall be made to highly compensated employees on
the basis of the amount of contributions on behalf of, or by,
each such employee. Forfeitures of excess aggregate
contributions may not be allocated to participants whose
contributions are reduced under this paragraph.
(D) Coordination with subsection (k) and 402(g)
The determination of the amount of excess aggregate
contributions with respect to a plan shall be made after -
(i) first determining the excess deferrals (within the
meaning of section 402(g)), and
(ii) then determining the excess contributions under
subsection (k).
(7) Treatment of distributions
(A) Additional tax of section 72(t) not applicable
No tax shall be imposed under section 72(t) on any amount
required to be distributed under paragraph (6).
(B) Exclusion of employee contributions
Any distribution attributable to employee contributions shall
not be included in gross income except to the extent
attributable to income on such contributions.
(8) Highly compensated employee
For purposes of this subsection, the term "highly compensated
employee" has the meaning given to such term by section 414(q).
(9) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this subsection and
subsection (k), including regulations permitting appropriate
aggregation of plans and contributions.
(10) Alternative method of satisfying tests
A defined contribution plan shall be treated as meeting the
requirements of paragraph (2) with respect to matching
contributions if the plan -
(A) meets the contribution requirements of subparagraph (B)
of subsection (k)(11),
(B) meets the exclusive plan requirements of subsection
(k)(11)(C), and
(C) meets the vesting requirements of section 408(p)(3).
(11) Additional alternative method of satisfying tests
(A) In general
A defined contribution plan shall be treated as meeting the
requirements of paragraph (2) with respect to matching
contributions if the plan -
(i) meets the contribution requirements of subparagraph (B)
or (C) of subsection (k)(12),
(ii) meets the notice requirements of subsection
(k)(12)(D), and
(iii) meets the requirements of subparagraph (B).
(B) Limitation on matching contributions
The requirements of this subparagraph are met if -
(i) matching contributions on behalf of any employee may
not be made with respect to an employee's contributions or
elective deferrals in excess of 6 percent of the employee's
compensation,
(ii) the rate of an employer's matching contribution does
not increase as the rate of an employee's contributions or
elective deferrals increase, and
(iii) the matching contribution with respect to any highly
compensated employee at any rate of an employee contribution
or rate of elective deferral is not greater than that with
respect to an employee who is not a highly compensated
employee.
(12) Cross reference
For excise tax on certain excess contributions, see section
4979.
(n) Coordination with qualified domestic relations orders
The Secretary shall prescribe such rules or regulations as may be
necessary to coordinate the requirements of subsection (a)(13)(B)
and section 414(p) (and the regulations issued by the Secretary of
Labor thereunder) with the other provisions of this chapter.
(o) Cross reference
For exemption from tax of a trust qualified under this
section, see section 501(a).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 134; Pub. L. 87-792, Sec. 2,
Oct. 10, 1962, 76 Stat. 809; Pub. L. 87-863, Sec. 2(a), Oct. 23,
1962, 76 Stat. 1141; Pub. L. 88-272, title II, Sec. 219(a), Feb.
26, 1964, 78 Stat. 57; Pub. L. 89-97, title I, Sec. 106(d)(4), July
30, 1965, 79 Stat. 337; Pub. L. 89-809, title II, Secs. 204(b)(1),
(c), 205(a), Nov. 13, 1966, 80 Stat. 1577, 1578; Pub. L. 91-691,
Sec. 1(a), Jan. 12, 1971, 84 Stat. 2074; Pub. L. 93-406, title II,
Secs. 1012(b), 1016(a)(2), 1021, 1022(a)-(d), (f), 1023,
2001(c)-(e)(4), (h)(1), 2004(a)(1), Sept. 2, 1974, 88 Stat. 913,
929, 935, 938-940, 943, 952-955, 957, 979; Pub. L. 94-267, Sec.
1(c)(1), (2), Apr. 15, 1976, 90 Stat. 367; Pub. L. 94-455, title
VIII, Sec. 803(b)(2), title XV, Sec. 1505(b), title XIX, Secs.
1901(a)(56), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1584, 1738,
1773, 1834; Pub. L. 95-600, title I, Secs. 135(a), 141(f)(3),
143(a), 152(e), Nov. 6, 1978, 92 Stat. 2785, 2795, 2796, 2799; Pub.
L. 96-222, title I, Sec. 101(a)(7)(L)(i)(V), (9), (14)(E)(iii),
Apr. 1, 1980, 94 Stat. 199, 201, 205; Pub. L. 96-364, title II,
Sec. 208(a), (e), title IV, Sec. 410(b), Sept. 26, 1980, 94 Stat.
1289, 1290, 1308; Pub. L. 96-605, title II, Secs. 221(a),
225(b)(1), (2), Dec. 28, 1980, 94 Stat. 3528, 3529; Pub. L. 97-34,
title III, Secs. 312(b)(1), (c)(2)-(4), (e)(2), 314(a)(1), 335,
338(a), Aug. 13, 1981, 95 Stat. 283-286, 297, 298; Pub. L. 97-248,
title II, Secs. 237(a), (b), (e)(1), 238(b), (d)(1), (2), 240(b),
242(a), 249(a), 254(a), Sept. 3, 1982, 96 Stat. 511-513, 520, 521,
527, 533; Pub. L. 97-448, title I, Sec. 103(c)(10)(A), (d)(2),
(g)(2)(A), title III, Sec. 306(a)(12), Jan. 12, 1983, 96 Stat.
2377-2379, 2405; Pub. L. 98-21, title I, Sec. 124(c)(4)(A), Apr.
20, 1983, 97 Stat. 91; Pub. L. 98-369, div. A, title II, Sec.
211(b)(5), title IV, Secs. 474(r)(13), 491(e)(4), (5), title V,
Secs. 521(a), 524(d)(1), 527(a), (b), 528(b), title VII, Sec.
713(c)(2)(A), (d)(3), July 18, 1984, 98 Stat. 754, 842, 853, 865,
872, 875-877, 957, 958; Pub. L. 98-397, title II, Secs. 203(a),
204(a), title III, Sec. 301(b), Aug. 23, 1984, 98 Stat. 1440, 1445,
1451; Pub. L. 99-514, title XI, Secs. 1106(d)(1), 1111(a), (b),
1112(b), (d)(1), 1114(b)(7), 1116(a)-(e), 1117(a), 1119(a),
1121(b), 1136(a), 1143(a), 1145(a), 1171(b)(5), 1174(c)(2)(A),
1175(a)(1), 1176(a), title XVIII, Secs. 1848(b), 1852(a)(4)(A),
(6), (b)(8), (g), (h)(1), 1879(g)(1), (2), 1898(b)(2)(A), (3)(A),
(7)(A), (13)(A), (14)(A), (c)(3), 1899A(10), Oct. 22, 1986, 100
Stat. 2435, 2439, 2444, 2445, 2451, 2454-2456, 2459, 2463, 2465,
2485, 2490, 2513, 2518, 2519, 2857, 2865-2869, 2906, 2907, 2945,
2948, 2950, 2953, 2958; Pub. L. 100-203, title IX, Sec. 9341(a),
Dec. 22, 1987, 101 Stat. 1330-369; Pub. L. 100-647, title I, Secs.
1011(c)(7)(A), (d)(4), (e)(3), (g)(1)-(3), (h)(3), (k)(1)(A), (B),
s2)-(7), (9), (l)(1)-(5)(A), (6), (7), 1011A(j), (l), 1011B(j)(1),
(2), (6), (k)(1), (2), title VI, Secs. 6053(a), 6055(a), 6071(a),
(b), Nov. 10, 1988, 102 Stat. 3458-3460, 3463, 3464, 3468-3470,
3483, 3492, 3493, 3696, 3697, 3705; Pub. L. 101-140, title II, Sec.
203(a)(5), Nov. 8, 1989, 103 Stat. 830; Pub. L. 101-239, title VII,
Secs. 7311(a), 7811(g)(1), (h)(3), 7816(l), 7881(i)(1)(A), (4)(A),
Dec. 19, 1989, 103 Stat. 2354, 2409, 2421, 2442; Pub. L. 101-508,
title XII, Sec. 12011(b), Nov. 5, 1990, 104 Stat. 1388-571; Pub. L.
102-318, title V, Secs. 521(b)(5)-(8), 522(a)(1), July 3, 1992, 106
Stat. 310, 313; Pub. L. 103-66, title XIII, Sec. 13212(a), Aug. 10,
1993, 107 Stat. 471; Pub. L. 103-465, title VII, Secs. 732(a),
751(a)(9)(C), 766(b), 776(d), Dec. 8, 1994, 108 Stat. 5004, 5021,
5037, 5048; Pub. L. 104-188, title I, Secs. 1401(b)(5), (6),
1404(a), 1422(a), (b), 1426(a), 1431(b)(2), (c)(1)(B), 1432(a),
(b), 1433(a)-(e), 1441(a), 1443(a), (b), 1445(a), 1459(a), (b),
1704(a), (t)(67), Aug. 20, 1996, 110 Stat. 1789, 1791, 1800, 1801,
1803-1809, 1811, 1820, 1878, 1890; Pub. L. 105-34, title XV, Secs.
1502(b), 1505(a)(1), (2), (b), 1525(a), 1530(c)(1), title XVI, Sec.
1601(d)(2)(A), (B), (D), (3), Aug. 5, 1997, 111 Stat. 1059, 1063,
1072, 1078, 1088, 1089; Pub. L. 106-554, Sec. 1(a)(7) [title III,
Sec. 316(c)], Dec. 21, 2000, 114 Stat. 2763, 2763A-644; Pub. L.
107-16, title VI, Secs. 611(c), (f)(3), (g)(1), 641(e)(3), 643(b),
646(a)(1), 657(a), 666(a), June 7, 2001, 115 Stat. 97, 99, 120,
122, 126, 135, 143; Pub. L. 107-147, title IV, Sec. 411(o)(2),
(q)(1), Mar. 9, 2002, 116 Stat. 48, 51.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The Employee Retirement Income Security Act of 1974, referred to
in subsec. (a)(12), (13)(C)(i)(II), (III), (iii)(II), (29)(B)(i),
(33)(C), (34), is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829, as
amended. Part 4 of subtitle B of title I of the Act is classified
generally to part 4 (Sec. 1101 et seq.) of subtitle B of subchapter
I of chapter 18 of Title 29, Labor. Title IV of the Act is
classified generally to subchapter III (Sec. 1301 et seq.) of
chapter 18 of Title 29. Sections 412, 4021, and 4050 of the Act are
classified to sections 1112, 1321, and 1350, respectively, of Title
29. For complete classification of this Act to the Code, see Short
Title note set out under section 1001 of Title 29 and Tables.
The Social Security Act, referred to in subsecs. (a)(15),
(l)(4)(C)(ii), (5)(A)(ii), (D)(ii), (E)(i), (F), is act Aug. 14,
1935, ch. 531, 49 Stat. 620, as amended, which is classified
generally to chapter 7 (Sec. 301 et seq.) of Title 42, The Public
Health and Welfare. Title II of the Social Security Act is
classified generally to subchapter II (Sec. 401 et seq.) of Title
42. Sections 223(d) and 230 of the Social Security Act are
classified to sections 423(d) and 430, respectively, of Title 42.
For complete classification of this Act to the Code, see section
1305 of Title 42 and Tables.
Section 521 of the Unemployment Compensation Amendments of 1992,
referred to in subsec. (a)(20), is section 521 of Pub. L. 102-318,
which amended section 402(a) to (f) of this title generally, and,
as so amended, subsec. (a) of section 402 does not contain a par.
(6)(B).
The Railroad Retirement Act of 1974, referred to in subsec.
(l)(6), is act Aug. 29, 1935, ch. 812, as amended generally by Pub.
L. 93-445, title I, Sec. 101, Oct. 16, 1974, 88 Stat. 1305, which
is classified generally to subchapter IV (Sec. 231 et seq.) of
chapter 9 of Title 45, Railroads. For further details and complete
classification of this Act to the Code, see Codification note set
out preceding section 231 of Title 45, section 231t of Title 45,
and Tables.
-MISC1-
AMENDMENTS
2002 - Subsec. (a)(30). Pub. L. 107-147, Sec. 411(o)(2),
substituted "402(g)(1)(A)" for "402(g)(1)".
Subsec. (a)(31)(C)(i). Pub. L. 107-147, Sec. 411(q)(1), inserted
"is a qualified trust which is part of a plan which is a defined
contribution plan and" before "agrees".
2001 - Subsec. (a)(17). Pub. L. 107-16, Secs. 611(c)(1), 901,
temporarily substituted "$200,000" for "$150,000" in two places.
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a)(17)(B). Pub. L. 107-16, Secs. 611(c)(2), 901,
temporarily substituted "July 1, 2001" for "October 1, 1993" and
temporarily substituted "$5,000" for "$10,000" in two places. See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a)(31). Pub. L. 107-16, Secs. 657(a)(2)(A), 901,
temporarily substituted "Direct" for "Optional direct" in heading.
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a)(31)(B). Pub. L. 107-16, Secs. 657(a)(1), 901,
temporarily added subpar. (B). Former subpar. (B) redesignated (C).
See Effective and Termination Dates of 2001 Amendment note below.
Pub. L. 107-16, Secs. 643(b), 901, temporarily inserted at end
"The preceding sentence shall not apply to such distribution if the
plan to which such distribution is transferred -
"(i) agrees to separately account for amounts so transferred,
including separately accounting for the portion of such
distribution which is includible in gross income and the portion
of such distribution which is not so includible, or
"(ii) is an eligible retirement plan described in clause (i) or
(ii) of section 402(c)(8)(B)."
See Effective and Termination Dates of 2001 Amendment note below.
Pub. L. 107-16, Secs. 641(e)(3), 901, temporarily substituted ",
403(a)(4), 403(b)(8), and 457(e)(16)" for "and 403(a)(4)". See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a)(31)(C). Pub. L. 107-16, Secs. 657(a)(2)(B), 901,
temporarily substituted "Subparagraphs (A) and (B)" for
"Subparagraph (A)". See Effective and Termination Dates of 2001
Amendment note below.
Pub. L. 107-16, Secs. 657(a)(1), 901, temporarily redesignated
subpar. (B) as (C). Former subpar. (C) redesignated (D). See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a)(31)(D), (E). Pub. L. 107-16, Secs. 657(a)(1), 901,
temporarily redesignated subpars. (C) and (D) as (D) and (E),
respectively. See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (c)(2)(A). Pub. L. 107-16, Secs. 611(g)(1), 901,
temporarily inserted at end "For purposes of this part only (other
than sections 419 and 419A), this subparagraph shall be applied as
if the term 'trade or business' for purposes of section 1402
included service described in section 1402(c)(6)." See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (k)(2)(B)(i)(I). Pub. L. 107-16, Secs. 646(a)(1)(A), 901,
temporarily substituted "severance from employment" for "separation
from service". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (k)(10). Pub. L. 107-16, Secs. 646(a)(1)(C)(iii), 901,
temporarily struck out "or disposition of assets or subsidiary"
after "plan" in heading. See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (k)(10)(A). Pub. L. 107-16, Secs. 646(a)(1)(B), 901,
temporarily reenacted heading without change and amended text
generally, substituting present provisions for provisions including
termination of plan, disposition of assets, and disposition of
subsidiary as events described in this paragraph. See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (k)(10)(B)(i). Pub. L. 107-16, Secs. 646(a)(1)(C)(i),
901, temporarily substituted "A termination" for "An event" and
"the termination" for "the event". See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (k)(10)(C). Pub. L. 107-16, Secs. 646(a)(1)(C)(ii), 901,
temporarily struck out heading and text of subpar. (C). Text read
as follows: "An event shall not be treated as described in clause
(ii) or (iii) of subparagraph (A) unless the transferor corporation
continues to maintain the plan after the disposition." See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (k)(11)(B)(i)(I). Pub. L. 107-16, Secs. 611(f)(3)(A),
901, temporarily substituted "the amount in effect under section
408(p)(2)(A)(ii)" for "$6,000". See Effective and Termination Dates
of 2001 Amendment note below.
Subsec. (k)(11)(E). Pub. L. 107-16, Secs. 611(f)(3)(B), 901,
temporarily struck out heading and text of subpar. (E). Text read
as follows: "The Secretary shall adjust the $6,000 amount under
subparagraph (B)(i)(I) at the same time and in the same manner as
under section 408(p)(2)(E)." See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (m)(9). Pub. L. 107-16, Secs. 666(a), 901, temporarily
reenacted heading without change and amended text generally. Prior
to amendment, text read as follows: "The Secretary shall prescribe
such regulations as may be necessary to carry out the purposes of
this subsection and subsection (k) including -
"(A) such regulations as may be necessary to prevent the
multiple use of the alternative limitation with respect to any
highly compensated employee, and
"(B) regulations permitting appropriate aggregation of plans
and contributions.
For purposes of the preceding sentence, the term 'alternative
limitation' means the limitation of section 401(k)(3)(A)(ii)(II)
and the limitation of paragraph (2)(A)(ii) of this subsection."
See Effective and Termination Dates of 2001 Amendment note below.
2000 - Subsec. (k)(10)(B)(ii). Pub. L. 106-554 inserted at end
"Such term includes a distribution of an annuity contract from -
"(I) a trust which forms a part of a plan described in section
401(a) and which is exempt from tax under section 501(a), or
"(II) an annuity plan described in section 403(a)."
1997 - Subsec. (a)(1). Pub. L. 105-34, Sec. 1530(c)(1), inserted
"or by a charitable remainder trust pursuant to a qualified
gratuitous transfer (as defined in section 664(g)(1))," after
"stock bonus plans),".
Subsec. (a)(5)(G). Pub. L. 105-34, Sec. 1505(a)(1), added subpar.
(G).
Subsec. (a)(13)(C), (D). Pub. L. 105-34, Sec. 1502(b), added
subpars. (C) and (D).
Subsec. (a)(26)(H). Pub. L. 105-34, Sec. 1505(a)(2), amended
heading and text of subpar. (H) generally. Prior to amendment, text
read as follows:
"(i) In general. - An employer may elect to have this paragraph
applied separately with respect to any classification of qualified
public safety employees for whom a separate plan is maintained.
"(ii) Qualified public safety employee. - For purposes of this
subparagraph, the term 'qualified public safety employee' means any
employee of any police department or fire department organized and
operated by a State or political subdivision if the employee
provides police protection, firefighting services, or emergency
medical services for any area within the jurisdiction of such State
or political subdivision."
Subsec. (k)(3)(G). Pub. L. 105-34, Sec. 1505(b), added subpar.
(G).
Subsec. (k)(7)(B)(iii) to (v). Pub. L. 105-34, Sec. 1525(a),
struck out "and" at end of cl. (iii), added cl. (iv), redesignated
former cl. (iv) as (v), and in cl. (v), substituted ", (iii), or
(iv)" for "or (iii)".
Subsec. (k)(11)(B)(iii). Pub. L. 105-34, Sec. 1601(d)(2)(D),
added cl. (iii).
Subsec. (k)(11)(D)(ii). Pub. L. 105-34, Sec. 1601(d)(2)(A),
inserted "if such plan allows only contributions required under
this paragraph" before period at end.
Subsec. (k)(11)(E). Pub. L. 105-34, Sec. 1601(d)(2)(B), added
subpar. (E).
Subsec. (m)(11). Pub. L. 105-34, Sec. 1601(d)(3), substituted
"Additional alternative" for "Alternative" in heading.
1996 - Subsec. (a)(5)(D)(ii). Pub. L. 104-188, Sec.
1431(c)(1)(B), substituted "section 414(q)(4)" for "section
414(q)(7)" in introductory provisions.
Subsec. (a)(5)(F). Pub. L. 104-188, Sec. 1445(a), added subpar.
(F).
Subsec. (a)(9)(C). Pub. L. 104-188, Sec. 1404(a), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "For purposes of this paragraph,
the term 'required beginning date' means April 1 of the calendar
year following the calendar year in which the employee attains age
70 1/2 . In the case of a governmental plan or church plan, the
required beginning date shall be the later of the date determined
under the preceding sentence or April 1 of the calendar year
following the calendar year in which the employee retires. For
purposes of this subparagraph, the term 'church plan' means a plan
maintained by a church for church employees, and the term 'church'
means any church (as defined in section 3121(w)(3)(A)) or qualified
church-controlled organization (as defined in section
3121(w)(3)(B))."
Subsec. (a)(17)(A). Pub. L. 104-188, Sec. 1431(b)(2), struck out
at end "In determining the compensation of an employee, the rules
of section 414(q)(6) shall apply, except that in applying such
rules, the term 'family' shall include only the spouse of the
employee and any lineal descendants of the employee who have not
attained age 19 before the close of the year."
Subsec. (a)(20). Pub. L. 104-188, Sec. 1704(t)(67), substituted
"section 521" for "section 211" in last sentence.
Subsec. (a)(26)(A). Pub. L. 104-188, Sec. 1432(a), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "A trust shall not constitute a
qualified trust under this subsection unless such trust is part of
a plan which on each day of the plan year benefits the lesser of -
"(i) 50 employees of the employer, or
"(ii) 40 percent or more of all employees of the employer."
Subsec. (a)(26)(G). Pub. L. 104-188, Sec. 1432(b), substituted
"paragraph (2)(A) or (7)" for "paragraph (7)".
Subsec. (a)(28)(B)(v). Pub. L. 104-188, Sec. 1401(b)(5), struck
out cl. (v) which read as follows:
"(v) Coordination with distribution rules. - Any distribution
required by this subparagraph shall not be taken into account in
determining whether a subsequent distribution is a lump sum
distribution under section 402(d)(4)(A) or in determining whether
section 402(c)(10) applies."
Subsec. (d). Pub. L. 104-188, Sec. 1441(a), amended subsec. (d)
generally, substituting provisions relating to contribution limit
on owner-employees for former provisions relating to additional
requirements for qualification of trusts and plans benefiting
owner-employees.
Subsec. (h). Pub. L. 104-188, Sec. 1704(a), provided that, except
as otherwise expressly provided, whenever in title XII of Pub. L.
101-508 an amendment or repeal is expressed in terms of an
amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986. Section 12011(b) of
title XII of Pub. L. 101-508 directed the amendment of this section
without specifying that the amendment was to the Internal Revenue
Code of 1986. See 1990 Amendment note below.
Subsec. (k)(3)(A). Pub. L. 104-188, Sec. 1433(c)(1), in
introductory provisions of cl. (ii) substituted "the plan year" for
"such year" and "for the preceding plan year" for "for such plan
year" and inserted at end of closing provisions of subpar. (A) "An
arrangement may apply clause (ii) by using the plan year rather
than the preceding plan year if the employer so elects, except that
if such an election is made, it may not be changed except as
provided by the Secretary."
Subsec. (k)(3)(E). Pub. L. 104-188, Sec. 1433(d)(1), added
subpar. (E).
Subsec. (k)(3)(F). Pub. L. 104-188, Sec. 1459(a), added subpar.
(F).
Subsec. (k)(4)(B). Pub. L. 104-188, Sec. 1426(a), amended subpar.
(B) generally. Prior to amendment, subpar. (B) read as follows:
"(B) State and local governments and tax-exempt organizations not
eligible. - A cash or deferred arrangement shall not be treated as
a qualified cash or deferred arrangement if it is part of a plan
maintained by -
"(i) a State or local government or political subdivision
thereof, or any agency or instrumentality thereof, or
"(ii) any organization exempt from tax under this subtitle.
This subparagraph shall not apply to a rural cooperative plan."
Subsec. (k)(7)(B)(i). Pub. L. 104-188, Sec. 1443(b), amended cl.
(i) generally. Prior to amendment, cl. (i) read as follows: "any
organization which -
"(I) is exempt from tax under this subtitle or which is a State
or local government or political subdivision thereof (or agency
or instrumentality thereof), and
"(II) is engaged primarily in providing electric service on a
mutual or cooperative basis,".
Subsec. (k)(7)(C). Pub. L. 104-188, Sec. 1443(a), added subpar.
(C).
Subsec. (k)(8)(C). Pub. L. 104-188, Sec. 1433(e)(1), substituted
"on the basis of the amount of contributions by, or on behalf of,
each of such employees" for "on the basis of the respective
portions of the excess contributions attributable to each of such
employees".
Subsec. (k)(10)(B)(ii). Pub. L. 104-188, Sec. 1401(b)(6), amended
cl. (ii) generally. Prior to amendment, cl. (ii) read as follows:
"(ii) Lump sum distribution. - For purposes of this subparagraph,
the term 'lump sum distribution' has the meaning given such term by
section 402(d)(4), without regard to clauses (i), (ii), (iii), and
(iv) of subparagraph (A), subparagraph (B), or subparagraph (F)
thereof."
Subsec. (k)(11). Pub. L. 104-188, Sec. 1422(a), added par. (11).
Subsec. (k)(12). Pub. L. 104-188, Sec. 1433(a), added par. (12).
Subsec. (m)(2)(A). Pub. L. 104-188, Sec. 1433(c)(2), inserted
"for such plan year" after "highly compensated employees" in
introductory provisions, inserted "for the preceding plan year"
after "eligible employees" wherever appearing in cls. (i) and (ii),
and inserted at end "This subparagraph may be applied by using the
plan year rather than the preceding plan year if the employer so
elects, except that if such an election is made, it may not be
changed except as provided by the Secretary."
Subsec. (m)(3). Pub. L. 104-188, Sec. 1433(d)(2), inserted at end
of closing provisions "Rules similar to the rules of subsection
(k)(3)(E) shall apply for purposes of this subsection."
Subsec. (m)(5)(C). Pub. L. 104-188, Sec. 1459(b), added subpar.
(C).
Subsec. (m)(6)(C). Pub. L. 104-188, Sec. 1433(e)(2), substituted
"on the basis of the amount of contributions on behalf of, or by,
each such employee" for "on the basis of the respective portions of
such amounts attributable to each of such employees".
Subsec. (m)(10). Pub. L. 104-188, Sec. 1422(b), added par. (10).
Former par. (10) redesignated (11).
Subsec. (m)(11). Pub. L. 104-188, Sec. 1433(b), added par. (11).
Former par. (11) redesignated (12).
Pub. L. 104-188, Sec. 1422(b), redesignated par. (10) as (11).
Subsec. (m)(12). Pub. L. 104-188, Sec. 1433(b), redesignated par.
(11) as (12).
1994 - Subsec. (a)(17)(B). Pub. L. 103-465, Sec. 732(a),
reenacted subpar. (B) heading without change and amended text
generally. Prior to amendment, text read as follows:
"(i) In general. - If, for any calendar year after 1994, the
excess (if any) of -
"(I) $150,000, increased by the cost-of-living adjustment for
the calendar year, over
"(II) the dollar amount in effect under subparagraph (A) for
taxable years beginning in the calendar year,
is equal to or greater than $10,000, then the $150,000 amount under
subparagraph (A) (as previously adjusted under this subparagraph)
for any taxable year beginning in any subsequent calendar year
shall be increased by the amount of such excess, rounded to the
next lowest multiple of $10,000.
"(ii) Cost-of-living adjustment. - The cost-of-living adjustment
for any calendar year shall be the adjustment made under section
415(d) for such calendar year, except that the base period for
purposes of section 415(d)(1)(A) shall be the calendar quarter
beginning October 1, 1993."
Subsec. (a)(32). Pub. L. 103-465, Sec. 751(a)(9)(C), which
directed amendment of subsec. (a) by adding par. (32) at end, was
executed by adding par. (32) after par. (31) to reflect the
probable intent of Congress.
Subsec. (a)(33). Pub. L. 103-465, Sec. 766(b), which directed
amendment of subsec. (a) by adding par. (33) at end, was executed
by adding par. (33) after par. (32) to reflect the probable intent
of Congress.
Subsec. (a)(34). Pub. L. 103-465, Sec. 776(d), added par. (34).
1993 - Subsec. (a)(17). Pub. L. 103-66 inserted par. heading,
designated existing provisions as subpar. (A), inserted subpar.
heading, substituted "$150,000" for "$200,000" in first sentence,
struck out after first sentence "The Secretary shall adjust the
$200,000 amount at the same time and in the same manner as under
section 415(d).", and added subpar. (B).
1992 - Subsec. (a)(20). Pub. L. 102-318, Sec. 521(b)(5),
substituted "1 or more distributions within 1 taxable year to a
distributee on account of a termination of the plan of which the
trust is a part, or in the case of a profit-sharing or stock bonus
plan, a complete discontinuance of contributions under such plan"
for "a qualified total distribution described in section
402(a)(5)(E)(i)(I)" and inserted at end "For purposes of this
paragraph, rules similar to the rules of section 402(a)(6)(B) (as
in effect before its repeal by section 211 of the Unemployment
Compensation Amendments of 1992) shall apply."
Subsec. (a)(28)(B)(v). Pub. L. 102-318, Sec. 521(b)(6), amended
cl. (v) generally. Prior to amendment, cl. (v) read as follows:
"Any distribution required by this subparagraph shall not be taken
into account in determining whether -
"(I) a subsequent distribution is a lump-sum distribution under
section 402(e)(4)(A), or
"(II) section 402(a)(5)(D)(iii) applies to a subsequent
distribution."
Subsec. (a)(31). Pub. L. 102-318, Sec. 522(a)(1), added par.
(31).
Subsec. (k)(2)(B)(i)(IV). Pub. L. 102-318, Sec. 521(b)(7),
substituted "402(e)(3)" for "402(a)(8)".
Subsec. (k)(10)(B)(ii). Pub. L. 102-318, Sec. 521(b)(8),
substituted "402(d)(4)" for "402(e)(4)" and "subparagraph (F)" for
"subparagraph (H)".
1990 - Subsec. (h). Pub. L. 101-508, which directed that "section
401(h) is amended by inserting ', and subject to the provisions of
section 420' " without specifying that amendment was to the
Internal Revenue Code of 1986, was executed by making the insertion
in subsec. (h) of this section. See 1996 Amendment note above.
1989 - Subsec. (a)(9)(C). Pub. L. 101-140 struck out "(as defined
in section 89(i)(4))" after "governmental or church plan" and
inserted at end "For purposes of this subparagraph, the term
'church plan' means a plan maintained by a church for church
employees, and the term 'church' means any church (as defined in
section 3121(w)(3)(A)) or qualified church-controlled organization
(as defined in section 3121(w)(3)(B))."
Subsec. (a)(28)(B)(ii)(II). Pub. L. 101-239, Sec. 7811(h)(3),
made technical correction to directory language of Pub. L. 100-647,
Sec. 1011B(j)(1), see 1988 Amendment note below.
Subsec. (a)(29)(A)(i). Pub. L. 101-239, Sec. 7881(i)(4)(A),
substituted "multiemployer plan) to which the requirements of
section 412 apply" for "multiemployer plan)".
Subsec. (a)(29)(C)(i)(II). Pub. L. 101-239, Sec. 7881(i)(1)(A),
substituted "plan amendment and any other plan amendments adopted
after December 22, 1987, and before such plan amendment" for "plan
amendment".
Subsec. (a)(30). Pub. L. 101-239, Sec. 7811(g)(1), moved par.
(30) from a position after the undesignated closing par. to a
position immediately after par. (29).
Subsec. (h). Pub. L. 101-239, Sec. 7311(a), inserted at end "In
no event shall the requirements of paragraph (1) be treated as met
if the aggregate actual contributions for medical benefits, when
added to actual contributions for life insurance protection under
the plan, exceed 25 percent of the total actual contributions to
the plan (other than contributions to fund past service credits)
after the date on which the account is established."
Subsec. (k)(4)(B). Pub. L. 101-239, Sec. 7816(l), amended Pub. L.
100-647, Sec. 6071(b)(2), see 1988 Amendment note below.
1988 - Subsec. (a)(9)(C). Pub. L. 100-647, Sec. 6053(a), inserted
at end "In the case of a governmental plan or church plan (as
defined in section 89(i)(4)), the required beginning date shall be
the later of the date determined under the preceding sentence or
April 1 of the calendar year following the calendar year in which
the employee retires."
Subsec. (a)(11)(E), (F). Pub. L. 100-647, Sec. 1011A(l),
redesignated subpar. (E), relating to cross reference, as (F).
Subsec. (a)(17). Pub. L. 100-647, Sec. 1011(d)(4), inserted at
end "In determining the compensation of an employee, the rules of
section 414(q)(6) shall apply, except that in applying such rules,
the term 'family' shall include only the spouse of the employee and
any lineal descendants of the employee who have not attained age 19
before the close of the year."
Subsec. (a)(22). Pub. L. 100-647, Sec. 1011B(k)(1), (2),
substituted "is not readily tradable on an established market" for
"is not publicly traded" in subpar. (A) and in last sentence, and
inserted at end "For purposes of the preceding sentence,
subsections (b), (c), (m), and (o) of section 414 shall not apply
except for determining whether stock of the employer is not readily
tradable on an established market."
Subsec. (a)(26)(F), (G). Pub. L. 100-647, Sec. 1011(h)(3), added
subpars. (F) and (G). Former subpar. (F) redesignated (H).
Subsec. (a)(26)(H). Pub. L. 100-647, Sec. 6055(a), added subpar.
(H). Former subpar. (H) redesignated (I).
Pub. L. 100-647, Sec. 1011(h)(3), redesignated former subpar. (F)
as (H).
Subsec. (a)(26)(I). Pub. L. 100-647, Sec. 6055(a), redesignated
former subpar. (H) as (I).
Subsec. (a)(27). Pub. L. 100-647, Sec. 1011A(j), inserted par.
heading, designated existing provisions as subpar. (A), inserted
subpar. (A) heading, and added subpar. (B).
Subsec. (a)(28)(B)(ii)(II). Pub. L. 100-647, Sec. 1011B(j)(1), as
amended by Pub. L. 101-239, Sec. 7811(h)(3), inserted "and within
90 days after the period during which the election may be made, the
plan invests the portion of the participant's account covered by
the election in accordance with such election" after "clause (i)".
Subsec. (a)(28)(B)(iv). Pub. L. 100-647, Sec. 1011B(d)(2),
amended cl. (iv) generally. Prior to amendment, cl. (iv) read as
follows: "For purposes of this subparagraph, the term 'qualified
election period' means the 5-plan-year period beginning with the
plan year after the plan year in which the participant attains age
55 (or, if later, beginning with the plan year after the 1st plan
year in which the individual 1st became a qualified participant)."
Subsec. (a)(28)(B)(v). Pub. L. 100-647, Sec. 1011B(j)(6), added
cl. (v).
Subsec. (a)(30). Pub. L. 100-647, Sec. 1011(c)(7)(A), added par.
(30) at end.
Subsec. (k)(1), (2). Pub. L. 100-647, Sec. 6071(a), struck out
"electric" after "or a rural".
Subsec. (k)(2)(B). Pub. L. 100-647, Sec. 1011(k)(2)(A), inserted
"amounts held by the trust which are attributable to employer
contributions made pursuant to the employee's election" after
"under which".
Subsec. (k)(2)(B)(i). Pub. L. 100-647, Sec. 1011(k)(2)(B), struck
out "amounts held by the trust which are attributable to employer
contributions made pursuant to the employee's election" before "may
not be".
Pub. L. 100-647, Sec. 1011(k)(1)(A), added subcl. (II),
redesignated former subcls. (V) and (VI) as (III) and (IV),
respectively, and struck out former subcls. (II) to (IV) which read
as follows:
"(II) termination of the plan without establishment of a
successor plan,
"(III) the date of the sale by a corporation of substantially all
of the assets (within the meaning of section 409(d)(2)) used by
such corporation in a trade or business of such corporation with
respect to an employee who continues employment with the
corporation acquiring such assets,
"(IV) the date of the sale by a corporation of such corporation's
interest in a subsidiary (within the meaning of section 409(d)(3))
with respect to an employee who continues employment with such
subsidiary,".
Subsec. (k)(2)(B)(ii). Pub. L. 100-647, Sec. 1011(k)(2)(C),
struck out "amounts" before "will not be".
Subsec. (k)(3)(A). Pub. L. 100-647, Sec. 1011(k)(3)(B), made
technical correction to Pub. L. 99-514, Sec. 1116(b)(4). See 1986
Amendment note below.
Subsec. (k)(3)(A)(ii). Pub. L. 100-647, Sec. 1011(k)(3)(A),
inserted "eligible" before "highly compensated employees" in
introductory text, in subcl. (I), and in two places in subcl. (II).
Subsec. (k)(3)(C), (D). Pub. L. 100-647, Sec. 1011(k)(4), (5),
redesignated subpar. (C), relating to employer contributions, as
(D), and substituted "meet" for "meets" in cl. (ii)(I).
Subsec. (k)(4)(A). Pub. L. 100-647, Sec. 1011(k)(6), struck out
"provided by such employer" after "any other benefit".
Subsec. (k)(4)(B). Pub. L. 100-647, Sec. 6071(b)(2), as amended
by Pub. L. 101-239, Sec. 7816(l), substituted "rural cooperative
plan" for "rural electric cooperative plan" in last sentence.
Pub. L. 100-647, Sec. 1011(k)(9), inserted at end "This
subparagraph shall not apply to a rural electric cooperative plan."
Subsec. (k)(7). Pub. L. 100-647, Sec. 6071(b)(1), substituted
"Rural cooperative plan" for "Rural electric cooperative plan" in
heading and amended text generally. Prior to amendment, text read
as follows: "For purposes of this subsection -
"(A) In general. - The term 'rural cooperative plan' means any
pension plan -
"(i) which is a defined contribution plan (as defined in
section 414(i)), and
"(ii) which is established and maintained by a rural
cooperative.
"(B) Rural cooperative defined. - For purposes of subparagraph
(A), the term 'rural cooperative' means -
"(i) any organization which -
"(I) is exempt from tax under this subtitle or which is a
State or local government or political subdivision thereof
(or agency or instrumentality thereof), and
"(II) is engaged primarily in providing electric service on
a mutual or cooperative basis,
"(ii) any organization described in paragraph (4) or (6) of
section 501(c) and at least 80 percent of the members of which
are organizations described in clause (i), and
"(iii) an organization which is a national association of
organizations described in clause (i) or (ii)."
Pub. L. 100-647, Sec. 1011(e)(3), amended par. (7) generally.
Prior to amendment, par. (7) read as follows: "For purposes of this
subsection, the term 'rural electric cooperative plan' means any
pension plan -
"(A) which is a defined contribution plan (as defined in
section 414(i)), and
"(B) which is established and maintained by a rural electric
cooperative (as defined in section 457(d)(9)(B)) or a national
association of such rural electric cooperatives."
Subsec. (k)(8)(E), (F). Pub. L. 100-647, Sec. 1011(k)(7), added
subpar. (E) and redesignated former subpar. (E) as (F).
Subsec. (k)(10). Pub. L. 100-647, Sec. 1011(k)(1)(B), added par.
(10).
Subsec. (l)(2)(B)(i), (ii). Pub. L. 100-647, Sec. 1011(g)(1)(A),
substituted "contributed by the employer under" for "contributed
under".
Subsec. (l)(3)(A)(ii). Pub. L. 100-647, Sec. 1011(g)(1)(B),
inserted "attributable to employer contributions" after "basis of
benefits".
Subsec. (l)(5)(C). Pub. L. 100-647, Sec. 1011(g)(2), amended
subpar. (C) generally. Prior to amendment, subpar. (C) read as
follows: "The term 'average annual compensation' means the greater
of -
"(i) the participant's final average compensation (determined
without regard to subparagraph (D)(ii)), or
"(ii) the participant's highest average annual compensation for
any other period of at least 3 consecutive years."
Subsec. (l)(5)(E). Pub. L. 100-647, Sec. 1011(g)(3), substituted
"the social security retirement age" for "age 65" in cl. (i) and in
two places in cl. (ii), and added cl. (iii).
Subsec. (m)(1). Pub. L. 100-647, Sec. 1011(l)(1), substituted "A
defined contribution plan" for "A plan".
Subsec. (m)(2)(B). Pub. L. 100-647, Sec. 1011(l)(3), substituted
"contributions to which this subsection applies are made" for "such
contributions are made".
Subsec. (m)(3). Pub. L. 100-647, Sec. 1011(l)(2), inserted at end
"If matching contributions are taken into account for purposes of
subsection (k)(3)(A)(ii) for any plan year, such contributions
shall not be taken into account under subparagraph (A) for such
year."
Subsec. (m)(4)(A)(i), (ii). Pub. L. 100-647, Sec. 1011(l)(4),
substituted "a defined contribution plan" for "the plan".
Subsec. (m)(4)(B). Pub. L. 100-647, Sec. 1011(l)(5)(A),
substituted "section 402(g)(3)" for "section 402(g)(3)(A)".
Subsec. (m)(6)(C). Pub. L. 100-647, Sec. 1011(l)(6), substituted
"excess aggregate contributions" for "excess contributions" in
heading.
Subsec. (m)(7)(A). Pub. L. 100-647, Sec. 1011(l)(7), substituted
"paragraph (6)" for "paragraph (8)".
1987 - Subsec. (a)(29). Pub. L. 100-203 added par. (29).
1986 - Subsec. (a)(4). Pub. L. 99-514, Sec. 1114(b)(7), amended
par. (4) generally. Prior to amendment, par. (4) read as follows:
"if the contributions or the benefits provided under the plan do
not discriminate in favor of employees who are -
"(A) officers,
"(B) shareholders, or
"(C) highly compensated.
For purposes of this paragraph, there shall be excluded from
consideration employees described in section 410(b)(3)(A) and (C)."
Subsec. (a)(5). Pub. L. 99-514, Sec. 1111(b), amended par. (5)
generally. Prior to amendment, par. (5) related to conditions which
taken alone would not require a classification to be considered
discriminatory and means of determining the basic or regular rate
of compensation of an employee and whether two or more plans of an
employer satisfy requirements of par. (4) when considered as a
single plan.
Subsec. (a)(8). Pub. L. 99-514, Sec. 1119(a), substituted
"defined benefit plan" for "pension plan".
Subsec. (a)(9)(C). Pub. L. 99-514, Sec. 1121(b), amended subpar.
(C) generally. Prior to amendment, subpar. (C) read as follows:
"For purposes of this paragraph, the term 'required beginning date'
means April 1 of the calendar year following the later of -
"(i) the calendar year in which the employee attains age 70 1/2
, or
"(ii) the calendar year in which the employee retires.
Clause (ii) shall not apply in the case of an employee who is a
5-percent owner (as defined in section 416(i)(1)(B)) at any time
during the 5-plan-year period ending in the calendar year in which
the employee attains age 70 1/2 . If the employee becomes a
5-percent owner during any subsequent plan year, the required
beginning date shall be April 1 of the calendar year following the
calendar year in which such subsequent plan year ends."
Pub. L. 99-514, Sec. 1852(a)(4)(A), substituted last 2 sentences
for "Except as provided in section 409(d), clause (ii) shall not
apply in the case of an employee who is a 5-percent owner (as
defined in section 416) with respect to the plan year ending in the
calendar year in which the employee attains 70 1/2 ."
Subsec. (a)(9)(G). Pub. L. 99-514, Sec. 1852(a)(6), added subpar.
(G).
Subsec. (a)(11)(A)(i). Pub. L. 99-514, Sec. 1898(b)(3)(A),
substituted "who does not die before the annuity starting date" for
"who retires under the plan".
Subsec. (a)(11)(B). Pub. L. 99-514, Sec. 1898(b)(2)(A)(ii),
inserted at end "Clause (iii)(III) shall apply only with respect to
the transferred assets (and income therefrom) if the plan
separately accounts for such assets and any income therefrom."
Subsec. (a)(11)(B)(iii)(I). Pub. L. 99-514, Sec. 1898(b)(7)(A),
inserted "(reduced by any security interest held by the plan by
reason of a loan outstanding to such participant)".
Pub. L. 99-514, Sec. 1898(b)(13)(A), substituted "section
417(a)(2)" for "section 417(a)(2)(A)".
Subsec. (a)(11)(B)(iii)(III). Pub. L. 99-514, Sec.
1898(b)(2)(A)(i), inserted "(in a transfer after December 31,
1984)".
Subsec. (a)(11)(D), (E). Pub. L. 99-514, Sec. 1145(a), added
subpar. (E) relating to exception for plans described in section
404(c) and redesignated former subpar. (D), relating to cross
references, as (E).
Pub. L. 99-514, Sec. 1898(b)(14)(A), added subpar. (D) and
redesignated former subpar. (D), relating to cross references, as
(E).
Subsec. (a)(17). Pub. L. 99-514, Sec. 1106(d)(1), added par.
(17).
Subsec. (a)(20). Pub. L. 99-514, Sec. 1852(b)(8), substituted
"qualified total distribution described in section
402(a)(5)(E)(i)(I)" for "qualifying rollover distribution
(determined as if section 402(a)(5)(D)(i) did not contain subclause
(II) thereof) described in section 402(a)(5)(A)(i) or
403(a)(4)(A)(i)".
Subsec. (a)(21). Pub. L. 99-514, Sec. 1171(b)(5), struck out par.
(21) which read as follows: "A trust forming part of a tax credit
employee stock ownership plan shall not fail to be considered a
permanent program merely because employer contributions under the
plan are determined solely by reference to the amount of credit
which would be allowable under section 41 if the employer made the
transfer described in section 41(c)(1)(B)".
Subsec. (a)(22). Pub. L. 99-514, Sec. 1899A(10), substituted "If"
for "if".
Pub. L. 99-514, Sec. 1176(a), inserted at end "The requirements
of subsection (e) of section 409 shall not apply to any employees
of an employer who are participants in any defined contribution
plan established and maintained by such employer if the stock of
such employer is not publicly traded and the trade or business of
such employer consists of publishing on a regular basis a newspaper
for general circulation."
Subsec. (a)(23). Pub. L. 99-514, Sec. 1174(c)(2)(A), amended par.
(23) generally. Prior to amendment, par. (23) read as follows: "A
stock bonus plan which otherwise meets the requirements of this
section shall not be considered to fail to meet the requirements of
this section because it provides a cash distribution option to
participants if that option meets the requirements of section
409(h), except that in applying section 409(h) for purposes of this
paragraph, the term 'employer securities' shall include any
securities of the employer held by the plan."
Subsec. (a)(26). Pub. L. 99-514, Sec. 1112(b), added par. (26).
Subsec. (a)(27). Pub. L. 99-514, Sec. 1136(a), added par. (27).
Subsec. (a)(28). Pub. L. 99-514, Sec. 1175(a)(1), added par.
(28).
Subsec. (c)(2)(A)(v). Pub. L. 99-514, Sec. 1848(b), substituted
"section 404" for "sections 404 and 405(c)".
Subsec. (c)(6). Pub. L. 99-514, Sec. 1143(a), added par. (6).
Subsec. (h). Pub. L. 99-514, Sec. 1852(h)(1), substituted "key
employee" for "5-percent owner" in two places in par. (6) and
amended last sentence generally, substituting " 'key employee'
means any employee, who" for " '5-percent owner' means any employee
who," and "key employee as defined in section 416(i)" for
"5-percent owner (as defined in section 416(i)(1)(B))".
Subsec. (k)(1), (2). Pub. L. 99-514, Sec. 1879(g)(1), substituted
", a pre-ERISA money purchase plan, or a rural electric cooperative
plan" for "(or a pre-ERISA money purchase plan)".
Subsec. (k)(2)(B). Pub. L. 99-514, Sec. 1116(b)(1), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "under which amounts held by the trust which are
attributable to employer contributions made pursuant to the
employee's election may not be distributable to participants or
other beneficiaries earlier than upon retirement, death,
disability, or separation from service (or in the case of a profit
sharing or stock bonus plan, hardship or the attainment of age 59
1/2 ) and will not be distributable merely by reason of the
completion of a stated period of participation or the lapse of a
fixed number of years; and".
Subsec. (k)(2)(C). Pub. L. 99-514, Sec. 1852(g)(3), substituted
"is nonforfeitable" for "are nonforfeitable".
Subsec. (k)(2)(D). Pub. L. 99-514, Sec. 1116(b)(2), added subpar.
(D).
Subsec. (k)(3). Pub. L. 99-514, Sec. 1116(d)(3), which directed
that the last sentence of subpar. (B) be struck out was executed by
striking out the last sentence of par. (3) as the probable intent
of Congress because subpar. (B) is composed of only one sentence.
Prior to being stricken, such last sentence read as follows: "For
purposes of the preceding sentence, the compensation of any
employee for a plan year shall be the amount of his compensation
which is taken into account under the plan in calculating the
contribution which may be made on his behalf for such plan year."
Subsec. (k)(3)(A). Pub. L. 99-514, Sec. 1116(b)(4), as amended by
Pub. L. 100-647, Sec. 1011(k)(3)(B), substituted "any highly
compensated employee" for "an employee" in concluding provisions.
Pub. L. 99-514, Sec. 1852(g)(2), substituted "If an employee is a
participant under 2 or more cash or deferred arrangements of the
employer, for purposes of determining the deferral percentage with
respect to such employee, all such cash or deferred arrangements
shall be treated as 1 cash or deferred arrangement" for "The
deferral percentage taken into account under this subparagraph for
any employee who is a participant under 2 or more cash or deferred
arrangements of the employer shall be the sum of the deferral
percentages for such employee under each of such arrangements".
Subsec. (k)(3)(A)(i). Pub. L. 99-514, Sec. 1112(d)(1), struck out
"subparagraph (A) or (B) of" before "section 410(b)(1)".
Subsec. (k)(3)(A)(ii). Pub. L. 99-514, Sec. 1116(c)(2),
substituted "paragraph (5)" for "paragraph (4)".
Pub. L. 99-514, Sec. 1116(a), substituted "1.25" for "1.5" in
subcl. (I), and "2 percentage points" for "3 percentage points" and
"2" for "2.5" in subcl. (II).
Subsec. (k)(3)(C). Pub. L. 99-514, Sec. 1852(g)(1), added subpar.
(C) relating to treatment of cash or deferred arrangements.
Pub. L. 99-514, Sec. 1116(e), added subpar. (C) relating to
employer contributions.
Subsec. (k)(4). Pub. L. 99-514, Sec. 1116(b)(3), added par. (4).
Former par. (4) redesignated (5).
Subsec. (k)(5). Pub. L. 99-514, Sec. 1116(b)(3), (d)(1),
redesignated former par. (4) as (5) and substituted "the term
'highly compensated employee' has the meaning given such term by
section 414(q)" for "the term 'highly compensated employee' means
any employee who is more highly compensated than two-thirds of all
eligible employees, taking into account only compensation which is
considered in applying paragraph (3)". Former par. (5) redesignated
(6).
Subsec. (k)(6). Pub. L. 99-514, Sec. 1116(b)(3), redesignated
former par. (5) as (6). Former par. (6) redesignated (7).
Pub. L. 99-514, Sec. 1879(g)(2), added par. (6).
Subsec. (k)(7). Pub. L. 99-514, Sec. 1116(b)(3), redesignated
former par. (6) as (7).
Subsec. (k)(8). Pub. L. 99-514, Sec. 1116(c)(1), added par. (8).
Subsec. (k)(9). Pub. L. 99-514, Sec. 1116(d)(2), added par. (9).
Subsec. (l). Pub. L. 99-514, Sec. 1111(a), amended subsec. (l)
generally, substituting provisions relating to permitted disparity
in plan contributions or benefits for provisions relating to
nondiscriminatory coordination of defined contribution plans with
OASDI.
Subsec. (m). Pub. L. 99-514, Sec. 1117(a), added subsec. (m) and
redesignated former subsec. (m) as (n).
Pub. L. 99-514, Sec. 1898(c)(3), added subsec. (m).
Subsec. (n). Pub. L. 99-514, Sec. 1117(a), redesignated former
subsec. (m) as (n). Former subsec. (n) redesignated (o).
Pub. L. 99-514, Sec. 1898(c)(3), redesignated subsec. (o) as (n).
Subsec. (o). Pub. L. 99-514, Sec. 1117(a), redesignated former
subsec. (n) as (o).
Pub. L. 99-514, Sec. 1898(c)(3), redesignated subsec. (o) as (n).
1984 - Subsec. (a)(9). Pub. L. 98-369, Sec. 521(a)(1), amended
par. (9) generally, redesignating existing provisions as subpar.
(A) and in subpar. (A) as so redesignated struck out "In the case
of a plan which provides contributions or benefits for employees
some or all of whom are employees within the meaning of subsection
(c)(1)" before "a trust forming part of such plan", substituted
"the plan provides that the entire interest of each employee - "
for ", under the plan, the entire interest of each employee - ",
redesignated subpars. (A) and (B) as cls. (i) and (ii)
respectively, in cl. (i) as so redesignated substituted provisions
stating that a qualified plan provides that the entire interest
will be distributed to the employee not later than the beginning
date for former provisions which provided alternative dates for
providing interest, in cl. (ii) as so redesignated substituted
alternate distribution dates to be set in accordance with
regulations for former provisions stating that a qualified plan
shall be distributed not later than the taxable year in which the
taxpayer attains age 70 1/2 , and struck out the par. following cl.
(ii) which provided "A trust shall not be disqualified under this
paragraph by reason of distributions under a designation, prior to
the date of the enactment of this paragraph, by any employee under
the plan of which such trust is a part, of a method of distribution
which does not meet the terms of the preceding sentence.", and
added subpars. (B) to (F).
Pub. L. 98-369, Sec. 521(a)(2), repealed amendment made by Pub.
L. 97-248, Sec. 242(a). See 1982 Amendment note below.
Subsec. (a)(10)(B)(iii). Pub. L. 98-369, Sec. 524(d)(1), added
cl. (iii).
Subsec. (a)(11). Pub. L. 98-397, Sec. 203(a), amended par. (11)
generally, inserting provisions relating to preretirement survivor
annuities, and substituting present four subpars. for former eight
subpars.
Subsec. (a)(13). Pub. L. 98-397, Sec. 204(a), designated existing
provisions as subpar. (A), corrected the margin of subpar. (A), and
added subpar. (B).
Subsec. (a)(21). Pub. L. 98-369, Sec. 474(r)(13), substituted
provisions relating to the amount of the credit which would be
allowable under section 41 if the employer made the transfer
described in section 41(c)(1)(B) for former provisions which had
related to the amount of credit which would be allowable under
section 46(a) if the employer made the transfer described in
section 48(n)(1) or under section 44G if the employer made the
transfer described in section 44G(c)(1)(B).
Subsec. (a)(22). Pub. L. 98-369, Sec. 491(e)(4), substituted
"section 409" for "section 409A".
Subsec. (a)(23). Pub. L. 98-369, Sec. 491(e)(5), substituted
"section 409(h)" for "section 409A(h)" in two places.
Subsec. (a)(24). Pub. L. 98-369, Sec. 211(b)(5), substituted
"section 818(a)(6)" for "section 805(d)(6)".
Subsec. (a)(25). Pub. L. 98-397, Sec. 301(b), added par. (25).
Subsec. (e). Pub. L. 98-369, Sec. 713(d)(3), repealed subsec. (e)
which related to contributions for premiums on annuity, etc.,
contracts.
Subsec. (f)(2). Pub. L. 98-369, Sec. 713(c)(2)(A), substituted
"(as defined in section 408(n))" for "(as defined in subsection
(d)(1))".
Subsec. (h)(6). Pub. L. 98-369, Sec. 528(b), added par. (6).
Subsec. (k)(1), (2). Pub. L. 98-369, Sec. 527(b)(1), inserted
"(or a pre-ERISA money purchase plan)".
Subsec. (k)(2)(B). Pub. L. 98-369, Sec. 527(b)(3), substituted
"(or in the case of a profit sharing or stock bonus plan, hardship
or the attainment of age 59 1/2 )" for ", hardship or the
attainment of age 59 1/2 ,".
Subsec. (k)(3)(A). Pub. L. 98-369, Sec. 527(a), struck out
"qualified" before "cash or deferred arrangement", substituted
"shall not be treated as a qualified cash or deferred arrangement
unless" for "shall be considered to satisfy the requirements of
subsection (a)(4), with respect to the amount of contributions, and
of subparagraph (B) of section 410(b)(1) for a plan year if",
designated provisions beginning "those employees" and ending
"section 401(b)(1)" as cl. (i) and text following as cl. (ii),
redesignated former cls. (i) and (ii) as subcls. (I) and (II) and
inserted text following subcl. (II).
Subsec. (k)(5). Pub. L. 98-369, Sec. 527(b)(2), added par. (5).
1983 - Subsec. (a)(21). Pub. L. 97-448, Sec. 103(g)(2)(A),
designated part of existing provisions as subpar. (A) and added
subpar. (B).
Subsec. (c)(2)(A)(vi). Pub. L. 98-21 added cl. (vi).
Subsec. (d)(2). Pub. L. 97-448, Sec. 306(a)(12), substituted
"paragraph (1)(B)" for "paragraph (9)(B)".
Subsec. (d)(5). Pub. L. 97-448, Sec. 103(c)(10)(A), substituted
"Subparagraphs (A) and (B) shall not apply to contributions
described in subsection (e), and shall not apply to any deductible
employee contribution (as defined in section 72(o)(5))" for
"Subparagraphs (A) and (B) do not apply to contributions described
in subsection (e)" in second sentence.
Subsec. (j)(3). Pub. L. 97-448, Sec. 103(d)(2), substituted
"under subparagraph (A) of paragraph (2) shall be treated as
beginning a new period of plan participation with respect only to
such change" for "under subparagraph (A) of subsection (j)(2) shall
be treated as beginning a new period of plan participation" in last
sentence.
1982 - Subsec. (a)(9). Pub. L. 97-248, Sec. 242(a), which was
repealed by Pub. L. 98-369, Sec. 521(a)(2), had amended par. (9)
generally, redesignating existing provisions as subpar. (A), in
subpar. (A), as so redesignated, struck out preliminary provision
which limited the application of this paragraph to plans providing
contributions or benefits for employees some or all of whom were
employees within the meaning of subsec. (c)(1), redesignated former
subpars. (A) and (B) as cls. (i) and (ii) of subpar. (A), in cl.
(i), as so redesignated, substituted reference to a key employee
who is a participant in a top-heavy plan for former reference to
owner-employees (within the meaning of subsec. (c)(3)),
redesignated former cls. (i) and (ii) of subpar. (B) as subcls. (I)
and (II) of cl. (ii), struck out former provision that a trust
would not be disqualified under this paragraph by reason of
distributions under a designation, prior to the date of the
enactment of this paragraph, by any employee under the plan of
which such trust was a part, of a method of distribution which did
not meet the terms of this paragraph, and adding subpar. (B).
Subsec. (a)(10). Pub. L. 97-248, Sec. 237(e)(1), amended par.
(10) generally, redesignating subpar. (B) as (A) and striking out
former subpar. (A) relating to qualified trust as a trust forming
part of such plan, for provisions relating to discriminatory plans
with respect to nonapplicability of paragraph (3), the first and
second sentences of paragraph (5) and section 410 of this title.
Subsec. (a)(10)(B). Pub. L. 97-248, Sec. 240(b), added subpar.
(B).
Subsec. (a)(17), (18). Pub. L. 97-248, Sec. 237(b), struck out
pars. (17) and (18) which related, respectively, to a plan which
provides contributions or benefits for employees some or all of
whom are employees within the meaning of subsection (c)(1), or are
shareholder-employees within the meaning of section 1379(d), and a
trust which is part of a plan providing a defined benefit for
employees some or all of whom are employees within the meaning of
subsection (c)(1), or are shareholder-employees within the meaning
of section 1379(d).
Subsec. (a)(24). Pub. L. 97-248 added par. (24).
Subsec. (c)(1). Pub. L. 97-248, Sec. 238(d)(1), amended par. (1)
generally, substituting in heading "Self-employed individual
treated as employee" for "Employee", adding subparagraph headings,
and substituting provisions defining "employee" and "self-employed
individual", for provisions defining "employee".
Subsec. (c)(2)(A). Pub. L. 97-248, Sec. 238(d)(2), added cl. (v).
Subsec. (d). Pub. L. 97-248, Sec. 237(a), redesignated pars. (9)
to (11) as (1) to (3), respectively. Former pars. (1) to (7), which
related to trusts created or organized before or after October 10,
1962, contributions under the plan, benefits under the plan for
employees, contributions or benefits under the plan, limitations
pursuant to the plan, applicability of requirements of subsec.
(a)(4) of this section, and distributions under the plan,
respectively, were struck out.
Subsec. (j). Pub. L. 97-248, Sec. 238(b), struck out subsec. (j)
which related to general requirements, regulation guidelines,
applicable percentage, certain contributions and benefits not taken
into account, definitions, and special rules with respect to
defined benefit plans providing benefits for self-employed
individuals and shareholder-employees.
Subsecs. (l), (o). Pub. L. 97-248, Sec. 249(a), added subsec. (l)
and redesignated former subsec. (l) as (o).
1981 - Subsec. (a)(17). Pub. L. 97-34, Sec. 312(b)(1), designated
provision relating to the annual compensation of each employee as
subpar. (A), and in subpar. (A) as so designated, substituted
"$200,000" for "$100,000", and added subpar. (B).
Subsec. (a)(22). Pub. L. 97-34, Sec. 338(a), inserted "(other
than a profit-sharing plan)" and substituted "if" for "If" and
"such plan" for "said plan".
Subsec. (a)(23). Pub. L. 97-34, Sec. 335, substituted "409A(h),
except that in applying section 409A(h) for purposes of this
paragraph, the term 'employer securities' shall include any
securities of the employer held by the plan" for "409A(h)(2)".
Subsec. (d)(4). Pub. L. 97-34, Sec. 312(e)(2), inserted provision
making subpar. (B) inapplicable to any distribution to which
section 72(m)(9) applies.
Subsec. (d)(5). Pub. L. 97-34, Sec. 314(a)(1), inserted provision
making subpar. (C) inapplicable to a distribution on account of the
termination of the plan.
Subsec. (e). Pub. L. 97-34, Sec. 312(c)(2), substituted "for such
taxable year exceeds $15,000" for "for all such years exceeds
$7,500".
Subsec. (j). Pub. L. 97-34, Sec. 312(c)(3), (4), substituted in
par. (2)(A) "$100,000" for "$50,000" and in par. (3) inserted
provision that for purposes of this paragraph, a change in the
annual compensation taken into account under subpar. (A) of subsec.
(j)(2) be treated as beginning a new period of plan participation.
1980 - Subsec. (a)(2). Pub. L. 96-364, Secs. 208(e), 410(b),
inserted provisions relating to applicability to multiemployer
plans and return of contributions made by a mistake of law or fact,
or return of withdrawal liability payment.
Subsec. (a)(4). Pub. L. 96-605, Sec. 225(b)(1), substituted
"section 410(b)(3)(A)" for "section 410(b)(2)(A)".
Subsec. (a)(12). Pub. L. 96-364, Sec. 208(a), substituted
provisions relating to applicability to multiemployer plans subject
to title IV of the Employee Retirement Income Security Act of 1974
of provisions of preceding sentence, for provisions relating to
applicability of paragraph to multiemployer plans to extent
determined by Corporation.
Subsec. (a)(20). Pub. L. 96-222, Sec. 101(a)(14)(E)(iii),
substituted "makes a qualifying rollover distribution (determined
as if section 402(a)(5)(D)(i) did not contain subclause (II)
thereof) described in section 402(a)(5)(A)(i) or 403(a)(4)(A)(i)"
for "makes a payment or distribution described in section
402(a)(5)(i) or 403(a)(4)(i)".
Subsec. (a)(21). Pub. L. 96-222, Sec. 101(a)(7)(L)(i)(V),
substituted "a tax credit employee stock ownership plan" for "an
ESOP".
Subsec. (a)(22)(B). Pub. L. 96-222, Sec. 101(a)(9), substituted
"are securities" for "as securities".
Subsec. (a)(23). Pub. L. 96-605, Sec. 221(a), added par. (23).
Subsec. (d)(3)(B). Pub. L. 96-605, Sec. 225(b)(2), substituted in
cl. (i) "section 410(b)(3)(A)" for "section 410(b)(2)(A)" and in
cl. (ii) "section 410(b)(3)(C)" for "section 410(b)(2)(C)".
1978 - Subsec. (a)(5). Pub. L. 95-600, Sec. 152(e), inserted
provision that for purposes of determining whether one or more
plans of the employer satisfy the requirements of section
410(b)(4), an employer may take into account all simplified
employee pensions to which only the employer contributes.
Subsec. (a)(21). Pub. L. 95-600, Sec. 141(f)(3), substituted
"ESOP" for "employee stock option plan which satisfies the
requirements of section 301(d) of the Tax Reduction Act of 1975"
and "section 48(n)(1)" for "subsection (d)(6) or (e)(3) of section
301 of the Tax Reduction Act of 1975".
Subsec. (a)(22). Pub. L. 95-600, Sec. 143(a), added par. (22).
Subsecs. (k), (l). Pub. L. 95-600, Sec. 135(a), added subsec. (k)
and redesignated former subsec. (k) as (l).
1976 - Subsec. (a). Pub. L. 94-455, Secs. 803(b)(2), 1901(a)(56),
1906(b)(13)(A), struck out "or his delegate" after "Secretary" in
pars. (5), (11), and (14), substituted references to Sept. 2, 1974,
for references to the enactment of the Employee Retirement Income
Security Act of 1974 in pars. (12), (13), (15), and (19), added
par. (21), and inserted reference to par. (20) in provisions
following par. (21), such addition of reference to par. (20)
duplicating amendment by Pub. L. 94-267, Sec. 1(c)(2).
Pub. L. 94-267, Sec. 1(c)(2), substituted "(19), and (20)" for
"and (19)".
Subsec. (a)(20). Pub. L. 94-267, Sec. 1(c)(1), added par. (20).
Subsecs. (b), (c), (d). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (f). Pub. L. 94-455, Sec. 1505(b), inserted reference to
contracts (other than life, health, or accident, property,
casualty, or liability insurance contracts) issued by an insurance
company qualified to do a business in a State and struck out "or
his delegate" after "Secretary".
Subsecs. (h), (i), (j). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
1974 - Subsec. (a). Pub. L. 93-406, Sec. 1021(a)(2), inserted
provision that paragraphs (11), (12), (13), (14), (15), and (19)
shall apply only in the case of a plan to which section 411
(relating to minimum vesting standards) applies without regard to
subsection (e)(2) of this section.
Subsec. (a)(3). Pub. L. 93-406, Sec. 1016(a)(2)(A), substituted
provisions referring simply to a plan of which the trust is a part
and the satisfaction by that plan of the requirements of section
410 (relating to minimum participation standards) for provisions
referring to a trust, trusts, or trust or trusts and annuity plan
or plans designated by the employer as constituting parts of a plan
intended to qualify under subsec. (a) and spelling out the
requisite coverage of the plan.
Subsec. (a)(4). Pub. L. 93-406, Sec. 1022(a), struck out
provisions referring to persons whose principal duties consist in
supervising the work of other employees and inserted provisions
directing the exclusion from consideration of employees described
in section 410(b)(2) (A) and (C).
Subsec. (a)(5). Pub. L. 93-406, Secs. 1012(b), 1016(a)(2)(B),
inserted provisions covering the determination of whether two or
more plans of an employer satisfy the requirements of par. (4) when
considered as a single plan and substituted "shall not be
considered discriminatory within the meaning of paragraph (4) of
section 410(b) (without regard to paragraph (1)(A) thereof)" for
"shall not be considered discriminatory within the meaning of
paragraph (3)(B) or (4)".
Subsec. (a)(7). Pub. L. 93-406, Sec. 1016(a)(2)(C), substituted
provisions referring simply to the satisfaction by the plan of
which a trust is a part of the requirements of section 411
(relating to minimum vesting standards) for provisions spelling out
in detail the conditions which the plan had to satisfy in order
that the trust forming part of that plan constitute a qualified
trust under this section.
Subsec. (a)(10)(A). Pub. L. 93-406, Secs. 1022(b)(1), 2001(e)(4),
inserted reference to section 410 in provisions preceding cl. (i)
and substituted "subsection (e)" for "subsection (e)(3)(A)" in cl.
(ii).
Subsec. (a)(11). Pub. L. 93-406, Sec. 1021(a)(1), added par.
(11).
Subsec. (a)(12). Pub. L. 93-406, Sec. 1021(b), added par. (12).
Subsec. (a)(13). Pub. L. 93-406, Sec. 1021(c), added par. (13).
Subsec. (a)(14). Pub. L. 93-406, Sec. 1021(d), added par. (14).
Subsec. (a)(15). Pub. L. 93-406, Sec. 1021(e), added par. (15).
Subsec. (a)(16). Pub. L. 93-406, Sec. 2004(a)(1), added par.
(16).
Subsec. (a)(17). Pub. L. 93-406, Sec. 2001(c), added par. (17).
Subsec. (a)(18). Pub. L. 93-406, Sec. 2001(d)(1), added par.
(18).
Subsec. (a)(19). Pub. L. 93-406, Sec. 1021(f), added par. (19).
Subsec. (b). Pub. L. 93-406, Sec. 1023, substituted reference to
the requirements of subsection (a) for the period beginning with
the date on which a stock bonus, pension, profit-sharing, or
annuity plan was put into effect, or for the period beginning with
the earlier of the date on which there was adopted or put into
effect any amendment which caused the plan to fail to satisfy such
requirements, and ending with the time prescribed by law for filing
the return of the employer for his taxable year in which such plan
or amendment was adopted (including extensions thereof) or such
later time as the Secretary or his delegate may designate for
reference to the requirements of paragraphs (3), (4), (5), and (6)
of subsection (a) for the period beginning with the date on which a
stock bonus, pension, profit-sharing, or annuity plan was put into
effect and ending with the 15th day of the third month following
the close of the taxable year of the employer in which the plan was
put in effect.
Subsec. (d)(1). Pub. L. 93-406, Sec. 1022(c), (f), substituted
"October 10, 1962" for "the date of the enactment of this
subsection" and "assets thereof are held by a bank or other person
who demonstrates to the satisfaction of the Secretary or his
delegate that the manner in which he will administer the trust will
be consistent with the requirements of this section. A trust shall
not be disqualified under this paragraph merely because a person
(including the employer) other than the trustee or custodian so
administering the trust" for "trustee is a bank, but a person
(including the employer) other than a bank" and inserted reference
to an insured credit union (within the meaning of section 101(6) of
the Federal Credit Union Act) in definition of "bank".
Subsec. (d)(3). Pub. L. 93-406, Sec. 1022(b)(2), inserted
reference to the section 410(a)(3) definition of "years of service"
and substituted reference to employees included in a unit of
employees covered by a collective-bargaining agreement described in
section 410(b)(2)(A) and employees who are nonresident aliens
described in section 410(b)(2)(C) for reference to employees whose
customary employment was for not more than 20 hours in any one week
or was for not more than 5 months in any calendar year.
Subsec. (d)(4)(B). Pub. L. 93-406, Sec. 2001(h)(1), inserted "in
excess of contributions made by an owner-employee as an employee"
after "benefits".
Subsec. (d)(5). Pub. L. 93-406, Sec. 2001(e)(1), substituted
"Subparagraphs (A) and (B) do not apply to contributions described
in subsection (e)" for "Subparagraphs (A) and (B) shall not apply
to any contribution which is not considered to be an excess
contribution (as defined in subsection (e)(1)) by reason of the
application of subsection (e)(3)".
Subsec. (d)(8). Pub. L. 93-406, Sec. 2001(e)(2), struck out par.
(8) covering excess contributions.
Subsec. (e). Pub. L. 93-406, Sec. 2001(e)(3), struck out pars.
(1) and (2) which defined and described the effect of excess
contributions, redesignated par. (3) as the entire subsec. (e) and
in provisions as thus carried forward as the entire subsec. (e)
substituted "$7,500" for "$2,500" and inserted references to
section 4972(b).
Subsec. (f). Pub. L. 93-406, Sec. 1022(d), expanded provisions to
cover annuity contracts.
Subsecs. (j), (k). Pub. L. 93-406, Sec. 2001(d)(2), added subsec.
(j) and redesignated former subsec. (j) as (k).
1971 - Subsec. (i). Pub. L. 91-691 struck out "multi-employer"
before "pension plans" in heading, and substituted "one or more
employers" for "two or more employers who are not related
(determined under regulations prescribed by the Secretary or his
delegate)" in par. (1).
1966 - Subsec. (a)(10)(A)(ii). Pub. L. 89-809, Sec. 204(b)(1)(A),
struck out "(determined without regard to section 404(a)(10))"
after "deducted under section 404".
Subsec. (c)(2)(A). Pub. L. 89-809, Sec. 204(c), struck out "to
the extent that such net earnings constitute earned income (as
defined in section 911(b) but determined with the application of
subparagraph (B))" after "The term 'earned income' means the net
earnings from self-employment (as defined in section 1402(a))",
added cl. (i) and redesignated former cls. (i) to (ii) as (ii) to
(iv) respectively, and struck out references to section 911(b) and
subparagraph (B), as in effect for a taxable year beginning on
January 1, 1963, in text following cl. (iv).
Subsec. (c)(2)(B). Pub. L. 89-809, Sec. 204(c), struck out
subpar. (B) relating to earned income when both personal services
and capital are material income-producing factors. See subsec.
(c)(2)(A)(i).
Subsec. (c)(2)(C). Pub. L. 89-809, Sec. 205(a), added subpar.
(C).
Subsecs. (d)(5)(A), (B), (d)(6)(A), (e)(1)(A), (B)(i), (3). Pub.
L. 89-809, Sec. 204(b)(1)(B) to (E), struck out "(determined
without regard to section 404(a)(10))" wherever appearing.
1965 - Subsec. (d)(4)(B). Pub. L. 89-97 substituted "section
72(m)(7)" for "section 213(g)(3)".
1964 - Subsecs. (i), (j). Pub. L. 88-272 added subsec. (i) and
redesignated former subsec. (i) as (j).
1962 - Subsec. (a)(5). Pub. L. 87-792, Sec. 2(1), inserted
provisions defining total compensation for purposes of par. (5) and
par. (10) of this subsection.
Subsec. (a)(7) to (10). Pub. L. 87-792, Sec. 2(2), added pars.
(7) to (10).
Subsecs. (c) to (g). Pub. L. 87-792, Sec. 2(3), added subsecs.
(c) to (g). Former subsec. (c) redesignated (h).
Subsec. (h). Pub. L. 87-863 added subsec. (h). Former subsec. (h)
redesignated (i).
Pub. L. 87-792, Sec. 2(3), redesignated former subsec. (c) as
(h).
Subsec. (i). Pub. L. 87-863 redesignated former subsec. (h) as
(i).
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by section 611(c), (f)(3), (g)(1) of Pub. L. 107-16
applicable to years beginning after Dec. 31, 2001, see section
611(i)(1) of Pub. L. 107-16, set out as a note under section 415 of
this title.
Amendment by section 641(e)(3) of Pub. L. 107-16 applicable to
distributions after Dec. 31, 2001, see section 641(f)(1) of Pub. L.
107-16, set out as a note under section 402 of this title.
Pub. L. 107-16, title VI, Sec. 643(d), June 7, 2001, 115 Stat.
123, provided that: "The amendments made by this section [amending
this section and sections 402 and 408 of this title] shall apply to
distributions made after December 31, 2001."
Pub. L. 107-16, title VI, Sec. 646(b), June 7, 2001, 115 Stat.
126, provided that: "The amendments made by this section [amending
this section and sections 403 and 457 of this title] shall apply to
distributions after December 31, 2001."
Pub. L. 107-16, title VI, Sec. 657(d), June 7, 2001, 115 Stat.
137, provided that: "The amendments made by this section [amending
this section, section 402 of this title, and section 1104 of Title
29, Labor] shall apply to distributions made after final
regulations implementing subsection (c)(2)(A) [set out as a note
below] are prescribed."
Pub. L. 107-16, title VI, Sec. 666(b), June 7, 2001, 115 Stat.
144, provided that: "The amendment made by this section [amending
this section] shall apply to years beginning after December 31,
2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 2000 AMENDMENT
Amendment by Pub. L. 106-554 effective as if included in the
provisions of the Small Business Job Protection Act of 1996, Pub.
L. 104-188, to which such amendment relates, see section 1(a)(7)
[title III, Sec. 316(e)] of Pub. L. 106-554, set out as a note
under section 51 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1502(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section and section 1056 of
Title 29, Labor] shall apply to judgments, orders, and decrees
issued, and settlement agreements entered into, on or after the
date of the enactment of this Act [Aug. 5, 1997]."
Section 1505(d) of Pub. L. 105-34, as amended by Pub. L. 105-206,
title VI, Sec. 6015(b), July 22, 1998, 112 Stat. 820, provided
that:
"(1) In general. - The amendments made by this section [amending
this section and sections 403 and 410 of this title] apply to
taxable years beginning on or after the date of enactment of this
Act [Aug. 5, 1997].
"(2) Treatment for years beginning before date of enactment. - A
governmental plan (within the meaning of section 414(d) of the
Internal Revenue Code of 1986) maintained by a State or local
government or political subdivision thereof (or agency or
instrumentality thereof) shall be treated as satisfying the
requirements of sections 401(a)(3), 401(a)(4), 401(a)(26), 401(k),
401(m), 403(b)(1)(D) and (b)(12)(A)(i), and 410 of such Code for
all taxable years beginning before the date of enactment of this
Act."
Section 1525(b) of Pub. L. 105-34 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to years
beginning after December 31, 1997."
Section 1530(d) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section and sections 404, 415,
664, 674, 2055, 2056, 4947, 4975, 4978, and 4979A of this title]
shall apply to transfers made by trusts to, or for the use of, an
employee stock ownership plan after the date of the enactment of
this Act [Aug. 5, 1997]."
Amendment by section 1601(d)(2)(A), (B), (3) of Pub. L. 105-34
effective as if included in the provisions of the Small Business
Job Protection Act of 1996, Pub. L. 104-188, to which it relates,
and amendment by section 1601(d)(2)(D) of Pub. L. 105-34 applicable
to calendar years beginning after Aug. 5, 1997, see section 1601(j)
of Pub. L. 105-34, set out as a note under section 23 of this
title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1401(b)(5), (6) of Pub. L. 104-188
applicable to taxable years beginning after Dec. 31, 1999, with
retention of certain transition rules, see section 1401(c) of Pub.
L. 104-188, set out as a note under section 402 of this title.
Section 1404(b) of Pub. L. 104-188 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to years
beginning after December 31, 1996."
Section 1422(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section] shall apply to plan
years beginning after December 31, 1996."
Section 1426(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall apply to plan
years beginning after December 31, 1996, but shall not apply to any
cash or deferred arrangement to which clause (i) of section
1116(f)(2)(B) of the Tax Reform Act of 1986 applies [Pub. L.
99-514, set out below]."
Amendment by section 1431(b)(2) of Pub. L. 104-188 applicable to
years beginning after Dec. 31, 1996, and amendment by section
1431(c)(1)(B) of Pub. L. 104-188 applicable to years beginning
after Dec. 31, 1996, except that in determining whether an employee
is a highly compensated employee for years beginning in 1997,
amendment by section 1431(c)(1)(B) to be treated as having been in
effect for years beginning in 1996, see section 1431(d) of Pub. L.
104-188, set out as a note under section 414 of this title.
Section 1432(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section] shall apply to years
beginning after December 31, 1996."
Section 1433(f) of Pub. L. 104-188 provided that:
"(1) In general. - The amendments made by this section [amending
this section] shall apply to years beginning after December 31,
1998.
"(2) Exceptions. - The amendments made by subsections (c), (d),
and (e) [amending this section] shall apply to years beginning
after December 31, 1996."
Section 1441(b) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section] shall apply to years
beginning after December 31, 1996."
Section 1443(c) of Pub. L. 104-188 provided that:
"(1) Distributions. - The amendments made by subsection (a)
[amending this section] shall apply to distributions after the date
of the enactment of this Act [Aug. 20, 1996].
"(2) Public utility districts. - The amendments made by
subsection (b) [amending this section] shall apply to plan years
beginning after December 31, 1996."
Section 1445(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall apply to years
beginning after December 31, 1996."
Section 1459(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section] shall apply to plan
years beginning after December 31, 1998."
EFFECTIVE DATE OF 1994 AMENDMENT
Section 732(e) of Pub. L. 103-465 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and sections
402, 408, and 415 of this title] shall apply to years beginning
after December 31, 1994.
"(2) Rounding not to result in decreases. - The amendments made
by this section providing for the rounding of indexed amounts shall
not apply to any year to the extent the rounding would require the
indexed amount to be reduced below the amount in effect for years
beginning in 1994."
Section 751(b) of Pub. L. 103-465 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and sections
404, 412, and 4971 of this title] shall apply to plan years
beginning after December 31, 1994.
"(2) Reference. - The amendment made by subsection (a)(11)
[amending section 404 of this title] shall take effect on the date
of the enactment of this Act [Dec. 8, 1994]."
Section 766(d) of Pub. L. 103-465 provided that: "The amendments
made by this section [amending this section and sections 1054 and
1322 of Title 29, Labor] shall apply to plan amendments adopted on
or after the date of enactment of this Act [Dec. 8, 1994]."
Amendment by section 776(d) of Pub. L. 103-465 effective with
respect to distributions that occur in plan years commencing on or
after Jan. 1, 1996, see section 776(e) of Pub. L. 103-465, set out
as a note under section 1056 of Title 29, Labor.
Section 781 of title VII of Pub. L. 103-465 provided that:
"Except as otherwise provided in this subtitle [subtitle F (Secs.
750-781) of title VII of Pub. L. 103-465, enacting sections 1310,
1311, and 1350 of Title 29, Labor, amending this section, sections
404, 411, 412, 415, 417, 4971, and 4972 of this title, and sections
1053 to 1056, 1082, 1132, 1301, 1303, 1305, 1306, 1322, 1341, 1342,
and 1343 of Title 29, and enacting provisions set out as notes
under this section, sections 1, 411, 412, and 4972 of this title,
and sections 1056, 1082, 1303, 1306, 1310, 1311, 1322, 1341, and
1342 of Title 29], the amendments made by this subtitle shall be
effective on the date of enactment of this Act [Dec. 8, 1994]."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13212(d) of Pub. L. 103-66, provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [amending this section and sections
404, 408, and 505 of this title] shall apply to benefits accruing
in plan years beginning after December 31, 1993.
"(2) Collectively bargained plans. - In the case of a plan
maintained pursuant to 1 or more collective bargaining agreements
between employee representatives and 1 or more employers ratified
before the date of the enactment of this Act [Aug. 10, 1993], the
amendments made by this section shall not apply to contributions or
benefits pursuant to such agreements for plan years beginning
before the earlier of -
"(A) the latest of -
"(i) January 1, 1994,
"(ii) the date on which the last of such collective
bargaining agreements terminates (without regard to any
extension, amendment, or modification of such agreements on or
after such date of enactment), or
"(iii) in the case of a plan maintained pursuant to
collective bargaining under the Railway Labor Act [45 U.S.C.
151 et seq.], the date of execution of an extension or
replacement of the last of such collective bargaining
agreements in effect on such date of enactment, or
"(B) January 1, 1997.
"(3) Transition rule for state and local plans. -
"(A) In general. - In the case of an eligible participant in a
governmental plan (within the meaning of section 414(d) of the
Internal Revenue Code of 1986), the dollar limitation under
section 401(a)(17) of such Code shall not apply to the extent the
amount of compensation which is allowed to be taken into account
under the plan would be reduced below the amount which was
allowed to be taken into account under the plan as in effect on
July 1, 1993.
"(B) Eligible participant. - For purposes of subparagraph (A),
an eligible participant is an individual who first became a
participant in the plan during a plan year beginning before the
1st plan year beginning after the earlier of -
"(i) the plan year in which the plan is amended to reflect
the amendments made by this section, or
"(ii) December 31, 1995.
"(C) Plan must be amended to incorporate limits. - This
paragraph shall not apply to any eligible participant of a plan
unless the plan is amended so that the plan incorporates by
reference the dollar limitation under section 401(a)(17) of the
Internal Revenue Code of 1986, effective with respect to
noneligible participants for plan years beginning after December
31, 1995 (or earlier if the plan amendment so provides)."
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by section 521(b)(5)-(8) of Pub. L. 102-318 applicable
to distributions after Dec. 31, 1992, see section 521(e) of Pub. L.
102-318, set out as a note under section 402 of this title.
Section 522(d) of Pub. L. 102-318 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and sections
402 to 404, 3402, 3405, 6047, and 6652 of this title] shall apply
to distributions after December 31, 1992.
"(2) Transition rule for certain annuity contracts. - If, as of
July 1, 1992, a State law prohibits a direct trustee-to-trustee
transfer from an annuity contract described in section 403(b) of
the Internal Revenue Code of 1986 which was purchased for an
employee by an employer which is a State or a political subdivision
thereof (or an agency or instrumentality of any 1 or more of
either), the amendments made by this section shall not apply to
distributions before the earlier of -
"(A) 90 days after the first day after July 1, 1992, on which
such transfer is allowed under State law, or
"(B) January 1, 1994."
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to transfers in taxable
years beginning after Dec. 31, 1990, see section 12011(c)(1) of
Pub. L. 101-508, set out as an Effective Date note under section
420 of this title.
EFFECTIVE DATE OF 1989 AMENDMENTS
Section 7311(b) of Pub. L. 101-239 provided that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to contributions after October 3, 1989.
"(2) Transition. - The amendment made by this section shall not
apply to contributions made before January 1, 1990, if -
"(A) the employer requested before October 3, 1989, a private
letter ruling or determination letter with respect to the
qualification of the plan maintaining the account under section
401(h) of the Internal Revenue Code of 1986,
"(B) the request sets forth a method under which the amount of
contributions to the account are to be determined on the basis of
cost,
"(C) such method is permissible under section 401(h) of such
Code under the provisions of General Counsel Memorandum 39785,
and
"(D) the Internal Revenue Service issued before October 4,
1989, a private letter ruling, determination letter, or other
letter providing that the specific plan involved qualifies under
section 401(a) of such Code when such method is used, that
contributions to the account are deductible, or acknowledging
that the account would not adversely affect the qualified status
of the plan (contingent on all phases of the particular plan
being approved)."
Amendment by sections 7811(g)(1), (h)(3) and 7816(l) of Pub. L.
101-239 effective, except as otherwise provided, as if included in
the provision of the Technical and Miscellaneous Revenue Act of
1988, Pub. L. 100-647, to which such amendment relates, see section
7817 of Pub. L. 101-239, set out as a note under section 1 of this
title.
Section 7882 of Pub. L. 101-239 provided that: "Except as
otherwise provided in this subpart [subpart C (Secs. 7881, 7882) of
part V of title VII of Pub. L. 101-239, amending this section and
sections 411 and 412 of this title, and sections 1002, 1021, 1023,
1054, 1082, 1083, 1085b, 1103, 1107, 1108, 1113, 1132, 1306, 1322,
1341, 1342, 1344, 1362, 1364, 1368, 1370, and 1371 of Title 29,
Labor, enacting provisions set out as a note under section 1054 of
Title 29, and amending provisions set out as notes under sections
404 and 412 of this title and sections 1021, 1301, 1322, and 1344
of Title 29], any amendment made by this subpart shall take effect
as if included in the provision of the Pension Protection Act [Pub.
L. 100-203, title IX, subtitle D, part II, Secs. 9302-9346] to
which such amendment relates."
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1011(c)(7)(E) of Pub. L. 100-647 provided that:
"(i) Except as provided in clause (ii), the amendments made by
this paragraph [amending this section and sections 403, 408, and
501 of this title] shall apply to plan years beginning after
December 31, 1987.
"(ii) In the case of a plan described in section 1105(c)(2) of
the Reform Act [section 1105(c)(2) of Pub. L. 99-514, set out as an
Effective Date of 1986 Amendment note under section 402 of this
title], the amendments made by this paragraph shall not apply to
contributions made pursuant to an agreement described in such
section for plan years beginning before the earlier of -
"(I) the later of January 1, 1988, or the date on which the
last of such agreements terminates (determined without regard to
any extension thereof after February 28, 1986), or
"(II) January 1, 1989."
Section 1011(k)(1)(C) of Pub. L. 100-647 provided that:
"(i) Subparagraph (A)(i) of section 401(k)(10) of the 1986 Code
(as added by subparagraph (B)) shall apply to distributions after
October 16, 1987.
"(ii) Subparagraph (B) of section 401(k)(10) of the 1986 Code (as
added by subparagraph (B)) shall apply to distributions after March
31, 1988."
Section 1011(l)(5)(B) of Pub. L. 100-647 provided that: "The
amendment made by this paragraph [amending this section] shall take
effect as if included in the amendments made by section 1120 of the
Reform Act [Pub. L. 99-514]."
Amendment by sections 1011(d)(4), (e)(3), (g)(1)-(3), (h)(3),
(k)(1)(A), (B), (2)-(7), (9), (l)(1)-(4), (6), (7), 1011A(j), (l),
and 1011B(j)(1), (2), (6), (k)(1), (2) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 6053(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall take effect as
if included in the amendments made by section 1121 of the Reform
Act [Pub. L. 99-514]."
Section 6055(b) of Pub. L. 100-647 provided that: "The amendment
made by this section [amending this section] shall take effect as
if included in the amendments made by section 1112(b) of the Reform
Act [Pub. L. 99-514]."
Section 6071(d) of Pub. L. 100-647 provided that: "The amendments
made by this section [amending this section and section 457 of this
title] shall apply to taxable years beginning after the date of the
enactment of this Act [Nov. 10, 1988]."
EFFECTIVE DATE OF 1987 AMENDMENT
Section 9341(c) of Pub. L. 100-203, as amended by Pub. L.
101-239, title VII, Sec. 7881(i)(5), Dec. 19, 1989, 103 Stat. 2442,
provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [enacting section 1085b of Title
29, Labor, and amending this section] shall apply to plan
amendments adopted after the date of the enactment of this Act
[Dec. 22, 1987].
"(2) Collective bargaining agreements. - In the case of a plan
maintained pursuant to 1 or more collective bargaining agreements
between employee representatives and 1 or more employers ratified
before the date of the enactment of this Act, the amendments made
by this section shall not apply to plan amendments adopted pursuant
to collective bargaining agreements ratified before the date of
enactment (without regard to any extension, amendment, or
modification of such agreements on or after such date of
enactment)."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1106(d)(1) of Pub. L. 99-514 applicable to
benefits accruing in years beginning after Dec. 31, 1988, except as
otherwise provided, see section 1106(i)(5) of Pub. L. 99-514, set
out as a note under section 415 of this title.
Section 1111(c) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011(g)(4), Nov. 10, 1988, 102 Stat. 3464, provided
that:
"(1) Subsection (a). - The amendments made by subsection (a)
[amending this section] shall apply to benefits attributable to
plan years beginning after December 31, 1988.
"(2) Subsection (b). - The amendments made by subsection (b)
[amending this section] shall apply to years beginning after
December 31, 1988.
"(3) Special rule for collective bargaining agreements. - In the
case of a plan maintained pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or
more employers ratified before March 1, 1986, the amendments made
by this section shall not apply to plan years beginning before the
earlier of -
"(A) the later of -
"(i) January 1, 1989, or
"(ii) the date on which the last of such collective
bargaining agreements terminates (determined without regard to
any extension thereof after February 28, 1986), or
"(B) January 1, 1991."
Section 1112(e) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011(h)(6)-(9), Nov. 10, 1988, 102 Stat. 3465,
provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 402, 404, 406, 407, 410, and 818 of this
title] shall apply to plan years beginning after December 31, 1988.
"(2) Special rule for collective bargaining agreements. - In the
case of a plan maintained pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or
more employers ratified before March 1, 1986, the amendments made
by this section shall not apply to plan years beginning before the
earlier of -
"(A) the later of -
"(i) January 1, 1989, or
"(ii) the date on which the last of such collective
bargaining agreement terminates (determined without regard to
any extension thereof after February 28, 1986), or
"(B) January 1, 1991.
"(3) Waiver of excise tax on reversions. -
"(A) In general. - If -
"(i) a plan is in existence on August 16, 1986,
"(ii) such plan would fail to meet the requirements of
section 401(a)(26) of the Internal Revenue Code of 1986 (as
added by subsection (b)) if such section were in effect for the
plan year including August 16, 1986, and
"(iii) there is no transfer of assets to or liabilities from
the plan or spinoff or merger involving such plan after August
16, 1986,
then no tax shall be imposed under section 4980 of such Code on
any employer reversion by reason of the termination or merger of
such plan before the 1st year to which the amendment made by
subsection (b) applies.
"(B) Interest rate for determining accrued benefit of highly
compensated employees for certain purposes. - In the case of a
termination, transfer, or distribution of assets of a plan
described in subparagraph (A)(ii) before the 1st year to which
the amendment made by subsection (b) applies -
"(i) Amount eligible for rollover, income averaging, or
tax-free transfer. - For purposes of determining any eligible
amount, the present value of the accrued benefit of any highly
compensated employee shall be determined by using an interest
rate not less than the highest of -
"(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 termination,
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
employee under the plan (or any other plan used in
determining whether the plan meets the requirements 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 section
402(e)(1) of such Code, or capital gains treatment 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 compensated
employee by reason of such termination or distribution, over
"(II) the amount determined by using the interest 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 interest rate applicable
under clause (i).
Such excess shall not be taken into account for purposes 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.
"(4) Special rule for plans which may not terminate. - To the
extent provided in regulations prescribed by the Secretary of the
Treasury or his delegate, if a plan is prohibited from terminating
under title IV of the Employee Retirement Income Security Act of
1974 [29 U.S.C. 1301 et seq.] before the 1st year to which the
amendment made by subsection (b) would apply, the amendment made by
subsection (b) shall only apply to years after the 1st year in
which the plan is able to terminate."
Amendment by section 1114(b)(7) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1988, see section 1114(c)(3) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Section 1116(f) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011(k)(8), (10), Nov. 10, 1988, 102 Stat. 3470,
provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [amending this section] shall apply
to years beginning after December 31, 1988.
"(2) Nondiscrimination rules. -
"(A) In general. - Except as provided in subparagraph (B), the
amendments made by subsections (a), (b)(4), and (d) [amending
this section], and the provisions of section 401(k)(4)(B) of the
Internal Revenue Code of 1986 (as added by this section), shall
apply to years beginning after December 31, 1986.
"(B) Transition rules for certain governmental and tax-exempt
plans. - Subparagraph (B) of section 401(k)(4) of the Internal
Revenue Code of 1986 (relating to governments and tax-exempt
organizations not eligible for cash or deferred arrangements), as
added by this section, shall not apply to any cash or deferred
arrangement adopted by -
"(i) a State or local government or political subdivision
thereof, or any agency or instrumentality thereof, before May
6, 1986, or
"(ii) a tax-exempt organization before July 2, 1986.
In the case of an arrangement described in clause (i), the
amendments made by subsections (a), (b)(4), and (d) shall apply
to years beginning after December 31, 1988. If clause (i) or (ii)
applies to any arrangement adopted by a governmental unit, then
any cash or deferred arrangement adopted by such unit on or after
the date referred to in the applicable clause shall be treated as
adopted before such date.
"(3) Aggregation and excess contributions. - The amendments made
by subsections (c) and (e) [amending this section] shall apply to
years beginning after December 31, 1986.
"(4) Collective bargaining agreements. -
"(A) In general. - In the case of a plan maintained pursuant to
1 or more collective bargaining agreements between employee
representatives and 1 or more employers ratified before March 1,
1986, the amendments made by this section shall not apply to
years beginning before the earlier of -
"(i) the later of -
"(I) January 1, 1989, or
"(II) the date on which the last of such collective
bargaining agreements terminates (determined without regard
to any extension thereof after February 28, 1986), or
"(ii) January 1, 1991.
"(B) Special rule for nondiscrimination rules. - In the case of
a plan described in subparagraph (A), the amendments and
provisions described in paragraph (2) shall not apply to years
beginning before the earlier of -
"(i) the date determined under subparagraph (A)(i)(II), or
"(ii) January 1, 1989.
"(5) Special rule for qualified offset arrangements. -
"(A) In general. - A cash or deferred arrangement shall not be
treated as failing to meet the requirements of section 401(k)(4)
of the Internal Revenue Code of 1986 (as added by this section)
to the extent such arrangement is part of a qualified offset
arrangement consisting of such cash or deferred arrangement and a
defined benefit plan.
"(B) Qualified offset arrangement. - For purposes of
subparagraph (A), a cash or deferred arrangement is part of a
qualified offset arrangement with a defined benefit plan to the
extent such offset arrangement satisfies each of the following
conditions with respect to the employer maintaining the
arrangement on April 16, 1986, and at all times thereafter:
"(i) The benefit under the defined benefit plan is directly
and uniformly conditioned on the initial elective deferrals (up
to 4 percent of compensation).
"(ii) The benefit provided under the defined benefit plan
(before the offset) is at least 60 percent of an employee's
cumulative elective deferrals (up to 4 percent of
compensation).
"(iii) The benefit under the defined benefit plan is reduced
by the benefit attributable to the employee's elective
deferrals under the plan (up to 4 percent of compensation) and
the income allocable thereto. The interest rate used to
calculate the reduction shall not exceed the greater of the
rate under section 411(a)(11)(B)(ii) of such Code or the
interest rate applicable under section 411(c)(2)(C)(iii) of
such Code, taking into account section 411(c)(2)(D) of such
Code.
For purposes of applying section 401(k)(3) of such Code to the
cash or deferred arrangement, the benefits under the defined
benefit plan conditioned on initial elective deferrals may be
treated as matching contributions under such rules as the
Secretary of the Treasury or his delegate may prescribe. The
Secretary shall provide rules for the application of this
paragraph in the case of successor plans.
"(C) Definition of employer. - For purposes of this paragraph,
the term 'employer' includes any research and development center
which is federally funded and engaged in cancer research, but
only with respect to employees of contractor-operators whose
salaries are reimbursed as direct costs against the operator's
contract to perform work at such center.
"(6) Withdrawals on sale of assets. - Subclauses (II), (III), and
(IV) of section 401(k)(2)(B)(i) of the Internal Revenue Code of
1986 (as added by subsection (b)(1)) shall apply to distributions
after December 31, 1984.
"(7) Distributions before plan amendment. -
"(A) In general. - If a plan amendment is required to allow a
plan to make any distribution described in section 401(k)(8) of
the Internal Revenue Code of 1986, any such distribution which is
made before the close of the 1st plan year for which such
amendment is required to be in effect under section 1140 [set out
as a note below], shall be treated as made in accordance with the
provisions of such plan.
"(B) Distributions pursuant to model amendment. -
"(i) Secretary to prescribe amendment. - The Secretary of the
Treasury or his delegate shall prescribe an amendment which
allows a plan to make any distribution described in section
401(k)(8) of such Code.
"(ii) Adoption by plan. - If a plan adopts the amendment
prescribed under clause (i) and makes a distribution in
accordance with such amendment, such distribution shall be
treated as made in accordance with the provisions of the plan."
Section 1117(d) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011(l)(12), Nov. 10, 1988, 102 Stat. 3471, provided
that:
"(1) In general. - The amendments made by this section [enacting
section 4979 of this title and amending this section and section
414 of this title] shall apply to plan years beginning after
December 31, 1986.
"(2) Collective bargaining agreements. - In the case of a plan
maintained pursuant to 1 or more collective bargaining agreements
between employee representatives and 1 or more employers ratified
before March 1, 1986, the amendments made by this section shall not
apply to plan years beginning before the earlier of -
"(A) January 1, 1989, or
"(B) the date on which the last of such collective bargaining
agreements terminates (determined without regard to any extension
thereof after February 28, 1986).
"(3) Annuity contracts. - In the case of an annuity contract
under section 403(b) of the Internal Revenue Code of 1986 -
"(A) the amendments made by this section shall apply to plan
years beginning after December 31, 1988, and
"(B) in the case of a collective bargaining agreement described
in paragraph (2), the amendments made by this section shall not
apply to years beginning before the earlier of -
"(i) the later of -
"(I) January 1, 1989, or
"(II) the date determined under paragraph (2)(B), or
"(ii) January 1, 1991.
"(4) Distributions before plan amendment. -
"(A) In general. - If a plan amendment is required to allow a
plan to make any distribution described in section 401(m)(6) of
the Internal Revenue Code of 1986, any such distribution which is
made before the close of the 1st plan year for which such
amendment is required to be in effect under section 1140 [set out
as a note below] shall be treated as made in accordance with the
provisions of the plan.
"(B) Distributions pursuant to model amendment. -
"(i) Secretary to prescribe amendment. - The Secretary of the
Treasury or his delegate shall prescribe an amendment which
allows a plan to make any distribution described in section
401(m)(6) of the Internal Revenue Code of 1986.
"(ii) Adoption by plan. - If a plan adopts the amendment
prescribed under clause (i) and makes a distribution in
accordance with such amendment, such distribution shall be
treated as made in accordance with the provisions of the plan."
Section 1119(b) of Pub. L. 99-514 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to plan
years beginning after December 31, 1985."
Section 1121(d) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011A(a)(3), (4), Nov. 10, 1988, 102 Stat. 3472,
provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [amending this section and sections
402, 408, and 4974 of this title] shall apply to years beginning
after December 31, 1988.
"(2) Subsection (c). - The amendments made by subsection (c)
[amending sections 402 and 408 of this title] shall apply to years
beginning after December 31, 1986.
"(3) Collective bargaining agreements. - In the case of a plan
maintained pursuant to 1 or more collective bargaining agreements
between employee representatives and 1 or more employers ratified
before March 1, 1986, the amendments made by this section shall not
apply to distributions to individuals covered by such agreements in
years beginning before the earlier of -
"(A) the later of -
"(i) the date on which the last of such collective bargaining
agreements terminates (determined without regard to any
extension thereof after February 28, 1986), or
"(ii) January 1, 1989, or
"(B) January 1, 1991.
"(4) Transition rules. -
"(A) The amendments made by subsections (a) and (b) [amending
this section and section 4974 of this title] shall not apply with
respect to any benefits with respect to which a designation is in
effect under section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982 [section 242(b)(2) of Pub. L. 97-248,
formerly set out as a note below].
"(B)(i) Except as provided in clause (ii), the amendment made
by subsection (b) [amending this section] shall not apply in the
case of any individual who has attained age 70 1/2 before
January 1, 1988.
"(ii) Clause (i) shall not apply to any individual who is a
5-percent owner (as defined in section 416(i) of the Internal
Revenue Code of 1986), at any time during -
"(I) the plan year ending with or within the calendar year in
which such owner attains age 66 1/2 , and
"(II) any subsequent plan year.
"(5) Plans may incorporate section 401(a)(9) requirements by
reference. - Notwithstanding any other provision of law, except as
provided in regulations prescribed by the Secretary of the Treasury
or his delegate, a plan may incorporate by reference the
requirements of section 401(a)(9) of the Internal Revenue Code of
1986."
Section 1136(c) of Pub. L. 99-514 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to years
beginning after December 31, 1985."
Section 1143(b) of Pub. L. 99-514 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1986."
Section 1145(d) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section, section 1055 of Title
29, Labor, and provisions set out as a note under section 1001 of
Title 29] shall apply as if included in the amendments made by the
Retirement Equity Act of 1984 [Pub. L. 98-397]."
Amendment by section 1171(b)(5) of Pub. L. 99-514 applicable to
compensation paid or accrued after Dec. 31, 1986, in taxable years
ending after such date, except as otherwise provided, see section
1171(c) of Pub. L. 99-514, set out as a note under section 38 of
this title.
Section 1174(c)(2)(B) of Pub. L. 99-514 provided that: "The
amendment made by this paragraph [amending this section] shall
apply to distributions attributable to stock acquired after
December 31, 1986."
Section 1175(a)(2) of Pub. L. 99-514 provided that: "The
amendment made by this subsection [amending this section] shall
apply to stock acquired after December 31, 1986."
Section 1176(c) of Pub. L. 99-514 provided that: "The amendment
made by subsection (a) [amending this section] shall be effective
December 31, 1986. The amendment made by subsection (b) [amending
section 409 of this title] shall apply to acquisitions of
securities after December 31, 1986."
Section 1852(h)(1) of Pub. L. 99-514, as amended by Pub. L.
100-647, title I, Sec. 1018(t)(3)(C), Nov. 10, 1988, 102 Stat.
3588, provided that the amendment made by that section is effective
for years beginning after Dec. 31, 1985.
Section 1879(g)(3) of Pub. L. 99-514 provided that: "The
amendments made by this subsection [amending this section] shall
apply to plan years beginning after December 31, 1984."
Amendment by sections 1848(b) and 1852(a)(4)(A), (6), (b)(8),
(g), (h)(1) of Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
Section 1898(j) of Pub. L. 99-514 provided that: "Except as
otherwise provided in this section, any amendment made by this
section [amending this section, sections 402, 411, 414, 415, 417,
and 2503 of this title, and sections 1053 to 1056 of Title 29,
Labor, and provisions set out as notes under section 1001 of Title
29] shall take effect as if included in the provision of the
Retirement Equity Act of 1984 [Pub. L. 98-397] to which such
amendment relates."
EFFECTIVE DATE OF 1984 AMENDMENTS
Amendment by section 203(a) of Pub. L. 98-397 applicable to plan
years beginning after Dec. 31, 1984, amendment by section 204(a) of
Pub. L. 98-397 effective Jan. 1, 1985, and amendment by section
301(b) of Pub. L. 98-397 applicable to plan amendments made after
July 30, 1984, but not applicable to the termination of a certain
defined benefit plan, except as otherwise provided, see sections
302 and 303 of Pub. L. 98-397, set out as a note under section 1001
of Title 29, Labor.
Nothing in amendment by section 203(a) of Pub. L. 98-397 to
prevent any distribution required by reason of a failure to comply
with the terms of a loan made on or before Aug. 18, 1985, and
secured by a portion of the participant's accrued benefit, see
section 1898(b)(4)(C)(ii) of Pub. L. 99-514, set out as an
Effective Date of 1986 Amendment note under section 417 of this
title.
Amendment by section 211(b)(5) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, see section 215 of
Pub. L. 98-369, set out as an Effective Date note under section 801
of this title.
Amendment by section 474(r)(13) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Section 491(f)(3) of Pub. L. 98-369 provided that: "The
amendments made by subsection (e) [redesignating section 409A as
section 409 of this title and amending this section and sections
41, 415, 4975, and 6699 of this title] shall take effect on January
1, 1984."
Section 521(e) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 72, 403, and 408 of this title and
repealing provisions set out as a note under this section] shall
apply to years beginning after December 31, 1984.
"(2) Repeal of section 242 of tefra. - The amendment made by
subsection (a)(2) [repealing section 242 of Pub. L. 97-248, which
amended this section and enacted provisions formerly set out below]
shall take effect as if included in the Tax Equity and Fiscal
Responsibility Act of 1982 [Pub. L. 97-248].
"(3) Transition rule. - A trust forming part of a plan shall not
be disqualified under paragraph (9) of section 401(a) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954], as amended by
subsection (a)(1), by reason of distributions under a designation
(before January 1, 1984) by any employee in accordance with a
designation described in section 242(b)(2) of the Tax Equity and
Fiscal Responsibility Act of 1982 (as in efffect [sic] before the
amendments made by this Act) [formerly set out as an Effective Date
of 1982 Amendment note below].
"(4) Special rule for governmental plans. - In the case of a
governmental plan (within the meaning of section 414(d) of the
Internal Revenue Code of 1986), paragraph (1) shall be applied by
substituting '1986' for '1984'.
"(5) Special rule for collective bargaining agreements. - In the
case of a plan maintained pursuant to one or more collective
bargaining agreements ratified on or before the date of the
enactment of this Act [July 18, 1984] between employee
representatives and one or more employers, the amendments made by
this section shall not apply to years beginning before the earlier
of -
"(A) the date on which the last of the collective bargaining
agreements relating to the plan terminates (determined without
regard to any extension thereof agreed to after the date of the
enactment of this Act), or
"(B) January 1, 1988.
For purposes of subparagraph (A), any plan amendment made pursuant
to a collective bargaining agreement relating to the plan which
amends the plan solely to conform to any requirement added by this
section shall not be treated as a termination of such collective
bargaining agreement."
Section 524(d)(2) of Pub. L. 98-369 provided that: "The amendment
made by this subsection [amending this section] shall apply to plan
years beginning after December 31, 1983."
Section 527(c) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) Subsection (a). -
"(A) In general. - Except as provided in subparagraph (B), the
amendment made by subsection (a) [amending this section] shall
apply to plan years beginning after December 31, 1984.
"(B) Exception for certain existing plans. - The amendment made
by subsection (a) shall not apply to any plan -
"(i) which was maintained by a State on June 8, 1984, and
"(ii) with respect to which a determination letter had been
issued by the Secretary on December 6, 1982.
"(2) Subsection (b). -
"(A) In general. - The amendments made by this section
[amending this section] shall apply with respect to plan years
beginning after the date of the enactment of this Act [July 18,
1984].
"(B) Transitional rule. - Rules similar to the rules under
section 135(c)(2) of the Revenue Act of 1978 [section 135(c)(2)
of Pub. L. 95-600, set out below] shall apply with respect to any
pre-ERISA money purchase plan (as defined in section 401(k)(5) of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) for
plan years beginning after December 31, 1979, and on or before
the date of the enactment of this Act."
Section 528(c) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section and section 415 of this
title] shall apply to years beginning after March 31, 1984."
Amendment by section 713 of Pub. L. 98-369 effective as if
included in the provision of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, to which such amendment
relates, see section 715 of Pub. L. 98-369, set out as a note under
section 31 of this title.
EFFECTIVE DATE OF 1983 AMENDMENTS
Amendment by Pub. L. 98-21 applicable to taxable years beginning
after Dec. 31, 1989, see section 124(d)(2) of Pub. L. 98-21, set
out as a note under section 1401 of this title.
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Section 242(b) of Pub. L. 97-248, which prescribed the effective
date for amendment by section 242(a) of Pub. L. 97-248, was
repealed by Pub. L. 98-369, div. A, title V, Sec. 521(a)(2), July
18, 1984, 98 Stat. 867.
Section 249(b) of Pub. L. 97-248 provided that: "The amendments
made by this section [amending this section] shall apply to plan
years beginning after December 31, 1983."
Section 254(b) of Pub. L. 97-248 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to taxable years beginning after December 31, 1981."
Amendment by sections 237, 238, and 240 of Pub. L. 97-248
applicable to years beginning after Dec. 31, 1983, see section 241
of Pub. L. 97-248, set out as an Effective Date note under section
416 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 312(b)(1), (c)(2)-(4), (e)(2) of Pub. L.
97-34 applicable to plans which include employees within the
meaning of subsec. (c)(1) of this section with respect to taxable
years beginning after Dec. 31, 1981, see section 312(f)(1) of Pub.
L. 97-34, set out as a note under section 72 of this title.
Section 314(a)(2) of Pub. L. 97-34 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to
distributions after December 31, 1980, in taxable years beginning
after such date."
Section 338(b) of Pub. L. 97-34 provided that: "The amendment
made by this section [amending this section] shall apply to
acquisitions of securities after December 31, 1979."
Section 339 of Pub. L. 97-34 provided that: "Except as otherwise
provided, the amendments made by this subtitle [subtitle D (Secs.
331-339) of title III of Pub. L. 97-34, enacting section 44G of
this title and amending this section and sections 46, 48, 55, 56,
381, 383, 404, 409A, 415, 6096, 6411, 6511, and 6699 of this title]
shall apply to taxable years beginning after December 31, 1981."
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 221(b) of Pub. L. 96-605 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to plan years beginning after December 31, 1980."
Section 225(c) of Pub. L. 96-605 provided that: "The amendments
made by this section [amending this section and sections 408 and
410 of this title] shall apply with respect to plan years beginning
after December 31, 1980."
Section 410(c) of Pub. L. 96-364 provided that: "The amendment
made by this section [amending this section and section 1103 of
Title 29, Labor] shall take effect on January 1, 1975, except that
in the case of contributions received by a collectively bargained
plan maintained by more than one employer before the date of
enactment of this Act, [Sept. 26, 1980], any determination by the
plan administrator that any such contribution was made by mistake
of fact or law before such date shall be deemed to have been made
on such date of enactment."
Amendment by section 208(a), (e) of Pub. L. 96-364 effective
Sept. 26, 1980, see section 210(a) of Pub. L. 96-364, set out as an
Effective Date note under section 418 of this title.
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 135(c)(1) of Pub. L. 95-600 provided that: "The
amendments made by this section [amending this section and section
402 of this title] shall apply to plan years beginning after
December 31, 1979."
Amendment by section 141(f)(3) of Pub. L. 95-600 effective with
respect to qualified investment for taxable years beginning after
Dec. 31, 1978, see section 141(g)(1) of Pub. L. 95-600, set out as
an Effective Date note under section 409 of this title.
Section 143(b) of Pub. L. 95-600 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
acquisitions of securities after December 31, 1979."
Amendment by section 152(e) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 152(h) of
Pub. L. 95-600, set out as a note under section 408 of this title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Amendment by section 803(b)(2) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1974, see section 803(j) of
Pub. L. 94-455, set out as a note under section 46 of this title.
Section 1505(c) of Pub. L. 94-455 provided that: "The amendments
made by this section [amending this section and section 801 of this
title] apply for taxable years beginning after December 31, 1975."
Amendment by section 1901(a)(56) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
Section 1(e) of Pub. L. 94-267 provided that: "The amendments
made by this Act [amending this section and sections 402 to 404 and
805 of this title, and enacting provisions set out as a note under
section 402 of this title] shall apply with respect to payments
made to an employee on or after July 4, 1974."
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by sections 1012(b) and 1016(a)(2) of Pub. L. 93-406
applicable, except as otherwise provided in section 1017(c) through
(i) of Pub. L. 93-406, for plan years beginning after Sept. 2,
1974, but, in the case of plans in existence on Jan. 1, 1974,
amendment by sections 1012(b) and 196(a)(2) of Pub. L. 93-406
applicable for plan years beginning after Dec. 31, 1975, see
section 1017 of Pub. L. 93-406, set out as an Effective Date;
Transitional Rules note under section 410 of this title.
Section 1021(a)(1), (b) of Pub. L. 93-406 provided that the
amendment made by that section is effective with respect to plan
years beginning after Dec. 31, 1975.
Section 1022(d) of Pub. L. 93-406 provided that the amendment
made by that section is effective as of Jan. 1, 1974.
Section 1022(f) of Pub. L. 93-406 provided that the amendment
made by that section is effective as of Jan. 1, 1974.
Section 1024 of Pub. L. 93-406 provided that: "Except as
otherwise provided in section 1021, the amendments made by section
1021 [amending this section] shall apply to plan years to which
part I applies. [For description of plan years to which part I
applies, see section 1017 of Pub. L. 93-406, set out as an
Effective Date; Transitional Rules note under section 410 of this
title.] Except as otherwise provided in section 1022, the
amendments made by section 1022 [amending this section and section
6051 of this title] shall apply to plan years to which part I
applies. Section 1023 [amending this section] shall take effect on
the date of the enactment of this Act [Sept. 2, 1974]."
Section 2001(i)(2)-(4) of Pub. L. 93-406 provided that:
"(2) The amendments made by subsection (c) [amending this
section] apply to
"(A) taxable years beginning after December 31, 1975, and
"(B) any other taxable years beginning after December 31,
1973, for which contributions were made under the plan in
excess of the amounts permitted to be made under sections
404(e) and 1379(b) [of this title] as in effect on the day
before the date of the enactment of this Act [Sept. 2, 1974].
"(3) The amendments made by subsection (d) [amending this
section] apply to taxable years beginning after December 31,
1975.
"(4) The amendments made by subsections (e) and (f) [enacting
section 4972 of this title and amending this section and section
72 of this title] apply to contributions made in taxable years
beginning after December 31, 1975."
Amendment by section 2001(h)(1) of Pub. L. 93-406 applicable to
taxable years ending after Sept. 2, 1974, see section 2001(i)(6) of
Pub. L. 93-406, set out as a note under section 72 of this title.
Amendment by section 2004(a)(1) of Pub. L. 93-406 applicable to
years beginning after Dec. 31, 1975, see section 2004(d) of Pub. L.
93-406, set out as an Effective Date; Transitional Provisions note
under section 415 of this title.
EFFECTIVE DATE OF 1971 AMENDMENT
Section 1(b) of Pub. L. 91-691 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1953, and ending after
August 16, 1954, but only with respect to contributions made after
December 31, 1954."
EFFECTIVE DATE OF 1966 AMENDMENT
Section 204(d) of Pub. L. 89-809, as amended by Pub. L. 90-607,
Oct. 21, 1968, 82 Stat. 1189; Pub. L. 99-514, Sec. 2, Oct. 22,
1986, 100 Stat. 2095, provided that: "The amendments made by
subsections (a) and (b) [amending this section and section 404 of
this title] shall apply with respect to taxable years beginning
after December 31, 1967. The amendment made by subsection (c)
[amending this section] shall apply with respect to taxable years
beginning after December 31, 1967, and in the case of a taxpayer
who applies the averaging provisions of section 401(e)(3) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] for a taxable
year beginning after December 31, 1967, the computation of the
amount deductible under section 404 of such Code for any prior
taxable year which began before January 1, 1968, shall be made, for
purposes of such averaging provisions, as if the amendment made by
subsection (c) were applicable to such prior taxable year."
Section 205(b) of Pub. L. 89-809 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years ending after the date of the enactment of this Act
[Nov. 13, 1966]."
EFFECTIVE DATE OF 1965 AMENDMENT
Amendment by Pub. L. 89-97 applicable to taxable years beginning
after Dec. 31, 1966, see section 106(e) of Pub. L. 89-97, set out
as a note under section 213 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 219(b) of Pub. L. 88-272 provided that: "The amendments
made by subsection (a) [amending this section] shall apply with
respect to taxable years beginning after December 31, 1953, and
ending after August 16, 1954, but only with respect to
contributions made after December 31, 1954."
EFFECTIVE DATE OF 1962 AMENDMENTS
Section 2(c) of Pub. L. 87-863 provided that: "The amendments
made by subsections (a) and (b) [amending this section and section
404 of this title] shall apply to taxable years beginning after the
date of the enactment of this Act [Oct. 23, 1962]."
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
SHORT TITLE OF 1962 AMENDMENT
Section 1 of Pub. L. 87-792 provided: "That this Act [enacting
sections 405 and 6047 of this title and amending this section and
sections 37, 62, 72, 101, 104, 105, 172, 402 to 404, 503, 805,
1361, 2039, 2517, 3306, 3401, and 7207 of this title] may be cited
as the 'Self-Employed Individuals Tax Retirement Act of 1962'."
REGULATIONS
Pub. L. 107-16, title VI, Sec. 657(c)(2), June 7, 2001, 115 Stat.
136, provided that:
"(A) Automatic rollover safe harbor. - Not later than 3 years
after the date of enactment of this Act [June 7, 2001], the
Secretary of Labor shall prescribe regulations providing for safe
harbors under which the designation of an institution and
investment of funds in accordance with section 401(a)(31)(B) of the
Internal Revenue Code of 1986 is deemed to satisfy the fiduciary
requirements of section 404(a) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104(a)).
"(B) Use of low-cost individual retirement plans. - The Secretary
of the Treasury and the Secretary of Labor may provide, and shall
give consideration to providing, special relief with respect to the
use of low-cost individual retirement plans for purposes of
transfers under section 401(a)(31)(B) of the Internal Revenue Code
of 1986 and for other uses that promote the preservation of assets
for retirement income purposes."
Section 1141 of Pub. L. 99-514 provided that: "The Secretary of
the Treasury or his delegate shall issue before February 1, 1988,
such final regulations as may be necessary to carry out the
amendments made by -
"(1) section 1111 [amending this section], relating to
application of nondiscrimination rules to integrated plans,
"(2) section 1112 [amending this section and sections 402, 404,
406, 407, 410, and 818 of this title], relating to coverage
requirements for qualified plans,
"(3) section 1113 [amending sections 410 and 411 of this title
and sections 1052 to 1054 of Title 29, Labor], relating to
minimum vesting standards,
"(4) section 1114 [amending this section, sections 106, 117,
120, 127, 129, 132, 274, 404A, 406, 407, 411, 414, 415, 423, 501,
505, and 4975 of this title, and section 1108 of Title 29],
relating to the definition of highly compensated employee,
"(5) section 1115 [amending section 414 of this title],
relating to separate lines of business and the definition of
compensation,
"(6) section 1116 [amending this section], relating to rules
for section 401(k) plans,
"(7) section 1117 [enacting section 4979 of this title and
amending this section and section 414 of this title], relating to
nondiscrimination requirements for employer matching and employer
contribution,
"(8) section 1120 [amending section 403 of this title],
relating to nondiscrimination requirements for tax sheltered
annuities, and
"(9) section 1133 [enacting section 4981A [now 4980A] of this
title], relating to tax on excess distributions."
NEW TECHNOLOGIES IN RETIREMENT PLANS
Section 1510 of Pub. L. 105-34 provided that:
"(a) In General. - Not later than December 31, 1998, the
Secretary of the Treasury and the Secretary of Labor shall each
issue guidance which is designed to -
"(1) interpret the notice, election, consent, disclosure, and
time requirements (and related recordkeeping requirements) under
the Internal Revenue Code of 1986 and the Employee Retirement
Income Security Act of 1974 [29 U.S.C. 1001 et seq.] relating to
retirement plans as applied to the use of new technologies by
plan sponsors and administrators while maintaining the protection
of the rights of participants and beneficiaries, and
"(2) clarify the extent to which writing requirements under the
Internal Revenue Code of 1986 relating to retirement plans shall
be interpreted to permit paperless transactions.
"(b) Applicability of Final Regulations. - Final regulations
applicable to the guidance regarding new technologies described in
subsection (a) shall not be effective until the first plan year
beginning at least 6 months after the issuance of such final
regulations."
TREATMENT OF QUALIFIED FOOTBALL COACHES PLAN
Section 1704(k) of Pub. L. 104-188 provided that:
"(1) In general. - For purposes of the Internal Revenue Code of
1986, a qualified football coaches plan -
"(A) shall be treated as a multiemployer collectively bargained
plan, and
"(B) notwithstanding section 401(k)(4)(B) of such Code, may
include a qualified cash and deferred arrangement under section
401(k) of such Code.
"(2) Qualified football coaches plan. - For purposes of this
subsection, the term 'qualified football coaches plan' means any
defined contribution plan which is established and maintained by an
organization -
"(A) which is described in section 501(c) of such Code,
"(B) the membership of which consists entirely of individuals
who primarily coach football as full-time employees of 4-year
colleges or universities described in section 170(b)(1)(A)(ii) of
such Code, and
"(C) which was in existence on September 18, 1986.
"(3) Effective date. - This subsection shall apply to years
beginning after December 22, 1987."
APPLICABILITY OF SUBSECTION (A)(26)
Section 6065 of Pub. L. 100-647 provided that: "In the case of
plan years beginning before January 1, 1993, section 401(a)(26) of
the 1986 Code shall not apply to any governmental plan (within the
meaning of section 414(d) of such Code) with respect to employees
who were participants in such plan on July 14, 1988."
COORDINATION OF INTERNAL REVENUE CODE OF 1986 WITH EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974
Section 9343(a) of Pub. L. 100-203 provided that: "Except to the
extent specifically provided in the Internal Revenue Code of 1986
or as determined by the Secretary of the Treasury, titles I and IV
of the Employee Retirement Income Security Act of 1974 [29 U.S.C.
1001 et seq., 1301 et seq.] are not applicable in interpreting such
Code."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
Section 1465 of title I of Pub. L. 104-188 provided that: "If any
amendment made by this subtitle [subtitle D (Secs. 1401-1465) of
title I of Pub. L. 104-188, see Tables for classification] requires
an amendment to any plan or annuity contract, such amendment shall
not be required to be made before the first day of the first plan
year beginning on or after January 1, 1998, if -
"(1) during the period after such amendment takes effect and
before such first plan year, the plan or contract is operated in
accordance with the requirements of such amendment, and
"(2) such amendment applies retroactively to such period.
In the case of a governmental plan (as defined in section 414(d) of
the Internal Revenue Code of 1986), this section shall be applied
by substituting '2000' for '1998'."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
Section 523 of title V of Pub. L. 102-318 provided that: "If any
amendment made by this subtitle [subtitle B (Secs. 521-523) of
title V of Pub. L. 102-318, amending this section and sections 55,
62, 72, 219, 402 to 404, 406 to 408, 411, 414, 415, 457, 691, 871,
877, 1441, 3121, 3306, 3402, 3405, 4973, 4980A, 6047, 6652, and
7701 of this title] requires an amendment to any plan, such plan
amendment shall not be required to be made before the first plan
year beginning on or after January 1, 1994, if -
"(1) during the period after such amendment takes effect and
before such first plan year, the plan is operated in accordance
with the requirements of such amendment, and
"(2) such plan amendment applies retroactively to such period."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
Section 1140 of title XI of Pub. L. 99-514, as amended by Pub. L.
101-239, title VII, Sec. 7861(c), Dec. 19, 1989, 103 Stat. 2431;
Pub. L. 104-188, title I, Sec. 1704(t)(27), Aug. 20, 1996, 110
Stat. 1888, provided that:
"(a) In General. - If any amendment made by this subtitle,
subtitle C [subtitles A (Secs. 1101-1147) and C (Secs. 1171-1177)
of title XI of Pub. L. 99-514, enacting sections 2057, 4972, 4979,
4980, 4981A, and 6659A of this title, amending this section,
sections 38, 56, 72, 106, 108, 117, 120, 127, 129, 132, 133, 219,
274, 402 to 404A, 406 to 411, 414 to 417, 423, 457, 501, 505, 818,
852, 3121, 3306, 3405, 4973 to 4975, 4979A, 6051, 6693, and 7701 of
this title, and sections 1052 to 1055 and 1108 of Title 29, Labor,
repealing sections 41 and 6699 of this title, and amending
provisions set out as a note under section 1001 of Title 29], or
title XVIII of this Act [see Tables for classification] requires an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after January 1,
1989, if -
"(1) during the period after such amendment takes effect and
before such first plan year, the plan is operated in accordance
with the requirements of such amendment or in accordance with an
amendment prescribed by the Secretary and adopted by the plan,
and
"(2) such plan amendment applies retroactively to the period
after such amendment takes effect and such first plan year.
A pension plan shall not be treated as failing to provide
definitely determinable benefits or contributions, or to be
operated in accordance with the provisions of the plan, merely
because it operates in accordance with this provision.
"(b) Model Amendment. -
"(1) Secretary to prescribe amendment. - The Secretary of the
Treasury or his delegate shall prescribe an amendment or
amendments which allow a plan to meet the requirements of any
amendment made by this subtitle or subtitle C -
"(A) which requires an amendment to such plan, and
"(B) is effective before the first plan year beginning after
December 31, 1988.
"(2) Adoption by plan. - If a plan adopts the amendment or
amendments prescribed under paragraph (1) and operates in
accordance with such amendment or amendments, such plan shall not
be treated as failing to provide definitely determinable benefits
or contributions or to be operated in accordance with the
provisions of the plan.
"(c) Special Rule for Collectively Bargained Plans. - In the case
of a plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more employers
ratified before March 1, 1986, subsection (a) shall be applied by
substituting for the first plan year beginning on or after January
1, 1989, the first plan year beginning after the later of -
"(1) December 31, 1988, or
"(2) the earlier of -
"(A) December 31, 1990, or
"(B) the date on which the last of such collective bargaining
agreements terminate (without regard to any extension after
February 28, 1986).
For purposes of paragraph (1)(B) [(2)(B)] and any other provision
of this title [see Tables for classification], an agreement shall
not be treated as terminated merely because the plan is amended
pursuant to such agreement to meet the requirements of any
amendment made by this title or title XVIII of this Act."
SECRETARY TO ACCEPT APPLICATIONS WITH RESPECT TO SECTION 401(K)
PLANS
Section 1142 of Pub. L. 99-514 provided that: "The Secretary of
the Treasury or his delegate shall, not later than May 1, 1987,
begin accepting applications for opinion letters with respect to
master and prototype plans for qualified cash or deferred
arrangements under section 401(k) of the Internal Revenue Code of
1986."
TREATMENT OF INDIVIDUALS HAVING BEGINNING DATE AFFECTED BY PUB. L.
99-514
Section 1852(a)(4)(C) of Pub. L. 99-514, as added by Pub. L.
100-647, title I, Sec. 1018(t)(3)(A), Nov. 10, 1988, 102 Stat.
3588, provided that: "An individual whose required beginning date
would, but for the amendment made by subparagraph (A) [amending
this section], occur after December 31, 1986, but whose required
beginning date after such amendment occurs before January 1, 1987,
shall be treated as if such individual had become a 5-percent owner
during the plan year ending in 1986."
DISTRIBUTION REQUIREMENTS FOR ACCOUNTS AND ANNUITIES OF AN INSURER
IN A REHABILITATION PROCEEDING
Section 553 of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) In General. - For purposes of sections 401(a)(9), 408(a)(6)
and (7), and 408(b)(3) and (4) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] -
"(1) a trust, custodial account, or annuity or other contract
forming part of a pension or profit-sharing plan, or a retirement
annuity, or
"(2) a grantor of an individual retirement account or an
individual retirement annuity,
shall not be treated as failing to meet the requirements of such
sections if such account, annuity, or contract was issued by an
insurance company which, on March 15, 1984, was a party to a
rehabilitation proceeding under the applicable State insurance law.
"(b) Limitation. - Subsection (a) shall apply only during the
period during which -
"(1) the insurance company continues to be a party to the
proceeding described in subsection (a), and
"(2) distributions under the trust, custodial account, or
annuity or other contract may not be made by reason of such
proceeding."
QUALIFICATION REQUIREMENTS MODIFIED IF REGULATIONS NOT ISSUED
Section 524(e) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - If the Secretary of the Treasury or his
delegate does not publish final regulations under section 416 of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as in
effect on the day before the date of the enactment of this Act
[July 18, 1984]) before January 1, 1985, the Secretary shall
publish before such date plan amendment provisions which may be
incorporated in a plan to meet the requirements of section
401(a)(10)(B)(ii) of such Code.
"(2) Effect of incorporation. - If a plan is amended to
incorporate the plan amendment provisions described in paragraph
(1), such plan shall be treated as meeting the requirements of
section 401(a)(10)(B)(ii) of the Internal Revenue Code of 1986
during the period such amendment is in effect but not later than 6
months after the final regulations described in paragraph (1) are
published.
"(3) Failure by secretary to publish. - If the Secretary of the
Treasury or his delegate does not publish plan amendment provisions
described in paragraph (1), the plan shall be treated as meeting
the requirements of section 401(a)(10)(B) of the Internal Revenue
Code of 1986 if -
"(A) such plan is amended to incorporate such requirements by
reference, except that
"(B) in the case of any optional requirement under section 416
of such Code, if such amendment does not specify the manner in
which such requirement will be met, the employer shall be treated
as having elected the requirement with respect to each employee
which provides the maximum vested accrued benefit for such
employee."
TRANSITIONAL RULE
Section 135(c)(2) of Pub. L. 95-600, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In
the case of cash or deferred arrangements in existence on June 27,
1974 -
"(A) the qualification of the plan and the trust under section
401 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954];
"(B) the exemption of the trust under section 501(a) of such
Code;
"(C) the taxable year of inclusion in gross income of the
employee of any amount so contributed by the employer to the
trust; and
"(D) the excludability of the interest of the employee in the
trust under sections 2039 and 2517 of such Code,
shall be determined for plan years beginning before January 1, 1980
in a manner consistent with Revenue Ruling 56-497 (1956-2 C.B.
284), Revenue Ruling 63-180 (1963-2 C.B. 189), and Revenue Ruling
68-89 (1968-1 C.B. 402)."
SALARY REDUCTION REGULATIONS
Section 2006 of Pub. L. 93-406, as amended by Pub. L. 94-455,
title XV, Sec. 1506, Oct. 4, 1976, 90 Stat. 1739; Pub. L. 95-615,
Sec. 5, Nov. 8, 1978, 92 Stat. 3097; Pub. L. 99-514, Sec. 2, Oct.
22, 1986, 100 Stat. 2095, provided that:
"(a) Inclusion of Certain Contributions in Income. - Except in
the case of plans or arrangements in existence on June 27, 1974, a
contribution made before January 1, 1980, to an employees' trust
described in section 401(a), 403(a) or 405(a) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] which is exempt from
tax under section 501(a) of such Code, or under an arrangement
which, but for the fact that it was not in existence on June 27,
1974, would be an arrangement described in subsection (b)(2) of
this section, shall be treated as a contribution made by an
employee if the contribution is made under an arrangement under
which the contribution will be made only if the employee elects to
receive a reduction in his compensation or to forego an increase in
his compensation.
"(b) Administration in the Case of Certain Qualified Pension or
Profit-Sharing Plans, Etc., in Existence on June 27, 1974. - No
salary reduction regulations may be issued by the Secretary of the
Treasury in final form before January 1, 1980, with respect to an
arrangement which was in existence on June 27, 1974, and which, on
that date -
"(1) provided for contributions to an employee's trust
described in section 401(a), 403(a), or 405(a) of the Internal
Revenue Code of 1986 [subsec. (a) of this section, section 403(a)
of this title, or section 405(a) of this title] which is exempt
from tax under section 501(a) of such Code [section 501(a) of
this title], or
"(2) was maintained as part of an arrangement under which an
employee was permitted to elect to receive part of his
compensation in one or more alternative forms if one of such
forms results in the inclusion of amounts in income under the
Internal Revenue Code of 1986 [this title].
"(c) Administration of Law With Respect to Certain Plans. -
"(1) Administration in the case of plans described in
subsection (b). - Until salary reduction regulations have been
issued in final form, the law with respect to plans or
arrangements described in subsection (b) shall be administered -
"(A) without regard to the proposed salary reduction
regulations (37 FR 25938) and without regard to any other
proposed salary reduction regulations, and
"(B) in the manner in which such law was administered before
January 1, 1972.
"(2) Administration in the case of qualified profit-sharing
plans. - In the case of plans or arrangements described in
subsection (b), in applying this section to the tax treatment of
contributions to qualified profit-sharing plans where the
contributed amounts are distributable only after a period of
deferral, the law shall be administered in a manner consistent
with -
"(A) Revenue Ruling 56-497 (1956 - 2 C.B. 284),
"(B) Revenue Ruling 63-180 (1963 - 2 C.B. 189), and
"(C) Revenue Ruling 68-89 (1968 - 1 C.B. 402).
"(d) Limitation on Retroactivity of Final Regulations. - In the
case of any salary reduction regulations which become final after
December 31, 1979 -
"(1) for purposes of chapter 1 of the Internal Revenue Code of
1986 (relating to normal taxes and surtaxes), such regulations
shall not apply before January 1, 1980; and
"(2) for purposes of chapter 21 of such Code (relating to
Federal Insurance Contributions Act) and for purposes of chapter
24 of such Code (relating to collection of income tax at source
on wages), such regulations shall not apply before the day on
which such regulations are issued in final form.
"(e) Salary Reduction Regulations Defined. - For purpose of this
section, the term 'salary reduction regulations' means regulations
dealing with the includibility in gross income (at the time of
contribution) of amounts contributed to a plan which includes a
trust that qualifies under section 401(a) [subsec. (a) of this
section], or a plan described in section 403(a) or 405(a),
including plans or arrangements described in subsection (b)(2), if
the contribution is made under an arrangement under which the
contribution will be made only if the employee elects to receive a
reduction in his compensation or to forego an increase in his
compensation, or under an arrangement under which the employee is
permitted to elect to receive part of his compensation in one or
more alternative forms (if one of such forms results in the
inclusion of amounts in income under the Internal Revenue Code of
1986)."
Pub. L. 95-615, Sec. 210(b), Nov. 8, 1978, 92 Stat. 3109,
provided that: "Section 5 of this Act [amending this note] shall
not apply with respect to any type of plan for any period for which
rules for that type of plan are provided by the Revenue Act of 1978
[see Short Title note set out under section 1 of this title]."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25B, 41, 62, 72, 83, 101,
104, 105, 120, 125, 127, 129, 132, 162, 172, 219, 220, 280G, 318,
402, 402A, 403, 404, 404A, 406, 407, 408, 408A, 409, 410, 411, 412,
413, 414, 415, 416, 417, 420, 447, 448, 457, 501, 503, 505, 511,
513, 514, 542, 664, 818, 856, 871, 1042, 1361, 1563, 2503, 3121,
3306, 3401, 3405, 3508, 4941, 4972, 4974, 4975, 4978, 4979, 4980,
4980B, 4980F, 4982, 6033, 6043, 6047, 6058, 6072, 6104, 6324, 7476,
7701 of this title; title 4 section 114; title 5 sections 8432,
8440; title 11 section 522; title 12 sections 1464, 1786, 1787,
1821, 1828, 1831f, 2277a-10b, 4502; title 15 sections 77c, 78c,
78l, 80a-3, 636; title 19 section 2345; title 28 section 3010;
title 29 sections 623, 1002, 1053, 1082, 1103, 1104, 1107, 1108,
1132, 1167, 1301, 1321, 1322, 1344; title 42 sections 300bb-8, 409;
title 45 sections 702, 726, 1347.
-FOOTNOTE-
(!1) So in original. Period before semicolon probably should be
a closing parenthesis.
(!2) So in original. Probably should be capitalized.
(!3) So in original. Probably should be "section".
(!4) So in original.
-End-
-CITE-
26 USC Sec. 402 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 402. Taxability of beneficiary of employees' trust
-STATUTE-
(a) Taxability of beneficiary of exempt trust
Except as otherwise provided in this section, any amount actually
distributed to any distributee by any employees' trust described in
section 401(a) which is exempt from tax under section 501(a) shall
be taxable to the distributee, in the taxable year of the
distributee in which distributed, under section 72 (relating to
annuities).
(b) Taxability of beneficiary of nonexempt trust
(1) Contributions
Contributions to an employees' trust made by an employer during
a taxable year of the employer which ends with or within a
taxable year of the trust for which the trust is not exempt from
tax under section 501(a) shall be included in the gross income of
the employee in accordance with section 83 (relating to property
transferred in connection with performance of services), except
that the value of the employee's interest in the trust shall be
substituted for the fair market value of the property for
purposes of applying such section.
(2) Distributions
The amount actually distributed or made available to any
distributee by any trust described in paragraph (1) shall be
taxable to the distributee, in the taxable year in which so
distributed or made available, under section 72 (relating to
annuities), except that distributions of income of such trust
before the annuity starting date (as defined in section 72(c)(4))
shall be included in the gross income of the employee without
regard to section 72(e)(5) (relating to amounts not received as
annuities).
(3) Grantor trusts
A beneficiary of any trust described in paragraph (1) shall not
be considered the owner of any portion of such trust under
subpart E of part I of subchapter J (relating to grantors and
others treated as substantial owners).
(4) Failure to meet requirements of section 410(b)
(A) Highly compensated employees
If 1 of the reasons a trust is not exempt from tax under
section 501(a) is the failure of the plan of which it is a part
to meet the requirements of section 401(a)(26) or 410(b), then
a highly compensated employee shall, in lieu of the amount
determined under paragraph (1) or (2) include in gross income
for the taxable year with or within which the taxable year of
the trust ends an amount equal to the vested accrued benefit of
such employee (other than the employee's investment in the
contract) as of the close of such taxable year of the trust.
(B) Failure to meet coverage tests
If a trust is not exempt from tax under section 501(a) for
any taxable year solely because such trust is part of a plan
which fails to meet the requirements of section 401(a)(26) or
410(b), paragraphs (1) and (2) shall not apply by reason of
such failure to any employee who was not a highly compensated
employee during -
(i) such taxable year, or
(ii) any preceding period for which service was creditable
to such employee under the plan.
(C) Highly compensated employee
For purposes of this paragraph, the term "highly compensated
employee" has the meaning given such term by section 414(q).
(c) Rules applicable to rollovers from exempt trusts
(1) Exclusion from income
If -
(A) any portion of the balance to the credit of an employee
in a qualified trust is paid to the employee in an eligible
rollover distribution,
(B) the distributee transfers any portion of the property
received in such distribution to an eligible retirement plan,
and
(C) in the case of a distribution of property other than
money, the amount so transferred consists of the property
distributed,
then such distribution (to the extent so transferred) shall not
be includible in gross income for the taxable year in which paid.
(2) Maximum amount which may be rolled over
In the case of any eligible rollover distribution, the maximum
amount transferred to which paragraph (1) applies shall not
exceed the portion of such distribution which is includible in
gross income (determined without regard to paragraph (1)). The
preceding sentence shall not apply to such distribution to the
extent -
(A) such portion is transferred in a direct
trustee-to-trustee transfer to a qualified trust which is part
of a plan which is a defined contribution plan and which agrees
to separately account for amounts so transferred, including
separately accounting for the portion of such distribution
which is includible in gross income and the portion of such
distribution which is not so includible, or
(B) such portion is transferred to an eligible retirement
plan described in clause (i) or (ii) of paragraph (8)(B).
In the case of a transfer described in subparagraph (A) or (B),
the amount transferred shall be treated as consisting first of
the portion of such distribution that is includible in gross
income (determined without regard to paragraph (1)).
(3) Transfer must be made within 60 days of receipt
(A) In general
Except as provided in subparagraph (B), paragraph (1) shall
not apply to any transfer of a distribution made after the 60th
day following the day on which the distributee received the
property distributed.
(B) Hardship exception
The Secretary may waive the 60-day requirement under
subparagraph (A) where the failure to waive such requirement
would be against equity or good conscience, including casualty,
disaster, or other events beyond the reasonable control of the
individual subject to such requirement.
(4) Eligible rollover distribution
For purposes of this subsection, the term "eligible rollover
distribution" means any distribution to an employee of all or any
portion of the balance to the credit of the employee in a
qualified trust; except that such term shall not include -
(A) any distribution which is one of a series of
substantially equal periodic payments (not less frequently than
annually) made -
(i) for the life (or life expectancy) of the employee or
the joint lives (or joint life expectancies) of the employee
and the employee's designated beneficiary, or
(ii) for a specified period of 10 years or more,
(B) any distribution to the extent such distribution is
required under section 401(a)(9), and
(C) any distribution which is made upon hardship of the
employee.
(5) Transfer treated as rollover contribution under section 408
For purposes of this title, a transfer to an eligible
retirement plan described in clause (i) or (ii) of paragraph
(8)(B) resulting in any portion of a distribution being excluded
from gross income under paragraph (1) shall be treated as a
rollover contribution described in section 408(d)(3).
(6) Sales of distributed property
For purposes of this subsection -
(A) Transfer of proceeds from sale of distributed property
treated as transfer of distributed property
The transfer of an amount equal to any portion of the
proceeds from the sale of property received in the distribution
shall be treated as the transfer of property received in the
distribution.
(B) Proceeds attributable to increase in value
The excess of fair market value of property on sale over its
fair market value on distribution shall be treated as property
received in the distribution.
(C) Designation where amount of distribution exceeds rollover
contribution
In any case where part or all of the distribution consists of
property other than money -
(i) the portion of the money or other property which is to
be treated as attributable to amounts not included in gross
income, and
(ii) the portion of the money or other property which is to
be treated as included in the rollover contribution,
shall be determined on a ratable basis unless the taxpayer
designates otherwise. Any designation under this subparagraph
for a taxable year shall be made not later than the time
prescribed by law for filing the return for such taxable year
(including extensions thereof). Any such designation, once
made, shall be irrevocable.
(D) Nonrecognition of gain or loss
No gain or loss shall be recognized on any sale described in
subparagraph (A) to the extent that an amount equal to the
proceeds is transferred pursuant to paragraph (1).
(7) Special rule for frozen deposits
(A) In general
The 60-day period described in paragraph (3) shall not -
(i) include any period during which the amount transferred
to the employee is a frozen deposit, or
(ii) end earlier than 10 days after such amount ceases to
be a frozen deposit.
(B) Frozen deposits
For purposes of this subparagraph, the term "frozen deposit"
means any deposit which may not be withdrawn because of -
(i) the bankruptcy or insolvency of any financial
institution, or
(ii) any requirement imposed by the State in which such
institution is located by reason of the bankruptcy or
insolvency (or threat thereof) of 1 or more financial
institutions in such State.
A deposit shall not be treated as a frozen deposit unless on at
least 1 day during the 60-day period described in paragraph (3)
(without regard to this paragraph) such deposit is described in
the preceding sentence.
(8) Definitions
For purposes of this subsection -
(A) Qualified trust
The term "qualified trust" means an employees' trust
described in section 401(a) which is exempt from tax under
section 501(a).
(B) Eligible retirement plan
The term "eligible retirement plan" means -
(i) an individual retirement account described in section
408(a),
(ii) an individual retirement annuity described in section
408(b) (other than an endowment contract),
(iii) a qualified trust,
(iv) an annuity plan described in section 403(a),
(v) an eligible deferred compensation plan described in
section 457(b) which is maintained by an eligible employer
described in section 457(e)(1)(A), and
(vi) an annuity contract described in section 403(b).
(9) Rollover where spouse receives distribution after death of
employee
If any distribution attributable to an employee is paid to the
spouse of the employee after the employee's death, the preceding
provisions of this subsection shall apply to such distribution in
the same manner as if the spouse were the employee.
(10) Separate accounting
Unless a plan described in clause (v) of paragraph (8)(B)
agrees to separately account for amounts rolled into such plan
from eligible retirement plans not described in such clause, the
plan described in such clause may not accept transfers or
rollovers from such retirement plans.
(d) Taxability of beneficiary of certain foreign situs trusts
For purposes of subsections (a), (b), and (c), a stock bonus,
pension, or profit-sharing trust which would qualify for exemption
from tax under section 501(a) except for the fact that it is a
trust created or organized outside the United States shall be
treated as if it were a trust exempt from tax under section 501(a).
(e) Other rules applicable to exempt trusts
(1) Alternate payees
(A) Alternate payee treated as distributee
For purposes of subsection (a) and section 72, an alternate
payee who is the spouse or former spouse of the participant
shall be treated as the distributee of any distribution or
payment made to the alternate payee under a qualified domestic
relations order (as defined in section 414(p)).
(B) Rollovers
If any amount is paid or distributed to an alternate payee
who is the spouse or former spouse of the participant by reason
of any qualified domestic relations order (within the meaning
of section 414(p)), subsection (c) shall apply to such
distribution in the same manner as if such alternate payee were
the employee.
(2) Distributions by United States to nonresident aliens
The amount includible under subsection (a) in the gross income
of a nonresident alien with respect to a distribution made by the
United States in respect of services performed by an employee of
the United States shall not exceed an amount which bears the same
ratio to the amount includible in gross income without regard to
this paragraph as -
(A) the aggregate basic pay paid by the United States to such
employee for such services, reduced by the amount of such basic
pay which was not includible in gross income by reason of being
from sources without the United States, bears to
(B) the aggregate basic pay paid by the United States to such
employee for such services.
In the case of distributions under the civil service retirement
laws, the term "basic pay" shall have the meaning provided in
section 8331(3) of title 5, United States Code.
(3) Cash or deferred arrangements
For purposes of this title, contributions made by an employer
on behalf of an employee to a trust which is a part of a
qualified cash or deferred arrangement (as defined in section
401(k)(2)) or which is part of a salary reduction agreement under
section 403(b) shall not be treated as distributed or made
available to the employee nor as contributions made to the trust
by the employee merely because the arrangement includes
provisions under which the employee has an election whether the
contribution will be made to the trust or received by the
employee in cash.
(4) Net unrealized appreciation
(A) Amounts attributable to employee contributions
For purposes of subsection (a) and section 72, in the case of
a distribution other than a lump sum distribution, the amount
actually distributed to any distributee from a trust described
in subsection (a) shall not include any net unrealized
appreciation in securities of the employer corporation
attributable to amounts contributed by the employee (other than
deductible employee contributions within the meaning of section
72(o)(5)). This subparagraph shall not apply to a distribution
to which subsection (c) applies.
(B) Amounts attributable to employer contributions
For purposes of subsection (a) and section 72, in the case of
any lump sum distribution which includes securities of the
employer corporation, there shall be excluded from gross income
the net unrealized appreciation attributable to that part of
the distribution which consists of securities of the employer
corporation. In accordance with rules prescribed by the
Secretary, a taxpayer may elect, on the return of tax on which
a lump sum distribution is required to be included, not to have
this subparagraph apply to such distribution.
(C) Determination of amounts and adjustments
For purposes of subparagraphs (A) and (B), net unrealized
appreciation and the resulting adjustments to basis shall be
determined in accordance with regulations prescribed by the
Secretary.
(D) Lump-sum distribution
For purposes of this paragraph -
(i) In general
The term "lump-sum distribution" means the distribution or
payment within one taxable year of the recipient of the
balance to the credit of an employee which becomes payable to
the recipient -
(I) on account of the employee's death,
(II) after the employee attains age 59 1/2 ,
(III) on account of the employee's separation from
service, or
(IV) after the employee has become disabled (within the
meaning of section 72(m)(7)),
from a trust which forms a part of a plan described in section
401(a) and which is exempt from tax under section 501 or from
a plan described in section 403(a). Subclause (III) of this
clause shall be applied only with respect to an individual
who is an employee without regard to section 401(c)(1), and
subclause (IV) shall be applied only with respect to an
employee within the meaning of section 401(c)(1). For
purposes of this clause, a distribution to two or more trusts
shall be treated as a distribution to one recipient. For
purposes of this paragraph, the balance to the credit of the
employee does not include the accumulated deductible employee
contributions under the plan (within the meaning of section
72(o)(5)).
(ii) Aggregation of certain trusts and plans
For purposes of determining the balance to the credit of an
employee under clause (i) -
(I) all trusts which are part of a plan shall be treated
as a single trust, all pension plans maintained by the
employer shall be treated as a single plan, all
profit-sharing plans maintained by the employer shall be
treated as a single plan, and all stock bonus plans
maintained by the employer shall be treated as a single
plan, and
(II) trusts which are not qualified trusts under section
401(a) and annuity contracts which do not satisfy the
requirements of section 404(a)(2) shall not be taken into
account.
(iii) Community property laws
The provisions of this paragraph shall be applied without
regard to community property laws.
(iv) Amounts subject to penalty
This paragraph shall not apply to amounts described in
subparagraph (A) of section 72(m)(5) to the extent that
section 72(m)(5) applies to such amounts.
(v) Balance to credit of employee not to include amounts
payable under qualified domestic relations order
For purposes of this paragraph, the balance to the credit
of an employee shall not include any amount payable to an
alternate payee under a qualified domestic relations order
(within the meaning of section 414(p)).
(vi) Transfers to cost-of-living arrangement not treated as
distribution
For purposes of this paragraph, the balance to the credit
of an employee under a defined contribution plan shall not
include any amount transferred from such defined contribution
plan to a qualified cost-of-living arrangement (within the
meaning of section 415(k)(2)) under a defined benefit plan.
(vii) Lump-sum distributions of alternate payees
If any distribution or payment of the balance to the credit
of an employee would be treated as a lump-sum distribution,
then, for purposes of this paragraph, the payment under a
qualified domestic relations order (within the meaning of
section 414(p)) of the balance to the credit of an alternate
payee who is the spouse or former spouse of the employee
shall be treated as a lump-sum distribution. For purposes of
this clause, the balance to the credit of the alternate payee
shall not include any amount payable to the employee.
(E) Definitions relating to securities
For purposes of this paragraph -
(i) Securities
The term "securities" means only shares of stock and bonds
or debentures issued by a corporation with interest coupons
or in registered form.
(ii) Securities of the employer
The term "securities of the employer corporation" includes
securities of a parent or subsidiary corporation (as defined
in subsections (e) and (f) of section 424) of the employer
corporation.
[(5) Repealed. Pub. L. 104-188, title I, Sec. 1401(b)(13), Aug.
20, 1996, 110 Stat. 1789]
(6) Direct trustee-to-trustee transfers
Any amount transferred in a direct trustee-to-trustee transfer
in accordance with section 401(a)(31) shall not be includible in
gross income for the taxable year of such transfer.
(f) Written explanation to recipients of distributions eligible for
rollover treatment
(1) In general
The plan administrator of any plan shall, within a reasonable
period of time before making an eligible rollover distribution,
provide a written explanation to the recipient -
(A) of the provisions under which the recipient may have the
distribution directly transferred to an eligible retirement
plan and that the automatic distribution by direct transfer
applies to certain distributions in accordance with section
401(a)(31)(B),
(B) of the provision which requires the withholding of tax on
the distribution if it is not directly transferred to an
eligible retirement plan,
(C) of the provisions under which the distribution will not
be subject to tax if transferred to an eligible retirement plan
within 60 days after the date on which the recipient received
the distribution,
(D) if applicable, of the provisions of subsections (d) and
(e) of this section, and
(E) of the provisions under which distributions from the
eligible retirement plan receiving the distribution may be
subject to restrictions and tax consequences which are
different from those applicable to distributions from the plan
making such distribution.
(2) Definitions
For purposes of this subsection -
(A) Eligible rollover distribution
The term "eligible rollover distribution" has the same
meaning as when used in subsection (c) of this section,
paragraph (4) of section 403(a), subparagraph (A) of section
403(b)(8), or subparagraph (A) of section 457(e)(16).
(B) Eligible retirement plan
The term "eligible retirement plan" has the meaning given
such term by subsection (c)(8)(B).
(g) Limitation on exclusion for elective deferrals
(1) In general
(A) Limitation
Notwithstanding subsections (e)(3) and (h)(1)(B), the
elective deferrals of any individual for any taxable year shall
be included in such individual's gross income to the extent the
amount of such deferrals for the taxable year exceeds the
applicable dollar amount.
(B) Applicable dollar amount
For purposes of subparagraph (A), the applicable dollar
amount shall be the amount determined in accordance with the
following table:
For taxable years The applicable
beginning in dollar amount:
calendar year:
2002 $11,000
2003 $12,000
2004 $13,000
2005 $14,000
2006 or thereafter $15,000.
(C) Catch-up contributions
In addition to subparagraph (A), in the case of an eligible
participant (as defined in section 414(v)), gross income shall
not include elective deferrals in excess of the applicable
dollar amount under subparagraph (B) to the extent that the
amount of such elective deferrals does not exceed the
applicable dollar amount under section 414(v)(2)(B)(i) for the
taxable year (without regard to the treatment of the elective
deferrals by an applicable employer plan under section 414(v)).
(2) Distribution of excess deferrals
(A) In general
If any amount (hereinafter in this paragraph referred to as
"excess deferrals") is included in the gross income of an
individual under paragraph (1) for any taxable year -
(i) not later than the 1st March 1 following the close of
the taxable year, the individual may allocate the amount of
such excess deferrals among the plans under which the
deferrals were made and may notify each such plan of the
portion allocated to it, and
(ii) not later than the 1st April 15 following the close of
the taxable year, each such plan may distribute to the
individual the amount allocated to it under clause (i) (and
any income allocable to such amount).
The distribution described in clause (ii) may be made
notwithstanding any other provision of law.
(B) Treatment of distribution under section 401(k)
Except to the extent provided under rules prescribed by the
Secretary, notwithstanding the distribution of any portion of
an excess deferral from a plan under subparagraph (A)(ii), such
portion shall, for purposes of applying section
401(k)(3)(A)(ii), be treated as an employer contribution.
(C) Taxation of distribution
In the case of a distribution to which subparagraph (A)
applies -
(i) except as provided in clause (ii), such distribution
shall not be included in gross income, and
(ii) any income on the excess deferral shall, for purposes
of this chapter, be treated as earned and received in the
taxable year in which such income is distributed.
No tax shall be imposed under section 72(t) on any distribution
described in the preceding sentence.
(D) Partial distributions
If a plan distributes only a portion of any excess deferral
and income allocable thereto, such portion shall be treated as
having been distributed ratably from the excess deferral and
the income.
(3) Elective deferrals
For purposes of this subsection, the term "elective deferrals"
means, with respect to any taxable year, the sum of -
(A) any employer contribution under a qualified cash or
deferred arrangement (as defined in section 401(k)) to the
extent not includible in gross income for the taxable year
under subsection (e)(3) (determined without regard to this
subsection),
(B) any employer contribution to the extent not includible in
gross income for the taxable year under subsection (h)(1)(B)
(determined without regard to this subsection),
(C) any employer contribution to purchase an annuity contract
under section 403(b) under a salary reduction agreement (within
the meaning of section 3121(a)(5)(D)), and
(D) any elective employer contribution under section
408(p)(2)(A)(i).
An employer contribution shall not be treated as an elective
deferral described in subparagraph (C) if under the salary
reduction agreement such contribution is made pursuant to a
one-time irrevocable election made by the employee at the time of
initial eligibility to participate in the agreement or is made
pursuant to a similar arrangement involving a one-time
irrevocable election specified in regulations.
(4) Cost-of-living adjustment
In the case of taxable years beginning after December 31, 2006,
the Secretary shall adjust the $15,000 amount under paragraph
(1)(B) at the same time and in the same manner as under section
415(d), except that the base period shall be the calendar quarter
beginning July 1, 2005, and any increase under this paragraph
which is not a multiple of $500 shall be rounded to the next
lowest multiple of $500.
(5) Disregard of community property laws
This subsection shall be applied without regard to community
property laws.
(6) Coordination with section 72
For purposes of applying section 72, any amount includible in
gross income for any taxable year under this subsection but which
is not distributed from the plan during such taxable year shall
not be treated as investment in the contract.
(7) Special rule for certain organizations
(A) In general
In the case of a qualified employee of a qualified
organization, with respect to employer contributions described
in paragraph (3)(C) made by such organization, the limitation
of paragraph (1) for any taxable year shall be increased by
whichever of the following is the least:
(i) $3,000,
(ii) $15,000 reduced by amounts not included in gross
income for prior taxable years by reason of this paragraph,
or
(iii) the excess of $5,000 multiplied by the number of
years of service of the employee with the qualified
organization over the employer contributions described in
paragraph (3) made by the organization on behalf of such
employee for prior taxable years (determined in the manner
prescribed by the Secretary).
(B) Qualified organization
For purposes of this paragraph, the term "qualified
organization" means any educational organization, hospital,
home health service agency, health and welfare service agency,
church, or convention or association of churches. Such term
includes any organization described in section
414(e)(3)(B)(ii). Terms used in this subparagraph shall have
the same meaning as when used in section 415(c)(4) (as in
effect before the enactment of the Economic Growth and Tax
Relief Reconciliation Act of 2001).
(C) Qualified employee
For purposes of this paragraph, the term "qualified employee"
means any employee who has completed 15 years of service with
the qualified organization.
(D) Years of service
For purposes of this paragraph, the term "years of service"
has the meaning given such term by section 403(b).
(8) Matching contributions on behalf of self-employed individuals
not treated as elective employer contributions
Except as provided in section 401(k)(3)(D)(ii), any matching
contribution described in section 401(m)(4)(A) which is made on
behalf of a self-employed individual (as defined in section
401(c)) shall not be treated as an elective employer contribution
under a qualified cash or deferred arrangement (as defined in
section 401(k)) for purposes of this title.
(h) Special rules for simplified employee pensions
For purposes of this chapter -
(1) In general
Except as provided in paragraph (2), contributions made by an
employer on behalf of an employee to an individual retirement
plan pursuant to a simplified employee pension (as defined in
section 408(k)) -
(A) shall not be treated as distributed or made available to
the employee or as contributions made by the employee, and
(B) if such contributions are made pursuant to an arrangement
under section 408(k)(6) under which an employee may elect to
have the employer make contributions to the simplified employee
pension on behalf of the employee, shall not be treated as
distributed or made available or as contributions made by the
employee merely because the simplified employee pension
includes provisions for such election.
(2) Limitations on employer contributions
Contributions made by an employer to a simplified employee
pension with respect to an employee for any year shall be treated
as distributed or made available to such employee and as
contributions made by the employee to the extent such
contributions exceed the lesser of -
(A) 25 percent of the compensation (within the meaning of
section 414(s)) from such employer includible in the employee's
gross income for the year (determined without regard to the
employer contributions to the simplified employee pension), or
(B) the limitation in effect under section 415(c)(1)(A),
reduced in the case of any highly compensated employee (within
the meaning of section 414(q)) by the amount taken into account
with respect to such employee under section 408(k)(3)(D).
(3) Distributions
Any amount paid or distributed out of an individual retirement
plan pursuant to a simplified employee pension shall be included
in gross income by the payee or distributee, as the case may be,
in accordance with the provisions of section 408(d).
(i) Treatment of self-employed individuals
For purposes of this section, except as otherwise provided in
subparagraph (A) of subsection (d)(4),(!1) the term "employee"
includes a self-employed individual (as defined in section
401(c)(1)(B)) and the employer of such individual shall be the
person treated as his employer under section 401(c)(4).
(j) Effect of disposition of stock by plan on net unrealized
appreciation
(1) In general
For purposes of subsection (e)(4), in the case of any
transaction to which this subsection applies, the determination
of net unrealized appreciation shall be made without regard to
such transaction.
(2) Transaction to which subsection applies
This subsection shall apply to any transaction in which -
(A) the plan trustee exchanges the plan's securities of the
employer corporation for other such securities, or
(B) the plan trustee disposes of securities of the employer
corporation and uses the proceeds of such disposition to
acquire securities of the employer corporation within 90 days
(or such longer period as the Secretary may prescribe), except
that this subparagraph shall not apply to any employee with
respect to whom a distribution of money was made during the
period after such disposition and before such acquisition.
(k) Treatment of simple retirement accounts
Rules similar to the rules of paragraphs (1) and (3) of
subsection (h) shall apply to contributions and distributions with
respect to a simple retirement account under section 408(p).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 135; Pub. L. 86-437, Secs. 1,
2(a), Apr. 22, 1960, 74 Stat. 79; Pub. L. 87-792, Sec. 4(c), Oct.
10, 1962, 76 Stat. 825; Pub. L. 88-272, title II, Secs. 221(c)(1),
232(e)(1)-(3), Feb. 26, 1964, 78 Stat. 75, 111; Pub. L. 91-172,
title III, Sec. 321(b)(1), title V, Sec. 515(a)(1), Dec. 30, 1969,
83 Stat. 590, 643; Pub. L. 93-406, title II, Secs. 2002(g)(5),
2005(a), (b)(1), (c)(1), (2), Sept. 2, 1974, 88 Stat. 968, 987,
990, 991: Pub. L. 94-267, Sec. 1(a), Apr. 15, 1976, 90 Stat. 365;
Pub. L. 94-455, title XIV, Sec. 1402(b)(1)(C), (2), title XV, Sec.
1512(a), title XIX, Secs. 1901(a)(57)(A)-(C)(i), 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1731, 1732, 1742, 1773, 1774, 1834; Pub. L.
95-30, title I, Sec. 102(b)(4), May 23, 1977, 91 Stat. 137; Pub. L.
95-458, Sec. 4(a), (c), Oct. 14, 1978, 92 Stat. 1257, 1259; Pub. L.
95-600, title I, Secs. 101(d)(1), 135(b), 157(f)(1), (g)(1),
(h)(1), Nov. 6, 1978, 92 Stat. 2770, 2787, 2806-2808; Pub. L.
96-222, title I, Sec. 101(a)(14)(C), (E)(i), Apr. 1, 1980, 94 Stat.
204, 205; Pub. L. 96-608, Sec. 2(a), Dec. 28, 1980, 94 Stat. 3551;
Pub. L. 97-34, title III, Secs. 311(b)(2), (3)(A), (c), 314(c)(1),
Aug. 13, 1981, 95 Stat. 280, 286; Pub. L. 97-448, title I, Secs.
101(b), 103(c)(7), (8)(A), (12)(D), Jan. 12, 1983, 96 Stat. 2366,
2376, 2377; Pub. L. 98-369, div. A, title IV, Sec. 491(c)(2),
(d)(9)-(11), title V, Sec. 522(a)(1), (b)-(d)(8), title VII, Sec.
713(c)(3), title X, Sec. 1001(b)(3), (e), July 18, 1984, 98 Stat.
848, 849, 868-870, 957, 1011, 1012; Pub. L. 98-397, title II, Secs.
204(c)(1), (3), (4), 207(a), Aug. 23, 1984, 98 Stat. 1448, 1449;
Pub. L. 99-272, title XI, Sec. 11012(c), Apr. 7, 1986, 100 Stat.
260; Pub. L. 99-514, title I, Sec. 104(b)(5), title XI, Secs.
1105(a), 1106(c)(2), 1108(b), 1112(c), 1121(c)(1), 1122(a),
(b)(1)(A), (2), (e)(1), (2)(A), (g), title XVIII, Secs.
1852(a)(5)(A), (b)(1)-(7), (c)(5), 1854(f)(2), 1875(c)(1)(A),
1898(a)(2), (3), (c)(1)(A), (7)(A)(i), (e), Oct. 22, 1986, 100
Stat. 2105, 2417, 2423, 2432, 2444, 2465, 2466, 2469, 2470,
2865-2867, 2881, 2894, 2942, 2943, 2951, 2954, 2955; Pub. L.
100-647, title I, Secs. 1011(c)(1)-(6)(B), (11), (h)(4),
1011A(a)(1), (b)(4)(A)-(D), (5)-(8), (10), (c)(9), 1018(t)(8)(A),
(C), (u)(1), (6), (7), title VI, Sec. 6068(a), Nov. 10, 1988, 102
Stat. 3457-3459, 3464, 3472-3474, 3476, 3589, 3590, 3703; Pub. L.
101-239, title VII, Sec. 7811(g)(2), (i)(13), Dec. 19, 1989, 103
Stat. 2409, 2411; Pub. L. 101-508, title XI, Sec. 11801(c)(9)(I),
Nov. 5, 1990, 104 Stat. 1388-526; Pub. L. 102-318, title V, Secs.
521(a), (b)(9)-(11), 522(c)(1), July 3, 1992, 106 Stat. 300, 310,
311, 315; Pub. L. 103-465, title VII, Sec. 732(c), Dec. 8, 1994,
108 Stat. 5005; Pub. L. 104-188, title I, Secs. 1401(a)-(b)(2),
(13), 1421(b)(3)(A), (9)(B), 1450(a)(2), 1704(t)(68), Aug. 20,
1996, 110 Stat. 1787-1789, 1796, 1798, 1814, 1891; Pub. L. 105-34,
title XV, Sec. 1501(a), Aug. 5, 1997, 111 Stat. 1058; Pub. L.
105-206, title VI, Sec. 6005(c)(2)(A), July 22, 1998, 112 Stat.
800; Pub. L. 107-16, title VI, Secs. 611(d)(1)-(3)(A), 617(b), (c),
632(a)(3)(G), 636(b)(1), 641(a)(2)(A), (B), (b)(2)-(d), (e)(4)-(6),
643(a), 644(a), 657(b), June 7, 2001, 115 Stat. 97, 98, 105, 114,
117, 119-123, 136; Pub. L. 107-147, title IV, Sec. 411(l)(3),
(o)(1), (p)(6), (q)(2), Mar. 9, 2002, 116 Stat. 47, 48, 51.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
Pub. L. 107-16, title VI, Sec. 617(b), (c), (f), title IX, Sec.
901, June 7, 2001, 115 Stat. 105, 106, 150, provided that,
applicable to taxable years beginning after Dec. 31, 2005, this
section is temporarily amended as follows:
(1) in subsection (c)(8)(B), by adding concluding provisions to
read as follows:
"If any portion of an eligible rollover distribution is
attributable to payments or distributions from a designated
Roth account (as defined in section 402A), an eligible
retirement plan with respect to such portion shall include only
another designated Roth account and a Roth IRA.";
(2) in subsection (g)(1)(A), by inserting at end "The preceding
sentence shall not apply the portion of such excess as does not
exceed the designated Roth contributions of the individual for the
taxable year."; and
(3) in subsection (g)(2)(A), by inserting "(or would be included
but for the last sentence thereof)" after "paragraph (1)".
-REFTEXT-
REFERENCES IN TEXT
The civil service retirement laws, referred to in subsec. (e)(2),
are classified generally to subchapter III (Sec. 8331 et seq.) of
chapter 83 of Title 5, Government Organization and Employees.
Section 415(c)(4) (as in effect before the enactment of the
Economic Growth and Tax Relief Reconciliation Act of 2001),
referred to in subsec. (g)(7)(B), means section 415(c)(4) of this
title prior to its repeal by Pub. L. 107-16, title VI, Sec.
632(a)(3)(E), June 7, 2001, 115 Stat. 114.
Subsection (d), referred to in subsec. (i), was amended generally
by Pub. L. 104-188, title I, Sec. 1401(a), Aug. 20, 1996, 110 Stat.
1787, and as so amended, no longer contains a par. (4).
-MISC1-
AMENDMENTS
2002 - Subsec. (c)(2). Pub. L. 107-147, Sec. 411(q)(2), inserted
at end: "In the case of a transfer described in subparagraph (A) or
(B), the amount transferred shall be treated as consisting first of
the portion of such distribution that is includible in gross income
(determined without regard to paragraph (1))."
Subsec. (g)(1)(C). Pub. L. 107-147, Sec. 411(o)(1), added subpar.
(C).
Subsec. (g)(7)(B). Pub. L. 107-147, Sec. 411(p)(6), substituted
"2001)." for "2001."
Subsec. (h)(2)(A). Pub. L. 107-147, Sec. 411(l)(3), substituted
"25 percent" for "15 percent".
2001 - Subsec. (c)(2). Pub. L. 107-16, Secs. 643(a), 901,
temporarily inserted at end "The preceding sentence shall not apply
to such distribution to the extent -
"(A) such portion is transferred in a direct trustee-to-trustee
transfer to a qualified trust which is part of a plan which is a
defined contribution plan and which agrees to separately account
for amounts so transferred, including separately accounting for
the portion of such distribution which is includible in gross
income and the portion of such distribution which is not so
includible, or
"(B) such portion is transferred to an eligible retirement plan
described in clause (i) or (ii) of paragraph (8)(B)."
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (c)(3). Pub. L. 107-16, Secs. 644(a), 901, temporarily
reenacted heading without change and amended text generally. Prior
to amendment, text read as follows: "Paragraph (1) shall not apply
to any transfer of a distribution made after the 60th day following
the day on which the distributee received the property
distributed." See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (c)(4)(C). Pub. L. 107-16, Secs. 636(b)(1), 901,
temporarily amended subpar. (C) generally. Prior to amendment,
subpar. (C) read as follows: "any hardship distribution described
in section 401(k)(2)(B)(i)(IV)." See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (c)(8)(B)(v). Pub. L. 107-16, Secs. 641(a)(2)(A), 901,
temporarily added cl. (v). See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (c)(8)(B)(vi). Pub. L. 107-16, Secs. 641(b)(2), 901,
temporarily added cl. (vi). See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (c)(9). Pub. L. 107-16, Secs. 641(d), 901, temporarily
struck out before period at end "; except that a trust or plan
described in clause (iii) or (iv) of paragraph (8)(B) shall not be
treated as an eligible retirement plan with respect to such
distribution". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c)(10). Pub. L. 107-16, Secs. 641(a)(2)(B), 901,
temporarily added par. (10). See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (f)(1). Pub. L. 107-16, Secs. 641(e)(5), 901, temporarily
struck out "from an eligible retirement plan" after "rollover
distribution" in introductory provisions. See Effective and
Termination Dates note below.
Subsec. (f)(1)(A). Pub. L. 107-16, Secs. 657(b), 901, temporarily
inserted before comma at end "and that the automatic distribution
by direct transfer applies to certain distributions in accordance
with section 401(a)(31)(B)". See Effective and Termination Dates of
2001 Amendment note below.
Pub. L. 107-16, Secs. 641(e)(6), 901, temporarily substituted "an
eligible retirement plan" for "another eligible retirement plan".
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (f)(1)(B). Pub. L. 107-16, Secs. 641(e)(6), 901,
temporarily substituted "an eligible retirement plan" for "another
eligible retirement plan". See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (f)(1)(E). Pub. L. 107-16, Secs. 641(c), 901, temporarily
added subpar. (E). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (f)(2)(A). Pub. L. 107-16, Secs. 641(e)(4), 901,
temporarily substituted ", paragraph (4) of section 403(a),
subparagraph (A) of section 403(b)(8), or subparagraph (A) of
section 457(e)(16)" for "or paragraph (4) of section 403(a)". See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (g)(1). Pub. L. 107-16, Secs. 611(d)(1), 901, temporarily
reenacted heading without change and amended text generally. Prior
to amendment, text read as follows: "Notwithstanding subsections
(e)(3) and (h)(1)(B), the elective deferrals of any individual for
any taxable year shall be included in such individual's gross
income to the extent the amount of such deferrals for the taxable
year exceeds $7,000." See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (g)(4). Pub. L. 107-16, Secs. 611(d)(3)(A), 901,
temporarily redesignated par. (5) as (4) and struck out heading and
text of former par. (4). Text read as follows: "The limitation
under paragraph (1) shall be increased (but not to an amount in
excess of $9,500) by the amount of any employer contributions for
the taxable year described in paragraph (3)(C)." See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (g)(5). Pub. L. 107-16, Secs. 611(d)(3)(A), 901,
temporarily redesignated par. (6) as (5). Former par. (5)
redesignated (4). See Effective and Termination Dates of 2001
Amendment note below.
Pub. L. 107-16, Secs. 611(d)(2), 901, temporarily reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "The Secretary shall adjust the
$7,000 amount under paragraph (1) at the same time and in the same
manner as under section 415(d); except that any increase under this
paragraph which is not a multiple of $500 shall be rounded to the
next lowest multiple of $500." See Effective and Termination Dates
of 2001 Amendment note below.
Subsec. (g)(6). Pub. L. 107-16, Secs. 611(d)(3)(A), 901,
temporarily redesignated par. (7) as (6). Former par. (6)
redesignated (5). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (g)(7). Pub. L. 107-16, Secs. 611(d)(3)(A), 901,
temporarily redesignated par. (8) as (7). See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (g)(7)(B). Pub. L. 107-16, Secs. 632(a)(3)(G), 901,
temporarily inserted "(as in effect before the enactment of the
Economic Growth and Tax Relief Reconciliation Act of 2001" before
period at end. See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (g)(8), (9). Pub. L. 107-16, Secs. 611(d)(3)(A), 901,
temporarily redesignated par. (9) as (8). Former par. (8)
redesignated (7). See Effective and Termination Dates of 2001
Amendment note below.
1998 - Subsec. (c)(4)(C). Pub. L. 105-206 added subpar. (C).
1997 - Subsec. (g)(9). Pub. L. 105-34 added par. (9).
1996 - Subsec. (c)(10). Pub. L. 104-188, Sec. 1401(b)(2), struck
out par. (10) which read as follows:
"(10) Denial of averaging for subsequent distributions. - If
paragraph (1) applies to any distribution paid to any employee,
paragraphs (1) and (3) of subsection (d) shall not apply to any
distribution (paid after such distribution) of the balance to the
credit of the employee under the plan under which the preceding
distribution was made (or under any other plan which, under
subsection (d)(4)(C), would be aggregated with such plan)."
Subsec. (d). Pub. L. 104-188, Sec. 1401(a), amended subsec. (d)
generally, substituting provisions relating to taxability of
beneficiary of certain foreign situs trusts for former provisions
relating to tax on lump sum distributions.
Subsec. (e)(3). Pub. L. 104-188, Sec. 1450(a)(2), inserted "or
which is part of a salary reduction agreement under section 403(b)"
after "section 401(k)(2))".
Subsec. (e)(4)(D). Pub. L. 104-188, Sec. 1401(b)(1), amended
subpar. (D) generally. Prior to amendment, subpar. (D) read as
follows:
"(D) Lump sum distribution. - For purposes of this paragraph, the
term 'lump sum distribution' has the meaning given such term by
subsection (d)(4)(A) (without regard to subsection (d)(4)(F))."
Subsec. (e)(5). Pub. L. 104-188, Sec. 1401(b)(13), struck out
par. (5) which read as follows:
"(5) Taxability of beneficiary of certain foreign situs trusts. -
For purposes of subsections (a), (b), and (c), a stock bonus,
pension, or profit-sharing trust which would qualify for exemption
from tax under section 501(a) except for the fact that it is a
trust created or organized outside the United States shall be
treated as if it were a trust exempt from tax under section
501(a)."
Subsec. (g)(3)(A). Pub. L. 104-188, Sec. 1704(t)(68), substituted
"subsection (e)(3)" for "subsection (a)(8)".
Subsec. (g)(3)(D). Pub. L. 104-188, Sec. 1421(b)(9)(B), added
subpar. (D).
Subsec. (k). Pub. L. 104-188, Sec. 1421(b)(3)(A), added subsec.
(k).
1994 - Subsec. (g)(5). Pub. L. 103-465 inserted before period at
end "; except that any increase under this paragraph which is not a
multiple of $500 shall be rounded to the next lowest multiple of
$500".
1992 - Subsecs. (a) to (d). Pub. L. 102-318, Sec. 521(a), amended
subsecs. (a) to (d) generally, substituting present provisions for
former provisions which in subsec. (a) related to taxability of
beneficiaries of exempt trusts, in subsec. (b) related to
taxability of beneficiaries of nonexempt trusts, in subsec. (c)
related to taxability of beneficiaries of certain foreign situs
trusts, and subsec. (d) which had been previously repealed.
Subsec. (e). Pub. L. 102-318, Sec. 521, amended subsec. (e)
generally, substituting provisions relating to other rules
applicable to exempt trusts for provisions relating to tax on lump
sum distributions.
Subsec. (e)(6). Pub. L. 102-318, Sec. 522(c)(1), added par. (6).
Subsec. (f). Pub. L. 102-318, Sec. 521(a), amended subsec. (f)
generally, substituting present provisions for provisions requiring
a different time when explanation was to be provided and a
different content of explanation to be given and using different
definitions for "eligible rollover distribution" and "eligible
retirement plan".
Subsec. (g)(1). Pub. L. 102-318, Sec. 521(b)(9), substituted
"subsections (e)(3)" for "subsections (a)(8)".
Subsec. (i). Pub. L. 192-318, Sec. 521(b)(10), substituted
"subsection (d)(4)" for "subsection (e)(4)".
Subsec. (j)(1). Pub. L. 102-318, Sec. 521(b)(11), substituted
"(e)(4)" for "(a)(1) or (e)(4)(J)".
1990 - Subsec. (a)(3)(B). Pub. L. 101-508, Sec.
11801(c)(9)(I)(i), substituted "section 424" for "section 425".
Subsec. (a)(6)(B)(i). Pub. L. 101-508, Sec. 11801(c)(9)(I)(ii),
substituted "section 424(f)" for "section 425(f)".
1989 - Subsec. (e)(7). Pub. L. 101-239, Sec. 7811(i)(13), added
par. (7).
Subsec. (g)(3). Pub. L. 101-239, Sec. 7811(g)(2), inserted
"involving a one-time irrevocable election" after "similar
arrangement" in last sentence.
1988 - Subsec. (a)(1). Pub. L. 100-647, Sec. 1011A(b)(8)(A),
substituted "paragraph (4)" for "paragraphs (2) and (4)".
Subsec. (a)(4). Pub. L. 100-647, Sec. 1011A(b)(8)(B), struck out
"or (2)" after "under paragraph (1)".
Subsec. (a)(5)(D)(i). Pub. L. 100-647, Sec. 1011A(b)(4)(C),
inserted at end "Any distribution described in section
401(a)(28)(B)(ii) shall be treated as meeting the requirements of
subclauses (I) and (II)."
Pub. L. 100-647, Sec. 1011A(b)(4)(A), repealed amendment by Pub.
L. 99-514, Sec. 1122(e)(1), which had amended cl. (i) generally,
and provided that the Internal Revenue Code of 1986 shall be
applied and administered as if such amendment had not been enacted.
See 1986 Amendment note and Effective Date of 1988 Amendment note
below.
Subsec. (a)(5)(D)(i)(I). Pub. L. 100-647, Sec. 1011A(b)(4)(B),
inserted "is payable as provided in clause (i), (iii), or (iv) of
subsection (e)(4)(A) (without regard to the second sentence
thereof) and" after "(I) such distribution".
Subsec. (a)(5)(D)(iii). Pub. L. 100-647, Sec. 1011A(b)(4)(D),
struck out "10-year" after "Denial of" in heading.
Subsec. (a)(5)(F). Pub. L. 100-647, Sec. 1011A(a)(1), substituted
"resulting in any portion of a distribution being excluded from
gross income under subparagraph (A)" for "described in subparagraph
(A)".
Subsec. (a)(6)(C). Pub. L. 100-647, Sec. 1011A(b)(8)(C), struck
out "paragraph (2) of subsection (a), and" after "paragraph (5)(A)
applies,".
Subsec. (a)(6)(E)(ii). Pub. L. 100-647, Sec. 1011A(b)(8)(D),
substituted "then paragraphs (1) and (3) of subsection (e) shall"
for "then paragraph (2) of subsection (a), and paragraphs (1) and
(3) of subsection (e), shall".
Subsec. (a)(6)(G). Pub. L. 100-647, Sec. 1018(t)(8)(A),
redesignated subpar. (G), relating to treatment of potential future
vesting, as (I).
Subsec. (a)(6)(H)(ii). Pub. L. 100-647, Sec. 1011A(b)(5),
inserted at end "A deposit shall not be treated as a frozen deposit
unless on at least 1 day during the 60-day period described in
paragraph (5)(C) (without regard to this subparagraph) such deposit
is described in the preceding sentence."
Subsec. (a)(6)(I). Pub. L. 100-647, Sec. 1018(t)(8)(A),
redesignated subpar. (G), relating to treatment of potential future
vesting, as (I).
Subsec. (b)(2)(A). Pub. L. 100-647, Sec. 1011(h)(4), added
subpar. (A) and struck out former subpar. (A) which related to
trust which is not exempt from tax under section 501(a) because
plan fails to meet requirements of section 410(b).
Subsec. (b)(2)(B). Pub. L. 100-647, Sec. 1011(h)(4), added
subpar. (B) and struck out former subpar. (B) which related to
failure of plan to meet requirements of section 410(b) for more
than 1 taxable year.
Subsec. (e)(1)(A). Pub. L. 100-647, Sec. 1011A(b)(8)(E), struck
out "ordinary income portion of a" after "subparagraph (B)) on
the".
Subsec. (e)(1)(B). Pub. L. 100-647, Sec. 1011A(b)(10), inserted
at end "For purposes of the preceding sentence, in determining the
amount of tax under section 1(c), section 1(g) shall be applied
without regard to paragraph (2)(B) thereof."
Pub. L. 100-647, Sec. 1018(u)(1), made technical correction to
directory language of Pub. L. 99-514, Sec. 104(b)(5). See 1986
Amendment note below.
Pub. L. 100-647, Sec. 1018(u)(6), related to execution of
amendment by Pub. L. 99-514, Sec. 1122(b)(2)(B), see 1986 Amendment
note below.
Subsec. (e)(3). Pub. L. 100-647, Sec. 1018(u)(7), related to
execution of amendment by Pub. L. 99-514, Sec. 1122(b)(2)(C), see
1986 Amendment note below.
Subsec. (e)(4)(A). Pub. L. 100-647, Sec. 1011A(b)(8)(F), in
concluding provisions, substituted "A" for "Except for purposes of
subsection (a)(2) and section 403(a)(2), a", and struck out
"subsection (a)(2) of this section, and subsection (a)(2) of
section 403," before "the balance to".
Subsec. (e)(4)(B)(i). Pub. L. 100-647, Sec. 1011A(b)(6),
substituted "employee" for "taxpayer".
Subsec. (e)(4)(I). Pub. L. 100-647, Sec. 1011A(c)(9), struck out
"clause (ii) of" after "amounts described in".
Subsec. (e)(4)(J). Pub. L. 100-647, Sec. 1011A(b)(7), amended
last sentence generally. Prior to amendment, last sentence read as
follows: "To the extent provided by the Secretary, a taxpayer may
elect before any distribution not to have this paragraph apply with
respect to such distribution."
Subsec. (e)(4)(L). Pub. L. 100-647, Sec. 1011A(b)(8)(G), struck
out subpar. (L) which related to election to treat pre-1974
participation as post-1973 participation.
Subsec. (e)(4)(M). Pub. L. 100-647, Sec. 1011A(b)(8)(H), struck
out ", subsection (a)(2) of this section, and section 403(a)(2)"
after "of this subsection".
Subsec. (e)(4)(O). Pub. L. 100-647, Sec. 6068(a), added subpar.
(O).
Subsec. (e)(5). Pub. L. 100-647, Sec. 1011A(b)(8)(I), struck out
"and paragraph (2) of subsection (a)" after "of this subsection".
Subsec. (e)(6)(C). Pub. L. 100-647, Sec. 1011A(b)(8)(J), amended
subpar. (C) generally. Prior to amendment, subpar. (C) read as
follows: "For purposes of this paragraph, special lump sum
treatment applies to any distribution if any portion of such
distribution -
"(i) is taxed under this subsection by reason of an election
under paragraph (4)(B), or
"(ii) is treated as long-term capital gain under subsection
(a)(2) of this section or section 403(a)(2)."
Subsec. (f)(1). Pub. L. 100-647, Sec. 1018(t)(8)(C), substituted
"an eligible" for "a eligible".
Subsec. (g). Pub. L. 100-647, Sec. 1011(c)(6)(B), redesignated
subsec. (g), relating to effect of disposition of stock by plan on
net unrealized appreciation, as (j).
Pub. L. 100-647, Sec. 1011(c)(6)(A), redesignated subsec. (g),
relating to treatment of self-employed individuals, as (i).
Subsec. (g)(2). Pub. L. 100-647, Sec. 1011(c)(2), substituted
"Distribution" for "Required distribution" in heading.
Subsec. (g)(2)(C). Pub. L. 100-647, Sec. 1011(c)(1), struck out
"(and no tax shall be imposed under section 72(t))" after "in gross
income", in cl. (i), substituted "such income is distributed" for
"such excess deferral is made" in cl. (ii), and inserted at end "No
tax shall be imposed under section 72(t) on any distribution
described in the preceding sentence."
Subsec. (g)(2)(D). Pub. L. 100-647, Sec. 1011(c)(3), added
subpar. (D).
Subsec. (g)(3). Pub. L. 100-647, Sec. 1011(c)(4), substituted
"this subsection" for "this paragraph".
Pub. L. 100-647, Sec. 1011(c)(11), inserted at end "An employer
contribution shall not be treated as an elective deferral described
in subparagraph (C) if under the salary reduction agreement such
contribution is made pursuant to a one-time irrevocable election
made by the employee at the time of initial eligibility to
participate in the agreement or is made pursuant to a similar
arrangement specified in regulations."
Subsec. (g)(8)(A)(iii). Pub. L. 100-647, Sec. 1011(c)(5)(A),
inserted "(determined in the manner prescribed by the Secretary)"
after "prior taxable years".
Subsec. (g)(8)(D). Pub. L. 100-647, Sec. 1011(c)(5)(B), added
subpar. (D).
Subsec. (i). Pub. L. 100-647, Sec. 1011(c)(6)(A), redesignated
subsec. (g), relating to treatment of self-employed individuals, as
(i).
Subsec. (j). Pub. L. 100-647, Sec. 1011(c)(6)(B), redesignated
subsec. (g), relating to effect of disposition of stock by plan on
net unrealized appreciation, as (j).
1986 - Subsec. (a)(2). Pub. L. 99-514, Sec. 1122(b)(1)(A), struck
out par. (2) relating to capital gains treatment for portion of
lump sum distribution.
Subsec. (a)(5)(D)(i). Pub. L. 99-514, Sec. 1122(e)(1), amended
cl. (i) generally, to read as follows: "Subparagraph (A) shall
apply to a partial distribution only if the employee elects to have
subparagraph (A) apply to such distribution and such distribution
would be a lump sum distribution if subsection (e)(4)(A) were
applied -
"(I) by substituting '50 percent of the balance to the credit
of an employee' for 'the balance to the credit of an employee',
"(II) without regard to clause (ii) thereof, the second
sentence thereof, and subparagraph (B) of subsection (e)(4).
Any distribution described in section 401(a)(28)(B)(ii) shall be
treated as meeting the requirements of this clause." This amendment
was repealed by Pub. L. 100-647, Sec. 1011A(b)(4)(A). See 1988
Amendment note above.
Pub. L. 99-514, Sec. 1852(b)(2), inserted at end "For purposes of
subclause (I), the balance to the credit of the employee shall not
include any accumulated deductible employee contributions (within
the meaning of section 72(o)(5))."
Subsec. (a)(5)(D)(ii). Pub. L. 99-514, Sec. 1852(b)(5),
substituted "a trust or plan described in subclause (III) or (IV)"
for "a plan described in subclause (IV) or (V)".
Subsec. (a)(5)(D)(iii). Pub. L. 99-514, Sec. 1122(b)(2)(A),
struck out "and capital gains treatment" in heading and amended
text generally. Prior to amendment, cl. (iii) read as follows: "If
an election under clause (i) is made with respect to any partial
distribution paid to any employee -
"(I) paragraph (2) of this subsection,
"(II) paragraphs (1) and (3) of subsection (e), and
"(III) paragraph (2) of section 403(a),
shall not apply to any distribution (paid after such partial
distribution) of the balance to the credit of such employee under
the plan under which such partial distribution was made (or under
any other plan which, under subsection (e)(4)(C), would be
aggregated with such plan)."
Subsec. (a)(5)(E)(v). Pub. L. 99-514, Sec. 1852(b)(1),
substituted "of all or any portion of" for "of any portion of".
Subsec. (a)(5)(F). Pub. L. 99-514, Sec. 1121(c)(1), amended
subpar. (F) generally. Prior to amendment, subpar. (F) heading read
"Special rules" and text read as follows:
"(i) Transfer treated as rollover contribution under section 408
"For purposes of this title, a transfer resulting in any portion
of a distribution being excluded from gross income under
subparagraph (A) to an eligible retirement plan described in
subclause (I) or (II) of subparagraph (E)(iv) shall be treated as a
rollover contribution described in section 408(d)(3).
"(ii) 5-percent owners
"An eligible retirement plan described in subclause (III) or (IV)
of subparagraph (E)(iv) shall not be treated as an eligible
retirement plan for the transfer of a distribution if the employee
is a 5-percent owner at the time such distribution is made. For
purposes of the preceding sentence, the term '5-percent owner'
means any individual who is a 5-percent owner (as defined in
section 416(i)(1)(B)) at any time during the 5 plan years preceding
the plan year in which the distribution is made."
Pub. L. 99-514, Sec. 1852(b)(6), in cl. (i) substituted "a
transfer resulting in any portion of a distribution being excluded
from gross income under subparagraph (A)" for "a transfer described
in subparagraph (A)".
Pub. L. 99-514, Sec. 1875(c)(1)(A), amended cl. (ii) generally.
Prior to amendment, cl. (ii), key employees, read as follows: "An
eligible retirement plan described in subclause (III) or (IV) of
subparagraph (E)(iv) shall not be treated as an eligible retirement
plan for the transfer of a distribution if any part of the
distribution is attributable to contributions made on behalf of the
employee while he was a key employee in a top-heavy plan. For
purposes of the preceding sentence, the terms 'key employee' and
'top-heavy plan' have the same respective meanings as when used in
section 416."
Subsec. (a)(5)(G). Pub. L. 99-514, Sec. 1852(a)(5)(A), added
subpar. (G).
Subsec. (a)(6)(D)(v). Pub. L. 99-514, Sec. 1852(b)(7),
substituted "(7)" for "(7)(B)".
Subsec. (a)(6)(F). Pub. L. 99-514, Sec. 1898(c)(7)(A)(i),
substituted "paragraph (5)" for "paragraph (5)(A)".
Subsec. (a)(6)(G). Pub. L. 99-514, Sec. 1898(a)(3), added subpar.
(G) relating to treatment of potential future vesting.
Pub. L. 99-272 added subpar. (G) relating to payments from
certain pension plan termination trusts.
Subsec. (a)(6)(H). Pub. L. 99-514, Sec. 1122(e)(2)(A), added
subpar. (H).
Subsec. (a)(7). Pub. L. 99-514, Sec. 1852(b)(4), inserted ";
except that a trust or plan described in subclause (III) or (IV) of
paragraph (5)(E)(iv) shall not be treated as an eligible retirement
plan with respect to such distribution" after "the spouse were the
employee".
Subsec. (a)(9). Pub. L. 99-514, Sec. 1898(c)(1)(A), substituted
"any alternate payee who is the spouse or former spouse of the
participant shall be treated" for "the alternate payee shall be
treated".
Subsec. (b). Pub. L. 99-514, Sec. 1112(c), designated existing
provisions as par. (1), inserted par. (1) heading, and added par.
(2).
Pub. L. 99-514, Sec. 1852(c)(5), substituted "section 72(e)(5)"
for "section 72(e)(1)".
Subsec. (e)(1)(B). Pub. L. 99-514, Sec. 1122(b)(2)(B), and Pub.
L. 100-647, Sec. 1018(u)(6), redesignated subpar. (C) as (B),
substituted "Amount of tax" for "Initial separate tax" in heading
and "The amount of tax imposed by subparagraph (A)" for "The
initial separate tax", and struck out former subpar. (B) which
related to computation of tax on lump sum distributions.
Pub. L. 99-514, Sec. 104(b)(5), as amended by Pub. L. 100-647,
Sec. 1018(u)(1), struck out "the zero bracket amount applicable to
such individual for the taxable year plus" after "amount equal to".
Pub. L. 99-514, Sec. 1122(a)(2)(A), (B), substituted "5" for "10"
and " 1/5 " for "one-tenth".
Subsec. (e)(1)(C) to (E). Pub. L. 99-514, Sec. 1122(b)(2)(B)(i),
redesignated subpars. (C) to (E) as (B) to (D), respectively.
Subsec. (e)(3). Pub. L. 99-514, Sec. 1122(b)(2)(C), and Pub. L.
100-647, Sec. 1018(u)(7), substituted "total taxable amount" for
"ordinary income portion".
Subsec. (e)(4)(B). Pub. L. 99-514, Sec. 1122(a)(1), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "For purposes of this section and section 403, no amount
which is not an annuity contract may be treated as a lump sum
distribution under subparagraph (A) unless the taxpayer elects for
the taxable year to have all such amounts received during such year
so treated at the time and in the manner provided under regulations
prescribed by the Secretary. Not more than one election may be made
under this subparagraph with respect to any individual after such
individual has attained age 59 1/2 . No election may be made under
this subparagraph by any taxpayer other than an individual, an
estate, or a trust. In the case of a lump sum distribution made
with respect to an employee to two or more trusts, the election
under this subparagraph shall be made by the personal
representative of the employee."
Subsec. (e)(4)(E). Pub. L. 99-514, Sec. 1122(b)(2)(D), struck out
subpar. (E) defining "ordinary income portion" with respect to a
lump sum distribution.
Subsec. (e)(4)(F). Pub. L. 99-514, Sec. 1852(b)(3)(B), struck out
subpar. (F) defining "employee". See subsec. (g) of this section
relating to treatment of self-employed individuals.
Subsec. (e)(4)(H). Pub. L. 99-514, Sec. 1122(b)(2)(E), struck out
"(but not for purposes of subsection (a)(2) or section
403(a)(2)(A))" after "For purposes of this subsection".
Subsec. (e)(4)(J). Pub. L. 99-514, Sec. 1122(g), inserted at end
"To the extent provided by the Secretary, a taxpayer may elect
before any distribution not to have this paragraph apply with
respect to such distribution."
Subsec. (e)(4)(N). Pub. L. 99-514, Sec. 1106(c)(2), added subpar.
(N).
Subsec. (e)(6). Pub. L. 99-514, Sec. 1898(a)(2), added par. (6).
Subsec. (f)(1). Pub. L. 99-514, Sec. 1898(e)(1), substituted
"eligible rollover distribution" for "qualifying rollover
distribution".
Subsec. (f)(2). Pub. L. 99-514, Sec. 1898(e)(2), amended par. (2)
generally. Prior to amendment, par. (2) read as follows: "For
purposes of this subsection, the terms 'qualifying rollover
distribution' and 'eligible retirement plan' have the respective
meanings given such terms by subsection (a)(5)(E)."
Subsec. (g). Pub. L. 99-514, Sec. 1854(f)(2), added subsec. (g)
relating to effect of disposition of stock by plan on net
unrealized appreciation.
Pub. L. 99-514, Sec. 1852(b)(3)(A), added subsec. (g) relating to
treatment of self-employed individuals.
Pub. L. 99-514, Sec. 1105(a), added subsec. (g) relating to
limitation on exclusion for elective deferrals.
Subsec. (h). Pub. L. 99-514, Sec. 1108(b), added subsec. (h).
1984 - Subsec. (a)(2). Pub. L. 98-369, Sec. 1001(b)(3),
substituted "6 months" for "1 year".
Subsec. (a)(5)(A)(i). Pub. L. 98-369, Sec. 522(a)(1), substituted
"any portion of the balance to the credit of an employee in a
qualified trust is paid to him" for "the balance to the credit of
an employee in a qualified trust is paid to him in a qualifying
rollover distribution".
Subsec. (a)(5)(B). Pub. L. 98-369, Sec. 522(d)(1)(A), (2),
substituted "qualified total distribution" for "qualifying rollover
distribution", and inserted "In the case of any partial
distribution, the maximum amount transferred to which subparagraph
(A) applies shall not exceed the portion of such distribution which
is includible in gross income (determined without regard to
subparagraph (A))."
Subsec. (a)(5)(D). Pub. L. 98-369, Sec. 522(b), added subpar.
(D). Former subpar. (D) redesignated (E).
Subsec. (a)(5)(D)(iv)(III)-(V). Pub. L. 98-369, Sec. 491(d)(9),
struck out subcl. (III), which included a retirement bond described
in section 409 within term "eligible retirement plan" and
redesignated former subcls. (IV) and (V) and (III) and (IV),
respectively.
Subsec. (a)(5)(E). Pub. L. 98-369, Sec. 522(b), redesignated
subpar. (D) as (E). Former subpar. (E) redesignated (F).
Subsec. (a)(5)(E)(i). Pub. L. 98-369, Sec. 522(d)(1)(B),
substituted "qualified total distribution" for "qualifying rollover
distribution" in heading and text.
Subsec. (a)(5)(E)(ii)(II). Pub. L. 98-369, Sec. 522(d)(3),
substituted "gross income (determined without regard to this
paragraph)" for "gross income".
Subsec. (a)(5)(E)(v). Pub. L. 98-369, Sec. 522(d)(4), substituted
provision dealing with partial distribution for provision dealing
with rollover of partial distributions of deductible employee
contributions permitted.
Subsec. (a)(5)(F). Pub. L. 98-369, Sec. 522(b), redesignated
subpar. (E) as (F).
Subsec. (a)(5)(F)(i). Pub. L. 98-369, Sec. 522(d)(5), substituted
"subparagraph (E)(iv)" for "subparagraph (D)(iv)".
Pub. L. 98-369, Sec. 491(d)(10), substituted "or (II)" for ",
(II), or (III)".
Subsec. (a)(5)(F)(ii). Pub. L. 98-369, Sec. 522(d)(5),
substituted "subparagraph (E)(iv)" for "subparagraph (D)(iv)".
Pub. L. 98-369, Sec. 491(d)(11), substituted "(III) or (IV)" for
"(IV) and (V)".
Pub. L. 98-369, Sec. 713(c)(3), substituted "Key employees" for
"Self-employed individuals and owner-employees" in heading and
"attributable to contributions made on behalf of the employee while
he was a key employee in a top-heavy plan" for "attributable to a
trust forming part of a plan under which the employee was an
employee within the meaning of section 401(c)(1) at the time
contributions were made on his behalf under the plan" in text, and
inserted sentence adopting the meaning of "key employee" and
"top-heavy plan" used in section 416.
Subsec. (a)(6)(A), (B). Pub. L. 98-369, Sec. 522(d)(6),
substituted "paragraph (5)(E)(i)" for "paragraph (5)(D)(i)".
Subsec. (a)(6)(D)(iii), (iv). Pub. L. 98-369, Sec. 522(d)(7),
substituted "employee contributions (or, in the case of a partial
distribution, the amount not includible in gross income)" for
"employee contributions".
Subsec. (a)(6)(E)(i). Pub. L. 98-369, Sec. 522(d)(1)(C), (8),
substituted "qualified total distribution" for "qualifying rollover
distribution", and "paragraph (5)(D) or (5)(E)(i)(II)" for
"paragraph (5)(D)(i)(II)".
Subsec. (a)(6)(F). Pub. L. 98-397, Sec. 204(c)(3), added subpar.
(F).
Subsec. (a)(7). Pub. L. 98-369, Sec. 522(c), substituted
provisions relating to rollover where spouse receives distributions
after death of employee for provisions dealing with rollover where
spouse receives lump-sum distribution at death of employee.
Subsec. (a)(9). Pub. L. 98-397, Sec. 204(c)(1), added par. (9).
Subsec. (e)(4)(L). Pub. L. 98-369, Sec. 1001(b)(3), substituted
"6 months" for "1 year", applicable to property acquired after June
22, 1984, and before Jan. 1, 1988. See Effective Date of 1984
Amendment note below.
Subsec. (e)(4)(M). Pub. L. 98-397, Sec. 204(c)(4), added subpar.
(M).
Subsec. (e)(5). Pub. L. 98-369, Sec. 491(c)(2), added par. (5).
Subsec. (f). Pub. L. 98-397, Sec. 207(a), added subsec. (f).
1983 - Subsec. (a)(5)(D)(v). Pub. L. 97-448, Sec. 103(c)(8)(A),
added cl. (v).
Subsec. (e)(1)(C). Pub. L. 97-448, Sec. 101(b), substituted "the
zero bracket amount applicable to such an individual for the
taxable year" for "$2,300".
Subsec. (e)(4)(A). Pub. L. 97-448, Sec. 103(c)(7), substituted
"this subsection, subsection (a)(2) of this section, and subsection
(a)(2) of section 403" for "this section and section 403" in last
sentence.
Subsec. (e)(4)(J). Pub. L. 97-448, Sec. 103(c)(12)(D), amended
Pub. L. 97-34, Sec. 311(c)(2) [see 1981 Amendment note below], by
substituting "section 72(o)(5)" for "section 77(o)(5)" in last
sentence of subpar. (j).
1981 - Subsec. (a)(1). Pub. L. 97-34, Sec. 311(c)(1), inserted
"(other than deductible employee contributions within the meaning
of section 72(o)(5))".
Pub. L. 97-34, Sec. 314(c)(1), struck out "or made available"
after "distributed" in three places.
Subsec. (a)(5). Pub. L. 97-34, Sec. 311(b)(3)(A), inserted
"(other than accumulated deductible employee contributions within
the meaning of section 72(o)(5))" after "contributions" in subpar.
(B) and added subcl. (III) in subpar. (D).
Subsec. (e)(4). Pub. L. 97-34, Sec. 311(b)(2), (c)(2), added to
subpar. (A) provision that for purposes of sections 402 and 403,
the balance to the credit of the employee does not include the
accumulated deductible employee contributions under the plan
(within the meaning of section 72(o)(5)), and added subpar. (J)
provision making subpar. (J) inapplicable to distributions of
accumulated deductible employee contributions (within the meaning
of section 77(o)(5)). See 1983 Amendment note above.
1980 - Subsec. (a)(6)(D)(iii). Pub. L. 96-222, Sec.
101(a)(14)(E)(i), substituted "may designate" for "many designate".
Subsec. (a)(6)(E). Pub. L. 96-608 added subpar. (E).
Subsec. (a)(7)(A)(i). Pub. L. 96-222, Sec. 101(a)(14)(C),
substituted "qualifying rollover distribution attributable to an
employee is paid to the spouse of the employee after" for "lump-sum
distribution from a qualified trust is paid to the spouse of the
employee on account of".
1978 - Subsec. (a)(5). Pub. L. 95-458, Sec. 4(a), among other
changes, substituted provision permitting tax-free treatment for
any portion of a lump sum distribution from a qualified retirement
plan which is deposited in an individual retirement account or
another qualifying plan for provision which required transfer of
all such property received.
Subsec. (a)(5)(D)(i)(II). Pub. L. 95-600, Sec. 157(h)(1),
substituted "subparagraphs (B) and (H) of subsection (e)(4)" for
"subsection (e)(4)(B)".
Subsec. (a)(6). Pub. L. 95-458, Sec. 4(c), in provision preceding
subpar. (A) struck out "For purposes of paragraph (5)(A)(i)", in
subpar. (A) substituted "For purposes of paragraph (5)(D)(i), a
complete" for "A complete", in subpar. (B) inserted "For purposes
of paragraph (5)(D)(i) - " after "assets. - " in provision
preceding cl. (i), and added subpar. (C).
Subsec. (a)(6)(D). Pub. L. 95-600, Sec. 157(f)(1), added subpar.
(D).
Subsec. (a)(7). Pub. L. 95-600, Sec. 157(g)(1), added par. (7).
Subsec. (a)(8). Pub. L. 95-600, Sec. 135(b), added par. (8).
Subsec. (e)(1)(C). Pub. L. 95-600, Sec. 101(d)(1), substituted
"$2,300" for "$2,200".
1977 - Subsec. (e)(1)(C). Pub. L. 95-30 substituted "amount equal
to $2,200 plus one-tenth of the excess of" for "amount equal to
one-tenth of the excess of" in provisions preceding cl. (i).
1976 - Subsec. (a)(1). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (a)(2). Pub. L. 94-455, Sec. 1402(b)(2), provided that "9
months" would be changed to "1 year".
Pub. L. 94-455, Secs. 1402(b)(1)(C), 1906(b)(13)(A), provided
that "6 months" would be changed to "9 months" for taxable years
beginning in 1977 and struck out "or his delegate" after
"Secretary".
Subsec. (a)(4). Pub. L. 94-455, Sec. 1901(a)(57)(A), substituted
"basic pay" for "basic salary", "civil service retirement laws" for
"Civil Service Retirement Act (5 U.S.C. 2251)", and "section
8331(3) of title 5, United States Code" for "section 1(d) of such
Act".
Subsec. (a)(5). Pub. L. 94-267, Sec. 1(a)(2), substituted "a
payment" for "the lump-sum distribution".
Subsec. (a)(5)(A). Pub. L. 94-267, Sec. 1(a)(1), restructured
provision by adding cl. (i) and designating existing provision as
cl. (ii).
Subsec. (a)(6). Pub. L. 94-267, Sec. 1(a)(3), added par. (6).
Subsec. (a)(6)(A). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (d). Pub. L. 94-455, Sec. 1901(a)(57)(B), struck out
subsec. (d) which related to certain trust agreements made before
Oct. 21, 1942.
Subsec. (e)(2). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
Subsec. (e)(4)(A). Pub. L. 94-455, Sec. 1901(a)(57)(C)(i),
substituted "Except for purposes of subsection (a)(2) and section
403(a)(2)" for "For purposes of this subparagraph".
Subsec. (e)(4)(B), (J). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (e)(4)(L). Pub. L. 94-455, Sec. 1402(b)(2), substituted
"1 year" for "9 months".
Pub. L. 94-455, Secs. 1402(b)(1)(C), 1512(a), added subsec.
(e)(4)(L) to be applicable to distributions and payments after Dec.
31, 1975, in taxable years beginning after Dec. 31, 1975, and
provided that "6 months" would be changed to "9 months" for taxable
years beginning in 1977.
1974 - Subsec. (a)(2). Pub. L. 93-406, Sec. 2005(b)(1),
substituted provisions covering capital gains treatment of portions
of lump sum distributions determined through the application of a
fraction formula susceptible of producing a phaseout of capital
gains treatment for provisions covering capital gains treatment of
portions of lump sum distributions determined on a fixed formula.
Subsec. (a)(3)(C). Pub. L. 93-406, Sec. 2005(c)(1), struck out
subsec. (a)(3)(C) which defined "total distribution payable".
Subsec. (a)(5). Pub. L. 93-406, Secs. 2002(g)(5), 2005(c)(2),
substituted provisions covering rollover amounts for provisions
covering limitation on capital gains treatment.
Subsec. (e). Pub. L. 93-406, Sec. 2005(a), substituted provisions
covering tax on lump sum distributions for provisions covering plan
termination distributions made after Dec. 31, 1953, and before Jan.
1, 1955.
1969 - Subsec. (a)(5). Pub. L. 91-172, Sec. 515(a)(1), added par.
(5).
Subsec. (b). Pub. L. 91-172, Sec. 321(b)(1), substituted
provision for inclusion of contributions made by an employer to a
nonexempt trust in the "gross income of the employee in accordance
with section 83 (relating to property transferred in connection
with performance of services), except that the value of the
employee's interest in the trust shall be substituted for the fair
market value of the property for purposes of applying such section"
for prior provision for inclusion in the "gross income of an
employee for the taxable year in which the contribution is made to
the trust in the case of an employee whose beneficial interest in
such contribution is nonforfeitable at the time the contribution is
made", and provided that distributions of income of such trust
before the annuity starting date (as defined in section 72(c)(4))
shall be included in the gross income of the employee without
regard to section 72(e)(1) (relating to amount not received as
annuities) and that a beneficiary of any such trust shall not be
considered the owner of any portion of such trust under subpart E
of part I of subch. J (relating to grantors and others treated as
substantial owners).
1964 - Subsec. (a)(1). Pub. L. 88-272, Sec. 232(e)(1), struck out
"except that section 72(e)(3) shall not apply" after "(relating to
annuities)".
Subsec. (a)(3)(B). Pub. L. 88-272, Sec. 221(c)(1), substituted
"subsections (e) and (f) of section 425" for "section 421(d)(2) and
(3)".
Subsecs. (b), (d). Pub. L. 88-272, Sec. 232(e)(2), (3), struck
out "except that section 72(e)(3) shall not apply" after "(relating
to annuities)".
1962 - Subsec. (a)(2). Pub. L. 87-792 inserted sentence providing
that this paragraph shall not apply to distributions paid to any
distributee to the extent such distributions are attributable to
contributions made on behalf of the employee while he was an
employee within the meaning of section 401(c)(1).
1960 - Subsec. (a)(1). Pub. L. 86-437, Sec. 2(a), substituted
"paragraphs (2) and (4)" for "paragraph (2)".
Subsec. (a)(4). Pub. L. 86-437, Sec. 1, added par. (4).
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by section 611(d)(1)-(3)(A) of Pub. L. 107-16
applicable to years beginning after Dec. 31, 2001, see section
611(i)(1) of Pub. L. 107-16, set out as a note under section 415 of
this title.
Pub. L. 107-16, title VI, Sec. 617(f), June 7, 2001, 115 Stat.
106, provided that: "The amendments made by this section [enacting
section 402A of this title and amending this section and sections
408A, 6047, and 6051 of this title] shall apply to taxable years
beginning after December 31, 2005."
Amendment by section 632(a)(3)(G) of Pub. L. 107-16 applicable to
years beginning after Dec. 31, 2001, see section 632(a)(4) of Pub.
L. 107-16, set out as a note under section 72 of this title.
Pub. L. 107-16, title VI, Sec. 636(b)(2), June 7, 2001, 115 Stat.
117, provided that: "The amendment made by this subsection
[amending this section] shall apply to distributions made after
December 31, 2001."
Pub. L. 107-16, title VI, Sec. 641(f), June 7, 2001, 115 Stat.
121, provided that:
"(1) Effective date. - The amendments made by this section
[amending this section and sections 72, 219, 401, 403, 408, 415,
457, 3401, 3405, and 4973 of this title] shall apply to
distributions after December 31, 2001.
"(2) Reasonable notice. - No penalty shall be imposed on a plan
for the failure to provide the information required by the
amendment made by subsection (c) [amending this section] with
respect to any distribution made before the date that is 90 days
after the date on which the Secretary of the Treasury issues a safe
harbor rollover notice after the date of the enactment of this Act
[June 7, 2001], if the administrator of such plan makes a
reasonable attempt to comply with such requirement.
"(3) Special rule. - Notwithstanding any other provision of law,
subsections (h)(3) and (h)(5) of section 1122 of the Tax Reform Act
of 1986 [Pub. L. 99-514, set out as a note below] shall not apply
to any distribution from an eligible retirement plan (as defined in
clause (iii) or (iv) of section 402(c)(8)(B) of the Internal
Revenue Code of 1986) on behalf of an individual if there was a
rollover to such plan on behalf of such individual which is
permitted solely by reason of any amendment made by this section."
Amendment by section 643(a) of Pub. L. 107-16 applicable to
distributions made after Dec. 31, 2001, see section 643(d) of Pub.
L. 107-16, set out as a note under section 401 of this title.
Pub. L. 107-16, title VI, Sec. 644(c), June 7, 2001, 115 Stat.
123, provided that: "The amendments made by this section [amending
this section and section 408 of this title] shall apply to
distributions after December 31, 2001."
Amendment by section 657(b) of Pub. L. 107-16 applicable to
distributions made after final regulations implementing section
657(c)(2)(A) of Pub. L. 107-16 are prescribed, see section 657(d)
of Pub. L. 107-16, set out as a note under section 401 of this
title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-206, title VI, Sec. 6005(c)(2)(C), July 22, 1998, 112
Stat. 800, provided that: "The amendments made by this paragraph
[amending this section and section 403 of this title] shall apply
to distributions after December 31, 1998."
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1501(c)(1) of Pub. L. 105-34 provided that: "The
amendment made by subsection (a) [amending this section] shall
apply to years beginning after December 31, 1997."
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1401(c) of Pub. L. 104-188 provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 55, 62, 401, 406, 407, 691, 871, 877, and
4980A of this title] shall apply to taxable years beginning after
December 31, 1999.
"(2) Retention of certain transition rules. - The amendments made
by this section shall not apply to any distribution for which the
taxpayer is eligible to elect the benefits of section 1122(h)(3) or
(5) of the Tax Reform Act of 1986 [Pub. L. 99-514, set out below].
Notwithstanding the preceding sentence, individuals who elect such
benefits after December 31, 1999, shall not be eligible for 5-year
averaging under section 402(d) of the Internal Revenue Code of 1986
(as in effect immediately before such amendments)."
Amendment by section 1421(b)(3)(A), (9)(B) of Pub. L. 104-188
applicable to taxable years beginning after Dec. 31, 1996, see
section 1421(e) of Pub. L. 104-188, set out as a note under section
72 of this title.
Amendment by section 1450(a)(2) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1995, see section 1450(a)(3)
of Pub. L. 104-188, set out in a Modifications of Subsection (b) of
This Section note under section 403 of this title.
EFFECTIVE DATE OF 1994 AMENDMENT
Amendment by Pub. L. 103-465 applicable to years beginning after
Dec. 31, 1994, and, to the extent of providing for the rounding of
indexed amounts, not applicable to any year to the extent the
rounding would require the indexed amount to be reduced below the
amount in effect for years beginning in 1994, see section 732(e) of
Pub. L. 103-465, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Section 521(e) of Pub. L. 102-318 provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 55, 62, 72, 219, 401, 403, 406 to 408,
411, 414, 415, 457, 691, 871, 877, 1441, 3121, 3306, 3405, 4973,
4980A, and 7701 of this title] shall apply to distributions after
December 31, 1992.
"(2) Special rule for partial distributions. - For purposes of
section 402(a)(5)(D)(i)(II) of the Internal Revenue Code of 1986
(as in effect before the amendments made by this section), a
distribution before January 1, 1993, which is made before or at the
same time as a series of periodic payments shall not be treated as
one of such series if it is not substantially equal in amount to
other payments in such series."
Amendment by section 522(c)(1) of Pub. L. 102-318 applicable,
except as otherwise provided, to distributions after Dec. 31, 1992,
see section 522(d) of Pub. L. 102-318, set out as a note under
section 401 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7811(i)(13) of Pub. L. 101-239 provided that the
amendment made by that section is effective with respect to taxable
years ending after Dec. 19, 1989 (or, at the election of the
taxpayer, beginning after Dec. 31, 1986).
Amendment by section 7811(g)(2) of Pub. L. 101-239 effective,
except as otherwise provided, as if included in the provision of
the Technical and Miscellaneous Revenue Act of 1988, Pub. L.
100-647, to which such amendment relates, see section 7817 of Pub.
L. 101-239, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1011(c)(1)-(6)(B), (11), (h)(4),
1011A(a)(1), (b)(4)(A)-(D), (5)-(8), (10), (c)(9), and
1018(t)(8)(A), (C), (u)(1), (6), (7) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 6068(b) of Pub. L. 100-647 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years ending after December 31, 1984."
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 104(b)(5) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 151(a) of
Pub. L. 99-514, set out as a note under section 1 of this title.
Section 1105(c) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011(c)(8), (9), Nov. 10, 1988, 102 Stat. 3458,
provided that:
"(1) In general. - Except as provided in this subsection, the
amendment made by subsection (a) [amending this section] shall
apply to taxable years beginning after December 31, 1986.
"(2) Deferrals under collective bargaining agreements. - In the
case of a plan maintained pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or
more employers ratified before March 1, 1986, the amendment made by
subsection (a) shall not apply to contributions made pursuant to
such an agreement for taxable years beginning before the earlier of
-
"(A) the date on which such agreement terminates (determined
without regard to any extension thereof after February 28, 1986),
or
"(B) January 1, 1989.
Such contributions shall be taken into account for purposes of
applying the amendment made by this section to other plans.
"(3) Distributions made before plan amendment. -
"(A) In general. - If a plan amendment is required to allow the
plan to make any distribution described in section
402(g)(2)(A)(ii) of the Internal Revenue Code of 1986, any such
distribution which is made before the close of the 1st plan year
for which such amendment is required to be in effect under
section 1140 [set out as a note under section 401 of this title]
shall be treated as made in accordance with the provisions of
such plan.
"(B) Distributions pursuant to model amendment. -
"(i) Secretary to prescribe amendment. - The Secretary of the
Treasury or his delegate shall prescribe an amendment which
allows a plan to make any distribution described in section
402(g)(2)(A)(ii) of such Code.
"(ii) Adoption by plan. - If a plan adopts the amendment
prescribed under clause (i) and makes a distribution in
accordance with such amendment, such distribution shall be
treated as made in accordance with the provisions of the plan.
"(4) Special rule for taxable years of partnerships which include
january 1, 1987. - In the case of the taxable year of any
partnership which begins before January 1, 1987, and ends after
January 1, 1987, elective deferrals (within the meaning of section
402(g)(3) of the Internal Revenue Code of 1986) made on behalf of a
partner for such taxable year shall, for purposes of section
402(g)(3) of such Code, be treated as having been made ratably
during such taxable year.
"(5) Cash or deferred arrangements. - The amendments made by this
section [amending this section and section 6051 of this title]
shall not apply to employer contributions made during 1987 and
attributable to services performed during 1986 under a qualified
cash or deferred arrangement (as defined in section 401(k) of the
Internal Revenue Code of 1986) if, under the terms of such
arrangement as in effect on August 16, 1986 -
"(A) the employee makes an election with respect to such
contribution before January 1, 1987, and
"(B) the employer identifies the amount of such contribution
before January 1, 1987.
"(6) Reporting requirements. - The amendments made by subsection
(b) [amending section 6051 of this title] shall apply to calendar
years beginning after December 31, 1986."
Amendment by section 1106(c)(2) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1986, see section 1106(i) of Pub. L.
99-514, set out as a note under section 415 of this title.
Amendment by section 1108(b) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1986, see section 1108(h) of Pub. L.
99-514, set out as a note under section 219 of this title.
Amendment by section 1112(c) of Pub. L. 99-514 applicable to plan
years beginning after Dec. 31, 1988, with special rule regarding
collective bargaining agreements ratified before Mar. 1, 1986, and
with provision for waiver of excise tax on reversions, see section
1112(e) of Pub. L. 99-514, set out as a note under section 401 of
this title.
Amendment by section 1121(c)(1) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1986, with special provisions for
plans maintained pursuant to collective bargaining agreements
ratified before Mar. 1, 1986, and transition rules, see section
1121(d) of Pub. L. 99-514, set out as a note under section 401 of
this title.
Section 1122(h) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011A(b)(11)-(15), Nov. 10, 1988, 102 Stat. 3474,
3475, provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and sections 72, 403, and 408 of this title] shall apply to
amounts distributed after December 31, 1986, in taxable years
ending after such date.
"(2) Subsection (c). -
"(A) Subsection (c)(1). - The amendment made by subsection
(c)(1) [amending section 72 of this title] shall apply to
individuals whose annuity starting date is after July 1, 1986.
"(B) Subsection (c)(2). - The amendment made by subsection
(c)(2) [amending section 72 of this title] shall apply to
individuals whose annuity starting date is after December 31,
1986, except that section 72(b)(3) of the Internal Revenue Code
of 1986 (as added by such subsection) shall apply to individuals
whose annuity starting date is after July 1, 1986.
"(C) Special rule for amounts not received as annuities. - In
the case of any plan not described in section 72(e)(8)(D) of the
Internal Revenue Code of 1986 (as added by subsection (c)(3)),
the amendments made by subsection (c)(3) [amending section 72 of
this title] shall apply to amounts received after July 1, 1986.
"(3) Special rule for individuals who attained age 50 before
january 1, 1986. -
"(A) In general. - In the case of a lump sum distribution to
which this paragraph applies -
"(i) the existing capital gains provisions shall continue to
apply, and
"(ii) the requirement of subparagraph (B) of section
402(e)(4) of the Internal Revenue Code of 1986 (as amended by
subsection (a)) that the distribution be received after
attaining age 59 1/2 shall not apply.
"(B) Computation of tax. - If subparagraph (A) applies to any
lump sum distribution of any taxpayer for any taxable year, the
tax imposed by section 1 of the Internal Revenue Code of 1986 on
such taxpayer for such taxable year shall be equal to the sum of
-
"(i) the tax imposed by such section 1 on the taxable income
of the taxpayer (reduced by the portion of such lump sum
distribution to which clause (ii) applies), plus
"(ii) 20 percent of the portion of such lump sum distribution
to which the existing capital gains provisions continue to
apply by reason of this paragraph.
"(C) Lump sum distributions to which paragraph applies. - This
paragraph shall apply to any lump sum distribution if -
"(i) such lump sum distribution is received by an employee
who has attained age 50 before January 1, 1986 or by an
individual, estate, or trust with respect to such an employee,
and
"(ii) the taxpayer makes an election under this paragraph.
Not more than 1 election may be made under this paragraph with
respect to an employee. An election under this subparagraph shall
be treated as an election under section 402(e)(4)(B) of such Code
for purposes of such Code.
"(4) 5-year phase-out of capital gains treatment. -
"(A) Notwithstanding the amendment made by subsection (b)
[amending this section and section 403 of this title], if the
taxpayer elects the application of this paragraph with respect to
any distribution after December 31, 1986, and before January 1,
1992, the phase-out percentage of the amount which would have
been treated, without regard to this subparagraph, as long-term
capital gain under the existing capital gains provisions shall be
treated as long-term capital gain.
"(B) For purposes of this paragraph -
"In the case of distributions 2The phase-out
during calendar year: percentage is:
--------------------------------------------------------------------
1987 100
1988 95
1989 75
1990 50
1991 25.
--------------------------------------------------------------------
"(C) No more than 1 election may be made under this paragraph
with respect to an employee. An election under this paragraph
shall be treated as an election under section 402(e)(4)(B) of the
Internal Revenue Code of 1986 for purposes of such Code.
"(5) Election of 10-year averaging. - An employee who has
attained age 50 before January 1, 1986, and elects the application
of paragraph (3) or section 402(e)(1) of the Internal Revenue Code
of 1986 (as amended by this Act) may elect to have such section
applied by substituting '10 times' for '5 times' and ' 1/10 ' for '
1/5 ' in subparagraph (B) thereof. For purposes of the preceding
sentence, section 402(e)(1) of such Code shall be applied by using
the rate of tax in effect under section 1 of the Internal Revenue
Code of 1954 for taxable years beginning during 1986 and by
including in gross income the zero bracket amount in effect under
section 63(d) of such Code for such years. This paragraph shall
also apply to an individual, estate, or trust which receives a
distribution with respect to an employee described in this
paragraph.
"(6) Existing capital gain provisions. - For purposes of
paragraphs (3) and (4), the term 'existing capital gains
provisions' means the provisions of paragraph (2) of section 402(a)
of the Internal Revenue Code of 1954 (as in effect on the day
before the date of the enactment of this Act [Oct. 22, 1986]) and
paragraph (2) of section 403(a) of such Code (as so in effect).
"(7) Subsection (d). - The amendments made by subsection (d)
[amending section 403 of this title] shall apply to taxable years
beginning after December 31, 1985.
"(8) Frozen deposits. - The amendments made by subsection (e)(2)
[amending this section and section 408 of this title] shall apply
to amounts transferred to an employee before, on, or after the date
of the enactment of this Act [Oct. 22, 1986], except that in the
case of an amount transferred on or before such date, the 60-day
period referred to in section 402(a)(5)(C) of the Internal Revenue
Code of 1986 shall not expire before the 60th day after the date of
the enactment of this Act.
"(9) Special rule for state plans. - In the case of a plan
maintained by a State which on May 5, 1986, permitted withdrawal by
the employee of employee contributions (other than as an annuity),
section 72(e) of the Internal Revenue Code of 1986 shall be applied
-
"(A) without regard to the phrase 'before separation from
service' in paragraph (8)(D), and
"(B) by treating any amount received (other than as an annuity)
before or with the 1st annuity payment as having been received
before the annuity starting date."
Amendment by section 1852(a)(5)(A), (b)(1)-(7), (c)(5) of Pub. L.
99-514 effective, except as otherwise provided, as if included in
the provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div.
A, to which such amendment relates, see section 1881 of Pub. L.
99-514, set out as a note under section 48 of this title.
Section 1854(f)(4)(C) of Pub. L. 99-514, as amended by Pub. L.
100-647, title I, Sec. 1011(c)(6)(C), Nov. 10, 1988, 102 Stat.
3458, provided that: "The amendments made by paragraph (2)
[amending this section] shall apply to any transaction occurring
after December 31, 1984, except that in the case of any transaction
occurring before the date of the enactment of this Act [Oct. 22,
1986], the period under which proceeds are required to be invested
under section 402(j) of the Internal Revenue Code of 1954 [now
1986] (as added by paragraph (2)) shall not end before the earlier
of 1 year after the date of such transaction or 180 days after the
date of the enactment of this Act."
Section 1875(c)(1)(B) of Pub. L. 99-514 provided that: "The
amendments made by subparagraph (A) [amending this section] shall
apply to distributions after the date of the enactment of this Act
[Oct. 22, 1986]. Such amendments shall apply also to distributions
after 1983 and on or before the date of the enactment of this Act
to individuals who are not 5-percent owners (as defined in section
402(a)(5)(F)(ii) of the Internal Revenue Code of 1954 [now 1986]
(as amended by this paragraph))."
Amendment by section 1898(a)(2), (3), (c)(7)(A)(i), (e) of Pub.
L. 99-514 effective as if included in the provision of the
Retirement Equity Act of 1984, Pub. L. 98-397, to which such
amendment relates, except as otherwise provided, see section
1898(j) of Pub. L. 99-514, set out as a note under section 401 of
this title.
Amendment by section 1898(c)(1)(A) of Pub. L. 99-514 applicable
to payments made after Oct. 22, 1986, see section 1898(c)(1)(C) of
Pub. L. 99-514, set out as a note under section 72 of this title.
Amendment by Pub. L. 99-272 effective Jan. 1, 1986, with certain
exceptions, see section 11019 of Pub. L. 99-272, set out as a note
under section 1341 of Title 29, Labor.
EFFECTIVE DATE OF 1984 AMENDMENTS
Amendment by section 204 of Pub. L. 98-397 effective Jan. 1,
1985, and amendment by section 207 of Pub. L. 98-397 applicable to
plan years beginning after Dec. 31, 1984, except as otherwise
provided, see sections 302 and 303 of Pub. L. 98-397, set out as a
note under section 1001 of Title 29, Labor.
Amendment by section 491(d)(9)-(11) of Pub. L. 98-369 applicable
to obligations issued after Dec. 31, 1983, see section 491(f)(1) of
Pub. L. 98-369, set out as a note under section 62 of this title.
Section 491(f)(2) of Pub. L. 98-369 provided that: "The amendment
made by subsection (c) [amending this section and section 405 of
this title] shall apply to redemptions after the date of the
enactment of this Act [July 18, 1984] in taxable years ending after
such date."
Section 522(e) of Pub. L. 98-369, as amended by Pub. L. 99-514,
title XVIII, Sec. 1852(b)(9), Oct. 22, 1986, 100 Stat. 2867,
provided that: "The amendments made by this section [amending this
section and sections 403, 408, and 409 of this title] shall apply
to distributions made after the date of the enactment of this Act
[July 18, 1984], in taxable years ending after such date.
Section 713(c)(4) of Pub. L. 98-369, as added by Pub. L. 99-514,
title XVIII, Sec. 1875(c)(2), Oct. 22, 1986, 100 Stat. 2894,
provided that: "The amendment made by paragraph (3) [amending this
section] shall apply to distributions after July 18, 1984."
Amendment by section 1001(b)(3) of Pub. L. 98-369 applicable to
property acquired after June 22, 1984, and before Jan. 1, 1988, see
section 1001(e) of Pub. L. 98-369, set out as a note under section
166 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 311(b)(2), (3)(A), (c) of Pub. L. 97-34,
applicable to taxable years beginning after Dec. 31, 1981, see
section 311(i)(1) of Pub. L. 97-34, set out as a note under section
219 of this title.
Section 314(c)(2) of Pub. L. 97-34 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to
taxable years beginning after December 31, 1981."
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 2(b) of Pub. L. 96-608, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - The amendment made by subsection (a) [amending
this section] shall apply to payments made in taxable years
beginning after December 31, 1978.
"(2) Transitional rule. - In the case of any payment made before
January 1, 1982, in a taxable year beginning after December 31,
1978, which is treated as a qualifying rollover distribution (as
defined in section 402(a)(5)(D)(i) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954]) by reason of the amendment made by
subsection (a), the applicable period specified in section
402(a)(5)(C) of such Code shall not expire before the close of
December 31, 1981."
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 101(d) of Pub. L. 95-600 effective with
respect to taxable years beginning after Dec. 31, 1978, see section
101(f)(1) of Pub. L. 95-600, set out as a note under section 1 of
this title.
Amendment by section 135(b) of Pub. L. 95-600 applicable to plan
years beginning after December 31, 1979, see section 135(c)(1) of
Pub. L. 95-600, set out as a note under section 401 of this title.
Section 157(h)(3)(A) of Pub. L. 95-600, as amended by Pub. L.
96-222, title I, Sec. 101(a)(14)(A), Apr. 1, 1980, 94 Stat. 204,
provided that: "The amendments made by this subsection [amending
this section and section 408 of this title] shall apply to payments
made in taxable years beginning after December 31, 1977."
Section 157(f)(2) of Pub. L. 95-600, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to qualifying rollover distributions (as defined in section
402(a)(5)(D)(i) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954]) completed after December 31, 1978, in taxable years
ending after such date."
Section 157(g)(4) of Pub. L. 95-600 provided that: "The
amendments made by this subsection [amending this section and
sections 403 and 408 of this title] shall apply to lump-sum
distributions completed after December 31, 1978, in taxable years
ending after such date."
EFFECTIVE DATE OF 1978 AMENDMENT; CERTAIN ROLLOVERS VALIDATED
Section 4(d) of Pub. L. 95-458, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - The amendments made by subsections (a), (b),
and (c) [amending this section and section 403 of this title] shall
apply with respect to taxable years beginning after December 31,
1974.
"(2) Validation of certain attempted rollovers. - If the taxpayer
-
"(A) attempted to comply with the requirements of section
402(a)(5) or 403(a)(4) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] for a taxable year beginning before the
date of the enactment of this Act, [Oct. 14, 1978], and
"(B) failed to meet the requirements of such section that all
property received in the distribution be transferred,
such section (as amended by this section) shall be applied by
treating any transfer of property made on or before December 31,
1978, as if it were made on or before the 60th day after the day on
which the taxpayer received such property. For purposes of the
preceding sentence, a transfer of money shall be treated as a
transfer of property received in a distribution to the extent that
the amount of the money transferred does not exceed the highest
fair market value of the property distributed during the 60-day
period beginning on the date on which the taxpayer received such
property."
EFFECTIVE DATE OF 1977 AMENDMENT
Amendment by Pub. L. 95-30 applicable to taxable years beginning
after Dec. 31, 1976, see section 106(a) of Pub. L. 95-30, set out
as a note under section 1 of this title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Section 1402(b)(1) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning in 1977.
Section 1402(b)(2) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning after Dec. 31, 1977.
Section 1512(b) of Pub. L. 94-455 provided that: "The amendment
made by this section [amending this section] shall apply to
distributions and payments made after December 31, 1975, in taxable
years beginning after such date."
Section 1901(a)(57)(C)(ii) of Pub. L. 94-455 provided that: "The
amendment made by clause (i) [amending this section] shall apply
with respect to distributions or payments made after December 31,
1973, in taxable years beginning after such date."
Amendment by Pub. L. 94-267 applicable with respect to payments
made to an employee on or after July 4, 1974, see section 1(e) of
Pub. L. 94-267, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Section 2002(i)(3) of Pub. L. 93-406, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by subsection (g)(5) and (6) [amending this section
and section 403 of this title] shall apply on and after the date of
enactment of this Act [Sept. 2, 1974] with respect to contributions
to an employees' trust described in section 401(a) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] which is exempt from
tax under section 501(a) of such Code or an annuity plan described
in section 403(a) of such Code."
Section 2005(d) of Pub. L. 93-406 provided that: "The amendments
made by this section [amending this section and sections 46, 50A,
56, 62, 72, 101, 122, 403, 405, 406, 407, 871, 877, 901, 1304, and
1348 of this title] shall apply only with respect to distributions
or payments made after December 31, 1973, in taxable years
beginning after such date."
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by section 321(b)(1) of Pub. L. 91-172 applicable with
respect to contributions made and premiums paid after Aug. 1, 1969,
see section 321(d) of Pub. L. 91-172, set out as an Effective Date
note under section 83 of this title.
Section 515(d) of Pub. L. 91-172 provided that: "The amendments
made by this section [amending this section and sections 72, 403,
405, 406, 407 and 1304 of this title] shall apply to taxable years
ending after December 31, 1969."
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by section 221(c)(1) of Pub. L. 88-272 applicable to
taxable years ending after Dec. 31, 1963, see section 221(e) of
Pub. L. 88-272, set out as a note under section 421 of this title.
Amendment by section 232(e)(1)-(3) of Pub. L. 88-272 applicable
to taxable years beginning after Dec. 31, 1963, see section 232(g)
of Pub. L. 88-272, set out as a note under section 5 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
EFFECTIVE DATE OF 1960 AMENDMENT
Section 3 of Pub. L. 86-437 provided that: "The amendments made
by this Act [amending this section and section 871 of this title]
shall apply only with respect to taxable years beginning after
December 31, 1959."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1112 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
CLARIFICATION OF DISQUALIFICATION RULES RELATING TO ACCEPTANCE OF
ROLLOVER CONTRIBUTIONS
Section 1509 of Pub. L. 105-34 provided that: "The Secretary of
the Treasury or his delegate shall clarify that, under the Internal
Revenue Service regulations protecting pension plans from
disqualification by reason of the receipt of invalid rollover
contributions under section 402(c) of the Internal Revenue Code of
1986, in order for the administrator of the plan receiving any such
contribution to reasonably conclude that the contribution is a
valid rollover contribution it is not necessary for the
distributing plan to have a determination letter with respect to
its status as a qualified plan under section 401 of such Code."
MODEL EXPLANATION
Section 521(d) of Pub. L. 102-318 provided that: "The Secretary
of the Treasury or his delegate shall develop a model explanation
which a plan administrator may provide to a recipient in order to
meet the requirements of section 402(f) of the Internal Revenue
Code of 1986."
INCORPORATION BY REFERENCE OF SUBSECTION (G) LIMITATIONS
Section 1011(c)(10) of Pub. L. 100-647 provided that:
"Notwithstanding any other provision of law, a plan may incorporate
by reference the dollar limitations under section 402(g) of the
Internal Revenue Code of 1986."
APPLICABILITY OF SUBSECTION (A)(5)(F)(II)
Section 1011A(a)(5) of Pub. L. 100-647 provided that: "Section
402(a)(5)(F)(ii) of the Internal Revenue Code of 1954 shall not
apply to distributions after October 22, 1986, and before the 1st
taxable year beginning after 1986 which are attributable to
benefits which accrued before January 1, 1985."
APPLICABILITY OF SUBSECTION (A)(5)(D)(I)(II)
Section 1011A(b)(4)(E) of Pub. L. 100-647 provided that: "Section
402(a)(5)(D)(i)(II) of the 1986 Code (as in effect after the
amendment made by subparagraph (A)) shall not apply to
distributions after December 31, 1986, and before March 31, 1988."
ELECTION TO TREAT CERTAIN LUMP SUM DISTRIBUTIONS RECEIVED DURING
1987 AS RECEIVED DURING 1986
Section 1124 of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011A(d), Nov. 10, 1988, 102 Stat. 3476, provided
that:
"(a) In General. - If an employee dies, separates from service,
or becomes disabled before 1987 and an individual, trust, or estate
receives a lump-sum distribution with respect to such employee
after December 31, 1986, and before March 16, 1987, on account of
such death, separation from service, or disability, then, for
purposes of the Internal Revenue Code of 1986, such individual,
estate, or trust may treat such distribution as if it were received
in 1986.
"(b) Special Rule for Terminated Plan. - In the case of an
individual, estate, or trust who receives with respect to an
employee a distribution from a terminated plan which was maintained
by a corporation organized under the laws of the State of Nevada,
the principal place of business of which is Denver, Colorado, and
which filed for relief from creditors under the United States
Bankruptcy Code on August 28, 1986, the individual, estate, or
trust may treat a lump sum distribution received from such plan
before June 30, 1987, as if it were received in 1986.
"(c) Lump Sum Distribution. - For purposes of this section, the
term 'lump sum distribution' has the meaning given such term by
section 402(e)(4)(A) of the Internal Revenue Code of 1986, without
regard to subparagraph (B) or (H) of section 402(e)(4) of such
Code."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TREATMENT OF CERTAIN DISTRIBUTIONS FROM QUALIFIED TERMINATED PLAN
Section 551 of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) In General. - For purposes of the Internal Revenue Code [of]
1986 [formerly I.R.C. 1954], if -
"(1) a distribution was made from a qualified terminated plan
to an employee on December 16, 1976, and on January 6, 1977, such
employee transferred all of the property received in such
distribution to an individual retirement account (within the
meaning of section 408(a) of such Code) established for the
benefit of such employee, and
"(2) the remaining balance to the credit of such employee in
such qualified terminated plan was distributed to such employee
on January 21, 1977, and all the property received by such
employee in such distribution was transferred by such employee to
such individual retirement account on January 21, 1977,
then such distributions shall be treated as qualifying rollover
distributions (within the meaning of section 402(a)(5) of such
Code) and shall not be includible in the gross income of such
employee for the taxable year in which paid.
"(b) Qualified Terminated Plan. - For purposes of this section,
the term 'qualified terminated plan' means a pension plan -
"(1) with respect to which a notice of sufficiency was issued
by the Pension Benefit Guaranty Corporation on December 2, 1976,
and
"(2) which was terminated by corporate action on February 20,
1976.
"(c) Refund or Credit of Overpayment Barred by Statute of
Limitations. - Notwithstanding section 6511(a) of the Internal
Revenue Code of 1986 or any other period of limitation or lapse of
time, a claim for credit or refund of overpayment of the tax
imposed by such Code which arises by reason of this section may be
filed by any person at any time within the 1-year period beginning
on the date of enactment of this Act [July 18, 1984]. Sections
6511(b) and 6514 of such Code shall not apply to any claim for
credit or refund filed under this subsection within such 1-year
period."
TRANSITIONAL RULE IN CASE OF ROLLOVER CONTRIBUTIONS TO EMPLOYEE
TRUSTS OR ANNUITIES
Section 157(h)(3)(B) of Pub. L. 95-600, as amended by Pub. L.
96-222, title I, Sec. 101(a)(14)(A), (D), Apr. 1, 1980, 94 Stat.
204, 205; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095,
provided that: "In the case of any payment made during 1978 which
is described in section 402(a)(5)(A) or 403(a)(4)(A) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] by reason of
the amendments made by this subsection [amending sections 402 and
408 of this title], the applicable period specified in section
402(a)(5)(C) of such Code (or in the case of an individual
retirement annuity, such section as made applicable by section
403(a)(4)(B) of such code) shall not expire before the close of
December 31, 1980."
TRANSITIONAL RULES RELATING TO PERIOD FOR ROLLOVER CONTRIBUTION
Section 1(d) of Pub. L. 94-267, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. -
"(A) Period for rollover contribution. - In the case of a
payment described in section 402(a)(5)(A) (other than a payment
described in section 402(a)(5)(A) as in effect on the day
before the date of the enactment of this Act) [Apr. 15, 1976]
or section 403(a)(4)(A) (other than a payment described in
section 403(a)(4)(A) as in effect on the day before the date of
the enactment of this Act [Apr. 15, 1976] of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] (relating to
distributions of the balance to the credit of the employee)
which is contributed by an employee after the date of the
enactment of this Act [Apr. 15, 1976] to a trust, plan,
account, annuity, or bond described in section 402(a)(5)(B) or
403(a)(4)(B) of such Code, the applicable period specified in
section 402(a)(5)(B) or 403(a)(4)(B) of such Code (relating to
rollover distributions to another plan or retirement account)
shall not expire before December 31, 1976.
"(B) Time of contribution. -
(i) General rule. - If the initial portion of a payment the
applicable period for which is determined under subparagraph
(A) is contributed before December 31, 1976, by an individual
to a trust, plan, account, annuity, or bond described in
subparagraph (A) and the remaining portion of such payment is
contributed by such individual to such a trust, plan,
account, annuity, or bond not later than 30 days after the
date a credit or refund is allowed by the Secretary of the
Treasury or his delegate under section 6402 of the Internal
Revenue Code of 1986 with respect to the contribution, then,
for purposes of subparagraph (A) and sections 402(a)(5) and
403(a)(4) of such Code, at the election of the individual
(made in accordance with regulations prescribed by the
Secretary or his delegate), such remaining portion shall be
considered to have been contributed on the date the initial
portion of the payment was contributed. For purposes of this
subparagraph, the initial portion of a payment is the amount
by which such payment exceeds the amount of the tax imposed
on such payment by chapter 1 of such Code (determined without
regard to this subparagraph). [chapter 1 of this title]
"(ii) Regulations. - For purposes of this subparagraph, the
tax imposed on a payment by chapter 1 of the Internal Revenue
Code of 1986, and the date a credit or refund is allowed by
the Secretary of the Treasury or his delegate under section
6402 with respect to a contribution, shall be determined
under regulations prescribed by the Secretary of the Treasury
or his delegate.
"(C) Period of limitations. - If an individual has made the
election provided by subparagraph (B), then -
"(i) the period provided by the Internal Revenue Code of
1986 for the assessment of any deficiency for the taxable
year in which the payment described in subparagraph (A) was
made and each subsequent taxable year for which tax is
determined by reference to the treatment of such payment
under such Code or the status under such Code of any trust,
plan, account, annuity, or bond described in subparagraph (A)
shall, to the extent attributable to such treatment, not
expire before the expiration of 3 years from the date the
Secretary of the Treasury or his delegate is notified by the
individual (in such manner as the Secretary of the Treasury
or his delegate may prescribe) that such individual has made
(or failed to make) the contribution of the remaining portion
of the payment within the period specified in subparagraph
(B)(i), and
"(ii) such deficiency may be assessed before the expiration
of such 3-year period notwithstanding the provisions of
section 6212(c) of such Code or the provisions of any other
law or rule of law which would otherwise prevent such
assessment.
"(2) Rollover contribution for certain property sold. -
Sections 402(a)(5)(C) and 403(a)(4)(C) of the Internal Revenue
Code of 1986 (relating to the requirement that rollover amount
must consist of property received in a distribution) shall not
apply with respect to that portion of the property received in a
payment described in section 402(a)(5)(A) (other than a payment
described in section 402(a)(5)(A) as in effect on the day before
the date of the enactment of this Act [Apr. 15, 1976] or
403(a)(4)(A) (other than a payment described in section
403(a)(4)(A) as in effect on the day before the date of the
enactment of this Act) [Apr. 15, 1976] of such Code which is sold
or exchanged by the employee on or before the date of the
enactment of this Act, [Apr. 15, 1976], if the employee transfers
an amount of cash equal to the proceeds received from the sale or
exchange of such property in excess of the amount considered
contributed by the employee (within the meaning of section
402(a)(4)(D)(i) of such Code).
"(3) Nonrecognition of gain or loss. - For purposes of the
Internal Revenue Code of 1986 [this title] no gain or loss shall
be recognized with respect to the sale or exchange of property
described in paragraph (2) if the proceeds of such sale or
exchange are transferred by an employee in accordance with this
subsection and the applicable provisions of section 402(a)(5) or
403(a)(4) of such Code."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25B, 72, 219, 401, 402A,
403, 404, 408, 411, 414, 415, 457, 501, 871, 911, 3121, 3306, 3401,
3405, 4972, 4973, 6048, 6051, 6652, 7701 of this title; title 4
section 114; title 5 sections 8334, 8432, 8433, 8440; title 29
sections 1053, 1107; title 38 section 4318; title 42 section 409.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC Sec. 402A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 402A. Optional treatment of elective deferrals as Roth
contributions
-STATUTE-
(a) General rule
If an applicable retirement plan includes a qualified Roth
contribution program -
(1) any designated Roth contribution made by an employee
pursuant to the program shall be treated as an elective deferral
for purposes of this chapter, except that such contribution shall
not be excludable from gross income, and
(2) such plan (and any arrangement which is part of such plan)
shall not be treated as failing to meet any requirement of this
chapter solely by reason of including such program.
(b) Qualified Roth contribution program
For purposes of this section -
(1) In general
The term "qualified Roth contribution program" means a program
under which an employee may elect to make designated Roth
contributions in lieu of all or a portion of elective deferrals
the employee is otherwise eligible to make under the applicable
retirement plan.
(2) Separate accounting required
A program shall not be treated as a qualified Roth contribution
program unless the applicable retirement plan -
(A) establishes separate accounts ("designated Roth
accounts") for the designated Roth contributions of each
employee and any earnings properly allocable to the
contributions, and
(B) maintains separate recordkeeping with respect to each
account.
(c) Definitions and rules relating to designated Roth contributions
For purposes of this section -
(1) Designated Roth contribution
The term "designated Roth contribution" means any elective
deferral which -
(A) is excludable from gross income of an employee without
regard to this section, and
(B) the employee designates (at such time and in such manner
as the Secretary may prescribe) as not being so excludable.
(2) Designation limits
The amount of elective deferrals which an employee may
designate under paragraph (1) shall not exceed the excess (if
any) of -
(A) the maximum amount of elective deferrals excludable from
gross income of the employee for the taxable year (without
regard to this section), over
(B) the aggregate amount of elective deferrals of the
employee for the taxable year which the employee does not
designate under paragraph (1).
(3) Rollover contributions
(A) In general
A rollover contribution of any payment or distribution from a
designated Roth account which is otherwise allowable under this
chapter may be made only if the contribution is to -
(i) another designated Roth account of the individual from
whose account the payment or distribution was made, or
(ii) a Roth IRA of such individual.
(B) Coordination with limit
Any rollover contribution to a designated Roth account under
subparagraph (A) shall not be taken into account for purposes
of paragraph (1).
(d) Distribution rules
For purposes of this title -
(1) Exclusion
Any qualified distribution from a designated Roth account shall
not be includible in gross income.
(2) Qualified distribution
For purposes of this subsection -
(A) In general
The term "qualified distribution" has the meaning given such
term by section 408A(d)(2)(A) (without regard to clause (iv)
thereof).
(B) Distributions within nonexclusion period
A payment or distribution from a designated Roth account
shall not be treated as a qualified distribution if such
payment or distribution is made within the 5-taxable-year
period beginning with the earlier of -
(i) the first taxable year for which the individual made a
designated Roth contribution to any designated Roth account
established for such individual under the same applicable
retirement plan, or
(ii) if a rollover contribution was made to such designated
Roth account from a designated Roth account previously
established for such individual under another applicable
retirement plan, the first taxable year for which the
individual made a designated Roth contribution to such
previously established account.
(C) Distributions of excess deferrals and contributions and
earnings thereon
The term "qualified distribution" shall not include any
distribution of any excess deferral under section 402(g)(2) or
any excess contribution under section 401(k)(8), and any income
on the excess deferral or contribution.
(3) Treatment of distributions of certain excess deferrals
Notwithstanding section 72, if any excess deferral under
section 402(g)(2) attributable to a designated Roth contribution
is not distributed on or before the 1st April 15 following the
close of the taxable year in which such excess deferral is made,
the amount of such excess deferral shall -
(A) not be treated as investment in the contract, and
(B) be included in gross income for the taxable year in which
such excess is distributed.
(4) Aggregation rules
Section 72 shall be applied separately with respect to
distributions and payments from a designated Roth account and
other distributions and payments from the plan.
(e) Other definitions
For purposes of this section -
(1) Applicable retirement plan
The term "applicable retirement plan" means -
(A) an employees' trust described in section 401(a) which is
exempt from tax under section 501(a), and
(B) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b).
(2) Elective deferral
The term "elective deferral" means any elective deferral
described in subparagraph (A) or (C) of section 402(g)(3).
-SOURCE-
(Added Pub. L. 107-16, title VI, Sec. 617(a), June 7, 2001, 115
Stat. 103.)
-STATAMEND-
TERMINATION OF SECTION
For termination of section by section 901 of Pub. L. 107-16, see
Effective and Termination Dates note below.
-MISC1-
EFFECTIVE AND TERMINATION DATES
Section applicable to taxable years beginning after Dec. 31,
2005, see section 617(f) of Pub. L. 107-16, set out as an Effective
and Termination Dates of 2001 Amendment note under section 402 of
this title.
Section inapplicable to taxable, plan, or limitation years
beginning after Dec. 31, 2010, and the Internal Revenue Code of
1986 to be applied and administered to such years as if it had
never been enacted, see section 901 of Pub. L. 107-16, set out as
an Effective and Termination Dates of 2001 Amendment note under
section 1 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 402, 408A, 6047, 6051 of
this title.
-End-
-CITE-
26 USC Sec. 403 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 403. Taxation of employee annuities
-STATUTE-
(a) Taxability of beneficiary under a qualified annuity plan
(1) Distributee taxable under section 72
If an annuity contract is purchased by an employer for an
employee under a plan which meets the requirements of section
404(a)(2) (whether or not the employer deducts the amounts paid
for the contract under such section), the amount actually
distributed to any distributee under the contract shall be
taxable to the distributee (in the year in which so distributed)
under section 72 (relating to annuities).
[(2) Repealed. Pub. L. 99-514, title XI, Sec. 1122(b)(1)(B), Oct.
22, 1986, 100 Stat. 2466]
(3) Self-employed individuals
For purposes of this subsection, the term "employee" includes
an individual who is an employee within the meaning of section
401(c)(1), and the employer of such individual is the person
treated as his employer under section 401(c)(4).
(4) Rollover amounts
(A) General rule
If -
(i) any portion of the balance to the credit of an employee
in an employee annuity described in paragraph (1) is paid to
him in an eligible rollover distribution (within the meaning
of section 402(c)(4)),
(ii) the employee transfers any portion of the property he
receives in such distribution to an eligible retirement plan,
and
(iii) in the case of a distribution of property other than
money, the amount so transferred consists of the property
distributed,
then such distribution (to the extent so transferred) shall not
be includible in gross income for the taxable year in which
paid.
(B) Certain rules made applicable
Rules similar to the rules of paragraphs (2) through (7) of
section 402(c) shall apply for purposes of subparagraph (A).
(5) Direct trustee-to-trustee transfer
Any amount transferred in a direct trustee-to-trustee transfer
in accordance with section 401(a)(31) shall not be includible in
gross income for the taxable year of such transfer.
(b) Taxability of beneficiary under annuity purchased by section
501(c)(3) organization or public school
(1) General rule
If -
(A) an annuity contract is purchased -
(i) for an employee by an employer described in section
501(c)(3) which is exempt from tax under section 501(a),
(ii) for an employee (other than an employee described in
clause (i)), who performs services for an educational
organization described in section 170(b)(1) (A)(ii), by an
employer which is a State, a political subdivision of a
State, or an agency or instrumentality of any one or more of
the foregoing, or
(iii) for the minister described in section 414(e)(5)(A) by
the minister or by an employer,
(B) such annuity contract is not subject to subsection (a),
(C) the employee's rights under the contract are
nonforfeitable, except for failure to pay future premiums,
(D) except in the case of a contract purchased by a church,
such contract is purchased under a plan which meets the
nondiscrimination requirements of paragraph (12), and
(E) in the case of a contract purchased under a salary
reduction agreement, the contract meets the requirements of
section 401(a)(30),
then contributions and other additions by such employer for such
annuity contract shall be excluded from the gross income of the
employee for the taxable year to the extent that the aggregate of
such contributions and additions (when expressed as an annual
addition (within the meaning of section 415(c)(2))) does not
exceed the applicable limit under section 415. The amount
actually distributed to any distributee under such contract shall
be taxable to the distributee (in the year in which so
distributed) under section 72 (relating to annuities). For
purposes of applying the rules of this subsection to
contributions and other additions by an employer for a taxable
year, amounts transferred to a contract described in this
paragraph by reason of a rollover contribution described in
paragraph (8) of this subsection or section 408(d)(3)(A)(ii)
shall not be considered contributed by such employer.
[(2) Repealed. Pub. L. 107-16, title VI, Sec. 632(a)(2)(B), June
7, 2001, 115 Stat. 113]
(3) Includible compensation
For purposes of this subsection, the term "includible
compensation" means, in the case of any employee, the amount of
compensation which is received from the employer described in
paragraph (1)(A), and which is includible in gross income
(computed without regard to section 911) for the most recent
period (ending not later than the close of the taxable year)
which under paragraph (4) may be counted as one year of service,
and which precedes the taxable year by no more than five years.
Such term does not include any amount contributed by the employer
for any annuity contract to which this subsection applies. Such
term includes -
(A) any elective deferral (as defined in section 402(g)(3)),
and
(B) any amount which is contributed or deferred by the
employer at the election of the employee and which is not
includible in the gross income of the employee by reason of
section 125, 132(f)(4), or 457.
(4) Years of service
In determining the number of years of service for purposes of
this subsection, there shall be included -
(A) one year for each full year during which the individual
was a full-time employee of the organization purchasing the
annuity for him, and
(B) a fraction of a year (determined in accordance with
regulations prescribed by the Secretary) for each full year
during which such individual was a part-time employee of such
organization and for each part of a year during which such
individual was a full-time or part-time employee of such
organization.
In no case shall the number of years of service be less than one.
(5) Application to more than one annuity contract
If for any taxable year of the employee this subsection applies
to 2 or more annuity contracts purchased by the employer, such
contracts shall be treated as one contract.
[(6) Repealed. Pub. L. 107-147, title IV, Sec. 411(p)(2), Mar. 9,
2002, 116 Stat. 50]
(7) Custodial accounts for regulated investment company stock
(A) Amounts paid treated as contributions
For purposes of this title, amounts paid by an employer
described in paragraph (1)(A) to a custodial account which
satisfies the requirements of section 401(f)(2) shall be
treated as amounts contributed by him for an annuity contract
for his employee if -
(i) the amounts are to be invested in regulated investment
company stock to be held in that custodial account, and
(ii) under the custodial account no such amounts may be
paid or made available to any distributee before the employee
dies, attains age 59 1/2 , has a severance from employment,
becomes disabled (within the meaning of section 72(m)(7)), or
in the case of contributions made pursuant to a salary
reduction agreement (within the meaning of section
3121(a)(1)(D)), encounters financial hardship.
(B) Account treated as plan
For purposes of this title, a custodial account which
satisfies the requirements of section 401(f)(2) shall be
treated as an organization described in section 401(a) solely
for purposes of subchapter F and subtitle F with respect to
amounts received by it (and income from investment thereof).
(C) Regulated investment company
For purposes of this paragraph, the term "regulated
investment company" means a domestic corporation which is a
regulated investment company within the meaning of section
851(a).
(8) Rollover amounts
(A) General rule
If -
(i) any portion of the balance to the credit of an employee
in an annuity contract described in paragraph (1) is paid to
him in an eligible rollover distribution (within the meaning
of section 402(c)(4)),
(ii) the employee transfers any portion of the property he
receives in such distribution to an eligible retirement plan
described in section 402(c)(8)(B), and
(iii) in the case of a distribution of property other than
money, the property so transferred consists of the property
distributed,
then such distribution (to the extent so transferred) shall not
be includible in gross income for the taxable year in which
paid.
(B) Certain rules made applicable
The rules of paragraphs (2) through (7) and (9) of section
402(c) and section 402(f) shall apply for purposes of
subparagraph (A), except that section 402(f) shall be applied
to the payor in lieu of the plan administrator.
(9) Retirement income accounts provided by churches, etc.
(A) Amounts paid treated as contributions
For purposes of this title -
(i) a retirement income account shall be treated as an
annuity contract described in this subsection, and
(ii) amounts paid by an employer described in paragraph
(1)(A) to a retirement income account shall be treated as
amounts contributed by the employer for an annuity contract
for the employee on whose behalf such account is maintained.
(B) Retirement income account
For purposes of this paragraph, the term "retirement income
account" means a defined contribution program established or
maintained by a church, a convention or association of
churches, including an organization described in section
414(e)(3)(A), to provide benefits under section 403(b) for an
employee described in paragraph (1) or his beneficiaries.
(10) Distribution requirements
Under regulations prescribed by the Secretary, this subsection
shall not apply to any annuity contract (or to any custodial
account described in paragraph (7) or retirement income account
described in paragraph (9)) unless requirements similar to the
requirements of sections 401(a)(9) and 401(a)(31) are met (and
requirements similar to the incidental death benefit requirements
of section 401(a) are met) with respect to such annuity contract
(or custodial account or retirement income account). Any amount
transferred in a direct trustee-to-trustee transfer in accordance
with section 401(a)(31) shall not be includible in gross income
for the taxable year of the transfer.
(11) Requirement that distributions not begin before age 59 1/2 ,
severance from employment, death, or disability
This subsection shall not apply to any annuity contract unless
under such contract distributions attributable to contributions
made pursuant to a salary reduction agreement (within the meaning
of section 402(g)(3)(C)) may be paid only -
(A) when the employee attains age 59 1/2 , has a severance
from employment, dies, or becomes disabled (within the meaning
of section 72(m)(7)), or
(B) in the case of hardship.
Such contract may not provide for the distribution of any income
attributable to such contributions in the case of hardship.
(12) Nondiscrimination requirements
(A) In general
For purposes of paragraph (1)(D), a plan meets the
nondiscrimination requirements of this paragraph if -
(i) with respect to contributions not made pursuant to a
salary reduction agreement, such plan meets the requirements
of paragraphs (4), (5), (17), and (26) of section 401(a),
section 401(m), and section 410(b) in the same manner as if
such plan were described in section 401(a), and
(ii) all employees of the organization may elect to have
the employer make contributions of more than $200 pursuant to
a salary reduction agreement if any employee of the
organization may elect to have the organization make
contributions for such contracts pursuant to such agreement.
For purposes of clause (i), a contribution shall be treated as
not made pursuant to a salary reduction agreement if under the
agreement it is made pursuant to a 1-time irrevocable election
made by the employee at the time of initial eligibility to
participate in the agreement or is made pursuant to a similar
arrangement involving a one-time irrevocable election specified
in regulations. For purposes of clause (ii), there may be
excluded any employee who is a participant in an eligible
deferred compensation plan (within the meaning of section 457)
or a qualified cash or deferred arrangement of the organization
or another annuity contract described in this subsection. Any
nonresident alien described in section 410(b)(3)(C) may also be
excluded. Subject to the conditions applicable under section
410(b)(4), there may be excluded for purposes of this
subparagraph employees who are students performing services
described in section 3121(b)(10) and employees who normally
work less than 20 hours per week.
(B) Church
For purposes of paragraph (1)(D), the term "church" has the
meaning given to such term by section 3121(w)(3)(A). Such term
shall include any qualified church-controlled organization (as
defined in section 3121(w)(3)(B)).
(C) State and local governmental plans
For purposes of paragraph (1)(D), the requirements of
subparagraph (A)(i) (other than those relating to section
401(a)(17)) shall not apply to a governmental plan (within the
meaning of section 414(d)) maintained by a State or local
government or political subdivision thereof (or agency or
instrumentality thereof).
(13) Trustee-to-trustee transfers to purchase permissive service
credit
No amount shall be includible in gross income by reason of a
direct trustee-to-trustee transfer to a defined benefit
governmental plan (as defined in section 414(d)) if such transfer
is -
(A) for the purchase of permissive service credit (as defined
in section 415(n)(3)(A)) under such plan, or
(B) a repayment to which section 415 does not apply by reason
of subsection (k)(3) thereof.
(c) Taxability of beneficiary under nonqualified annuities or under
annuities purchased by exempt organizations
Premiums paid by an employer for an annuity contract which is not
subject to subsection (a) shall be included in the gross income of
the employee in accordance with section 83 (relating to property
transferred in connection with performance of services), except
that the value of such contract shall be substituted for the fair
market value of the property for purposes of applying such section.
The preceding sentence shall not apply to that portion of the
premiums paid which is excluded from gross income under subsection
(b). In the case of any portion of any contract which is
attributable to premiums to which this subsection applies, the
amount actually paid or made available under such contract to any
beneficiary which is attributable to such premiums shall be taxable
to the beneficiary (in the year in which so paid or made available)
under section 72 (relating to annuities).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 137; Pub. L. 85-866, title I,
Sec. 23(a)-(c), Sept. 2, 1958, 72 Stat. 1620-1622; Pub. L. 87-370,
Sec. 3(a), Oct. 4, 1961, 75 Stat. 801; Pub. L. 87-792, Sec. 4(d),
Oct. 10, 1962, 76 Stat. 825; Pub. L. 88-272, title II, Sec.
232(e)(4)-(6), Feb. 26, 1964, 78 Stat. 111; Pub. L. 91-172, title
III, Sec. 321(b)(2), title V, Sec. 515(a)(2), Dec. 30, 1969, 83
Stat. 591, 644; Pub. L. 93-406, title II, Secs. 1022(e),
2002(g)(6), 2004(c)(4), 2005(b)(2), Sept. 2, 1974, 88 Stat. 940,
969, 986, 991; Pub. L. 94-267, Sec. 1(b), Apr. 15, 1976, 90 Stat.
366; Pub. L. 94-455, title XIV, Sec. 1402(b)(1)(D), (2), title XV,
Sec. 1504(a), title XIX, Secs. 1901(a)(58), (b)(8)(A),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1731, 1732, 1738, 1774,
1794, 1834; Pub. L. 95-458, Sec. 4(b), Oct. 14, 1978, 92 Stat.
1259; Pub. L. 95-600, title I, Secs. 154(a), 156(a), (b),
157(g)(2), Nov. 6, 1978, 92 Stat. 2801, 2802, 2808; Pub. L. 96-222,
title I, Sec. 101(a)(12), (13)(C), Apr. 1, 1980, 94 Stat. 204; Pub.
L. 97-34, title III, Sec. 311(b)(3)(B), Aug. 13, 1981, 95 Stat.
280; Pub. L. 97-248, title II, Sec. 251(a), (b), (c)(3), Sept. 3,
1982, 96 Stat. 529-531; Pub. L. 97-448, title I, Sec. 103(c)(8)(B),
Jan. 12, 1983, 96 Stat. 2377; Pub. L. 98-21, title I, Sec.
122(c)(4), Apr. 20, 1983, 97 Stat. 87; Pub. L. 98-369, div. A,
title IV, Sec. 491(d)(12), title V, Secs. 521(c), 522(a)(2), (3),
(d)(9)-(11), title X, Sec. 1001(b)(4), (e), July 18, 1984, 98 Stat.
849, 867, 869-871, 1011, 1012; Pub. L. 99-514, title XI, Secs.
1120(a), (b), 1122(b)(1)(B), (d), 1123(c), title XVIII, Sec.
1852(a)(3)(A), (B), (5)(B), (b)(10), Oct. 22, 1986, 100 Stat. 2463,
2466, 2469, 2474, 2865, 2867; Pub. L. 100-647, title I, Sec.
1011(c)(7)(B), (12), (m)(1), (2), title VI, Sec. 6052(a)(1), Nov.
10, 1988, 102 Stat. 3458, 3459, 3471, 3696; Pub. L. 101-508, title
XI, Sec. 11701(k), Nov. 5, 1990, 104 Stat. 1388-513; Pub. L.
102-318, title V, Secs. 521(b)(12), (13), 522(a)(3), (c)(2), (3),
July 3, 1992, 106 Stat. 311, 314, 315; Pub. L. 104-188, title I,
Secs. 1450(c)(1), 1704(t)(69), Aug. 20, 1996, 110 Stat. 1815, 1891;
Pub. L. 105-34, title XV, Secs. 1504(a)(1), 1505(c), title XVI,
Sec. 1601(d)(6)(B), Aug. 5, 1997, 111 Stat. 1063, 1064, 1090; Pub.
L. 105-206, title VI, Sec. 6005(c)(2)(B), July 22, 1998, 112 Stat.
800; Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec. 314(e)(1)],
Dec. 21, 2000, 114 Stat. 2763, 2763A-643; Pub. L. 107-16, title VI,
Secs. 632(a)(2), 641(b)(1), (e)(7), 642(b)(1), 646(a)(2), 647(a),
June 7, 2001, 115 Stat. 113, 120, 121, 126, 127; Pub. L. 107-147,
title IV, Sec. 411(p)(1)-(3), Mar. 9, 2002, 116 Stat. 49, 50.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
AMENDMENTS
2002 - Subsec. (b)(1). Pub. L. 107-147, Sec. 411(p)(1), inserted
concluding provisions and struck out former concluding provisions
which read as follows: "then amounts contributed by such employer
for such annuity contract on or after such rights become
nonforfeitable shall be excluded from the gross income of the
employee for the taxable year to the extent that the aggregate of
such amounts does not exceed the applicable limit under section
415. The amount actually distributed to any distributee under such
contract shall be taxable to the distributee (in the year in which
so distributed) under section 72 (relating to annuities). For
purposes of applying the rules of this subsection to amounts
contributed by an employer for a taxable year, amounts transferred
to a contract described in this paragraph by reason of a rollover
contribution described in paragraph (8) of this subsection or
section 408(d)(3)(A)(ii) shall not be considered contributed by
such employer."
Subsec. (b)(3). Pub. L. 107-147, Sec. 411(p)(3), in first
sentence, inserted ", and which precedes the taxable year by no
more than five years" before period at end and, in second sentence,
struck out "or any amount received by a former employee after the
fifth taxable year following the taxable year in which such
employee was terminated" after "this subsection applies".
Subsec. (b)(6). Pub. L. 107-147, Sec. 411(p)(2), struck out
heading and text of par. (6). Text read as follows: "For purposes
of this subsection and section 72(f) (relating to special rules for
computing employees' contributions to annuity contracts), if rights
of the employee under an annuity contract described in
subparagraphs (A) and (B) of paragraph (1) change from forfeitable
to nonforfeitable rights, then the amount (determined without
regard to this subsection) includible in gross income by reason of
such change shall be treated as an amount contributed by the
employer for such annuity contract as of the time such rights
become nonforfeitable."
2001 - Subsec. (b)(1). Pub. L. 107-16, Secs. 642(b)(1), 901,
temporarily substituted "section 408(d)(3)(A)(ii)" for "section
408(d)(3)(A)(iii)" in concluding provisions. See Effective and
Termination Dates of 2001 Amendment note below.
Pub. L. 107-16, Secs. 632(a)(2)(A), 901, temporarily substituted
"the applicable limit under section 415" for "the exclusion
allowance for such taxable year" in concluding provisions. See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (b)(2). Pub. L. 107-16, Secs. 632(a)(2)(B), 901,
temporarily struck out par. (2), which described exclusion
allowance for purposes of subsec. (b) providing general criteria,
determination under section 415 rules, number of years of service
for duly ordained, commissioned, or licensed ministers or lay
employees, and alternative exclusion allowance for such ministers
or lay employees. See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (b)(3). Pub. L. 107-16, Secs. 632(a)(2)(C), 901,
temporarily inserted "or any amount received by a former employee
after the fifth taxable year following the taxable year in which
such employee was terminated" before period at end of second
sentence. See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (b)(7)(A)(ii). Pub. L. 107-16, Secs. 646(a)(2)(A), 901,
temporarily substituted "has a severance from employment" for
"separates from service". See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (b)(8)(A)(ii). Pub. L. 107-16, Secs. 641(b)(1), 901,
temporarily substituted "such distribution to an eligible
retirement plan described in section 402(c)(8)(B), and" for "such
distribution to an individual retirement plan or to an annuity
contract described in paragraph (1), and". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (b)(8)(B). Pub. L. 107-16, Secs. 641(e)(7), 901,
temporarily reenacted heading without change and amended text
generally. Prior to amendment, text read as follows: "Rules similar
to the rules of paragraphs (2) through (7) of section 402(c)
(including paragraph (4)(C) thereof) shall apply for purposes of
subparagraph (A)." See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (b)(11). Pub. L. 107-16, Secs. 646(a)(2)(B), 901,
temporarily substituted "severance from employment" for "separation
from service" in heading. See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (b)(11)(A). Pub. L. 107-16, Secs. 646(a)(2)(A), 901,
temporarily substituted "has a severance from employment" for
"separates from service". See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (b)(13). Pub. L. 107-16, Secs. 647(a), 901, temporarily
added par. (13). See Effective and Termination Dates of 2001
Amendment note below.
2000 - Subsec. (b)(3)(B). Pub. L. 106-554 substituted "section
125, 132(f)(4), or" for "section 125 or".
1998 - Subsec. (b)(8)(B). Pub. L. 105-206 inserted "(including
paragraph (4)(C) thereof)" after "section 402(c)".
1997 - Subsec. (b)(1)(A)(iii). Pub. L. 105-34, Sec.
1601(d)(6)(B), added cl. (iii).
Subsec. (b)(3). Pub. L. 105-34, Sec. 1504(a)(1), inserted at end
"Such term includes - " and subpars. (A) and (B).
Subsec. (b)(12)(C). Pub. L. 105-34, Sec. 1505(c), added subpar.
(C).
1996 - Subsec. (b)(1)(E). Pub. L. 104-188, Sec. 1450(c)(1),
amended subpar. (E) generally. Prior to amendment, subpar. (E) read
as follows: "in the case of a contract purchased under a plan which
provides a salary reduction agreement, the plan meets the
requirements of section 401(a)(30),".
Subsec. (b)(10). Pub. L. 104-188, Sec. 1704(t)(69), substituted
"a direct" for "an direct" in last sentence.
1992 - Subsec. (a)(4)(A)(i). Pub. L. 102-318, Sec. 521(b)(12)(A),
inserted before comma at end "in an eligible rollover distribution
(within the meaning of section 402(c)(4))".
Subsec. (a)(4)(B). Pub. L. 102-318, Sec. 521(b)(12)(B), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "Rules similar to the rules of subparagraphs (B) through
(G) of section 402(a)(5) and of paragraphs (6) and (7) of section
402(a) shall apply for purposes of subparagraph (A)."
Subsec. (a)(5). Pub. L. 102-318, Sec. 522(c)(2), added par. (5).
Subsec. (b)(8)(A)(i). Pub. L. 102-318, Sec. 521(b)(13)(A),
inserted before comma at end "in an eligible rollover distribution
(within the meaning of section 402(c)(4))".
Subsec. (b)(8)(B) to (D). Pub. L. 102-318, Sec. 521(b)(13)(B),
added subpar. (B) and struck out former subpars. (B) to (D), which
related to special rules for partial distributions, applicability
of certain similar rules, and eligibility for rollover treatment of
required distributions.
Subsec. (b)(10). Pub. L. 102-318, Sec. 522(a)(3), (c)(3),
substituted "sections 401(a)(9) and 401(a)(31)" for "section
401(a)(9)" and inserted at end "Any amount transferred in an direct
trustee-to-trustee transfer in accordance with section 401(a)(31)
shall not be includible in gross income for the taxable year of the
transfer."
1990 - Subsec. (b)(12)(A). Pub. L. 101-508 inserted "involving a
one-time irrevocable election" after "similar arrangement" in
second sentence.
1988 - Subsec. (b)(1)(D). Pub. L. 100-647, Sec. 1011(m)(1)(B),
substituted "paragraph (12)" for "paragraph (10)".
Subsec. (b)(1)(E). Pub. L. 100-647, Sec. 1011(c)(7)(B), added
subpar. (E).
Subsec. (b)(10). Pub. L. 100-647, Sec. 1011(m)(1)(A),
redesignated par. (10), relating to nondiscrimination requirements,
as (12).
Subsec. (b)(12). Pub. L. 100-647, Sec. 1011(m)(1)(A),
redesignated par. (10), relating to nondiscrimination requirements,
as (12).
Subsec. (b)(12)(A). Pub. L. 100-647, Sec. 1011(m)(2), inserted
"(17)," after "paragraphs (4), (5)," and ", section 401(m)," after
"of section 401(a)" in cl. (i).
Pub. L. 100-647, Sec. 1011(c)(12), inserted after cl. (ii) "For
purposes of clause (i), a contribution shall be treated as not made
pursuant to a salary reduction agreement if under the agreement it
is made pursuant to a 1-time irrevocable election made by the
employee at the time of initial eligibility to participate in the
agreement or is made pursuant to a similar arrangement specified in
regulations."
Pub. L. 100-647, Sec. 6052(a)(1), amended last sentence
generally. Prior to amendment, last sentence read as follows: "For
purposes of this subparagraph, students who normally work less than
20 hours per week may (subject to the conditions applicable under
section 410(b)(4)) be excluded."
1986 - Subsec. (a)(1). Pub. L. 99-514, Sec. 1122(d)(1),
substituted "Distributee taxable under section 72" for "General
rule" in heading and amended par. (1) generally. Prior to
amendment, par. (1) read as follows: "Except as provided in
paragraph (2), if an annuity contract is purchased by an employer
for an employee under a plan which meets the requirements of
section 404(a)(2) (whether or not the employer deducts the amounts
paid for the contract under such section), the employee shall
include in his gross income the amounts received under such
contract for the year received as provided in section 72 (relating
to annuities)."
Subsec. (a)(2). Pub. L. 99-514, Sec. 1122(b)(1)(B), struck out
par. (2) which read as follows:
"(A) General rule
"If -
"(i) an annuity contract is purchased by an employer for an
employee under a plan described in paragraph (1);
"(ii) such plan requires that refunds of contributions with
respect to annuity contracts purchased under such plan be used to
reduce subsequent premiums on the contracts under the plan; and
"(iii) a lump sum distribution (as defined in section
402(e)(4)(A)) is paid to the recipient,
so much of the total taxable amount (as defined in section
402(e)(4)(D)) of such distribution as is equal to the product of
such total taxable amount multiplied by the fraction described in
section 402(a)(2) shall be treated as a gain from the sale or
exchange of a capital asset held for more than 6 months. For
purposes of this paragraph, in the case of an individual who is an
employee without regard to section 401(c)(1), determination of
whether or not any distribution is a lump sum distribution shall be
made without regard to the requirement that an election be made
under subsection (e)(4)(B) of section 402, but no distribution to
any taxpayer other than an individual, estate, or trust may be
treated as a lump sum distribution under this paragraph.
"(B) Cross reference
"For imposition of separate tax on ordinary income portion of
lump sum distribution, see section 402(e)."
Subsec. (a)(4)(B). Pub. L. 99-514, Sec. 1852(a)(5)(B)(i),
substituted "through (G)" for "through (F)".
Subsec. (b)(1). Pub. L. 99-514, Sec. 1122(d)(2), amended second
sentence generally. Prior to amendment, second sentence read as
follows: "The employee shall include in his gross income the
amounts received under such contract for the year received as
provided in section 72 (relating to annuities)".
Subsec. (b)(1)(D). Pub. L. 99-514, Sec. 1120(a), added subpar.
(D).
Subsec. (b)(7)(A)(ii). Pub. L. 99-514, Sec. 1123(c)(2), inserted
"in the case of contributions made pursuant to a salary reduction
agreement (within the meaning of section 3121(a)(1)(D))," after
"section 72(m)(7)), or".
Subsec. (b)(7)(D). Pub. L. 99-514, Sec. 1852(a)(3)(B), struck out
subpar. (D) "Distribution requirements" which read as follows: "For
purposes of determining when the interest of an employee in a
custodial account must be distributed, such account shall be
treated in the same manner as an annuity contract."
Subsec. (b)(8)(C). Pub. L. 99-514, Sec. 1852(b)(10), inserted
"and" before "(F)(i)".
Subsec. (b)(8)(D). Pub. L. 99-514, Sec. 1852(a)(5)(B)(ii), added
subpar. (D).
Subsec. (b)(10). Pub. L. 99-514, Sec. 1120(b), added par. (10)
relating to nondiscrimination requirements.
Pub. L. 99-514, Sec. 1852(a)(3)(A), added par. (10) relating to
distribution requirements.
Subsec. (b)(11). Pub. L. 99-514, Sec. 1123(c)(1), added par.
(11).
Subsec. (c). Pub. L. 99-514, Sec. 1122(d)(3), amended last
sentence generally. Prior to amendment, last sentence read as
follows: "The amount actually paid or made available to any
beneficiary under such contract shall be taxable to him in the year
in which so paid or made available under section 72 (relating to
annuities)."
1984 - Subsec. (a)(2)(A). Pub. L. 98-369, Sec. 1001(b)(4),
substituted "6 months" for "1 year", applicable to property
acquired after June 22, 1984, and before Jan. 1, 1988. See
Effective Date of 1984 Amendment note below.
Subsec. (a)(4)(A)(i). Pub. L. 98-369, Sec. 522(a)(2), substituted
"any portion of the balance to the credit of an employee in an
employee annuity described in paragraph (1) is paid to him," for
"the balance to the credit of an employee in an employee annuity
described in paragraph (1) is paid to him in a qualifying rollover
distribution."
Subsec. (a)(4)(B). Pub. L. 98-369, Sec. 522(d)(9), substituted
"(B) through (F)" for "(B) through (E)".
Subsec. (b)(1). Pub. L. 98-369, Sec. 491(d)(12), struck out "or
409(b)(3)(C)" after "408(d)(3)(A)(iii)".
Subsec. (b)(7)(D). Pub. L. 98-369, Sec. 521(c), added subpar.
(D).
Subsec. (b)(8)(A)(i). Pub. L. 98-369, Sec. 522(a)(3), substituted
"any portion of the balance to the credit of an employee in an
annuity contract described in paragraph (1) is paid to him" for
"the balance to the credit of an employee is paid to him in a
qualifying distribution".
Subsec. (b)(8)(B). Pub. L. 98-369, Sec. 522(d)(10), substituted
provisions relating to special rules for partial distributions for
provisions relating to definition of qualifying distributions.
Subsec. (b)(8)(C). Pub. L. 98-369, Sec. 522(d)(11), substituted
"(F)(i)" for "(D)(v), and (E)(i)".
1983 - Subsec. (b)(3). Pub. L. 98-21 substituted "section 911"
for "sections 105(d) and 911".
Subsec. (b)(8)(C). Pub. L. 97-448 substituted "subparagraphs (B),
(C), (D)(v), and (E)(i) of section 402(a)(5)" for "subparagraphs
(B), (C), and (E)(i) of section 402(a)(5)".
1982 - Subsec. (b)(2)(B). Pub. L. 97-248, Sec. 251(a)(1), (c)(3),
substituted "home health service agencies, and certain churches,
etc." for "and home health service agencies", and "(under section
415 without regard to section 415(c)(8))" for "(under section
415)".
Subsec. (b)(2)(C), (D). Pub. L. 97-248, Sec. 251(a)(2), added
subpars. (C) and (D).
Subsec. (b)(9). Pub. L. 97-248, Sec. 251(b), added par. (9).
1981 - Subsec. (b)(8)(B)(i). Pub. L. 97-34 inserted ", or 1 or
more distributions of accumulated deductible employee contributions
(within the meaning of section 72(o)(5))" after "subsection (a)".
1980 - Subsec. (b). Pub. L. 96-222 substituted in par. (1)
"409(b)(3)(C)" for "409(d)(3)(C)", and in par. (7)(A) "which
satisfies" for "which satisfied".
1978 - Subsec. (a)(4). Pub. L. 95-600, Sec. 157(g)(2), in subpar.
(B) substituted "paragraphs (6) and (7)" for "paragraph (6)".
Pub. L. 95-458, among other changes, substituted provision
permitting tax free treatment for any portion of a lump sum
distribution from a qualified retirement plan which is deposited in
an individual retirement account or another qualifying plan for
provision which required transfer of all such property received.
Subsec. (a)(5). Pub. L. 95-458 struck out par. (5) which related
to special rules concerning time of termination of a profit-sharing
plan and the treatment of the sale of a corporate subsidiary or
assets as payment or distribution on account of termination of a
plan of which an annuity trust was a part.
Subsec. (b)(1). Pub. L. 95-600, Sec. 156(b), inserted provision
relating to application of rules of this subsection to amounts
contributed by an employer for a taxable year.
Subsec. (b)(7)(A). Pub. L. 95-600, Sec. 154(a), struck out "the
amounts are paid to provide a retirement benefit for that employee
and are to be invested in regulated investment company stock to be
held in that custodial account" after "contract for his employee
if", and added cls. (i) and (ii).
Subsec. (b)(8). Pub. L. 95-600, Sec. 156(a), added par. (8).
1976 - Subsec. (a)(2)(A). Pub. L. 94-455, Sec. 1402(b)(2),
provided that "9 months" would be changed to "1 year".
Pub. L. 94-455, Sec. 1402(b) (1)(D), provided that "6 months"
would be changed to "9 months" for taxable years beginning in 1977.
Subsec. (a)(4). Pub. L. 94-455, Sec. 1901(a)(58), reenacted
provisions following subpar. (C) without substantive change.
Pub. L. 94-267, Sec. 1(b)(2), substituted "a payment" for "the
lump-sum distribution".
Subsec. (a)(4)(A). Pub. L. 94-267, Sec. 1(b)(1), restructured
provisions by adding cl. (i) and designating existing provision as
cl. (ii).
Subsec. (a)(5). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary" wherever appearing.
Pub. L. 94-267, Sec. 1(b)(3), added par. (5).
Subsec. (b)(1)(A)(ii). Pub. L. 94-455, Sec. 1901(b)(8)(A),
substituted "educational organization described in section
170(b)(1)(A)(ii)" for "educational institution (as defined in
section 151(e)(4))".
Subsec. (b)(4)(B). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (b)(7)(C). Pub. L. 94-455, Sec. 1504(a), struck out ",
and which issues only redeemable stock" after "regulated investment
company within the meaning of section 851(a)".
1974 - Subsec. (a)(2). Pub. L. 93-406, Sec. 2005(b)(2),
substituted "a lump sum distribution (as defined in section
4002(e)(4)(A)) is paid to the recipient" for "the total amounts
payable by reason of an employee's death or other separation from
the service, or by reason of the death of an employee after the
employee's separation from the service, are paid to the payee
within one taxable year of the payee" as cl. (iii) of subpar. (A),
substituted "so much of the total taxable amount (as defined in
section 402(e)(4)(D)) of such distribution as is equal to the
product of such total taxable amount multiplied by the fraction
described in section 402(a)(2) shall be treated as a gain from the
sale or exchange of a capital asset held for more than 6 months.
For purposes of this paragraph, in the case of an individual who is
an employee without regard to section 401(c)(1), determination of
whether or not any distribution is a lump sum distribution shall be
made without regard to the requirement that an election be made
under subsection (e)(4)(B) of section 402, but no distribution to
any taxpayer other than an individual, estate, or trust may be
treated as a lump sum distribution under this paragraph" for "then
the amount of such payments, to the extent exceeding the amount
contributed by the employee (determined by applying section 72(f)),
which employee contributions shall be reduced by any amounts
theretofore paid to him which were not includible in gross income,
shall be considered a gain from the sale or exchange of a capital
asset held for more than 6 months. This subparagraph shall not
apply to amounts paid to any payee to the extent such amounts are
attributable to contributions made on behalf of the employee while
he was an employee within the meaning of section 401(c)(1)"
following cl. (iii) of subpar. (A), substituted provisions setting
out a cross reference to section 402(e) for provisions defining
"total amounts" as subpar. (B), and struck out subpar. (C) setting
out limitations on capital gains treatment.
Subsec. (a)(4). Pub. L. 93-406, Sec. 2002(g)(6), added par. (4).
Subsec. (b)(2). Pub. L. 93-406, Sec. 2004(c)(4), designated
existing provisions as subpar. (A) and added subpar. (B).
Subsec. (b)(7). Pub. L. 93-406, Sec. 1022(e), added par. (7).
1969 - Subsec. (a)(2)(C). Pub. L. 91-172, Sec. 515(a)(2), added
subpar. (C).
Subsec. (c). Pub. L. 91-172, Sec. 321(b)(2), consolidated
provisions of subsec. (c) providing for taxability of beneficiary
under a nonqualified annuity, the employees gross income to include
amount contributed by employer for annuity contract in the year in
which amount is contributed, the amount to be included as provided
in section 72 of this title and of subsec. (d) providing for
taxability of beneficiary under certain forfeitable contracts
purchased by exempt organizations, including farmers' cooperatives,
the gross income to include amount contributed by employer after
Dec. 31, 1957, in the year of change from forfeitable to
nonforfeitable rights, the new provisions including premiums paid
by an employer in accordance with section 83, except that value of
the contract shall be substituted for fair market value of the
property for purposes of applying such section 83, such provision
not to be applicable to that portion of premiums paid which is
excluded from gross income under subsec. (b) of this section.
Subsec. (d). Pub. L. 91-172, Sec. 321(b)(2), struck out subsec.
(d) providing for taxability of beneficiary under certain
forfeitable contracts purchased by exempt organizations, including
farmers' cooperatives, gross income of the employee to include
(amount contributed by employer after Dec. 31, 1957), in year of
change from forfeitable to nonforfeitable rights. See subsec. (c)
of this section.
1964 - Subsecs. (a)(1), (b)(1), (c). Pub. L. 88-272, Sec.
232(e)(4)-(6), struck out "except that section 72(e)(3) shall not
apply" after "(relating to annuities)".
1962 - Subsec. (a)(2)(A). Pub. L. 87-792, Sec. 4(d)(1), (2),
substituted "described in paragraph (1)" for "which meets the
requirements of section 401(a)(3), (4), (5), and (6)" in cl. (i),
and inserted sentence at end thereof providing that this
subparagraph shall not apply to amounts paid to any payee to the
extent such amounts are attributable to contributions made on
behalf of the employee while he was an employee within the meaning
of section 401(c)(1).
Subsec. (a)(3). Pub. L. 87-792, Sec. 4(d)(3), added par. (3).
1961 - Subsec. (b). Pub. L. 87-370, Sec. 3(a)(3), inserted "or
public school" in heading.
Subsec. (b)(1)(A). Pub. L. 87-370, Sec. 3(a)(1), included annuity
contracts purchased for an employee, other than one described in
clause (i) of this subpar., who performs services for an
educational institution, as defined in section 151(e)(4) of this
title, by an employer which is a State, a political subdivision of
a State, or an agency or instrumentality of either.
Subsec. (b)(3). Pub. L. 87-370, Sec. (3)(a)(2), substituted "the
employer described in paragraph (1)(A)" for "the employer described
in section 501(c)(3) and exempt from tax under section 501(a)".
1958 - Subsec. (a)(1). Pub. L. 85-866, Sec. 23(b), substituted
"which meets the requirements of section 404(a)(2) (whether or not
the employer deducts the amounts paid for the contract under such
section)," for "with respect to which the employer's contribution
is deductible under section 404(a)(2), or if an annuity contract is
purchased for an employee by an employer described in section
501(c)(3) which is exempt from tax under section 501(a),".
Subsecs. (b) to (d). Pub. L. 85-866, Sec. 23(a), added subsec.
(b), redesignated former subsec. (b) as (c), and added subsec. (d).
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by section 632(a)(2) of Pub. L. 107-16 applicable to
years beginning after Dec. 31, 2001, see section 632(a)(4) of Pub.
L. 107-16, set out as a note under section 72 of this title.
Amendment by section 641(b)(1), (e)(7) of Pub. L. 107-16
applicable to distributions after Dec. 31, 2001, see section
641(f)(1) of Pub. L. 107-16, set out as a note under section 402 of
this title.
Amendment by section 642(b)(1) of Pub. L. 107-16 applicable to
distributions after Dec. 31, 2001, see section 642(c) of Pub. L.
107-16, set out as a note under section 408 of this title.
Amendment by section 646(a)(2) of Pub. L. 107-16 applicable to
distributions after Dec. 31, 2001, see section 646(b) of Pub. L.
107-16, set out as a note under section 401 of this title.
Pub. L. 107-16, title VI, Sec. 647(c), June 7, 2001, 115 Stat.
127, provided that: "The amendments made by this section [amending
this section and section 457 of this title] shall apply to
trustee-to-trustee transfers after December 31, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 2000 AMENDMENT
Amendment by Pub. L. 106-554 effective as if included in the
provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 1(a)(7) [title III, Sec.
314(g)] of Pub. L. 106-554, set out as a note under section 56 of
this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by section 6005 of Pub. L. 105-206 applicable to
distributions after Dec. 31, 1998, see section 6005(c)(2)(C) of
Pub. L. 105-206, set out as a note under section 402 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1504(a)(2) of Pub. L. 105-34 provided that: "The
amendment made by this subsection [amending this section] shall
apply to years beginning after December 31, 1997."
Amendment by section 1505(c) of Pub. L. 105-34 applicable to
taxable years beginning on or after Aug. 5, 1997, with certain
governmental plans treated as satisfying requirements for all
taxable years beginning before Aug. 5, 1997, see section 1505(d) of
Pub. L. 105-34, set out as a note under section 401 of this title.
Amendment by section 1601(d)(6)(B) of Pub. L. 105-34 effective as
if included in the provisions of the Small Business Job Protection
Act of 1996, Pub. L. 104-188, to which it relates, see section
1601(j) of Pub. L. 105-34, set out as a note under section 23 of
this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1450(c)(2) of Pub. L. 104-188 provided that: "The
amendment made by this subsection [amending this section] shall
apply to years beginning after December 31, 1995, except a contract
shall not be required to meet any change in any requirement by
reason of such amendment before the 90th day after the date of the
enactment of this Act [Aug. 20, 1996]."
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by section 521(b)(12), (13) of Pub. L. 102-318
applicable to distributions after Dec. 31, 1992, see section 521(e)
of Pub. L. 102-318, set out as a note under section 402 of this
title.
Amendment by section 522(a)(3), (c)(2), (3) of Pub. L. 102-318
applicable, except as otherwise provided, to distributions after
Dec. 31, 1992, see section 522(d) of Pub. L. 102-318, set out as a
note under section 401 of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 effective, except as otherwise
provided, as if included in the provision of the Revenue
Reconciliation Act of 1989, Pub. L. 101-239, title VII, to which
such amendment relates, see section 11701(n) of Pub. L. 101-508,
set out as a note under section 42 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011(c)(7)(B) of Pub. L. 100-647 applicable
to plan years beginning after Dec. 31, 1987, with exception in case
of a plan described in section 1105(c)(2) of Pub. L. 99-514, see
section 1011(c)(7)(E) of Pub. L. 100-647, set out as a note under
section 401 of this title.
Amendment by section 1011(c)(12), (m)(1), (2) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 6052(a)(2) of Pub. L. 100-647 provided that: "The
amendment made by paragraph (1) [amending this section] shall take
effect as if included in the amendment made by section 1120(b) of
the Reform Act [Pub. L. 99-514]."
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1120(c) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011(m)(3), Nov. 10, 1988, 102 Stat. 3471, provided
that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section] shall apply
to years beginning after December 31, 1988.
"(2) Collective bargaining agreements. - In the case of a plan
maintained pursuant to 1 or more collective bargaining agreements
between employee representatives and 1 or more employers ratified
before March 1, 1986, the amendments made by this section shall not
apply to plan years beginning before the earlier of -
"(A) January 1, 1991, or
"(B) the later of -
"(i) January 1, 1989, or
"(ii) the date on which the last of such collective
bargaining agreements terminates (determined without regard to
any extension thereof after February 28, 1986)."
Amendment by section 1122(b)(1)(B), (d) of Pub. L. 99-514
applicable, except as otherwise provided, to amounts distributed
after Dec. 31, 1986, in taxable years ending after such date, see
section 1122(h) of Pub. L. 99-514, set out as a note under section
402 of this title.
Amendment by section 1123(c) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1988, but only with respect to
distributions from contracts described in subsec. (b) of this
section which are attributable to assets other than assets held as
of the close of the last year beginning before Jan. 1, 1989, with
certain exceptions and transition rule, see section 1123(e) of Pub.
L. 99-514, as amended, set out as a note under section 72 of this
title.
Section 1852(a)(3)(C) of Pub. L. 99-514 provided that: "The
amendments made by this paragraph [amending this section] shall
apply to benefits accruing after December 31, 1986, in taxable
years ending after such date."
Amendment by section 1852(a)(5)(B), (b)(10) of Pub. L. 99-514
effective, except as otherwise provided, as if included in the
provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A,
to which such amendment relates, see section 1881 of Pub. L.
99-514, set out as a note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 491(d)(12) of Pub. L. 98-369 applicable to
obligations issued after Dec. 31, 1983, see section 491(f)(1) of
Pub. L. 98-369, set out as a note under section 62 of this title.
Amendment by section 521(c) of Pub. L. 98-369 applicable to years
beginning after Dec. 31, 1984, see section 521(e) of Pub. L.
98-369, set out as a note under section 401 of this title.
Amendment by section 522 of Pub. L. 98-369 applicable to
distributions made after July 18, 1984, in taxable years ending
after that date, see section 522(e) of Pub. L. 98-369, set out as a
note under section 402 of this title.
Amendment by section 1001(b)(4) of Pub. L. 98-369 applicable to
property acquired after June 22, 1984, and before Jan. 1, 1988, see
section 1001(e) of Pub. L. 98-369, set out as a note under section
166 of this title.
EFFECTIVE DATE OF 1983 AMENDMENTS
Amendment by Pub. L. 98-21 applicable to taxable years beginning
after Dec. 31, 1983, except that if an individual's annuity
starting date was deferred under section 105(d)(6) of this title as
in effect on the day before Apr. 20, 1983, such deferral shall end
on the first day of such individual's first taxable year beginning
after Dec. 31, 1983, see section 122(d) of Pub. L. 98-21, set out
as a note under section 22 of this title.
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Section 251(e) of Pub. L. 97-248, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [amending this section and section
415 of this title, and enacting a provision set out as a note
below] shall apply to taxable years beginning after December 31,
1981.
"(2) Retirement income accounts. - The amendments made by
subsection (b) [amending this section] shall apply to taxable years
beginning after December 31, 1974.
"(3) Section 415 amendments. - The amendments made by subsection
(c) [amending section 415 of this title] shall apply to years
beginning after December 31, 1981.
"(4) Correction period. - The amendment made by subsection (d)
[enacting provisions set out below] shall take effect on July 1,
1982.
"(5) Special rule for existing defined benefit arrangements. -
Any defined benefit arrangement which is established by a church or
a convention or association of churches (including an organization
described in section 414(e)(3)(B)(ii) of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954]) and which is in effect on the date
of the enactment of this Act [Sept. 3, 1982] shall not be treated
as failing to meet the requirements of section 403(b)(2) of such
Code merely because it is a defined benefit arrangement."
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to taxable years beginning
after Dec. 31, 1981, see section 311(i)(1) of Pub. L. 97-34, set
out as a note under section 219 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENTS
Section 154(b) of Pub. L. 95-600 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1978."
Section 156(d) of Pub. L. 95-600, as amended by Pub. L. 96-222,
title I, Sec. 101(a)(13)(A), Apr. 1, 1980, 94 Stat. 204, provided
that: "The amendments made by this section [amending this section
and sections 219, 220, 408, 409, 2039, and 4973] shall apply to
distributions or transfers made after December 31, 1977, in taxable
years beginning after such date."
Amendment by section 157(g)(2) of Pub. L. 95-600 applicable to
lump-sum distributions completed after Dec. 31, 1978, in taxable
years ending after such date, see section 157(g)(4) of Pub. L.
95-600, set out as a note under section 402 of this title.
Amendment by Pub. L. 95-458 applicable with respect to taxable
years beginning after Dec. 31, 1974, see section 4(d) of Pub. L.
95-458, set out as a note under section 402 of this title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Section 1402(b)(1) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning in 1977.
Section 1402(b)(2) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning after Dec. 31, 1977.
Section 1504(b) of Pub. L. 94-455 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1975."
Amendment by section 1901(a)(58), (b)(8)(A) of Pub. L. 94-455
effective for taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
Amendment by Pub. L. 94-267 applicable with respect to payments
made to an employee on or after July 4, 1974, see section 1(e) of
Pub. L. 94-267, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Section 1022(e) of Pub. L. 93-406 provided that the amendment
made by that section is effective Jan. 1, 1974.
Amendment by section 2002(g)(6) of Pub. L. 93-406 applicable on
and after Sept. 2, 1974, with respect to contributions to an
employees' trust described in section 401(a) which is exempt from
tax under section 501(a) or an annuity plan described in section
403(a), see section 2002(i)(3) of Pub. L. 93-406, set out as a note
under section 402 of this title.
Amendment by section 2004(c)(4) of Pub. L. 93-406 applicable to
years beginning after Dec. 31, 1975, see section 2004(d) of Pub. L.
93-406, set out as an Effective Date; Transition Provisions note
under section 415 of this title.
Amendment by section 2005(b)(2) of Pub. L. 93-406 applicable only
with respect to distributions or payments made after Dec. 31, 1973,
in taxable years beginning after Dec. 31, 1973, see section 2005(d)
of Pub. L. 93-406, set out as a note under section 402 of this
title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by section 321(b)(2) of Pub. L. 91-172 applicable with
respect to contributions made and premiums paid after Aug. 1, 1969,
see section 321(d) of Pub. L. 91-172, set out as an Effective Date
note under section 83 of this title.
Amendment by section 515(a)(2) of Pub. L. 91-172 applicable to
taxable years ending after Dec. 31, 1969, see section 515(d) of
Pub. L. 91-172, set out as a note under section 402 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by Pub. L. 88-272 applicable to taxable years beginning
after Dec. 31, 1963, see section 232(g) of Pub. L. 88-272, set out
as a note under section 5 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
EFFECTIVE DATE OF 1961 AMENDMENT
Section 3(b) of Pub. L. 87-370 provided that: "The amendments
made by subsection (a) [amending this section] shall apply with
respect to taxable years beginning after December 31, 1957."
EFFECTIVE DATES OF 1958 AMENDMENT
Section 23(g) of Pub. L. 85-866 provided that: "The amendments
made by subsections (a), (b), (c), and (d) [amending this section
and section 101 of this title] shall apply with respect to taxable
years beginning after December 31, 1957. The amendments made by
subsection (e) [amending section 2039 of this title] shall apply
with respect to estates of decedents dying after December 31, 1957.
The amendments made by subsection (f) [amending section 2517 of
this title] shall apply with respect to calendar years after 1957."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1120 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
ELECTION TO MODIFY SECTION 403(B) EXCLUSION ALLOWANCE TO CONFORM TO
SECTION 415 MODIFICATION
Pub. L. 107-16, title VI, Sec. 632(b)(3), June 7, 2001, 115 Stat.
115, provided that: "In the case of taxable years beginning after
December 31, 1999, and before January 1, 2002, a plan may disregard
the requirement in the regulations regarding the exclusion
allowance under section 403(b)(2) of the Internal Revenue Code of
1986 that contributions to a defined benefit pension plan be
treated as previously excluded amounts for purposes of the
exclusion allowance."
MODIFICATIONS OF SUBSECTION (B) OF THIS SECTION
Section 1601(d)(4) of Pub. L. 105-34, as amended by Pub. L.
105-206, title VI, Sec. 6016(a)(2), July 22, 1998, 112 Stat. 822,
provided that:
"(A) Paragraphs (7)(A)(ii) and (11) of section 403(b) of the
Internal Revenue Code of 1986 shall not apply with respect to a
distribution from a contract described in section 1450(b)(1) of
such Act [Pub. L. 104-188, set out below] to the extent that such
distribution is not includible in income by reason of -
"(i) in the case of distributions before January 1, 1998,
section 403(b)(8) or (b)(10) of such Code (determined after the
application of section 1450(b)(2) of such Act [Pub. L. 104-188,
set out below]), and
"(ii) in the case of distributions on and after such date, such
section 403(b)(10).
"(B) This paragraph shall apply as if included in section 1450 of
the Small Business Job Protection Act of 1996 [Pub. L. 104-188, set
out below]."
Section 1450(a), (b) of Pub. L. 104-188 provided that:
"(a) Multiple Salary Reduction Agreements Permitted. -
"(1) General rule. - For purposes of section 403(b) of the
Internal Revenue Code of 1986, the frequency that an employee is
permitted to enter into a salary reduction agreement, the salary
to which such an agreement may apply, and the ability to revoke
such an agreement shall be determined under the rules applicable
to cash or deferred elections under section 401(k) of such Code.
"(2) Constructive receipt. - [Amended section 402 of this
title.]
"(3) Effective date. - This subsection shall apply to taxable
years beginning after December 31, 1995.
"(b) Treatment of Indian Tribal Governments. -
"(1) In general. - In the case of any contract purchased in a
plan year beginning before January 1, 1995, section 403(b) of the
Internal Revenue Code of 1986 shall be applied as if any
reference to an employer described in section 501(c)(3) of the
Internal Revenue Code of 1986 which is exempt from tax under
section 501 of such Code included a reference to an employer
which is an Indian tribal government (as defined by section
7701(a)(40) of such Code), a subdivision of an Indian tribal
government (determined in accordance with section 7871(d) of such
Code), an agency or instrumentality of an Indian tribal
government or subdivision thereof, or a corporation chartered
under Federal, State, or tribal law which is owned in whole or in
part by any of the foregoing.
"(2) Rollovers. - Solely for purposes of applying section
403(b)(8) of such Code to a contract to which paragraph (1)
applies, a qualified cash or deferred arrangement under section
401(k) of such Code shall be treated as if it were a plan or
contract described in clause (ii) of section 403(b)(8)(A) of such
Code."
SAMPLING TO DETERMINE WHETHER PLAN MEETS SUBSECTION (B)(12)
REQUIREMENTS
Section 6052(b) of Pub. L. 100-647 provided that: "In the case of
plan years beginning in 1989, 1990, or 1991, determinations as to
whether a plan meets the requirements of section 403(b)(12) of the
1986 Code may be made on the basis of a statistically valid random
sample. The preceding sentence shall apply only if -
"(1) the sampling is conducted by an independent person in a
manner not inconsistent with regulations prescribed by the
Secretary, and
"(2) the statistical method and sample size result in a 95
percent probability that the results will have a margin of error
not greater than 3 percent."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
CORRECTION PERIOD FOR CHURCH PLANS
Section 251(d) of Pub. L. 97-248, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "A church
plan (within the meaning of section 414(e) of the Internal Revenue
Code of 1986 [formerly I.R.C. 1954]) shall not be treated as not
meeting the requirements of section 401 or 403 of such Code if -
"(1) by reason of any change in any law, regulation, ruling, or
otherwise such plan is required to be amended to meet such
requirements, and
"(2) such plan is so amended at the next earliest church
convention or such other time as the Secretary of the Treasury or
his delegate may prescribe."
TRANSITIONAL RULE FOR MAKING SECTION 403(B)(8) ROLLOVER IN THE CASE
OF PAYMENTS DURING 1978
Section 101(a)(13)(B) of Pub. L. 96-222, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In
the case of any payment made during 1978 in a qualifying
distribution described in section 403(b)(8) of the Internal Revenue
Code of 1986 [formerly I.R.C. 1954], the applicable period
specified in section 402(a)(5)(C) of such Code shall not expire
before the close of December 31, 1980."
TRANSITIONAL RULE IN CASE OF ROLLOVER CONTRIBUTIONS TO EMPLOYEE
TRUSTS OR ANNUITIES
Applicable period specified in section 402(a)(5)(C) of this title
shall not expire before close of Dec. 31, 1980 in case of any
payment described in subsec. (a)(4)(A) of this section or section
402(a)(5)(A) of this title, see section 157(h)(3)(B) of Pub. L.
95-600, set out as a note under section 402 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 72, 104, 219, 280G, 401,
402, 402A, 404, 406, 407, 408, 411, 412, 414, 415, 457, 818, 871,
911, 3121, 3306, 3401, 3405, 4972, 4973, 4974, 4975, 4979, 4980,
6047, 6104, 7476, 7871 of this title; title 4 section 114; title 11
section 522; title 12 section 1831f; title 15 sections 77c, 78c;
title 28 section 3010; title 29 sections 1053, 1103, 1132, 1344;
title 42 section 409.
-End-
-CITE-
26 USC Sec. 404 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 404. Deduction for contributions of an employer to an
employees' trust or annuity plan and compensation under a
deferred-payment plan
-STATUTE-
(a) General rule
If contributions are paid by an employer to or under a stock
bonus, pension, profit-sharing, or annuity plan, or if compensation
is paid or accrued on account of any employee under a plan
deferring the receipt of such compensation, such contributions or
compensation shall not be deductible under this chapter; but, if
they would otherwise be deductible, they shall be deductible under
this section, subject, however, to the following limitations as to
the amounts deductible in any year:
(1) Pension trusts
(A) In general
In the taxable year when paid, if the contributions are paid
into a pension trust (other than a trust to which paragraph (3)
applies), and if such taxable year ends within or with a
taxable year of the trust for which the trust is exempt under
section 501(a), in an amount determined as follows:
(i) the amount necessary to satisfy the minimum funding
standard provided by section 412(a) for plan years ending
within or with such taxable year (or for any prior plan
year), if such amount is greater than the amount determined
under clause (ii) or (iii) (whichever is applicable with
respect to the plan),
(ii) the amount necessary to provide with respect to all of
the employees under the trust the remaining unfunded cost of
their past and current service credits distributed as a level
amount, or a level percentage of compensation, over the
remaining future service of each such employee, as determined
under regulations prescribed by the Secretary, but if such
remaining unfunded cost with respect to any 3 individuals is
more than 50 percent of such remaining unfunded cost, the
amount of such unfunded cost attributable to such individuals
shall be distributed over a period of at least 5 taxable
years,
(iii) an amount equal to the normal cost of the plan, as
determined under regulations prescribed by the Secretary,
plus, if past service or other supplementary pension or
annuity credits are provided by the plan, an amount necessary
to amortize the unfunded costs attributable to such credits
in equal annual payments (until fully amortized) over 10
years, as determined under regulations prescribed by the
Secretary.
In determining the amount deductible in such year under the
foregoing limitations the funding method and the actuarial
assumptions used shall be those used for such year under
section 412, and the maximum amount deductible for such year
shall be an amount equal to the full funding limitation for
such year determined under section 412.
(B) Special rule in case of certain amendments
In the case of a plan which the Secretary of Labor finds to
be collectively bargained which makes an election under this
subparagraph (in such manner and at such time as may be
provided under regulations prescribed by the Secretary), if the
full funding limitation determined under section 412(c)(7) for
such year is zero, if as a result of any plan amendment
applying to such plan year, the amount determined under section
412(c)(7)(B) exceeds the amount determined under section
412(c)(7)(A), and if the funding method and the actuarial
assumptions used are those used for such year under section
412, the maximum amount deductible in such year under the
limitations of this paragraph shall be an amount equal to the
lesser of -
(i) the full funding limitation for such year determined by
applying section 412(c)(7) but increasing the amount referred
to in subparagraph (A) thereof by the decrease in the present
value of all unamortized liabilities resulting from such
amendment, or
(ii) the normal cost under the plan reduced by the amount
necessary to amortize in equal annual installments over 10
years (until fully amortized) the decrease described in
clause (i).
In the case of any election under this subparagraph, the amount
deductible under the limitations of this paragraph with respect
to any of the plan years following the plan year for which such
election was made shall be determined as provided under such
regulations as may be prescribed by the Secretary to carry out
the purposes of this subparagraph.
(C) Certain collectively-bargained plans
In the case of a plan which the Secretary of Labor finds to
be collectively bargained, established or maintained by an
employer doing business in not less than 40 States and engaged
in the trade or business of furnishing or selling services
described in section 168(i)(10)(C), with respect to which the
rates have been established or approved by a State or political
subdivision thereof, by any agency or instrumentality of the
United States, or by a public service or public utility
commission or other similar body of any State or political
subdivision thereof, and in the case of any employer which is a
member of a controlled group with such employer, subparagraph
(B) shall be applied by substituting for the words "plan
amendment" the words "plan amendment or increase in benefits
payable under title II of the Social Security Act". For the
purposes of this subparagraph, the term "controlled group" has
the meaning provided by section 1563(a), determined without
regard to section 1563(a)(4) and (e)(3)(C).
(D) Special rule in case of certain plans
(i) In general
In the case of any defined benefit plan, except as provided
in regulations, the maximum amount deductible under the
limitations of this paragraph shall not be less than the
unfunded current liability determined under section 412(l).
(ii) Plans with 100 or less participants
For purposes of this subparagraph, in the case of a plan
which has 100 or less participants for the plan year,
unfunded current liability shall not include the liability
attributable to benefit increases for highly compensated
employees (as defined in section 414(q)) resulting from a
plan amendment which is made or becomes effective, whichever
is later, within the last 2 years.
(iii) Rule for determining number of participants
For purposes of determining the number of plan
participants, all defined benefit plans maintained by the
same employer (or any member of such employer's controlled
group (within the meaning of section 412(l)(8)(C))) shall be
treated as one plan, but only employees of such member or
employer shall be taken into account.
(iv) Special rule for terminating plans
In the case of a plan which, subject to section 4041 of the
Employee Retirement Income Security Act of 1974, terminates
during the plan year, clause (i) shall be applied by
substituting for unfunded current liability the amount
required to make the plan sufficient for benefit liabilities
(within the meaning of section 4041(d) of such Act).
(E) Carryover
Any amount paid in a taxable year in excess of the amount
deductible in such year under the foregoing limitations shall
be deductible in the succeeding taxable years in order of time
to the extent of the difference between the amount paid and
deductible in each such succeeding year and the maximum amount
deductible for such year under the foregoing limitations.
(2) Employees' annuities
In the taxable year when paid, in an amount determined in
accordance with paragraph (1), if the contributions are paid
toward the purchase of retirement annuities, or retirement
annuities and medical benefits as described in section 401(h),
and such purchase is part of a plan which meets the requirements
of section 401(a)(3), (4), (5), (6), (7), (8), (9), (11), (12),
(13), (14), (15), (16), (17),(!1) (19), (20), (22), (26), (27),
and (31) and, if applicable, the requirements of section
401(a)(10) and of section 401(d), and if refunds of premiums, if
any, are applied within the current taxable year or next
succeeding taxable year toward the purchase of such retirement
annuities, or such retirement annuities and medical benefits.
(3) Stock bonus and profit-sharing trusts
(A) Limits on deductible contributions
(i) In general
In the taxable year when paid, if the contributions are
paid into a stock bonus or profit-sharing trust, and if such
taxable year ends within or with a taxable year of the trust
with respect to which the trust is exempt under section
501(a), in an amount not in excess of the greater of -
(I) 25 percent of the compensation otherwise paid or
accrued during the taxable year to the beneficiaries under
the stock bonus or profit-sharing plan, or
(II) the amount such employer is required to contribute
to such trust under section 401(k)(11) for such year.
(ii) Carryover of excess contributions
Any amount paid into the trust in any taxable year in
excess of the limitation of clause (i) (or the corresponding
provision of prior law) shall be deductible in the succeeding
taxable years in order of time, but the amount so deductible
under this clause in any 1 such succeeding taxable year
together with the amount allowable under clause (i) shall not
exceed the amount described in subclause (I) or (II) of
clause (i), whichever is greater, with respect to such
taxable year.
(iii) Certain retirement plans excluded
For purposes of this subparagraph, the term "stock bonus or
profit-sharing trust" shall not include any trust designed to
provide benefits upon retirement and covering a period of
years, if under the plan the amounts to be contributed by the
employer can be determined actuarially as provided in
paragraph (1).
(iv) 2 or more trusts treated as 1 trust
If the contributions are made to 2 or more stock bonus or
profit-sharing trusts, such trusts shall be considered a
single trust for purposes of applying the limitations in this
subparagraph.
(v) Defined contribution plans subject to the funding
standards
Except as provided by the Secretary, a defined contribution
plan which is subject to the funding standards of section 412
shall be treated in the same manner as a stock bonus or
profit-sharing plan for purposes of this subparagraph.
(B) Profit-sharing plan of affiliated group
In the case of a profit-sharing plan, or a stock bonus plan
in which contributions are determined with reference to
profits, of a group of corporations which is an affiliated
group within the meaning of section 1504, if any member of such
affiliated group is prevented from making a contribution which
it would otherwise have made under the plan, by reason of
having no current or accumulated earnings or profits or because
such earnings or profits are less than the contributions which
it would otherwise have made, then so much of the contribution
which such member was so prevented from making may be made, for
the benefit of the employees of such member, by the other
members of the group, to the extent of current or accumulated
earnings or profits, except that such contribution by each such
other member shall be limited, where the group does not file a
consolidated return, to that proportion of its total current
and accumulated earnings or profits remaining after adjustment
for its contribution deductible without regard to this
subparagraph which the total prevented contribution bears to
the total current and accumulated earnings or profits of all
the members of the group remaining after adjustment for all
contributions deductible without regard to this subparagraph.
Contributions made under the preceding sentence shall be
deductible under subparagraph (A) of this paragraph by the
employer making such contribution, and, for the purpose of
determining amounts which may be carried forward and deducted
under the second sentence of subparagraph (A) of this paragraph
in succeeding taxable years, shall be deemed to have been made
by the employer on behalf of whose employees such contributions
were made.
(4) Trusts created or organized outside the United States
If a stock bonus, pension, or profit-sharing trust would
qualify for exemption under section 501(a) except for the fact
that it is a trust created or organized outside the United
States, contributions to such a trust by an employer which is a
resident, or corporation, or other entity of the United States,
shall be deductible under the preceding paragraphs.
(5) Other plans
If the plan is not one included in paragraph (1), (2), or (3),
in the taxable year in which an amount attributable to the
contribution is includible in the gross income of employees
participating in the plan, but, in the case of a plan in which
more than one employee participates only if separate accounts are
maintained for each employee. For purposes of this section, any
vacation pay which is treated as deferred compensation shall be
deductible for the taxable year of the employer in which paid to
the employee.
(6) Time when contributions deemed made
For purposes of paragraphs (1), (2), and (3), a taxpayer shall
be deemed to have made a payment on the last day of the preceding
taxable year if the payment is on account of such taxable year
and is made not later than the time prescribed by law for filing
the return for such taxable year (including extensions thereof).
(7) Limitation on deductions where combination of defined
contribution plan and defined benefit plan
(A) In general
If amounts are deductible under the foregoing paragraphs of
this subsection (other than paragraph (5)) in connection with 1
or more defined contribution plans and 1 or more defined
benefit plans or in connection with trusts or plans described
in 2 or more of such paragraphs, the total amount deductible in
a taxable year under such plans shall not exceed the greater of
-
(i) 25 percent of the compensation otherwise paid or
accrued during the taxable year to the beneficiaries under
such plans, or
(ii) the amount of contributions made to or under the
defined benefit plans to the extent such contributions do not
exceed the amount of employer contributions necessary to
satisfy the minimum funding standard provided by section 412
with respect to any such defined benefit plans for the plan
year which ends with or within such taxable year (or for any
prior plan year).
A defined contribution plan which is a pension plan shall not
be treated as failing to provide definitely determinable
benefits merely by limiting employer contributions to amounts
deductible under this section. For purposes of clause (ii), if
paragraph (1)(D) applies to a defined benefit plan for any plan
year, the amount necessary to satisfy the minimum funding
standard provided by section 412 with respect to such plan for
such plan year shall not be less than the unfunded current
liability of such plan under section 412(l).
(B) Carryover of contributions in excess of the deductible
limit
Any amount paid under the plans in any taxable year in excess
of the limitation of subparagraph (A) shall be deductible in
the succeeding taxable years in order of time, but the amount
so deductible under this subparagraph in any 1 such succeeding
taxable year together with the amount allowable under
subparagraph (A) shall not exceed 25 percent of the
compensation otherwise paid or accrued during such taxable year
to the beneficiaries under the plans.
(C) Paragraph not to apply in certain cases
(i) Beneficiary test
This paragraph shall not have the effect of reducing the
amount otherwise deductible under paragraphs (1), (2), and
(3), if no employee is a beneficiary under more than 1 trust
or under a trust and an annuity plan.
(ii) Elective deferrals
If, in connection with 1 or more defined contribution plans
and 1 or more defined benefit plans, no amounts (other than
elective deferrals (as defined in section 402(g)(3))) are
contributed to any of the defined contribution plans for the
taxable year, then subparagraph (A) shall not apply with
respect to any of such defined contribution plans and defined
benefit plans.
(D) Section 412(i) plans
For purposes of this paragraph, any plan described in section
412(i) shall be treated as a defined benefit plan.
(8) Self-employed individuals
In the case of a plan included in paragraph (1), (2), or (3)
which provides contributions or benefits for employees some or
all of whom are employees within the meaning of section
401(c)(1), for purposes of this section -
(A) the term "employee" includes an individual who is an
employee within the meaning of section 401(c)(1), and the
employer of such individual is the person treated as his
employer under section 401(c)(4);
(B) the term "earned income" has the meaning assigned to it
by section 401(c)(2);
(C) the contributions to such plan on behalf of an individual
who is an employee within the meaning of section 401(c)(1)
shall be considered to satisfy the conditions of section 162 or
212 to the extent that such contributions do not exceed the
earned income of such individual (determined without regard to
the deductions allowed by this section) derived from the trade
or business with respect to which such plan is established, and
to the extent that such contributions are not allocable
(determined in accordance with regulations prescribed by the
Secretary) to the purchase of life, accident, health, or other
insurance; and
(D) any reference to compensation shall, in the case of an
individual who is an employee within the meaning of section
401(c)(1), be considered to be a reference to the earned income
of such individual derived from the trade or business with
respect to which the plan is established.
(9) Certain contributions to employee stock ownership plans
(A) Principal payments
Notwithstanding the provisions of paragraphs (3) and (7), if
contributions are paid into a trust which forms a part of an
employee stock ownership plan (as described in section
4975(e)(7)), and such contributions are, on or before the time
prescribed in paragraph (6), applied by the plan to the
repayment of the principal of a loan incurred for the purpose
of acquiring qualifying employer securities (as described in
section 4975(e)(8)), such contributions shall be deductible
under this paragraph for the taxable year determined under
paragraph (6). The amount deductible under this paragraph shall
not, however, exceed 25 percent of the compensation otherwise
paid or accrued during the taxable year to the employees under
such employee stock ownership plan. Any amount paid into such
trust in any taxable year in excess of the amount deductible
under this paragraph shall be deductible in the succeeding
taxable years in order of time to the extent of the difference
between the amount paid and deductible in each such succeeding
year and the maximum amount deductible for such year under the
preceding sentence.
(B) Interest payment
Notwithstanding the provisions of paragraphs (3) and (7), if
contributions are made to an employee stock ownership plan
(described in subparagraph (A)) and such contributions are
applied by the plan to the repayment of interest on a loan
incurred for the purpose of acquiring qualifying employer
securities (as described in subparagraph (A)), such
contributions shall be deductible for the taxable year with
respect to which such contributions are made as determined
under paragraph (6).
(C) S corporations
This paragraph shall not apply to an S corporation.
(D) Qualified gratuitous transfers
A qualified gratuitous transfer (as defined in section
664(g)(1)) shall have no effect on the amount or amounts
otherwise deductible under paragraph (3) or (7) or under this
paragraph.
(10) Contributions by certain ministers to retirement income
accounts
In the case of contributions made by a minister described in
section 414(e)(5) to a retirement income account described in
section 403(b)(9) and not by a person other than such minister,
such contributions -
(A) shall be treated as made to a trust which is exempt from
tax under section 501(a) and which is part of a plan which is
described in section 401(a), and
(B) shall be deductible under this subsection to the extent
such contributions do not exceed the limit on elective
deferrals under section 402(g) or the limit on annual additions
under section 415.
For purposes of this paragraph, all plans in which the minister
is a participant shall be treated as one plan.
(11) Determinations relating to deferred compensation
For purposes of determining under this section -
(A) whether compensation of an employee is deferred
compensation; and
(B) when deferred compensation is paid,
no amount shall be treated as received by the employee, or paid,
until it is actually received by the employee.
(12) Definition of compensation
For purposes of paragraphs (3), (7), (8), and (9) and
subsection (h)(1)(C), the term "compensation" shall include
amounts treated as "participant's compensation" under
subparagraph (C) or (D) of section 415(c)(3).
(b) Method of contributions, etc., having the effect of a plan;
certain deferred benefits
(1) Method of contributions, etc., having the effect of a plan
If -
(A) there is no plan, but
(B) there is a method or arrangement of employer
contributions or compensation which has the effect of a stock
bonus, pension, profit-sharing, or annuity plan, or other plan
deferring the receipt of compensation (including a plan
described in paragraph (2)),
subsection (a) shall apply as if there were such a plan.
(2) Plans providing certain deferred benefits
(A) In general
For purposes of this section, any plan providing for deferred
benefits (other than compensation) for employees, their
spouses, or their dependents shall be treated as a plan
deferring the receipt of compensation. In the case of such a
plan, for purposes of this section, the determination of when
an amount is includible in gross income shall be made without
regard to any provisions of this chapter excluding such
benefits from gross income.
(B) Exception
Subparagraph (A) shall not apply to any benefit provided
through a welfare benefit fund (as defined in section 419(e)).
(c) Certain negotiated plans
If contributions are paid by an employer -
(1) under a plan under which such contributions are held in
trust for the purpose of paying (either from principal or income
or both) for the benefit of employees and their families and
dependents at least medical or hospital care, or pensions on
retirement or death of employees; and
(2) such plan was established prior to January 1, 1954, as a
result of an agreement between employee representatives and the
Government of the United States during a period of Government
operation, under seizure powers, of a major part of the
productive facilities of the industry in which such employer is
engaged,
such contributions shall not be deductible under this section nor
be made nondeductible by this section, but the deductibility
thereof shall be governed solely by section 162 (relating to trade
or business expenses). For purposes of this chapter and subtitle B,
in the case of any individual who before July 1, 1974, was a
participant in a plan described in the preceding sentence -
(A) such individual, if he is or was an employee within the
meaning of section 401(c)(1), shall be treated (with respect to
service covered by the plan) as being an employee other than an
employee within the meaning of section 401(c)(1) and as being an
employee of a participating employer under the plan,
(B) earnings derived from service covered by the plan shall be
treated as not being earned income within the meaning of section
401(c)(2), and
(C) such individual shall be treated as an employee of a
participating employer under the plan with respect to service
before July 1, 1975, covered by the plan.
Section 277 (relating to deductions incurred by certain membership
organizations in transactions with members) does not apply to any
trust described in this subsection. The first and third sentences
of this subsection shall have no application with respect to
amounts contributed to a trust on or after any date on which such
trust is qualified for exemption from tax under section 501(a).
(d) Deductibility of payments of deferred compensation, etc., to
independent contractors
If a plan would be described in so much of subsection (a) as
precedes paragraph (1) thereof (as modified by subsection (b)) but
for the fact that there is no employer-employee relationship, the
contributions or compensation -
(1) shall not be deductible by the payor thereof under this
chapter, but
(2) shall (if they would be deductible under this chapter but
for paragraph (1)) be deductible under this subsection for the
taxable year in which an amount attributable to the contribution
or compensation is includible in the gross income of the persons
participating in the plan.
(e) Contributions allocable to life insurance protection for
self-employed individuals
In the case of a self-employed individual described in section
401(c)(1), contributions which are allocable (determined under
regulations prescribed by the Secretary) to the purchase of life,
accident, health, or other insurance shall not be taken into
account under paragraph (1), (2), or (3) of subsection (a).
[(f) Repealed. Pub. L. 98-369, div. A, title VII, Sec. 713(b)(3),
July 18, 1984, 98 Stat. 957]
(g) Certain employer liability payments considered as contributions
(1) In general
For purposes of this section, any amount paid by an employer
under section 4041(b), 4062, 4063, or 4064, or part 1 of subtitle
E of title IV of the Employee Retirement Income Security Act of
1974 shall be treated as a contribution to which this section
applies by such employer to or under a stock bonus, pension,
profit-sharing, or annuity plan.
(2) Controlled group deductions
In the case of a payment described in paragraph (1) made by an
entity which is liable because it is a member of a commonly
controlled group of corporations, trades, or businesses, within
the meaning of subsection (b) or (c) of section 414, the fact
that the entity did not directly employ participants of the plan
with respect to which the liability payment was made shall not
affect the deductibility of a payment which otherwise satisfies
the conditions of section 162 (relating to trade or business
expenses) or section 212 (relating to expenses for the production
of income).
(3) Timing of deduction of contributions
(A) In general
Except as otherwise provided in this paragraph, any payment
described in paragraph (1) shall (subject to the last sentence
of subsection (a)(1)(A)) be deductible under this section when
paid.
(B) Contributions under standard terminations
Subparagraph (A) shall not apply (and subsection (a)(1)(A)
shall apply) to any payments described in paragraph (1) which
are paid to terminate a plan under section 4041(b) of the
Employee Retirement Income Security Act of 1974 to the extent
such payments result in the assets of the plan being in excess
of the total amount of benefits under such plan which are
guaranteed by the Pension Benefit Guaranty Corporation under
section 4022 of such Act.
(C) Contributions to certain trusts
Subparagraph (A) shall not apply to any payment described in
paragraph (1) which is made under section 4062(c) of such Act
and such payment shall be deductible at such time as may be
prescribed in regulations which are based on principles similar
to the principles of subsection (a)(1)(A).
(4) References to Employee Retirement Income Security Act of 1974
For purposes of this subsection, any reference to a section of
the Employee Retirement Income Security Act of 1974 shall be
treated as a reference to such section as in effect on the date
of the enactment of the Retirement Protection Act of 1994.
(h) Special rules for simplified employee pensions
(1) In general
Employer contributions to a simplified employee pension shall
be treated as if they are made to a plan subject to the
requirements of this section. Employer contributions to a
simplified employee pension are subject to the following
limitations:
(A) Contributions made for a year are deductible -
(i) in the case of a simplified employee pension maintained
on a calendar year basis, for the taxable year with or within
which the calendar year ends, or
(ii) in the case of a simplified employee pension which is
maintained on the basis of the taxable year of the employer,
for such taxable year.
(B) Contributions shall be treated for purposes of this
subsection as if they were made for a taxable year if such
contributions are made on account of such taxable year and are
made not later than the time prescribed by law for filing the
return for such taxable year (including extensions thereof).
(C) The amount deductible in a taxable year for a simplified
employee pension shall not exceed 25 percent of the
compensation paid to the employees during the calendar year
ending with or within the taxable year (or during the taxable
year in the case of a taxable year described in subparagraph
(A)(ii)). The excess of the amount contributed over the amount
deductible for a taxable year shall be deductible in the
succeeding taxable years in order of time, subject to the 25
percent limit of the preceding sentence.
(2) Effect on certain trusts
For any taxable year for which the employer has a deduction
under paragraph (1), the otherwise applicable limitations in
subsection (a)(3)(A) shall be reduced by the amount of the
allowable deductions under paragraph (1) with respect to
participants in the trust subject to subsection (a)(3)(A).
(3) Coordination with subsection (a)(7)
For purposes of subsection (a)(7), a simplified employee
pension shall be treated as if it were a separate stock bonus or
profit-sharing trust.
[(i) Repealed. Pub. L. 99-514, title XI, Sec. 1171(b)(6), Oct. 22,
1986, 100 Stat. 2513]
(j) Special rules relating to application with section 415
(1) No deduction in excess of section 415 limitation
In computing the amount of any deduction allowable under
paragraph (1), (2), (3), (4), (7), or (9) of subsection (a) for
any year -
(A) in the case of a defined benefit plan, there shall not be
taken into account any benefits for any year in excess of any
limitation on such benefits under section 415 for such year, or
(B) in the case of a defined contribution plan, the amount of
any contributions otherwise taken into account shall be reduced
by any annual additions in excess of the limitation under
section 415 for such year.
(2) No advance funding of cost-of-living adjustments
For purposes of clause (i), (ii) or (iii) of subsection
(a)(1)(A), and in computing the full funding limitation, there
shall not be taken into account any adjustments under section
415(d)(1) for any year before the year for which such adjustment
first takes effect.
(k) Deduction for dividends paid on certain employer securities
(1) General rule
In the case of a C corporation, there shall be allowed as a
deduction for a taxable year the amount of any applicable
dividend paid in cash by such corporation with respect to
applicable employer securities. Such deduction shall be in
addition to the deductions allowed under subsection (a).
(2) Applicable dividend
For purposes of this subsection -
(A) In general
The term "applicable dividend" means any dividend which, in
accordance with the plan provisions -
(i) is paid in cash to the participants in the plan or
their beneficiaries,
(ii) is paid to the plan and is distributed in cash to
participants in the plan or their beneficiaries not later
than 90 days after the close of the plan year in which paid,
(iii) is, at the election of such participants or their
beneficiaries -
(I) payable as provided in clause (i) or (ii), or
(II) paid to the plan and reinvested in qualifying
employer securities, or
(iv) is used to make payments on a loan described in
subsection (a)(9) the proceeds of which were used to acquire
the employer securities (whether or not allocated to
participants) with respect to which the dividend is paid.
(B) Limitation on certain dividends
A dividend described in subparagraph (A)(iv) which is paid
with respect to any employer security which is allocated to a
participant shall not be treated as an applicable dividend
unless the plan provides that employer securities with a fair
market value of not less than the amount of such dividend are
allocated to such participant for the year which (but for
subparagraph (A)) such dividend would have been allocated to
such participant.
(3) Applicable employer securities
For purposes of this subsection, the term "applicable employer
securities" means, with respect to any dividend, employer
securities which are held on the record date for such dividend by
an employee stock ownership plan which is maintained by -
(A) the corporation paying such dividend, or
(B) any other corporation which is a member of a controlled
group of corporations (within the meaning of section 409(l)(4))
which includes such corporation.
(4) Time for deduction
(A) In general
The deduction under paragraph (1) shall be allowable in the
taxable year of the corporation in which the dividend is paid
or distributed to a participant or his beneficiary.
(B) Reinvestment dividends
For purposes of subparagraph (A), an applicable dividend
reinvested pursuant to clause (iii)(II) of paragraph (2)(A)
shall be treated as paid in the taxable year of the corporation
in which such dividend is reinvested in qualifying employer
securities or in which the election under clause (iii) of
paragraph (2)(A) is made, whichever is later.
(C) Repayment of loans
In the case of an applicable dividend described in clause
(iv) of paragraph (2)(A), the deduction under paragraph (1)
shall be allowable in the taxable year of the corporation in
which such dividend is used to repay the loan described in such
clause.
(5) Other rules
For purposes of this subsection -
(A) Disallowance of deduction
The Secretary may disallow the deduction under paragraph (1)
for any dividend if the Secretary determines that such dividend
constitutes, in substance, an avoidance or evasion of taxation.
(B) Plan qualification
A plan shall not be treated as violating the requirements of
section 401, 409, or 4975(e)(7), or as engaging in a prohibited
transaction for purposes of section 4975(d)(3), merely by
reason of any payment or distribution described in paragraph
(2)(A).
(6) Definitions
For purposes of this subsection -
(A) Employer securities
The term "employer securities" has the meaning given such
term by section 409(l).
(B) Employee stock ownership plan
The term "employee stock ownership plan" has the meaning
given such term by section 4975(e)(7). Such term includes a tax
credit employee stock ownership plan (as defined in section
409).
(7) Full vesting
In accordance with section 411, an applicable dividend
described in clause (iii)(II) of paragraph (2)(A) shall be
subject to the requirements of section 411(a)(1).
(l) Limitation on amount of annual compensation taken into account
For purposes of applying the limitations of this section, the
amount of annual compensation of each employee taken into account
under the plan for any year shall not exceed $200,000. The
Secretary shall adjust the $200,000 amount at the same time, and by
the same amount, as any adjustment under section 401(a)(17)(B). For
purposes of clause (i), (ii), or (iii) of subsection (a)(1)(A), and
in computing the full funding limitation, any adjustment under the
preceding sentence shall not be taken into account for any year
before the year for which such adjustment first takes effect.
(m) Special rules for simple retirement accounts
(1) In general
Employer contributions to a simple retirement account shall be
treated as if they are made to a plan subject to the requirements
of this section.
(2) Timing
(A) Deduction
Contributions described in paragraph (1) shall be deductible
in the taxable year of the employer with or within which the
calendar year for which the contributions were made ends.
(B) Contributions after end of year
For purposes of this subsection, contributions shall be
treated as made for a taxable year if they are made on account
of the taxable year and are made not later than the time
prescribed by law for filing the return for the taxable year
(including extensions thereof).
(n) Elective deferrals not taken into account for purposes of
deduction limits
Elective deferrals (as defined in section 402(g)(3)) shall not be
subject to any limitation contained in paragraph (3), (7), or (9)
of subsection (a) or paragraph (1)(C) of subsection (h) and such
elective deferrals shall not be taken into account in applying any
such limitation to any other contributions.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 138; Pub. L. 85-866, title I,
Sec. 24, Sept. 2, 1958, 72 Stat. 1623; Pub. L. 87-792, Sec. 3, Oct.
10, 1962, 76 Stat. 819; Pub. L. 87-863, Sec. 2(b), Oct. 23, 1962,
76 Stat. 1141; Pub. L. 89-809, title II, Sec. 204(a), (b)(2), (3),
Nov. 13, 1966, 80 Stat. 1577; Pub. L. 91-172, title III, Sec.
321(b)(3), Dec. 30, 1969, 83 Stat. 591; Pub. L. 93-406, title II,
Secs. 1013(c), 1016(a)(3), 2001(a), (g)(2)(E), (F), 2004(b),
(c)(1), 2007(a), (b), title IV, Sec. 4401(a), formerly Sec.
4081(a), Sept. 2, 1974, 88 Stat. 921, 929, 952, 957, 986, 993, 994,
1033, renumbered Sec. 4401(a), Pub. L. 96-364, title I, Sec.
108(a), Sept. 26, 1980, 94 Stat. 1267; Pub. L. 94-267, Sec.
1(c)(3), Apr. 15, 1976, 90 Stat. 367; Pub. L. 94-455, title XV,
Sec. 1502(a)(2), title XIX, Secs. 1901(a)(59), 1906(b)(13)(A), Oct.
4, 1976, 90 Stat. 1737, 1774, 1834; Pub. L. 95-600, title I, Secs.
133(a), (b), 141(f)(9), 152(f), Nov. 6, 1978, 92 Stat. 2783, 2795,
2799; Pub. L. 96-222, title I, Sec. 101(a)(10)(E), (J)(ii), Apr. 1,
1980, 94 Stat. 202, 204; Pub. L. 96-364, title II, Sec. 205, Sept.
26, 1980, 94 Stat. 1287; Pub. L. 97-34, title III, Secs. 312(a),
331(b), 333(a), Aug. 13, 1981, 95 Stat. 283, 293, 296; Pub. L.
97-248, title II, Secs. 235(f), 237(e)(2), 238(a), 253(b), Sept. 3,
1982, 96 Stat. 507, 512, 533; Pub. L. 98-369, div. A, title IV,
Sec. 474(r)(14), title V, Secs. 512(a), 542(a), title VII, Sec.
713(b)(3), (d)(4)(A), (5), (6), (9), July 18, 1984, 98 Stat. 842,
862, 890, 957, 958; Pub. L. 99-272, title XI, Sec. 11011(c)(1),
(2), Apr. 7, 1986, 100 Stat. 257, 258; Pub. L. 99-514, title XI,
Secs. 1106(d)(2), 1108(c), 1112(d)(2), 1131(a), (b), 1136(b),
1171(b)(6), 1173(a), title XVIII, Secs. 1848(c),
1851(b)(2)(A)-(C)(ii), 1854(b)(2)-(5), 1875(c)(7), Oct. 22, 1986,
100 Stat. 2424, 2433, 2445, 2476, 2477, 2486, 2513, 2515, 2857,
2863, 2878, 2895; Pub. L. 100-203, title IX, Sec. 9307(c), (d),
title X, Sec. 10201(b)(2), (3), Dec. 22, 1987, 101 Stat. 1330-357,
1330-387; Pub. L. 100-647, title I, Secs. 1011(d)(1), (4), (f)(6),
1011A(e)(4), 1011B(h)(3), (6), 1018(t)(4)(A), (5), title II, Sec.
2005(b), Nov. 10, 1988, 102 Stat. 3459, 3463, 3478, 3491, 3492,
3588, 3589, 3610; Pub. L. 101-239, title VII, Secs. 7302(a),
7841(b)(1), Dec. 19, 1989, 103 Stat. 2351, 2428; Pub. L. 101-508,
title XI, Sec. 11812(b)(7), Nov. 5, 1990, 104 Stat. 1388-535; Pub.
L. 102-318, title V, Sec. 522(a)(2), July 3, 1992, 106 Stat. 314;
Pub. L. 103-66, title XIII, Sec. 13212(c)(1), Aug. 10, 1993, 107
Stat. 472; Pub. L. 103-465, title VII, Sec. 751(a)(11), Dec. 8,
1994, 108 Stat. 5022; Pub. L. 104-188, title I, Secs. 1316(d)(1),
(2), 1421(b)(2), 1431(b)(3), 1461(b), 1704(q)(1), (t)(76), Aug. 20,
1996, 110 Stat. 1786, 1795, 1803, 1823, 1887, 1891; Pub. L. 105-34,
title XV, Sec. 1530(c)(2), title XVI, Sec. 1601(d)(2)(C), Aug. 5,
1997, 111 Stat. 1078, 1088; Pub. L. 105-206, title VI, Sec.
6015(d), title VII, Sec. 7001(a), July 22, 1998, 112 Stat. 821,
827; Pub. L. 107-16, title VI, Secs. 611(c)(1), 614(a),
616(a)-(b)(2)(A), 632(a)(3)(B), 652(a), 662(a), (b), June 7, 2001,
115 Stat. 97, 102, 103, 114, 129, 142; Pub. L. 107-147, title IV,
Sec. 411(l)(1), (2), (4), (s), (w), Mar. 9, 2002, 116 Stat. 47, 51,
52.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The Social Security Act, referred to in subsec. (a)(1)(C), is act
Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended. Title II of the
Social Security Act is classified generally to subchapter II (Sec.
401 et seq.) of Title 42, The Public Health and Welfare. For
complete classification of this Act to the Code, see section 1305
of Title 42 and Tables.
Section 401(a)(17), referred to in subsec. (a)(2), was repealed
by Pub. L. 97-248, title II, Sec. 237(b), Sept. 3, 1982, 96 Stat.
511. A new section 401(a)(17) was added by Pub. L. 99-514, title
XI, Sec. 1106(d)(1), Oct. 22, 1986, 100 Stat. 2423.
The date of the enactment of the Tax Reform Act of 1986, referred
to in subsec. (a)(3)(A)(v)(II), is the date of enactment of Pub. L.
99-514, which was approved Oct. 22, 1986.
The Employee Retirement Income Security Act of 1974, referred to
in subsecs. (a)(1)(D)(iv), (g)(1), (3)(B), (C), (4), is Pub. L.
93-406, Sept. 2, 1974, 88 Stat. 829, as amended, which is
classified principally to chapter 18 (Sec. 1001 et seq.) of Title
29, Labor. Part 1 of subtitle E of title IV of the Employee
Retirement Income Security Act of 1974 is classified generally to
part 1 (Sec. 1381 et seq.) of subtitle E of subchapter III of
chapter 18 of Title 29. Sections 4022, 4041, 4062, 4063, and 4064
of the Employee Retirement Income Security Act of 1974 are
classified to sections 1322, 1341, 1362, 1363, and 1364,
respectively, of Title 29. For complete classification of this Act
to the Code, see Short Title note set out under section 1001 of
Title 29 and Tables.
The date of the enactment of the Retirement Protection Act of
1994, referred to in subsec. (g)(4), is the date of enactment of
subtitle F (Secs. 750-781) of title VII of Pub. L. 103-465, which
was approved Dec. 8, 1994.
-MISC1-
AMENDMENTS
2002 - Subsec. (a)(1)(D)(iv). Pub. L. 107-147, Sec. 411(s),
substituted "Special rule for terminating plans" for "Plans
maintained by professional service employers" in heading.
Subsec. (a)(7)(C). Pub. L. 107-147, Sec. 411(l)(4), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "This paragraph shall not have the
effect of reducing the amount otherwise deductible under paragraphs
(1), (2), and (3), if no employee is a beneficiary under more than
1 trust or under a trust and an annuity plan."
Subsec. (a)(12). Pub. L. 107-147, Sec. 411(l)(1), substituted
"(9) and subsection (h)(1)(C)," for "(9),".
Subsec. (k)(1). Pub. L. 107-147, Sec. 411(w)(1)(A), struck out
"during the taxable year" after "such corporation".
Subsec. (k)(2)(B). Pub. L. 107-147, Sec. 411(w)(1)(B),
substituted "(A)(iv)" for "(A)(iii)".
Subsec. (k)(4)(B), (C). Pub. L. 107-147, Sec. 411(w)(1)(C), (D),
substituted "clause (iv)" for "clause (iii)" in subpar. (B), added
a new subpar. (B), and redesignated former subpar. (B) as (C).
Subsec. (k)(7). Pub. L. 107-147, Sec. 411(w)(2), added par. (7).
Subsec. (n). Pub. L. 107-147, Sec. 411(l)(2), substituted
"subsection (a) or paragraph (1)(C) of subsection (h)" for
"subsection (a),".
2001 - Subsec. (a)(1)(A). Pub. L. 107-16, Secs. 616(a)(2)(B)(i),
901, temporarily inserted "(other than a trust to which paragraph
(3) applies)" after "pension trust" in introductory provisions. See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a)(1)(D). Pub. L. 107-16, Secs. 652(a), 901, temporarily
reenacted heading without change and amended text generally. Prior
to amendment, text read as follows: "In the case of any defined
benefit plan (other than a multiemployer plan) which has more than
100 participants for the plan year, except as provided in
regulations, the maximum amount deductible under the limitations of
this paragraph shall not be less than the unfunded current
liability determined under section 412(l). For purposes of
determining whether a plan has more than 100 participants, all
defined benefit plans maintained by the same employer (or any
member of such employer's controlled group (within the meaning of
section 412(l)(8)(C))) shall be treated as 1 plan, but only
employees of such member or employer shall be taken into account."
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a)(3)(A)(i)(I). Pub. L. 107-16, Secs. 616(a)(1)(A), 901,
temporarily substituted "25 percent" for "15 percent". See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a)(3)(A)(v). Pub. L. 107-16, Secs. 616(a)(2)(A), 901,
temporarily amended cl. (v) generally, substituting present
provisions for provisions which directed that the limitation of cl.
(i) for any taxable year would be increased by the unused pre-87
limitation carryforwards and defined "unused pre-87 limitation
carryforwards". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (a)(3)(B). Pub. L. 107-16, Secs. 616(b)(2)(A), 901,
temporarily struck out at end "The term 'compensation otherwise
paid or accrued during the taxable year to all employees' shall
include any amount with respect to which an election under section
415(c)(3)(C) is in effect, but only to the extent that any
contribution with respect to such amount is nonforfeitable." See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a)(10)(B). Pub. L. 107-16, Secs. 632(a)(3)(B), 901,
temporarily struck out ", the exclusion allowance under section
403(b)(2)," after "deferrals under section 402(g)". See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (a)(12). Pub. L. 107-16, Secs. 616(b)(1), 901,
temporarily added par. (12). See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (h)(1)(C). Pub. L. 107-16, Secs. 616(a)(1)(B), 901,
temporarily substituted "25 percent" for "15 percent" in two
places. See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (h)(2). Pub. L. 107-16, Secs. 616(a)(2)(B)(ii), (iii),
901, temporarily substituted "certain trusts" for "stock bonus and
profit-sharing trust" in heading and "trust subject to subsection
(a)(3)(A)" for "stock bonus or profit-sharing trust" in text. See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (k)(2)(A)(iii), (iv). Pub. L. 107-16, Secs. 662(a), 901,
temporarily added cl. (iii) and redesignated former cl. (iii) as
(iv). See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (k)(5)(A). Pub. L. 107-16, Secs. 662(b), 901, temporarily
inserted "avoidance or" before "evasion". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (l). Pub. L. 107-16, Secs. 611(c)(1), 901, temporarily
substituted "$200,000" for "$150,000" in two places. See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (n). Pub. L. 107-16, Secs. 614(a), 901, temporarily added
subsec. (n). See Effective and Termination Dates of 2001 Amendment
note below.
1998 - Subsec. (a)(9)(C), (D). Pub. L. 105-206, Sec. 6015(d),
redesignated subpar. (C), relating to qualified gratuitous
transfers, as (D) and inserted heading.
Subsec. (a)(11). Pub. L. 105-206, Sec. 7001(a), added par. (11).
1997 - Subsec. (a)(3)(A)(i). Pub. L. 105-34, Sec.
1601(d)(2)(C)(i), substituted "not in excess of the greater of - "
and subcls. (I) and (II) for "not in excess of 15 percent of the
compensation otherwise paid or accrued during the taxable year to
the beneficiaries under the stock bonus or profit-sharing plan."
Subsec. (a)(3)(A)(ii). Pub. L. 105-34, Sec. 1601(d)(2)(C)(ii),
substituted "the amount described in subclause (I) or (II) of
clause (i), whichever is greater, with respect to such taxable
year." for "15 percent of the compensation otherwise paid or
accrued during such taxable year to the beneficiaries under the
plan."
Subsec. (a)(9)(C). Pub. L. 105-34, Sec. 1530(c)(2), added subpar.
(C) relating to qualified gratuitous transfers.
1996 - Subsec. (a)(2). Pub. L. 104-188, Sec. 1704(t)(76), struck
out "(18)," after "(17),".
Subsec. (a)(9)(C). Pub. L. 104-188, Sec. 1316(d)(1), added
subpar. (C) relating to S corporations.
Subsec. (a)(10). Pub. L. 104-188, Sec. 1461(b), added par. (10).
Subsec. (j)(1). Pub. L. 104-188, Sec. 1704(q)(1), substituted
"(9)" for "(10)" in introductory provisions.
Subsec. (k)(1). Pub. L. 104-188, Sec. 1316(d)(2), substituted "a
C corporation" for "a corporation".
Subsec. (l). Pub. L. 104-188, Sec. 1431(b)(3), struck out at end
"In determining the compensation of an employee, the rules of
section 414(q)(6) shall apply, except that in applying such rules,
the term 'family' shall include only the spouse of the employee and
any lineal descendants of the employee who have not attained age 19
before the close of the year."
Subsec. (m). Pub. L. 104-188, Sec. 1421(b)(2), added subsec. (m).
1994 - Subsec. (g)(4). Pub. L. 103-465 substituted "the
Retirement Protection Act of 1994" for "the Single-Employer Pension
Plan Amendments Act of 1986".
1993 - Subsec. (l). Pub. L. 103-66 substituted "$150,000" for
"$200,000" in first sentence and "The Secretary shall adjust the
$150,000 amount at the same time, and by the same amount, as any
adjustment under section 401(a)(17)(B)." for "The Secretary shall
adjust the $200,000 amount at the same time and in the same manner
as under section 415(d)."
1992 - Subsec. (a)(2). Pub. L. 102-318 substituted "(27), and
(31)" for "and (27)".
1990 - Subsec. (a)(1)(C). Pub. L. 101-508 substituted "section
168(i)(10)(C)" for "section 167(l)(3)(A)(iii)".
1989 - Subsec. (g)(1). Pub. L. 101-239, Sec. 7841(b)(1), inserted
"4041(b)," after "under section".
Subsec. (k). Pub. L. 101-239, Sec. 7302(a), amended subsec. (k)
generally, substituting "Deduction for dividends paid on certain
employer securities" for "Dividends paid deductions" in heading and
pars. (1) to (6) for former pars. (1) and (2) and concluding
provisions.
1988 - Subsec. (a)(1)(D). Pub. L. 100-647, Sec. 2005(b)(3),
struck out "(without regard to any reduction by the credit balance
in the funding standard account)" after "under section 412(l)".
Pub. L. 100-647, Sec. 2005(b)(1), substituted "For purposes of
determining whether a plan has more than 100 participants" for "For
purposes of this subparagraph".
Subsec. (a)(7)(A). Pub. L. 100-647, Sec. 2005(b)(2), inserted at
end "For purposes of clause (ii), if paragraph (1)(D) applies to a
defined benefit plan for any plan year, the amount necessary to
satisfy the minimum funding standard provided by section 412 with
respect to such plan for such plan year shall not be less than the
unfunded current liability of such plan under section 412(l)."
Pub. L. 100-647, Sec. 1011A(e)(4)(A), in introductory provisions,
substituted "foregoing paragraphs" for "foregoing provisions" and
inserted "or in connection with trusts or plans described in 2 or
more of such paragraphs" after "defined benefit plans".
Subsec. (a)(8)(D). Pub. L. 100-647, Sec. 1018(t)(5), made
technical correction to Pub. L. 99-514, Sec. 1875(c)(7)(B), see
1986 Amendment note below.
Subsec. (h)(1)(C). Pub. L. 100-647, Sec. 1011(f)(6), inserted
"(or during the taxable year in the case of a taxable year
described in subparagraph (A)(ii))" after "within the taxable
year".
Subsec. (h)(3). Pub. L. 100-647, Sec. 1011A(e)(4)(B), substituted
"Coordination with subsection (a)(7)" for "Effect on limit on
deductions" in heading and amended text generally. Prior to
amendment, text read as follows: "For any taxable year for which
the employer has a deduction under paragraph (1), the otherwise
applicable 25 percent limitations in subsection (a)(7) shall be
reduced by the amount of the allowable deductions under paragraph
(1) with respect to participants in the stock bonus or
profit-sharing trust."
Subsec. (k). Pub. L. 100-647, Sec. 1011B(h)(3)(A), inserted
"(whether or not allocated to participants)" after "to employer
securities" in par. (2)(C).
Pub. L. 100-647, Sec. 1011B(h)(6), substituted "or as engaging in
a prohibited transaction for purposes of section 4975(d)(3) merely
by reason of any distribution or payment" for "merely by reason of
any distribution" in third sentence.
Pub. L. 100-647, Sec. 1018(t)(4)(A), substituted "evasion of
taxation" for "avoidance of taxation" in fourth sentence.
Pub. L. 100-647, Sec. 1011B(h)(3)(B), inserted at end "Paragraph
(2)(C) shall not apply to dividends from employer securities which
are allocated to any participant unless the plan provides that
employer securities with a fair market value not less than the
amount of such dividends are allocated to such participant for the
year which (but for paragraph (2)(C)) such dividends would have
been allocated to such participant."
Subsec. (l). Pub. L. 100-647, Sec. 1011(d)(4), inserted at end
"In determining the compensation of an employee, the rules of
section 414(q)(6) shall apply, except that in applying such rules,
the term 'family' shall include only the spouse of the employee and
any lineal descendants of the employee who have not attained age 19
before the close of the year."
Pub. L. 100-647, Sec. 1011(d)(1), inserted at end "For purposes
of clause (i), (ii), or (iii) of subsection (a)(1)(A), and in
computing the full funding limitation, any adjustment under the
preceding sentence shall not be taken into account for any year
before the year for which such adjustment first takes effect."
1987 - Subsec. (a)(1)(A)(iii). Pub. L. 100-203, Sec. 9307(d),
inserted "the unfunded costs attributable to" after "to amortize".
Subsec. (a)(1)(D), (E). Pub. L. 100-203, Sec. 9307(c), added
subpar. (D) and redesignated former subpar. (D) as (E).
Subsec. (a)(5). Pub. L. 100-203, Sec. 10201(b)(3), inserted at
end "For purposes of this section, any vacation pay which is
treated as deferred compensation shall be deductible for the
taxable year of the employer in which paid to the employee."
Subsec. (b)(2)(B). Pub. L. 100-203, Sec. 10201(b)(2), substituted
"Exception" for "Exception for certain benefits" in heading and
amended text generally. Prior to amendment, text read as follows:
"Subparagraph (A) shall not apply to -
"(i) any benefit provided through a welfare benefit fund (as
defined in section 419(e)), or
"(ii) any benefit with respect to which an election under
section 463 applies."
1986 - Subsec. (a). Pub. L. 99-514, Sec. 1851(b)(2)(C)(i),
substituted "this chapter; but, if they would otherwise be
deductible" for "section 162 (relating to trade or business
expenses) or section 212 (relating to expenses for the production
of income); but, if they satisfy the conditions of either of such
sections".
Subsec. (a)(2). Pub. L. 99-514, Sec. 1136(b), substituted "(26),
and (27)" for "and (26)".
Pub. L. 99-514, Sec. 1112(d)(2), substituted "(22), and (26)" for
"and (22)".
Subsec. (a)(3)(A). Pub. L. 99-514, Sec. 1131(a), amended subpar.
(A) generally, revising and restating as cls. (i) to (v) provisions
formerly contained in single paragraph.
Subsec. (a)(7). Pub. L. 99-514, Sec. 1131(b), amended par. (7)
generally, revising and restating as subpars. (A) to (C) provisions
formerly contained in single paragraph, and adding subpar. (D).
Subsec. (a)(8)(C). Pub. L. 99-514, Sec. 1875(c)(7)(A), inserted
"(determined without regard to the deductions allowed by this
section)".
Subsec. (a)(8)(D). Pub. L. 99-514, Sec. 1875(c)(7)(B), as amended
by Pub. L. 100-647, Sec. 1018(t)(5), struck out "(determined
without regard to the deductions allowed by this section)" after
"earned income of such individual".
Pub. L. 99-514, Sec. 1848(c), substituted "the deduction allowed
by this section" for "the deductions allowed by this section and
section 405(c)".
Subsec. (b). Pub. L. 99-514, Sec. 1851(b)(2)(B)(i), substituted
"certain" for "unfunded" in heading.
Subsec. (b)(2). Pub. L. 99-514, Sec. 1851(b)(2)(A), (B)(ii),
substituted "certain" for "unfunded" in heading, and in subpar.
(B)(ii), substituted "any benefit" for "to any benefit".
Subsec. (d). Pub. L. 99-514, Sec. 1851(b)(2)(C)(ii), substituted
"under this chapter" for "under section 162 or 212" in pars. (1)
and (2).
Subsec. (g)(3). Pub. L. 99-272, Sec. 11011(c)(1), amended par.
(3) generally. Prior to the amendment, par. (3), coordination with
subsection (a), read as follows: "Any payment described in
paragraph (1) shall (subject to the last sentence of subsection
(a)(1)(A)) be deductible under this section when paid."
Subsec. (g)(4). Pub. L. 99-272, Sec. 11011(c)(2), added par. (4).
Subsec. (h)(1)(A), (B). Pub. L. 99-514, Sec. 1108(c), amended
subpars. (A) and (B) generally. Prior to amendment, subpars. (A)
and (B) read as follows:
"(A) Contributions made for a calendar year are deductible for
the taxable year with which or within which the calendar year ends.
"(B) Contributions made within 3 1/2 months after the close of a
calendar year are treated as if they were made on the last day of
such calendar year if they are made on account of such calendar
year."
Subsec. (i). Pub. L. 99-514, Sec. 1171(b)(6), struck out subsec.
(i) relating to the deductibility of unused portions of employee
stock ownership credit.
Subsec. (k). Pub. L. 99-514, Sec. 1854(b)(2)(B), struck out
"during the taxable year" after "cash by such corporation" in
introductory provisions.
Pub. L. 99-514, Sec. 1854(b)(4), inserted "The Secretary may
disallow the deduction under this subsection for any dividend if
the Secretary determines that such dividend constitutes, in
substance, an avoidance of taxation."
Pub. L. 99-514, Sec. 1854(b)(3), inserted "A plan to which this
subsection applies shall not be treated as violating the
requirements of section 401, 409, or 4975(e)(7) merely by reason of
any distribution described in paragraph (2)."
Pub. L. 99-514, Sec. 1854(b)(2)(A), inserted "Any deduction under
subparagraph (A) or (B) of paragraph (2) shall be allowed in the
taxable year of the corporation in which the dividend is paid or
distributed to the participant under paragraph (2)."
Pub. L. 99-514, Sec. 1173(a)(2), inserted "Any deduction under
paragraph (2)(C) shall be allowable in the taxable year of the
corporation in which the dividend is used to repay the loan
described in such paragraph."
Subsec. (k)(2)(A), (B). Pub. L. 99-514, Sec. 1854(b)(5), inserted
"or their beneficiaries".
Subsec. (k)(2)(C). Pub. L. 99-514, Sec. 1173(a)(1), added subpar.
(C).
Subsec. (l). Pub. L. 99-514, Sec. 1106(d)(2), added subsec. (l).
1984 - Subsec. (a)(8)(D). Pub. L. 98-369, Sec. 713(d)(6),
inserted "(determined without regard to the deductions allowed by
this section and section 405(c))".
Subsec. (a)(9), (10). Pub. L. 98-369, Sec. 713(d)(4)(A), struck
out par. (9) relating to plans benefiting self-employed individuals
and redesignated par. (10) as (9).
Subsec. (b). Pub. L. 98-369, Sec. 512(a), amended subsec. (b)
generally, inserting heading, redesignating former heading as par.
(1) heading, designating existing provisions as par. (1), and in
par. (1) as so designated, inserted "(including a plan described in
paragraph (2))" after "compensation" and adding par. (2).
Subsec. (e). Pub. L. 98-369, Sec. 713(d)(9), substituted "under
paragraph (1), (2), or (3) of subsection (a)" for "under this
section".
Subsec. (f). Pub. L. 98-369, Sec. 713(b)(3), repealed subsec. (f)
which related to certain loan repayments considered as
contributions.
Subsec. (h)(4). Pub. L. 98-369, Sec. 713(d)(5), repealed par. (4)
which related to effect on self-employed individuals or
shareholder-employees.
Subsec. (i). Pub. L. 98-369, Sec. 474(r)(14), in par. (1),
substituted "If any portion of the employee stock ownership credit
determined under section 41 for any taxable year has not, after the
application of section 38(c), been allowed under section 38 for any
taxable year, such portion shall be allowed as a deduction (without
regard to any limitations provided under this section) for the last
taxable year to which such portion could have been allowed as a
credit under section 39" for "There shall be allowed as a deduction
(without regard to any limitations provided under this section) for
the last taxable year to which an unused employee stock ownership
credit carryover (within the meaning of section 44G(b)(2)(A)) may
be carried, an amount equal to the portion of such unused credit
carryover which expires at the close of such taxable year", and in
par. (2), substituted references to section 41 and 41(c)(3) for
references to section 44G and 44G(c)(3), respectively.
Subsec. (k). Pub. L. 98-369, Sec. 542(a), added subsec. (k).
1982 - Subsec. (a)(2). Pub. L. 97-248, Sec. 237(e)(2),
substituted "(8), (9)" for "(8)", and "401(a)(10) and of section
401(d)" for "401(a)(9), (10), (17), and (18) and of section 401(d)
(other than paragraph (1))".
Subsec. (a)(3)(B). Pub. L. 97-248, Sec. 253(b), inserted
provision that "compensation otherwise paid or accrued during the
taxable year to all employees" shall include any amount with
respect to which an election under section 415(c)(3)(C) is in
effect, but only to the extent that any contribution with respect
to such amount is nonforfeitable.
Subsec. (e). Pub. L. 97-248, Sec. 238(a), amended subsec. (e)
generally, substituting provisions relating to contributions
allocable to life insurance protection for self-employed
individuals, for provisions relating to general requirements,
contributions made under more than one plan, contributions
allocable to insurance protection, and limitations of not lower
than $750 or 100 percent of earned income with respect to special
limitations for self-employed individuals.
Subsec. (j). Pub. L. 97-248, Sec. 235(f), added subsec. (j).
1981 - Subsec. (a)(10). Pub. L. 97-34, Sec. 333(a), added par.
(10).
Subsec. (e). Pub. L. 97-34, Sec. 312(a), substituted in pars. (1)
and (2)(A) "$15,000" for "$7,500".
Subsec. (i). Pub. L. 97-34, Sec. 331(b), added subsec. (i).
1980 - Subsec. (g). Pub. L. 96-364 redesignated existing
provisions as par. (1), inserted applicability to part 1 of
subtitle E of title IV of Employee Retirement Income Security Act
of 1974, and added pars. (2) and (3).
Subsec. (h). Pub. L. 96-222 inserted "or shareholder employees"
after "individuals" in heading, and in par. (4) "or described in
section 1379(b)(1)" after "of subsection (e)" and "or a
shareholder-employee (as defined in section 1379(d))" after
"section 401(c)(1)" and substituted in pars. (2) to (4) "paragraph
(1)" for "subparagraph (1)".
1978 - Subsec. (a)(2). Pub. L. 95-600, Sec. 141(f)(9),
substituted "(20), and (22)" for "and (20)".
Subsec. (b). Pub. L. 95-600, Sec. 133(b), substituted "other
plan" for "similar plan".
Subsec. (d). Pub. L. 95-600, Sec. 133(a), added subsec. (d).
Subsec. (h). Pub. L. 95-600, Sec. 152(f), added subsec. (h).
1976 - Subsecs. (a)(1)(B), (8)(C). Pub. L. 94-455, Sec.
1906(b)(13)(A), struck out "or his delegate" after "Secretary".
Subsec. (a)(2). Pub. L. 94-267 substituted "(19), and (20)" for
"and (19)".
Subsec. (d). Pub. L. 94-455, Sec. 1901(a)(59), struck out subsec.
(d) which related to the taxability of the beneficiary under
certain forfeitable contracts purchased by exempt organizations.
Subsecs. (e)(2)(B), (3). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (e)(4). Pub. L. 94-455, Sec. 1502(a)(2), inserted
provisions following subpar. (B).
1974 - Subsec. (a)(1). Pub. L. 93-406, Sec. 1013(c)(1), expanded
subpars. (A), (B), and (C) to accommodate the increased minimum
funding standards required by section 412.
Subsec. (a)(2). Pub. L. 93-406, Secs. 1016(a)(3), 2001(g)(2)(E),
2004(c)(1), inserted references to the requirements of section
401(a)(11), (12), (13), (14), (15), (16), (17), (18), and (19),
and, if applicable, the requirements of section 401(a)(17) and
(18).
Subsec. (a)(3)(A). Pub. L. 93-406, Sec. 2004(b), inserted ", but
the amount so deductible under this sentence in any one succeeding
taxable year together with the amount so deductible under the first
sentence of this subparagraph shall not exceed 25 percent of the
compensation otherwise paid or accrued during such taxable year to
the beneficiaries under the plan" after "If in any taxable year
there is paid into the trust, or a similar trust then in effect,
amounts less than the amounts deductible under the preceding
sentence, the excess, or if no amount is paid, the amounts
deductible, shall be carried forward and be deductible when paid in
the succeeding taxable years in order of time, but the amount so
deductible under this sentence in any such succeeding taxable year
shall not exceed 15 percent of the compensation otherwise paid or
accrued during such succeeding taxable year to the beneficiaries
under the plan".
Subsec. (a)(6). Pub. L. 93-406, Sec. 1013(c)(2), substituted
provisions covering only taxpayers operating on the accrual basis
for provisions covering the time when contributions shall be deemed
made.
Subsec. (a)(7). Pub. L. 93-406, Sec. 1013(c)(3), inserted
reference to the amount of contributions made to or under the
trusts or plans to the extent such contributions do not exceed the
amount of employer contributions necessary to satisfy the minimum
funding standards provided by section 412 for the plan year which
ends with or within such taxable year (or for any prior plan year)
and substituted "25 percent" for "30 percent" in provision covering
amounts paid into trusts or under an annuity plan in any taxable
year in excess of the amount allowable with respect to such year.
Subsec. (a)(9)(B)(ii). Pub. L. 93-406, Sec. 2001(g)(2)(F),
substituted "the second sentence of paragraph (3)" for "paragraph
(1)(D), the second and third sentences of paragraph (3), and the
second sentence of paragraph (7)".
Subsec. (c). Pub. L. 93-406, Sec. 2008(a), (b), substituted "or
pensions" for "and pensions" in par. (1), substituted "The first
and third sentences of this subsection" for "This subsection" in
provisions covering amounts contributed to a trust on or after any
date on which such trust is qualified for exemption from tax under
section 501(a), inserted provisions setting out specified treatment
to be accorded individuals who before July 1, 1974, were
participants in plans described in the subsections, and inserted
provision that section 277 (relating to deductions incurred by
certain membership organizations in transactions with members) does
not apply to any trust described in the subsection.
Subsec. (e)(1). Pub. L. 93-406, Sec. 2001(a)(1), substituted
"subject to paragraphs (2) and (4), not exceed $7,500, or 15
percent" for "subject to the provisions of paragraph (2), not
exceed $2,500, or 10 percent".
Subsec. (e)(2)(A). Pub. L. 93-406, Sec. 2001(a)(2), substituted
"shall (subject to paragraph (4)) not exceed $7,500, or 15 percent"
for "shall not exceed $2,500 or 10 percent".
Subsec. (e)(4). Pub. L. 93-406, Sec. 2001(a)(3), added par. (4).
Subsec. (g). Pub. L. 93-406, Sec. 4081(a), added subsec. (g).
1969 - Subsec. (a)(5). Pub. L. 91-172 substituted "If the plan is
not one included in paragraph (1), (2), or (3), in the taxable year
in which an amount attributable to the contribution is includible
in the gross income of employees participating in the plan, but, in
the case of a plan in which more than one employee participates
only if separate accounts are maintained for each employee" for "In
the taxable year when paid, if the plan is not one included in
paragraph (1), (2), or (3), if the employees' rights to or derived
from such employer's contribution or such compensation are
nonforfeitable at the time the contribution or compensation is
paid".
1966 - Subsec. (a). Pub. L. 89-809, Sec. 204(a), repealed par.
(10) which provided for a special limitation on the amount allowed
as a deduction for self-employed individuals.
Subsec. (e). Pub. L. 89-809, Sec. 204(b)(2), (3), struck out
references to par. (10) of subsec. (a) wherever appearing.
1962 - Subsec. (a)(2). Pub. L. 87-863 inserted ", or retirement
annuities and medical benefits as described in section 401(h),"
after "purchase of retirement annuities", and ", or such retirement
annuities and medical benefits" after "such retirement annuities."
Pub. L. 87-792, Sec. 3(a)(1), substituted "(5), (6), (7), and
(8), and, if applicable, the requirements of section 401(a)(9) and
(10) and of section 401(d) (other than paragraph (1))," for "(5),
and (6),".
Subsecs. (a)(8) to (10). Pub. L. 87-792, Sec. 3(a)(2), added
pars. (8) to (10).
Subsecs. (e), (f). Pub. L. 87-792, Sec. 3(b), added subsecs. (e)
and (f).
1958 - Subsec. (a). Pub. L. 85-866 substituted "income); but, if"
for "income) but if" preceding par. (1).
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by section 611(c)(1) of Pub. L. 107-16 applicable to
years beginning after Dec. 31, 2001, see section 611(i)(1) of Pub.
L. 107-16, set out as a note under section 415 of this title.
Pub. L. 107-16, title VI, Sec. 614(b), June 7, 2001, 115 Stat.
102, provided that: "The amendment made by this section [amending
this section] shall apply to years beginning after December 31,
2001."
Pub. L. 107-16, title VI, Sec. 616(c), June 7, 2001, 115 Stat.
103, provided that: "The amendments made by this section [amending
this section and section 4972 of this title] shall apply to years
beginning after December 31, 2001."
Amendment by section 632(a)(3)(B) of Pub. L. 107-16 applicable to
years beginning after Dec. 31, 2001, see section 632(a)(4) of Pub.
L. 107-16, set out as a note under section 72 of this title.
Pub. L. 107-16, title VI, Sec. 652(c), June 7, 2001, 115 Stat.
130, provided that: "The amendments made by this section [amending
this section and section 4972 of this title] shall apply to plan
years beginning after December 31, 2001."
Pub. L. 107-16, title VI, Sec. 662(c), June 7, 2001, 115 Stat.
142, provided that: "The amendments made by this section [amending
this section] shall apply to taxable years beginning after December
31, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by section 6015(d) of Pub. L. 105-206 effective, except
as otherwise provided, as if included in the provisions of the
Taxpayer Relief Act of 1997, Pub. L. 105-34, to which such
amendment relates, see section 6024 of Pub. L. 105-206, set out as
a note under section 1 of this title.
Pub. L. 105-206, title VII, Sec. 7001(b), July 22, 1998, 112
Stat. 827, provided that:
"(1) In general. - The amendment made by subsection (a) [amending
this section] shall apply to taxable years ending after the date of
the enactment of this Act [July 22, 1998].
"(2) Change in method of accounting. - In the case of any
taxpayer required by the amendment made by subsection (a) [amending
this section] to change its method of accounting for its first
taxable year ending after the date of the enactment of this Act
[July 22, 1998] -
"(A) such change shall be treated as initiated by the taxpayer,
"(B) such change shall be treated as made with the consent of
the Secretary of the Treasury; and
"(C) the net amount of the adjustments required to be taken
into account by the taxpayer under section 481 of the Internal
Revenue Code of 1986 shall be taken into account ratably over the
3-taxable year period beginning with such first taxable year."
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 1530(c)(2) of Pub. L. 105-34 applicable to
transfers made by trusts to, or for the use of, an employee stock
ownership plan after Aug. 5, 1997, see section 1530(d) of Pub. L.
105-34, set out as a note under section 401 of this title.
Amendment by section 1601(d)(2)(C) of Pub. L. 105-34 effective as
if included in the provisions of the Small Business Job Protection
Act of 1996, Pub. L. 104-188, to which it relates, see section
1601(j) of Pub. L. 105-34, set out as a note under section 23 of
this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1316(d)(1), (2) of Pub. L. 104-188
applicable to taxable years beginning after Dec. 31, 1997, see
section 1316(f) of Pub. L. 104-188, set out as a note under section
170 of this title.
Amendment by section 1421(b)(2) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1996, see section 1421(e) of
Pub. L. 104-188, set out as a note under section 72 of this title.
Amendment by section 1431(b)(3) of Pub. L. 104-188 applicable to
years beginning after Dec. 31, 1996, see section 1431(d)(2) of Pub.
L. 104-188, set out as a note under section 414 of this title.
Section 1461(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section and section 1414 of
this title] shall apply to years beginning after December 31,
1996."
Section 1704(q)(2) of Pub. L. 104-188 provided that: "The
amendment made by paragraph (1) [amending this section] shall take
effect as if included in the amendments made by section
713(d)(4)(A) of the Deficit Reduction Act of 1984 [Pub. L.
98-369]."
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable, except as otherwise
provided, to benefits accruing in plan years beginning after Dec.
31, 1993, see section 13212(d) of Pub. L. 103-66, set out as a note
under section 401 of this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-318 applicable, except as otherwise
provided, to distributions after Dec. 31, 1992, see section 522(d)
of Pub. L. 102-318, set out as a note under section 401 of this
title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to property placed in
service after Nov. 5, 1990, but not applicable to any property to
which section 168 of this title does not apply by reason of subsec.
(f)(5) of section 168, and not applicable to rehabilitation
expenditures described in section 252(f)(5) of Pub. L. 99-514, see
section 11812(c) of Pub. L. 101-508, set out as a note under
section 42 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7302(b) of Pub. L. 101-239 provided that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to employer securities acquired after
August 4, 1989.
"(2) Securities acquired with certain loans. - The amendment made
by this section shall not apply to employer securities acquired
after August 4, 1989, which are acquired -
"(A) with the proceeds of any loan which was made pursuant to a
binding written commitment in effect on August 4, 1989, and at
all times thereafter before such loan is made, and
"(B) pursuant to a written binding contract (or tender offer
registered with the Securities and Exchange Commission) in effect
on August 4, 1989, and at all times thereafter before such
securities are acquired."
Section 7841(b)(2) of Pub. L. 101-239 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to payments made after January 1, 1986, in taxable years ending
after such date."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1011(d)(1), (4), (f)(6), 1011A(e)(4),
1011B(h)(3), (6), and 1018(t)(4)(A), (5) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 2005(e) of Pub. L. 100-647, as amended by Pub. L.
101-239, title VII, Sec. 7812(d), Dec. 19, 1989, 103 Stat. 2412,
provided that: "The amendments made by this section [amending this
section and sections 412, 414, and 4972 of this title and section
1082 of Title 29, Labor] shall take effect as if included in the
amendments made by the provisions of the Omnibus Budget
Reconciliation Act of 1987 [Pub. L. 100-203] to which it relates,
except that the amendment made by subsection (a)(1) [amending
section 4972 of this title] shall take effect as if included in the
amendment made by section 1131(c) of the Tax Reform Act of 1986
[Pub. L. 99-514]."
EFFECTIVE DATE OF 1987 AMENDMENT
Section 9307(f) of Pub. L. 100-203, as amended by Pub. L.
101-239, title VII, Sec. 7881(d)(3), Dec. 19, 1989, 103 Stat. 2439,
provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and section
412 of this title and section 1082 of Title 29, Labor] shall apply
to years beginning after December 31, 1987.
"(2) Amortization of gains and losses. - Sections
412(b)(2)(B)(iv) and 412(b)(3)(B)(ii) of the Internal Revenue Code
of 1986 and sections 302(b)(2)(B)(iv) and 302(b)(3)(B)(ii) of the
Employee Retirement Income Security Act of 1974 [29 U.S.C.
1082(b)(2)(B)(iv), (3)(B)(ii)] (as amended by paragraphs (1)(A) and
(2)(A) of subsection (a)) shall apply to gains and losses
established in years beginning after December 31, 1987. For
purposes of the preceding sentence, any gain or loss determined by
a valuation occurring as of January 1, 1988, shall be treated as
established in years beginning before 1988, or at the election of
the employer, shall be amortized in accordance with Internal
Revenue Service Notice 89-52."
Section 10201(c)(1) of Pub. L. 100-203 provided that: "The
amendments made by this section [amending this section and sections
419 and 461 of this title, and repealing sections 81 and 463 of
this title] shall apply to taxable years beginning after December
31, 1987."
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 1106(d)(2) of Pub. L. 99-514 applicable to
benefits accruing in years beginning after Dec. 31, 1988, except as
otherwise provided, see section 1106(i)(5) of Pub. L. 99-514, set
out as a note under section 415 of this title.
Amendment by section 1108(c) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1986, see section 1108(h) of Pub. L.
99-514, set out as a note under section 219 of this title.
Amendment by section 1112(d)(2) of Pub. L. 99-514 applicable to
plan years beginning after Dec. 31, 1988, with special rule
regarding collective bargaining agreements ratified before Mar. 1,
1986, and with provision for waiver of excise tax on reversions,
see section 1112(e) of Pub. L. 99-514, set out as a note under
section 401 of this title.
Section 1131(d) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011A(e)(3), Nov. 10, 1988, 102 Stat. 3478, provided
that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [enacting section 4972 of this
title and amending this section] shall apply to taxable years
beginning after December 31, 1986.
"(2) Special rules for collective bargaining agreements. - In the
case of a plan maintained pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or
more employers ratified before March 1, 1986, the amendments made
by this section shall not apply to contributions pursuant to any
such agreement for taxable years beginning before the earlier of -
"(A) January 1, 1989, or
"(B) the date on which the last of such collective bargaining
agreements terminates (determined without regard to any extension
thereof after February 28, 1986)."
Amendment by section 1171(b)(6) of Pub. L. 99-514 applicable to
compensation paid or accrued after Dec. 31, 1986, in taxable years
ending after such date, but this section 404(i) of this title to
continue to apply with respect to credits under section 41 of this
title attributable to compensation paid or accrued before Jan. 1,
1987 (or under section 38 of this title with respect to qualified
investment before Jan. 1, 1983), see section 1171(c) of Pub. L.
99-514, set out as a note under section 38 of this title.
Section 1173(c)(1) of Pub. L. 99-514 provided that: "The
amendments made by subsection (a) [amending this section] shall
apply to dividends paid in taxable years beginning after the date
of the enactment of this Act [Oct. 22, 1986]."
Amendment by sections 1848(c), 1851(b)(2)(A)-(C)(ii), and
1854(b)(3)-(5) of Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
Amendment by section 1854(b)(2) of Pub. L. 99-514 not applicable
to dividends paid before Jan. 1, 1986, if the taxpayer treated such
dividends in a manner inconsistent with such amendment on a return
filed with the Secretary before Oct. 22, 1986, see section
1854(b)(6) of Pub. L. 99-514, set out as a note under section 72 of
this title.
Section 1875(c)(7)(B) of Pub. L. 99-514 provided that the
amendment made by that section is effective with respect to taxable
years beginning after Dec. 31, 1984.
Section 11011(c)(3) of Pub. L. 99-272 provided that: "The
amendments made by this subsection [amending this section] shall
apply to payments made after January 1, 1986, in taxable years
ending after such date."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(r)(14) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Section 512(c) of Pub. L. 98-369 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and section
162 of this title] shall apply to amounts paid or incurred after
the date of the enactment of this Act [July 18, 1984] in taxable
years ending after such date.
"(2) Exception for certain extended vacation pay plans. - In the
case of any extended vacation pay plan maintained pursuant to a
collective bargaining agreement -
"(A) between employee representatives and 1 or more employers,
and
"(B) in effect on June 22, 1984,
the amendments made by this section shall not apply before the date
on which such collective bargaining agreement terminates
(determined without regard to any extension thereof agreed to after
June 22, 1984). For purposes of the preceding sentence, any plan
amendment made pursuant to a collective bargaining agreement
relating to the plan which amends the plan solely to conform to any
requirement added by this section shall not be treated as a
termination of such collective bargaining agreement."
Section 542(d) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section and sections 116 and
3405 of this title] shall apply to taxable years beginning after
the date of enactment of this Act [July 18, 1984]."
Amendment by section 713 of Pub. L. 98-369 effective as if
included in the provision of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, to which such amendment
relates, see section 715 of Pub. L. 98-369, set out as a note under
section 31 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Section 253(c) of Pub. L. 97-248 provided that: "The amendments
made by this section [amending this section and section 415 of this
title] shall apply to taxable years beginning after December 31,
1981."
Amendment by section 235(f) of Pub. L. 97-248, in the case of any
plan which is not in existence on July 1, 1982, applicable to years
ending after July 1, 1982, and in the case of any plan which is in
existence on July 1, 1982, applicable to years beginning after Dec.
31, 1982, see section 235(g)(1) of Pub. L. 97-248, set out as a
note under section 415 of this title.
Amendment by sections 237 and 238 of Pub. L. 97-248 applicable to
years beginning after Dec. 31, 1983, see section 241 of Pub. L.
97-248, set out as an Effective Date note under section 416 of this
title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 312(a) of Pub. L. 97-34 applicable to plans
which include employees within the meaning of section 401(c)(1) of
this title with respect to taxable years beginning after Dec. 31,
1981, see section 312(f)(1) of Pub. L. 97-34, set out as a note
under section 72 of this title.
Section 331(f)(2) of Pub. L. 97-34 provided that: "The amendments
made by subsections (b) and (c) [amending this section and sections
56, 409A, and 6699 of this title] shall apply to taxable years
ending after December 31, 1982."
EFFECTIVE DATE OF 1980 AMENDMENTS
Amendment by Pub. L. 96-364 effective Sept. 26, 1980, see section
210(a) of Pub. L. 96-364, set out as an Effective Date note under
section 418 of this title.
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 133(c) of Pub. L. 95-600, as amended by Pub. L. 96-222,
title I, Sec. 101(a)(5), Apr. 1, 1980, 94 Stat. 196; Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section] shall apply
to deductions for taxable years beginning after December 31, 1978.
"(2) Special rule for certain title insurance companies. -
"(A) In general. - In the case of a qualified title insurance
company plan, the amendment made by subsection (a) [amending this
section] shall apply to deductions for taxable years beginning
after December 31, 1979.
"(B) Qualified title insurance company plan. - For purposes of
subparagraph (A), the term 'qualified title insurance company
plan' means a plan of a qualified title insurance company -
"(i) which defers the payment of amounts credited by such
company to separate accounts for members of such company in
consideration of their issuance of policies of title insurance,
and
"(ii) under which no part of such amounts is payable to or
withdrawable by the members until after the period for the
adverse possession of real property under applicable State law.
"(C) Qualified title insurance company. - For purposes of
subparagraph (B), the term 'qualified title insurance company'
means an unincorporated title insurance company organized as a
business trust -
"(i) which is engaged in the business of providing title
insurance coverage on interests in and liens upon real property
obtained by clients of the members of such company, and
"(ii) which is subject to tax under section 831 of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954]."
Amendment by section 141(f)(9) of Pub. L. 95-600 effective with
respect to qualified investment for taxable years beginning after
Dec. 31, 1978, see section 141(g)(1) of Pub. L. 95-600, set out as
an Effective Date note under section 409 of this title.
Amendment by section 152(f) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 152(h) of
Pub. L. 95-600, set out as a note under section 408 of this title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Amendment by section 1502(a)(2) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1975, see section 1502(b) of
Pub. L. 94-455, set out as a note under section 415 of this title.
Amendment by section 1901(a)(59) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
Amendment by Pub. L. 94-267 applicable with respect to payments
made to an employee on or after July 4, 1974, see section 1(e) of
Pub. L. 94-267, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by sections 1013(c) and 1016(a)(3) of Pub. L. 93-406
applicable, except as otherwise provided in section 1017(c) through
(i) of Pub. L. 93-406, for plan years beginning after Sept. 2,
1974, but, in the case of plans in existence on Jan. 1, 1974,
amendment by sections 1013(c) and 1016(a)(3) of Pub. L. 93-406
applicable for plan years beginning after Dec. 31, 1975, see
section 1017 of Pub. L. 93-406, set out as an Effective Date;
Transitional Rules note under section 410 of this title.
Section 2001(i)(1) of Pub. L. 93-406 provided that: "The
amendments made by subsections (a) [amending this section] and (b)
[amending section 1379 of this title] apply to taxable years
beginning after December 31, 1973."
Amendment by section 2001(g)(2)(E), (F) of Pub. L. 93-406
applicable to distributions made in taxable years beginning after
Dec. 31, 1975, see section 2001(i)(5) of Pub. L. 93-406, set out as
a note under section 72 of this title.
Section 2008(c) of Pub. L. 93-406 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years ending on or after June 30, 1972."
Amendment by section 2004(b), (c)(1) of Pub. L. 93-406 applicable
to years beginning after Dec. 31, 1975, see section 2004(d) of Pub.
L. 93-406, set out as an Effective Date; Transition Provisions note
under section 415 of this title.
Amendment by section 4081(a) of Pub. L. 93-406 effective on Sept.
2, 1974, with exceptions specified in section 1461(b), (c) of Title
29, Labor, see section 1461(a) of Title 29.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable with respect to
contributions made and premiums paid after Aug. 1, 1969, see
section 321(d) of Pub. L. 91-172, set out as an Effective Date note
under section 83 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Amendment by Pub. L. 89-809 applicable with respect to taxable
years beginning after Dec. 31, 1967, see section 204(d) of Pub. L.
89-809, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1962 AMENDMENTS
Amendment by Pub. L. 87-863 applicable to taxable years beginning
after Oct. 23, 1962, see section 2(c) of Pub. L. 87-863, set out as
a note under section 401 of this title.
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to taxable years beginning
after Dec. 31, 1953, and ending after Aug. 16, 1954, see section
1(c)(1) of Pub. L. 85-866, set out as a note under section 165 of
this title.
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1112 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
CLARIFICATION OF TREATMENT OF CONTRIBUTIONS TO MULTIEMPLOYER PLAN
Pub. L. 107-16, title VI, Sec. 658, June 7, 2001, 115 Stat. 137,
provided that:
"(a) Not Considered Method of Accounting. - For purposes of
section 446 of the Internal Revenue Code of 1986, a determination
under section 404(a)(6) of such Code regarding the taxable year
with respect to which a contribution to a multiemployer pension
plan is deemed made shall not be treated as a method of accounting
of the taxpayer. No deduction shall be allowed for any taxable year
for any contribution to a multiemployer pension plan with respect
to which a deduction was previously allowed.
"(b) Regulations. - The Secretary of the Treasury shall
promulgate such regulations as necessary to clarify that a taxpayer
shall not be allowed an aggregate amount of deductions for
contributions to a multiemployer pension plan which exceeds the
amount of such contributions made or deemed made under section
404(a)(6) of the Internal Revenue Code of 1986 to such plan.
"(c) Effective Date. - Subsection (a), and any regulations
promulgated under subsection (b), shall be effective for years
ending after the date of the enactment of this Act [June 7, 2001]."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
COORDINATION OF REPEALS OF CERTAIN SECTIONS
Section 713(d)(8) of Pub. L. 98-369, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"Sections 404(e) and 1379(b) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] (as in effect on the day before the date of
the enactment of the Tax Equity and Fiscal Responsibility Act of
1982 [Sept. 3, 1982]) shall not apply to any plan to which section
401(j) of such Code applies (or would apply but for its repeal)."
DEDUCTIBILITY OF PAYMENTS TO PLAN BY CORPORATION OPERATING PUBLIC
TRANSPORTATION SYSTEM ACQUIRED BY STATE
Section 408 of Pub. L. 96-364, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) For purposes of subsection (g) of section 404 of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to
certain employer liability payments considered as contributions),
as amended by section 205 of this Act, any payment made to a plan
covering employees of a corporation operating a public
transportation system shall be treated as a payment described in
paragraph (1) of such subsection if -
"(1) such payment is made to fund accrued benefits under the
plan in conjunction with an acquisition by a State (or agency or
instrumentality thereof) of the stock or assets of such
corporation, and
"(2) such acquisition is pursuant to a State public
transportation law enacted after June 30, 1979, and before
January 1, 1980.
"(b) The provisions of this section shall apply to payments made
after June 29, 1980."
YEAR OF DEDUCTION FOR CERTAIN EMPLOYER CONTRIBUTIONS FOR SEVERANCE
PAYMENTS REQUIRED BY FOREIGN LAW
Section 1022(j) of Pub. L. 93-406, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "Effective
for taxable years beginning after December 31, 1973, if -
"(1) an employer is engaged in a trade or business in a foreign
country,
"(2) such employer is required by the laws of that country to
make payments, based on periods of service, to its employees or
their beneficiaries after the employees' retirement, death, or
other separation from the service, and
"(3) such employer establishes a trust (whether organized
within or outside the United States) for the purpose of funding
the payments required by such law,
then, in determining for purposes of paragraph (5) of section
404(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
the taxable year in which any contribution to or under the plan is
includible in the gross income of the nonresident alien employees
of such employer, such paragraph (5) shall be treated as not
requiring that separate accounts be maintained for such nonresident
alien employees."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 25B, 62, 72, 83, 104,
162, 172, 381, 401, 402, 403, 404A, 406, 407, 408, 409, 411, 413,
414, 415, 419, 465, 467, 542, 556, 664, 3405, 4941, 4972, 6047,
6048, 6662, 9701, 9704 of this title; title 15 sections 77c, 78c,
78l, 80a-3; title 19 section 2345; title 29 sections 1053, 1055,
1103, 1321, 1322, 1385, 1391, 1396.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC Sec. 404A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 404A. Deduction for certain foreign deferred compensation
plans
-STATUTE-
(a) General rule
Amounts paid or accrued by an employer under a qualified foreign
plan -
(1) shall not be allowable as a deduction under this chapter,
but
(2) if they would otherwise be deductible, shall be allowed as
a deduction under this section for the taxable year for which
such amounts are properly taken into account under this section.
(b) Rules for qualified funded plans
For purposes of this section -
(1) In general
Except as otherwise provided in this section, in the case of a
qualified funded plan contributions are properly taken into
account for the taxable year in which paid.
(2) Payment after close of taxable year
For purposes of paragraph (1), a payment made after the close
of a taxable year shall be treated as made on the last day of
such year if the payment is made -
(A) on account of such year, and
(B) not later than the time prescribed by law for filing the
return for such year (including extensions thereof).
(3) Limitations
In the case of a qualified funded plan, the amount allowable as
a deduction for the taxable year shall be subject to -
(A) in the case of -
(i) a plan under which the benefits are fixed or
determinable, limitations similar to those contained in
clauses (ii) and (iii) of subparagraph (A) of section
404(a)(1) (determined without regard to the last sentence of
such subparagraph (A)), or
(ii) any other plan, limitations similar to the limitations
contained in paragraph (3) of section 404(a), and
(B) limitations similar to those contained in paragraph (7)
of section 404(a).
(4) Carryover
If -
(A) the aggregate of the contributions paid during the
taxable year reduced by any contributions not allowable as a
deduction under paragraphs (1) and (2) of subsection (g),
exceeds
(B) the amount allowable as a deduction under subsection (a)
(determined without regard to subsection (d)),
such excess shall be treated as an amount paid in the succeeding
taxable year.
(5) Amounts must be paid to qualified trust, etc.
In the case of a qualified funded plan, a contribution shall be
taken into account only if it is paid -
(A) to a trust (or the equivalent of a trust) which meets the
requirements of section 401(a)(2),
(B) for a retirement annuity, or
(C) to a participant or beneficiary.
(c) Rules relating to qualified reserve plans
For purposes of this section -
(1) In general
In the case of a qualified reserve plan, the amount properly
taken into account for the taxable year is the reasonable
addition for such year to a reserve for the taxpayer's liability
under the plan. Unless otherwise required or permitted in
regulations prescribed by the Secretary, the reserve for the
taxpayer's liability shall be determined under the unit credit
method modified to reflect the requirements of paragraphs (3) and
(4). All benefits paid under the plan shall be charged to the
reserve.
(2) Income item
In the case of a plan which is or has been a qualified reserve
plan, an amount equal to that portion of any decrease for the
taxable year in the reserve which is not attributable to the
payment of benefits shall be included in gross income.
(3) Rights must be nonforfeitable, etc.
In the case of a qualified reserve plan, an item shall be taken
into account for a taxable year only if -
(A) there is no substantial risk that the rights of the
employee will be forfeited, and
(B) such item meets such additional requirements as the
Secretary may by regulations prescribe as necessary or
appropriate to ensure that the liability will be satisfied.
(4) Spreading of certain increases and decreases in reserves
There shall be amortized over a 10-year period any increase or
decrease to the reserve on account of -
(A) the adoption of the plan or a plan amendment,
(B) experience gains and losses, and (!1)
(C) any change in actuarial assumptions,
(D) changes in the interest rate under subsection (g)(3)(B),
and
(E) such other factors as may be prescribed by regulations.
(d) Amounts taken into account must be consistent with amounts
allowed under foreign law
(1) General rule
In the case of any plan, the amount allowed as a deduction
under subsection (a) for any taxable year shall equal -
(A) the lesser of -
(i) the cumulative United States amount, or
(ii) the cumulative foreign amount, reduced by
(B) the aggregate amount determined under this section for
all prior taxable years.
(2) Cumulative amounts defined
For purposes of paragraph (1) -
(A) Cumulative United States amount
The term "cumulative United States amount" means the
aggregate amount determined with respect to the plan under this
section for the taxable year and for all prior taxable years to
which this section applies. Such determination shall be made
for each taxable year without regard to the application of
paragraph (1).
(B) Cumulative foreign amount
The term "cumulative foreign amount" means the aggregate
amount allowed as a deduction under the appropriate foreign tax
laws for the taxable year and all prior taxable years to which
this section applies.
(3) Effect on earnings and profits, etc.
In determining the earnings and profits and accumulated profits
of any foreign corporation with respect to a qualified foreign
plan, except as provided in regulations, the amount determined
under paragraph (1) with respect to any plan for any taxable year
shall in no event exceed the amount allowed as a deduction under
the appropriate foreign tax laws for such taxable year.
(e) Qualified foreign plan
For purposes of this section, the term "qualified foreign plan"
means any written plan of an employer for deferring the receipt of
compensation but only if -
(1) such plan is for the exclusive benefit of the employer's
employees or their beneficiaries,
(2) 90 percent or more of the amounts taken into account for
the taxable year under the plan are attributable to services -
(A) performed by nonresident aliens, and
(B) the compensation for which is not subject to tax under
this chapter, and
(3) the employer elects (at such time and in such manner as the
Secretary shall by regulations prescribe) to have this section
apply to such plan.
(f) Funded and reserve plans
For purposes of this section -
(1) Qualified funded plan
The term "qualified funded plan" means a qualified foreign plan
which is not a qualified reserve plan.
(2) Qualified reserve plan
The term "qualified reserve plan" means a qualified foreign
plan with respect to which an election made by the taxpayer is in
effect for the taxable year. An election under the preceding
sentence shall be made in such manner and form as the Secretary
may by regulations prescribe and, once made, may be revoked only
with the consent of the Secretary.
(g) Other special rules
(1) No deduction for certain amounts
Except as provided in section 404(a)(5), no deduction shall be
allowed under this section for any item to the extent such item
is attributable to services -
(A) performed by a citizen or resident of the United States
who is a highly compensated employee (within the meaning of
section 414(q)), or
(B) performed in the United States the compensation for which
is subject to tax under this chapter.
(2) Taxpayer must furnish information
(A) In general
No deduction shall be allowed under this section with respect
to any plan for any taxable year unless the taxpayer furnishes
to the Secretary with respect to such plan (at such time as the
Secretary may by regulations prescribe) -
(i) a statement from the foreign tax authorities specifying
the amount of the deduction allowed in computing taxable
income under foreign law for such year with respect to such
plan,
(ii) if the return under foreign tax law shows the
deduction for plan contributions or reserves as a separate,
identifiable item, a copy of the foreign tax return for the
taxable year, or
(iii) such other statement, return, or other evidence as
the Secretary prescribes by regulation as being sufficient to
establish the amount of the deduction under foreign law.
(B) Redetermination where foreign tax deduction is adjusted
If the deduction under foreign tax law is adjusted, the
taxpayer shall notify the Secretary of such adjustment on or
before the date prescribed by regulations, and the Secretary
shall redetermine the amount of the tax for the year or years
affected. In any case described in the preceding sentence,
rules similar to the rules of subsection (c) of section 905
shall apply.
(3) Actuarial assumptions must be reasonable; full funding
(A) In general
Except as provided in subparagraph (B), principles similar to
those set forth in paragraphs (3) and (7) of section 412(c)
shall apply for purposes of this section.
(B) Interest rate for reserve plan
(i) In general
In the case of a qualified reserve plan, in lieu of taking
rates of interest into account under subparagraph (A), the
rate of interest for the plan shall be the rate selected by
the taxpayer which is within the permissible range.
(ii) Rate remains in effect so long as it falls within
permissible range
Any rate selected by the taxpayer for the plan under this
subparagraph shall remain in effect for such plan until the
first taxable year for which such rate is no longer within
the permissible range. At such time, the taxpayer shall
select a new rate of interest which is within the permissible
range applicable at such time.
(iii) Permissible range
For purposes of this subparagraph, the term "permissible
range" means a rate of interest which is not more than 20
percent above, and not more than 20 percent below, the
average rate of interest for long-term corporate bonds in the
appropriate country for the 15-year period ending on the last
day before the beginning of the taxable year.
(4) Accounting method
Any change in the method (but not the actuarial assumptions)
used to determine the amount allowed as a deduction under
subsection (a) shall be treated as a change in accounting method
under section 446(e).
(5) Section 481 applies to election
For purposes of section 481, any election under this section
shall be treated as a change in the taxpayer's method of
accounting. In applying section 481 with respect to any such
election, the period for taking into account any increase or
decrease in accumulated profits, earnings and profits or taxable
income resulting from the application of section 481(a)(2) shall
be the year for which the election is made and the fourteen
succeeding years.
(h) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this section (including
regulations providing for the coordination of the provisions of
this section with section 404 in the case of a plan which has been
subject to both of such sections).
-SOURCE-
(Added Pub. L. 96-603, Sec. 2(a), Dec. 28, 1980, 94 Stat. 3505;
amended Pub. L. 99-514, title XI, Sec. 1114(b)(8), title XVIII,
Sec. 1851(b)(2)(C)(iii), Oct. 22, 1986, 100 Stat. 2451, 2863; Pub.
L. 100-647, title I, Sec. 1012(b)(4), Nov. 10, 1988, 102 Stat.
3496.)
-MISC1-
AMENDMENTS
1988 - Subsec. (d)(3). Pub. L. 100-647 inserted "except as
provided in regulations," after "qualified foreign plan,".
1986 - Subsec. (a). Pub. L. 99-514, Sec. 1851(b)(2)(C)(iii),
substituted "under this chapter" for "under section 162, 212, or
404" in par. (1) and "they would otherwise be deductible" for "they
satisfy the conditions of section 162" in par. (2).
Subsec. (g)(1)(A). Pub. L. 99-514, Sec. 1114(b)(8), substituted
"a highly compensated employee (within the meaning of section
414(q))" for "an officer, shareholder, or highly compensated".
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1114(b)(8) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1988, see section 1114(c)(3) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Amendment by section 1851(b)(2)(C)(iii) of Pub. L. 99-514
effective, except as otherwise provided, as if included in the
provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A,
to which such amendment relates, see section 1881 of Pub. L.
99-514, set out as a note under section 48 of this title.
EFFECTIVE DATE
Section 2(e) of Pub. L. 96-603, as amended by Pub. L. 97-448,
title III, Sec. 305(a), Jan. 12, 1983, 96 Stat. 2399; Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - The amendments made by this section [enacting
this section and section 6689 of this title and amending sections
679 and 905 of this title] shall apply with respect to employer
contributions or accruals for taxable years beginning after
December 31, 1979.
"(2) Election to apply amendments retroactively with respect to
foreign subsidiaries. -
"(A) In general. - The taxpayer may elect to have the
amendments made by this section [enacting this section and
section 6689 of this title and amending sections 679 and 905 of
this title] apply retroactively with respect to its foreign
subsidiaries.
"(B) Scope of retroactive application. - Any election made
under this paragraph shall apply with respect to all foreign
subsidiaries of the taxpayer for the taxpayer's open period.
"(C) Distributions by foreign subsidiary must be out of
post-1971 earnings and profits. - The election under this
paragraph shall apply to distributions made by a foreign
subsidiary only if made out of accumulated profits (or earnings
and profits) earned after December 31, 1970.
"(D) Revocation only with consent. - An election under this
paragraph may be revoked only with the consent of the Secretary
of the Treasury or his delegate.
"(E) Open period. - For purposes of this subsection, the term
'open period' means, with respect to any taxpayer, all taxable
years which begin before January 1, 1980, and which begin after
December 31, 1971, and for which, on December 31, 1980, the
making of a refund, or the assessment of a deficiency, was not
barred by any law or rule of law.
"(3) Allowance of prior deductions in case of certain funded
branch plans. -
"(A) In general. - If -
"(i) the taxpayer elects to have this paragraph apply, and
"(ii) the taxpayer agrees to the assessment of all
deficiencies (including interest thereon) arising from all
erroneous deductions,
then an amount equal to 1/15 th of the aggregate of the prior
deductions which would have been allowable if the amendments made
by this section [enacting this section and section 6689 of this
title and amending sections 679 and 905 of this title] applied to
taxable years beginning before January 1, 1980, shall be allowed
as a deduction for the taxpayer's first taxable year beginning in
1980, and an equal amount shall be allowed for each of the
succeeding 14 taxable years.
"(B) Prior deduction. - For purposes of subparagraph (A), the
term 'prior deduction' means a deduction with respect to a
qualified funded plan (within the meaning of section 404A(f)(1)
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) of
the taxpayer -
"(i) which the taxpayer claimed for a taxable year (or could
have claimed if the amendments made by this section [enacting
this section and section 6689 of this title and amending
sections 679 and 905 of this title] applied to taxable years
beginning before January 1, 1980) beginning before January 1,
1980,
"(ii) which was not allowable, and
"(iii) with respect to which, on December 1, 1980, the
assessment of a deficiency was not barred by any law or rule of
law.
"(4) Time and manner for making elections. -
"(A) Time. - An election under paragraph (2) or (3) may be made
only on or before the due date (including extensions) for filing
the taxpayer's return of tax under chapter 1 of the Internal
Revenue Code of 1986 [section 1 et seq. of this title] for its
first taxable year ending on or after December 31, 1980.
"(B) Manner. - An election under paragraph (2) may be made only
by a statement attached to the taxpayer's return for its first
taxable year ending on or after December 31, 1980. An election
under paragraph (3) may be made only if the taxpayer, on or
before the last day for making the election, files with the
Secretary of the Treasury or his delegate such amended return and
such other information as the Secretary of the Treasury or his
delegate may require, and agrees to the assessment of a
deficiency for any closed year falling within the open period, to
the extent such deficiency is attributable to the operation of
such election."
[Pub. L. 97-448, title III, Sec. 311(c)(1), Jan. 12, 1983, 96
Stat. 2411, provided that: "The amendment made by subsection (a) of
section 305 [amending par. (2)(E) of this note] shall take effect
on December 28, 1980."]
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 419, 467, 6048, 6689 of
this title.
-FOOTNOTE-
(!1) So in original. The word "and" probably should not appear.
-End-
-CITE-
26 USC Sec. 405 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
[Sec. 405. Repealed. Pub. L. 98-369, div. A, title IV, Sec. 491(a),
July 18, 1984, 98 Stat. 848]
-MISC1-
Section, added Pub. L. 87-792, Sec. 5(a), Oct. 10, 1962, 76 Stat.
826; amended Pub. L. 89-97, title I, Sec. 106(d)(5), July 30, 1965,
79 Stat. 337; Pub. L. 91-172, title V, Sec. 515(c)(1), Dec. 30,
1969, 83 Stat. 645; Pub. L. 93-406, title II, Secs. 2004(c)(2),
2005(c)(11), Sept. 2, 1974, 88 Stat. 986, 992; Pub. L. 94-455,
title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub.
L. 97-34, title III, Sec. 313(a), (b)(1), Aug. 13, 1981, 95 Stat.
285, 286; Pub. L. 97-452, Sec. 2(c)(1), Jan. 12, 1983, 96 Stat.
2478; Pub. L. 98-369, div. A, title I, Sec. 42(a)(6), July 18,
1984, 98 Stat. 557, related to qualified bond purchase plans.
EFFECTIVE DATE OF REPEAL
Repeal applicable to obligations issued after Dec. 31, 1983, see
section 491(f)(1) of Pub. L. 98-369, set out as an Effective Date
of 1984 Amendment note under section 62 of this title.
ROLLOVER OF EXISTING BONDS INTO QUALIFIED EMPLOYER PLANS
Pub. L. 98-369, div. A, title IV, Sec. 491(c)(1), (f)(2), July
18, 1984, 98 Stat. 848, 853, provided that, applicable to
redemptions after July 18, 1984, in taxable years ending after such
date, subsec. (d)(3)(A) of this section, as in effect before its
repeal, is amended to read as follows:
"(A) In general. - If -
"(i) any qualified bond is redeemed,
"(ii) any portion of the excess of the proceeds from such
redemption over the basis of such bond is transferred to an
individual retirement plan which is maintained for the benefit of
the individual redeeming such bond, or to a qualified trust (as
defined in section 402(a)(5)(D)(iii)) for the benefit of such
individual, and
"(iii) such transfer is made on or before the 60th day after
the individual received the proceeds of such redemption,
then gross income shall not include the proceeds to the extent so
transferred and the transfer shall be treated as a rollover
contribution described in section 408(d)(3)."
BONDS UNDER QUALIFIED BOND PURCHASE PLANS REDEEMABLE AT ANY TIME
AFTER JULY 18, 1984
Section 491(f)(4) of Pub. L. 98-369 provided that:
"Notwithstanding -
"(A) subparagraph (D) of section 405(b)(1) of the Internal
Revenue Code of 1954 (as in effect before its repeal by this
section) [see above], and
"(B) the terms of any bond described in subsection (b) of such
section 405,
such a bond may be redeemed at any time after the date of the
enactment of this Act [July 18, 1984] in the same manner as if the
individual redeeming the bond had attained age 59 1/2 ."
-End-
-CITE-
26 USC Sec. 406 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 406. Employees of foreign affiliates covered by section
3121(l) agreements
-STATUTE-
(a) Treatment as employees of American employer
For purposes of applying this part with respect to a pension,
profit-sharing, or stock bonus plan described in section 401(a) or
an annuity plan described in section 403(a), of an American
employer (as defined in section 3121(h)), an individual who is a
citizen or resident of the United States and who is an employee of
a foreign affiliate (as defined in section 3121(l)(6)) of such
American employer shall be treated as an employee of such American
employer, if -
(1) such American employer has entered into an agreement under
section 3121(l) which applies to the foreign affiliate of which
such individual is an employee;
(2) the plan of such American employer expressly provides for
contributions or benefits for individuals who are citizens or
residents of the United States and who are employees of its
foreign affiliates to which an agreement entered into by such
American employer under section 3121(l) applies; and
(3) contributions under a funded plan of deferred compensation
(whether or not a plan described in section 401(a) or 403(a)) are
not provided by any other person with respect to the remuneration
paid to such individual by the foreign affiliate.
(b) Special rules for application of section 401(a)
(1) Nondiscrimination requirements
For purposes of applying section 401(a)(4) and section 410(b)
with respect to an individual who is treated as an employee of an
American employer under subsection (a) -
(A) if such individual is a highly compensated employee
(within the meaning of section 414(q)), he shall be treated as
having such capacity with respect to such American employer;
and
(B) the determination of whether such individual is a highly
compensated employee (as so defined) shall be made by treating
such individual's total compensation (determined with the
application of paragraph (2) of this subsection) as
compensation paid by such American employer and by determining
such individual's status with regard to such American employer.
(2) Determination of compensation
For purposes of applying paragraph (5) of section 401(a) with
respect to an individual who is treated as an employee of an
American employer under subsection (a) -
(A) the total compensation of such individual shall be the
remuneration paid to such individual by the foreign affiliate
which would constitute his total compensation if his services
had been performed for such American employer, and the basic or
regular rate of compensation of such individual shall be
determined under regulations prescribed by the Secretary; and
(B) such individual shall be treated as having paid the
amount paid by such American employer which is equivalent to
the tax imposed by section 3101.
[(c) Repealed. Pub. L. 104-188, title I, Sec. 1401(b)(7), Aug. 20,
1996, 110 Stat. 1789]
(d) Deductibility of contributions
For purposes of applying section 404 with respect to
contributions made to or under a pension, profit-sharing, stock
bonus, or annuity plan by an American employer, or by another
taxpayer which is entitled to deduct its contributions under
section 404(a)(3)(B), on behalf of an individual who is treated as
an employee of such American employer under subsection (a) -
(1) except as provided in paragraph (2), no deduction shall be
allowed to such American employer or to any other taxpayer which
is entitled to deduct its contributions under such sections,
(2) there shall be allowed as a deduction to the foreign
affiliate of which such individual is an employee an amount equal
to the amount which (but for paragraph (1)) would be deductible
under section 404 by the American employer if he were an employee
of the American employer, and
(3) any reference to compensation shall be considered to be a
reference to the total compensation of such individual
(determined with the application of subsection (b)(2)).
Any amount deductible by a foreign affiliate under this subsection
shall be deductible for its taxable year with or within which the
taxable year of such American employer ends.
(e) Treatment as employee under related provisions
An individual who is treated as an employee of an American
employer under subsection (a) shall also be treated as an employee
of such American employer, with respect to the plan described in
subsection (a)(2), for purposes of applying the following
provisions of this title:
(1) Section 72(f) (relating to special rules for computing
employees' contributions).
(2) Section 2039 (relating to annuities).
-SOURCE-
(Added Pub. L. 88-272, title II, Sec. 220(a), Feb. 26, 1964, 78
Stat. 58; amended Pub. L. 91-172, title V, Sec. 515(c)(2), Dec. 30,
1969, 83 Stat. 645; Pub. L. 93-406, title II, Secs. 1016(a)(4),
2005(c)(12), Sept. 2, 1974, 88 Stat. 929, 992; Pub. L. 94-455,
title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub.
L. 98-21, title III, Sec. 321(c), (e)(2)(A)-(D)(i), Apr. 20, 1983,
97 Stat. 119, 120; Pub. L. 98-369, div. A, title IV, Sec.
491(d)(13)-(15), July 18, 1984, 98 Stat. 849; Pub. L. 99-514, title
XI, Secs. 1112(d)(3), 1114(b)(9)(A), (C), title XVIII, Sec.
1852(e)(2)(C), Oct. 22, 1986, 100 Stat. 2445, 2451, 2868; Pub. L.
100-647, title I, Sec. 1011A(b)(1)(C), (16), Nov. 10, 1988, 102
Stat. 3472, 3475; Pub. L. 101-239, title VII, Secs. 7811(g)(3),
7831(f), title X, Sec. 10201(b)(1), (2), Dec. 19, 1989, 103 Stat.
2409, 2427, 2472; Pub. L. 102-318, title V, Sec. 521(b)(14), July
3, 1992, 106 Stat. 311; Pub. L. 104-188, title I, Secs. 1401(b)(7),
1402(b)(2), Aug. 20, 1996, 110 Stat. 1789, 1790.)
-MISC1-
AMENDMENTS
1996 - Subsec. (c). Pub. L. 104-188, Sec. 1401(b)(7), struck out
subsec. (c) which related to treatment of termination of status as
deemed employee.
Subsec. (e)(2), (3). Pub. L. 104-188, Sec. 1402(b)(2),
redesignated par. (3) as (2) and struck out former par. (2) which
read as follows: "Section 101(b) (relating to employees' death
benefits)."
1992 - Subsec. (c). Pub. L. 102-318 substituted "402(d)" for
"402(e)".
1989 - Subsec. (a). Pub. L. 101-239, Sec. 10201(b)(1),
substituted "3121(l)(6)" for "3121(l)(8)".
Subsec. (b)(1)(A). Pub. L. 101-239, Sec. 7831(f), made technical
correction to Pub. L. 99-514, Sec. 1114(b)(9)(A), see 1986
Amendment note below.
Subsec. (c). Pub. L. 101-239, Sec. 7811(g)(3), substituted
"purposes of limitation" for "purposes limitation" in heading.
Subsec. (c)(3). Pub. L. 101-239, Sec. 10201(b)(2), substituted
"3121(l)(6)(B)" for "3121(l)(8)(B)".
1988 - Subsec. (c). Pub. L. 100-647, Sec. 1011A(b)(16), struck
out "of capital gain provisions and" after "service for purposes"
in heading and substituted "applying section 402(e)" for "applying
subsections (a)(2) and (e) of section 402, and section 403(a)(2)"
in text.
Subsec. (e). Pub. L. 100-647, Sec. 1011A(b)(1)(C), redesignated
pars. (2) to (4) as (1) to (3), respectively, and struck out former
par. (1) which read as follows: "Section 72(d) (relating to
employees' annuities)."
1986 - Subsec. (b)(1). Pub. L. 99-514, Sec. 1112(d)(3), struck
out "(without regard to paragraph (1)(A) thereof)" after "section
410(b)" in introductory text.
Subsec. (b)(1)(A). Pub. L. 99-514, Sec. 1114(b)(9)(A), as amended
by Pub. L. 101-239, Sec. 7831(f), substituted "a highly compensated
employee (within the meaning of section 414(q))" for "an officer,
shareholder, or person whose principal duties consist in
supervising the work of other employees of a foreign affiliate of
such American employer".
Subsec. (b)(1)(B). Pub. L. 99-514, Sec. 1114(b)(9)(C), inserted
"(as so defined)" after "employee".
Subsec. (e)(5). Pub. L. 99-514, Sec. 1852(e)(2)(C), struck out
par. (5) which read as follows: "Section 2517 (relating to certain
annuities under qualified plans)."
1984 - Subsec. (a). Pub. L. 98-369, Sec. 491(d)(13), substituted
in introductory provision "or an annuity plan described in section
403(a)" for ", an annuity plan described in section 403(a), or a
bond purchase plan described in section 405(a)".
Subsec. (a)(3). Pub. L. 98-369, Sec. 491(d)(14), substituted "or
403(a)" for ", 403(a), or 405(a)".
Subsec. (d). Pub. L. 98-369, Sec. 491(d)(15)(A), (B), substituted
in introductory provision "section 404" for "sections 404 and
405(c)", and "or annuity" for "annuity, or bond purchase".
Subsec. (d)(2). Pub. L. 98-369, Sec. 491(d)(15)(C), struck out
"(or section 405(c))" after "section 404".
1983 - Pub. L. 98-21, Sec. 321(e)(2)(D)(i), substituted
"Employees of foreign affiliates covered by section 3121(l)
agreements" for "Certain employees of foreign subsidiaries" in
section catchline.
Subsec. (a). Pub. L. 98-21, Sec. 321(c), amended subsec. (a)
generally, substituting "American employer" for "domestic
corporation" in heading and in text wherever appearing, inserting
reference to section 3121(h) of this title, inserting "or resident"
after "citizen" wherever appearing, substituting "foreign
affiliate" for "foreign subsidiary" wherever appearing, and
"foreign affiliates" for "foreign subsidiaries".
Subsec. (b). Pub. L. 98-21, Sec. 321(e)(2)(A), substituted
reference to an American employer for reference to a domestic
corporation, and reference to an affiliate for reference to a
subsidiary, wherever appearing.
Subsec. (c). Pub. L. 98-21, Sec. 321(e)(2)(A), substituted
reference to an American employer for reference to a domestic
corporation, and reference to an affiliate for reference to a
subsidiary, wherever appearing in provisions preceding par. (1) and
in pars. (1) and (2).
Subsec. (c)(3). Pub. L. 98-21, Sec. 321(e)(2)(A), (B),
substituted "foreign affiliate by reason of which he is treated as
an employee of such American employer, if he becomes an employee of
another entity in which such American employer has not less than a
10-percent interest (within the meaning of section 3121(l)(8)(B)"
for "foreign subsidiary by reason of which he is treated as an
employee of such domestic corporation, if he becomes an employee of
another corporation controlled by such domestic corporation".
Subsec. (d). Pub. L. 98-21, Sec. 321(e)(2)(A), (C), substituted
references to an American employer for references to a domestic
corporation and reference to an affiliate for a reference to a
subsidiary wherever appearing, substituted "another taxpayer" for
"another corporation" in provisions preceding par. (1), and
substituted "any other taxpayer" for "any other corporation" in
par. (1).
Subsec. (e). Pub. L. 98-21, Sec. 321(e)(2)(A), substituted
reference to an American employer for reference to a domestic
corporation wherever appearing in provisions preceding par. (1).
1976 - Subsec. (b)(2)(A). Pub. L. 94-455 struck out "or his
delegate" after "Secretary".
1974 - Subsec. (b)(1). Pub. L. 93-406, Sec. 1016(a)(4),
substituted "section 401(a)(4) and section 410(b) (without regard
to paragraph (1)(A) thereof)" for "paragraphs (3)(B) and (4) of
section 401(a)".
Subsec. (c). Pub. L. 93-406, Sec. 2005(c)(12), substituted
"subsections (a)(2) and (e) of section 402" for "section 72(n),
section 402(a)(2)".
1969 - Subsec. (c). Pub. L. 91-172 substituted "provisions and
limitation of tax" for "provisions" in heading, and substituted
"section 72(n), section 402(a)(2)," for "section 402(a)(2)" in
text.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1401(b)(7) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1999, with retention of
certain transition rules, see section 1401(c) of Pub. L. 104-188,
set out as a note under section 402 of this title.
Amendment by section 1402(b)(2) of Pub. L. 104-188 applicable
with respect to decedents dying after Aug. 20, 1996, see section
1402(c) of Pub. L. 104-188, set out as a note under section 101 of
this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-318 applicable to distributions after
Dec. 31, 1992, see section 521(e) of Pub. L. 102-318, set out as a
note under section 402 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by section 7811(g)(3) of Pub. L. 101-239 effective,
except as otherwise provided, as if included in the provision of
the Technical and Miscellaneous Revenue Act of 1988, Pub. L.
100-647, to which such amendment relates, see section 7817 of Pub.
L. 101-239, set out as a note under section 1 of this title.
Amendment by section 7831(f) of Pub. L. 101-239 effective as if
included in the provision of the Tax Reform Act of 1986, Pub. L.
99-514, to which such amendment relates, see section 7831(g) of
Pub. L. 101-239, set out as a note under section 1 of this title.
Section 10201(c) of Pub. L. 101-239 provided that: "The
amendments made by this section [amending this section, section
3121 of this title, and section 410 of Title 42, The Public Health
and Welfare] shall apply with respect to any agreement in effect
under section 3121(l) of the Internal Revenue Code of 1986 on or
after June 15, 1989, with respect to which no notice of termination
is in effect on such date."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1112(d)(3) of Pub. L. 99-514 applicable to
plan years beginning after Dec. 31, 1988, with special rule
regarding collective bargaining agreements ratified before Mar. 1,
1986, and with provision for waiver of excise tax on reversions,
see section 1112(e) of Pub. L. 99-514, set out as a note under
section 401 of this title.
Amendment by section 1114(b)(9)(A), (C) of Pub. L. 99-514
applicable to years beginning after Dec. 31, 1988, see section
1114(c)(3) of Pub. L. 99-514, set out as a note under section 414
of this title.
Section 1852(e)(2)(E) of Pub. L. 99-514 provided that: "The
amendments made by this paragraph [amending this section and
section 407 of this title and repealing section 2517 of this title]
shall apply to transfers after the date of the enactment of this
Act [Oct. 22, 1986]."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to obligations issued
after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 98-369, set
out as a note under section 62 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Section 321(f) of Pub. L. 98-21 provided that:
"(1)(A) The amendments made by this section [amending this
section and sections 407, 1402, 3121, and 6413 of this title and
section 410 of Title 42, The Public Health and Welfare] (other than
subsection (d) [amending section 407 of this title]) shall apply to
agreements entered into after the date of the enactment of this Act
[Apr. 20, 1983].
"(B) At the election of any American employer, the amendments
made by this section (other than subsection (d)) shall also apply
to any agreement entered into on or before the date of the
enactment of this Act. Any such election shall be made at such time
and in such manner as the Secretary may by regulations prescribe.
"(2)(A) The amendments made by subsection (d) [amending section
407 of this title] shall apply to plans established after the date
of the enactment of this Act [Apr. 20, 1983].
"(B) At the election of any domestic parent corporation the
amendments made by subsection (d) shall also apply to any plan
established on or before the date of the enactment of this Act. Any
such election shall be made at such time and in such manner as the
Secretary may by regulations prescribe."
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by section 1016(a)(4) of Pub. L. 93-406 applicable,
except as otherwise provided in section 1017(c) through (i) of Pub.
L. 93-406, for plan years beginning after Sept. 2, 1974, but, in
the case of plans in existence on Jan. 1, 1974, amendment by Pub.
L. 93-406 applicable for plan years beginning after Dec. 31, 1975,
see section 1017 of Pub. L. 93-406, set out as an Effective Date;
Transition of Rules note under section 410 of this title.
Amendment by section 2005(c)(12) of Pub. L. 93-406 applicable
only with respect to distributions or payments made after Dec. 31,
1973, in taxable years beginning after Dec. 31, 1973, see section
2005(d) of Pub. L. 93-406, set out as a note under section 402 of
this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years ending
after Dec. 31, 1969, see section 515(d) of Pub. L. 91-172, set out
as a note under section 402 of this title.
EFFECTIVE DATE
Section 220(d) of Pub. L. 88-272 provided that: "The amendments
made by subsections (a) [enacting this section], (b) [enacting
section 407 of this title], and (c)(1) [amending the analysis
preceding section 401 of this title] shall apply to taxable years
ending after December 31, 1963. The amendments made by subsections
(c)(2) [amending section 3121 of this title] and (3) [amending
section 409 of Title 42, The Public Health and Welfare] shall apply
to remuneration paid after December 31, 1962."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by sections
1112 and 1114 of Pub. L. 99-514, see section 1141 of Pub. L.
99-514, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-End-
-CITE-
26 USC Sec. 407 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 407. Certain employees of domestic subsidiaries engaged in
business outside the United States
-STATUTE-
(a) Treatment as employees of domestic parent corporation
(1) In general
For purposes of applying this part with respect to a pension,
profit-sharing, or stock bonus plan described in section 401(a)
or an annuity plan described in section 403(a), of a domestic
parent corporation, an individual who is a citizen or resident of
the United States and who is an employee of a domestic subsidiary
(within the meaning of paragraph (2)) of such domestic parent
corporation shall be treated as an employee of such domestic
parent corporation, if -
(A) the plan of such domestic parent corporation expressly
provides for contributions or benefits for individuals who are
citizens or residents of the United States and who are
employees of its domestic subsidiaries; and
(B) contributions under a funded plan of deferred
compensation (whether or not a plan described in section 401(a)
or 403(a)) are not provided by any other person with respect to
the remuneration paid to such individual by the domestic
subsidiary.
(2) Definitions
For purposes of this section -
(A) Domestic subsidiary
A corporation shall be treated as a domestic subsidiary for
any taxable year only if -
(i) such corporation is a domestic corporation 80 percent
or more of the outstanding voting stock of which is owned by
another domestic corporation;
(ii) 95 percent or more of its gross income for the
three-year period immediately preceding the close of its
taxable year which ends on or before the close of the taxable
year of such other domestic corporation (or for such part of
such period during which the corporation was in existence),
was derived from sources without the United States; and
(iii) 90 percent or more of its gross income for such
period (or such part) was derived from the active conduct of
a trade or business.
If for the period (or part thereof) referred to in clauses (ii)
and (iii) such corporation has no gross income, the provisions
of clauses (ii) and (iii) shall be treated as satisfied if it
is reasonable to anticipate that, with respect to the first
taxable year thereafter for which such corporation has gross
income, the provisions of such clauses will be satisfied.
(B) Domestic parent corporation
The domestic parent corporation of any domestic subsidiary is
the domestic corporation which owns 80 percent or more of the
outstanding voting stock of such domestic subsidiary.
(b) Special rules for application of section 401(a)
(1) Nondiscrimination requirements
For purposes of applying section 401(a)(4) and section 410(b)
with respect to an individual who is treated as an employee of a
domestic parent corporation under subsection (a) -
(A) if such individual is a highly compensated employee
(within the meaning of section 414(q)), he shall be treated as
having such capacity with respect to such domestic parent
corporation; and
(B) the determination of whether such individual is a highly
compensated employee (as so defined) shall be made by treating
such individual's total compensation (determined with the
application of paragraph (2) of this subsection) as
compensation paid by such domestic parent corporation and by
determining such individual's status with regard to such
domestic parent corporation.
(2) Determination of compensation
For purposes of applying paragraph (5) of section 401(a) with
respect to an individual who is treated as an employee of a
domestic parent corporation under subsection (a), the total
compensation of such individual shall be the remuneration paid to
such individual by the domestic subsidiary which would constitute
his total compensation if his services had been performed for
such domestic parent corporation, and the basic or regular rate
of compensation of such individual shall be determined under
regulations prescribed by the Secretary.
[(c) Repealed. Pub. L. 104-188, title I, Sec. 1401(b)(8), Aug. 20,
1996, 110 Stat. 1789]
(d) Deductibility of contributions
For purposes of applying section 404 with respect to
contributions made to or under a pension, profit-sharing, stock
bonus, or annuity plan by a domestic parent corporation, or by
another corporation which is entitled to deduct its contributions
under section 404(a)(3)(B), on behalf of an individual who is
treated as an employee of such domestic corporation under
subsection (a) -
(1) except as provided in paragraph (2), no deduction shall be
allowed to such domestic parent corporation or to any other
corporation which is entitled to deduct its contributions under
such sections,
(2) there shall be allowed as a deduction to the domestic
subsidiary of which such individual is an employee an amount
equal to the amount which (but for paragraph (1)) would be
deductible under section 404 by the domestic parent corporation
if he were an employee of the domestic parent corporation, and
(3) any reference to compensation shall be considered to be a
reference to the total compensation of such individual
(determined with the application of subsection (b)(2)).
Any amount deductible by a domestic subsidiary under this
subsection shall be deductible for its taxable year with or within
which the taxable year of such domestic parent corporation ends.
(e) Treatment as employee under related provisions
An individual who is treated as an employee of a domestic parent
corporation under subsection (a) shall also be treated as an
employee of such domestic parent corporation, with respect to the
plan described in subsection (a)(1)(A), for purposes of applying
the following provisions of this title:
(1) Section 72(f) (relating to special rules for computing
employees' contributions).
(2) Section 2039 (relating to annuities).
-SOURCE-
(Added Pub. L. 88-272, title II, Sec. 220(b), Feb. 26, 1964, 78
Stat. 60; amended Pub. L. 91-172, title V, Sec. 515(c)(3), Dec. 30,
1969, 83 Stat. 646; Pub. L. 93-406, title II, Secs. 1016(a)(5),
2005(c)(13), Sept. 2, 1974, 88 Stat. 929, 992; Pub. L. 94-455,
title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub.
L. 98-21, title III, Sec. 321(d), Apr. 20, 1983, 97 Stat. 119; Pub.
L. 98-369, div. A, title IV, Sec. 491(d)(16)-(18), July 18, 1984,
98 Stat. 850; Pub. L. 99-514, title XI, Secs. 1112(d)(3),
1114(b)(9)(B), (C), title XVIII, Sec. 1852(e)(2)(D), Oct. 22, 1986,
100 Stat. 2445, 2451, 2868; Pub. L. 100-647, title I, Sec.
1011A(b)(1)(C), (16), Nov. 10, 1988, 102 Stat. 3472, 3475; Pub. L.
101-239, title VII, Secs. 7811(g)(3), 7831(f), Dec. 19, 1989, 103
Stat. 2409, 2427; Pub. L. 102-318, title V, Sec. 521(b)(15), July
3, 1992, 106 Stat. 311; Pub. L. 104-188, title I, Secs. 1401(b)(8),
1402(b)(2), Aug. 20, 1996, 110 Stat. 1789, 1790.)
-MISC1-
AMENDMENTS
1996 - Subsec. (c). Pub. L. 104-188, Sec. 1401(b)(8), struck out
subsec. (c) which related to treatment of termination of status as
deemed employee.
Subsec. (e)(2), (3). Pub. L. 104-188, Sec. 1402(b)(2),
redesignated par. (3) as (2) and struck out former par. (2) which
read as follows: "Section 101(b) (relating to employees' death
benefits)."
1992 - Subsec. (c). Pub. L. 102-318 substituted "402(d)" for
"402(e)".
1989 - Subsec. (b)(1)(A). Pub. L. 101-239, Sec. 7831(f), made
technical correction to Pub. L. 99-514, Sec. 1114(b)(9)(B), see
1986 Amendment note below.
Subsec. (c). Pub. L. 101-239, Sec. 7811(g)(3), substituted
"purposes of limitation" for "purposes limitation" in heading.
1988 - Subsec. (c). Pub. L. 100-647, Sec. 1011A(b)(16), struck
out "of capital gain provisions and" after "service for purposes"
in heading and substituted "applying section 402(e)" for "applying
subsections (a)(2) and (e) of section 402, and section 403(a)(2)"
in text.
Subsec. (e). Pub. L. 100-647, Sec. 1011A(b)(1)(C), redesignated
pars. (2) to (4) as (1) to (3), respectively, and struck out former
par. (1) which read as follows: "Section 72(d) (relating to
employees' annuities)."
1986 - Subsec. (b)(1). Pub. L. 99-514, Sec. 1112(d)(3), struck
out "(without regard to paragraph (1)(A) thereof)" after "section
410(b)" in introductory text.
Subsec. (b)(1)(A). Pub. L. 99-514, Sec. 1114(b)(9)(B), as amended
by Pub. L. 101-239, Sec. 7831(f), substituted "a highly compensated
employee (within the meaning of section 414(q))" for "an officer,
shareholder, or person whose principal duties consist in
supervising the work of other employees of a domestic subsidiary".
Subsec. (b)(1)(B). Pub. L. 99-514, Sec. 1114(b)(9)(C), inserted
"(as so defined)" after "employee".
Subsec. (e)(5). Pub. L. 99-514, Sec. 1852(e)(2)(D), struck out
par. (5) which read as follows: "Section 2517 (relating to certain
annuities under qualified plans)."
1984 - Subsec. (a)(1). Pub. L. 98-369, Sec. 491(d)(16),
substituted "or an annuity plan described in section 403(a)" for ",
an annuity plan described in section 403(a), or a bond purchase
plan described in section 405(a)".
Subsec. (a)(1)(B). Pub. L. 98-369, Sec. 491(d)(17), substituted
"or 403(a)" for ", 403(a), or 405(a)".
Subsec. (d). Pub. L. 98-369, Sec. 491(d)(18)(A), (B), substituted
in introductory provision "section 404" for "sections 404 and
405(a)", and "or annuity" for "annuity, or bond purchase".
Subsec. (d)(2). Pub. L. 98-369, Sec. 491(d)(18)(C), struck out
"(or section 405(c))" after "section 404".
1983 - Subsec. (a)(1). Pub. L. 98-21 inserted "or resident" after
"citizen", and inserted "or residents" after "citizens" in subpar.
(A).
1976 - Subsec. (b)(2). Pub. L. 94-455 struck out "or his
delegate" after "Secretary".
1974 - Subsec. (b)(1). Pub. L. 93-406, Sec. 1016(a)(5),
substituted "section 401(a)(4) and section 410(b) (without regard
to paragraph (1)(A) thereof)" for "paragraphs (3)(B) and (4) of
section 401(a)".
Subsec. (c). Pub. L. 93-406, Sec. 2005(c)(13), substituted
"subsections (a)(2) and (e) of section 402" for "section 72(n),
section 402(a)(2)".
1969 - Subsec. (c). Pub. L. 91-172 substituted "provisions and
limitation of tax" for "provisions" in heading, and substituted
"section 72(n), section 402(a)(2)," for "section 402(a)(2)" in
text.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1401(b)(8) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1999, with retention of
certain transition rules, see section 1401(c) of Pub. L. 104-188,
set out as a note under section 402 of this title.
Amendment by section 1402(b)(2) of Pub. L. 104-188 applicable
with respect to decedents dying after Aug. 20, 1996, see section
1402(c) of Pub. L. 104-188, set out as a note under section 101 of
this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-318 applicable to distributions after
Dec. 31, 1992, see section 521(e) of Pub. L. 102-318, set out as a
note under section 402 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by section 7811(g)(3) of Pub. L. 101-239 effective,
except as otherwise provided, as if included in the provision of
the Technical and Miscellaneous Revenue Act of 1988, Pub. L.
100-647, to which such amendment relates, see section 7817 of Pub.
L. 101-239, set out as a note under section 1 of this title.
Amendment by section 7831(f) of Pub. L. 101-239 effective as if
included in the provision of the Tax Reform Act of 1986, Pub. L.
99-514, to which such amendment relates, see section 7831(g) of
Pub. L. 101-239, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1112(d)(3) of Pub. L. 99-514 applicable to
plan years beginning after Dec. 31, 1988, with special rule
regarding collective bargaining agreements ratified before Mar. 1,
1986, and with provision for waiver of excise tax on reversions,
see section 1112(e) of Pub. L. 99-514, set out as a note under
section 401 of this title.
Amendment by section 1114(b)(9)(B), (C) of Pub. L. 99-514
applicable to years beginning after Dec. 31, 1988, see section
1114(c)(3) of Pub. L. 99-514, set out as a note under section 414
of this title.
Amendment by section 1852(e)(2)(D) of Pub. L. 99-514 applicable
to transfers after Oct. 22, 1986, see section 1852(e)(2)(E) of Pub.
L. 99-514, set out as a note under section 406 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to obligations issued
after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 98-369, set
out as a note under section 62 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 98-21 applicable to plans established after
Apr. 20, 1983, except that at the election of any domestic parent
corporation such amendment shall also apply to any plan established
on or before Apr. 20, 1983, see section 321(f) of Pub. L. 98-21 set
out as a note under section 406 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by section 1016(a)(5) of Pub. L. 93-406 applicable,
except as otherwise provided in section 1017(c) through (i) of Pub.
L. 93-406, for plan years beginning after Sept. 2, 1974, but, in
the case of plans in existence on Jan. 1, 1974, amendment by Pub.
L. 93-406 applicable for plan years beginning after Dec. 31, 1975,
see section 1017 of Pub. L. 93-406, set out as an Effective Date;
Transitional Rules note under section 410 of this title.
Amendment by section 2005(c)(13) of Pub. L. 93-406 applicable
only with respect to distributions or payments made after Dec. 31,
1973, in taxable years beginning after Dec. 31, 1973, see section
2005(d) of Pub. L. 93-406, set out as a note under section 402 of
this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years ending
after Dec. 31, 1969, see section 515(d) of Pub. L. 91-172, set out
as a note under section 402 of this title.
EFFECTIVE DATE
Section applicable to taxable years ending after Dec. 31, 1963,
see section 220(d) of Pub. L. 88-272, set out as a note under
section 406 of this title.
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by sections
1112 and 1114 of Pub. L. 99-514, see section 1141 of Pub. L.
99-514, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-End-
-CITE-
26 USC Sec. 408 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 408. Individual retirement accounts
-STATUTE-
(a) Individual retirement account
For purposes of this section, the term "individual retirement
account" means a trust created or organized in the United States
for the exclusive benefit of an individual or his beneficiaries,
but only if the written governing instrument creating the trust
meets the following requirements:
(1) Except in the case of a rollover contribution described in
subsection (d)(3) in (!1) section 402(c), 403(a)(4), 403(b)(8),
or 457(e)(16) (!2) no contribution will be accepted unless it is
in cash, and contributions will not be accepted for the taxable
year on behalf of any individual in excess of the amount in
effect for such taxable year under section 219(b)(1)(A).
(2) The trustee is a bank (as defined in subsection (n)) or
such other person who demonstrates to the satisfaction of the
Secretary that the manner in which such other person will
administer the trust will be consistent with the requirements of
this section.
(3) No part of the trust funds will be invested in life
insurance contracts.
(4) The interest of an individual in the balance in his account
is nonforfeitable.
(5) The assets of the trust will not be commingled with other
property except in a common trust fund or common investment fund.
(6) Under regulations prescribed by the Secretary, rules
similar to the rules of section 401(a)(9) and the incidental
death benefit requirements of section 401(a) shall apply to the
distribution of the entire interest of an individual for whose
benefit the trust is maintained.
(b) Individual retirement annuity
For purposes of this section, the term "individual retirement
annuity" means an annuity contract, or an endowment contract (as
determined under regulations prescribed by the Secretary), issued
by an insurance company which meets the following requirements:
(1) The contract is not transferable by the owner.
(2) Under the contract -
(A) the premiums are not fixed,
(B) the annual premium on behalf of any individual will not
exceed the dollar amount in effect under section 219(b)(1)(A),
and
(C) any refund of premiums will be applied before the close
of the calendar year following the year of the refund toward
the payment of future premiums or the purchase of additional
benefits.
(3) Under regulations prescribed by the Secretary, rules
similar to the rules of section 401(a)(9) and the incidental
death benefit requirements of section 401(a) shall apply to the
distribution of the entire interest of the owner.
(4) The entire interest of the owner is nonforfeitable.
Such term does not include such an annuity contract for any taxable
year of the owner in which it is disqualified on the application of
subsection (e) or for any subsequent taxable year. For purposes of
this subsection, no contract shall be treated as an endowment
contract if it matures later than the taxable year in which the
individual in whose name such contract is purchased attains age 70
1/2 ; if it is not for the exclusive benefit of the individual in
whose name it is purchased or his beneficiaries; or if the
aggregate annual premiums under all such contracts purchased in the
name of such individual for any taxable year exceed the dollar
amount in effect under section 219(b)(1)(A).
(c) Accounts established by employers and certain associations of
employees
A trust created or organized in the United States by an employer
for the exclusive benefit of his employees or their beneficiaries,
or by an association of employees (which may include employees
within the meaning of section 401(c)(1)) for the exclusive benefit
of its members or their beneficiaries, shall be treated as an
individual retirement account (described in subsection (a)), but
only if the written governing instrument creating the trust meets
the following requirements:
(1) The trust satisfies the requirements of paragraphs (1)
through (6) of subsection (a).
(2) There is a separate accounting for the interest of each
employee or member (or spouse of an employee or member).
The assets of the trust may be held in a common fund for the
account of all individuals who have an interest in the trust.
(d) Tax treatment of distributions
(1) In general
Except as otherwise provided in this subsection, any amount
paid or distributed out of an individual retirement plan shall be
included in gross income by the payee or distributee, as the case
may be, in the manner provided under section 72.
(2) Special rules for applying section 72
For purposes of applying section 72 to any amount described in
paragraph (1) -
(A) all individual retirement plans shall be treated as 1
contract,
(B) all distributions during any taxable year shall be
treated as 1 distribution, and
(C) the value of the contract, income on the contract, and
investment in the contract shall be computed as of the close of
the calendar year in which the taxable year begins.
For purposes of subparagraph (C), the value of the contract shall
be increased by the amount of any distributions during the
calendar year.
(3) Rollover contribution
An amount is described in this paragraph as a rollover
contribution if it meets the requirements of subparagraphs (A)
and (B).
(A) In general
Paragraph (1) does not apply to any amount paid or
distributed out of an individual retirement account or
individual retirement annuity to the individual for whose
benefit the account or annuity is maintained if -
(i) the entire amount received (including money and any
other property) is paid into an individual retirement account
or individual retirement annuity (other than an endowment
contract) for the benefit of such individual not later than
the 60th day after the day on which he receives the payment
or distribution; or
(ii) the entire amount received (including money and any
other property) is paid into an eligible retirement plan for
the benefit of such individual not later than the 60th day
after the date on which the payment or distribution is
received, except that the maximum amount which may be paid
into such plan may not exceed the portion of the amount
received which is includible in gross income (determined
without regard to this paragraph).
For purposes of clause (ii), the term "eligible retirement
plan" means an eligible retirement plan described in clause
(iii), (iv), (v), or (vi) of section 402(c)(8)(B).
(B) Limitation
This paragraph does not apply to any amount described in
subparagraph (A)(i) received by an individual from an
individual retirement account or individual retirement annuity
if at any time during the 1-year period ending on the day of
such receipt such individual received any other amount
described in that subparagraph from an individual retirement
account or an individual retirement annuity which was not
includible in his gross income because of the application of
this paragraph.
(C) Denial of rollover treatment for inherited accounts, etc.
(i) In general
In the case of an inherited individual retirement account
or individual retirement annuity -
(I) this paragraph shall not apply to any amount received
by an individual from such an account or annuity (and no
amount transferred from such account or annuity to another
individual retirement account or annuity shall be excluded
from gross income by reason of such transfer), and
(II) such inherited account or annuity shall not be
treated as an individual retirement account or annuity for
purposes of determining whether any other amount is a
rollover contribution.
(ii) Inherited individual retirement account or annuity
An individual retirement account or individual retirement
annuity shall be treated as inherited if -
(I) the individual for whose benefit the account or
annuity is maintained acquired such account by reason of
the death of another individual, and
(II) such individual was not the surviving spouse of such
other individual.
(D) Partial rollovers permitted
(i) In general
If any amount paid or distributed out of an individual
retirement account or individual retirement annuity would
meet the requirements of subparagraph (A) but for the fact
that the entire amount was not paid into an eligible plan as
required by clause (i) or (ii) of subparagraph (A), such
amount shall be treated as meeting the requirements of
subparagraph (A) to the extent it is paid into an eligible
plan referred to in such clause not later than the 60th day
referred to in such clause.
(ii) Eligible plan
For purposes of clause (i), the term "eligible plan" means
any account, annuity, contract, or plan referred to in
subparagraph (A).
(E) Denial of rollover treatment for required distributions
This paragraph shall not apply to any amount to the extent
such amount is required to be distributed under subsection
(a)(6) or (b)(3).
(F) Frozen deposits
For purposes of this paragraph, rules similar to the rules of
section 402(c)(7) (relating to frozen deposits) shall apply.
(G) Simple retirement accounts
In the case of any payment or distribution out of a simple
retirement account (as defined in subsection (p)) to which
section 72(t)(6) applies, this paragraph shall not apply unless
such payment or distribution is paid into another simple
retirement account.
(H) Application of section 72
(i) In general
If -
(I) a distribution is made from an individual retirement
plan, and
(II) a rollover contribution is made to an eligible
retirement plan described in section 402(c)(8)(B)(iii),
(iv), (v), or (vi) with respect to all or part of such
distribution,
then, notwithstanding paragraph (2), the rules of clause (ii)
shall apply for purposes of applying section 72.
(ii) Applicable rules
In the case of a distribution described in clause (i) -
(I) section 72 shall be applied separately to such
distribution,
(II) notwithstanding the pro rata allocation of income
on, and investment in, the contract to distributions under
section 72, the portion of such distribution rolled over to
an eligible retirement plan described in clause (i) shall
be treated as from income on the contract (to the extent of
the aggregate income on the contract from all individual
retirement plans of the distributee), and
(III) appropriate adjustments shall be made in applying
section 72 to other distributions in such taxable year and
subsequent taxable years.
(I) Waiver of 60-day requirement
The Secretary may waive the 60-day requirement under
subparagraphs (A) and (D) where the failure to waive such
requirement would be against equity or good conscience,
including casualty, disaster, or other events beyond the
reasonable control of the individual subject to such
requirement.
(4) Contributions returned before due date of return
Paragraph (1) does not apply to the distribution of any
contribution paid during a taxable year to an individual
retirement account or for an individual retirement annuity if -
(A) such distribution is received on or before the day
prescribed by law (including extensions of time) for filing
such individual's return for such taxable year,
(B) no deduction is allowed under section 219 with respect to
such contribution, and
(C) such distribution is accompanied by the amount of net
income attributable to such contribution.
In the case of such a distribution, for purposes of section 61,
any net income described in subparagraph (C) shall be deemed to
have been earned and receivable in the taxable year in which such
contribution is made.
(5) Distributions of excess contributions after due date for
taxable year and certain excess rollover contributions
(A) In general
In the case of any individual, if the aggregate contributions
(other than rollover contributions) paid for any taxable year
to an individual retirement account or for an individual
retirement annuity do not exceed the dollar amount in effect
under section 219(b)(1)(A), paragraph (1) shall not apply to
the distribution of any such contribution to the extent that
such contribution exceeds the amount allowable as a deduction
under section 219 for the taxable year for which the
contribution was paid -
(i) if such distribution is received after the date
described in paragraph (4),
(ii) but only to the extent that no deduction has been
allowed under section 219 with respect to such excess
contribution.
If employer contributions on behalf of the individual are paid
for the taxable year to a simplified employee pension, the
dollar limitation of the preceding sentence shall be increased
by the lesser of the amount of such contributions or the dollar
limitation in effect under section 415(c)(1)(A) for such
taxable year.
(B) Excess rollover contributions attributable to erroneous
information
If -
(i) the taxpayer reasonably relies on information supplied
pursuant to subtitle F for determining the amount of a
rollover contribution, but
(ii) the information was erroneous,
subparagraph (A) shall be applied by increasing the dollar
limit set forth therein by that portion of the excess
contribution which was attributable to such information.
For purposes of this paragraph, the amount allowable as a
deduction under section 219 shall be computed without regard to
section 219(g).
(6) Transfer of account incident to divorce
The transfer of an individual's interest in an individual
retirement account or an individual retirement annuity to his
spouse or former spouse under a divorce or separation instrument
described in subparagraph (A) of section 71(b)(2) is not to be
considered a taxable transfer made by such individual
notwithstanding any other provision of this subtitle, and such
interest at the time of the transfer is to be treated as an
individual retirement account of such spouse, and not of such
individual. Thereafter such account or annuity for purposes of
this subtitle is to be treated as maintained for the benefit of
such spouse.
(7) Special rules for simplified employee pensions or simple
retirement accounts
(A) Transfer or rollover of contributions prohibited until
deferral test met
Notwithstanding any other provision of this subsection or
section 72(t), paragraph (1) and section 72(t)(1) shall apply
to the transfer or distribution from a simplified employee
pension of any contribution under a salary reduction
arrangement described in subsection (k)(6) (or any income
allocable thereto) before a determination as to whether the
requirements of subsection (k)(6)(A)(iii) are met with respect
to such contribution.
(B) Certain exclusions treated as deductions
For purposes of paragraphs (4) and (5) and section 4973, any
amount excludable or excluded from gross income under section
402(h) or 402(k) shall be treated as an amount allowable or
allowed as a deduction under section 219.
(e) Tax treatment of accounts and annuities
(1) Exemption from tax
Any individual retirement account is exempt from taxation under
this subtitle unless such account has ceased to be an individual
retirement account by reason of paragraph (2) or (3).
Notwithstanding the preceding sentence, any such account is
subject to the taxes imposed by section 511 (relating to
imposition of tax on unrelated business income of charitable,
etc. organizations).
(2) Loss of exemption of account where employee engages in
prohibited transaction
(A) In general
If, during any taxable year of the individual for whose
benefit any individual retirement account is established, that
individual or his beneficiary engages in any transaction
prohibited by section 4975 with respect to such account, such
account ceases to be an individual retirement account as of the
first day of such taxable year. For purposes of this paragraph
-
(i) the individual for whose benefit any account was
established is treated as the creator of such account, and
(ii) the separate account for any individual within an
individual retirement account maintained by an employer or
association of employees is treated as a separate individual
retirement account.
(B) Account treated as distributing all its assets
In any case in which any account ceases to be an individual
retirement account by reason of subparagraph (A) as of the
first day of any taxable year, paragraph (1) of subsection (d)
applies as if there were a distribution on such first day in an
amount equal to the fair market value (on such first day) of
all assets in the account (on such first day).
(3) Effect of borrowing on annuity contract
If during any taxable year the owner of an individual
retirement annuity borrows any money under or by use of such
contract, the contract ceases to be an individual retirement
annuity as of the first day of such taxable year. Such owner
shall include in gross income for such year an amount equal to
the fair market value of such contract as of such first day.
(4) Effect of pledging account as security
If, during any taxable year of the individual for whose benefit
an individual retirement account is established, that individual
uses the account or any portion thereof as security for a loan,
the portion so used is treated as distributed to that individual.
(5) Purchase of endowment contract by individual retirement
account
If the assets of an individual retirement account or any part
of such assets are used to purchase an endowment contract for the
benefit of the individual for whose benefit the account is
established -
(A) to the extent that the amount of the assets involved in
the purchase are not attributable to the purchase of life
insurance, the purchase is treated as a rollover contribution
described in subsection (d)(3), and
(B) to the extent that the amount of the assets involved in
the purchase are attributable to the purchase of life, health,
accident, or other insurance, such amounts are treated as
distributed to that individual (but the provisions of
subsection (f) do not apply).
(6) Commingling individual retirement account amounts in certain
common trust funds and common investment funds
Any common trust fund or common investment fund of individual
retirement account assets which is exempt from taxation under
this subtitle does not cease to be exempt on account of the
participation or inclusion of assets of a trust exempt from
taxation under section 501(a) which is described in section
401(a).
[(f) Repealed. Pub. L. 99-514, title XI, Sec. 1123(d)(2), Oct. 22,
1986, 100 Stat. 2475]
(g) Community property laws
This section shall be applied without regard to any community
property laws.
(h) Custodial accounts
For purposes of this section, a custodial account shall be
treated as a trust if the assets of such account are held by a bank
(as defined in subsection (n)) or another person who demonstrates,
to the satisfaction of the Secretary, that the manner in which he
will administer the account will be consistent with the
requirements of this section, and if the custodial account would,
except for the fact that it is not a trust, constitute an
individual retirement account described in subsection (a). For
purposes of this title, in the case of a custodial account treated
as a trust by reason of the preceding sentence, the custodian of
such account shall be treated as the trustee thereof.
(i) Reports
The trustee of an individual retirement account and the issuer of
an endowment contract described in subsection (b) or an individual
retirement annuity shall make such reports regarding such account,
contract, or annuity to the Secretary and to the individuals for
whom the account, contract, or annuity is, or is to be, maintained
with respect to contributions (and the years to which they relate),
distributions aggregating $10 or more in any calendar year, and
such other matters as the Secretary may require. The reports
required by this subsection -
(1) shall be filed at such time and in such manner as the
Secretary prescribes, and
(2) shall be furnished to individuals -
(A) not later than January 31 of the calendar year following
the calendar year to which such reports relate, and
(B) in such manner as the Secretary prescribes.
In the case of a simple retirement account under subsection (p),
only one report under this subsection shall be required to be
submitted each calendar year to the Secretary (at the time provided
under paragraph (2)) but, in addition to the report under this
subsection, there shall be furnished, within 31 days after each
calendar year, to the individual on whose behalf the account is
maintained a statement with respect to the account balance as of
the close of, and the account activity during, such calendar year.
(j) Increase in maximum limitations for simplified employee
pensions
In the case of any simplified employee pension, subsections
(a)(1) and (b)(2) of this section shall be applied by increasing
the amounts contained therein by the amount of the limitation in
effect under section 415(c)(1)(A).
(k) Simplified employee pension defined
(1) In general
For purposes of this title, the term "simplified employee
pension" means an individual retirement account or individual
retirement annuity -
(A) with respect to which the requirements of paragraphs (2),
(3), (4), and (5) of this subsection are met, and
(B) if such account or annuity is part of a top-heavy plan
(as defined in section 416), with respect to which the
requirements of section 416(c)(2) are met.
(2) Participation requirements
This paragraph is satisfied with respect to a simplified
employee pension for a year only if for such year the employer
contributes to the simplified employee pension of each employee
who -
(A) has attained age 21,
(B) has performed service for the employer during at least 3
of the immediately preceding 5 years, and
(C) received at least $450 in compensation (within the
meaning of section 414(q)(4)) from the employer for the year.
For purposes of this paragraph, there shall be excluded from
consideration employees described in subparagraph (A) or (C) of
section 410(b)(3). For purposes of any arrangement described in
subsection (k)(6), any employee who is eligible to have employer
contributions made on the employee's behalf under such
arrangement shall be treated as if such a contribution was made.
(3) Contributions may not discriminate in favor of the highly
compensated, etc.
(A) In general
The requirements of this paragraph are met with respect to a
simplified employee pension for a year if for such year the
contributions made by the employer to simplified employee
pensions for his employees do not discriminate in favor of any
highly compensated employee (within the meaning of section
414(q)).
(B) Special rules
For purposes of subparagraph (A), there shall be excluded
from consideration employees described in subparagraph (A) or
(C) of section 410(b)(3).
(C) Contributions must bear uniform relationship to total
compensation
For purposes of subparagraph (A), and except as provided in
subparagraph (D), employer contributions to simplified employee
pensions (other than contributions under an arrangement
described in paragraph (6)) shall be considered discriminatory
unless contributions thereto bear a uniform relationship to the
compensation (not in excess of the first $200,000) of each
employee maintaining a simplified employee pension.
(D) Permitted disparity
For purposes of subparagraph (C), the rules of section
401(l)(2) shall apply to contributions to simplified employee
pensions (other than contributions under an arrangement
described in paragraph (6)).
(4) Withdrawals must be permitted
A simplified employee pension meets the requirements of this
paragraph only if -
(A) employer contributions thereto are not conditioned on the
retention in such pension of any portion of the amount
contributed, and
(B) there is no prohibition imposed by the employer on
withdrawals from the simplified employee pension.
(5) Contributions must be made under written allocation formula
The requirements of this paragraph are met with respect to a
simplified employee pension only if employer contributions to
such pension are determined under a definite written allocation
formula which specifies -
(A) the requirements which an employee must satisfy to share
in an allocation, and
(B) the manner in which the amount allocated is computed.
(6) Employee may elect salary reduction arrangement
(A) Arrangements which qualify
(i) In general
A simplified employee pension shall not fail to meet the
requirements of this subsection for a year merely because,
under the terms of the pension, an employee may elect to have
the employer make payments -
(I) as elective employer contributions to the simplified
employee pension on behalf of the employee, or
(II) to the employee directly in cash.
(ii) 50 percent of eligible employees must elect
Clause (i) shall not apply to a simplified employee pension
unless an election described in clause (i)(I) is made or is
in effect with respect to not less than 50 percent of the
employees of the employer eligible to participate.
(iii) Requirements relating to deferral percentage
Clause (i) shall not apply to a simplified employee pension
for any year unless the deferral percentage for such year of
each highly compensated employee eligible to participate is
not more than the product of -
(I) the average of the deferral percentages for such year
of all employees (other than highly compensated employees)
eligible to participate, multiplied by
(II) 1.25.
(iv) Limitations on elective deferrals
Clause (i) shall not apply to a simplified employee pension
unless the requirements of section 401(a)(30) are met.
(B) Exception where more than 25 employees
This paragraph shall not apply with respect to any year in
the case of a simplified employee pension maintained by an
employer with more than 25 employees who were eligible to
participate (or would have been required to be eligible to
participate if a pension was maintained) at any time during the
preceding year.
(C) Distributions of excess contributions
(i) In general
Rules similar to the rules of section 401(k)(8) shall apply
to any excess contribution under this paragraph. Any excess
contribution under a simplified employee pension shall be
treated as an excess contribution for purposes of section
4979.
(ii) Excess contribution
For purposes of clause (i), the term "excess contribution"
means, with respect to a highly compensated employee, the
excess of elective employer contributions under this
paragraph over the maximum amount of such contributions
allowable under subparagraph (A)(iii).
(D) Deferral percentage
For purposes of this paragraph, the deferral percentage for
an employee for a year shall be the ratio of -
(i) the amount of elective employer contributions actually
paid over to the simplified employee pension on behalf of the
employee for the year, to
(ii) the employee's compensation (not in excess of the
first $200,000) for the year.
(E) Exception for State and local and tax-exempt pensions
This paragraph shall not apply to a simplified employee
pension maintained by -
(i) a State or local government or political subdivision
thereof, or any agency or instrumentality thereof, or
(ii) an organization exempt from tax under this title.
(F) Exception where pension does not meet requirements
necessary to insure distribution of excess contributions
This paragraph shall not apply with respect to any year for
which the simplified employee pension does not meet such
requirements as the Secretary may prescribe as are necessary to
insure that excess contributions are distributed in accordance
with subparagraph (C), including -
(i) reporting requirements, and
(ii) requirements which, notwithstanding paragraph (4),
provide that contributions (and any income allocable thereto)
may not be withdrawn from a simplified employee pension until
a determination has been made that the requirements of
subparagraph (A)(iii) have been met with respect to such
contributions.
(G) Highly compensated employee
For purposes of this paragraph, the term "highly compensated
employee" has the meaning given such term by section 414(q).
(H) Termination
This paragraph shall not apply to years beginning after
December 31, 1996. The preceding sentence shall not apply to a
simplified employee pension of an employer if the terms of
simplified employee pensions of such employer, as in effect on
December 31, 1996, provide that an employee may make the
election described in subparagraph (A).
(7) Definitions
For purposes of this subsection and subsection (l) -
(A) Employee, employer, or owner-employee
The terms "employee", "employer", and "owner-employee" shall
have the respective meanings given such terms by section
401(c).
(B) Compensation
Except as provided in paragraph (2)(C), the term
"compensation" has the meaning given such term by section
414(s).
(C) Year
The term "year" means -
(i) the calendar year, or
(ii) if the employer elects, subject to such terms and
conditions as the Secretary may prescribe, to maintain the
simplified employee pension on the basis of the employer's
taxable year.
(8) Cost-of-living adjustment
The Secretary shall adjust the $450 amount in paragraph (2)(C)
at the same time and in the same manner as under section 415(d)
and shall adjust the $200,000 amount in paragraphs (3)(C) and
(6)(D)(ii) at the same time, and by the same amount, as any
adjustment under section 401(a)(17)(B); except that any increase
in the $450 amount which is not a multiple of $50 shall be
rounded to the next lowest multiple of $50.
(9) Cross reference
For excise tax on certain excess contributions, see section
4979.
(l) Simplified employer reports
(1) In general
An employer who makes a contribution on behalf of an employee
to a simplified employee pension shall provide such simplified
reports with respect to such contributions as the Secretary may
require by regulations. The reports required by this subsection
shall be filed at such time and in such manner, and information
with respect to such contributions shall be furnished to the
employee at such time and in such manner, as may be required by
regulations.
(2) Simple retirement accounts
(A) No employer reports
Except as provided in this paragraph, no report shall be
required under this section by an employer maintaining a
qualified salary reduction arrangement under subsection (p).
(B) Summary description
The trustee of any simple retirement account established
pursuant to a qualified salary reduction arrangement under
subsection (p) and the issuer of an annuity established under
such an arrangement shall provide to the employer maintaining
the arrangement, each year a description containing the
following information:
(i) The name and address of the employer and the trustee or
issuer.
(ii) The requirements for eligibility for participation.
(iii) The benefits provided with respect to the
arrangement.
(iv) The time and method of making elections with respect
to the arrangement.
(v) The procedures for, and effects of, withdrawals
(including rollovers) from the arrangement.
(C) Employee notification
The employer shall notify each employee immediately before
the period for which an election described in subsection
(p)(5)(C) may be made of the employee's opportunity to make
such election. Such notice shall include a copy of the
description described in subparagraph (B).
(m) Investment in collectibles treated as distributions
(1) In general
The acquisition by an individual retirement account or by an
individually-directed account under a plan described in section
401(a) of any collectible shall be treated (for purposes of this
section and section 402) as a distribution from such account in
an amount equal to the cost to such account of such collectible.
(2) Collectible defined
For purposes of this subsection, the term "collectible" means -
(A) any work of art,
(B) any rug or antique,
(C) any metal or gem,
(D) any stamp or coin,
(E) any alcoholic beverage, or
(F) any other tangible personal property specified by the
Secretary for purposes of this subsection.
(3) Exception for certain coins and bullion
For purposes of this subsection, the term "collectible" shall
not include -
(A) any coin which is -
(i) a gold coin described in paragraph (7), (8), (9), or
(10) of section 5112(a) of title 31, United States Code,
(ii) a silver coin described in section 5112(e) of title
31, United States Code,
(iii) a platinum coin described in section 5112(k) of title
31, United States Code, or
(iv) a coin issued under the laws of any State, or
(B) any gold, silver, platinum, or palladium bullion of a
fineness equal to or exceeding the minimum fineness that a
contract market (as described in section 7 of the Commodity
Exchange Act, 7 U.S.C. 7) (!3) requires for metals which may be
delivered in satisfaction of a regulated futures contract,
if such bullion is in the physical possession of a trustee
described under subsection (a) of this section.
(n) Bank
For purposes of subsection (a)(2), the term "bank" means -
(1) any bank (as defined in section 581),
(2) an insured credit union (within the meaning of section
101(6) of the Federal Credit Union Act), and
(3) a corporation which, under the laws of the State of its
incorporation, is subject to supervision and examination by the
Commissioner of Banking or other officer of such State in charge
of the administration of the banking laws of such State.
(o) Definitions and rules relating to nondeductible contributions
to individual retirement plans
(1) In general
Subject to the provisions of this subsection, designated
nondeductible contributions may be made on behalf of an
individual to an individual retirement plan.
(2) Limits on amounts which may be contributed
(A) In general
The amount of the designated nondeductible contributions made
on behalf of any individual for any taxable year shall not
exceed the nondeductible limit for such taxable year.
(B) Nondeductible limit
For purposes of this paragraph -
(i) In general
The term "nondeductible limit" means the excess of -
(I) the amount allowable as a deduction under section 219
(determined without regard to section 219(g)), over
(II) the amount allowable as a deduction under section
219 (determined with regard to section 219(g)).
(ii) Taxpayer may elect to treat deductible contributions as
nondeductible
If a taxpayer elects not to deduct an amount which (without
regard to this clause) is allowable as a deduction under
section 219 for any taxable year, the nondeductible limit for
such taxable year shall be increased by such amount.
(C) Designated nondeductible contributions
(i) In general
For purposes of this paragraph, the term "designated
nondeductible contribution" means any contribution to an
individual retirement plan for the taxable year which is
designated (in such manner as the Secretary may prescribe) as
a contribution for which a deduction is not allowable under
section 219.
(ii) Designation
Any designation under clause (i) shall be made on the
return of tax imposed by chapter 1 for the taxable year.
(3) Time when contributions made
In determining for which taxable year a designated
nondeductible contribution is made, the rule of section 219(f)(3)
shall apply.
(4) Individual required to report amount of designated
nondeductible contributions
(A) In general
Any individual who -
(i) makes a designated nondeductible contribution to any
individual retirement plan for any taxable year, or
(ii) receives any amount from any individual retirement
plan for any taxable year,
shall include on his return of the tax imposed by chapter 1 for
such taxable year and any succeeding taxable year (or on such
other form as the Secretary may prescribe for any such taxable
year) information described in subparagraph (B).
(B) Information required to be supplied
The following information is described in this subparagraph:
(i) The amount of designated nondeductible contributions
for the taxable year.
(ii) The amount of distributions from individual retirement
plans for the taxable year.
(iii) The excess (if any) of -
(I) the aggregate amount of designated nondeductible
contributions for all preceding taxable years, over
(II) the aggregate amount of distributions from
individual retirement plans which was excludable from gross
income for such taxable years.
(iv) The aggregate balance of all individual retirement
plans of the individual as of the close of the calendar year
in which the taxable year begins.
(v) Such other information as the Secretary may prescribe.
(C) Penalty for reporting contributions not made
For penalty where individual reports designated nondeductible
contributions not made, see section 6693(b).
(p) Simple retirement accounts
(1) In general
For purposes of this title, the term "simple retirement
account" means an individual retirement plan (as defined in
section 7701(a)(37)) -
(A) with respect to which the requirements of paragraphs (3),
(4), and (5) are met; and
(B) with respect to which the only contributions allowed are
contributions under a qualified salary reduction arrangement.
(2) Qualified salary reduction arrangement
(A) In general
For purposes of this subsection, the term "qualified salary
reduction arrangement" means a written arrangement of an
eligible employer under which -
(i) an employee eligible to participate in the arrangement
may elect to have the employer make payments -
(I) as elective employer contributions to a simple
retirement account on behalf of the employee, or
(II) to the employee directly in cash,
(ii) the amount which an employee may elect under clause
(i) for any year is required to be expressed as a percentage
of compensation and may not exceed a total of the applicable
dollar amount for any year,
(iii) the employer is required to make a matching
contribution to the simple retirement account for any year in
an amount equal to so much of the amount the employee elects
under clause (i)(I) as does not exceed the applicable
percentage of compensation for the year, and
(iv) no contributions may be made other than contributions
described in clause (i) or (iii).
(B) Employer may elect 2-percent nonelective contribution
(i) In general
An employer shall be treated as meeting the requirements of
subparagraph (A)(iii) for any year if, in lieu of the
contributions described in such clause, the employer elects
to make nonelective contributions of 2 percent of
compensation for each employee who is eligible to participate
in the arrangement and who has at least $5,000 of
compensation from the employer for the year. If an employer
makes an election under this subparagraph for any year, the
employer shall notify employees of such election within a
reasonable period of time before the 60-day period for such
year under paragraph (5)(C).
(ii) Compensation limitation
The compensation taken into account under clause (i) for
any year shall not exceed the limitation in effect for such
year under section 401(a)(17).
(C) Definitions
For purposes of this subsection -
(i) Eligible employer
(I) In general
The term "eligible employer" means, with respect to any
year, an employer which had no more than 100 employees who
received at least $5,000 of compensation from the employer
for the preceding year.
(II) 2-year grace period
An eligible employer who establishes and maintains a plan
under this subsection for 1 or more years and who fails to
be an eligible employer for any subsequent year shall be
treated as an eligible employer for the 2 years following
the last year the employer was an eligible employer. If
such failure is due to any acquisition, disposition, or
similar transaction involving an eligible employer, the
preceding sentence shall not apply.
(ii) Applicable percentage
(I) In general
The term "applicable percentage" means 3 percent.
(II) Election of lower percentage
An employer may elect to apply a lower percentage (not
less than 1 percent) for any year for all employees
eligible to participate in the plan for such year if the
employer notifies the employees of such lower percentage
within a reasonable period of time before the 60-day
election period for such year under paragraph (5)(C). An
employer may not elect a lower percentage under this
subclause for any year if that election would result in the
applicable percentage being lower than 3 percent in more
than 2 of the years in the 5-year period ending with such
year.
(III) Special rule for years arrangement not in effect
If any year in the 5-year period described in subclause
(II) is a year prior to the first year for which any
qualified salary reduction arrangement is in effect with
respect to the employer (or any predecessor), the employer
shall be treated as if the level of the employer matching
contribution was at 3 percent of compensation for such
prior year.
(D) Arrangement may be only plan of employer
(i) In general
An arrangement shall not be treated as a qualified salary
reduction arrangement for any year if the employer (or any
predecessor employer) maintained a qualified plan with
respect to which contributions were made, or benefits were
accrued, for service in any year in the period beginning with
the year such arrangement became effective and ending with
the year for which the determination is being made. If only
individuals other than employees described in subparagraph
(A) of section 410(b)(3) are eligible to participate in such
arrangement, then the preceding sentence shall be applied
without regard to any qualified plan in which only employees
so described are eligible to participate.
(ii) Qualified plan
For purposes of this subparagraph, the term "qualified
plan" means a plan, contract, pension, or trust described in
subparagraph (A) or (B) of section 219(g)(5).
(E) Applicable dollar amount; cost-of-living adjustment
(i) In general
For purposes of subparagraph (A)(ii), the applicable dollar
amount shall be the amount determined in accordance with the
following table:
For years The applicable
beginning in dollar amount:
calendar year:
2002 $7,000
2003 $8,000
2004 $9,000
2005 or thereafter $10,000.
(ii) Cost-of-living adjustment
In the case of a year beginning after December 31, 2005,
the Secretary shall adjust the $10,000 amount under clause
(i) at the same time and in the same manner as under section
415(d), except that the base period taken into account shall
be the calendar quarter beginning July 1, 2004, and any
increase under this subparagraph which is not a multiple of
$500 shall be rounded to the next lower multiple of $500.
(3) Vesting requirements
The requirements of this paragraph are met with respect to a
simple retirement account if the employee's rights to any
contribution to the simple retirement account are nonforfeitable.
For purposes of this paragraph, rules similar to the rules of
subsection (k)(4) shall apply.
(4) Participation requirements
(A) In general
The requirements of this paragraph are met with respect to
any simple retirement account for a year only if, under the
qualified salary reduction arrangement, all employees of the
employer who -
(i) received at least $5,000 in compensation from the
employer during any 2 preceding years, and
(ii) are reasonably expected to receive at least $5,000 in
compensation during the year,
are eligible to make the election under paragraph (2)(A)(i) or
receive the nonelective contribution described in paragraph
(2)(B).
(B) Excludable employees
An employer may elect to exclude from the requirement under
subparagraph (A) employees described in section 410(b)(3).
(5) Administrative requirements
The requirements of this paragraph are met with respect to any
simple retirement account if, under the qualified salary
reduction arrangement -
(A) an employer must -
(i) make the elective employer contributions under
paragraph (2)(A)(i) not later than the close of the 30-day
period following the last day of the month with respect to
which the contributions are to be made, and
(ii) make the matching contributions under paragraph
(2)(A)(iii) or the nonelective contributions under paragraph
(2)(B) not later than the date described in section
404(m)(2)(B),
(B) an employee may elect to terminate participation in such
arrangement at any time during the year, except that if an
employee so terminates, the arrangement may provide that the
employee may not elect to resume participation until the
beginning of the next year, and
(C) each employee eligible to participate may elect, during
the 60-day period before the beginning of any year (and the
60-day period before the first day such employee is eligible to
participate), to participate in the arrangement, or to modify
the amounts subject to such arrangement, for such year.
(6) Definitions
For purposes of this subsection -
(A) Compensation
(i) In general
The term "compensation" means amounts described in
paragraphs (3) and (8) of section 6051(a).
(ii) Self-employed
In the case of an employee described in subparagraph (B),
the term "compensation" means net earnings from
self-employment determined under section 1402(a) without
regard to any contribution under this subsection. The
preceding sentence shall be applied as if the term "trade or
business" for purposes of section 1402 included service
described in section 1402(c)(6).
(B) Employee
The term "employee" includes an employee as defined in
section 401(c)(1).
(C) Year
The term "year" means the calendar year.
(7) Use of designated financial institution
A plan shall not be treated as failing to satisfy the
requirements of this subsection or any other provision of this
title merely because the employer makes all contributions to the
individual retirement accounts or annuities of a designated
trustee or issuer. The preceding sentence shall not apply unless
each plan participant is notified in writing (either separately
or as part of the notice under subsection (l)(2)(C)) that the
participant's balance may be transferred without cost or penalty
to another individual account or annuity in accordance with
subsection (d)(3)(G).
(8) Coordination with maximum limitation under subsection (a)
In the case of any simple retirement account, subsections
(a)(1) and (b)(2) shall be applied by substituting "the sum of
the dollar amount in effect under paragraph (2)(A)(ii) of this
subsection and the employer contribution required under
subparagraph (A)(iii) or (B)(i) of paragraph (2) of this
subsection, whichever is applicable" for "the dollar amount in
effect under section 219(b)(1)(A)".
(9) Matching contributions on behalf of self-employed individuals
not treated as elective employer contributions
Any matching contribution described in paragraph (2)(A)(iii)
which is made on behalf of a self-employed individual (as defined
in section 401(c)) shall not be treated as an elective employer
contribution to a simple retirement account for purposes of this
title.
(10) Special rules for acquisitions, dispositions, and similar
transactions
(A) In general
An employer which fails to meet any applicable requirement by
reason of an acquisition, disposition, or similar transaction
shall not be treated as failing to meet such requirement during
the transition period if -
(i) the employer satisfies requirements similar to the
requirements of section 410(b)(6)(C)(i)(II); and
(ii) the qualified salary reduction arrangement maintained
by the employer would satisfy the requirements of this
subsection after the transaction if the employer which
maintained the arrangement before the transaction had
remained a separate employer.
(B) Applicable requirement
For purposes of this paragraph, the term "applicable
requirement" means -
(i) the requirement under paragraph (2)(A)(i) that an
employer be an eligible employer;
(ii) the requirement under paragraph (2)(D) that an
arrangement be the only plan of an employer; and
(iii) the participation requirements under paragraph (4).
(C) Transition period
For purposes of this paragraph, the term "transition period"
means the period beginning on the date of any transaction
described in subparagraph (A) and ending on the last day of the
second calendar year following the calendar year in which such
transaction occurs.
(q) Deemed IRAs under qualified employer plans
(1) General rule
If -
(A) a qualified employer plan elects to allow employees to
make voluntary employee contributions to a separate account or
annuity established under the plan, and
(B) under the terms of the qualified employer plan, such
account or annuity meets the applicable requirements of this
section or section 408A for an individual retirement account or
annuity,
then such account or annuity shall be treated for purposes of
this title in the same manner as an individual retirement plan
and not as a qualified employer plan (and contributions to such
account or annuity as contributions to an individual retirement
plan and not to the qualified employer plan). For purposes of
subparagraph (B), the requirements of subsection (a)(5) shall not
apply.
(2) Special rules for qualified employer plans
For purposes of this title, a qualified employer plan shall not
fail to meet any requirement of this title solely by reason of
establishing and maintaining a program described in paragraph
(1).
(3) Definitions
For purposes of this subsection -
(A) Qualified employer plan
The term "qualified employer plan" has the meaning given such
term by section 72(p)(4)(A)(i); except that such term shall
also include an eligible deferred compensation plan (as defined
in section 457(b)) of an eligible employer described in section
457(e)(1)(A).
(B) Voluntary employee contribution
The term "voluntary employee contribution" means any
contribution (other than a mandatory contribution within the
meaning of section 411(c)(2)(C)) -
(i) which is made by an individual as an employee under a
qualified employer plan which allows employees to elect to
make contributions described in paragraph (1), and
(ii) with respect to which the individual has designated
the contribution as a contribution to which this subsection
applies.
(r) Cross references
(1) For tax on excess contributions in individual retirement
accounts or annuities, see section 4963.
(2) For tax on certain accumulations in individual retirement
accounts or annuities, see section 4974.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 2002(b), Sept. 2, 1974, 88
Stat. 959; amended Pub. L. 94-455, title XV, Sec. 1501(b)(2), (5),
(10), title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat.
1735-1737, 1834; Pub. L. 95-600, title I, Secs. 152(a), (b),
156(c)(1), (3), 157(c)(1), (d)(1), (e)(1)(A), (g)(3), (h)(2), title
VII, Sec. 703(c)(4), Nov. 6, 1978, 92 Stat. 2797, 2802, 2803, 2805,
2806, 2808, 2939; Pub. L. 96-222, title I, Sec. 101(a)(10)(A), (C),
(F), (G), (J)(i), (14)(B), (E)(ii), Apr. 1, 1980, 94 Stat. 201-205;
Pub. L. 96-605, title II, Sec. 225(b)(3), (4), Dec. 28, 1980, 94
Stat. 3529; Pub. L. 97-34, title III, Secs. 311(g)(1)(A)-(C), (2),
(h)(2), 312(b)(2), (c)(5), 313(b)(2), 314(b)(1), Aug. 13, 1981, 95
Stat. 281-284, 286; Pub. L. 97-248, title II, Secs. 237(e)(3),
238(d)(3), (4), 243(a), (b)(1)(A), title III, Sec. 335(a)(1), Sept.
3, 1982, 96 Stat. 512, 513, 521, 522, 628; Pub. L. 97-448, title I,
Sec. 103(d)(1), (e), Jan. 12, 1983, 96 Stat. 2378; Pub. L. 98-369,
div. A, title I, Sec. 147(a), title IV, Sec. 491(d)(19)-(24), title
V, Secs. 521(b), 522(d)(12), title VII, Sec. 713(c)(2)(B), (f)(2),
(5)(B), (g)(2), (j), July 18, 1984, 98 Stat. 687, 850, 867, 871,
957, 959, 960; Pub. L. 99-514, title XI, Secs. 1102(a), (b)(2),
(c), (e)(2), 1108(a), (d)-(g)(1), (4), (6), 1121(c)(2),
1122(e)(2)(B), 1123(d)(2), 1144(a), title XVIII, Secs. 1852(a)(1),
(5)(C), (7)(A), 1875(c)(6)(A), (8), 1898(a)(5), Oct. 22, 1986, 100
Stat. 2414-2416, 2431, 2433, 2434, 2465, 2470, 2475, 2490,
2864-2866, 2895, 2944; Pub. L. 100-647, title I, Secs.
1011(b)(1)-(3), (c)(7)(C), (f)(1)-(5), (10), (i)(5),
1011A(a)(2)(A), 1018(t)(3)(D), title VI, Sec. 6057(a), Nov. 10,
1988, 102 Stat. 3456, 3458, 3461-3463, 3468, 3472, 3588, 3698; Pub.
L. 101-239, title VII, Secs. 7811(m)(7), 7841(a)(1), Dec. 19, 1989,
103 Stat. 2412, 2427; Pub. L. 102-318, title V, Sec.
521(b)(16)-(19), July 3, 1992, 106 Stat. 311; Pub. L. 103-66, title
XIII, Sec. 13212(b), Aug. 10, 1993, 107 Stat. 472; Pub. L. 103-465,
title VII, Sec. 732(d), Dec. 8, 1994, 108 Stat. 5005; Pub. L.
104-188, title I, Secs. 1421(a), (b)(3)(B), (5), (6), (c),
1427(b)(3), 1431(c)(1)(B), 1455(b)(1), Aug. 20, 1996, 110 Stat.
1792, 1796-1798, 1802, 1803, 1817; Pub. L. 105-34, title III, Secs.
302(d), 304(a), title XV, Sec. 1501(b), title XVI, Sec.
1601(d)(1)(A)-(C)(i), (D)-(G), Aug. 5, 1997, 111 Stat. 829, 831,
1058, 1087, 1088; Pub. L. 105-206, title VI, Secs. 6015(a),
6016(a)(1), 6018(b), July 22, 1998, 112 Stat. 820-822; Pub. L.
106-554, Sec. 1(a)(7) [title III, Sec. 319(3)], Dec. 21, 2000, 114
Stat. 2763, 2763A-646; Pub. L. 107-16, title VI, Secs. 601(b),
602(a), 611(c)(1), (f)(1), (2), (g)(2), 641(e)(8), 642(a), (b)(2),
(3), 643(c), 644(b), June 7, 2001, 115 Stat. 95, 97, 99, 121-123;
Pub. L. 107-147, title IV, Sec. 411(i)(1), (j)(1), Mar. 9, 2002,
116 Stat. 46, 47.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
Section 7 of the Commodity Exchange Act, referred to in subsec.
(m)(3)(B), is classified to section 11 of Title 7, Agriculture, and
relates to vacation on request of designation as "contract market".
Section 5 of the Commodity Exchange Act, which is classified to
section 7 of Title 7, relates to designation of boards of trade as
"contract markets".
Section 101(6) of the Federal Credit Union Act, referred to in
subsec. (n)(2), is classified to section 1752(6) of Title 12, Banks
and Banking.
-MISC1-
AMENDMENTS
2002 - Subsec. (k)(2)(C). Pub. L. 107-147, Sec. 411(j)(1)(A),
substituted "$450" for "$300".
Subsec. (k)(8). Pub. L. 107-147, Sec. 411(j)(1)(B), substituted
"$450" for "$300" in two places.
Subsec. (q)(3)(A). Pub. L. 107-147, Sec. 411(i)(1), reenacted
heading without change and amended text of subpar. (A) generally.
Prior to amendment, text read as follows: "The term 'qualified
employer plan' has the meaning given such term by section 72(p)(4);
except such term shall not include a government plan which is not a
qualified plan unless the plan is an eligible deferred compensation
plan (as defined in section 457(b))."
2001 - Subsec. (a)(1). Pub. L. 107-16, Secs. 641(e)(8), 901,
temporarily substituted "403(b)(8), or 457(e)(16)" for "or
403(b)(8),". See Effective and Termination Dates of 2001 Amendment
note below.
Pub. L. 107-16, Secs. 601(b)(1), 901, temporarily substituted "on
behalf of any individual in excess of the amount in effect for such
taxable year under section 219(b)(1)(A)" for "in excess of $2,000
on behalf of any individual". See Effective and Termination Dates
of 2001 Amendment note below.
Subsec. (b). Pub. L. 107-16, Secs. 601(b)(3), 901, temporarily
substituted "the dollar amount in effect under section
219(b)(1)(A)" for "$2,000" in concluding provisions. See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (b)(2)(B). Pub. L. 107-16, Secs. 601(b)(2), 901,
temporarily substituted "the dollar amount in effect under section
219(b)(1)(A)" for "$2,000". See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (d)(3)(A). Pub. L. 107-16, Secs. 642(a), 901, temporarily
inserted "or" at end of cl. (i), added cl. (ii) and concluding
provisions, and struck out former cls. (ii) and (iii) which read as
follows:
"(ii) no amount in the account and no part of the value of the
annuity is attributable to any source other than a rollover
contribution (as defined in section 402) from an employee's trust
described in section 401(a) which is exempt from tax under section
501(a) or from an annuity plan described in section 403(a) (and any
earnings on such contribution), and the entire amount received
(including property and other money) is paid (for the benefit of
such individual) into another such trust or annuity plan not later
than the 60th day on which the individual receives the payment or
the distribution; or
"(iii)(I) the entire amount received (including money and other
property) represents the entire interest in the account or the
entire value of the annuity,
"(II) no amount in the account and no part of the value of the
annuity is attributable to any source other than a rollover
contribution from an annuity contract described in section 403(b)
and any earnings on such rollover, and
"(III) the entire amount thereof is paid into another annuity
contract described in section 403(b) (for the benefit of such
individual) not later than the 60th day after he receives the
payment or distribution."
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(3)(D)(i). Pub. L. 107-16, Secs. 642(b)(2), 901,
temporarily substituted "(i) or (ii)" for "(i), (ii), or (iii)".
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(3)(G). Pub. L. 107-16, Secs. 642(b)(3), 901,
temporarily reenacted heading without change and amended text of
subpar. (G) generally. Prior to amendment, text read as follows:
"This paragraph shall not apply to any amount paid or distributed
out of a simple retirement account (as defined in subsection (p))
unless -
"(i) it is paid into another simple retirement account, or
"(ii) in the case of any payment or distribution to which
section 72(t)(6) does not apply, it is paid into an individual
retirement plan."
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(3)(H). Pub. L. 107-16, Secs. 643(c), 901, temporarily
added subpar. (H). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (d)(3)(I). Pub. L. 107-16, Secs. 644(b), 901, temporarily
added subpar. (I). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (j). Pub. L. 107-16, Secs. 601(b)(4), 901, temporarily
struck out "$2,000" before "amounts". See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (k)(3)(C), (6)(D)(ii), (8). Pub. L. 107-16, Secs.
611(c)(1), 901, temporarily substituted "$200,000" for "$150,000".
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (p)(2)(A)(ii). Pub. L. 107-16, Secs. 611(f)(1), 901,
temporarily substituted "the applicable dollar amount" for
"$6,000". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (p)(2)(E). Pub. L. 107-16, Secs. 611(f)(2), 901,
temporarily amended heading and text of subpar. (E) generally.
Prior to amendment, text read as follows: "The Secretary shall
adjust the $6,000 amount under subparagraph (A)(ii) at the same
time and in the same manner as under section 415(d), except that
the base period taken into account shall be the calendar quarter
ending September 30, 1996, and any increase under this subparagraph
which is not a multiple of $500 shall be rounded to the next lower
multiple of $500." See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (p)(6)(A)(ii). Pub. L. 107-16, Secs. 611(g)(2), 901,
temporarily inserted at end "The preceding sentence shall be
applied as if the term 'trade or business' for purposes of section
1402 included service described in section 1402(c)(6)." See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (p)(8). Pub. L. 107-16, Secs. 601(b)(5), 901, temporarily
substituted "the dollar amount in effect under section
219(b)(1)(A)" for "$2,000". See Effective and Termination Dates of
2001 Amendment note below.
Subsecs. (q), (r). Pub. L. 107-16, Secs. 602(a), 901, temporarily
added subsec. (q) and redesignated former subsec. (q) as (r). See
Effective and Termination Dates of 2001 Amendment note below.
2000 - Subsec. (d)(5). Pub. L. 106-554 amended heading generally.
Prior to amendment, heading read as follows: "Certain distributions
of excess contributions after due date for taxable year".
1998 - Subsec. (d)(7). Pub. L. 105-206, Sec. 6018(b)(2), inserted
"or simple retirement accounts" after "pensions" in heading.
Subsec. (d)(7)(B). Pub. L. 105-206, Sec. 6018(b)(1), inserted "or
402(k)" after "section 402(h)".
Subsec. (p)(2)(C)(i)(II). Pub. L. 105-206, Sec. 6016(a)(1)(C)(i),
substituted "the preceding sentence shall not apply" for "the
preceding sentence shall apply only in accordance with rules
similar to the rules of section 410(b)(6)(C)(i)" in last sentence.
Subsec. (p)(2)(D)(i). Pub. L. 105-206, Sec. 6016(a)(1)(A), struck
out "or (B)" after "(A)" in last sentence.
Subsec. (p)(2)(D)(iii). Pub. L. 105-206, Sec. 6016(a)(1)(C)(ii),
struck out heading and text of cl. (iii). Text read as follows: "In
the case of an employer who establishes and maintains a plan under
this subsection for 1 or more years and who fails to meet any
requirement of this subsection for any subsequent year due to any
acquisition, disposition, or similar transaction involving another
such employer, rules similar to the rules of section 410(b)(6)(C)
shall apply for purposes of this subsection."
Subsec. (p)(8), (9). Pub. L. 105-206, Sec. 6015(a), redesignated
par. (8), relating to matching contributions on behalf of
self-employed individuals not treated as elective employer
contributions, as (9).
Subsec. (p)(10). Pub. L. 105-206, Sec. 6016(a)(1)(B), added par.
(10).
1997 - Subsec. (i). Pub. L. 105-34, Sec. 1601(d)(1)(A),
substituted "31 days" for "30 days" in concluding provisions.
Pub. L. 105-34, Sec. 302(d), struck out "under regulations" after
"may require" in introductory provisions and struck out "in such
regulations" after "prescribes" in pars. (1) and (2)(B).
Subsec. (k)(6)(H). Pub. L. 105-34, Sec. 1601(d)(1)(B),
substituted "of an employer if the terms of simplified employee
pensions of such employer" for "if the terms of such pension".
Subsec. (l)(2)(B). Pub. L. 105-34, Sec. 1601(d)(1)(C)(i),
inserted "and the issuer of an annuity established under such an
arrangement" after "under subsection (p)" in introductory
provisions and "or issuer" after "trustee" in cl. (i).
Subsec. (m)(3). Pub. L. 105-34, Sec. 304(a), amended heading and
text of par. (3) generally. Prior to amendment, text read as
follows: "In the case of an individual retirement account,
paragraph (2) shall not apply to -
"(A) any gold coin described in paragraph (7), (8), (9), or
(10) of section 5112(a) of title 31,
"(B) any silver coin described in section 5112(e) of title 31,
or
"(C) any coin issued under the laws of any State."
Subsec. (p)(2)(D)(i). Pub. L. 105-34, Sec. 1601(d)(1)(E),
inserted at end "If only individuals other than employees described
in subparagraph (A) or (B) of section 410(b)(3) are eligible to
participate in such arrangement, then the preceding sentence shall
be applied without regard to any qualified plan in which only
employees so described are eligible to participate."
Subsec. (p)(2)(D)(iii). Pub. L. 105-34, Sec. 1601(d)(1)(F), added
cl. (iii).
Subsec. (p)(5). Pub. L. 105-34, Sec. 1601(d)(1)(G), substituted
"simple" for "simplified" in introductory provisions.
Subsec. (p)(8). Pub. L. 105-34, Sec. 1601(d)(1)(D), added par.
(8) relating to coordination with maximum limitation under
subsection (a).
Pub. L. 105-34, Sec. 1501(b), added par. (8) relating to matching
contributions on behalf of self-employed individuals not treated as
elective employer contributions.
1996 - Subsec. (d)(3)(G). Pub. L. 104-188, Sec. 1421(b)(3)(B),
added subpar. (G).
Subsec. (d)(5)(A). Pub. L. 104-188, Sec. 1427(b)(3), substituted
"the dollar amount in effect under section 219(b)(1)(A)" for
"$2,250" in introductory provisions.
Subsec. (i). Pub. L. 104-188, Sec. 1455(b)(1), inserted
"aggregating $10 or more in any calendar year" after
"distributions" in introductory provisions.
Pub. L. 104-188, Sec. 1421(b)(6), inserted at end "In the case of
a simple retirement account under subsection (p), only one report
under this subsection shall be required to be submitted each
calendar year to the Secretary (at the time provided under
paragraph (2)) but, in addition to the report under this
subsection, there shall be furnished, within 30 days after each
calendar year, to the individual on whose behalf the account is
maintained a statement with respect to the account balance as of
the close of, and the account activity during, such calendar year."
Subsec. (k)(2)(C). Pub. L. 104-188, Sec. 1431(c)(1)(B),
substituted "section 414(q)(4)" for "section 414(q)(7)".
Subsec. (k)(6)(H). Pub. L. 104-188, Sec. 1421(c), added subpar.
(H).
Subsec. (l). Pub. L. 104-188, Sec. 1421(b)(5), designated
existing provisions as par. (1), inserted heading, and added par.
(2).
Subsecs. (p), (q). Pub. L. 104-188, Sec. 1421(a), added subsec.
(p) and redesignated former subsec. (p) as (q).
1994 - Subsec. (k)(8). Pub. L. 103-465 inserted before period at
end "; except that any increase in the $300 amount which is not a
multiple of $50 shall be rounded to the next lowest multiple of
$50".
1993 - Subsec. (k)(3)(C), (6)(D)(ii). Pub. L. 103-66, Sec.
13212(b)(1), substituted "$150,000" for "$200,000".
Subsec. (k)(8). Pub. L. 103-66, Sec. 13212(b)(2), amended heading
and text of par. (8) generally. Prior to amendment, text read as
follows: "The Secretary shall adjust the $300 amount in paragraph
(2)(C) and the $200,000 amount in paragraphs (3)(C) and (6)(D)(ii)
at the same time and in the same manner as under section 415(d),
except that in the case of years beginning after 1988, the $200,000
amount (as so adjusted) shall not exceed the amount in effect under
section 401(a)(17)."
1992 - Subsec. (a)(1). Pub. L. 102-318, Sec. 521(b)(16),
substituted "402(c)" for "402(a)(5), 402(a)(7)".
Subsec. (d)(3)(A)(ii). Pub. L. 102-318, Sec. 521(b)(17), amended
clause (ii) generally. Prior to amendment, clause (ii) read as
follows: "the entire amount received (including money and any other
property) represents the entire amount in the account or the entire
value of the annuity and no amount in the account and no part of
the value of the annuity is attributable to any source other than a
rollover contribution of a qualified total distribution (as defined
in section 402(a)(5)(E)(i)) from an employee's trust described in
section 401(a) which is exempt from tax under section 501(a), or an
annuity plan described in section 403(a) and any earnings on such
sums and the entire amount thereof is paid into another such trust
(for the benefit of such individual) or annuity plan not later than
the 60th day on which he receives the payment or distribution; or".
Subsec. (d)(3)(B). Pub. L. 102-318, Sec. 521(b)(18), struck out
at end "Clause (ii) of subparagraph (A) shall not apply to any
amount paid or distributed out of an individual retirement account
or an individual retirement annuity to which an amount was
contributed which was treated as a rollover contribution by section
402(a)(7) (or in the case of an individual retirement annuity, such
section as made applicable by section 403(a)(4)(B))."
Subsec. (d)(3)(F). Pub. L. 102-318, Sec. 521(b)(19), substituted
"402(c)(7)" for "402(a)(6)(H)".
1989 - Subsecs. (a)(6), (b)(3). Pub. L. 101-239, Sec. 7811(m)(7),
struck out "(without regard to subparagraph (C)(ii) thereof)" after
"section 401(a)(9)".
Subsec. (d)(6). Pub. L. 101-239, Sec. 7841(a)(1), substituted
"his spouse or former spouse under a divorce or separation
instrument described in subparagraph (A) of section 71(b)(2)" for
"his former spouse under a divorce decree or under a written
instrument incident to such divorce".
1988 - Subsec. (d)(2)(C). Pub. L. 100-647, Sec. 1011(b)(1),
substituted "in which the taxable year begins" for "with or within
which the taxable year ends".
Subsec. (d)(3)(A). Pub. L. 100-647, Sec. 1011A(a)(2)(A), struck
out at end "Clause (ii) shall not apply during the 5-year period
beginning on the date of the qualified total distribution referred
to in such clause if the individual was treated as a 5-percent
owner with respect to such distribution under section
402(a)(5)(F)(ii)."
Subsec. (d)(3)(E). Pub. L. 100-647, Sec. 1018(t)(3)(D),
substituted "paragraph" for "subparagraph".
Subsec. (d)(4). Pub. L. 100-647, Sec. 1011(b)(2), substituted
"Contributions" for "Excess contributions" in heading, struck out
"to the extent that such contribution exceeds the amount allowable
as a deduction under section 219" after "individual retirement
annuity" in introductory provisions, and substituted "such
contribution" for "such excess contribution" in subpars. (B) and
(C) and in last sentence.
Subsec. (d)(5). Pub. L. 100-647, Sec. 1011(b)(3), substituted
"shall be computed without regard to section 219(g)" for "(after
application of section 408(o)(2)(B)(ii)) shall be increased by the
nondeductible limit under section 408(o)(2)(B)" in last sentence.
Subsec. (d)(7). Pub. L. 100-647, Sec. 1011(f)(5), added par. (7).
Subsec. (k)(3)(B). Pub. L. 100-647, Sec. 1011(i)(5), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "For purposes of subparagraph (A) -
"(i) there shall be excluded from consideration employees
described in subparagraph (A) or (C) of section 410(b)(3), and
"(ii) an individual shall be considered a shareholder if he
owns (with the application of section 318) more than 10 percent
of the value of the stock of the employer."
Subsec. (k)(3)(C). Pub. L. 100-647, Sec. 1011(f)(3)(C), struck
out "total" before "compensation".
Subsec. (k)(6)(A). Pub. L. 100-647, Sec. 1011(f)(1), substituted
"Arrangements which qualify" for "In general" in heading and
amended text generally. Prior to amendment, text read as follows:
"A simplified employee pension shall not fail to meet the
requirements of this subsection for a year merely because, under
the terms of the pension -
"(i) an employee may elect to have the employer make payments -
"(I) as elective employer contributions to the simplified
employee pension on behalf of the employee, or
"(II) to the employee directly in cash,
"(ii) an election described in clause (i)(I) is made or is in
effect with respect to not less than 50 percent of the employees
of the employer, and
"(iii) the deferral percentage for such year of each highly
compensated employee eligible to participate is not more than the
product derived by multiplying the average of the deferral
percentages for such year of all employees (other than highly
compensated employees) eligible to participate by 1.25."
Subsec. (k)(6)(A)(iv). Pub. L. 100-647, Sec. 1011(c)(7)(C), added
cl. (iv).
Subsec. (k)(6)(B). Pub. L. 100-647, Sec. 1011(f)(2), inserted
"who were eligible to participate (or would have been required to
be eligible to participate if a pension was maintained)" after
"than 25 employees".
Subsec. (k)(6)(D)(ii). Pub. L. 100-647, Sec. 1011(f)(3)(A),
substituted "(not in excess of the first $200,000)" for "(within
the meaning of section 414(s))".
Subsec. (k)(6)(F), (G). Pub. L. 100-647, Sec. 1011(f)(4), added
subpar. (f) and redesignated former subpar. (F) as (G).
Subsec. (k)(7)(B). Pub. L. 100-647, Sec. 1011(f)(3)(B), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "The term 'compensation' means, in the case of an employee
within the meaning of section 401(c)(1), earned income within the
meaning of section 401(c)(2)."
Subsec. (k)(8). Pub. L. 100-647, Sec. 1011(f)(3)(D), (10),
substituted "paragraphs (3)(C) and (6)(D)(ii)" for "paragraph
(3)(C)" and inserted ", except that in the case of years beginning
after 1988, the $200,000 amount (as so adjusted) shall not exceed
the amount in effect under section 401(a)(17)" after "under section
415(d)".
Subsec. (m)(3). Pub. L. 100-647, Sec. 6057(a), amended par. (3)
generally. Prior to amendment, par. (3) read as follows: "In the
case of an individual retirement account, paragraph (2) shall not
apply to any gold coin described in paragraph (7), (8), (9), or
(10) of section 5112(a) of title 31 or any silver coin described in
section 5112(e) of title 31."
Subsec. (o)(4)(B)(iv). Pub. L. 100-647, Sec. 1011(b)(1),
substituted "in which the taxable year begins" for "with or within
which the taxable year ends".
1986 - Subsecs. (a)(6), (b)(3). Pub. L. 99-514, Sec. 1852(a)(1),
substituted "(without regard to subparagraph (C)(ii) thereof) and
the incidental death benefit requirements of section 401(a)" for
"(relating to required distributions)".
Subsec. (c)(1). Pub. L. 99-514, Sec. 1852(a)(7)(A), substituted
"paragraphs (1) through (6)" for "paragraphs (1) through (7)".
Subsec. (d)(1). Pub. L. 99-514, Sec. 1102(c), amended par. (1)
generally. Prior to amendment, par. (1) read as follows: "Except as
otherwise provided in this subsection, any amount paid or
distributed out of an individual retirement account or under an
individual retirement annuity shall be included in gross income by
the payee or distributee, as the case may be, for the taxable year
in which the payment or distribution is received. Notwithstanding
any other provision of this title (including chapters 11 and 12),
the basis any person in such an account or annuity is zero."
Subsec. (d)(2). Pub. L. 99-514, Sec. 1102(c), substituted
"Special rules for applying section 72" for "Distributions of
annuity contracts" in heading and amended par. generally. Prior to
amendment, par. (2) read as follows: "Paragraph (1) does not apply
to any annuity contract which meets the requirements of paragraphs
(1), (3), (4), and (5) of subsection (b) and which is distributed
from an individual retirement account. Section 72 applies to any
such annuity contract, and for purposes of section 72 the
investment in such contract is zero."
Subsec. (d)(3)(A). Pub. L. 99-514, Sec. 1875(c)(8)(C), inserted
at end "Clause (ii) shall not apply during the 5-year period
beginning on the date of the qualified total distribution referred
to in such clause if the individual was treated as a 5-percent
owner with respect to such distribution under section
402(a)(5)(F)(ii)."
Subsec. (d)(3)(A)(ii). Pub. L. 99-514, Sec. 1875(c)(8)(A), (B),
struck out "(other than a trust forming part of a plan under which
the individual was an employee within the meaning of section
401(c)(1) at the time contributions were made on his behalf under
the plan)" after "section 501(a)" and struck out "(other than a
plan under which the individual was an employee within the meaning
of section 401(c)(1) at the time contributions were made on his
behalf under the plan)" after "section 403(a)".
Pub. L. 99-514, Sec. 1121(c)(2), made amendment identical to Pub.
L. 99-514, Sec. 1875(c)(8)(A), (B), see above.
Subsec. (d)(3)(E). Pub. L. 99-514, Sec. 1852(a)(5)(C), added
subpar. (E).
Subsec. (d)(3)(F). Pub. L. 99-514, Sec. 1122(e)(2)(B), added
subpar. (F).
Subsec. (d)(5). Pub. L. 99-514, Sec. 1102(b)(2), inserted at end
"For purposes of this paragraph, the amount allowable as a
deduction under section 219 (after application of section
408(o)(2)(B)(ii)) shall be increased by the nondeductible limit
under section 408(o)(2)(B)."
Subsec. (d)(5)(A). Pub. L. 99-514, Sec. 1875(c)(6)(A),
substituted "the dollar limitation in effect under section
415(c)(1)(A) for such taxable year" for "$15,000".
Subsec. (f). Pub. L. 99-514, Sec. 1123(d)(2), struck out subsec.
(f) which related to additional tax on certain amounts included in
gross income before age 59 1/2 .
Subsec. (i). Pub. L. 99-514, Sec. 1102(e)(2), amended last
sentence generally. Prior to amendment, last sentence read as
follows: "The reports required by this subsection shall be filed at
such time and in such manner and furnished to such individuals at
such time and in such manner as may be required by those
regulations."
Subsec. (k)(2). Pub. L. 99-514, Sec. 1108(d), amended par. (2)
generally. Prior to amendment, par. (2) read as follows: "This
paragraph is satisfied with respect to a simplified employee
pension for a calendar year only if for such year the employer
contributes to the simplified employee pension of each employee who
-
"(A) has attained age 21, and
"(B) has performed service for the employer during at least 3
of the immediately preceding 5 calendar years.
For purposes of this paragraph, there shall be excluded from
consideration employees described in subparagraph (A) or (C) of
section 410(b)(3)."
Subsec. (k)(2)(A). Pub. L. 99-514, Sec. 1898(a)(5), substituted
"age 21" for "age 25".
Subsec. (k)(3)(A). Pub. L. 99-514, Sec. 1108(g)(4), substituted
"year" for "calendar year".
Pub. L. 99-514, Sec. 1108(g)(1)(A), substituted "any highly
compensated employee (within the meaning of section 414(q))" for
"any employee who is -
"(i) an officer,
"(ii) a shareholder,
"(iii) a self-employed individual, or
"(iv) highly compensated".
Subsec. (k)(3)(C). Pub. L. 99-514, Sec. 1108(g)(1)(B), inserted
"and except as provided in subparagraph (D)," and "(other than
contributions under an arrangement described in paragraph (6))",
and struck out end sentence which read as follows: "The Secretary
shall annually adjust the $200,000 amount contained in the
preceding sentence at the same time and in the same manner as he
adjusts the dollar amount contained in section 415(c)(1)(A)."
Subsec. (k)(3)(D), (E). Pub. L. 99-514, Sec. 1108(g)(1)(C), added
subpar. (D) and struck out former subpar. (D), treatment of certain
contributions and taxes, which read "Except as provided in this
subparagraph, employer contributions do not meet the requirements
of this paragraph unless such contributions meet the requirements
of this paragraph without taking into account contributions or
benefits under chapter 2 (relating to tax on self-employment
income), chapter 21 (relating to Federal Insurance Contribution
Act), title II of the Social Security Act, or any other Federal or
State law. If the employer does not maintain an integrated plan at
any time during the taxable year, OASDI contributions (as defined
in section 401(l)(2)) may, for purposes of this paragraph, be taken
into account as contributions by the employer to the employee's
simplified employee pension, but only if such contributions are so
taken into account with respect to each employee maintaining a
simplified employee pension.", and former subpar. (E), integrated
plan defined, which read "For purposes of subparagraph (D), the
term 'integrated plan' means a plan which meets the requirements of
section 401(a) or 403(a) but would not meet such requirements if
contributions or benefits under chapter 2 (relating to tax on
self-employment income), chapter 21 (relating to Federal Insurance
Contributions Act), title II of the Social Security Act, or any
other Federal or State law were not taken into account."
Subsec. (k)(6). Pub. L. 99-514, Sec. 1108(a), added par. (6).
Subsec. (k)(7)(C). Pub. L. 99-514, Sec. 1108(f), added subpar.
(C).
Subsec. (k)(8). Pub. L. 99-514, Sec. 1108(e), added par. (8).
Subsec. (k)(9). Pub. L. 99-514, Sec. 1108(g)(6), added par. (9).
Subsec. (m)(3). Pub. L. 99-514, Sec. 1144(a), added par. (3).
Subsecs. (o), (p). Pub. L. 99-514, Sec. 1102(a), added subsec.
(o) and redesignated former subsec. (o) as (p).
1984 - Subsec. (a)(1). Pub. L. 98-369, Sec. 491(d)(19),
substituted "or 403(b)(8)" for "403(b)(8), 405(d)(3), or
409(b)(3)(C)".
Subsec. (a)(6). Pub. L. 98-369, Sec. 521(b)(1), added par. (6)
and struck out former par. (6) which provided that the entire
interest of an individual for whose benefit the trust is maintained
will be distributed to him not later than the close of his taxable
year in which he attains age 70 1/2 , or will be distributed,
commencing before the close of such taxable year, in accordance
with regulations prescribed by the Secretary, over (A) the life of
such individual or the lives of such individual and his spouse, or
(B) a period not extending beyond the life expectancy of such
individual or the life expectancy of such individual and his
spouse.
Subsec. (a)(7). Pub. L. 98-369, Sec. 521(b)(1), struck out par.
(7) which provided that if (A) an individual for whose benefit the
trust is maintained dies before his entire interest has been
distributed to him, or (B) distribution has been commenced as
provided in paragraph (6) to his surviving spouse and such
surviving spouse dies before the entire interest has been
distributed to such spouse, the entire interest (or the remaining
part of such interest if distribution thereof has commenced) will
be distributed within 5 years after his death (or the death of the
surviving spouse). The preceding sentence shall not apply if
distributions over a term certain commenced before the death of the
individual for whose benefit the trust was maintained and the term
certain is for a period permitted under paragraph (6).
Subsec. (b)(3). Pub. L. 98-369, Sec. 521(b)(2), added par. (3)
and struck out former par. (3) which provided that the entire
interest of the owner will be distributed to him not later than the
close of his taxable year in which he attains age 70 1/2 , or will
be distributed, in accordance with regulations prescribed by the
Secretary, over (A) the life of such owner or the lives of such
owner and his spouse, or (B) a period not extending beyond the life
expectancy of such owner or the life expectancy of such owner and
his spouse.
Subsec. (b)(4), (5). Pub. L. 98-369, Sec. 521(b)(2), redesignated
par. (5) as (4) and struck out former par. (4) which provided that
if (A) the owner dies before his entire interest has been
distributed to him, or (B) distribution has been commenced as
provided in paragraph (3) to his surviving spouse and such
surviving spouse dies before the entire interest has been
distributed to such spouse, the entire interest (or the remaining
part of such interest if distribution thereof has commenced) will
be distributed within 5 years after his death (or the death of the
surviving spouse). The preceding sentence shall not apply if
distributions over a term certain commenced before the death of the
owner and the term certain is for a period permitted under
paragraph (3).
Subsec. (d)(3)(A)(i). Pub. L. 98-369, Sec. 491(d)(20), struck out
"or retirement bond" before "for the benefit".
Subsec. (d)(3)(A)(ii). Pub. L. 98-369, Sec. 522(d)(12),
substituted "rollover contribution of a qualified total
distribution (as defined in section 402(a)(5)(E)(i)) from an
employee's trust" for "rollover contribution from an employee's
trust".
Subsec. (d)(3)(B). Pub. L. 98-369, Sec. 491(d)(21), substituted
"or an individual retirement annuity" for ", individual retirement
annuity, or a retirement bond".
Subsec. (d)(3)(C), (D). Pub. L. 98-369, Sec. 713(g)(2),
designated the subpar. (C), as added by section 335(a)(1) of Pub.
L. 97-248, relating to permitting partial rollovers, as subpar.
(D).
Subsec. (d)(3)(D)(ii). Pub. L. 98-369, Sec. 491(d)(22), struck
out "bond," after "annuity,".
Subsec. (d)(6). Pub. L. 98-369, Sec. 491(d)(23), substituted "or
an individual retirement annuity" for ", individual retirement
annuity, or retirement bond", and "or annuity" for ", annuity, or
bond".
Subsec. (h). Pub. L. 98-369, Sec. 713(c)(2)(B), substituted "(as
defined in subsection (n))" for "(as defined in section
401(d)(1))".
Subsec. (i). Pub. L. 98-369, Sec. 147(a), inserted "(and the
years to which they relate)".
Subsec. (k)(1). Pub. L. 98-369, Sec. 713(f)(2), amended par. (1)
generally, designating existing provisions as subpar. (A) and
adding subpar. (B).
Subsec. (k)(3)(C). Pub. L. 98-369, Sec. 713(f)(5)(B), inserted
provision which required annual adjustment of the $200,000 amount
concurrently with the dollar amount adjustment in section
415(c)(1)(A).
Subsec. (k)(3)(D). Pub. L. 98-369, Sec. 713(j), substituted in
penultimate sentence "OASDI contributions (as defined in section
401(l)(2)" for "taxes paid under section 3111 (relating to tax on
employers) with respect to an employee" and "as contributions by
the employer to the employee's simplified employee pension, but
only if such contributions are so taken into account with respect
to each employee maintaining a simplified employee pension" for "as
a contribution by the employer to an employee's simplified pension"
and struck out third sentence which provided "If contributions are
made to the simplified employee pension of an owner-employee, the
preceding sentence shall not apply unless taxes paid by all such
owner-employees under chapter 2, and the taxes which would be
payable under chapter 2 by such owner-employees but for paragraphs
(4) and (5) of section 1402(c), are taken into account as
contributions by the employer on behalf of such owner-employees."
Subsec. (k)(3)(E). Pub. L. 98-369, Sec. 491(d)(24), substituted
"or 403(a)" for ", 403(a), or 405(a)".
1983 - Subsec. (j). Pub. L. 97-448, Sec. 103(d)(1)(B),
substituted "$17,000" for "$15,000" in provisions preceding par.
(1).
Subsec. (k)(3)(C)(ii). Pub. L. 97-448, Sec. 103(d)(1)(A),
inserted "(other than an employee within the meaning of section
401(c)(1))" after "a simplified employee pension on behalf of each
employee".
Subsecs. (m), (n). Pub. L. 97-448, Sec. 103(e)(1), amended
directory language of Pub. L. 97-34, Sec. 314(b)(1), thereby
correcting subsec. designations. See 1981 Amendment note below for
subsecs. (m) and (n).
1982 - Subsec. (a)(2). Pub. L. 97-248, Sec. 237(e)(3)(A),
substituted reference to subsection (n) of this section, for
reference to section 401(d)(1).
Subsec. (a)(7). Pub. L. 97-248, Sec. 243(a)(1), amended par. (7)
generally, designating existing provisions as subpars. (A) and (B),
in subpar. (B), as so designated, striking out "if" before
"distribution", in provisions following subpar. (B) substituting
"will be distributed within 5 years after his death (or the death
of the surviving spouse)" for "will, within 5 years after his death
(or the death of the surviving spouse), be distributed, or applied
to the purchase of an immediate annuity for his beneficiary or
beneficiaries (or the beneficiary or beneficiaries of his surviving
spouse) which will be payable for the life of such beneficiary or
beneficiaries (or for a term certain not extending beyond the life
expectancy of such beneficiary or beneficiaries) and which annuity
will be immediately distributed to such beneficiary or
beneficiaries", and substituting "shall not apply" for "does not
apply".
Subsec. (b)(4). Pub. L. 97-248, Sec. 243(a)(2), amended par. (4)
generally, designating existing provisions, as subpars. (A) and
(B), in subpar. (B), as so redesignated, striking out "if" before
"distribution", in provisions following subpar. (B) substituting
"will be distributed within 5 years after his death (or the death
of the surviving spouse)" for "will, within 5 years after his death
(or the death of the surviving spouse), be distributed, or applied
to the purchase of an immediate annuity for his beneficiary or
beneficiaries (or the beneficiary or beneficiaries of his surviving
spouse) which will be payable for the life of such beneficiary or
beneficiaries (or for a term certain not extending beyond the life
expectancy of such beneficiary or beneficiaries) and which annuity
will be immediately distributed to such beneficiary or
beneficiaries", and substituting "shall not apply" for "shall have
no application".
Subsec. (d)(3)(C). Pub. L. 97-248, Sec. 243(b)(1)(A), added
subpar. (C) relating to denial of rollover treatment for inherited
accounts.
Pub. L. 97-248, Sec. 335(a)(1), added subpar. (C) relating to
permitting partial rollovers.
Subsec. (j). Pub. L. 97-248, Sec. 238(d)(3), amended subsec. (j)
generally, substituting provisions increasing amount by the amount
of the limitation in effect under section 415(c)(1)(A), for
provisions increasing amount by substituting "$15,000" for
"$2,000".
Subsec. (k)(1). Pub. L. 97-248, Sec. 238(d)(4)(B), struck out
reference to par. (6) of this subsection.
Subsec. (k)(3)(C). Pub. L. 97-248, Sec. 238(d)(4)(C), amended
subpar. (C) generally, striking out cl. "(i)" designation and cl.
(ii) which related to taking into account compensation in excess of
$100,000 with respect to a simplified employee pension.
Subsec. (k)(6). Pub. L. 97-248, Sec. 238(d)(4)(A), struck out
par. (6) which related to prohibition on employer maintaining plan
to which section 401(j) applies.
Subsecs. (n), (o). Pub. L. 97-248, Sec. 237(e)(3)(B), added
subsec. (n) and redesignated former subsec. (n) as (o).
1981 - Subsec. (a)(1). Pub. L. 97-34, Sec. 313(b)(2), inserted
reference to section 405(d)(3).
Pub. L. 97-34, Sec. 311(g)(1)(A), substituted "$2,000" for
"$1,500".
Subsec. (b). Pub. L. 97-34, Sec. 311(g)(1)(B), substituted in
par. (2)(B) and provision following par. (5) "$2,000" for "$1,500".
Subsec. (d)(4). Pub. L. 97-34, Sec. 311(h)(2), substituted
section "219" for "219 or 220" in provision preceding subpar. (A)
and in subpar. (B).
Subsec. (d)(5)(A). Pub. L. 97-34, Sec. 312(c)(5), substituted
"$15,000" for "$7,500".
Pub. L. 97-34, Sec. 311(g)(2), (h)(2), substituted "$2,250" for
"$1,750" and "219" for "219 or 220" in two places.
Subsec. (j). Pub. L. 97-34, Sec. 312(c)(5), substituted "$15,000"
for "$7,500".
Pub. L. 97-34, Sec. 311(g)(1)(C), substituted "$2,000" for
"$1,500".
Subsec. (k)(3)(C). Pub. L. 97-34, Sec. 312(b)(2), designated
provision relating to compensation bearing a uniform relationship
to total compensation as cl. (i), and in cl. (i) as so designated,
substituted "$200,000" for "$100,000", and added cl. (ii).
Subsecs. (m), (n). Pub. L. 97-34, Sec. 314(b)(1), as amended by
Pub. L. 97-448, Sec. 103(e)(1), added subsec. (m) and redesignated
former subsec. (m) as (n).
1980 - Subsec. (a)(1). Pub. L. 96-222, Sec. 101(a)(14)(B),
inserted reference to section 402(a)(7).
Subsec. (d)(5). Pub. L. 96-222, Sec. 101(a)(10)(C), (14)(E)(ii),
in subpar. (A) inserted provisions requiring that if employer
contributions on behalf of the individual are paid for the taxable
year to a simplified employee pension, the dollar amount of the
preceding sentence be increased by the lessor of the amount of such
contributions or $7,500 and restructured subpar. (B).
Subsec. (j)(3). Pub. L. 96-222, Sec. 101(a)(10)(J)(i), struck out
par. (3) which made reference to paragraph (5) of subsection (b).
Subsec. (k). Pub. L. 96-222, Sec. 101(a)(10)(A), (F), (G),
substituted in par. (1) "(5), and (6)" for "and (5)" and in par.
(3)(D) "If the employer does not maintain an integrated plan at any
time during the taxable year, taxes paid" for "Taxes paid",
inserted in par. (2) provisions requiring that for purposes of this
paragraph there be excluded from consideration employees described
in subparagraph (A) or (C) of section 410(b)(2) and pars. (3)(E)
and (6), and redesignated former par. (6) as (7).
Subsec. (k)(2), (3)(B)(i). Pub. L. 96-605, Sec. 225(b)(3), (4),
substituted "section 410(b)(3)" for "section 410(b)(2)".
1978 - Subsec. (a)(1). Pub. L. 95-600, Sec. 156(c)(3), inserted
reference to section 403(b)(8).
Subsec. (b)(2). Pub. L. 95-600, Sec. 157(d)(1), (e)(1)(A),
designated existing provisions as subpars. (B) and (C) and added
subpar. (A), and in subpar. (B) as so designated, inserted "on
behalf of any individual" after "annual premium", respectively.
Subsec. (d)(3)(A)(iii). Pub. L. 95-600, Sec. 156(c)(1), added cl.
(iii).
Subsec. (d)(3)(B). Pub. L. 95-600, Sec. 157(g)(3), (h)(2),
inserted provision relating to the applicability of clause (ii) of
subparagraph (A) to any amount paid or distributed out of an
individual retirement account or annuity to which an amount was
contributed which was treated as a rollover contribution by section
402(a)(7) and substituted "1-year period" for "3-year period".
Subsec. (d)(4). Pub. L. 95-600, Sec. 703(c)(4), amended Pub. L.
94-455, Sec. 1501(b)(5). See 1976 Amendment note below.
Subsec. (d)(5), (6). Pub. L. 95-600, Sec. 157(c)(1), added par.
(5) and redesignated former par. (5) as (6).
Subsecs. (j) to (m). Pub. L. 95-600, Sec. 152(a), added subsecs.
(j) to (l) and redesignated former subsec. (j) as (m).
1976 - Subsecs. (a)(2), (6), (b). Pub. L. 94-455, Sec.
1906(b)(13)(A), struck out "or his delegate" after "Secretary".
Subsec. (c)(2). Pub. L. 94-455, Sec. 1501(b)(2), substituted
"member (or spouse of an employee or member)" for "member".
Subsec. (d)(1). Pub. L. 94-455, Sec. 1501(b)(10), substituted
"Notwithstanding any other provision of this title (including
chapters 11 and 12), the basis" for "The basis".
Subsec. (d)(4). Pub. L. 94-455, Sec. 1501(b)(5), as amended by
Pub. L. 95-600, Sec. 703(c)(4), inserted reference to section 220
and substituted "In the case of such a distribution, for purposes
of section 61, any net income described in subparagraph (C) shall
be deemed to have been earned and receivable in the taxable year in
which such excess contribution is made" for "Any net income
described in subparagraph (C) shall be included in the gross income
of the individual for the taxable year in which received".
Subsecs. (h), (i). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by section 601(b) of Pub. L. 107-16 applicable to
taxable years beginning after Dec. 31, 2001, see section 601(c) of
Pub. L. 107-16, set out as a note under section 219 of this title.
Pub. L. 107-16, title VI, Sec. 602(c), June 7, 2001, 115 Stat.
96, provided that: "The amendments made by this section [amending
this section and section 1003 of Title 29, Labor] shall apply to
plan years beginning after December 31, 2002."
Amendment by section 611(c)(1), (f)(1), (2), (g)(2) of Pub. L.
107-16 applicable to years beginning after Dec. 31, 2001, see
section 611(i)(1) of Pub. L. 107-16, set out as a note under
section 415 of this title.
Amendment by section 641(e)(8) of Pub. L. 107-16 applicable to
distributions after Dec. 31, 2001, see section 641(f)(1) of Pub. L.
107-16, set out as a note under section 402 of this title.
Pub. L. 107-16, title VI, Sec. 642(c), June 7, 2001, 115 Stat.
122, provided that:
"(1) Effective date. - The amendments made by this section
[amending this section and section 403 of this title] shall apply
to distributions after December 31, 2001.
"(2) Special rule. - Notwithstanding any other provision of law,
subsections (h)(3) and (h)(5) of section 1122 of the Tax Reform Act
of 1986 [Pub. L. 99-514, set out as a note under section 402 of
this title] shall not apply to any distribution from an eligible
retirement plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986) on behalf of an
individual if there was a rollover to such plan on behalf of such
individual which is permitted solely by reason of the amendments
made by this section."
Amendment by section 643(c) of Pub. L. 107-16 applicable to
distributions made after Dec. 31, 2001, see section 643(d) of Pub.
L. 107-16, set out as a note under section 401 of this title.
Amendment by section 644(b) of Pub. L. 107-16 applicable to
distributions after Dec. 31, 2001, see section 644(c) of Pub. L.
107-16, set out as a note under section 402 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by section 6018(b) of Pub. L. 105-206 effective as if
included in the provisions of the Small Business Job Protection Act
of 1996, Pub. L. 104-188, to which such amendment relates, see
section 6018(h) of Pub. L. 105-206, set out as a note under section
23 of this title.
Amendment by sections 6015(a) and 6016(a)(1) of Pub. L. 105-206
effective, except as otherwise provided, as if included in the
provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 6024 of Pub. L. 105-206,
set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 302(d) of Pub. L. 105-34 applicable to
taxable years beginning after Dec. 31, 1997, see section 302(f) of
Pub. L. 105-34, set out as a note under section 219 of this title.
Section 304(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1997."
Section 1501(c)(2) of Pub. L. 105-34 provided that: "The
amendment made by subsection (b) [amending this section] shall
apply to years beginning after December 31, 1996."
Amendment by section 1601(d)(1)(A)-(C)(i), (D)-(G) of Pub. L.
105-34 effective as if included in the provisions of the Small
Business Job Protection Act of 1996, Pub. L. 104-188, to which it
relates, see section 1601(j) of Pub. L. 105-34, set out as a note
under section 23 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1421(a), (b)(3)(B), (5), (6), (c) of Pub. L.
104-188 applicable to taxable years beginning after Dec. 31, 1996,
see section 1421(e) of Pub. L. 104-188, set out as a note under
section 72 of this title.
Amendment by section 1427(b)(3) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1996, see section 1427(c) of
Pub. L. 104-188, set out as a note under section 219 of this title.
Amendment by section 1431(c)(1)(B) of Pub. L. 104-188 applicable
to years beginning after Dec. 31, 1996, except that in determining
whether an employee is a highly compensated employee for years
beginning in 1997, such amendment to be treated as having been in
effect for years beginning in 1996, see section 1431(d)(1) of Pub.
L. 104-188, set out as a note under section 414 of this title.
Section 1455(e) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section and sections 6047,
6652, 6693, and 6724 of this title] shall apply to returns,
reports, and other statements the due date for which (determined
without regard to extensions) is after December 31, 1996."
EFFECTIVE DATE OF 1994 AMENDMENT
Amendment by Pub. L. 103-465 applicable to years beginning after
Dec. 31, 1994, and, to the extent of providing for the rounding of
indexed amounts, not applicable to any year to the extent the
rounding would require the indexed amount to be reduced below the
amount in effect for years beginning in 1994, see section 732(e) of
Pub. L. 103-465, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable, except as otherwise
provided, to benefits accruing in plan years beginning after Dec.
31, 1993, see section 13212(d) of Pub. L. 103-66, set out as a note
under section 401 of this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-318 applicable to distributions after
Dec. 31, 1992, see section 521(e) of Pub. L. 102-318, set out as a
note under section 402 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by section 7811(m)(7) of Pub. L. 101-239 effective,
except as otherwise provided, as if included in the provision of
the Technical and Miscellaneous Revenue Act of 1988, Pub. L.
100-647, to which such amendment relates, see section 7817 of Pub.
L. 101-239, set out as a note under section 1 of this title.
Section 7841(a)(3) of Pub. L. 101-239 provided that: "The
amendments made by this subsection [amending this section and
section 414 of this title] shall apply to transfers after the date
of the enactment of this Act [Dec. 19, 1989] in taxable years
ending after such date."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011(c)(7)(C) of Pub. L. 100-647 applicable
to plan years beginning after Dec. 31, 1987, with exception in case
of a plan described in section 1105(c)(2) of Pub. L. 99-514, see
section 1011(c)(7)(E) of Pub. L. 100-647, set out as a note under
section 401 of this title.
Section 1011A(a)(2)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending this section] shall
apply to rollover contributions made in taxable years beginning
after December 31, 1986."
Amendment by sections 1011(b)(1)-(3), (f)(1)-(5), (10), (i)(5)
and 1018(t)(3)(D) of Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
Section 6057(b) of Pub. L. 100-647 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to
acquisitions after the date of the enactment of this Act [Nov. 10,
1988]."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1102(a), (b)(2), (c), (e)(2) of Pub. L.
99-514 applicable to contributions and distributions for taxable
years beginning after Dec. 31, 1986, see section 1102(g) of Pub. L.
99-514, set out as a note under section 219 of this title.
Amendment by section 1108(a), (d)-(g)(1), (4), (6) of Pub. L.
99-514 applicable to years beginning after Dec. 31, 1986, except
that section 408(k)(3)(D) and (E) of the Internal Revenue Code of
1954 (as in effect before the amendments made by section 1108 of
Pub. L. 99-514) shall continue to apply for years beginning after
Dec. 31, 1986, and before Jan. 1, 1989, except that employer
contributions under an arrangement under section 408(k)(6) of the
Internal Revenue Code of 1986 (as added by section 1108 of Pub. L.
99-514) may not be integrated under section 408(k)(3)(D) and (E) of
the Internal Revenue Code of 1954, see section 1108(h) of Pub. L.
99-514, as amended, set out as a note under section 219 of this
title.
Amendment by section 1121(c)(2) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1986, with special provisions for
plans maintained pursuant to collective bargaining agreements
ratified before Mar. 1, 1986, and transition rules, see section
1121(d) of Pub. L. 99-514, set out as a note under section 401 of
this title.
Amendment by section 1122(e)(2)(B) of Pub. L. 99-514 applicable,
except as otherwise provided, to amounts distributed after Dec. 31,
1986, in taxable years ending after such date, see section 1122(h)
of Pub. L. 99-514, set out as a note under section 402 of this
title.
Amendment by section 1123(d)(2) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, except as otherwise
provided, see section 1123(e) of Pub. L. 99-514, set out as a note
under section 72 of this title.
Section 1144(b) of Pub. L. 99-514 provided that: "The amendment
made by this section [amending this section] shall apply to
acquisitions after December 31, 1986."
Amendment by sections 1852(a)(1), (5)(C), (7)(A) and 1875(c)(8)
of Pub. L. 99-514 effective, except as otherwise provided, as if
included in the provisions of the Tax Reform Act of 1984, Pub. L.
98-369, div. A, to which such amendment relates, see section 1881
of Pub. L. 99-514, set out as a note under section 48 of this
title.
Amendment by section 1875(c)(6)(A) of Pub. L. 99-514 effective as
if included in the amendments made by section 238 of Pub. L.
97-248, see section 1875(c)(12) of Pub. L. 99-514, set out as a
note under section 62 of this title.
Section 1898(a)(5) of Pub. L. 99-514 provided that the amendment
made by that section is effective with respect to plan years
beginning after Oct. 22, 1986.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 147(a) of Pub. L. 98-369 applicable to
contributions made after Dec. 31, 1984, see section 147(d)(1) of
Pub. L. 98-369, set out as a note under section 219 of this title.
Amendment by section 491(d)(19)-(24) of Pub. L. 98-369 applicable
to obligations issued after Dec. 31, 1983, see section 491(f)(1) of
Pub. L. 98-369, set out as a note under section 62 of this title.
Amendment by section 521(b) of Pub. L. 98-369 applicable to years
beginning after Dec. 31, 1984, see section 521(e) of Pub. L.
98-369, set out as a note under section 401 of this title.
Amendment by section 522(d)(12) of Pub. L. 98-369 applicable to
distributions made after July 18, 1984, in taxable years ending
after that date, see section 522(e) of Pub. L. 98-369, set out as a
note under section 402 of this title.
Amendment by section 713 of Pub. L. 98-369 effective as if
included in the provision of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, to which such amendment
relates, see section 715 of Pub. L. 98-369, set out as a note under
section 31 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by sections 237 and 238 of Pub. L. 97-248 applicable to
years beginning after Dec. 31, 1983, see section 241 of Pub. L.
97-248, set out as an Effective Date note under section 416 of this
title.
Section 243(c) of Pub. L. 97-248, as amended by Pub. L. 98-369,
div. A, title VII, Sec. 713(g)(1), July 18, 1984, 98 Stat. 960,
provided that: "The amendments made by this section [amending this
section and sections 219 and 409 of this title] shall apply with
respect to individuals dying after December 31, 1983."
Section 335(b) of Pub. L. 97-248 provided that: "The amendments
made by subsection (a) [amending this section and section 409 of
this title] shall apply to distributions made after December 31,
1982, in taxable years ending after such date."
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 311(g)(1)(A)-(C), (2), (h)(2) of Pub. L.
97-34 applicable to taxable years beginning after Dec. 31, 1981,
see section 311(i) of Pub. L. 97-34, set out as a note under
section 219 of this title.
Amendment by section 312(b)(2), (c)(5) of Pub. L. 97-34
applicable to plans which include employees within the meaning of
section 401(c)(1) with respect to taxable years beginning after
Dec. 31, 1981, see section 312(f) of Pub. L. 97-34, set out as a
note under section 72 of this title.
Amendment by section 313(b)(2) of Pub. L. 97-34 applicable to
redemptions after Aug. 13, 1981, in taxable years ending after such
date, see section 313(c) of Pub. L. 97-34, set out as a note under
section 219 of this title.
Section 314(b)(2) of Pub. L. 97-34 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to
property acquired after December 31, 1981, in taxable years ending
after such date."
EFFECTIVE DATE OF 1980 AMENDMENTS
Amendment by Pub. L. 96-605 applicable with respect to plan years
beginning after Dec. 31, 1980, see section 225(c) of Pub. L.
96-605, set out as a note under section 401 of this title.
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 152(h) of Pub. L. 95-600 provided that: "The amendments
made by this section [amending this section and sections 219, 401,
404, 414, and 415 of this title] shall apply to taxable years
beginning after December 31, 1978."
Amendment by section 156(c)(1), (3) of Pub. L. 95-600 applicable
to distributions or transfers made after Dec. 31, 1977, in taxable
years beginning after such date, see section 156(d) of Pub. L.
95-600, set out as a note under section 403 of this title.
Section 157(c)(2)(A) of Pub. L. 95-600 provided that: "The
amendments made by paragraph (1) [amending this section] shall
apply to distributions in taxable years beginning after December
31, 1975."
Section 157(d)(2) of Pub. L. 95-600 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to
contracts issued after the date of the enactment of this Act [Nov.
6, 1978]."
Amendment by section 157(h)(2) of Pub. L. 95-600 applicable to
payments made in taxable years beginning after Dec. 31, 1977, see
section 157(h)(3)(A) of Pub. L. 95-600, set out as a note under
section 402 of this title.
Section 157(e)(2) of Pub. L. 95-600 provided that: "The
amendments made by paragraph (1) [amending this section and section
409 of this title] shall apply to taxable years beginning after
December 31, 1976."
Amendment by section 157(g)(3) of Pub. L. 95-600 applicable to
lump-sum distributions completed after Dec. 31, 1978, in taxable
years ending after such date, see section 157(g)(4) of Pub. L.
95-600, set out as a note under section 402 of this title.
Amendment by section 703(c)(4) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1976, see section 703(c)(5)
of Pub. L. 95-600, set out as a note under section 219 of this
title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1501(b)(2), (5), (10) of Pub. L. 94-455
effective for taxable years beginning after Dec. 31, 1976, see
section 1501(d) of Pub. L. 94-455, set out as a note under section
62 of this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1974, see section 2002(i)(1) of Pub. L. 93-406, set out as a note
under section 219 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TRANSITIONAL RULE FOR CONTRIBUTIONS FOR TAXABLE YEARS BEGINNING
BEFORE JANUARY 1, 1978
Section 157(c)(2)(B) of Pub. L. 95-600, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In
the case of contributions for taxable years beginning before
January 1, 1978, paragraph (5) of section 408(d) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] shall be applied as if
such paragraph did not contain any dollar limitation."
EXCHANGE OF FIXED PREMIUM ANNUITY OR ENDOWMENT CONTRACT ISSUED ON
OR BEFORE NOV. 6, 1978, FOR INDIVIDUAL RETIREMENT ANNUITY
Section 157(d)(3) of Pub. L. 95-600, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In
the case of any annuity or endowment contract issued on or before
the date of the enactment of this Act [Nov. 6, 1978] which would be
an individual retirement annuity within the meaning of section
408(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
(as amended by paragraph (1) [amending subsec. (b)(2) of this
section]) but for the fact that the premiums under the contract are
fixed, at the election of the taxpayer an exchange before January
1, 1981, of that contract for an individual retirement annuity
within the meaning of such section 408(b) (as amended by paragraph
(1)) shall be treated as a nontaxable exchange which does not
constitute a distribution."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 25B, 45D, 45E, 72,
219, 220, 223, 280G, 401, 402, 403, 408A, 411, 414, 415, 416, 529,
530, 818, 1397C, 3121, 3306, 3401, 4972, 4973, 4974, 4975, 4979,
6012, 6047, 6058, 6104, 6332, 6693, 6724, 7528, 7701 of this title;
title 4 section 114; title 11 section 522; title 12 sections 1464,
1787, 1821; title 29 sections 1003, 1021, 1051, 1053, 1081, 1103,
1104, 1107, 1108; title 42 section 409.
-FOOTNOTE-
(!1) So in original.
(!2) So in original. Probably should be followed by a comma.
(!3) See References in Text note below.
-End-
-CITE-
26 USC Sec. 408A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 408A. Roth IRAs
-STATUTE-
(a) General rule
Except as provided in this section, a Roth IRA shall be treated
for purposes of this title in the same manner as an individual
retirement plan.
(b) Roth IRA
For purposes of this title, the term "Roth IRA" means an
individual retirement plan (as defined in section 7701(a)(37))
which is designated (in such manner as the Secretary may prescribe)
at the time of establishment of the plan as a Roth IRA. Such
designation shall be made in such manner as the Secretary may
prescribe.
(c) Treatment of contributions
(1) No deduction allowed
No deduction shall be allowed under section 219 for a
contribution to a Roth IRA.
(2) Contribution limit
The aggregate amount of contributions for any taxable year to
all Roth IRAs maintained for the benefit of an individual shall
not exceed the excess (if any) of -
(A) the maximum amount allowable as a deduction under section
219 with respect to such individual for such taxable year
(computed without regard to subsection (d)(1) or (g) of such
section), over
(B) the aggregate amount of contributions for such taxable
year to all other individual retirement plans (other than Roth
IRAs) maintained for the benefit of the individual.
(3) Limits based on modified adjusted gross income
(A) Dollar limit
The amount determined under paragraph (2) for any taxable
year shall not exceed an amount equal to the amount determined
under paragraph (2)(A) for such taxable year, reduced (but not
below zero) by the amount which bears the same ratio to such
amount as -
(i) the excess of -
(I) the taxpayer's adjusted gross income for such taxable
year, over
(II) the applicable dollar amount, bears to
(ii) $15,000 ($10,000 in the case of a joint return or a
married individual filing a separate return).
The rules of subparagraphs (B) and (C) of section 219(g)(2)
shall apply to any reduction under this subparagraph.
(B) Rollover from IRA
A taxpayer shall not be allowed to make a qualified rollover
contribution to a Roth IRA from an individual retirement plan
other than a Roth IRA during any taxable year if, for the
taxable year of the distribution to which such contribution
relates -
(i) the taxpayer's adjusted gross income exceeds $100,000,
or
(ii) the taxpayer is a married individual filing a separate
return.
(C) Definitions
For purposes of this paragraph -
(i) adjusted gross income shall be determined in the same
manner as under section 219(g)(3), except that -
(I) any amount included in gross income under subsection
(d)(3) shall not be taken into account; and
(II) any amount included in gross income by reason of a
required distribution under a provision described in
paragraph (5) shall not be taken into account for purposes
of subparagraph (B)(i), and
(ii) the applicable dollar amount is -
(I) in the case of a taxpayer filing a joint return,
$150,000,
(II) in the case of any other taxpayer (other than a
married individual filing a separate return), $95,000, and
(III) in the case of a married individual filing a
separate return, zero.
(D) Marital status
Section 219(g)(4) shall apply for purposes of this paragraph.
(4) Contributions permitted after age 70 1/2
Contributions to a Roth IRA may be made even after the
individual for whom the account is maintained has attained age 70
1/2 .
(5) Mandatory distribution rules not to apply before death
Notwithstanding subsections (a)(6) and (b)(3) of section 408
(relating to required distributions), the following provisions
shall not apply to any Roth IRA:
(A) Section 401(a)(9)(A).
(B) The incidental death benefit requirements of section
401(a).
(6) Rollover contributions
(A) In general
No rollover contribution may be made to a Roth IRA unless it
is a qualified rollover contribution.
(B) Coordination with limit
A qualified rollover contribution shall not be taken into
account for purposes of paragraph (2).
(7) Time when contributions made
For purposes of this section, the rule of section 219(f)(3)
shall apply.
(d) Distribution rules
For purposes of this title -
(1) Exclusion
Any qualified distribution from a Roth IRA shall not be
includible in gross income.
(2) Qualified distribution
For purposes of this subsection -
(A) In general
The term "qualified distribution" means any payment or
distribution -
(i) made on or after the date on which the individual
attains age 59 1/2 ,
(ii) made to a beneficiary (or to the estate of the
individual) on or after the death of the individual,
(iii) attributable to the individual's being disabled
(within the meaning of section 72(m)(7)), or
(iv) which is a qualified special purpose distribution.
(B) Distributions within nonexclusion period
A payment or distribution from a Roth IRA shall not be
treated as a qualified distribution under subparagraph (A) if
such payment or distribution is made within the 5-taxable year
period beginning with the first taxable year for which the
individual made a contribution to a Roth IRA (or such
individual's spouse made a contribution to a Roth IRA)
established for such individual.
(C) Distributions of excess contributions and earnings
The term "qualified distribution" shall not include any
distribution of any contribution described in section 408(d)(4)
and any net income allocable to the contribution.
(3) Rollovers from an IRA other than a Roth IRA
(A) In general
Notwithstanding section 408(d)(3), in the case of any
distribution to which this paragraph applies -
(i) there shall be included in gross income any amount
which would be includible were it not part of a qualified
rollover contribution,
(ii) section 72(t) shall not apply, and
(iii) unless the taxpayer elects not to have this clause
apply for any taxable year, any amount required to be
included in gross income for such taxable year by reason of
this paragraph for any distribution before January 1, 1999,
shall be so included ratably over the 4-taxable year period
beginning with such taxable year.
Any election under clause (iii) for any distributions during a
taxable year may not be changed after the due date for such
taxable year.
(B) Distributions to which paragraph applies
This paragraph shall apply to a distribution from an
individual retirement plan (other than a Roth IRA) maintained
for the benefit of an individual which is contributed to a Roth
IRA maintained for the benefit of such individual in a
qualified rollover contribution.
(C) Conversions
The conversion of an individual retirement plan (other than a
Roth IRA) to a Roth IRA shall be treated for purposes of this
paragraph as a distribution to which this paragraph applies.
(D) Additional reporting requirements
Trustees of Roth IRAs, trustees of individual retirement
plans, or both, whichever is appropriate, shall include such
additional information in reports required under section 408(i)
as the Secretary may require to ensure that amounts required to
be included in gross income under subparagraph (A) are so
included.
(E) Special rules for contributions to which 4-year averaging
applies
In the case of a qualified rollover contribution to a Roth
IRA of a distribution to which subparagraph (A)(iii) applied,
the following rules shall apply:
(i) Acceleration of inclusion
(I) In general
The amount required to be included in gross income for
each of the first 3 taxable years in the 4-year period
under subparagraph (A)(iii) shall be increased by the
aggregate distributions from Roth IRAs for such taxable
year which are allocable under paragraph (4) to the portion
of such qualified rollover contribution required to be
included in gross income under subparagraph (A)(i).
(II) Limitation on aggregate amount included
The amount required to be included in gross income for
any taxable year under subparagraph (A)(iii) shall not
exceed the aggregate amount required to be included in
gross income under subparagraph (A)(iii) for all taxable
years in the 4-year period (without regard to subclause
(I)) reduced by amounts included for all preceding taxable
years.
(ii) Death of distributee
(I) In general
If the individual required to include amounts in gross
income under such subparagraph dies before all of such
amounts are included, all remaining amounts shall be
included in gross income for the taxable year which
includes the date of death.
(II) Special rule for surviving spouse
If the spouse of the individual described in subclause
(I) acquires the individual's entire interest in any Roth
IRA to which such qualified rollover contribution is
properly allocable, the spouse may elect to treat the
remaining amounts described in subclause (I) as includible
in the spouse's gross income in the taxable years of the
spouse ending with or within the taxable years of such
individual in which such amounts would otherwise have been
includible. Any such election may not be made or changed
after the due date for the spouse's taxable year which
includes the date of death.
(F) Special rule for applying section 72
(i) In general
If -
(I) any portion of a distribution from a Roth IRA is
properly allocable to a qualified rollover contribution
described in this paragraph; and
(II) such distribution is made within the 5-taxable year
period beginning with the taxable year in which such
contribution was made,
then section 72(t) shall be applied as if such portion were
includible in gross income.
(ii) Limitation
Clause (i) shall apply only to the extent of the amount of
the qualified rollover contribution includible in gross
income under subparagraph (A)(i).
(4) Aggregation and ordering rules
(A) Aggregation rules
Section 408(d)(2) shall be applied separately with respect to
Roth IRAs and other individual retirement plans.
(B) Ordering rules
For purposes of applying this section and section 72 to any
distribution from a Roth IRA, such distribution shall be
treated as made -
(i) from contributions to the extent that the amount of
such distribution, when added to all previous distributions
from the Roth IRA, does not exceed the aggregate
contributions to the Roth IRA; and
(ii) from such contributions in the following order:
(I) Contributions other than qualified rollover
contributions to which paragraph (3) applies.
(II) Qualified rollover contributions to which paragraph
(3) applies on a first-in, first-out basis.
Any distribution allocated to a qualified rollover contribution
under clause (ii)(II) shall be allocated first to the portion
of such contribution required to be included in gross income.
(5) Qualified special purpose distribution
For purposes of this section, the term "qualified special
purpose distribution" means any distribution to which
subparagraph (F) of section 72(t)(2) applies.
(6) Taxpayer may make adjustments before due date
(A) In general
Except as provided by the Secretary, if, on or before the due
date for any taxable year, a taxpayer transfers in a
trustee-to-trustee transfer any contribution to an individual
retirement plan made during such taxable year from such plan to
any other individual retirement plan, then, for purposes of
this chapter, such contribution shall be treated as having been
made to the transferee plan (and not the transferor plan).
(B) Special rules
(i) Transfer of earnings
Subparagraph (A) shall not apply to the transfer of any
contribution unless such transfer is accompanied by any net
income allocable to such contribution.
(ii) No deduction
Subparagraph (A) shall apply to the transfer of any
contribution only to the extent no deduction was allowed with
respect to the contribution to the transferor plan.
(7) Due date
For purposes of this subsection, the due date for any taxable
year is the date prescribed by law (including extensions of time)
for filing the taxpayer's return for such taxable year.
(e) Qualified rollover contribution
For purposes of this section, the term "qualified rollover
contribution" means a rollover contribution to a Roth IRA from
another such account, or from an individual retirement plan, but
only if such rollover contribution meets the requirements of
section 408(d)(3). For purposes of section 408(d)(3)(B), there
shall be disregarded any qualified rollover contribution from an
individual retirement plan (other than a Roth IRA) to a Roth IRA.
(f) Individual retirement plan
For purposes of this section -
(1) a simplified employee pension or a simple retirement
account may not be designated as a Roth IRA; and
(2) contributions to any such pension or account shall not be
taken into account for purposes of subsection (c)(2)(B).
-SOURCE-
(Added Pub. L. 105-34, title III, Sec. 302(a), Aug. 5, 1997, 111
Stat. 825; amended Pub. L. 105-206, title VI, Sec. 6005(b)(1)-(7),
(9), title VII, Sec. 7004(a), July 22, 1998, 112 Stat. 796-800,
833; Pub. L. 105-277, div. J, title IV, Sec. 4002(j), Oct. 21,
1998, 112 Stat. 2681-908; Pub. L. 107-16, title VI, Sec. 617(e)(1),
June 7, 2001, 115 Stat. 106.)
-STATAMEND-
AMENDMENT OF SUBSECTION (E)
Pub. L. 107-16, title VI, Sec. 617(e)(1), (f), title IX, Sec.
901, June 7, 2001, 115 Stat. 106, 150, provided that, applicable to
taxable years beginning after Dec. 31, 2005, subsection (e) of this
section is temporarily amended by inserting after the first
sentence "Such term includes a rollover contribution described in
section 402A(c)(3)(A)." See Effective and Termination Dates of 2001
Amendment note below.
-MISC1-
AMENDMENTS
1998 - Subsec. (c)(3)(A). Pub. L. 105-206, Sec. 6005(b)(1),
substituted "shall not exceed an amount equal to the amount
determined under paragraph (2)(A) for such taxable year, reduced"
for "shall be reduced" in introductory provisions.
Subsec. (c)(3)(A)(ii). Pub. L. 105-206, Sec. 6005(b)(2)(A),
inserted "or a married individual filing a separate return" after
"joint return".
Subsec. (c)(3)(B). Pub. L. 105-206, Sec. 6005(b)(2)(B)(i),
inserted ", for the taxable year of the distribution to which such
contribution relates" after "if" in introductory provisions.
Subsec. (c)(3)(B)(i). Pub. L. 105-206, Sec. 6005(b)(2)(B)(ii),
struck out "for such taxable year" after "gross income".
Subsec. (c)(3)(C)(i). Pub. L. 105-206, Sec. 7004(a), amended cl.
(i) generally. Prior to amendment, cl. (i) read as follows:
"adjusted gross income shall be determined in the same manner as
under section 219(g)(3), except that any amount included in gross
income under subsection (d)(3) shall not be taken into account,
and".
Pub. L. 105-206, Sec. 6005(b)(2)(C), struck out "and the
deduction under section 219 shall be taken into account" after
"taken into account".
Subsec. (c)(3)(C)(i)(II). Pub. L. 105-277 substituted ", and" for
period at end.
Subsec. (d)(1). Pub. L. 105-206, Sec. 6005(b)(5)(B), substituted
"Exclusion" for "General rules" in heading and amended text
generally. Prior to amendment, text read as follows:
"(A) Exclusions from gross income. - Any qualified distribution
from a Roth IRA shall not be includible in gross income.
"(B) Nonqualified distributions. - In applying section 72 to any
distribution from a Roth IRA which is not a qualified distribution,
such distribution shall be treated as made from contributions to
the Roth IRA to the extent that such distribution, when added to
all previous distributions from the Roth IRA, does not exceed the
aggregate amount of contributions to the Roth IRA."
Subsec. (d)(2)(B). Pub. L. 105-206, Sec. 6005(b)(3)(A), added
subpar. (B) and struck out heading and text of former subpar. (B).
Text read as follows: "A payment or distribution shall not be
treated as a qualified distribution under subparagraph (A) if -
"(i) it is made within the 5-taxable year period beginning with
the 1st taxable year for which the individual made a contribution
to a Roth IRA (or such individual's spouse made a contribution to
a Roth IRA) established for such individual, or
"(ii) in the case of a payment or distribution properly
allocable (as determined in the manner prescribed by the
Secretary) to a qualified rollover contribution from an
individual retirement plan other than a Roth IRA (or income
allocable thereto), it is made within the 5-taxable year period
beginning with the taxable year in which the rollover
contribution was made."
Subsec. (d)(2)(C). Pub. L. 105-206, Sec. 6005(b)(3)(B), added
subpar. (C).
Subsec. (d)(3)(A). Pub. L. 105-206, Sec. 6005(b)(4)(A), added cl.
(iii) and concluding provisions and struck out former cl. (iii)
which read as follows: "in the case of a distribution before
January 1, 1999, any amount required to be included in gross income
by reason of this paragraph shall be so included ratably over the
4-taxable year period beginning with the taxable year in which the
payment or distribution is made."
Subsec. (d)(3)(D). Pub. L. 105-206, Sec. 6005(b)(6)(B),
redesignated subpar. (E) as (D) and struck out heading and text of
former subpar. (D). Text read as follows: "If, no later than the
due date for filing the return of tax for any taxable year (without
regard to extensions), an individual transfers, from an individual
retirement plan (other than a Roth IRA), contributions for such
taxable year (and any earnings allocable thereto) to a Roth IRA, no
such amount shall be includible in gross income to the extent no
deduction was allowed with respect to such amount."
Subsec. (d)(3)(E). Pub. L. 105-206, Sec. 6005(b)(6)(B),
redesignated subpar. (F) as (E). Former subpar. (E) redesignated
(D).
Subsec. (d)(3)(F). Pub. L. 105-206, Sec. 6005(b)(6)(B),
redesignated subpar. (G) as (F). Former subpar. (F) redesignated
(E).
Pub. L. 105-206, Sec. 6005(b)(4)(B), added subpar. (F).
Subsec. (d)(3)(G). Pub. L. 105-206, Sec. 6005(b)(6)(B),
redesignated subpar. (G) as (F).
Pub. L. 105-206, Sec. 6005(b)(4)(B), added subpar. (G).
Subsec. (d)(4). Pub. L. 105-206, Sec. 6005(b)(5)(A), substituted
"Aggregation and ordering rules" for "Coordination with individual
retirement accounts" in heading and amended text generally. Prior
to amendment, text read as follows: "Section 408(d)(2) shall be
applied separately with respect to Roth IRAs and other individual
retirement plans."
Subsec. (d)(6). Pub. L. 105-206, Sec. 6005(b)(6)(A), added par.
(6).
Subsec. (d)(7). Pub. L. 105-206, Sec. 6005(b)(7), added par. (7).
Subsec. (f). Pub. L. 105-206, Sec. 6005(b)(9), added subsec. (f).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to taxable years beginning
after Dec. 31, 2005, see section 617(f) of Pub. L. 107-16, set out
as a note under section 402 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENTS
Amendment by Pub. L. 105-277 effective as if included in the
provision of the Internal Revenue Service Restructuring and Reform
Act of 1998, Pub. L. 105-206, to which such amendment relates, see
section 4002(k) of Pub. L. 105-277, set out as a note under section
1 of this title.
Amendment by section 6005(b)(1)-(7), (9) of Pub. L. 105-206
effective, except as otherwise provided, as if included in the
provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 6024 of Pub. L. 105-206,
set out as a note under section 1 of this title.
Pub. L. 105-206, title VII, Sec. 7004(b), July 22, 1998, 112
Stat. 833, provided that: "The amendment made by this section
[amending this section] shall apply to taxable years beginning
after December 31, 2004."
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1997, see section 302(f) of Pub. L. 105-34, set out as an Effective
Date of 1997 Amendment note under section 219 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25B, 219, 402A, 408, 4973
of this title.
-End-
-CITE-
26 USC Sec. 409 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
Sec. 409. Qualifications for tax credit employee stock ownership
plans
-STATUTE-
(a) Tax credit employee stock ownership plan defined
Except as otherwise provided in this title, for purposes of this
title, the term "tax credit employee stock ownership plan" means a
defined contribution plan which -
(1) meets the requirements of section 401(a),
(2) is designed to invest primarily in employer securities, and
(3) meets the requirements of subsections (b), (c), (d), (e),
(f), (g), (h), and (o) of this section.
(b) Required allocation of employer securities
(1) In general
A plan meets the requirements of this subsection if -
(A) the plan provides for the allocation for the plan year of
all employer securities transferred to it or purchased by it
(because of the requirements of section 41(c)(1)(B)) (!1) to
the accounts of all participants who are entitled to share in
such allocation, and
(B) for the plan year the allocation to each participant so
entitled is an amount which bears substantially the same
proportion to the amount of all such securities allocated to
all such participants in the plan for that year as the amount
of compensation paid to such participant during that year bears
to the compensation paid to all such participants during that
year.
(2) Compensation in excess of $100,000 disregarded
For purposes of paragraph (1), compensation of any participant
in excess of the first $100,000 per year shall be disregarded.
(3) Determination of compensation
For purposes of this subsection, the amount of compensation
paid to a participant for any period is the amount of such
participant's compensation (within the meaning of section
415(c)(3)) for such period.
(4) Suspension of allocation in certain cases
Notwithstanding paragraph (1), the allocation to the account of
any participant which is attributable to the basic employee plan
credit or the credit allowed under section 41 (!1) (relating to
the employee stock ownership credit) may be extended over
whatever period may be necessary to comply with the requirements
of section 415.
(c) Participants must have nonforfeitable rights
A plan meets the requirements of this subsection only if it
provides that each participant has a nonforfeitable right to any
employer security allocated to his account.
(d) Employer securities must stay in the plan
A plan meets the requirements of this subsection only if it
provides that no employer security allocated to a participant's
account under subsection (b) (or allocated to a participant's
account in connection with matched employer and employee
contributions) may be distributed from that account before the end
of the 84th month beginning after the month in which the security
is allocated to the account. To the extent provided in the plan,
the preceding sentence shall not apply in the case of -
(1) death, disability, separation from service, or termination
of the plan;
(2) a transfer of a participant to the employment of an
acquiring employer from the employment of the selling corporation
in the case of a sale to the acquiring corporation of
substantially all of the assets used by the selling corporation
in a trade or business conducted by the selling corporation, or
(3) with respect to the stock of a selling corporation, a
disposition of such selling corporation's interest in a
subsidiary when the participant continues employment with such
subsidiary.
This subsection shall not apply to any distribution required under
section 401(a)(9) or to any distribution or reinvestment required
under section 401(a)(28).
(e) Voting rights
(1) In general
A plan meets the requirements of this subsection if it meets
the requirements of paragraph (2) or (3), whichever is
applicable.
(2) Requirements where employer has a registration-type class of
securities
If the employer has a registration-type class of securities,
the plan meets the requirements of this paragraph only if each
participant or beneficiary in the plan is entitled to direct the
plan as to the manner in which securities of the employer which
are entitled to vote and are allocated to the account of such
participant or beneficiary are to be voted.
(3) Requirement for other employers
If the employer does not have a registration-type class of
securities, the plan meets the requirements of this paragraph
only if each participant or beneficiary in the plan is entitled
to direct the plan as to the manner in which voting rights under
securities of the employer which are allocated to the account of
such participant or beneficiary are to be exercised with respect
to any corporate matter which involves the voting of such shares
with respect to the approval or disapproval of any corporate
merger or consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets of a
trade or business, or such similar transaction as the Secretary
may prescribe in regulations.
(4) Registration-type class of securities defined
For purposes of this subsection, the term, "registration-type
class of securities" means -
(A) a class of securities required to be registered under
section 12 of the Securities Exchange Act of 1934, and
(B) a class of securities which would be required to be so
registered except for the exemption from registration provided
in subsection (g)(2)(H) of such section 12.
(5) 1 vote per participant
A plan meets the requirements of paragraph (3) with respect to
an issue if -
(A) the plan permits each participant 1 vote with respect to
such issue, and
(B) the trustee votes the shares held by the plan in the
proportion determined after application of subparagraph (A).
(f) Plan must be established before employer's due date
(1) In general
A plan meets the requirements of this subsection only if it is
established on or before the due date (including any extension of
such date) for the filing of the employer's tax return for the
first taxable year of the employer for which an employee plan
credit is claimed by the employer with respect to the plan.
(2) Special rule for first year
A plan which otherwise meets the requirements of this section
shall not be considered to have failed to meet the requirements
of section 401(a) merely because it was not established by the
close of the first taxable year of the employer for which an
employee plan credit is claimed by the employer with respect to
the plan.
(g) Transferred amounts must stay in plan even though investment
credit is redetermined or recaptured
A plan meets the requirement of this subsection only if it
provides that amounts which are transferred to the plan (because of
the requirements of section 48(n)(1) or 41(c)(1)(B)) (!2) shall
remain in the plan (and, if allocated under the plan, shall remain
so allocated) even though part or all of the employee plan credit
or the credit allowed under section 41 (!2) (relating to employee
stock ownership credit) is recaptured or redetermined. For purposes
of the preceding sentence, the references to section 48(n)(1) (!2)
and the employee plan credit shall refer to such section and credit
as in effect before the enactment of the Tax Reform Act of 1984.
(h) Right to demand employer securities; put option
(1) In general
A plan meets the requirements of this subsection if a
participant who is entitled to a distribution from the plan -
(A) has a right to demand that his benefits be distributed in
the form of employer securities, and
(B) if the employer securities are not readily tradable on an
established market, has a right to require that the employer
repurchase employer securities under a fair valuation formula.
(2) Plan may distribute cash in certain cases
(A) In general
A plan which otherwise meets the requirements of this
subsection or of section 4975(e)(7) shall not be considered to
have failed to meet the requirements of section 401(a) merely
because under the plan the benefits may be distributed in cash
or in the form of employer securities.
(B) Exception for certain plans restricted from distributing
securities
(i) In general
A plan to which this subparagraph applies shall not be
treated as failing to meet the requirements of this
subsection or section 401(a) merely because it does not
permit a participant to exercise the right described in
paragraph (1)(A) if such plan provides that the participant
entitled to a distribution has a right to receive the
distribution in cash, except that such plan may distribute
employer securities subject to a requirement that such
securities may be resold to the employer under terms which
meet the requirements of paragraph (1)(B).
(ii) Applicable plans
This subparagraph shall apply to a plan which otherwise
meets the requirements of this subsection or section
4975(e)(7) and which is established and maintained by -
(I) an employer whose charter or bylaws restrict the
ownership of substantially all outstanding employer
securities to employees or to a trust described in section
401(a), or
(II) an S corporation.
(3) Special rule for banks
In the case of a plan established and maintained by a bank (as
defined in section 581) which is prohibited by law from redeeming
or purchasing its own securities, the requirements of paragraph
(1)(B) shall not apply if the plan provides that participants
entitled to a distribution from the plan shall have a right to
receive a distribution in cash.
(4) Put option period
An employer shall be deemed to satisfy the requirements of
paragraph (1)(B) if it provides a put option for a period of at
least 60 days following the date of distribution of stock of the
employer and, if the put option is not exercised within such
60-day period, for an additional period of at least 60 days in
the following plan year (as provided in regulations promulgated
by the Secretary).
(5) Payment requirement for total distribution
If an employer is required to repurchase employer securities
which are distributed to the employee as part of a total
distribution, the requirements of paragraph (1)(B) shall be
treated as met if -
(A) the amount to be paid for the employer securities is paid
in substantially equal periodic payments (not less frequently
than annually) over a period beginning not later than 30 days
after the exercise of the put option described in paragraph (4)
and not exceeding 5 years, and
(B) there is adequate security provided and reasonable
interest paid on the unpaid amounts referred to in subparagraph
(A).
For purposes of this paragraph, the term "total distribution"
means the distribution within 1 taxable year to the recipient of
the balance to the credit of the recipient's account.
(6) Payment requirement for installment distributions
If an employer is required to repurchase employer securities as
part of an installment distribution, the requirements of
paragraph (1)(B) shall be treated as met if the amount to be paid
for the employer securities is paid not later than 30 days after
the exercise of the put option described in paragraph (4).
(7) Exception where employee elected diversification
Paragraph (1)(A) shall not apply with respect to the portion of
the participant's account which the employee elected to have
reinvested under section 401(a)(28)(B).
(i) Reimbursement for expenses of establishing and administering
plan
A plan which otherwise meets the requirements of this section
shall not be treated as failing to meet such requirements merely
because it provides that -
(1) Expenses of establishing plan
As reimbursement for the expenses of establishing the plan, the
employer may withhold from amounts due the plan for the taxable
year for which the plan is established (or the plan may pay) so
much of the amounts paid or incurred in connection with the
establishment of the plan as does not exceed the sum of -
(A) 10 percent of the first $100,000 which the employer is
required to transfer to the plan for that taxable year under
section 41(c)(1)(B),(!3) and
(B) 5 percent of any amount so required to be transferred in
excess of the first $100,000; and
(2) Administrative expenses
As reimbursement for the expenses of administering the plan,
the employer may withhold from amounts due the plan (or the plan
may pay) so much of the amounts paid or incurred during the
taxable year as expenses of administering the plan as does not
exceed the lesser of -
(A) the sum of -
(i) 10 percent of the first $100,000 of the dividends paid
to the plan with respect to stock of the employer during the
plan year ending with or within the employer's taxable year,
and
(ii) 5 percent of the amount of such dividends in excess of
$100,000 or
(B) $100,000.
(j) Conditional contributions to the plan
A plan which otherwise meets the requirements of this section
shall not be treated as failing to satisfy such requirements (or as
failing to satisfy the requirements of section 401(a) of this title
or of section 403(c)(1) of the Employee Retirement Income Security
Act of 1974) merely because of the return of a contribution (or a
provision permitting such a return) if -
(1) the contribution to the plan is conditioned on a
determination by the Secretary that such plan meets the
requirements of this section,
(2) the application for a determination described in paragraph
(1) is filed with the Secretary not later than 90 days after the
date on which an employee plan credit is claimed, and
(3) the contribution is returned within 1 year after the date
on which the Secretary issues notice to the employer that such
plan does not satisfy the requirements of this section.
(k) Requirements relating to certain withdrawals
Notwithstanding any other law or rule of law -
(1) the withdrawal from a plan which otherwise meets the
requirements of this section by the employer of an amount
contributed for purposes of the matching employee plan credit
shall not be considered to make the benefits forfeitable, and
(2) the plan shall not, by reason of such withdrawal, fail to
be for the exclusive benefit of participants or their
beneficiaries,
if the withdrawn amounts were not matched by employee contributions
or were in excess of the limitations of section 415. Any withdrawal
described in the preceding sentence shall not be considered to
violate the provisions of section 403(c)(1) of the Employee
Retirement Income Security Act of 1974. For purposes of this
subsection, the reference to the matching employee plan credit
shall refer to such credit as in effect before the enactment of the
Tax Reform Act of 1984.
(l) Employer securities defined
For purposes of this section -
(1) In general
The term "employer securities" means common stock issued by the
employer (or by a corporation which is a member of the same
controlled group) which is readily tradable on an established
securities market.
(2) Special rule where there is no readily tradable common stock
If there is no common stock which meets the requirements of
paragraph (1), the term "employer securities" means common stock
issued by the employer (or by a corporation which is a member of
the same controlled group) having a combination of voting power
and dividend rights equal to or in excess of -
(A) that class of common stock of the employer (or of any
other such corporation) having the greatest voting power, and
(B) that class of common stock of the employer (or of any
other such corporation) having the greatest dividend rights.
(3) Preferred stock may be issued in certain cases
Noncallable preferred stock shall be treated as employer
securities if such stock is convertible at any time into stock
which meets the requirements of paragraph (1) or (2) (whichever
is applicable) and if such conversion is at a conversion price
which (as of the date of the acquisition by the tax credit
employee stock ownership plan) is reasonable. For purposes of the
preceding sentence, under regulations prescribed by the
Secretary, preferred stock shall be treated as noncallable if
after the call there will be a reasonable opportunity for a
conversion which meets the requirements of the preceding
sentence.
(4) Application to controlled group of corporations
(A) In general
For purposes of this subsection, the term "controlled group
of corporations" has the meaning given to such term by section
1563(a) (determined without regard to subsections (a)(4) and
(e)(3)(C) of section 1563).
(B) Where common parent owns at least 50 percent of first tier
subsidiary
For purposes of subparagraph (A), if the common parent owns
directly stock possessing at least 50 percent of the voting
power of all classes of stock and at least 50 percent of each
class of nonvoting stock in a first tier subsidiary, such
subsidiary (and all other corporations below it in the chain
which would meet the 80 percent test of section 1563(a) if the
first tier subsidiary were the common parent) shall be treated
as includible corporations.
(C) Where common parent owns 100 percent of first tier
subsidiary
For purposes of subparagraph (A), if the common parent owns
directly stock possessing all of the voting power of all
classes of stock and all of the nonvoting stock, in a first
tier subsidiary, and if the first tier subsidiary owns directly
stock possessing at least 50 percent of the voting power of all
classes of stock, and at least 50 percent of each class of
nonvoting stock, in a second tier subsidiary of the common
parent, such second tier subsidiary (and all other corporations
below it in the chain which would meet the 80 percent test of
section 1563(a) if the second tier subsidiary were the common
parent) shall be treated as includible corporations.
(5) Nonvoting common stock may be acquired in certain cases
Nonvoting common stock of an employer described in the second
sentence of section 401(a)(22) shall be treated as employer
securities if an employer has a class of nonvoting common stock
outstanding and the specific shares that the plan acquires have
been issued and outstanding for at least 24 months.
(m) Nonrecognition of gain or loss on contribution of employer
securities to tax credit employee stock ownership plan
No gain or loss shall be recognized to the taxpayer with respect
to the transfer of employer securities to a tax credit employee
stock ownership plan maintained by the taxpayer to the extent that
such transfer is required under section 41(c)(1)(B),(!4) or
subparagraph (A) or (B) of section 48(n)(1).(!4)
(n) Securities received in certain transactions
(1) In general
A plan to which section 1042 applies and an eligible
worker-owned cooperative (within the meaning of section 1042(c))
shall provide that no portion of the assets of the plan or
cooperative attributable to (or allocable in lieu of) employer
securities acquired by the plan or cooperative in a sale to which
section 1042 applies may accrue (or be allocated directly or
indirectly under any plan of the employer meeting the
requirements of section 401(a)) -
(A) during the nonallocation period, for the benefit of -
(i) any taxpayer who makes an election under section
1042(a) with respect to employer securities,,,(!5)
(ii) any individual who is related to the taxpayer (within
the meaning of section 267(b)), or
(B) for the benefit of any other person who owns (after
application of section 318(a)) more than 25 percent of -
(i) any class of outstanding stock of the corporation which
issued such employer securities or of any corporation which
is a member of the same controlled group of corporations
(within the meaning of subsection (l)(4)) as such
corporation, or
(ii) the total value of any class of outstanding stock of
any such corporation.
For purposes of subparagraph (B), section 318(a) shall be applied
without regard to the employee trust exception in paragraph
(2)(B)(i).
(2) Failure to meet requirements
If a plan fails to meet the requirements of paragraph (1) -
(A) the plan shall be treated as having distributed to the
person described in paragraph (1) the amount allocated to the
account of such person in violation of paragraph (1) at the
time of such allocation,
(B) the provisions of section 4979A shall apply, and
(C) the statutory period for the assessment of any tax
imposed by section 4979A shall not expire before the date which
is 3 years from the later of -
(i) the 1st allocation of employer securities in connection
with a sale to the plan to which section 1042 applies, or
(ii) the date on which the Secretary is notified of such
failure.
(3) Definitions and special rules
For purposes of this subsection -
(A) Lineal descendants
Paragraph (1)(A)(ii) shall not apply to any individual if -
(i) such individual is a lineal descendant of the taxpayer,
and
(ii) the aggregate amount allocated to the benefit of all
such lineal descendants during the nonallocation period does
not exceed more than 5 percent of the employer securities (or
amounts allocated in lieu thereof) held by the plan which are
attributable to a sale to the plan by any person related to
such descendants (within the meaning of section 267(c)(4)) in
a transaction to which section 1042 applied.
(B) 25-percent shareholders
A person shall be treated as failing to meet the stock
ownership limitation under paragraph (1)(B) if such person
fails such limitation -
(i) at any time during the 1-year period ending on the date
of sale of qualified securities to the plan or cooperative,
or
(ii) on the date as of which qualified securities are
allocated to participants in the plan or cooperative.
(C) Nonallocation period
The term "nonallocation period" means the period beginning on
the date of the sale of the qualified securities and ending on
the later of -
(i) the date which is 10 years after the date of sale, or
(ii) the date of the plan allocation attributable to the
final payment of acquisition indebtedness incurred in
connection with such sale.
(o) Distribution and payment requirements
A plan meets the requirements of this subsection if -
(1) Distribution requirement
(A) In general
The plan provides that, if the participant and, if applicable
pursuant to sections 401(a)(11) and 417, with the consent of
the participant's spouse elects, the distribution of the
participant's account balance in the plan will commence not
later than 1 year after the close of the plan year -
(i) in which the participant separates from service by
reason of the attainment of normal retirement age under the
plan, disability, or death, or
(ii) which is the 5th plan year following the plan year in
which the participant otherwise separates from service,
except that this clause shall not apply if the participant is
reemployed by the employer before distribution is required to
begin under this clause.
(B) Exception for certain financed securities
For purposes of this subsection, the account balance of a
participant shall not include any employer securities acquired
with the proceeds of the loan described in section 404(a)(9)
until the close of the plan year in which such loan is repaid
in full.
(C) Limited distribution period
The plan provides that, unless the participant elects
otherwise, the distribution of the participant's account
balance will be in substantially equal periodic payments (not
less frequently than annually) over a period not longer than
the greater of -
(i) 5 years, or
(ii) in the case of a participant with an account balance
in excess of $800,000, 5 years plus 1 additional year (but
not more than 5 additional years) for each $160,000 or
fraction thereof by which such balance exceeds $800,000.
(2) Cost-of-living adjustment
The Secretary shall adjust the dollar amounts under paragraph
(1)(C) at the same time and in the same manner as under section
415(d).
(p) Prohibited allocations of securities in an S corporation
(1) In general
An employee stock ownership plan holding employer securities
consisting of stock in an S corporation shall provide that no
portion of the assets of the plan attributable to (or allocable
in lieu of) such employer securities may, during a nonallocation
year, accrue (or be allocated directly or indirectly under any
plan of the employer meeting the requirements of section 401(a))
for the benefit of any disqualified person.
(2) Failure to meet requirements
(A) In general
If a plan fails to meet the requirements of paragraph (1),
the plan shall be treated as having distributed to any
disqualified person the amount allocated to the account of such
person in violation of paragraph (1) at the time of such
allocation.
(B) Cross reference
For excise tax relating to violations of paragraph (1) and
ownership of synthetic equity, see section 4979A.
(3) Nonallocation year
For purposes of this subsection -
(A) In general
The term "nonallocation year" means any plan year of an
employee stock ownership plan if, at any time during such plan
year -
(i) such plan holds employer securities consisting of stock
in an S corporation, and
(ii) disqualified persons own at least 50 percent of the
number of shares of stock in the S corporation.
(B) Attribution rules
For purposes of subparagraph (A) -
(i) In general
The rules of section 318(a) shall apply for purposes of
determining ownership, except that -
(I) in applying paragraph (1) thereof, the members of an
individual's family shall include members of the family
described in paragraph (4)(D), and
(II) paragraph (4) thereof shall not apply.
(ii) Deemed-owned shares
Notwithstanding the employee trust exception in section
318(a)(2)(B)(i), an individual shall be treated as owning
deemed-owned shares of the individual.
Solely for purposes of applying paragraph (5), this
subparagraph shall be applied after the attribution rules of
paragraph (5) have been applied.
(4) Disqualified person
For purposes of this subsection -
(A) In general
The term "disqualified person" means any person if -
(i) the aggregate number of deemed-owned shares of such
person and the members of such person's family is at least 20
percent of the number of deemed-owned shares of stock in the
S corporation, or
(ii) in the case of a person not described in clause (i),
the number of deemed-owned shares of such person is at least
10 percent of the number of deemed-owned shares of stock in
such corporation.
(B) Treatment of family members
In the case of a disqualified person described in
subparagraph (A)(i), any member of such person's family with
deemed-owned shares shall be treated as a disqualified person
if not otherwise treated as a disqualified person under
subparagraph (A).
(C) Deemed-owned shares
(i) In general
The term "deemed-owned shares" means, with respect to any
person -
(I) the stock in the S corporation constituting employer
securities of an employee stock ownership plan which is
allocated to such person under the plan, and
(II) such person's share of the stock in such corporation
which is held by such plan but which is not allocated under
the plan to participants.
(ii) Person's share of unallocated stock
For purposes of clause (i)(II), a person's share of
unallocated S corporation stock held by such plan is the
amount of the unallocated stock which would be allocated to
such person if the unallocated stock were allocated to all
participants in the same proportions as the most recent stock
allocation under the plan.
(D) Member of family
For purposes of this paragraph, the term "member of the
family" means, with respect to any individual -
(i) the spouse of the individual,
(ii) an ancestor or lineal descendant of the individual or
the individual's spouse,
(iii) a brother or sister of the individual or the
individual's spouse and any lineal descendant of the brother
or sister, and
(iv) the spouse of any individual described in clause (ii)
or (iii).
A spouse of an individual who is legally separated from such
individual under a decree of divorce or separate maintenance
shall not be treated as such individual's spouse for purposes
of this subparagraph.
(5) Treatment of synthetic equity
For purposes of paragraphs (3) and (4), in the case of a person
who owns synthetic equity in the S corporation, except to the
extent provided in regulations, the shares of stock in such
corporation on which such synthetic equity is based shall be
treated as outstanding stock in such corporation and deemed-owned
shares of such person if such treatment of synthetic equity of 1
or more such persons results in -
(A) the treatment of any person as a disqualified person, or
(B) the treatment of any year as a nonallocation year.
For purposes of this paragraph, synthetic equity shall be treated
as owned by a person in the same manner as stock is treated as
owned by a person under the rules of paragraphs (2) and (3) of
section 318(a). If, without regard to this paragraph, a person is
treated as a disqualified person or a year is treated as a
nonallocation year, this paragraph shall not be construed to
result in the person or year not being so treated.
(6) Definitions
For purposes of this subsection -
(A) Employee stock ownership plan
The term "employee stock ownership plan" has the meaning
given such term by section 4975(e)(7).
(B) Employer securities
The term "employer security" has the meaning given such term
by section 409(l).
(C) Synthetic equity
The term "synthetic equity" means any stock option, warrant,
restricted stock, deferred issuance stock right, or similar
interest or right that gives the holder the right to acquire or
receive stock of the S corporation in the future. Except to the
extent provided in regulations, synthetic equity also includes
a stock appreciation right, phantom stock unit, or similar
right to a future cash payment based on the value of such stock
or appreciation in such value.
(7) Regulations and guidance
(A) In general
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this subsection.
(B) Avoidance or evasion
The Secretary may, by regulation or other guidance of general
applicability, provide that a nonallocation year occurs in any
case in which the principal purpose of the ownership structure
of an S corporation constitutes an avoidance or evasion of this
subsection.
(q) Cross references
(1) For requirements for allowance of employee plan credit,
see section 48(n).(!6)
(2) For assessable penalties for failure to meet requirements
of this section, or for failure to make contributions required
with respect to the allowance of an employee plan credit or
employee stock ownership credit, see section 6699.(!6)
(3) For requirements for allowance of an employee stock
ownership credit, see section 41.(!6)
-SOURCE-
(Added Pub. L. 95-600, title I, Sec. 141(a), Nov. 6, 1978, 92 Stat.
2787, Sec. 409A; amended Pub. L. 96-222, title I, Sec.
101(a)(7)(D)-(F), (I), (J), (L)(i)(VI), (ii)(I), (II), (iii)(V),
(v)(VI), (VII), Apr. 1, 1980, 94 Stat. 198-200; Pub. L. 96-605,
title II, Sec. 224(a), Dec. 28, 1980, 94 Stat. 3528; Pub. L. 97-34,
title III, Secs. 331(c)(1), 334, 336, 337(a), Aug. 13, 1981, 95
Stat. 293, 297, 298; Pub. L. 97-448, title I, Sec. 103(h), (i),
Jan. 12, 1983, 96 Stat. 2379; renumbered Sec. 409 and amended Pub.
L. 98-369, div. A, title IV, Secs. 474(r)(15), 491(e)(1), July 18,
1984, 98 Stat. 843, 852; Pub. L. 99-514, title XI, Secs.
1172(b)(1), 1174(a)(1), (b)(1), (2), (c)(1)(A), 1176(b), title
XVIII, Secs. 1852(a)(4)(B), 1854(a)(3)(A), (f)(1), (3)(C),
1899A(11), Oct. 22, 1986, 100 Stat. 2514, 2516, 2517, 2520, 2865,
2873, 2881, 2882, 2958; Pub. L. 100-647, title I, Secs.
1011B(g)(1), (2), (i)(1), (3), (j)(3), (5), (k)(3), 1018(t)(4)(B),
(C), (H), Nov. 10, 1988, 102 Stat. 3490, 3492, 3493, 3588, 3589;
Pub. L. 101-239, title VII, Secs. 7304(a)(2)(A), (B), 7811(h)(1),
Dec. 19, 1989, 103 Stat. 2352, 2353, 2409; Pub. L. 105-34, title
XV, Sec. 1506(a), Aug. 5, 1997, 111 Stat. 1064; Pub. L. 107-16,
title VI, Sec. 656(a), June 7, 2001, 115 Stat. 131; Pub. L.
107-147, title IV, Sec. 411(j)(2), Mar. 9, 2002, 116 Stat. 47.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
Section 41, referred to in subsecs. (b)(1)(A), (4), (g),
(i)(1)(A), (m), and (p), which related to employee stock ownership
credit, was repealed by Pub. L. 99-514, title XI, Sec. 1171(a),
Oct. 22, 1986, 100 Stat. 2513. Section 30 of this title, relating
to credit for increasing research activities, was renumbered
section 41.
Section 12 of the Securities Exchange Act of 1934, referred to in
subsec. (e)(4), is classified to section 78l of Title 15, Commerce
and Trade.
Section 403(c)(1) of the Employee Retirement Income Security Act
of 1974, referred to in subsecs. (j) and (k), is classified to
section 1103(c)(1) of Title 29, Labor.
The enactment of the Tax Reform Act of 1984, referred to in
subsecs. (g) and (k), means the enactment of div. A of Pub. L.
98-369, which was approved July 18, 1984.
Subsec. (n) of section 48, referred to in subsecs. (g), (m), and
(p)(1), was repealed by section 474(o)(15) of Pub. L. 98-369.
Section 6699, referred to in subsec. (p)(2), was repealed by Pub.
L. 99-514, title XI, Sec. 1171(b)(7)(A), Oct. 22, 1986, 100 Stat.
2513.
-MISC1-
PRIOR PROVISIONS
A prior section 409, added Pub. L. 93-406, title II, Sec.
2002(c), Sept. 2, 1974, 88 Stat. 964; amended Pub. L. 94-455, title
XV, Sec. 1501(b)(6), title XIX, Secs. 1901(a)(60), 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1736, 1774, 1834; Pub. L. 95-600, title I,
Secs. 156(c)(2), (3), 157(e)(1)(B), Nov. 6, 1978, 92 Stat. 2803,
2806; Pub. L. 96-222, title I, Sec. 101(a)(14)(B), Apr. 1, 1980, 94
Stat. 204; Pub. L. 97-34, title III, Sec. 311(g)(1)(D), (3), Aug.
13, 1981, 95 Stat. 281; Pub. L. 97-248, title II, Sec.
243(b)(1)(B), title III, Sec. 335(a)(2), Sept. 3, 1982, 96 Stat.
523, 628; Pub. L. 97-452, Sec. 2(c)(1), Jan. 12, 1983, 96 Stat.
2478; Pub. L. 98-369, div. A, title I, Sec. 42(a)(7), title V, Sec.
522(d)(13), July 18, 1984, 98 Stat. 557, 871, related to retirement
bonds, prior to repeal by Pub. L. 98-369, div. A, title IV, Sec.
491(b), (f)(1), July 18, 1984, 98 Stat. 848, 853, applicable to
obligations issued after Dec. 31, 1983.
AMENDMENTS
2002 - Subsec. (o)(1)(C)(ii). Pub. L. 107-147 substituted
"$800,000" for "$500,000" in two places and "$160,000" for
"$100,000".
2001 - Subsecs. (p), (q). Pub. L. 107-16, Secs. 656(a), 901,
temporarily added subsec. (p) and redesignated former subsec. (p)
as (q). See Effective and Termination Dates of 2001 Amendment note
below.
1997 - Subsec. (h)(2). Pub. L. 105-34 designated existing
provisions as subpar. (A), inserted subpar. heading, struck out "In
the case of an employer whose charter or bylaws restrict the
ownership of substantially all outstanding employer securities to
employees or to a trust described in section 401(a), a plan which
otherwise meets the requirements of this subsection or section
4975(e)(7) shall not be considered to have failed to meet the
requirements of this subsection or of section 401(a) merely because
it does not permit a participant to exercise the right described in
paragraph (1)(A) if such plan provides that participants entitled
to a distribution from the plan shall have a right to receive such
distribution in cash, except that such plan may distribute employer
securities subject to a requirement that such securities may be
resold to the employer under terms which meet the requirements of
paragraph (1)(B)." after "employer securities.", and added subpar.
(B).
1989 - Subsec. (l)(5). Pub. L. 101-239, Sec. 7811(h)(1),
substituted "the second sentence" for "the last sentence".
Subsec. (n)(1). Pub. L. 101-239, Sec. 7304(a)(2)(A)(i), struck
out "or section 2057" after "section 1042" in two places in
introductory provisions.
Subsec. (n)(1)(A)(i). Pub. L. 101-239, Sec. 7304(a)(2)(A)(ii),
struck out "or any decedent if the executor of the estate of such
decedent makes a qualified sale to which section 2057 applies"
after "employer securities,".
Subsec. (n)(1)(A)(ii). Pub. L. 101-239, Sec. 7304(a)(2)(A)(iii),
struck out "or the decedent" after "the taxpayer".
Subsec. (n)(2)(C)(i), (3)(A)(ii). Pub. L. 101-239, Sec.
7304(a)(2)(B), struck out "or section 2057" after "section 1042".
1988 - Subsec. (d). Pub. L. 100-647, Sec. 1011B(j)(3), inserted
"or to any distribution or reinvestment required under section
401(a)(28)" after "under section 401(a)(9)".
Subsec. (e)(5). Pub. L. 100-647, Sec. 1018(t)(4)(H), substituted
"paragraph (3)" for "paragraph (2) or (3)".
Subsec. (h)(2). Pub. L. 100-647, Sec. 1018(t)(4)(B), substituted
"paragraph (1)(B)" for "section 409(o)".
Subsec. (h)(7). Pub. L. 100-647, Sec. 1011B(j)(5), added par.
(7).
Subsec. (l)(4), (5). Pub. L. 100-647, Sec. 1011B(k)(3),
redesignated par. (4), relating to nonvoting common stock may be
acquired in certain cases, as (5).
Subsec. (n)(1). Pub. L. 100-647, Sec. 1011B(g)(1), made technical
amendment to directory language of Pub. L. 99-514, Sec. 1172(b)(1).
See 1986 Amendment note below.
Subsec. (n)(2)(C)(i), (3)(A)(ii). Pub. L. 100-647, Sec.
1011B(g)(2), inserted "or section 2057" after "which section 1042".
Subsec. (n)(3)(C). Pub. L. 100-647, Sec. 1018(t)(4)(C), amended
subpar. (C) generally. Prior to amendment, subpar. (C) read as
follows: "The term 'nonallocation period' means the 10-year period
beginning on the later of -
"(i) the date of the sale of the qualified securities, or
"(ii) the date of the plan allocation attributable to the final
payment of acquisition indebtedness incurred in connection with
such sale."
Subsec. (o)(1)(A). Pub. L. 100-647, Sec. 1011B(i)(3), substituted
"if the participant and, if applicable pursuant to sections
401(a)(11) and 417, with the consent of the participant's spouse
elects" for "unless the participant otherwise elects".
Subsec. (o)(1)(A)(ii). Pub. L. 100-647, Sec. 1011B(i)(1),
substituted "distribution is required to begin under this clause"
for "such year".
1986 - Subsec. (a)(3). Pub. L. 99-514, Sec. 1174(b)(2), inserted
reference to subsec. (o).
Subsec. (d). Pub. L. 99-514, Sec. 1899A(11), substituted
"participant's" for "participants's".
Pub. L. 99-514, Sec. 1852(a)(4)(B), inserted at end "This
subsection shall not apply to any distribution required under
section 401(a)(9)."
Subsec. (d)(1). Pub. L. 99-514, Sec. 1174(a)(1), substituted
"separation from service, or termination of the plan" for "or
separation from service".
Subsec. (e)(2). Pub. L. 99-514, Sec. 1854(f)(1)(C), (D), inserted
"or beneficiary" after "participant" in two places and substituted
"securities of the employer" for "employer securities".
Subsec. (e)(3). Pub. L. 99-514, Sec. 1854(f)(1)(B)-(D), inserted
"or beneficiary" after "participant" in two places and substituted
"securities of the employer" for "employer securities" and "any
corporate matter which involves the voting of such shares with
respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation,
dissolution, sale of substantially all assets of a trade or
business, or such similar transaction as the Secretary may
prescribe in regulations" for "a corporate matter which (by law or
charter) must be decided by more than a majority vote of
outstanding common shares voted".
Subsec. (e)(5). Pub. L. 99-514, Sec. 1854(f)(1)(A), added par.
(5).
Subsec. (h)(2). Pub. L. 99-514, Sec. 1854(f)(3)(C), inserted ",
except that such plan may distribute employer securities subject to
a requirement that such securities may be resold to the employer
under terms which meet the requirements of section 409(o)".
Subsec. (h)(5), (6). Pub. L. 99-514, Sec. 1174(c)(1)(A), added
pars. (5) and (6).
Subsec. (l)(4). Pub. L. 99-514, Sec. 1176(b), added par. (4)
relating to acquisition of nonvoting common stock.
Subsec. (n). Pub. L. 99-514, Sec. 1854(a)(3)(A), added subsec.
(n). Former subsec. (n) redesignated (o).
Subsec. (n)(1). Pub. L. 99-514, Sec. 1172(b)(1), as amended by
Pub. L. 100-647, Sec. 1011B(g)(1), inserted "or section 2057" in
two places in introductory provisions, "or any decedent if the
executor of the estate of such decedent makes a qualified sale to
which section 2057 applies," in subpar. (A)(i), and "or the
decedent" in subpar. (A)(ii).
Subsec. (o). Pub. L. 99-514, Sec. 1174(b)(1), added subsec. (o).
Former subsec. (o) redesignated (p).
Pub. L. 99-514, Sec. 1854(a)(3)(A), redesignated former subsec.
(n) as (o).
Subsec. (p). Pub. L. 99-514, Sec. 1174(b)(1), redesignated former
subsec. (o) as (p).
1984 - Subsec. (b)(1)(A). Pub. L. 98-369, Sec. 474(r)(15)(A),
(B), substituted "41" for "44G" and struck out "48(n)(1)(A) or"
after "requirements of section".
Subsec. (b)(4). Pub. L. 98-369, Sec. 474(r)(15)(A), substituted
"41" for "44G".
Subsec. (g). Pub. L. 98-369, Sec. 474(r)(15)(A), (C), substituted
"41" for "44G" in two places, and inserted provision directing
that, for purposes of the preceding sentence, the references to
section 48(n)(1) and the employee plan credit shall refer to such
section and credit as in effect before the enactment of the Tax
Reform Act of 1984.
Subsec. (i)(1)(A). Pub. L. 98-369, Sec. 474(r)(15)(A), (D),
substituted "41" for "44G", and struck out "48(n)(1) or" after
"taxable year under section".
Subsec. (k). Pub. L. 98-369, Sec. 474(r)(15)(E), inserted
provision requiring that, for purposes of this subsection, the
reference to the matching employee plan credit refer to such credit
as in effect before the enactment of the Tax Reform Act of 1984.
Subsec. (m). Pub. L. 98-369, Sec. 474(r)(15)(A), substituted "41"
for "44G".
Subsec. (n)(3). Pub. L. 98-369, Sec. 474(r)(15)(A), substituted
"41" for "44G".
1983 - Subsec. (d)(2). Pub. L. 97-448, Sec. 103(i), struck out
provisions covering the sale of substantially all of the stock of a
subsidiary of the employer.
Subsec. (h)(2). Pub. L. 97-448, Sec. 103(h), substituted "the
requirements of this subsection or of section 401(a)" for "the
requirements of section 401(a)".
1981 - Subsec. (b). Pub. L. 97-34, Sec. 331(c)(1)(A), (B),
inserted in par. (1)(A) reference to section 44G(c)(1)(B), and
inserted in par. (4) "or the credit allowed under section 44G
(relating to the employee stock ownership credit)" after "basic
employee plan credit".
Subsec. (d). Pub. L. 97-34, Sec. 337, designated provision
relating to death, disability, or separation from service as par.
(1) and added pars. (2) and (3).
Subsec. (g). Pub. L. 97-34, Sec. 331(c)(1)(C), (D), inserted
reference to section 44G(c)(1)(B) and inserted "or the credit
allowed under section 44G (relating to employee stock ownership
credit)" after "employee plan credit".
Subsec. (h)(2). Pub. L. 97-34, Sec. 334, substituted "this
subsection" for "this section" and inserted provision respecting
receipt of distributions in cash where employer's charter or bylaws
restrict ownership of substantially all outstanding employer
securities to employees or to a section 401(a) trust where a
participant is not permitted to exercise the right described in
par. (1)(A).
Subsec. (h)(3), (4). Pub. L. 97-34, Sec. 336, added pars. (3) and
(4).
Subsec. (i)(1)(A). Pub. L. 97-34, Sec. 331(c)(1)(E), inserted
reference to section 44G(c)(1)(B).
Subsec. (m). Pub. L. 97-34, Sec. 331(c)(1)(F), inserted reference
to section 44G(c)(1)(B).
Subsec. (n)(2), (3). Pub. L. 97-34, Sec. 331(c)(1)(G), (H),
inserted "or employee stock ownership credit" after "employee plan
credit" in par. (2) and added par. (3).
1980 - Pub. L. 96-222, Sec. 101(a)(7)(L)(v)(VII), substituted
"tax credit employee stock ownership plans" for "ESOPS" in section
catchline.
Subsec. (a). Pub. L. 96-222, Sec. 101(a)(7)(L)(ii)(I), (v)(VI),
substituted in heading and in text "tax credit employee stock
ownership plan" for "ESOP".
Subsec. (b)(4). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V),
substituted "employee plan credit" for "ESOP credit".
Subsec. (d). Pub. L. 96-222, Sec. 101(a)(7)(F), inserted "(or
allocated to a participant's account in connection with matched
employer and employee contributions)" after "under subsection (b)".
Subsec. (f)(1). Pub. L. 96-222, Sec. 101(a)(7)(I)(i), substituted
"only if it is established on or before the due date (including any
extension of such date) for the filing of the employer's tax return
for the first taxable year of the employer for which an employee
plan credit is claimed by the employer with respect to the plan"
for "for a plan year only if it is established on or before the due
date for the filing of the employer's tax return for the taxable
year (including any extension of such date) in which or with which
the plan year ends".
Subsec. (f)(2). Pub. L. 96-222, Sec. 101(a)(7)(I)(ii),
(L)(v)(VII), substituted "employee plan" for "ESOP" and inserted
"with respect to the plan" after "by the employer".
Subsec. (g). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V),
substituted "employee plan credit" for "ESOP credit".
Subsec. (h)(2). Pub. L. 96-222, Sec. 101(a)(7)(E), inserted "or
of section 4975(e)(7)" after "the requirements of this section".
Subsecs. (j)(2), (k)(1). Pub. L. 96-222, Sec.
101(a)(7)(L)(iii)(V), substituted "employee plan credit" for "ESOP
credit".
Subsec. (l)(2)(B). Pub. L. 96-222, Sec. 101(a)(7)(J)(i),
substituted "class of common stock" for "class of stock".
Subsec. (l)(3). Pub. L. 96-222, Sec. 101(a)(7)(J)(ii),
(L)(ii)(II), substituted "as employer securities" for "as meeting
the requirements of paragraph (1)", "paragraph (1) or (2)" for
"paragraph (2)", and "tax credit employee stock ownership plan" for
"ESOP" and inserted provisions requiring preferred stock to be
treated as noncallable if after the call there will be a reasonable
opportunity for a conversion which meets the requirements of the
preceding sentence.
Subsec. (l)(4). Pub. L. 96-605 substituted in heading
"Application to controlled group of corporations" for "Controlled
group of corporations defined" and in subpar. (B) heading "Where
common parent owns at least" for "Common parent may own only" and
added subpar. (C).
Subsec. (m). Pub. L. 96-222, Sec. 101(a)(7)(D), (L)(i),
substituted provisions relating to nonrecognition of gain or loss
on contribution of employer securities to a tax credit employee
stock ownership plan for provisions relating to contributions of
stock of a controlling corporation.
Subsec. (n). Pub. L. 96-222, Sec. 101(a)(7)(L)(iii)(V),
substituted "employee plan credit" for "ESOP credit" in pars. (1)
and (2).
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title VI, Sec. 656(d), June 7, 2001, 115 Stat.
135, provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 4975 and 4979A of this title] shall apply
to plan years beginning after December 31, 2004.
"(2) Exception for certain plans. - In the case of any -
"(A) employee stock ownership plan established after March 14,
2001, or
"(B) employee stock ownership plan established on or before
such date if employer securities held by the plan consist of
stock in a corporation with respect to which an election under
section 1362(a) of the Internal Revenue Code of 1986 is not in
effect on such date,
the amendments made by this section shall apply to plan years
ending after March 14, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1506(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section, section 4975 of this
title, and section 1108 of Title 29, Labor] shall apply to taxable
years beginning after December 31, 1997."
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7304(a)(3) of Pub. L. 101-239 provided that: "The
amendments made by this subsection [amending this section and
sections 4978 and 4979A of this title and repealing sections 2057
and 4978A of this title] shall apply to the estates of decedents
dying after the date of the enactment of this Act [Dec. 19, 1989]."
Amendment by section 7811(h)(1) of Pub. L. 101-239 effective,
except as otherwise provided, as if included in the provision of
the Technical and Miscellaneous Revenue Act of 1988, Pub. L.
100-647, to which such amendment relates, see section 7817 of Pub.
L. 101-239, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1172(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [enacting section 2057 of this title and
amending this section and section 4979A of this title] shall apply
to sales after the date of the enactment of this Act [Oct. 22,
1986] with respect to which an election is made by the executor of
an estate who is required to file the return of the tax imposed by
the Internal Revenue Code of 1986 on a date (including extensions)
after the date of the enactment of this Act."
Section 1174(a)(2) of Pub. L. 99-514, as amended by Pub. L.
100-647, title I, Sec. 1011B(i)(2), Nov. 10, 1988, 102 Stat. 3492,
provided that: "The amendment made by this subsection [amending
this section] shall apply to distributions after December 31,
1984."
Section 1174(b)(3) of Pub. L. 99-514 provided that: "The
amendments made by this subsection [amending this section] shall
apply to distributions attributable to stock acquired after
December 31, 1986."
Section 1174(c)(1)(B) of Pub. L. 99-514 provided that: "The
amendment made by this paragraph [amending this section] shall
apply to distributions attributable to stock acquired after
December 31, 1986, except that a plan may elect to have such
amendment apply to all distributions after the date of the
enactment of this Act [Oct. 22, 1986]."
Amendment by section 1176(b) of Pub. L. 99-514 applicable to
acquisitions of securities after Dec. 31, 1986, see section 1176(c)
of Pub. L. 99-514, set out as a note under section 401 of this
title.
Amendment by section 1852(a)(4)(B) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
Section 1854(a)(3)(C) of Pub. L. 99-514, as amended by Pub. L.
100-647, title I, Sec. 1018(t)(4)(G), Nov. 10, 1988, 102 Stat.
3588, provided that:
"(i) Except as provided in clause (ii), the amendments made by
this paragraph [amending this section and section 1042 of this
title] shall apply to sales of securities after the date of the
enactment of this Act [Oct. 22, 1986].
"(ii) A taxpayer or executor may elect to have section 1042(b)(3)
of the Internal Revenue Code of 1954 (as in effect before the
amendment made by subparagraph (B)) apply to sales before the date
of the enactment of this Act as if such section included the last
sentence of section 409(n)(1) of the Internal Revenue Code of 1986
(as added by subparagraph (A))."
Section 1854(f)(4)(A), (B) of Pub. L. 99-514 provided that:
"(A) The amendments made by paragraph (1)(A) and (3) [amending
this section and sections 1042 and 4975 of this title] shall take
effect on the date of the enactment of this Act [Oct. 22, 1986]."
"(B) The amendments made by subparagraphs (B), (C), and (D) of
paragraph (1) [amending this section] shall apply after December
31, 1986, to stock acquired after December 31, 1979."
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(r)(15) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Redesignation of section 409A as 409 by section 491(e)(1) of Pub.
L. 98-369 effective Jan. 1, 1984, see section 491(f)(3) of Pub. L.
98-369, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 331(c)(1) of Pub. L. 97-34 applicable to
taxable years ending after Dec. 31, 1982, see section 331(f)(2) of
Pub. L. 97-34, set out as a note under section 404 of this title.
Section 337(b) of Pub. L. 97-34, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by this section [amending this section] shall apply
to distributions described in section 409A(d) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] (or any corresponding
provision of prior law) made after March 29, 1975."
Amendment by sections 334 and 336 of Pub. L. 97-34 applicable to
taxable years beginning after Dec. 31, 1981, see section 339 of
Pub. L. 97-34, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 224(b) of Pub. L. 96-605 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to qualified investment for taxable years beginning after
December 31, 1978."
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE
Section 141(g) of Pub. L. 95-600, as added by Pub. L. 96-222,
title I, Sec. 101(a)(7)(B), Apr. 1, 1980, 94 Stat. 197; amended by
Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided
that:
"(1) In general. - Except as otherwise provided in this
subsection and subsection (h) [set out as an Effective Date of 1978
Amendment note under section 4975 of this title], the amendments
made by this section [enacting sections 409A [now 409] and 6699 of
this title and amending sections 46, 48, 56, 401, 404, 415, 805,
1504, and 4975 of this title] shall apply with respect to qualified
investment for taxable years beginning after December 31, 1978.
"(2) Election to have amendments apply during 1978. - At the
election of the taxpayer, paragraph (1) shall be applied by
substituting 'December 31, 1977' for 'December 31, 1978'; except
that in the case of a plan in existence before December 31, 1978,
any such election shall not affect the required allocation of
employer securities attributable to qualified investment for
taxable years beginning before January 1, 1979. An election under
the preceding sentence shall be made at such time and in such
manner as the Secretary of the Treasury or his delegate shall
prescribe. Such an election, once made, shall be irrevocable.
"(3) Voting right provisions. - Section 409A(e) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection
(a)) [now section 409] shall apply to plans to which section 409A
of such Code applies, beginning with the first day of such
application.
"(4) Right to demand employer securities, etc. - Paragraphs
(1)(A) and (2) of section 409A(h) of the Internal Revenue Code of
1986 (as added by subsection (a)) [now section 409] shall apply to
distributions after December 31, 1978, made by a plan to which
section 409A of such Code applies.
"(5) Subsection (f)(7). - The amendment made by subsection (f)(7)
[amending section 415 of this title] shall apply to years beginning
after December 31, 1978.
"(6) Retroactive application of amendment made by subsection (d).
- In determining the regular tax deduction under section 56(c) of
the Internal Revenue Code of 1986 for any taxable year beginning
before January 1, 1979, the amount of the credit allowable under
section 38 of such Code shall be determined without regard to
section 46(a)(2)(B) of such Code (as in effect before the enactment
of the Energy Tax Act of 1978 [Nov. 9, 1978])."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 401, 404, 411, 414, 415,
512, 664, 1042, 4975, 4978, 4979A, 4980 of this title; title 28
section 3010; title 29 sections 1054, 1055.
-FOOTNOTE-
(!1) See References in Text note below.
(!2) See References in Text note below.
(!3) See References in Text note below.
(!4) See References in Text note below.
(!5) So in original.
(!6) See References in Text note below.
-End-
-CITE-
26 USC Sec. 409A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart A - General Rule
-HEAD-
[Sec. 409A. Renumbered Sec. 409]
-STATUTE-
-End-
-CITE-
26 USC Subpart B - Special Rules 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart B - Special Rules
-HEAD-
SUBPART B - SPECIAL RULES
-MISC1-
Sec.
410. Minimum participation standards.
411. Minimum vesting standards.
412. Minimum funding standards.
413. Collectively bargained plans.(!1)
414. Definitions and special rules.
415. Limitations on benefits and contribution under
qualified plans.
416. Special rules for top-heavy plans.
417. Definitions and special rules for purposes of minimum
survivor annuity requirements.
AMENDMENTS
1984 - Pub. L. 98-397, title II, Sec. 203(c), Aug. 23, 1984, 98
Stat. 1445, added item 417.
1982 - Pub. L. 97-248, title II, Sec. 240(d), Sept. 3, 1982, 96
Stat. 520, added item 416.
1974 - Pub. L. 93-406, title II, Sec. 1011, Sept. 2, 1974, 88
Stat. 898, added subpart heading and analysis of sections.
-FOOTNOTE-
(!1) So in original. Does not conform to section catchline.
-End-
-CITE-
26 USC Sec. 410 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart B - Special Rules
-HEAD-
Sec. 410. Minimum participation standards
-STATUTE-
(a) Participation
(1) Minimum age and service conditions
(A) General rule
A trust shall not constitute a qualified trust under section
401(a) if the plan of which it is a part requires, as a
condition of participation in the plan, that an employee
complete a period of service with the employer or employers
maintaining the plan extending beyond the later of the
following dates -
(i) the date on which the employee attains the age of 21;
or
(ii) the date on which he completes 1 year of service.
(B) Special rules for certain plans
(i) In the case of any plan which provides that after not
more than 2 years of service each participant has a right to
100 percent of his accrued benefit under the plan which is
nonforfeitable (within the meaning of section 411) at the
time such benefit accrues, clause (ii) of subparagraph (A)
shall be applied by substituting "2 years of service" for "1
year of service".
(ii) In the case of any plan maintained exclusively for
employees of an educational institution (as defined in
section 170(b)(1)(A)(ii) by an employer which is exempt from
tax under section 501(a) which provides that each participant
having at least 1 year of service has a right to 100 percent
of his accrued benefit under the plan which is nonforfeitable
(within the meaning of section 411) at the time such benefit
accrues, clause (i) of subparagraph (A) shall be applied by
substituting "26" for "21". This clause shall not apply to
any plan to which clause (i) applies.
(2) Maximum age conditions
A trust shall not constitute a qualified trust under section
401(a) if the plan of which it is a part excludes from
participation (on the basis of age) employees who have attained a
specified age.
(3) Definition of year of service
(A) General rule
For purposes of this subsection, the term "year of service"
means a 12-month period during which the employee has not less
than 1,000 hours of service. For purposes of this paragraph,
computation of any 12-month period shall be made with reference
to the date on which the employee's employment commenced,
except that, under regulations prescribed by the Secretary of
Labor, such computation may be made by reference to the first
day of a plan year in the case of an employee who does not
complete 1,000 hours of service during the 12-month period
beginning on the date his employment commenced.
(B) Seasonal industries
In the case of any seasonal industry where the customary
period of employment is less than 1,000 hours during a calendar
year, the term "year of service" shall be such period as may be
determined under regulations prescribed by the Secretary of
Labor.
(C) Hours of service
For purposes of this subsection, the term "hour of service"
means a time of service determined under regulations prescribed
by the Secretary of Labor.
(D) Maritime industries
For purposes of this subsection, in the case of any maritime
industry, 125 days of service shall be treated as 1,000 hours
of service. The Secretary of Labor may prescribe regulations to
carry out this subparagraph.
(4) Time of participation
A plan shall be treated as not meeting the requirements of
paragraph (1) unless it provides that any employee who has
satisfied the minimum age and service requirements specified in
such paragraph, and who is otherwise entitled to participate in
the plan, commences participation in the plan no later than the
earlier of -
(A) the first day of the first plan year beginning after the
date on which such employee satisfied such requirements, or
(B) the date 6 months after the date on which he satisfied
such requirements,
unless such employee was separated from the service before the
date referred to in subparagraph (A) or (B), whichever is
applicable.
(5) Breaks in service
(A) General rule
Except as otherwise provided in subparagraphs (B), (C), and
(D), all years of service with the employer or employers
maintaining the plan shall be taken into account in computing
the period of service for purposes of paragraph (1).
(B) Employees under 2-year 100 percent vesting
In the case of any employee who has any 1-year break in
service (as defined in section 411(a)(6)(A)) under a plan to
which the service requirements of clause (i) of paragraph
(1)(B) apply, if such employee has not satisfied such
requirements, service before such break shall not be required
to be taken into account.
(C) 1-year break in service
In computing an employee's period of service for purposes of
paragraph (1) in the case of any participant who has any 1-year
break in service (as defined in section 411(a)(6)(A)), service
before such break shall not be required to be taken into
account under the plan until he has completed a year of service
(as defined in paragraph (3)) after his return.
(D) Nonvested participants
(i) In general
For purposes of paragraph (1), in the case of a nonvested
participant, years of service with the employer or employers
maintaining the plan before any period of consecutive 1-year
breaks in service shall not be required to be taken into
account in computing the period of service if the number of
consecutive 1-year breaks in service within such period
equals or exceeds the greater of -
(I) 5, or
(II) the aggregate number of years of service before such
period.
(ii) Years of service not taken into account
If any years of service are not required to be taken into
account by reason of a period of breaks in service to which
clause (i) applies, such years of service shall not be taken
into account in applying clause (i) to a subsequent period of
breaks in service.
(iii) Nonvested participant defined
For purposes of clause (i), the term "nonvested
participant" means a participant who does not have any
nonforfeitable right under the plan to an accrued benefit
derived from employer contributions.
(E) Special rule for maternity or paternity absences
(i) General rule
In the case of each individual who is absent from work for
any period -
(I) by reason of the pregnancy of the individual,
(II) by reason of the birth of a child of the individual,
(III) by reason of the placement of a child with the
individual in connection with the adoption of such child by
such individual, or
(IV) for purposes of caring for such child for a period
beginning immediately following such birth or placement,
the plan shall treat as hours of service, solely for purposes
of determining under this paragraph whether a 1-year break in
service (as defined in section 411(a)(6)(A)) has occurred,
the hours described in clause (ii).
(ii) Hours treated as hours of service
The hours described in this clause are -
(I) the hours of service which otherwise would normally
have been credited to such individual but for such absence,
or
(II) in any case in which the plan is unable to determine
the hours described in subclause (I), 8 hours of service
per day of such absence,
except that the total number of hours treated as hours of
service under this clause by reason of any such pregnancy or
placement shall not exceed 501 hours.
(iii) Year to which hours are credited
The hours described in clause (ii) shall be treated as
hours of service as provided in this subparagraph -
(I) only in the year in which the absence from work
begins, if a participant would be prevented from incurring
a 1-year break in service in such year solely because the
period of absence is treated as hours of service as
provided in clause (i); or
(II) in any other case, in the immediately following
year.
(iv) Year defined
For purposes of this subparagraph, the term "year" means
the period used in computations pursuant to paragraph (3).
(v) Information required to be filed
A plan shall not fail to satisfy the requirements of this
subparagraph solely because it provides that no credit will
be given pursuant to this subparagraph unless the individual
furnishes to the plan administrator such timely information
as the plan may reasonably require to establish -
(I) that the absence from work is for reasons referred to
in clause (i), and
(II) the number of days for which there was such an
absence.
(b) Minimum coverage requirements
(1) In general
A trust shall not constitute a qualified trust under section
401(a) unless such trust is designated by the employer as part of
a plan which meets 1 of the following requirements:
(A) The plan benefits at least 70 percent of employees who
are not highly compensated employees.
(B) The plan benefits -
(i) a percentage of employees who are not highly
compensated employees which is at least 70 percent of
(ii) the percentage of highly compensated employees
benefiting under the plan.
(C) The plan meets the requirements of paragraph (2).
(2) Average benefit percentage test
(A) In general
A plan shall be treated as meeting the requirements of this
paragraph if -
(i) the plan benefits such employees as qualify under a
classification set up by the employer and found by the
Secretary not to be discriminatory in favor of highly
compensated employees, and
(ii) the average benefit percentage for employees who are
not highly compensated employees is at least 70 percent of
the average benefit percentage for highly compensated
employees.
(B) Average benefit percentage
For purposes of this paragraph, the term "average benefit
percentage" means, with respect to any group, the average of
the benefit percentages calculated separately with respect to
each employee in such group (whether or not a participant in
any plan).
(C) Benefit percentage
For purposes of this paragraph -
(i) In general
The term "benefit percentage" means the employer-provided
contribution or benefit of an employee under all qualified
plans maintained by the employer, expressed as a percentage
of such employee's compensation (within the meaning of
section 414(s)).
(ii) Period for computing percentage
At the election of an employer, the benefit percentage for
any plan year shall be computed on the basis of contributions
or benefits for -
(I) such plan year, or
(II) any consecutive plan year period (not greater than 3
years) which ends with such plan year and which is
specified in such election.
An election under this clause, once made, may be revoked or
modified only with the consent of the Secretary.
(D) Employees taken into account
For purposes of determining who is an employee for purposes
of determining the average benefit percentage under
subparagraph (B) -
(i) except as provided in clause (ii), paragraph (4)(A)
shall not apply, or
(ii) if the employer elects, paragraph (4)(A) shall be
applied by using the lowest age and service requirements of
all qualified plans maintained by the employer.
(E) Qualified plan
For purposes of this paragraph, the term "qualified plan"
means any plan which (without regard to this subsection) meets
the requirements of section 401(a).
(3) Exclusion of certain employees
For purposes of this subsection, there shall be excluded from
consideration -
(A) employees who are included in a unit of employees covered
by an agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee
representatives and one or more employers, if there is evidence
that retirement benefits were the subject of good faith
bargaining between such employee representatives and such
employer or employers,
(B) in the case of a trust established or maintained pursuant
to an agreement which the Secretary of Labor finds to be a
collective bargaining agreement between air pilots represented
in accordance with title II of the Railway Labor Act and one or
more employers, all employees not covered by such agreement,
and
(C) employees who are nonresident aliens and who receive no
earned income (within the meaning of section 911(d)(2)) from
the employer which constitutes income from sources within the
United States (within the meaning of section 861(a)(3)).
Subparagraph (A) shall not apply with respect to coverage of
employees under a plan pursuant to an agreement under such
subparagraph. Subparagraph (B) shall not apply in the case of a
plan which provides contributions or benefits for employees whose
principal duties are not customarily performed aboard aircraft in
flight.
(4) Exclusion of employees not meeting age and service
requirements
(A) In general
If a plan -
(i) prescribes minimum age and service requirements as a
condition of participation, and
(ii) excludes all employees not meeting such requirements
from participation,
then such employees shall be excluded from consideration for
purposes of this subsection.
(B) Requirements may be met separately with respect to excluded
group
If employees not meeting the minimum age or service
requirements of subsection (a)(1) (without regard to
subparagraph (B) thereof) are covered under a plan of the
employer which meets the requirements of paragraph (1)
separately with respect to such employees, such employees may
be excluded from consideration in determining whether any plan
of the employer meets the requirements of paragraph (1).
(C) Requirements not treated as being met before entry date
An employee shall not be treated as meeting the age and
service requirements described in this paragraph until the
first date on which, under the plan, any employee with the same
age and service would be eligible to commence participation in
the plan.
(5) Line of business exception
(A) In general
If, under section 414(r), an employer is treated as operating
separate lines of business for a year, the employer may apply
the requirements of this subsection for such year separately
with respect to employees in each separate line of business.
(B) Plan must be nondiscriminatory
Subparagraph (A) shall not apply with respect to any plan
maintained by an employer unless such plan benefits such
employees as qualify under a classification set up by the
employer and found by the Secretary not to be discriminatory in
favor of highly compensated employees.
(6) Definitions and special rules
For purposes of this subsection -
(A) Highly compensated employee
The term "highly compensated employee" has the meaning given
such term by section 414(q).
(B) Aggregation rules
An employer may elect to designate -
(i) 2 or more trusts,
(ii) 1 or more trusts and 1 or more annuity plans, or
(iii) 2 or more annuity plans,
as part of 1 plan intended to qualify under section 401(a) to
determine whether the requirements of this subsection are met
with respect to such trusts or annuity plans. If an employer
elects to treat any trusts or annuity plans as 1 plan under
this subparagraph, such trusts or annuity plans shall be
treated as 1 plan for purposes of section 401(a)(4).
(C) Special rules for certain dispositions or acquisitions
(i) In general
If a person becomes, or ceases to be, a member of a group
described in subsection (b), (c), (m), or (o) of section 414,
then the requirements of this subsection shall be treated as
having been met during the transition period with respect to
any plan covering employees of such person or any other
member of such group if -
(I) such requirements were met immediately before each
such change, and
(II) the coverage under such plan is not significantly
changed during the transition period (other than by reason
of the change in members of a group) or such plan meets
such other requirements as the Secretary may prescribe by
regulation.
(ii) Transition period
For purposes of clause (i), the term "transition period"
means the period -
(I) beginning on the date of the change in members of a
group, and
(II) ending on the last day of the 1st plan year
beginning after the date of such change.
(D) Special rule for certain employee stock ownership plans
A trust which is part of a tax credit employee stock
ownership plan which is the only plan of an employer intended
to qualify under section 401(a) shall not be treated as not a
qualified trust under section 401(a) solely because it fails to
meet the requirements of this subsection if -
(i) such plan benefits 50 percent or more of all the
employees who are eligible under a nondiscriminatory
classification under the plan, and
(ii) the sum of the amounts allocated to each participant's
account for the year does not exceed 2 percent of the
compensation of that participant for the year.
(E) Eligibility to contribute
In the case of contributions which are subject to section
401(k) or 401(m), employees who are eligible to contribute (or
elect to have contributions made on their behalf) shall be
treated as benefiting under the plan (other than for purposes
of paragraph (2)(A)(ii)).
(F) Employers with only highly compensated employees
A plan maintained by an employer which has no employees other
than highly compensated employees for any year shall be treated
as meeting the requirements of this subsection for such year.
(G) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this
subsection.
(c) Application of participation standards to certain plans
(1) The provisions of this section (other than paragraph (2) of
this subsection) shall not apply to -
(A) a governmental plan (within the meaning of section
414(d)),
(B) a church plan (within the meaning of section 414(e)) with
respect to which the election provided by subsection (d) of
this section has not been made,
(C) a plan which has not at any time after September 2, 1974,
provided for employer contributions, and
(D) a plan established and maintained by a society, order, or
association described in section 501(c)(8) or (9) if no part of
the contributions to or under such plan are made by employers
of participants in such plan.
(2) A plan described in paragraph (1) shall be treated as
meeting the requirements of this section for purposes of section
401(a), except that in the case of a plan described in
subparagraph (B), (C), or (D) of paragraph (1), this paragraph
shall apply only if such plan meets the requirements of section
401(a)(3) (as in effect on September 1, 1974).
(d) Election by church to have participation, vesting, funding,
etc., provisions apply
(1) In general
If the church or convention or association of churches which
maintains any church plan makes an election under this subsection
(in such form and manner as the Secretary may by regulations
prescribe), then the provisions of this title relating to
participation, vesting, funding, etc. (as in effect from time to
time) shall apply to such church plan as if such provisions did
not contain an exclusion for church plans.
(2) Election irrevocable
An election under this subsection with respect to any church
plan shall be binding with respect to such plan, and, once made,
shall be irrevocable.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 1011, Sept. 2, 1974, 88 Stat.
898; amended Pub. L. 94-455, title XIX, Secs. 1901(a)(61),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1774, 1834; Pub. L. 96-605,
title II, Sec. 225(a), Dec. 28, 1980, 94 Stat. 3529; Pub. L. 97-34,
title I, Sec. 111(b)(4), Aug. 13, 1981, 95 Stat. 194; Pub. L.
98-397, title II, Sec. 202(a), (d)(1), (e)(1), Aug. 23, 1984, 98
Stat. 1436-1438; Pub. L. 99-509, title IX, Sec. 9203(a)(2), Oct.
21, 1986, 100 Stat. 1979; Pub. L. 99-514, title XI, Secs. 1112(a),
1113(c), (d)(A), Oct. 22, 1986, 100 Stat. 2440, 2447; Pub. L.
100-647, title I, Sec. 1011(h)(1), (2), (11), title III, Sec.
3021(a)(13)(B), Nov. 10, 1988, 102 Stat. 3464, 3467, 3631; Pub. L.
101-239, title VII, Sec. 7841(d)(6), Dec. 19, 1989, 103 Stat. 2428;
Pub. L. 105-34, title XV, Sec. 1505(a)(3), Aug. 5, 1997, 111 Stat.
1063.)
-REFTEXT-
REFERENCES IN TEXT
The Railway Labor Act, referred to in subsec. (b)(3)(B), is act
May 20, 1926, ch. 347, 44 Stat. 577, as amended. Title II of the
Railway Labor Act was added by act Apr. 10, 1936, ch. 166, 49 Stat.
1189, and is classified generally to subchapter II (Sec. 181 et
seq.) of Title 45, Railroads. For complete classification of this
Act to the Code, see section 151 of Title 45 and Tables.
-MISC1-
AMENDMENTS
1997 - Subsec. (c)(2). Pub. L. 105-34 amended par. (2) generally.
Prior to amendment, par. (2) read as follows: "A plan described in
paragraph (1) shall be treated as meeting the requirements of this
section, for purposes of section 401(a), if such plan meets the
requirements of section 401(a)(3) as in effect on September 1,
1974."
1989 - Subsec. (a)(2). Pub. L. 101-239 struck out comma before
period at end.
1988 - Subsec. (b)(4)(B). Pub. L. 100-647, Sec. 1011(h)(1),
substituted "not meeting" for "do not meet" and struck out "and"
before "are covered".
Subsec. (b)(4)(C). Pub. L. 100-647, Sec. 1011(h)(11), added
subpar. (C).
Subsec. (b)(6)(C)(i)(II). Pub. L. 100-647, Sec. 3021(a)(13)(B),
inserted "or such plan meets such other requirements as the
Secretary may prescribe by regulation" after "of a group)".
Subsec. (b)(6)(F), (G). Pub. L. 100-647, Sec. 1011(h)(2), added
subpar. (F) and redesignated former subpar. (F) as (G).
1986 - Subsec. (a)(1)(B)(i). Pub. L. 99-514, Sec. 1113(c),
substituted "2 years of service" for "3 years of service" in two
places.
Subsec. (a)(2). Pub. L. 99-509 substituted a period for "unless -
"(A) the plan is a -
"(i) defined benefit plan, or
"(ii) target benefit plan (as defined under regulations
prescribed by the Secretary), and
"(B) such employees begin employment with the employer after
they have attained a specified age which is not more than 5 years
before the normal retirement age under the plan."
Subsec. (a)(5)(B). Pub. L. 99-514, Sec. 1113(d)(A), substituted
"2-year" for "3-year" in heading.
Subsec. (b). Pub. L. 99-514, Sec. 1112(a), substituted "Minimum
coverage requirements" for "Eligibility" as subsec. (b) heading and
amended subsec. generally, revising and restating as pars. (1) to
(6) provisions formerly contained in pars. (1) to (3).
1984 - Subsec. (a)(1)(A)(i). Pub. L. 98-397, Sec. 202(a)(1),
substituted "21" for "25".
Subsec. (a)(1)(B)(ii). Pub. L. 98-397, Sec. 202(a)(2),
substituted " '26' for '21' " for " '30' for '25' ".
Subsec. (a)(5)(D). Pub. L. 98-397, Sec. 202(d)(1), amended
subpar. (D) generally.
Subsec. (a)(5)(E). Pub. L. 98-397, Sec. 202(e)(1), added subpar.
(E).
1981 - Subsec. (b)(3)(C). Pub. L. 97-34 substituted "section
911(d)(2)" for "section 911(b)".
1980 - Subsec. (b)(2), (3). Pub. L. 96-605 added par. (2),
redesignated former par. (2) as (3) and substituted "paragraphs (1)
and (2)" for "paragraph (1)".
1976 - Subsec. (a)(2)(A)(ii). Pub. L. 94-455, Sec.
1906(b)(13)(A), struck out "or his delegate" after "Secretary".
Subsec. (a)(5)(C), (D). Pub. L. 94-455, Sec. 1901(a)(61)(A),
substituted "purposes of paragraph (1)" for "purposes of subsection
(a)(1)".
Subsec. (b)(1)(B). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (c)(1)(C). Pub. L. 94-455, Sec. 1901(a)(61)(B),
substituted "September 2, 1974," for "the date of the enactment of
the Employee Retirement Income Security Act of 1974".
Subsec. (c)(2). Pub. L. 94-455, Sec. 1901(a)(61)(C), substituted
"September 1, 1974" for "the day before the date of the enactment
of this section".
Subsec. (d)(1). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable to taxable years beginning
on or after Aug. 5, 1997, with certain governmental plans treated
as satisfying requirements for all taxable years beginning before
Aug. 5, 1997, see section 1505(d) of Pub. L. 105-34, set out as a
note under section 401 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011(h)(1), (2), (11) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Amendment by section 3021(a)(13)(B) of Pub. L. 100-647 effective
as if included in the amendments by section 1151 of Pub. L. 99-514,
see section 3021(d)(1) of Pub. L. 100-647, set out as a note under
section 129 of this title.
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 1112(a) of Pub. L. 99-514 applicable to plan
years beginning after Dec. 31, 1988, with special rule regarding
collective bargaining agreements ratified before Mar. 1, 1986, and
with provision for waiver of excise tax on reversions, see section
1112(e) of Pub. L. 99-514, set out as a note under section 401 of
this title.
Amendment by section 1113(c), (d)(A) of Pub. L. 99-514 applicable
to plan years beginning after Dec. 31, 1988, with special rule for
plans maintained pursuant to collective bargaining agreements
ratified before Mar. 1, 1986, and not applicable to employees who
do not have 1 hour of service in any plan year to which the
amendment applies, see section 1113(f) of Pub. L. 99-514, as
amended, set out as a note under section 411 of this title.
Amendment by Pub. L. 99-509 applicable only with respect to plan
years beginning on or after January 1, 1988, and only with respect
to service performed on or after such date, see section 9204(b) of
Pub. L. 99-509, set out as an Effective and Termination Dates of
1986 Amendments note under section 623 of Title 29, Labor.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-397 applicable to plan years beginning
after Dec. 31, 1984, except as otherwise provided, see sections 302
and 303 of Pub. L. 98-397, set out as a note under section 1001 of
Title 29, Labor.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable with respect to taxable
years beginning after Dec. 31, 1981, see section 115 of Pub. L.
97-34, set out as a note under section 911 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-605 applicable with respect to plan years
beginning after December 31, 1980, see section 225(c) of Pub. L.
96-605, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(61) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE; TRANSITIONAL RULES
Section 1017 of Pub. L. 93-406, as amended by Pub. L. 94-12,
title IV, Sec. 402, Mar. 29, 1975, 89 Stat. 47; Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) General Rule. - Except as otherwise provided in this
section, the amendments made by this part [part 1 (Secs. 1011-1017)
of subtitle A of title II of Pub. L. 93-406, enacting this section
and sections 411, 412, 413, 414, and 4971 of this title, amending
sections 275, 401, 404, 406, 407, 805, 6161, 6201, 6204, 6211,
6212, 6213, 6214, 6344, 6501, 6503, 6512, 6601, 6653, 6659 [now
6662], 6676, 6677, 6679, 6682, 6688, 6861, 6862, and 7422 of this
title and enacting provisions set out as notes under this section
and sections 411 and 412 of this title] shall apply for plan years
beginning after the date of the enactment of this Act [Sept. 2,
1974].
"(b) Existing Plans. - Except as otherwise provided in
subsections (c) through (i), in the case of a plan in existence on
January 1, 1974, the amendments made by this part shall apply for
plan years beginning after December 31, 1975.
"(c) Existing Plans Under Collective Bargaining Agreements. -
"(1) Application of vesting rules to certain plan provisions. -
"(A) Waiver of application. - In the case of a plan
maintained on January 1, 1974, pursuant to one or more
agreements which the Secretary of Labor finds to be collective
bargaining agreements between employee representatives and one
or more employers, during the special temporary waiver period
the plan shall not be treated as not meeting the requirements
of section 411(b)(1) or (2) of the Internal Revenue Code of
1986 [formerly I.R.C. 1954] solely by reason of a supplementary
or special plan provision (within the meaning of subparagraph
(D)).
"(B) Special temporary waiver period. - For purposes of this
paragraph, the term 'special temporary waiver period' means
plan years beginning after December 31, 1975, and before the
earlier of -
"(i) the date on which the last of the collective
bargaining agreements relating to the plan terminates
(determined without regard to any extension thereof agreed to
after the date of the enactment of this Act [Sept. 2, 1974]),
or
"(ii) January 1, 1981.
For purposes of clause (i), any plan amendment made pursuant to a
collective bargaining agreement relating to the plan which amends
the plan solely to conform to any requirement contained in this
Act [see Short Title note set out under section 1001 of Title 29,
Labor] shall not be treated as a termination of such collective
bargaining agreement.
"(C) Determination by secretary of labor required. -
Subparagraph (A) shall not apply unless the Secretary of Labor
determines that the participation and vesting rules in effect
on the date of the enactment of this Act [Sept. 2, 1974] are
not less favorable to the employees, in the aggregate than the
rules provided under sections 410 and 411 of the Internal
Revenue Code of 1986.
"(D) Supplementary or special plan provisions. - For purposes
of this paragraph, the term 'supplementary or special plan
provision' means any plan provision which -
"(i) provides supplementary benefits, not in excess of
one-third of the basic benefit, in the form of an annuity for
the life of the participant, or
"(ii) provides that, under a contractual agreement based on
medical evidence as to the effects of working in an adverse
environment for an extended period of time, a participant
having 25 years of service is to be treated as having 30
years of service.
"(2) Application of funding rules. -
"(A) In general. - In the case of a plan maintained on
January 1, 1974, pursuant to one or more agreements which the
Secretary of Labor finds to be collective bargaining agreements
between employee representatives and one or more employers,
section 412 of the Internal Revenue Code of 1986, and other
amendments made by this part to the extent such amendments
relate to such section 412, shall not apply during the special
temporary waiver period (as defined in paragraph (1)(B)).
"(B) Waiver of underfunding. - In the case of a plan
maintained on January 1, 1974, pursuant to one or more
agreements which the Secretary of Labor finds to be collective
bargaining agreements between employee representatives and one
or more employers, if by reason of subparagraph (A) the
requirements of section 401(a)(7) of the Internal Revenue Code
of 1986 apply without regard to the amendment of such section
401(a)(7) by section 1016(a)(2)(C) of this Act [Pub. L.
93-406], the plan shall not be treated as not meeting such
requirements solely by reason of the application of the
amendments made by sections 1011 and 1012 of this Act [enacting
this section and section 411 of this title] or related
amendments made by this part.
"(C) Labor organization conventions. - In the case of a plan
maintained by a labor organization, which is exempt from tax
under section 501(c)(5) of the Internal Revenue Code of 1986
exclusively for the benefit of its employees and their
beneficiaries, section 412 of such Code and other amendments
made by this part to the extent such amendments relate to such
section 412, shall be applied by substituting for the term
'December 31, 1975' in subsection (b), the earlier of -
"(i) the date on which the second convention of such labor
organization held after the date of the enactment of this Act
[Sept. 2, 1974] ends, or
"(ii) December 31, 1980,
but in no event shall a date earlier than the later of December
31, 1975, or the date determined under subparagraph (A) or (B) be
substituted.
"(d) Existing Plans May Elect New Provisions. - In the case of a
plan in existence on January 1, 1974, the provisions of the
Internal Revenue Code of 1986 relating to participation, vesting,
funding, and form of benefit (as in effect from time to time) shall
apply in the case of the plan year (which begins after the date of
the enactment of this Act [Sept. 2, 1974] but before the applicable
effective date determined under subsection (b) or (c)) selected by
the plan administrator and to all subsequent plan years, if the
plan administrator elects (in such manner and at such time as the
Secretary of the Treasury or his delegate shall by regulations
prescribe) to have such provisions so apply. Any election made
under this subsection, once made, shall be irrevocable.
"(e) Certain Definitions and Special Rules. - Section 414 of the
Internal Revenue Code of 1986 (other than subsections (b) and (c)
of such section 414), as added by section 1015(a) of this Act [Pub.
L. 93-406], shall take effect on the date of the enactment of this
Act [Sept. 2, 1974].
"(f) Transitional Rules With Respect to Breaks in Service. -
"(1) Participation. - In the case of a plan to which section
410 of the Internal Revenue Code of 1986 [this section] applies,
if any plan amendment with respect to breaks in service (which
amendment is made or becomes effective after January 1, 1974, and
before the date on which such section 410 first becomes effective
with respect to such plan) provides that any employee's
participation in the plan would commence at any date later than
the later of -
"(A) the date on which his participation would commence under
the break in service rules of section 410(a)(5) of such Code,
or
"(B) the date on which his participation would commence under
the plan as in effect on January 1, 1974,
such plan shall not constitute a plan described in section 403(a)
or 405(a) of such Code and a trust forming a part of such plan
shall not constitute a qualified trust under section 401(a) of
such Code.
"(2) Vesting. - In the case of a plan to which section 411 of
the Internal Revenue Code of 1986 applies, if any plan amendment
with respect to breaks in service (which amendment is made or
becomes effective after January 1, 1974, and before the date on
which such section 411 first becomes effective with respect to
such plan) provides that the nonforfeitable benefit derived from
employer contributions to which any employee would be entitled is
less than the lesser of the nonforfeitable benefit derived from
employer contributions to which he would be entitled under -
"(A) the break in service rules of section 411(a)(6) of such
Code, or
"(B) the plan as in effect on January 1, 1974,
such plan shall not constitute a plan described in section 403(a)
or 405(a) of such Code and a trust forming a part of such plan
shall not constitute a qualified trust under section 401(a) of
such Code. Subparagraph (B) shall not apply if the break in
service rules under the plan would have been in violation of any
law or rule of law in effect on January 1, 1974.
"(g) 3-Year Delay for Certain Provisions. - Subparagraphs (B) and
(C) of section 404(a)(1) shall apply only in the case of plan years
beginning on or after 3 years after the date of the enactment of
this Act [Sept. 2, 1974].
"(h)(1) Except as provided in paragraph (2), section 413 of the
Internal Revenue Code of 1986 shall apply to plan years beginning
after December 31, 1953.
"(2)(A) For plan years beginning before the applicable effective
date of section 410 of such Code, the provisions of paragraphs (1)
and (8) of subsection (b) of such section 413 shall be applied by
substituting '401(a)(3)' for '410'.
"(B) For plan years beginning before the applicable effective
date of section 411 of such Code, the provisions of subsection
(b)(2) of such section 413 shall be applied by substituting
'401(a)(7)' for '411(d)(3)'.
"(C)(i) The provisions of subsection (b)(4) of such section 413
shall not apply to plan years beginning before the applicable
effective date of section 411 of such Code.
"(ii) The provisions of subsection (b)(5) (other than the second
sentence thereof) of such section 413 shall not apply to plan years
beginning before the applicable effective date of section 412 of
such Code.
"(i) Contributions to H.R. 10 Plans. - Notwithstanding
subsections (b) and (c)(2), in the case of a plan in existence on
January 1, 1974, the amendment made by section 1013(c)(2) of this
Act [amending section 404(a)(6) of this title] shall apply, with
respect to a plan which provides contributions or benefits for
employees some or all of whom are employees within the meaning of
section 401(c)(1) of the Internal Revenue Code of 1986, for plan
years beginning after December 31, 1974, but only if the employer
(within the meaning of section 401(c)(4) of such Code) elects in
such manner and at such time as the Secretary of the Treasury or
his delegate shall by regulations prescribe, to have such amendment
so apply. Any election made under this subsection, once made, shall
be irrevocable."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by sections
1112 and 1113 of Pub. L. 99-514, see section 1141 of Pub. L.
99-514, set out as a note under section 401 of this title.
Secretary of Labor, Secretary of the Treasury, and Equal
Employment Opportunity Commission shall each issue before Feb. 1,
1988, final regulations to carry out amendments made by section
9203 of Pub. L. 99-509, see section 9204 of Pub. L. 99-509, set out
as a note under section 623 of Title 29, Labor.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
For provisions directing that if any amendments made by section
9203(a)(2) of Pub. L. 99-509 require an amendment to any plan, such
plan amendment shall not be required to be made before the first
plan year beginning on or after Jan. 1, 1989, see section 9204 of
Pub. L. 99-509, set out as a note under section 623 of Title 29,
Labor.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 125, 129, 401, 402, 403,
406, 407, 408, 411, 412, 413, 414, 416, 4975, 4980F of this title;
title 29 sections 1003, 1021, 1201, 1202, 1321; title 45 section
726.
-End-
-CITE-
26 USC Sec. 411 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart B - Special Rules
-HEAD-
Sec. 411. Minimum vesting standards
-STATUTE-
(a) General rule
A trust shall not constitute a qualified trust under section
401(a) unless the plan of which such trust is a part provides that
an employee's right to his normal retirement benefit is
nonforfeitable upon the attainment of normal retirement age (as
defined in paragraph (8)) and in addition satisfies the
requirements of paragraphs (1), (2), and (11) of this subsection
and the requirements of subsection (b)(3), and also satisfies, in
the case of a defined benefit plan, the requirements of subsection
(b)(1) and, in the case of a defined contribution plan, the
requirements of subsection (b)(2).
(1) Employee contributions
A plan satisfies the requirements of this paragraph if an
employee's rights in his accrued benefit derived from his own
contributions are nonforfeitable.
(2) Employer contributions
Except as provided in paragraph (12), a plan satisfies the
requirements of this paragraph if it satisfies the requirements
of subparagraph (A) or (B).
(A) 5-year vesting
A plan satisfies the requirements of this subparagraph if an
employee who has completed at least 5 years of service has a
nonforfeitable right to 100 percent of the employee's accrued
benefit derived from employer contributions.
(B) 3 to 7 year vesting
A plan satisfies the requirements of this subparagraph if an
employee has a nonforfeitable right to a percentage of the
employee's accrued benefit derived from employer contributions
determined under the following table:
Years of service: 2The nonforfeitable
percentage is:
--------------------------------------------------------------------
3 20
4 40
5 60
6 80
7 or more 100.
--------------------------------------------------------------------
(3) Certain permitted forfeitures, suspensions, etc.
For purposes of this subsection -
(A) Forfeiture on account of death
A right to an accrued benefit derived from employer
contributions shall not be treated as forfeitable solely
because the plan provides that it is not payable if the
participant dies (except in the case of a survivor annuity
which is payable as provided in section 401(a)(11)).
(B) Suspension of benefits upon reemployment of retiree
A right to an accrued benefit derived from employer
contributions shall not be treated as forfeitable solely
because the plan provides that the payment of benefits is
suspended for such period as the employee is employed,
subsequent to the commencement of payment of such benefits -
(i) in the case of a plan other than a multi-employer plan,
by the employer who maintains the plan under which such
benefits were being paid; and
(ii) in the case of a multiemployer plan, in the same
industry, the same trade or craft, and the same geographic
area covered by the plan as when such benefits commenced.
The Secretary of Labor shall prescribe such regulations as may
be necessary to carry out the purposes of this subparagraph,
including regulations with respect to the meaning of the term
"employed".
(C) Effect of retroactive plan amendments
A right to an accrued benefit derived from employer
contributions shall not be treated as forfeitable solely
because plan amendments may be given retroactive application as
provided in section 412(c)(8).
(D) Withdrawal of mandatory contribution
(i) A right to an accrued benefit derived from employer
contributions shall not be treated as forfeitable solely
because the plan provides that, in the case of a participant
who does not have a nonforfeitable right to at least 50
percent of his accrued benefit derived from employer
contributions, such accrued benefit may be forfeited on
account of the withdrawal by the participant of any amount
attributable to the benefit derived from mandatory
contributions (as defined in subsection (c)(2)(C)) made by
such participant.
(ii) Clause (i) shall not apply to a plan unless the plan
provides that any accrued benefit forfeited under a plan
provision described in such clause shall be restored upon
repayment by the participant of the full amount of the
withdrawal described in such clause plus, in the case of a
defined benefit plan, interest. Such interest shall be
computed on such amount at the rate determined for purposes
of subsection (c)(2)(C) on the date of such repayment
(computed annually from the date of such withdrawal). The
plan provision required under this clause may provide that
such repayment must be made (I) in the case of a withdrawal
on account of separation from service, before the earlier of
5 years after the first date on which the participant is
subsequently re-employed by the employer, or the close of the
first period of 5 consecutive 1-year breaks in service
commencing after the withdrawal; or (II) in the case of any
other withdrawal, 5 years after the date of the withdrawal.
(iii) In the case of accrued benefits derived from employer
contributions which accrued before September 2, 1974, a right
to such accrued benefit derived from employer contributions
shall not be treated as forfeitable solely because the plan
provides that an amount of such accrued benefit may be
forfeited on account of the withdrawal by the participant of
an amount attributable to the benefit derived from mandatory
contributions (as defined in subsection (c)(2)(C)) made by
such participant before September 2, 1974 if such amount
forfeited is proportional to such amount withdrawn. This
clause shall not apply to any plan to which any mandatory
contribution is made after September 2, 1974. The Secretary
shall prescribe such regulations as may be necessary to carry
out the purposes of this clause.
(iv) For purposes of this subparagraph, in the case of any
class-year plan, a withdrawal of employee contributions shall
be treated as a withdrawal of such contributions on a plan
year by plan year basis in succeeding order of time.
(v) For nonforfeitability where the employee has a
nonforfeitable right to at least 50 percent of his accrued
benefit, see section 401(a)(19).
(E) Cessation of contributions under a multiemployer plan
A right to an accrued benefit derived from employer
contributions under a multiemployer plan shall not be treated
as forfeitable solely because the plan provides that benefits
accrued as a result of service with the participant's employer
before the employer had an obligation to contribute under the
plan may not be payable if the employer ceases contributions to
the multiemployer plan.
(F) Reduction and suspension of benefits by a multiemployer
plan
A participant's right to an accrued benefit derived from
employer contributions under a multiemployer plan shall not be
treated as forfeitable solely because -
(i) the plan is amended to reduce benefits under section
418D or under section 4281 of the Employee Retirement Income
Security Act of 1974, or
(ii) benefit payments under the plan may be suspended under
section 418E or under section 4281 of the Employee Retirement
Income Security Act of 1974.
(G) Treatment of matching contributions forfeited by reason of
excess deferral or contribution
A matching contribution (within the meaning of section
401(m)) shall not be treated as forfeitable merely because such
contribution is forfeitable if the contribution to which the
matching contribution relates is treated as an excess
contribution under section 401(k)(8)(B), an excess deferral
under section 402(g)(2)(A), or an excess aggregate contribution
under section 401(m)(6)(B).
(4) Service included in determination of nonforfeitable
percentage
In computing the period of service under the plan for purposes
of determining the nonforfeitable percentage under paragraph (2),
all of an employee's years of service with the employer or
employers maintaining the plan shall be taken into account,
except that the following may be disregarded:
(A) years of service before age 18,(!1)
(B) years of service during a period for which the employee
declined to contribute to a plan requiring employee
contributions;
(C) years of service with an employer during any period for
which the employer did not maintain the plan or a predecessor
plan (as defined under regulations prescribed by the Secretary;
(D) service not required to be taken into account under
paragraph (6);
(E) years of service before January 1, 1971, unless the
employee has had at least 3 years of service after December 31,
1970;
(F) years of service before the first plan year to which this
section applies, if such service would have been disregarded
under the rules of the plan with regard to breaks in service as
in effect on the applicable date; and
(G) in the case of a multiemployer plan, years of service -
(i) with an employer after -
(I) a complete withdrawal of that employer from the plan
(within the meaning of section 4203 of the Employee
Retirement Income Security Act of 1974), or
(II) to the extent permitted in regulations prescribed by
the Secretary, a partial withdrawal described in section
4205(b)(2)(A)(i) of such Act in conjunction with the
decertification of the collective bargaining
representative, and
(ii) with any employer under the plan after the termination
date of the plan under section 4048 of such Act.
(5) Year of service
(A) General rule
For purposes of this subsection, except as provided in
subparagraph (C), the term "year of service" means a calendar
year, plan year, or other 12-consecutive month period
designated by the plan (and not prohibited under regulations
prescribed by the Secretary of Labor) during which the
participant has completed 1,000 hours of service.
(B) Hours of service
For purposes of this subsection, the term "hours of service"
has the meaning provided by section 410(a)(3)(C).
(C) Seasonal industries
In the case of any seasonal industry where the customary
period of employment is less than 1,000 hours during a calendar
year, the term "year of service" shall be such period as may be
determined under regulations prescribed by the Secretary of
Labor.
(D) Maritime industries
For purposes of this subsection, in the case of any maritime
industry, 125 days of service shall be treated as 1,000 hours
of service. The Secretary of Labor may prescribe regulations to
carry out the purposes of this subparagraph.
(6) Breaks in service
(A) Definition of 1-year break in service
For purposes of this paragraph, the term "1-year break in
service" means a calendar year, plan year, or other
12-consecutive-month period designated by the plan (and not
prohibited under regulations prescribed by the Secretary of
Labor) during which the participant has not completed more than
500 hours of service.
(B) 1 year of service after 1-year break in service
For purposes of paragraph (4), in the case of any employee
who has any 1-year break in service, years of service before
such break shall not be required to be taken into account until
he has completed a year of service after his return.
(C) 5 consecutive 1-year breaks in service under defined
contribution plan
For purposes of paragraph (4), in the case of any participant
in a defined contribution plan, or an insured defined benefit
plan which satisfies the requirements of subsection (b)(1)(F),
who has 5 consecutive 1-year breaks in service, years of
service after such 5-year period shall not be required to be
taken into account for purposes of determining the
nonforfeitable percentage of his accrued benefit derived from
employer contributions which accrued before such 5-year period.
(D) Nonvested participants
(i) In general
For purposes of paragraph (4), in the case of a nonvested
participant, years of service with the employer or employers
maintaining the plan before any period of consecutive 1-year
breaks in service shall not be required to be taken into
account if the number of consecutive 1-year breaks in service
within such period equals or exceeds the greater of -
(I) 5, or
(II) the aggregate number of years of service before such
period.
(ii) Years of service not taken into account
If any years of service are not required to be taken into
account by reason of a period of breaks in service to which
clause (i) applies, such years of service shall not be taken
into account in applying clause (i) to a subsequent period of
breaks in service.
(iii) Nonvested participant defined
For purposes of clause (i), the term "nonvested
participant" means a participant who does not have any
nonforfeitable right under the plan to an accrued benefit
derived from employer contributions.
(E) Special rule for maternity or paternity absences
(i) General rule
In the case of each individual who is absent from work for
any period -
(I) by reason of the pregnancy of the individual,
(II) by reason of the birth of a child of the individual,
(III) by reason of the placement of a child with the
individual in connection with the adoption of such child by
such individual, or
(IV) for purposes of caring for such child for a period
beginning immediately following such birth or placement,
the plan shall treat as hours of service, solely for purposes
of determining under this paragraph whether a 1-year break in
service has occurred, the hours described in clause (ii).
(ii) Hours treated as hours of service
The hours described in this clause are -
(I) the hours of service which otherwise would normally
have been credited to such individual but for such absence,
or
(II) in any case in which the plan is unable to determine
the hours described in subclause (I), 8 hours of service
per day of absence,
except that the total number of hours treated as hours of
service under this clause by reason of any such pregnancy or
placement shall not exceed 501 hours.
(iii) Year to which hours are credited
The hours described in clause (ii) shall be treated as
hours of service as provided in this subparagraph -
(I) only in the year in which the absence from work
begins, if a participant would be prevented from incurring
a 1-year break in service in such year solely because the
period of absence is treated as hours of service as
provided in clause (i); or
(II) in any other case, in the immediately following
year.
(iv) Year defined
For purposes of this subparagraph, the term "year" means
the period used in computations pursuant to paragraph (5).
(v) Information required to be filed
A plan shall not fail to satisfy the requirements of this
subparagraph solely because it provides that no credit will
be given pursuant to this subparagraph unless the individual
furnishes to the plan administrator such timely information
as the plan may reasonably require to establish -
(I) that the absence from work is for reasons referred to
in clause (i), and
(II) the number of days for which there was such an
absence.
(7) Accrued benefit
(A) In general
For purposes of this section, the term "accrued benefit"
means -
(i) in the case of a defined benefit plan, the employee's
accrued benefit determined under the plan and, except as
provided in subsection (c)(3), expressed in the form of an
annual benefit commencing at normal retirement age, or
(ii) in the case of a plan which is not a defined benefit
plan, the balance of the employee's account.
(B) Effect of certain distributions
Notwithstanding paragraph (4), for purposes of determining
the employee's accrued benefit under the plan, the plan may
disregard service performed by the employee with respect to
which he has received -
(i) a distribution of the present value of his entire
nonforfeitable benefit if such distribution was in an amount
(not more than the dollar limit under section 411(a)(11)(A))
permitted under regulations prescribed by the Secretary, or
(ii) a distribution of the present value of his
nonforfeitable benefit attributable to such service which he
elected to receive.
Clause (i) of this subparagraph shall apply only if such
distribution was made on termination of the employee's
participation in the plan. Clause (ii) of this subparagraph
shall apply only if such distribution was made on termination
of the employee's participation in the plan or under such other
circumstances as may be provided under regulations prescribed
by the Secretary.
(C) Repayment of subparagraph (B) distributions
For purposes of determining the employee's accrued benefit
under a plan, the plan may not disregard service as provided in
subparagraph (B) unless the plan provides an opportunity for
the participant to repay the full amount of the distribution
described in such subparagraph (B) with, in the case of a
defined benefit plan, interest at the rate determined for
purposes of subsection (c)(2)(C) and provides that upon such
repayment the employee's accrued benefit shall be recomputed by
taking into account service so disregarded. This subparagraph
shall apply only in the case of a participant who -
(i) received such a distribution in any plan year to which
this section applies, which distribution was less than the
present value of his accrued benefit,
(ii) resumes employment covered under the plan, and
(iii) repays the full amount of such distribution with, in
the case of a defined benefit plan, interest at the rate
determined for purposes of subsection (c)(2)(C).
The plan provision required under this subparagraph may provide
that such repayment must be made (I) in the case of a
withdrawal on account of separation from service, before the
earlier of 5 years after the first date on which the
participant is subsequently re-employed by the employer, or the
close of the first period of 5 consecutive 1-year breaks in
service commencing after the withdrawal; or (II) in the case of
any other withdrawal, 5 years after the date of the withdrawal.
(D) Accrued benefit attributable to employee contributions
The accrued benefit of an employee shall not be less than the
amount determined under subsection (c)(2)(B) with respect to
the employee's accumulated contributions.
(8) Normal retirement age
For purposes of this section, the term "normal retirement age"
means the earlier of -
(A) the time a plan participant attains normal retirement age
under the plan, or
(B) the later of -
(i) the time a plan participant attains age 65, or
(ii) the 5th anniversary of the time a plan participant
commenced participation in the plan.
(9) Normal retirement benefit
For purposes of this section, the term "normal retirement
benefit" means the greater of the early retirement benefit under
the plan, or the benefit under the plan commencing at normal
retirement age. The normal retirement benefit shall be determined
without regard to -
(A) medical benefits, and
(B) disability benefits not in excess of the qualified
disability benefit.
For purposes of this paragraph, a qualified disability benefit is
a disability benefit provided by a plan which does not exceed the
benefit which would be provided for the participant if he
separated from the service at normal retirement age. For purposes
of this paragraph, the early retirement benefit under a plan
shall be determined without regard to any benefits commencing
before benefits payable under title II of the Social Security Act
become payable which -
(i) do not exceed such social security benefits, and
(ii) terminate when such social security benefits commence.
(10) Changes in vesting schedule
(A) General rule
A plan amendment changing any vesting schedule under the plan
shall be treated as not satisfying the requirements of
paragraph (2) if the nonforfeitable percentage of the accrued
benefit derived from employer contributions (determined as of
the later of the date such amendment is adopted, or the date
such amendment becomes effective) of any employee who is a
participant in the plan is less than such nonforfeitable
percentage computed under the plan without regard to such
amendment.
(B) Election of former schedule
A plan amendment changing any vesting schedule under the plan
shall be treated as not satisfying the requirements of
paragraph (2) unless each participant having not less than 3
years of service is permitted to elect, within a reasonable
period after the adoption of such amendment, to have his
nonforfeitable percentage computed under the plan without
regard to such amendment.
(11) Restrictions on certain mandatory distributions
(A) In general
If the present value of any nonforfeitable accrued benefit
exceeds $5,000, a plan meets the requirements of this paragraph
only if such plan provides that such benefit may not be
immediately distributed without the consent of the participant.
(B) Determination of present value
For purposes of subparagraph (A), the present value shall be
calculated in accordance with section 417(e)(3).
(C) Dividend distributions of ESOPS arrangement
This paragraph shall not apply to any distribution of
dividends to which section 404(k) applies.
(D) Special rule for rollover contributions
A plan shall not fail to meet the requirements of this
paragraph if, under the terms of the plan, the present value of
the nonforfeitable accrued benefit is determined without regard
to that portion of such benefit which is attributable to
rollover contributions (and earnings allocable thereto). For
purposes of this subparagraph, the term "rollover
contributions" means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16).
(12) Faster vesting for matching contributions
In the case of matching contributions (as defined in section
401(m)(4)(A)), paragraph (2) shall be applied -
(A) by substituting "3 years" for "5 years" in subparagraph
(A), and
(B) by substituting the following table for the table
contained in subparagraph (B):
The
nonforfeitable
Years of service: percentage is:
2 20
3 40
4 60
5 80
6 100.
(b) Accrued benefit requirements
(1) Defined benefit plans
(A) 3-percent method
A defined benefit plan satisfies the requirements of this
paragraph if the accrued benefit to which each participant is
entitled upon his separation from the service is not less than
-
(i) 3 percent of the normal retirement benefit to which he
would be entitled if he commenced participation at the
earliest possible entry age under the plan and served
continuously until the earlier of age 65 or the normal
retirement age specified under the plan, multiplied by
(ii) the number of years (not in excess of 33 1/3 ) of his
participation in the plan.
In the case of a plan providing retirement benefits based on
compensation during any period, the normal retirement benefit
to which a participant would be entitled shall be determined as
if he continued to earn annually the average rate of
compensation which he earned during consecutive years of
service, not in excess of 10, for which his compensation was
the highest. For purposes of this subparagraph, social security
benefits and all other relevant factors used to compute
benefits shall be treated as remaining constant as of the
current year for all years after such current year.
(B) 133 1/3 percent rule
A defined benefit plan satisfies the requirements of this
paragraph for a particular plan year if under the plan the
accrued benefit payable at the normal retirement age is equal
to the normal retirement benefit and the annual rate at which
any individual who is or could be a participant can accrue the
retirement benefits payable at normal retirement age under the
plan for any later plan year is not more than 133 1/3 percent
of the annual rate at which he can accrue benefits for any plan
year beginning on or after such particular plan year and before
such later plan year. For purposes of this subparagraph -
(i) any amendment to the plan which is in effect for the
current year shall be treated as in effect for all other plan
years;
(ii) any change in an accrual rate which does not apply to
any individual who is or could be a participant in the
current year shall be disregarded;
(iii) the fact that benefits under the plan may be payable
to certain employees before normal retirement age shall be
disregarded; and
(iv) social security benefits and all other relevant
factors used to compute benefits shall be treated as
remaining constant as of the current year for all years after
the current year.
(C) Fractional rule
A defined benefits plan satisfies the requirements of this
paragraph if the accrued benefit to which any participant is
entitled upon his separation from the service is not less than
a fraction of the annual benefit commencing at normal
retirement age to which he would be entitled under the plan as
in effect on the date of his separation if he continued to earn
annually until normal retirement age the same rate of
compensation upon which his normal retirement benefit would be
computed under the plan, determined as if he had attained
normal retirement age on the date on which any such
determination is made (but taking into account no more than the
10 years of service immediately preceding his separation from
service). Such fraction shall be a fraction, not exceeding 1,
the numerator of which is the total number of his years of
participation in the plan (as of the date of his separation
from the service) and the denominator of which is the total
number of years he would have participated in the plan if he
separated from the service at the normal retirement age. For
purposes of this subparagraph, social security benefits and all
other relevant factors used to compute benefits shall be
treated as remaining constant as of the current year for all
years after such current year.
(D) Accrual for service before effective date
Subparagraphs (A), (B), and (C) shall not apply with respect
to years of participation before the first plan year to which
this section applies, but a defined benefit plan satisfies the
requirements of this subparagraph with respect to such years of
participation only if the accrued benefit of any participant
with respect to such years of participation is not less than
the greater of -
(i) his accrued benefit determined under the plan, as in
effect from time to time prior to September 2, 1974, or
(ii) an accrued benefit which is not less than one-half of
the accrued benefit to which such participant would have been
entitled if subparagraph (A), (B), or (C) applied with
respect to such years of participation.
(E) First two years of service
Notwithstanding subparagraphs (A), (B), and (C) of this
paragraph, a plan shall not be treated as not satisfying the
requirements of this paragraph solely because the accrual of
benefits under the plan does not become effective until the
employee has two continuous years of service. For purposes of
this subparagraph, the term "years of service" has the meaning
provided by section 410(a)(3)(A).
(F) Certain insured defined benefit plans
Notwithstanding subparagraphs (A), (B), and (C), a defined
benefit plan satisfies the requirements of this paragraph if
such plan -
(i) is funded exclusively by the purchase of insurance
contracts, and
(ii) satisfies the requirements of paragraphs (2) and (3)
of section 412(i) (relating to certain insurance contract
plans),
but only if an employee's accrued benefit as of any applicable
date is not less than the cash surrender value his insurance
contracts would have on such applicable date if the
requirements of paragraphs (4), (5), and (6) of section 412(i)
were satisfied.
(G) Accrued benefit may not decrease on account of increasing
age or service
Notwithstanding the preceding subparagraphs, a defined
benefit plan shall be treated as not satisfying the
requirements of this paragraph if the participant's accrued
benefit is reduced on account of any increase in his age or
service. The preceding sentence shall not apply to benefits
under the plan commencing before entitlement to benefits
payable under title II of the Social Security Act which
benefits under the plan -
(i) do not exceed such social security benefits, and
(ii) terminate when such social security benefits commence.
(H) Continued accrual beyond normal retirement age
(i) In general
Notwithstanding the preceding subparagraphs, a defined
benefit plan shall be treated as not satisfying the
requirements of this paragraph if, under the plan, an
employee's benefit accrual is ceased, or the rate of an
employee's benefit accrual is reduced, because of the
attainment of any age.
(ii) Certain limitations permitted
A plan shall not be treated as failing to meet the
requirements of this subparagraph solely because the plan
imposes (without regard to age) a limitation on the amount of
benefits that the plan provides or a limitation on the number
of years of service or years of participation which are taken
into account for purposes of determining benefit accrual
under the plan.
(iii) Adjustments under plan for delayed retirement taken
into account
In the case of any employee who, as of the end of any plan
year under a defined benefit plan, has attained normal
retirement age under such plan -
(I) if distribution of benefits under such plan with
respect to such employee has commenced as of the end of
such plan year, then any requirement of this subparagraph
for continued accrual of benefits under such plan with
respect to such employee during such plan year shall be
treated as satisfied to the extent of the actuarial
equivalent of inservice distribution of benefits, and
(II) if distribution of benefits under such plan with
respect to such employee has not commenced as of the end of
such year in accordance with section 401(a)(14)(C), and the
payment of benefits under such plan with respect to such
employee is not suspended during such plan year pursuant to
subsection (a)(3)(B), then any requirement of this
subparagraph for continued accrual of benefits under such
plan with respect to such employee during such plan year
shall be treated as satisfied to the extent of any
adjustment in the benefit payable under the plan during
such plan year attributable to the delay in the
distribution of benefits after the attainment of normal
retirement age.
The preceding provisions of this clause shall apply in
accordance with regulations of the Secretary. Such
regulations may provide for the application of the preceding
provisions of this clause, in the case of any such employee,
with respect to any period of time within a plan year.
(iv) Disregard of subsidized portion of early retirement
benefit
A plan shall not be treated as failing to meet the
requirements of clause (i) solely because the subsidized
portion of any early retirement benefit is disregarded in
determining benefit accruals.
(v) Coordination with other requirements
The Secretary shall provide by regulation for the
coordination of the requirements of this subparagraph with
the requirements of subsection (a), sections 404, 410, and
415, and the provisions of this subchapter precluding
discrimination in favor of highly compensated employees.
(2) Defined contribution plans
(A) In general
A defined contribution plan satisfies the requirements of
this paragraph if, under the plan, allocations to the
employee's account are not ceased, and the rate at which
amounts are allocated to the employee's account is not reduced,
because of the attainment of any age.
(B) Application to target benefit plans
The Secretary shall provide by regulation for the application
of the requirements of this paragraph to target benefit plans.
(C) Coordination with other requirements
The Secretary may provide by regulation for the coordination
of the requirements of this paragraph with the requirements of
subsection (a), sections 404, 410, and 415, and the provisions
of this subchapter precluding discrimination in favor of highly
compensated employees.
(3) Separate accounting required in certain cases
A plan satisfies the requirements of this paragraph if -
(A) in the case of the defined benefit plan, the plan
requires separate accounting for the portion of each employee's
accrued benefit derived from any voluntary employee
contributions permitted under the plan; and
(B) in the case of any plan which is not a defined benefit
plan, the plan requires separate accounting for each employee's
accrued benefit.
(4) Year of participation
(A) Definition
For purposes of determining an employee's accrued benefit,
the term "year of participation" means a period of service
(beginning at the earliest date on which the employee is a
participant in the plan and which is included in a period of
service required to be taken into account under section
410(a)(5), determined without regard to section 410(a)(5)(E))
as determined under regulations prescribed by the Secretary of
Labor which provide for the calculation of such period on any
reasonable and consistent basis.
(B) Less than full time service
For purposes of this paragraph, except as provided in
subparagraph (C), in the case of any employee whose customary
employment is less than full time, the calculation of such
employee's service on any basis which provides less than a
ratable portion of the accrued benefit to which he would be
entitled under the plan if his customary employment were full
time shall not be treated as made on a reasonable and
consistent basis.
(C) Less than 1,000 hours of service during year
For purposes of this paragraph, in the case of any employee
whose service is less than 1,000 hours during any calendar
year, plan year or other 12-consecutive month period designated
by the plan (and not prohibited under regulations prescribed by
the Secretary of Labor) the calculation of his period of
service shall not be treated as not made on a reasonable and
consistent basis solely because such service is not taken into
account.
(D) Seasonal industries
In the case of any seasonal industry where the customary
period of employment is less than 1,000 hours during a calendar
year, the term "year of participation" shall be such period as
determined under regulations prescribed by the Secretary of
Labor.
(E) Maritime industries
For purposes of this subsection, in the case of any maritime
industry, 125 days of service shall be treated as a year of
participation. The Secretary of Labor may prescribe regulations
to carry out the purposes of this subparagraph.
(c) Allocation of accrued benefits between employer and employee
contributions
(1) Accrued benefit derived from employer contributions
For purposes of this section, an employee's accrued benefit
derived from employer contributions as of any applicable date is
the excess, if any, of the accrued benefit for such employee as
of such applicable date over the accrued benefit derived from
contributions made by such employee as of such date.
(2) Accrued benefit derived from employee contributions
(A) Plans other than defined benefit plans
In the case of a plan other than a defined benefit plan, the
accrued benefit derived from contributions made by an employee
as of any applicable date is -
(i) except as provided in clause (ii), the balance of the
employee's separate account consisting only of his
contributions and the income, expenses, gains, and losses
attributable thereto, or
(ii) if a separate account is not maintained with respect
to an employee's contributions under such a plan, the amount
which bears the same ratio to his total accrued benefit as
the total amount of the employee's contributions (less
withdrawals) bears to the sum of such contributions and the
contributions made on his behalf by the employer (less
withdrawals).
(B) Defined benefit plans
In the case of a defined benefit plan, the accrued benefit
derived from contributions made by an employee as of any
applicable date is the amount equal to the employee's
accumulated contributions expressed as an annual benefit
commencing at normal retirement age, using an interest rate
which would be used under the plan under section 417(e)(3) (as
of the determination date).
(C) Definition of accumulated contributions
For purposes of this subsection, the term "accumulated
contribution" means the total of -
(i) all mandatory contributions made by the employee,
(ii) interest (if any) under the plan to the end of the
last plan year to which subsection (a)(2) does not apply (by
reason of the applicable effective date), and
(iii) interest on the sum of the amounts determined under
clauses (i) and (ii) compounded annually -
(I) at the rate of 120 percent of the Federal mid-term
rate (as in effect under section 1274 for the 1st month of
a plan year) for the period beginning with the 1st plan
year to which subsection (a)(2) applies (by reason of the
applicable effective date) and ending with the date on
which the determination is being made, and
(II) at the interest rate which would be used under the
plan under section 417(e)(3) (as of the determination date)
for the period beginning with the determination date and
ending on the date on which the employee attains normal
retirement age.
For purposes of this subparagraph, the term "mandatory
contributions" means amounts contributed to the plan by the
employee which are required as a condition of employment, as a
condition of participation in such plan, or as a condition of
obtaining benefits under the plan attributable to employer
contributions.
(D) Adjustments
The Secretary is authorized to adjust by regulation the
conversion factor described in subparagraph (B) from time to
time as he may deem necessary. No such adjustment shall be
effective for a plan year beginning before the expiration of 1
year after such adjustment is determined and published.
(3) Actuarial adjustment
For purposes of this section, in the case of any defined
benefit plan, if an employee's accrued benefit is to be
determined as an amount other than an annual benefit commencing
at normal retirement age, or if the accrued benefit derived from
contributions made by an employee is to be determined with
respect to a benefit other than an annual benefit in the form of
a single life annuity (without ancillary benefits) commencing at
normal retirement age, the employee's accrued benefit, or the
accrued benefits derived from contributions made by an employee,
as the case may be, shall be the actuarial equivalent of such
benefit or amount determined under paragraph (1) or (2).
(d) Special rules
(1) Coordination with section 401(a)(4)
A plan which satisfies the requirements of this section shall
be treated as satisfying any vesting requirements resulting from
the application of section 401(a)(4) unless -
(A) there has been a pattern of abuse under the plan (such as
a dismissal of employees before their accrued benefits become
nonforfeitable) tending to discriminate in favor of employees
who are highly compensated employees (within the meaning of
section 414(q)), or
(B) there have been, or there is reason to believe there will
be, an accrual of benefits or forfeitures tending to
discriminate in favor of employees who are highly compensated
employees (within the meaning of section 414(q)).
(2) Prohibited discrimination
Subsection (a) shall not apply to benefits which may not be
provided for designated employees in the event of early
termination of the plan under provisions of the plan adopted
pursuant to regulations prescribed by the Secretary to preclude
the discrimination prohibited by section 401(a)(4).
(3) Termination or partial termination; discontinuance of
contributions
Notwithstanding the provisions of subsection (a), a trust shall
not constitute a qualified trust under section 401(a) unless the
plan of which such trust is a part provides that -
(A) upon its termination or partial termination, or
(B) in the case of a plan to which section 412 does not
apply, upon complete discontinuance of contributions under the
plan,
the rights of all affected employees to benefits accrued to the
date of such termination, partial termination, or discontinuance,
to the extent funded as of such date, or the amounts credited to
the employees' accounts, are nonforfeitable. This paragraph shall
not apply to benefits or contributions which, under provisions of
the plan adopted pursuant to regulations prescribed by the
Secretary to preclude the discrimination prohibited by section
401(a)(4), may not be used for designated employees in the event
of early termination of the plan. For purposes of this paragraph,
in the case of the complete discontinuance of contributions under
a profit-sharing or stock bonus plan, such plan shall be treated
as having terminated on the day on which the plan administrator
notifies the Secretary (in accordance with regulations) of the
discontinuance.
[(4) Repealed. Pub. L. 99-514, title XI, Sec. 1113(b), Oct. 22,
1986, 100 Stat. 2447]
(5) Treatment of voluntary employee contributions
In the case of a defined benefit plan which permits voluntary
employee contributions, the portion of an employee's accrued
benefit derived from such contributions shall be treated as an
accrued benefit derived from employee contributions under a plan
other than a defined benefit plan.
(6) Accrued benefit not to be decreased by amendment
(A) In general
A plan shall be treated as not satisfying the requirements of
this section if the accrued benefit of a participant is
decreased by an amendment of the plan, other than an amendment
described in section 412(c)(8), or section 4281 of the Employee
Retirement Income Security Act of 1974.
(B) Treatment of certain plan amendments
For purposes of subparagraph (A), a plan amendment which has
the effect of -
(i) eliminating or reducing an early retirement benefit or
a retirement-type subsidy (as defined in regulations), or
(ii) eliminating an optional form of benefit,
with respect to benefits attributable to service before the
amendment shall be treated as reducing accrued benefits. In the
case of a retirement-type subsidy, the preceding sentence shall
apply only with respect to a participant who satisfies (either
before or after the amendment) the preamendment conditions for
the subsidy. The Secretary shall by regulations provide that
this subparagraph shall not apply to any plan amendment which
reduces or eliminates benefits or subsidies which create
significant burdens or complexities for the plan and plan
participants, unless such amendment adversely affects the
rights of any participant in a more than de minimis manner. The
Secretary may by regulations provide that this subparagraph
shall not apply to a plan amendment described in clause (ii)
(other than a plan amendment having an effect described in
clause (i)).
(C) Special rule for ESOPS
For purposes of this paragraph, any -
(i) tax credit employee stock ownership plan (as defined in
section 409(a)), or
(ii) employee stock ownership plan (as defined in section
4975(e)(7)),
shall not be treated as failing to meet the requirements of
this paragraph merely because it modifies distribution options
in a nondiscriminatory manner.
(D) Plan transfers
(i) In general
A defined contribution plan (in this subparagraph referred
to as the "transferee plan") shall not be treated as failing
to meet the requirements of this subsection merely because
the transferee plan does not provide some or all of the forms
of distribution previously available under another defined
contribution plan (in this subparagraph referred to as the
"transferor plan") to the extent that -
(I) the forms of distribution previously available under
the transferor plan applied to the account of a participant
or beneficiary under the transferor plan that was
transferred from the transferor plan to the transferee plan
pursuant to a direct transfer rather than pursuant to a
distribution from the transferor plan,
(II) the terms of both the transferor plan and the
transferee plan authorize the transfer described in
subclause (I),
(III) the transfer described in subclause (I) was made
pursuant to a voluntary election by the participant or
beneficiary whose account was transferred to the transferee
plan,
(IV) the election described in subclause (III) was made
after the participant or beneficiary received a notice
describing the consequences of making the election, and
(V) the transferee plan allows the participant or
beneficiary described in subclause (III) to receive any
distribution to which the participant or beneficiary is
entitled under the transferee plan in the form of a single
sum distribution.
(ii) Special rule for mergers, etc.
Clause (i) shall apply to plan mergers and other
transactions having the effect of a direct transfer,
including consolidations of benefits attributable to
different employers within a multiple employer plan.
(E) Elimination of form of distribution
Except to the extent provided in regulations, a defined
contribution plan shall not be treated as failing to meet the
requirements of this section merely because of the elimination
of a form of distribution previously available thereunder. This
subparagraph shall not apply to the elimination of a form of
distribution with respect to any participant unless -
(i) a single sum payment is available to such participant
at the same time or times as the form of distribution being
eliminated, and
(ii) such single sum payment is based on the same or
greater portion of the participant's account as the form of
distribution being eliminated.
(e) Application of vesting standards to certain plans
(1) The provisions of this section (other than paragraph (2))
shall not apply to -
(A) a governmental plan (within the meaning of section 414(d)),
(B) a church plan (within the meaning of section 414(e)) with
respect to which the election provided by section 410(d) has not
been made,
(C) a plan which has not, at any time after September 2, 1974,
provided for employer contributions, and
(D) a plan established and maintained by a society, order, or
association described in section 501(c)(8) or (9), if no part of
the contributions to or under such plan are made by employers of
participants in such plan.
(2) A plan described in paragraph (1) shall be treated as meeting
the requirements of this section, for purposes of section 401(a),
if such plan meets the vesting requirements resulting from the
application of sections 401(a)(4) and 401(a)(7) as in effect on
September 1, 1974.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 1012(a), Sept. 2, 1974, 88
Stat. 901; amended Pub. L. 94-455, title XIX, Secs. 1901(a)(62),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1774, 1834; Pub. L. 96-364,
title II, Sec. 206, Sept. 26, 1980, 94 Stat. 1287; Pub. L. 98-397,
title II, Sec. 202(b), (c), (d)(2), (e)(2), (3), (f), 205, title
III, Sec. 301(a)(1), Aug. 23, 1984, 98 Stat. 1437, 1439, 1440,
1449, 1450; Pub. L. 99-509, title IX, Secs. 9202(b), 9203(b)(2),
Oct. 21, 1986, 100 Stat. 1977, 1979; Pub. L. 99-514, title XI,
Secs. 1113(a), (b), (d)(B), 1114(b)(10), 1139(a), title XVIII, Sec.
1898(a)(1)(A), (4)(A), (d)(1)(A), (2)(A), (f)(1)(A), Oct. 22, 1986,
100 Stat. 2446, 2447, 2451, 2487, 2941, 2943, 2955, 2956; Pub. L.
100-203, title IX, Sec. 9346(b), Dec. 22, 1987, 101 Stat. 1330-374;
Pub. L. 100-647, title I, Sec. 1018(t)(8)(B), Nov. 10, 1988, 102
Stat. 3589; Pub. L. 101-239, title VII, Secs. 7861(a)(5)(A),
(6)(A), 7871(a)(1), (2), (b)(1), 7881(m)(1), Dec. 19, 1989, 103
Stat. 2430, 2435, 2443; Pub. L. 102-318, title V, Sec. 521(b)(44),
July 3, 1992, 106 Stat. 313; Pub. L. 103-465, title VII, Sec.
767(a)(1), Dec. 8, 1994, 108 Stat. 5037; Pub. L. 104-188, title I,
Sec. 1442(a), Aug. 20, 1996, 110 Stat. 1808; Pub. L. 105-34, title
X, Sec. 1071(a)(1), (2)(A), Aug. 5, 1997, 111 Stat. 948; Pub. L.
107-16, title VI, Secs. 633(a), 645(a)(1), (b)(1), 648(a)(1), June
7, 2001, 115 Stat. 115, 123, 125, 127.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
Section 4281 of the Employee Retirement Income Security Act of
1974, referred to in subsecs. (a)(3)(F)(i), (ii) and (d)(6)(A), is
classified to section 1441 of Title 29, Labor.
Section 4203 of the Employee Retirement Income Security Act of
1974, referred to in subsec. (a)(4)(G)(i)(I), is classified to
section 1383 of Title 29.
Section 4205(b)(2)(A)(i) of such Act, referred to in subsec.
(a)(4)(G)(i)(II), is classified to section 1385(b)(2)(A)(i) of
Title 29.
Section 4048 of such Act, referred to in subsec. (a)(4)(G)(ii),
is classified to section 1348 of Title 29.
The Social Security Act, referred to in subsecs. (a)(9) and
(b)(1)(G), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended.
Title II of the Social Security Act is classified generally to
subchapter II (Sec. 401 et seq.) of Title 42, The Public Health and
Welfare. For complete classification of this Act to the Code, see
section 1305 of Title 42 and Tables.
-MISC1-
AMENDMENTS
2001 - Subsec. (a)(2). Pub. L. 107-16, Secs. 633(a)(1), 901,
temporarily substituted "Except as provided in paragraph (12), a
plan" for "A plan" in introductory provisions. See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (a)(11)(D). Pub. L. 107-16, Secs. 648(a)(1), 901,
temporarily added subpar. (D). See Effective and Termination Dates
of 2001 Amendment note below.
Subsec. (a)(12). Pub. L. 107-16, Secs. 633(a)(2), 901,
temporarily added par. (12). See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (d)(6)(B). Pub. L. 107-16, Secs. 645(b)(1), 901,
temporarily inserted after second sentence "The Secretary shall by
regulations provide that this subparagraph shall not apply to any
plan amendment which reduces or eliminates benefits or subsidies
which create significant burdens or complexities for the plan and
plan participants, unless such amendment adversely affects the
rights of any participant in a more than de minimis manner." See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(6)(D), (E). Pub. L. 107-16, Secs. 645(a)(1), 901,
temporarily added subpars. (D) and (E). See Effective and
Termination Dates of 2001 Amendment note below.
1997 - Subsec. (a)(7)(B)(i). Pub. L. 105-34, Sec. 1071(a)(2)(A),
substituted "the dollar limit under section 411(a)(11)(A)" for
"$3,500".
Subsec. (a)(11)(A). Pub. L. 105-34, Sec. 1071(a)(1), substituted
"$5,000" for "$3,500".
1996 - Subsec. (a)(2). Pub. L. 104-188 substituted "subparagraph
(A) or (B)" for "subparagraph (A), (B), or (C)" in introductory
provisions and struck out subpar. (C) which read as follows:
"Multiemployer plans. - A plan satisfies the requirements of this
subparagraph if -
"(i) the plan is a multiemployer plan (within the meaning of
section 414(f)), and
"(ii) under the plan -
"(I) an employee who is covered pursuant to a collective
bargaining agreement described in section 414(f)(1)(B) and who
has completed at least 10 years of service has a nonforfeitable
right to 100 percent of the employee's accrued benefit derived
from employer contributions, and
"(II) the requirements of subparagraph (A) or (B) are met
with respect to employees not described in subclause (I)."
1994 - Subsec. (a)(11)(B). Pub. L. 103-465 reenacted subpar. (B)
heading without change and amended text generally. Prior to
amendment, text read as follows:
"(i) In general. - For purposes of subparagraph (A), the present
value shall be calculated -
"(I) by using an interest rate no greater than the applicable
interest rate if the vested accrued benefit (using such rate) is
not in excess of $25,000, and
"(II) by using an interest rate no greater than 120 percent of
the applicable interest rate if the vested accrued benefit
exceeds $25,000 (as determined under subclause (I)).
In no event shall the present value determined under subclause (II)
be less than $25,000.
"(ii) Applicable interest rate. - For purposes of clause (i), the
term 'applicable interest rate' means the interest rate which would
be used (as of the date of the distribution) by the Pension Benefit
Guaranty Corporation for purposes of determining the present value
of a lump sum distribution on plan termination."
1992 - Subsec. (d)(3). Pub. L. 102-318 inserted at end "For
purposes of this paragraph, in the case of the complete
discontinuance of contributions under a profit-sharing or stock
bonus plan, such plan shall be treated as having terminated on the
day on which the plan administrator notifies the Secretary (in
accordance with regulations) of the discontinuance."
1989 - Subsec. (a)(3)(G). Pub. L. 101-239, Sec. 7861(a)(5)(A),
added subpar. (G).
Subsec. (a)(4)(A). Pub. L. 101-239, Sec. 7861(a)(6)(A), amended
subpar. (A) generally. Prior to amendment, subpar. (A) read as
follows: "years of service before age 18, except that in the case
of a plan which does not satisfy subparagraph (A) or (B) of
paragraph (2), the plan may not disregard any such year of service
during which the employee was a participant;".
Subsec. (a)(7)(D). Pub. L. 101-239, Sec. 7881(m)(1)(D), added
subpar. (D).
Subsec. (a)(8)(B). Pub. L. 101-239, Sec. 7871(b)(1), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "the latest of -
"(i) the time a plan participant attains age 65,
"(ii) in the case of a plan participant who commences
participation in the plan within 5 years before attaining normal
retirement age under the plan, the 5th anniversary of the time
the plan participant commences participation in the plan, or
"(iii) in the case of a plan participant not described in
clause (ii), the 10th anniversary of the time the plan
participant commences participation in the plan."
Subsec. (b)(2)(B). Pub. L. 101-239, Sec. 7871(a)(1), redesignated
subpar. (C) as (B) and struck out former subpar. (B) which read as
follows: "Disregard of subsidized portion of early retirement
benefit. - A plan shall not be treated as failing to meet the
requirements of subparagraph (A) solely because the subsidized
portion of any early retirement benefit is disregarded in
determining benefit accruals."
Subsec. (b)(2)(C), (D). Pub. L. 101-239, Sec. 7871(a)(1), (2),
redesignated subpar. (D) as (C) and substituted "this paragraph"
for "this subparagraph". Former subpar. (C) redesignated (B).
Subsec. (c)(2)(B). Pub. L. 101-239, Sec. 7881(m)(1)(B), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows:
"(i) In general. - In the case of a defined benefit plan
providing an annual benefit in the form of a single life annuity
(without ancillary benefits) commencing at normal retirement age,
the accrued benefit derived from contributions made by an employee
as of any applicable date is the annual benefit equal to the
employee's accumulated contributions multiplied by the appropriate
conversion factor.
"(ii) Appropriate conversion factor. - For purposes of clause
(i), the term 'appropriate conversion factor' means the factor
necessary to convert an amount equal to the accumulated
contributions to a single life annuity (without ancillary benefits)
commencing at normal retirement age and shall be 10 percent for a
normal retirement age of 65 years. For other normal retirement ages
the conversion factor shall be determined in accordance with
regulations prescribed by the Secretary."
Subsec. (c)(2)(C)(iii). Pub. L. 101-239, Sec. 7881(m)(1)(A),
amended cl. (iii) generally. Prior to amendment, cl. (iii) read as
follows: "interest on the sum of the amounts determined under
clauses (i) and (ii) compounded annually at the rate of 120 percent
of the Federal mid-term rate (as in effect under section 1274 for
the 1st month of a plan year) from the beginning of the first plan
year to which subsection (a)(2) applies (by reason of the
applicable effective date) to the date upon which the employee
would attain normal retirement age."
Subsec. (c)(2)(E). Pub. L. 101-239, Sec. 7881(m)(1)(C), struck
out subpar. (E) which read as follows: "Limitation. - The accrued
benefit derived from employee contributions shall not exceed the
greater of -
"(i) the employee's accrued benefit under the plan, or
"(ii) the accrued benefit derived from employee contributions
determined as though the amounts calculated under clauses (ii)
and (iii) of subparagraph (C) were zero."
1988 - Subsec. (a)(11)(A). Pub. L. 100-647 substituted
"nonforfeitable" for "vested".
1987 - Subsec. (c)(2)(C)(iii). Pub. L. 100-203, Sec. 9346(b)(1),
substituted "120 percent of the Federal mid-term rate (as in effect
under section 1274 for the 1st month of a plan year)" for "5
percent per annum".
Subsec. (c)(2)(D). Pub. L. 100-203, Sec. 9346(b)(2), struck out
", the rate of interest described in clause (iii) of subparagraph
(C), or both" before "from time to time" in first sentence and
struck out second sentence which read as follows: "The rate of
interest described in clause (iii) of subparagraph (C), or both,
from time to time as he may deem necessary. The rate of interest
shall bear the relationship to 5 percent which the Secretary
determines to be comparable to the relationship which the long-term
money rates and investment yields for the last period of 10
calendar years ending at least 12 months before the beginning of
the plan year bear to the long-term money rates and investment
yields for the 10-calendar year period 1964 through 1973."
1986 - Subsec. (a). Pub. L. 99-514, Sec. 1898(d)(1)(A)(ii),
inserted reference to par. (11) in introductory text.
Pub. L. 99-509, Sec. 9202(b)(3), substituted "subsection (b)(3),
and also satisfies, in the case of a defined benefit plan, the
requirements of subsection (b)(1) and, in the case of a defined
contribution plan, the requirements of subsection (b)(2)" for
"paragraph (2) of subsection (b), and in the case of a defined
benefit plan, also satisfies the requirements of paragraph (1) of
subsection (b)" in first sentence.
Subsec. (a)(2). Pub. L. 99-514, Sec. 1113(a), amended par. (2)
generally, substituting provisions covering 5-year vesting, 3 to 7
year vesting, and multiemployer plans, for former provisions which
had covered 10-year vesting, 5- to 15-year vesting, and the "rule
of 45".
Subsec. (a)(3)(D)(ii). Pub. L. 99-514, Sec. 1898(a)(4)(A)(i),
substituted last sentence for former last sentence which read as
follows: "In the case of a defined contribution plan, the plan
provision required under this clause may provide that such
repayment must be made before the participant has any one-year
break in service commencing after the withdrawal."
Subsec. (a)(7)(C). Pub. L. 99-514, Sec. 1898(a)(4)(A)(ii),
substituted last sentence for former last sentence which read as
follows: "In the case of a defined contribution plan, the plan
provision required under this subparagraph may provide that such
repayment must be made before the participant has 5 consecutive
1-year breaks in service commencing after such withdrawal."
Subsec. (a)(8)(B). Pub. L. 99-509, Sec. 9203(b)(2), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "the latter of -
"(i) the time a plan participant attains age 65, or
"(ii) the 10th anniversary of the time a plan participant
commenced participation in the plan."
Subsec. (a)(10)(B). Pub. L. 99-514, Sec. 1113(d)(B), substituted
"3 years" for "5 years".
Subsec. (a)(11)(A). Pub. L. 99-514, Sec. 1898(d)(1)(A)(i),
amended subpar. (A) generally. Prior to amendment, subpar. (A) read
as follows: "If the present value of any accrued benefit exceeds
$3,500, such benefit shall not be treated as nonforfeitable if the
plan provides that the present value of such benefit could be
immediately distributed without the consent of the participant."
Subsec. (a)(11)(B). Pub. L. 99-514, Sec. 1139(a), amended subpar.
(B) generally. Prior to amendment, subpar. (B) read as follows:
"For purposes of subparagraph (A), the present value shall be
calculated by using an interest rate not greater than the interest
rate which would be used (as of the date of the distribution) by
the Pension Benefit Guaranty Corporation for purposes of
determining the present value of a lump sum distribution on plan
termination."
Subsec. (a)(11)(C). Pub. L. 99-514, Sec. 1898(d)(2)(A), added
subpar. (C).
Subsec. (b)(1). Pub. L. 99-509, Sec. 9202(b)(1), substituted
"Defined benefit plans" for "General rules" in heading and added
subpar. (H).
Subsec. (b)(2) to (4). Pub. L. 99-509, Sec. 9202(b)(2), added
par. (2) and redesignated former pars. (2) and (3) as (3) and (4),
respectively.
Subsec. (d)(1)(A), (B). Pub. L. 99-514, Sec. 1114(b)(10),
substituted "highly compensated employees (within the meaning of
section 414(q))" for "officers, shareholders, or highly
compensated".
Subsec. (d)(4). Pub. L. 99-514, Sec. 1113(b), repealed par. (4)
which provided that a class year plan satisfied the requirements of
subsec. (a)(2) if it provided that 100 percent of each employee's
right to or derived from the contributions of the employer on his
behalf with respect to any plan year were nonforfeitable not later
than the end of the 5th plan year following the plan year for which
such contributions were made.
Pub. L. 99-514, Sec. 1898(a)(1)(A), substituted "Class-year" for
"Class year" in heading and amended par. (4) generally. Prior to
amendment, par. (4) read as follows: "The requirements of
subsection (a)(2) shall be deemed to be satisfied in the case of a
class year plan if such plan provides that 100 percent of each
employee's right to or derived from the contributions of the
employer on his behalf with respect to any plan year are
nonforfeitable not later than the end of the 5th plan year
following the plan year for which such contributions were made. For
purposes of this section, the term 'class year plan' means a
profit-sharing, stock bonus, or money purchase plan which provides
for the separate nonforfeitability of employees' rights to or
derived from the contributions for each plan year."
Subsec. (d)(6)(C). Pub. L. 99-514, Sec. 1898(f)(1)(A), added
subpar. (C).
1984 - Subsec. (a)(4)(A). Pub. L. 98-397, Sec. 202(b),
substituted "18" for "22".
Subsec. (a)(6)(C). Pub. L. 98-397, Sec. 202(c), substituted "5
consecutive 1-year breaks" for "1-year break", in heading, and in
text substituted "5 consecutive 1-year breaks in service" for "any
1-year break in service" and "such 5-year period" for "such break"
in two places.
Subsec. (a)(6)(D). Pub. L. 98-397, Sec. 202(d)(2), amended
subpar. (D) generally.
Subsec. (a)(6)(E). Pub. L. 98-397, Sec. 202(e)(2), added subpar.
(E).
Subsec. (a)(7)(B)(i). Pub. L. 98-397, Sec. 205(b), substituted
"$3,500" for "$1,750".
Subsec. (a)(7)(C). Pub. L. 98-397, Sec. 202(f), substituted "5
consecutive 1-year breaks in service" for "any one-year break in
service".
Subsec. (a)(11). Pub. L. 98-397, Sec. 205(a), added par. (11).
Subsec. (b)(3)(A). Pub. L. 98-397, Sec. 202(e)(3), inserted ",
determined without regard to section 410(a)(5)(E)".
Subsec. (d)(6). Pub. L. 98-397, Sec. 301(a)(1), designated
existing provisions as subpar. (A) and added subpar. (B).
1980 - Subsec. (a). Pub. L. 96-364, Sec. 206(1)-(4), in par. (3)
added subpars. (E) and (F), and in par. (4) added subpar. (G).
Subsec. (d)(6). Pub. L. 96-364, Sec. 206(5), inserted reference
to section 4281 of the Employee Retirement Income Security Act of
1974.
1976 - Subsec. (a). Pub. L. 94-455, Secs. 1901(a)(62)(A)-(C),
1906(b)(13)(A), substituted "paragraph (8)" for "subsection (a)(8)"
in provisions preceding par. (1), substituted references to Sept.
2, 1974, for references to the date of enactment of the Employee
Retirement Income Security Act of 1974 in par. (3)(D)(iii), struck
out "or his delegate" after "Secretary" in pars. (4)(C) and (7)(B),
and substituted "(B)" for "(b)" in heading of par. (7)(C).
Subsec. (b)(1)(D)(i). Pub. L. 94-455, Sec. 1901(a)(62)(D),
substituted reference to Sept. 2, 1974, for reference to the date
of enactment of the Employee Retirement Income Security Act of
1974.
Subsecs. (c)(2)(B)(ii), (D), (d)(2), (3). Pub. L. 94-455, Sec.
1906(b)(13)(A), struck out "or his delegate" after "Secretary".
Subsec. (e)(1)(C). Pub. L. 94-455, Sec. 1901(a)(62)(D),
substituted reference to Sept. 2, 1974, for reference to the date
of enactment of the Employee Retirement Income Security Act of
1974.
Subsec. (e)(2). Pub. L. 94-455, Sec. 1901(a)(62)(E), substituted
reference to Sept. 1, 1974, for reference to the date before the
date of enactment of the Employee Retirement Income Security Act of
1974.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title VI, Sec. 633(c), June 7, 2001, 115 Stat.
116, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and section
1053 of Title 29, Labor] shall apply to contributions for plan
years beginning after December 31, 2001.
"(2) Collective bargaining agreements. - In the case of a plan
maintained pursuant to one or more collective bargaining agreements
between employee representatives and one or more employers ratified
by the date of the enactment of this Act [June 7, 2001], the
amendments made by this section shall not apply to contributions on
behalf of employees covered by any such agreement for plan years
beginning before the earlier of -
"(A) the later of -
"(i) the date on which the last of such collective bargaining
agreements terminates (determined without regard to any
extension thereof on or after such date of the enactment); or
"(ii) January 1, 2002; or
"(B) January 1, 2006.
"(3) Service required. - With respect to any plan, the amendments
made by this section shall not apply to any employee before the
date that such employee has 1 hour of service under such plan in
any plan year to which the amendments made by this section apply."
Pub. L. 107-16, title VI, Sec. 645(a)(3), June 7, 2001, 115 Stat.
125, provided that: "The amendments made by this subsection
[amending this section and section 1054 of Title 29, Labor] shall
apply to years beginning after December 31, 2001."
Pub. L. 107-16, title VI, Sec. 648(c), June 7, 2001, 115 Stat.
128, provided that: "The amendments made by this section [amending
this section, section 457 of this title, and section 1053 of Title
29, Labor] shall apply to distributions after December 31, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1071(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section, sections 417 and 457
of this title, and sections 1053 to 1055 of Title 29, Labor] shall
apply to plan years beginning after the date of the enactment of
this Act [Aug. 5, 1997]."
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1442(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section and section 1053 of
Title 29, Labor] shall apply to plan years beginning on or after
the earlier of -
"(1) the later of -
"(A) January 1, 1997, or
"(B) the date on which the last of the collective bargaining
agreements pursuant to which the plan is maintained terminates
(determined without regard to any extension thereof after the
date of the enactment of this Act [Aug. 20, 1996]), or
"(2) January 1, 1999.
Such amendments shall not apply to any individual who does not have
more than 1 hour of service under the plan on or after the 1st day
of the 1st plan year to which such amendments apply."
EFFECTIVE DATE OF 1994 AMENDMENT
Section 767(d) of Pub. L. 103-465, as amended by Pub. L. 104-188,
title I, Sec. 1449(a), Aug. 20, 1996, 110 Stat. 1813; Pub. L.
105-34, title XVI, Sec. 1604(b)(3), Aug. 5, 1997, 111 Stat. 1097,
provided that:
"(1) In general. - The amendments made by this section [amending
this section, sections 415 and 417 of this title, and sections 1053
and 1055 of Title 29, Labor] shall apply to plan years and
limitation years beginning after December 31, 1994; except that an
employer may elect to treat the amendments made by this section as
being effective on or after the date of the enactment of this Act
[Dec. 8, 1994].
"(2) No reduction in accrued benefits. - A participant's accrued
benefit shall not be considered to be reduced in violation of
section 411(d)(6) of the Internal Revenue Code of 1986 or section
204(g) of the Employee Retirement Income Security Act of 1974 [29
U.S.C. 1054(g)] merely because (A) the benefit is determined in
accordance with section 417(e)(3)(A) of such Code, as amended by
this Act, or section 205(g)(3) of the Employee Retirement Income
Security Act of 1974 [29 U.S.C. 1055(g)(3)], as amended by this
Act, or (B) the plan applies section 415(b)(2)(E) of such Code, as
amended by this Act.
"(3) Section 415. -
"(A) Exception. - A plan that was adopted and in effect before
December 8, 1994, shall not be required to apply the amendments
made by subsection (b) [amending section 415 of this title] with
respect to benefits accrued before the earlier of -
"(i) the later of the date a plan amendment applying the
amendments made by subsection (b) is adopted or made effective,
or
"(ii) the first day of the first limitation year beginning
after December 31, 1999.
Determinations under section 415(b)(2)(E) of the Internal Revenue
Code of 1986 before such earlier date shall be made with respect
to such benefits on the basis of such section as in effect on
December 7, 1994, and the provisions of the plan as in effect on
December 7, 1994, but only if such provisions of the plan meet
the requirements of such section (as so in effect).
"(B) Timing of plan amendment. - A plan that operates in
accordance with the amendments made by subsection (b) shall not
be treated as failing to satisfy section 401(a) of the Internal
Revenue Code of 1986 or as not being operated in accordance with
the provisions of the plan until such date as the Secretary of
the Treasury provides merely because the plan has not been
amended to include the amendments made by subsection (b)."
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-318 applicable to distributions after
Dec. 31, 1992, see section 521(e) of Pub. L. 102-318, set out as a
note under section 402 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by section 7861(a)(5)(A), (6)(A) of Pub. L. 101-239
effective as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
7863 of Pub. L. 101-239, set out as a note under section 106 of
this title.
Section 7871(a)(4) of Pub. L. 101-239 provided that: "The
amendments made by this subsection [amending this section and
section 1054 of Title 29, Labor] shall take effect as if included
in the amendments made by section 9202 of the Omnibus Budget
Reconciliation Act of 1986 [Pub. L. 99-509]."
Section 7871(b)(3) of Pub. L. 101-239 provided that: "The
amendments made by this subsection [amending this section and
section 1002 of Title 29, Labor] shall take effect as if included
in the amendments made by section 9203 of the Omnibus Budget
Reconciliation Act of 1986 [Pub. L. 99-509]."
Amendment by section 7881(m)(1) of Pub. L. 101-239 effective,
except as otherwise provided, as if included in the provision of
the Pension Protection Act, Pub. L. 100-203, Secs. 9302-9346, to
which such amendment relates, see section 7882 of Pub. L. 101-239,
set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Amendment by Pub. L. 100-203 applicable to plan years beginning
after Dec. 31, 1987, with plan amendments not required to be made
before first plan year beginning on or after Jan. 1, 1989, if
certain conditions are met, see section 9346(c) of Pub. L. 100-203,
set out as a note under section 1054 of Title 29, Labor.
EFFECTIVE DATE OF 1986 AMENDMENTS
Section 1113(f), formerly Sec. 1113(e), of Pub. L. 99-514, as
redesignated and amended by Pub. L. 101-239, title VII, Sec.
7861(a)(3), (4), Dec. 19, 1989, 103 Stat. 2430, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and section
410 of this title and sections 1052 to 1054 of Title 29, Labor]
shall apply to plan years beginning after December 31, 1988.
"(2) Special rule for collective bargaining agreements. - In the
case of a plan maintained pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or
more employers ratified before March 1, 1986, the amendments made
by this section shall not apply to employees covered by any such
agreement in plan years beginning before the earlier of -
"(A) the later of -
"(i) January 1, 1989, or
"(ii) the date on which the last of such collective
bargaining agreements terminates (determined without regard to
any extension thereof after February 28, 1986), or
"(B) January 1, 1991.
"(3) Participation required. - The amendments made by this
section shall not apply to any employee who does not have 1 hour of
service in any plan year to which the amendments made by this
section apply.
"(4) Repeal of class year vesting. - If a plan amendment
repealing class year vesting is adopted after October 22, 1986,
such amendment shall not apply to any employee for the 1st plan
year to which the amendments made by subsections (b) and (e)(2)
[amending this section and section 1053 of Title 29] apply (and any
subsequent plan year) if -
"(A) such plan amendment would reduce the nonforfeitable right
of such employee for such year, and
"(B) such employee has at least 1 hour of service before the
adoption of such plan amendment and after the beginning of such
1st plan year.
This paragraph shall not apply to an employee who has 5 consecutive
1-year breaks in service (as defined in section 411(a)(6)(A) of the
Internal Revenue Code of 1986) which include the 1st day of the 1st
plan year to which the amendments made by subsection (b) and (e)(2)
apply. A plan shall not be treated as failing to meet the
requirements of section 401(a)(26) of such Code by reason of
complying with the provisions of this paragraph."
Amendment by section 1114(b)(10) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1988, see section 1114(c)(3) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Section 1139(d) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011A(k), Nov. 10, 1988, 102 Stat. 3483, provided
that:
"(1) In general. - The amendments made by this section [amending
this section and section 417 of this title and sections 1053 and
1055 of Title 29, Labor] shall apply to distributions in plan years
beginning after December 31, 1984, except that such amendments
shall not apply to any distributions in plan years beginning after
December 31, 1984, and before January 1, 1987, if such
distributions were made in accordance with the requirements of the
regulations issued under the Retirement Equity Act of 1984 [Pub. L.
98-397, see Short Title of 1984 Amendment note set out under
section 1001 of Title 29].
"(2) Reduction in accrued benefits. -
"(A) In general. - If a plan -
"(i) adopts a plan amendment before the close of the first
plan year beginning on or after January 1, 1989, which provides
for the calculation of the present value of the accrued
benefits in the manner provided by the amendments made by this
section, and
"(ii) the plan reduces the accrued benefits for any plan year
to which such plan amendment applies in accordance with such
plan amendment,
such reduction shall not be treated as a violation of section
411(d)(6) of the Internal Revenue Code of 1986 or section 204(g)
of the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1054(g)).
"(B) Special rule. - In the case of a plan maintained by a
corporation incorporated on April 11, 1934, which is
headquartered in Tarrant County, Texas -
"(i) such plan may be amended to remove the option of an
employee to receive a lump sum distribution (within the meaning
of section 402(e)(5) of such Code) if such amendment -
"(I) is adopted within 1 year of the date of the enactment
of this Act [Oct. 22, 1986], and
"(II) is not effective until 2 years after the employees
are notified of such amendment, and
"(ii) the present value of any vested accrued benefit of such
plan determined during the 3-year period beginning on the date
of the enactment of this Act shall be determined under the
applicable interest rate (within the meaning of section
411(a)(11)(B)(ii) of such Code), except that if such value (as
so determined) exceeds $50,000, then the value of any excess
over $50,000 shall be determined by using the interest rate
specified in the plan as of August 16, 1986."
Section 1898(a)(1)(C) of Pub. L. 99-514 provided that: "The
amendments made by this paragraph [amending this section and
section 1053 of Title 29, Labor] shall apply to contributions made
for plan years beginning after the date of the enactment of this
Act [Oct. 22, 1986]; except that, in the case of a plan described
in section 302(b) of the Retirement Equity Act of 1984 [section
302(b) of Pub. L. 98-397, set out as a note under section 1001 of
Title 29], such amendments shall not apply to any plan year to
which the amendments made by such Act [see Short Title of 1984
Amendment note set out under section 1001 of Title 29] do not apply
by reason of such section 302(b)."
Amendment by section 1898(a)(4)(A), (d)(1)(A), (2)(A), (f)(1)(A)
of Pub. L. 99-514 effective as if included in the provision of the
Retirement Equity Act of 1984, Pub. L. 98-397, to which such
amendment relates, except as otherwise provided, see section
1898(j) of Pub. L. 99-514, set out as a note under section 401 of
this title.
Amendment by section 9202(b) of Pub. L. 99-509 applicable only
with respect to plan years beginning on or after Jan. 1, 1988, and
only to employees who have 1 hour of service in any plan year to
which amendment applies, with special rule for collectively
bargained plans, and amendment by section 9203(b)(2) of Pub. L.
99-509 applicable only with respect to plan years beginning on or
after Jan. 1, 1988, and only with respect to service performed on
or after such date, see section 9204(a), (b) of Pub. L. 99-509, set
out as an Effective and Termination Dates of 1986 Amendments note
under section 623 of Title 29, Labor.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-397 applicable to plan years beginning
after Dec. 31, 1984, except as otherwise provided, see sections 302
and 303 of Pub. L. 98-397, set out as a note under section 1001 of
Title 29, Labor.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-364 effective Sept. 26, 1980, see section
210(a) of Pub. L. 96-364, set out as an Effective Date note under
section 418 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(62) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE
Section applicable, except as otherwise provided in section
1017(c) through (i) of Pub. L. 93-406, for plan years beginning
after Sept. 2, 1974, and, in the case of plans in existence on Jan.
1, 1974, for plan years beginning after Dec. 31, 1975, see section
1017 of Pub. L. 93-406, set out as an Effective Date; Transitional
Rules note under section 410 of this title.
REGULATIONS
Pub. L. 107-16, title VI, Sec. 645(b)(3), June 7, 2001, 115 Stat.
126, provided that: "Not later than December 31, 2003, the
Secretary of the Treasury is directed to issue regulations under
section 411(d)(6) of the Internal Revenue Code of 1986 and section
204(g) of the Employee Retirement Income Security Act of 1974 [29
U.S.C. 1054(g)], including the regulations required by the
amendment made by this subsection [amending this section and
section 1054 of Title 29, Labor]. Such regulations shall apply to
plan years beginning after December 31, 2003, or such earlier date
as is specified by the Secretary of the Treasury."
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by sections
1113 and 1114 of Pub. L. 99-514, see section 1141 of Pub. L.
99-514, set out as a note under section 401 of this title.
Secretary of Labor, Secretary of the Treasury, and Equal
Employment Opportunity Commission shall each issue before Feb. 1,
1988, final regulations to carry out amendments made by sections
9202 and 9203 of Pub. L. 99-509, see section 9204 of Pub. L.
99-509, set out as a note under section 623 of Title 29, Labor.
PROVISIONS RELATING TO PLAN AMENDMENTS
Section 1541 of title XV of Pub. L. 105-34 provided that:
"(a) In General. - If this section applies to any plan or
contract amendment -
"(1) such plan or contract shall be treated as being operated
in accordance with the terms of the plan during the period
described in subsection (b)(2)(A), and
"(2) such plan shall not fail to meet the requirements of
section 411(d)(6) of the Internal Revenue Code of 1986 or section
204(g) of the Employee Retirement Income Security Act of 1974 [29
U.S.C. 1054(g)] by reason of such amendment.
"(b) Amendments to Which Section Applies. -
"(1) In general. - This section shall apply to any amendment to
any plan or annuity contract which is made -
"(A) pursuant to any amendment made by this title [enacting
sections 9811 and 9812 of this title, amending sections 101,
401 to 404, 408, 409, 410, 412, 414, 415, 512, 664, 674, 2055,
2056, 4947, 4972, 4975, 4978, 4979A, 4980D, 9801, 9802, and
9831 of this title, sections 1021, 1022, 1024, 1026 to 1028,
1056, 1082, 1107, 1108, and 1132 of Title 29, Labor, and
section 1320b-14 of Title 42, The Public Health and Welfare,
renumbering sections 9804 to 9806 of this title as sections
9831 to 9833, respectively, of this title, and amending
provisions set out as a note under section 412 of this title]
or subtitle H of title X [Secs. 1071-1075, amending this
section, sections 72, 132, 417, 457, 691, 2013, 2053, 4975, and
6018 of this title, and sections 1053 to 1055 of Title 29 and
repealing section 4980A of this title], and
"(B) before the first day of the first plan year beginning on
or after January 1, 1999.
In the case of a governmental plan (as defined in section 414(d)
of the Internal Revenue Code of 1986), this paragraph shall be
applied by substituting '2001' for '1999'.
"(2) Conditions. - This section shall not apply to any
amendment unless -
"(A) during the period -
"(i) beginning on the date the legislative amendment
described in paragraph (1)(A) takes effect (or in the case of
a plan or contract amendment not required by such legislative
amendment, the effective date specified by the plan), and
"(ii) ending on the date described in paragraph (1)(B) (or,
if earlier, the date the plan or contract amendment is
adopted),
the plan or contract is operated as if such plan or contract
amendment were in effect, and
"(B) such plan or contract amendment applies retroactively
for such period."
TRANSITIONAL RULE: CERTAIN PLAN AMENDMENTS ADOPTED OR EFFECTIVE ON
OR BEFORE AUGUST 20, 1996
Section 1449(d) of Pub. L. 104-188 provided that: "In the case of
a plan that was adopted and in effect before December 8, 1994, if -
"(1) a plan amendment was adopted or made effective on or
before the date of the enactment of this Act [Aug. 20, 1996]
applying the amendments made by section 767 of the Uruguay Round
Agreements Act [Pub. L. 103-465, see Effective Date of 1994
Amendment note set out above], and
"(2) within 1 year after the date of the enactment of this Act
[Aug. 20, 1996], a plan amendment is adopted which repeals the
amendment referred to in paragraph (1),
the amendment referred to in paragraph (1) shall not be taken into
account in applying section 767(d)(3)(A) of the Uruguay Round
Agreements Act, as amended by subsection (a)."
PLAN AMENDMENTS REFLECTING AMENDMENTS BY SECTION 7881(M) OF PUB. L.
101-239 NOT TREATED AS REDUCING ACCRUED BENEFITS
For provisions directing that if during the period beginning Dec.
22, 1987, and ending June 21, 1988, a plan was amended to reflect
the amendments by section 9346 of Pub. L. 100-203 and such plan is
amended to reflect the amendments by section 7881(m) of Pub. L.
101-239, any plan amendments made to reflect the amendments by
section 7881(m) of Pub. L. 101-239 shall not be treated as reducing
accrued benefits for purposes of subsection (d)(6) of this section
or section 1054(g) of Title 29, Labor, see section 7881(m)(3) of
Pub. L. 101-239, set out as a note under section 1054 of Title 29.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
For provisions directing that if any amendments made by sections
9202(b) and 9203(b)(2) of Pub. L. 99-509 require an amendment to
any plan, such plan amendment shall not be required to be made
before the first plan year beginning on or after Jan. 1, 1989, see
section 9204 of Pub. L. 99-509, set out as a note under section 623
of Title 29, Labor.
ALTERNATE METHODS OF SATISFYING REQUIREMENTS FOR VESTING AND
ACCRUED BENEFITS
Section 1012(c) of Pub. L. 93-406, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In the case
of any plan maintained on January 1, 1974, if, not later than 2
years after the date of the enactment of this Act [Sept. 2, 1974],
the plan administrator petitions the Secretary of Labor, the
Secretary of Labor may prescribe an alternate method which shall be
treated as satisfying the requirements of subsection (a)(2) of
section 411 of the Internal Revenue Code of 1986 [formerly I.R.C.
1954], or of subsection (b)(1) (other than subparagraph (D)
thereof) of such section 411, or of both such provisions for a
period of not more than 4 years. The Secretary may prescribe such
alternate method only when he finds that -
"(1) the application of such requirements would increase the
costs of the plan to such an extent that there would result a
substantial risk to the voluntary continuation of the plan or a
substantial curtailment of benefit levels or the levels of
employees' compensation,
"(2) the application of such requirements or discontinuance of
the plan would be adverse to the interests of plan participants
in the aggregate, and
"(3) a waiver or extension of time granted under section 412(d)
or (e) would be inadequate.
In the case of any plan with respect to which an alternate method
has been prescribed under the preceding provisions of this
subsection for a period of not more than 4 years, if, not later
than 1 year before the expiration of such period, the plan
administrator petitions the Secretary of Labor for an extension of
such alternate method, and the Secretary makes the findings
required by the preceding sentence, such alternate method may be
extended for not more than 3 years."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 401, 404, 408, 410, 412,
413, 414, 416, 417, 418D, 418E, 457, 4978, 4980F; title 29 sections
623, 1054, 1082, 1202, 1322a, 1343, 1390.
-FOOTNOTE-
(!1) So in original. The comma probably should be a semicolon.
-End-
-CITE-
26 USC Sec. 412 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart B - Special Rules
-HEAD-
Sec. 412. Minimum funding standards
-STATUTE-
(a) General rule
Except as provided in subsection (h), this section applies to a
plan if, for any plan year beginning on or after the effective date
of this section for such plan -
(1) such plan included a trust which qualified (or was
determined by the Secretary to have qualified) under section
401(a), or
(2) such plan satisfied (or was determined by the Secretary to
have satisfied) the requirements of section 403(a).
A plan to which this section applies shall have satisfied the
minimum funding standard for such plan for a plan year if as of the
end of such plan year, the plan does not have an accumulated
funding deficiency. For purposes of this section and section 4971,
the term "accumulated funding deficiency" means for any plan the
excess of the total charges to the funding standard account for all
plan years (beginning with the first plan year to which this
section applies) over the total credits to such account for such
years or, if less, the excess of the total charges to the
alternative minimum funding standard account for such plan years
over the total credits to such account for such years. In any plan
year in which a multiemployer plan is in reorganization, the
accumulated funding deficiency of the plan shall be determined
under section 418B.
(b) Funding standard account
(1) Account required
Each plan to which this section applies shall establish and
maintain a funding standard account. Such account shall be
credited and charged solely as provided in this section.
(2) Charges to account
For a plan year, the funding standard account shall be charged
with the sum of -
(A) the normal cost of the plan for the plan year,
(B) the amounts necessary to amortize in equal annual
installments (until fully amortized) -
(i) in the case of a plan in existence on January 1, 1974,
the unfunded past service liability under the plan on the
first day of the first plan year to which this section
applies, over a period of 40 plan years,
(ii) in the case of a plan which comes into existence after
January 1, 1974, the unfunded past service liability under
the plan on the first day of the first plan year to which
this section applies, over a period of 30 plan years,
(iii) separately, with respect to each plan year, the net
increase (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 30 plan years,
(iv) separately, with respect to each plan year, the net
experience loss (if any) under the plan, over a period of 5
plan years (15 plan years in the case of a multiemployer
plan), and
(v) separately, with respect to each plan year, the net
loss (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 10 plan years (30 plan
years in the case of a multiemployer plan),
(C) the amount necessary to amortize each waived funding
deficiency (within the meaning of subsection (d)(3)) for each
prior plan year in equal annual installments (until fully
amortized) over a period of 5 plan years (15 plan years in the
case of a multiemployer plan),
(D) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 5 plan
years any amount credited to the funding standard account under
paragraph (3)(D), and
(E) the amount necessary to amortize in equal annual
installments (until fully amortized) over a period of 20 years
the contributions which would be required to be made under the
plan but for the provisions of subsection (c)(7)(A)(i)(I).
For additional requirements in the case of plans other than
multiemployer plans, see subsection (l).
(3) Credits to account
For a plan year, the funding standard account shall be credited
with the sum of -
(A) the amount considered contributed by the employer to or
under the plan for the plan year,
(B) the amount necessary to amortize in equal annual
installments (until fully amortized) -
(i) separately, with respect to each plan year, the net
decrease (if any) in unfunded past service liability under
the plan arising from plan amendments adopted in such year,
over a period of 30 plan years,
(ii) separately, with respect to each plan year, the net
experience gain (if any) under the plan, over a period of 5
plan years (15 plan years in the case of a multiemployer
plan), and
(iii) separately, with respect to each plan year, the net
gain (if any) resulting from changes in actuarial assumptions
used under the plan, over a period of 10 plan years (30 plan
years in the case of a multiemployer plan),
(C) the amount of the waived funding deficiency (within the
meaning of subsection (d)(3) (!1) for the plan year, and
(D) in the case of a plan year for which the accumulated
funding deficiency is determined under the funding standard
account if such plan year follows a plan year for which such
deficiency was determined under the alternative minimum funding
standards, the excess (if any) of any debit balance in the
funding standard account (determined without regard to this
subparagraph) over any debit balance in the alternative minimum
funding standard account.
(4) Combining and offsetting amounts to be amortized
Under regulations prescribed by the Secretary, amounts required
to be amortized under paragraph (2) or paragraph (3), as the case
may be -
(A) may be combined into one amount under such paragraph to
be amortized over a period determined on the basis of the
remaining amortization period for all items entering into such
combined amount, and
(B) may be offset against amounts required to be amortized
under the other such paragraph, with the resulting amount to be
amortized over a period determined on the basis of the
remaining amortization periods for all items entering into
whichever of the two amounts being offset is the greater.
(5) Interest
(A) In general
The funding standard account (and items therein) shall be
charged or credited (as determined under regulations prescribed
by the Secretary) with interest at the appropriate rate
consistent with the rate or rates of interest used under the
plan to determine costs.
(B) Required change of interest rate
For purposes of determining a plan's current liability and
for purposes of determining a plan's required contribution
under section 412(l) for any plan year -
(i) In general
If any rate of interest used under the plan to determine
cost is not within the permissible range, the plan shall
establish a new rate of interest within the permissible
range.
(ii) Permissible range
For purposes of this subparagraph -
(I) In general
Except as provided in subclause (II), the term
"permissible range" means a rate of interest which is not
more than 10 percent above, and not more than 10 percent
below, the weighted average of the rates of interest on
30-year Treasury securities during the 4-year period ending
on the last day before the beginning of the plan year.
(II) Secretarial authority
If the Secretary finds that the lowest rate of interest
permissible under subclause (I) is unreasonably high, the
Secretary may prescribe a lower rate of interest, except
that such rate may not be less than 80 percent of the
average rate determined under subclause (I).
(iii) Assumptions
Notwithstanding subsection (c)(3)(A)(i), the interest rate
used under the plan shall be -
(I) determined without taking into account the experience
of the plan and reasonable expectations, but
(II) consistent with the assumptions which reflect the
purchase rates which would be used by insurance companies
to satisfy the liabilities under the plan.
(6) Certain amortization charges and credits
In the case of a plan which, immediately before the date of the
enactment of the Multiemployer Pension Plan Amendments Act of
1980, was a multiemployer plan (within the meaning of section
414(f) as in effect immediately before such date) -
(A) any amount described in paragraph (2)(B)(ii),
(2)(B)(iii), or (3)(B)(i) of this subsection which arose in a
plan year beginning before such date shall be amortized in
equal annual installments (until fully amortized) over 40 plan
years, beginning with the plan year in which the amount arose;
(B) any amount described in paragraph (2)(B)(iv) or
(3)(B)(ii) of this subsection which arose in a plan year
beginning before such date shall be amortized in equal annual
installments (until fully amortized) over 20 plan years,
beginning with the plan year in which the amount arose;
(C) any change in past service liability which arises during
the period of 3 plan years beginning on or after such date, and
results from a plan amendment adopted before such date, shall
be amortized in equal annual installments (until fully
amortized) over 40 plan years, beginning with the plan year in
which the change arises; and
(D) any change in past service liability which arises during
the period of 2 plan years beginning on or after such date, and
results from the changing of a group of participants from one
benefit level to another benefit level under a schedule of plan
benefits which -
(i) was adopted before such date, and
(ii) was effective for any plan participant before the
beginning of the first plan year beginning on or after such
date,
shall be amortized in equal annual installments (until fully
amortized) over 40 plan years, beginning with the plan year in
which the change arises.
(7) Special rules for multiemployer plans
For purposes of this section -
(A) Withdrawal liability
Any amount received by a multiemployer plan in payment of all
or part of an employer's withdrawal liability under part 1 of
subtitle E of title IV of the Employee Retirement Income
Security Act of 1974 shall be considered an amount contributed
by the employer to or under the plan. The Secretary may
prescribe by regulation additional charges and credits to a
multiemployer plan's funding standard account to the extent
necessary to prevent withdrawal liability payments from being
unduly reflected as advance funding for plan liabilities.
(B) Adjustments when a multiemployer plan leaves reorganization
If a multiemployer plan is not in reorganization in the plan
year but was in reorganization in the immediately preceding
plan year, any balance in the funding standard account at the
close of such immediately preceding plan year -
(i) shall be eliminated by an offsetting credit or charge
(as the case may be), but
(ii) shall be taken into account in subsequent plan years
by being amortized in equal annual installments (until fully
amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of any
accumulated funding deficiency under section 418B(a) as of the
end of the last plan year that the plan was in reorganization.
(C) Plan payments to supplemental program or withdrawal
liability payment fund
Any amount paid by a plan during a plan year to the Pension
Benefit Guaranty Corporation pursuant to section 4222 of such
Act or to a fund exempt under section 501(c)(22) pursuant to
section 4223 of such Act shall reduce the amount of
contributions considered received by the plan for the plan
year.
(D) Interim withdrawal liability payments
Any amount paid by an employer pending a final determination
of the employer's withdrawal liability under part 1 of subtitle
E of title IV of such Act and subsequently refunded to the
employer by the plan shall be charged to the funding standard
account in accordance with regulations prescribed by the
Secretary.
(E) For purposes of the full funding limitation under
subsection (c)(7), unless otherwise provided by the plan, the
accrued liability under a multiemployer plan shall not include
benefits which are not nonforfeitable under the plan after the
termination of the plan (taking into consideration section
411(d)(3)).
(c) Special rules
(1) Determinations to be made under funding method
For purposes of this section, normal costs, accrued liability,
past service liabilities, and experience gains and losses shall
be determined under the funding method used to determine costs
under the plan.
(2) Valuation of assets
(A) In general
For purposes of this section, the value of the plan's assets
shall be determined on the basis of any reasonable actuarial
method of valuation which takes into account fair market value
and which is permitted under regulations prescribed by the
Secretary.
(B) Election with respect to bonds
The value of a bond or other evidence of indebtedness which
is not in default as to principal or interest may, at the
election of the plan administrator, be determined on an
amortized basis running from initial cost at purchase to par
value at maturity or earliest call date. Any election under
this subparagraph shall be made at such time and in such manner
as the Secretary shall by regulations provide, shall apply to
all such evidences of indebtedness, and may be revoked only
with the consent of the Secretary. In the case of a plan other
than a multiemployer plan, this subparagraph shall not apply,
but the Secretary may by regulations provide that the value of
any dedicated bond portfolio of such plan shall be determined
by using the interest rate under subsection (b)(5).
(3) Actuarial assumptions must be reasonable
For purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be determined on
the basis of actuarial assumptions and methods -
(A) in the case of -
(i) a plan other than a multiemployer plan, each of which
is reasonable (taking into account the experience of the plan
and reasonable expectations) or which, in the aggregate,
result in a total contribution equivalent to that which would
be determined if each such assumption and method were
reasonable, or
(ii) a multiemployer plan, which, in the aggregate, are
reasonable (taking into account the experiences of the plan
and reasonable expectations), and
(B) which, in combination, offer the actuary's best estimate
of anticipated experience under the plan.
(4) Treatment of certain changes as experience gain or loss
For purposes of this section, if -
(A) a change in benefits under the Social Security Act or in
other retirement benefits created under Federal or State law,
or
(B) a change in the definition of the term "wages" under
section 3121, or a change in the amount of such wages taken
into account under regulations prescribed for purposes of
section 401(a)(5),
results in an increase or decrease in accrued liability under a
plan, such increase or decrease shall be treated as an experience
loss or gain.
(5) Change in funding method or in plan year requires approval
(A) In general
If the funding method for a plan is changed, the new funding
method shall become the funding method used to determine costs
and liabilities under the plan only if the change is approved
by the Secretary. If the plan year for a plan is changed, the
new plan year shall become the plan year for the plan only if
the change is approved by the Secretary.
(B) Approval required for certain changes in assumptions by
certain single-employer plans subject to additional funding
requirement
(i) In general
No actuarial assumption (other than the assumptions
described in subsection (l)(7)(C)) used to determine the
current liability for a plan to which this subparagraph
applies may be changed without the approval of the Secretary.
(ii) Plans to which subparagraph applies
This subparagraph shall apply to a plan only if -
(I) the plan is a defined benefit plan (other than a
multiemployer plan) to which title IV of the Employee
Retirement Income Security Act of 1974 applies;
(II) the aggregate unfunded vested benefits as of the
close of the preceding plan year (as determined under
section 4006(a)(3)(E)(iii) of the Employee Retirement
Income Security Act of 1974) of such plan and all other
plans maintained by the contributing sponsors (as defined
in section 4001(a)(13) of such Act) and members of such
sponsors' controlled groups (as defined in section
4001(a)(14) of such Act) which are covered by title IV of
such Act (disregarding plans with no unfunded vested
benefits) exceed $50,000,000; and
(III) the change in assumptions (determined after taking
into account any changes in interest rate and mortality
table) results in a decrease in the unfunded current
liability of the plan for the current plan year that
exceeds $50,000,000, or that exceeds $5,000,000 and that is
5 percent or more of the current liability of the plan
before such change.
(6) Full funding
If, as of the close of a plan year, a plan would (without
regard to this paragraph) have an accumulated funding deficiency
(determined without regard to the alternative minimum funding
standard account permitted under subsection (g)) in excess of the
full funding limitation -
(A) the funding standard account shall be credited with the
amount of such excess, and
(B) all amounts described in paragraphs (2)(B), (C), and (D)
and (3)(B) of subsection (b) which are required to be amortized
shall be considered fully amortized for purposes of such
paragraphs.
(7) Full-funding limitation
(A) In general
For purposes of paragraph (6), the term "full-funding
limitation" means the excess (if any) of -
(i) the lesser of (I) in the case of plan years beginning
before January 1, 2004, the applicable percentage of current
liability (including the expected increase in current
liability due to benefits accruing during the plan year), or
(II) the accrued liability (including normal cost) under the
plan (determined under the entry age normal funding method if
such accrued liability cannot be directly calculated under
the funding method used for the plan), over
(ii) the lesser of -
(I) the fair market value of the plan's assets, or
(II) the value of such assets determined under paragraph
(2).
(B) Current liability
For purposes of subparagraph (D) and subclause (I) of
subparagraph (A)(i), the term "current liability" has the
meaning given such term by subsection (l)(7) (without regard to
subparagraphs (C) and (D) thereof) and using the rate of
interest used under subsection (b)(5)(B).
(C) Special rule for paragraph (6)(B)
For purposes of paragraph (6)(B), subparagraph (A)(i) shall
be applied without regard to subclause (I) thereof.
(D) Regulatory authority
The Secretary may by regulations provide -
(i) for adjustments to the percentage contained in
subparagraph (A)(i) to take into account the respective ages
or lengths of service of the participants, and
(ii) alternative methods based on factors other than
current liability for the determination of the amount taken
into account under subparagraph (A)(i).
(E) Minimum amount
(i) In general
In no event shall the full-funding limitation determined
under subparagraph (A) be less than the excess (if any) of -
(I) 90 percent of the current liability of the plan
(including the expected increase in current liability due
to benefits accruing during the plan year), over
(II) the value of the plan's assets determined under
paragraph (2).
(ii) Current liability; assets
For purposes of clause (i) -
(I) the term "current liability" has the meaning given
such term by subsection (l)(7) (without regard to
subparagraph (D) thereof), and
(II) assets shall not be reduced by any credit balance in
the funding standard account.
(F) Applicable percentage
For purposes of subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance with the following
table:
In the case of any plan year The applicable
beginning in - percentage is -
2002 165
2003 170.
(8) Certain retroactive plan amendments
For purposes of this section, any amendment applying to a plan
year which -
(A) is adopted after the close of such plan year but no later
than 2 and one-half months after the close of the plan year
(or, in the case of a multiemployer plan, no later than 2 years
after the close of such plan year),
(B) does not reduce the accrued benefit of any participant
determined as of the beginning of the first plan year to which
the amendment applies, and
(C) does not reduce the accrued benefit of any participant
determined as of the time of adoption except to the extent
required by the circumstances,
shall, at the election of the plan administrator, be deemed to
have been made on the first day of such plan year. No amendment
described in this paragraph which reduces the accrued benefits of
any participant shall take effect unless the plan administrator
files a notice with the Secretary of Labor notifying him of such
amendment and the Secretary of Labor has approved such amendment,
or within 90 days after the date on which such notice was filed,
failed to disapprove such amendment. No amendment described in
this subsection shall be approved by the Secretary of Labor
unless he determines that such amendment is necessary because of
a substantial business hardship (as determined under subsection
(d)(2)) and that a waiver under subsection (d)(1) is unavailable
or inadequate.
(9) Annual valuation
(A) In general
For purposes of this section, a determination of experience
gains and losses and a valuation of the plan's liability shall
be made not less frequently than once every year, except that
such determination shall be made more frequently to the extent
required in particular cases under regulations prescribed by
the Secretary.
(B) Valuation date
(i) Current year
Except as provided in clause (ii), the valuation referred
to in subparagraph (A) shall be made as of a date within the
plan year to which the valuation refers or within one month
prior to the beginning of such year.
(ii) Use of prior year valuation
The valuation referred to in subparagraph (A) may be made
as of a date within the plan year prior to the year to which
the valuation refers if, as of such date, the value of the
assets of the plan are not less than 100 percent of the
plan's current liability (as defined in paragraph (7)(B)).
(iii) Adjustments
Information under clause (ii) shall, in accordance with
regulations, be actuarially adjusted to reflect significant
differences in participants.
(iv) Limitation
A change in funding method to use a prior year valuation,
as provided in clause (ii), may not be made unless as of the
valuation date within the prior plan year, the value of the
assets of the plan are not less than 125 percent of the
plan's current liability (as defined in paragraph (7)(B)).
(10) Time when certain contributions deemed made
For purposes of this section -
(A) Defined benefit plans other than multiemployer plans
In the case of a defined benefit plan other than a
multiemployer plan, any contributions for a plan year made by
an employer during the period -
(i) beginning on the day after the last day of such plan
year, and
(ii) ending on the day which is 8 1/2 months after the
close of the plan year,
shall be deemed to have been made on such last day.
(B) Other plans
In the case of a plan not described in subparagraph (A), any
contributions for a plan year made by an employer after the
last day of such plan year, but not later than two and one-half
months after such day, shall be deemed to have been made on
such last day. For purposes of this subparagraph, such two and
one-half month period may be extended for not more than six
months under regulations prescribed by the Secretary.
(11) Liability for contributions
(A) In general
Except as provided in subparagraph (B), the amount of any
contribution required by this section and any required
installments under subsection (m) shall be paid by the employer
responsible for contributing to or under the plan the amount
described in subsection (b)(3)(A).
(B) Joint and several liability where employer member of
controlled group
(i) In general
In the case of a plan other than a multiemployer plan, if
the employer referred to in subparagraph (A) is a member of a
controlled group, each member of such group shall be jointly
and severally liable for payment of such contribution or
required installment.
(ii) Controlled group
For purposes of clause (i), the term "controlled group"
means any group treated as a single employer under subsection
(b), (c), (m), or (o) of section 414.
(12) Anticipation of benefit increases effective in the future
In determining projected benefits, the funding method of a
collectively bargained plan described in section 413(a) (other
than a multiemployer plan) shall anticipate benefit increases
scheduled to take effect during the term of the collective
bargaining agreement applicable to the plan.
(d) Variance from minimum funding standard
(1) Waiver in case of business hardship
If an employer or in the case of a multiemployer plan, 10
percent or more of the number of employers contributing to or
under the plan, are unable to satisfy the minimum funding
standard for a plan year without temporary substantial business
hardship (substantial business hardship in the case of a
multiemployer plan) and if application of the standard would be
adverse to the interests of plan participants in the aggregate,
the Secretary may waive the requirements of subsection (a) for
such year with respect to all or any portion of the minimum
funding standard other than the portion thereof determined under
subsection (b)(2)(C). The Secretary shall not waive the minimum
funding standard with respect to a plan for more than 3 of any 15
(5 of any 15 in the case of a multiemployer plan) consecutive
plan years. The interest rate used for purposes of computing the
amortization charge described in subsection (b)(2)(C) for any
plan year shall be -
(A) in the case of a plan other than a multiemployer plan,
the greater of (i) 150 percent of the Federal mid-term rate (as
in effect under section 1274 for the 1st month of such plan
year), or (ii) the rate of interest used under the plan in
determining costs (including adjustments under subsection
(b)(5)(B)), and
(B) in the case of a multiemployer plan, the rate determined
under section 6621(b).
(2) Determination of business hardship
For purposes of this section, the factors taken into account in
determining temporary substantial business hardship (substantial
business hardship in the case of a multiemployer plan) shall
include (but shall not be limited to) whether or not -
(A) the employer is operating at an economic loss,
(B) there is substantial unemployment or underemployment in
the trade or business and in the industry concerned,
(C) the sales and profits of the industry concerned are
depressed or declining, and
(D) it is reasonable to expect that the plan will be
continued only if the waiver is granted.
(3) Waived funding deficiency
For purposes of this section, the term "waived funding
deficiency" means the portion of the minimum funding standard
(determined without regard to subsection (b)(3)(C)) for a plan
year waived by the Secretary and not satisfied by employer
contributions.
(4) Application must be submitted before date 2 1/2 months after
close of year
In the case of a plan other than a multiemployer plan, no
waiver may be granted under this subsection with respect to any
plan for any plan year unless an application therefor is
submitted to the Secretary not later than the 15th day of the 3rd
month beginning after the close of such plan year.
(5) Special rule if employer is member of controlled group
(A) In general
In the case of a plan other than a multiemployer plan, if an
employer is a member of a controlled group, the temporary
substantial business hardship requirements of paragraph (1)
shall be treated as met only if such requirements are met -
(i) with respect to such employer, and
(ii) with respect to the controlled group of which such
employer is a member (determined by treating all members of
such group as a single employer).
The Secretary may provide that an analysis of a trade or
business or industry of a member need not be conducted if the
Secretary determines such analysis is not necessary because the
taking into account of such member would not significantly
affect the determination under this subsection.
(B) Controlled group
For purposes of subparagraph (A), the term "controlled group"
means any group treated as a single employer under subsection
(b), (c), (m), or (o) of section 414.
(e) Extension of amortization periods
The period of years required to amortize any unfunded liability
(described in any clause of subsection (b)(2)(B)) of any plan may
be extended by the Secretary of Labor for a period of time (not in
excess of 10 years) if he determines that such extension would
carry out the purposes of the Employee Retirement Income Security
Act of 1974 and would provide adequate protection for participants
under the plan and their beneficiaries and if he determines that
the failure to permit such extension would -
(1) result in -
(A) a substantial risk to the voluntary continuation of the
plan, or
(B) a substantial curtailment of pension benefit levels or
employee compensation, and
(2) be adverse to the interests of plan participants in the
aggregate.
In the case of a plan other than a multiemployer plan, the interest
rate applicable for any plan year under any arrangement entered
into by the Secretary in connection with an extension granted under
this subsection shall be the greater of (A) 150 percent of the
Federal mid-term rate (as in effect under section 1274 for the 1st
month of such plan year), or (B) the rate of interest used under
the plan in determining costs. In the case of a multiemployer plan,
such rate shall be the rate determined under section 6621(b).
(f) Requirements relating to waivers and extensions
(1) Benefits may not be increased during waiver or extension
period
No amendment of the plan which increases the liabilities of the
plan by reason of any increase in benefits, any change in the
accrual of benefits, or any change in the rate at which benefits
become nonforfeitable under the plan shall be adopted if a waiver
under subsection (d)(1) or an extension of time under subsection
(e) is in effect with respect to the plan, or if a plan amendment
described in subsection (c)(8) has been made at any time in the
preceding 12 months (24 months for multiemployer plans). If a
plan is amended in violation of the preceding sentence, any such
waiver or extension of time shall not apply to any plan year
ending on or after the date on which such amendment is adopted.
(2) Exception
Paragraph (1) shall not apply to any plan amendment which -
(A) the Secretary of Labor determines to be reasonable and
which provides for only de minimis increases in the liabilities
of the plan.
(B) only repeals an amendment described in subsection (c)(8),
or
(C) is required as a condition of qualification under this
part.
(3) Security for waivers and extensions; consultations
(A) Security may be required
(i) In general
Except as provided in subparagraph (C), the Secretary may
require an employer maintaining a defined benefit plan which
is a single-employer plan (within the meaning of section
4001(a)(15) of the Employee Retirement Income Security Act of
1974) to provide security to such plan as a condition for
granting or modifying a waiver under subsection (d) or an
extension under subsection (e).
(ii) Special rules
Any security provided under clause (i) may be perfected and
enforced only by the Pension Benefit Guaranty Corporation, or
at the direction of the Corporation, by a contributing
sponsor (within the meaning of section 4001(a)(13) of such
Act), or a member of such sponsor's controlled group (within
the meaning of section 4001(a)(14) of such Act).
(B) Consultation with the pension benefit guaranty corporation
Except as provided in subparagraph (C), the Secretary shall,
before granting or modifying a waiver under subsection (d) or
an extension under subsection (e) with respect to a plan
described in subparagraph (A)(i) -
(i) provide the Pension Benefit Guaranty Corporation with -
(I) notice of the completed application for any waiver,
extension, or modification, and
(II) an opportunity to comment on such application within
30 days after receipt of such notice, and
(ii) consider -
(I) any comments of the Corporation under clause (i)(II),
and
(II) any views of any employee organization (within the
meaning of section 3(4) of the Employee Retirement Income
Security Act of 1974) representing participants in the plan
which are submitted in writing to the Secretary in
connection with such application.
Information provided to the corporation under this subparagraph
shall be considered tax return information and subject to the
safeguarding and reporting requirements of section 6103(p).
(C) Exception for certain waivers and extensions
(i) In general
The preceding provisions of this paragraph shall not apply
to any plan with respect to which the sum of -
(I) the outstanding balance of the accumulated funding
deficiencies (within the meaning of subsection (a) and
section 302(a) of such Act) of the plan,
(II) the outstanding balance of the amount of waived
funding deficiencies of the plan waived under subsection
(d) or section 303 of such Act, and
(III) the outstanding balance of the amount of decreases
in the minimum funding standard allowed under subsection
(e) or section 304 of such Act,
is less than $1,000,000.
(ii) Accumulated funding deficiencies
For purposes of clause (i)(I), accumulated funding
deficiencies shall include any increase in such amount which
would result if all applications for waivers of the minimum
funding standard under subsection (d) or section 303 of such
Act and for extensions of the amortization period under
subsection (e) or section 304 of such Act which are pending
with respect to such plan were denied.
(4) Additional requirements
(A) Advance notice
The Secretary shall, before granting a waiver under
subsection (d) or an extension under subsection (e), require
each applicant to provide evidence satisfactory to the
Secretary that the applicant has provided notice of the filing
of the application for such waiver or extension to each
employee organization representing employees covered by the
affected plan, and each participant, beneficiary, and alternate
payee (within the meaning of section 414(p)(8)). Such notice
shall include a description of the extent to which the plan is
funded for benefits which are guaranteed under title IV of such
Act and for benefit liabilities.
(B) Consideration of relevant information
The Secretary shall consider any relevant information
provided by a person to whom notice was given under
subparagraph (A).
(g) Alternative minimum funding standard
(1) In general
A plan which uses a funding method that requires contributions
in all years not less than those required under the entry age
normal funding method may maintain an alternative minimum funding
standard account for any plan year. Such account shall be
credited and charged solely as provided in this subsection.
(2) Charges and credits to account
For a plan year the alternative minimum funding standard
account shall be -
(A) charged with the sum of -
(i) the lesser of normal cost under the funding method used
under the plan or normal cost determined under the unit
credit method,
(ii) the excess, if any, of the present value of accrued
benefits under the plan over the fair market value of the
assets, and
(iii) an amount equal to the excess (if any) of credits to
the alternative minimum standard account for all prior plan
years over charges to such account for all such years, and
(B) credited with the amount considered contributed by the
employer to or under the plan for the plan year.
(3) Special rules
The alternative minimum funding standard account (and items
therein) shall be charged or credited with interest in the manner
provided under subsection (b)(5) with respect to the funding
standard account.
(h) Exceptions
This section shall not apply to -
(1) any profit-sharing or stock bonus plan,
(2) any insurance contract plan described in subsection (i),
(3) any governmental plan (within the meaning of section
414(d)),
(4) any church plan (within the meaning of section 414(e)) with
respect to which the election provided by section 410(d) has not
been made,
(5) any plan which has not, at any time after September 2,
1974, provided for employer contributions, or
(6) any plan established and maintained by a society, order, or
association described in section 501(c)(8) or (9), if no part of
the contributions to or under such plan are made by employers of
participants in such plan.
No plan described in paragraph (3), (4), or (6) shall be treated as
a qualified plan for purposes of section 401(a) unless such plan
meets the requirements of section 401(a)(7) as in effect on
September 1, 1974.
(i) Certain insurance contract plans
A plan is described in this subsection if -
(1) the plan is funded exclusively by the purchase of
individual insurance contracts.
(2) such contracts provide for level annual premium payments to
be paid extending not later than the retirement age for each
individual participating in the plan, and commencing with the
date the individual became a participant in the plan (or, in the
case of an increase in benefits, commencing at the time such
increase becomes effective),
(3) benefits provided by the plan are equal to the benefits
provided under each contract at normal retirement age under the
plan and are guaranteed by an insurance carrier (licensed under
the laws of a State to do business with the plan) to the extent
premiums have been paid,
(4) premiums payable for the plan year, and all prior plan
years, under such contracts have been paid before lapse or there
is reinstatement of the policy,
(5) no rights under such contracts have been subject to a
security interest at any time during the plan year, and
(6) no policy loans are outstanding at any time during the plan
year.
A plan funded exclusively by the purchase of group insurance
contracts which is determined under regulations prescribed by the
Secretary to have the same characteristics as contracts described
in the preceding sentence shall be treated as a plan described in
this subsection.
(j) Certain terminated multiemployer plans
This section applies with respect to a terminated multiemployer
plan to which section 4021 of the Employee Retirement Income
Security Act of 1974 applies, until the last day of the plan year
in which the plan terminates, within the meaning of section
4041A(a)(2) of that Act.
(k) Financial assistance
Any amount of any financial assistance from the Pension Benefit
Guaranty Corporation to any plan, and any repayment of such amount,
shall be taken into account under this section in such manner as
determined by the Secretary.
(l) Additional funding requirements for plans which are not
multiemployer plans
(1) In general
In the case of a defined benefit plan (other than a
multiemployer plan) to which this subsection applies under
paragraph (9) for any plan year, the amount charged to the
funding standard account for such plan year shall be increased by
the sum of -
(A) the excess (if any) of -
(i) the deficit reduction contribution determined under
paragraph (2) for such plan year, over
(ii) the sum of the charges for such plan year under
subsection (b)(2), reduced by the sum of the credits for such
plan year under subparagraph (B) of subsection (b)(3), plus
(B) the unpredictable contingent event amount (if any) for
such plan year.
Such increase shall not exceed the amount which, after taking
into account charges (other than the additional charge under this
subsection) and credits under subsection (b), is necessary to
increase the funded current liability percentage (taking into
account the expected increase in current liability due to
benefits accruing during the plan year) to 100 percent.
(2) Deficit reduction contribution
For purposes of paragraph (1), the deficit reduction
contribution determined under this paragraph for any plan year is
the sum of -
(A) the unfunded old liability amount,
(B) the unfunded new liability amount,
(C) the expected increase in current liability due to
benefits accruing during the plan year, and
(D) the aggregate of the unfunded mortality increase amounts.
(3) Unfunded old liability amount
For purposes of this subsection -
(A) In general
The unfunded old liability amount with respect to any plan
for any plan year is the amount necessary to amortize the
unfunded old liability under the plan in equal annual
installments over a period of 18 plan years (beginning with the
1st plan year beginning after December 31, 1988).
(B) Unfunded old liability
The term "unfunded old liability" means the unfunded current
liability of the plan as of the beginning of the 1st plan year
beginning after December 31, 1987 (determined without regard to
any plan amendment increasing liabilities adopted after October
16, 1987).
(C) Special rules for benefit increases under existing
collective bargaining agreements
(i) In general
In the case of a plan maintained pursuant to 1 or more
collective bargaining agreements between employee
representatives and the employer ratified before October 29,
1987, the unfunded old liability amount with respect to such
plan for any plan year shall be increased by the amount
necessary to amortize the unfunded existing benefit increase
liability in equal annual installments over a period of 18
plan years beginning with -
(I) the plan year in which the benefit increase with
respect to such liability occurs, or
(II) if the taxpayer elects, the 1st plan year beginning
after December 31, 1988.
(ii) Unfunded existing benefit increase liabilities
For purposes of clause (i), the unfunded existing benefit
increase liability means, with respect to any benefit
increase under the agreements described in clause (i) which
takes effect during or after the 1st plan year beginning
after December 31, 1987, the unfunded current liability
determined -
(I) by taking into account only liabilities attributable
to such benefit increase, and
(II) by reducing (but not below zero) the amount
determined under paragraph (8)(A)(ii) by the current
liability determined without regard to such benefit
increase.
(iii) Extensions, modifications, etc. not taken into account
For purposes of this subparagraph, any extension,
amendment, or other modification of an agreement after
October 28, 1987, shall not be taken into account.
(D) Special rule for required changes in actuarial assumptions
(i) In general
The unfunded old liability amount with respect to any plan
for any plan year shall be increased by the amount necessary
to amortize the amount of additional unfunded old liability
under the plan in equal annual installments over a period of
12 plan years (beginning with the first plan year beginning
after December 31, 1994).
(ii) Additional unfunded old liability
For purposes of clause (i), the term "additional unfunded
old liability" means the amount (if any) by which -
(I) the current liability of the plan as of the beginning
of the first plan year beginning after December 31, 1994,
valued using the assumptions required by paragraph (7)(C)
as in effect for plan years beginning after December 31,
1994, exceeds
(II) the current liability of the plan as of the
beginning of such first plan year, valued using the same
assumptions used under subclause (I) (other than the
assumptions required by paragraph (7)(C)), using the prior
interest rate, and using such mortality assumptions as were
used to determine current liability for the first plan year
beginning after December 31, 1992.
(iii) Prior interest rate
For purposes of clause (ii), the term "prior interest rate"
means the rate of interest that is the same percentage of the
weighted average under subsection (b)(5)(B)(ii)(I) for the
first plan year beginning after December 31, 1994, as the
rate of interest used by the plan to determine current
liability for the first plan year beginning after December
31, 1992, is of the weighted average under subsection
(b)(5)(B)(ii)(I) for such first plan year beginning after
December 31, 1992.
(E) Optional rule for additional unfunded old liability
(i) In general
If an employer makes an election under clause (ii), the
additional unfunded old liability for purposes of
subparagraph (D) shall be the amount (if any) by which -
(I) the unfunded current liability of the plan as of the
beginning of the first plan year beginning after December
31, 1994, valued using the assumptions required by
paragraph (7)(C) as in effect for plan years beginning
after December 31, 1994, exceeds
(II) the unamortized portion of the unfunded old
liability under the plan as of the beginning of the first
plan year beginning after December 31, 1994.
(ii) Election
(I) An employer may irrevocably elect to apply the
provisions of this subparagraph as of the beginning of the
first plan year beginning after December 31, 1994.
(II) If an election is made under this clause, the increase
under paragraph (1) for any plan year beginning after
December 31, 1994, and before January 1, 2002, to which this
subsection applies (without regard to this subclause) shall
not be less than the increase that would be required under
paragraph (1) if the provisions of this title as in effect
for the last plan year beginning before January 1, 1995, had
remained in effect.
(4) Unfunded new liability amount
For purposes of this subsection -
(A) In general
The unfunded new liability amount with respect to any plan
for any plan year is the applicable percentage of the unfunded
new liability.
(B) Unfunded new liability
The term "unfunded new liability" means the unfunded current
liability of the plan for the plan year determined without
regard to -
(i) the unamortized portion of the unfunded old liability,
the unamortized portion of the additional unfunded old
liability, the unamortized portion of each unfunded mortality
increase, and the unamortized portion of the unfunded
existing benefit increase liability, and
(ii) the liability with respect to any unpredictable
contingent event benefits (without regard to whether the
event has occurred).
(C) Applicable percentage
The term "applicable percentage" means, with respect to any
plan year, 30 percent, reduced by the product of -
(i) .40 multiplied by
(ii) the number of percentage points (if any) by which the
funded current liability percentage exceeds 60 percent.
(5) Unpredictable contingent event amount
(A) In general
The unpredictable contingent event amount with respect to a
plan for any plan year is an amount equal to the greatest of -
(i) the applicable percentage of the product of -
(I) 100 percent, reduced (but not below zero) by the
funded current liability percentage for the plan year,
multiplied by
(II) the amount of unpredictable contingent event
benefits paid during the plan year, including (except as
provided by the Secretary) any payment for the purchase of
an annuity contract for a participant or beneficiary with
respect to such benefits,
(ii) the amount which would be determined for the plan year
if the unpredictable contingent event benefit liabilities
were amortized in equal annual installments over 7 plan years
(beginning with the plan year in which such event occurs), or
(iii) the additional amount that would be determined under
paragraph (4)(A) if the unpredictable contingent event
benefit liabilities were included in unfunded new liability
notwithstanding paragraph (4)(B)(ii).
(B) Applicable percentage
In the case of plan The applicable
years beginning in: percentage is:
1989 and 1990 5
1991 10
1992 15
1993 20
1994 30
1995 40
1996 50
1997 60
1998 70
1999 80
2000 90
2001 and thereafter 100.
(C) Paragraph not to apply to existing benefits
This paragraph shall not apply to unpredictable contingent
event benefits (and liabilities attributable thereto) for which
the event occurred before the first plan year beginning after
December 31, 1988.
(D) Special rule for first year of amortization
Unless the employer elects otherwise, the amount determined
under subparagraph (A) for the plan year in which the event
occurs shall be equal to 150 percent of the amount determined
under subparagraph (A)(i). The amount under subparagraph
(A)(ii) for subsequent plan years in the amortization period
shall be adjusted in the manner provided by the Secretary to
reflect the application of this subparagraph.
(E) Limitation
The present value of the amounts described in subparagraph
(A) with respect to any one event shall not exceed the
unpredictable contingent event benefit liabilities attributable
to that event.
(6) Special rules for small plans
(A) Plans with 100 or fewer participants
This subsection shall not apply to any plan for any plan year
if on each day during the preceding plan year such plan had no
more than 100 participants.
(B) Plans with more than 100 but not more than 150 participants
In the case of a plan to which subparagraph (A) does not
apply and which on each day during the preceding plan year had
no more than 150 participants, the amount of the increase under
paragraph (1) for such plan year shall be equal to the product
of -
(i) such increase determined without regard to this
subparagraph, multiplied by
(ii) 2 percent for the highest number of participants in
excess of 100 on any such day.
(C) Aggregation of plans
For purposes of this paragraph, all defined benefit plans
maintained by the same employer (or any member of such
employer's controlled group) shall be treated as 1 plan, but
only employees of such employer or member shall be taken into
account.
(7) Current liability
For purposes of this subsection -
(A) In general
The term "current liability" means all liabilities to
employees and their beneficiaries under the plan.
(B) Treatment of unpredictable contingent event benefits
(i) In general
For purposes of subparagraph (A), any unpredictable
contingent event benefit shall not be taken into account
until the event on which the benefit is contingent occurs.
(ii) Unpredictable contingent event benefit
The term "unpredictable contingent event benefit" means any
benefit contingent on an event other than -
(I) age, service, compensation, death, or disability, or
(II) an event which is reasonably and reliably
predictable (as determined by the Secretary).
(C) Interest rate and mortality assumptions used
Effective for plan years beginning after December 31, 1994 -
(i) Interest rate
(I) In general
The rate of interest used to determine current liability
under this subsection shall be the rate of interest used
under subsection (b)(5), except that the highest rate in
the permissible range under subparagraph (B)(ii) thereof
shall not exceed the specified percentage under subclause
(II) of the weighted average referred to in such
subparagraph.
(II) Specified percentage
For purposes of subclause (I), the specified percentage
shall be determined as follows:
In the case of
plan years beginning The specified
in calendar year: percentage is:
1995 109
1996 108
1997 107
1998 106
1999 and thereafter 105.
(III) Special rule for 2002 and 2003
For a plan year beginning in 2002 or 2003,
notwithstanding subclause (I), in the case that the rate of
interest used under subsection (b)(5) exceeds the highest
rate permitted under subclause (I), the rate of interest
used to determine current liability under this subsection
may exceed the rate of interest otherwise permitted under
subclause (I); except that such rate of interest shall not
exceed 120 percent of the weighted average referred to in
subsection (b)(5)(B)(ii).
(ii) Mortality tables
(I) Commissioners' standard table
In the case of plan years beginning before the first plan
year to which the first tables prescribed under subclause
(II) apply, the mortality table used in determining current
liability under this subsection shall be the table
prescribed by the Secretary which is based on the
prevailing commissioners' standard table (described in
section 807(d)(5)(A)) used to determine reserves for group
annuity contracts issued on January 1, 1993.
(II) Secretarial authority
The Secretary may by regulation prescribe for plan years
beginning after December 31, 1999, mortality tables to be
used in determining current liability under this
subsection. Such tables shall be based upon the actual
experience of pension plans and projected trends in such
experience. In prescribing such tables, the Secretary shall
take into account results of available independent studies
of mortality of individuals covered by pension plans.
(III) Periodic review
The Secretary shall periodically (at least every 5 years)
review any tables in effect under this subsection and
shall, to the extent the Secretary determines necessary, by
regulation update the tables to reflect the actual
experience of pension plans and projected trends in such
experience.
(iii) Separate mortality tables for the disabled
Notwithstanding clause (ii) -
(I) In general
In the case of plan years beginning after December 31,
1995, the Secretary shall establish mortality tables which
may be used (in lieu of the tables under clause (ii)) to
determine current liability under this subsection for
individuals who are entitled to benefits under the plan on
account of disability. The Secretary shall establish
separate tables for individuals whose disabilities occur in
plan years beginning before January 1, 1995, and for
individuals whose disabilities occur in plan years
beginning on or after such date.
(II) Special rule for disabilities occurring after 1994
In the case of disabilities occurring in plan years
beginning after December 31, 1994, the tables under
subclause (I) shall apply only with respect to individuals
described in such subclause who are disabled within the
meaning of title II of the Social Security Act and the
regulations thereunder.
(III) Plan years beginning in 1995
In the case of any plan year beginning in 1995, a plan
may use its own mortality assumptions for individuals who
are entitled to benefits under the plan on account of
disability.
(D) Certain service disregarded
(i) In general
In the case of a participant to whom this subparagraph
applies, only the applicable percentage of the years of
service before such individual became a participant shall be
taken into account in computing the current liability of the
plan.
(ii) Applicable percentage
For purposes of this subparagraph, the applicable
percentage shall be determined as follows:
If the years of The applicable
participation are: percentage is:
1 20
2 40
3 60
4 80
5 or more 100.
(iii) Participants to whom subparagraph applies
This subparagraph shall apply to any participant who, at
the time of becoming a participant -
(I) has not accrued any other benefit under any defined
benefit plan (whether or not terminated) maintained by the
employer or a member of the same controlled group of which
the employer is a member,
(II) who first becomes a participant under the plan in a
plan year beginning after December 31, 1987, and
(III) has years of service greater than the minimum years
of service necessary for eligibility to participate in the
plan.
(iv) Election
An employer may elect not to have this subparagraph apply.
Such an election, once made, may be revoked only with the
consent of the Secretary.
(8) Other definitions
For purposes of this subsection -
(A) Unfunded current liability
The term "unfunded current liability" means, with respect to
any plan year, the excess (if any) of -
(i) the current liability under the plan, over
(ii) value of the plan's assets determined under subsection
(c)(2).
(B) Funded current liability percentage
The term "funded current liability percentage" means, with
respect to any plan year, the percentage which -
(i) the amount determined under subparagraph (A)(ii), is of
(ii) the current liability under the plan.
(C) Controlled group
The term "controlled group" means any group treated as a
single employer under subsections (b), (c), (m), and (o) of
section 414.
(D) Adjustments to prevent omissions and duplications
The Secretary shall provide such adjustments in the unfunded
old liability amount, the unfunded new liability amount, the
unpredictable contingent event amount, the current payment
amount, and any other charges or credits under this section as
are necessary to avoid duplication or omission of any factors
in the determination of such amounts, charges, or credits.
(E) Deduction for credit balances
For purposes of this subsection, the amount determined under
subparagraph (A)(ii) shall be reduced by any credit balance in
the funding standard account. The Secretary may provide for
such reduction for purposes of any other provision which
references this subsection.
(9) Applicability of subsection
(A) In general
Except as provided in paragraph (6)(A), this subsection shall
apply to a plan for any plan year if its funded current
liability percentage for such year is less than 90 percent.
(B) Exception for certain plans at least 80 percent funded
Subparagraph (A) shall not apply to a plan for a plan year if
-
(i) the funded current liability percentage for the plan
year is at least 80 percent, and
(ii) such percentage for each of the 2 immediately
preceding plan years (or each of the 2d and 3d immediately
preceding plan years) is at least 90 percent.
(C) Funded current liability percentage
For purposes of subparagraphs (A) and (B), the term "funded
current liability percentage" has the meaning given such term
by paragraph (8)(B), except that such percentage shall be
determined for any plan year -
(i) without regard to paragraph (8)(E), and
(ii) by using the rate of interest which is the highest
rate allowable for the plan year under paragraph (7)(C).
(D) Transition rules
For purposes of this paragraph:
(i) Funded percentage for years before 1995
The funded current liability percentage for any plan year
beginning before January 1, 1995, shall be treated as not
less than 90 percent only if for such plan year the plan met
one of the following requirements (as in effect for such
year):
(I) The full-funding limitation under subsection (c)(7)
for the plan was zero.
(II) The plan had no additional funding requirement under
this subsection (or would have had no such requirement if
its funded current liability percentage had been determined
under subparagraph (C)).
(III) The plan's additional funding requirement under
this subsection did not exceed the lesser of 0.5 percent of
current liability or $5,000,000.
(ii) Special rule for 1995 and 1996
For purposes of determining whether subparagraph (B)
applies to any plan year beginning in 1995 or 1996, a plan
shall be treated as meeting the requirements of subparagraph
(B)(ii) if the plan met the requirements of clause (i) of
this subparagraph for any two of the plan years beginning in
1992, 1993, and 1994 (whether or not consecutive).
(10) Unfunded mortality increase amount
(A) In general
The unfunded mortality increase amount with respect to each
unfunded mortality increase is the amount necessary to amortize
such increase in equal annual installments over a period of 10
plan years (beginning with the first plan year for which a plan
uses any new mortality table issued under paragraph
(7)(C)(ii)(II) or (III)).
(B) Unfunded mortality increase
For purposes of subparagraph (A), the term "unfunded
mortality increase" means an amount equal to the excess of -
(i) the current liability of the plan for the first plan
year for which a plan uses any new mortality table issued
under paragraph (7)(C)(ii)(II) or (III), over
(ii) the current liability of the plan for such plan year
which would have been determined if the mortality table in
effect for the preceding plan year had been used.
(11) Phase-in of increases in funding required by Retirement
Protection Act of 1994
(A) In general
For any applicable plan year, at the election of the
employer, the increase under paragraph (1) shall not exceed the
greater of -
(i) the increase that would be required under paragraph (1)
if the provisions of this title as in effect for plan years
beginning before January 1, 1995, had remained in effect, or
(ii) the amount which, after taking into account charges
(other than the additional charge under this subsection) and
credits under subsection (b), is necessary to increase the
funded current liability percentage (taking into account the
expected increase in current liability due to benefits
accruing during the plan year) for the applicable plan year
to a percentage equal to the sum of the initial funded
current liability percentage of the plan plus the applicable
number of percentage points for such applicable plan year.
(B) Applicable number of percentage points
(i) Initial funded current liability percentage of 75 percent
or less
Except as provided in clause (ii), for plans with an
initial funded current liability percentage of 75 percent or
less, the applicable number of percentage points for the
applicable plan year is:
In the case The applicable
of applicable number of
plan years percentage
beginning in: points is:
1995 3
1996 6
1997 9
1998 12
1999 15
2000 19
2001 24.
(ii) Other cases
In the case of a plan to which this clause applies, the
applicable number of percentage points for any such
applicable plan year is the sum of -
(I) 2 percentage points;
(II) the applicable number of percentage points (if any)
under this clause for the preceding applicable plan year;
(III) the product of .10 multiplied by the excess (if
any) of (a) 85 percentage points over (b) the sum of the
initial funded current liability percentage and the number
determined under subclause (II);
(IV) for applicable plan years beginning in 2000, 1
percentage point; and
(V) for applicable plan years beginning in 2001, 2
percentage points.
(iii) Plans to which clause (ii) applies
(I) In general
Clause (ii) shall apply to a plan for an applicable plan
year if the initial funded current liability percentage of
such plan is more than 75 percent.
(II) Plans initially under clause (i)
In the case of a plan which (but for this subclause) has
an initial funded current liability percentage of 75
percent or less, clause (ii) (and not clause (i)) shall
apply to such plan with respect to applicable plan years
beginning after the first applicable plan year for which
the sum of the initial funded current liability percentage
and the applicable number of percentage points (determined
under clause (i)) exceeds 75 percent. For purposes of
applying clause (ii) to such a plan, the initial funded
current liability percentage of such plan shall be treated
as being the sum referred to in the preceding sentence.
(C) Definitions
For purposes of this paragraph:
(i) The term "applicable plan year" means a plan year
beginning after December 31, 1994, and before January 1,
2002.
(ii) The term "initial funded current liability percentage"
means the funded current liability percentage as of the first
day of the first plan year beginning after December 31, 1994.
(m) Quarterly contributions required
(1) In general
If a defined benefit plan (other than a multiemployer plan)
which has a funded current liability percentage (as defined in
subsection (l)(8)) for the preceding plan year of less than 100
percent fails to pay the full amount of a required installment
for the plan year, then the rate of interest charged to the
funding standard account under subsection (b)(5) with respect to
the amount of the underpayment for the period of the underpayment
shall be equal to the greater of -
(A) 175 percent of the Federal mid-term rate (as in effect
under section 1274 for the 1st month of such plan year), or
(B) the rate of interest used under the plan in determining
costs (including adjustments under subsection (b)(5)(B)).
(2) Amount of underpayment, period of underpayment
For purposes of paragraph (1) -
(A) Amount
The amount of the underpayment shall be the excess of -
(i) the required installment, over
(ii) the amount (if any) of the installment contributed to
or under the plan on or before the due date for the
installment.
(B) Period of underpayment
The period for which interest is charged under this
subsection with regard to any portion of the underpayment shall
run from the due date for the installment to the date on which
such portion is contributed to or under the plan (determined
without regard to subsection (c)(10)).
(C) Order of crediting contributions
For purposes of subparagraph (A)(ii), contributions shall be
credited against unpaid required installments in the order in
which such installments are required to be paid.
(3) Number of required installments; due dates
For purposes of this subsection -
(A) Payable in 4 installments
There shall be 4 required installments for each plan year.
(B) Time for payment of installments
In the case of the following The due date is:
required installments:
--------------------------------------------------------------------
1st April 15
2nd July 15
3rd October 15
4th January 15 of
the following
year.
--------------------------------------------------------------------
(4) Amount of required installment
For purposes of this subsection -
(A) In general
The amount of any required installment shall be the
applicable percentage of the required annual payment.
(B) Required annual payment
For purposes of subparagraph (A), the term "required annual
payment" means the lesser of -
(i) 90 percent of the amount required to be contributed to
or under the plan by the employer for the plan year under
section 412 (without regard to any waiver under subsection
(c) thereof), or
(ii) 100 percent of the amount so required for the
preceding plan year.
Clause (ii) shall not apply if the preceding plan year was not
a year of 12 months.
(C) Applicable percentage
For purposes of subparagraph (A), the applicable percentage
shall be determined in accordance with the following table:
For plan years The applicable
beginning in: percentage is:
1989 6.25
1990 12.5
1991 18.75
1992 and thereafter 25.
(D) Special rules for unpredictable contingent event benefits
In the case of a plan to which subsection (1) (!2) applies
for any calendar year and which has any unpredictable
contingent event benefit liabilities -
(i) Liabilities not taken into account
Such liabilities shall not be taken into account in
computing the required annual payment under subparagraph (B).
(ii) Increase in installments
Each required installment shall be increased by the
greatest of -
(I) the unfunded percentage of the amount of benefits
described in subsection (l)(5)(A)(i) paid during the
3-month period preceding the month in which the due date
for such installment occurs,
(II) 25 percent of the amount determined under subsection
(l)(5)(A)(ii) for the plan year, or
(III) 25 percent of the amount determined under
subsection (l)(5)(A)(iii) for the plan year.
(iii) Unfunded percentage
For purposes of clause (ii)(I), the term "unfunded
percentage" means the percentage determined under subsection
(l)(5)(A)(i)(I) for the plan year.
(iv) Limitation on increase
In no event shall the increases under clause (ii) exceed
the amount necessary to increase the funded current liability
percentage (within the meaning of subsection (l)(8)(B)) for
the plan year to 100 percent.
(5) Liquidity requirement
(A) In general
A plan to which this paragraph applies shall be treated as
failing to pay the full amount of any required installment to
the extent that the value of the liquid assets paid in such
installment is less than the liquidity shortfall (whether or
not such liquidity shortfall exceeds the amount of such
installment required to be paid but for this paragraph).
(B) Plans to which paragraph applies
This paragraph shall apply to a defined benefit plan (other
than a multiemployer plan or a plan described in subsection
(l)(6)(A)) which -
(i) is required to pay installments under this subsection
for a plan year, and
(ii) has a liquidity shortfall for any quarter during such
plan year.
(C) Period of underpayment
For purposes of paragraph (1), any portion of an installment
that is treated as not paid under subparagraph (A) shall
continue to be treated as unpaid until the close of the quarter
in which the due date for such installment occurs.
(D) Limitation on increase
If the amount of any required installment is increased by
reason of subparagraph (A), in no event shall such increase
exceed the amount which, when added to prior installments for
the plan year, is necessary to increase the funded current
liability percentage (taking into account the expected increase
in current liability due to benefits accruing during the plan
year) to 100 percent.
(E) Definitions
For purposes of this paragraph:
(i) Liquidity shortfall
The term "liquidity shortfall" means, with respect to any
required installment, an amount equal to the excess (as of
the last day of the quarter for which such installment is
made) of the base amount with respect to such quarter over
the value (as of such last day) of the plan's liquid assets.
(ii) Base amount
(I) In general
The term "base amount" means, with respect to any
quarter, an amount equal to 3 times the sum of the adjusted
disbursements from the plan for the 12 months ending on the
last day of such quarter.
(II) Special rule
If the amount determined under subclause (I) exceeds an
amount equal to 2 times the sum of the adjusted
disbursements from the plan for the 36 months ending on the
last day of the quarter and an enrolled actuary certifies
to the satisfaction of the Secretary that such excess is
the result of nonrecurring circumstances, the base amount
with respect to such quarter shall be determined without
regard to amounts related to those nonrecurring
circumstances.
(iii) Disbursements from the plan
The term "disbursements from the plan" means all
disbursements from the trust, including purchases of
annuities, payments of single sums and other benefits, and
administrative expenses.
(iv) Adjusted disbursements
The term "adjusted disbursements" means disbursements from
the plan reduced by the product of -
(I) the plan's funded current liability percentage (as
defined in subsection (l)(8)) for the plan year, and
(II) the sum of the purchases of annuities, payments of
single sums, and such other disbursements as the Secretary
shall provide in regulations.
(v) Liquid assets
The term "liquid assets" means cash, marketable securities
and such other assets as specified by the Secretary in
regulations.
(vi) Quarter
The term "quarter" means, with respect to any required
installment, the 3-month period preceding the month in which
the due date for such installment occurs.
(F) Regulations
The Secretary may prescribe such regulations as are necessary
to carry out this paragraph.
(6) Fiscal years and short years
(A) Fiscal years
In applying this subsection to a plan year beginning on any
date other than January 1, there shall be substituted for the
months specified in this subsection, the months which
correspond thereto.
(B) Short plan year
This subsection shall be applied to plan years of less than
12 months in accordance with regulations prescribed by the
Secretary.
(7) Special rules for 2002 and 2004
In any case in which the interest rate used to determine
current liability is determined under subsection
(l)(7)(C)(i)(III) -
(A) 2002
For purposes of applying paragraphs (1) and (4)(B)(ii) for
plan years beginning in 2002, the current liability for the
preceding plan year shall be redetermined using 120 percent as
the specified percentage determined under subsection
(l)(7)(C)(i)(II).
(B) 2004
For purposes of applying paragraphs (1) and (4)(B)(ii) for
plan years beginning in 2004, the current liability for the
preceding plan year shall be redetermined using 105 percent as
the specified percentage determined under subsection
(l)(7)(C)(i)(II).
(n) Imposition of lien where failure to make required contributions
(1) In general
In the case of a plan to which this section applies, if -
(A) any person fails to make a required installment under
subsection (m) or any other payment required under this section
before the due date for such installment or other payment, and
(B) the unpaid balance of such installment or other payment
(including interest), when added to the aggregate unpaid
balance of all preceding such installments or other payments
for which payment was not made before the due date (including
interest), exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount
determined under paragraph (3) upon all property and rights to
property, whether real or personal, belonging to such person and
any other person who is a member of the same controlled group of
which such person is a member.
(2) Plans to which subsection applies
This subsection shall apply to a defined benefit plan (other
than a multiemployer plan) for any plan year for which the funded
current liability percentage (within the meaning of subsection
(l)(8)(B)) of such plan is less than 100 percent. This subsection
shall not apply to any plan to which section 4021 of the Employee
Retirement Income Security Act of 1974 does not apply (as such
section is in effect on the date of the enactment of the
Retirement Protection Act of 1994).
(3) Amount of lien
For purposes of paragraph (1), the amount of the lien shall be
equal to the aggregate unpaid balance of required installments
and other payments required under this section (including
interest) -
(A) for plan years beginning after 1987, and
(B) for which payment has not been made before the due date.
(4) Notice of failure; lien
(A) Notice of failure
A person committing a failure described in paragraph (1)
shall notify the Pension Benefit Guaranty Corporation of such
failure within 10 days of the due date for the required
installment or other payment.
(B) Period of lien
The lien imposed by paragraph (1) shall arise on the due date
for the required installment or other payment and shall
continue until the last day of the first plan year in which the
plan ceases to be described in paragraph (1)(B). Such lien
shall continue to run without regard to whether such plan
continues to be described in paragraph (2) during the period
referred to in the preceding sentence.
(C) Certain rules to apply
Any amount with respect to which a lien is imposed under
paragraph (1) shall be treated as taxes due and owing the
United States and rules similar to the rules of subsections
(c), (d), and (e) of section 4068 of the Employee Retirement
Income Security Act of 1974 shall apply with respect to a lien
imposed by subsection (a) and the amount with respect to such
lien.
(5) Enforcement
Any lien created under paragraph (1) may be perfected and
enforced only by the Pension Benefit Guaranty Corporation, or at
the direction of the Pension Benefit Guaranty Corporation, by the
contributing sponsor (or any member of the controlled group of
the contributing sponsor).
(6) Definitions
For purposes of this subsection -
(A) Due date; required installment
The terms "due date" and "required installment" have the
meanings given such terms by subsection (m), except that in the
case of a payment other than a required installment, the due
date shall be the date such payment is required to be made
under this section.
(B) Controlled group
The term "controlled group" means any group treated as a
single employer under subsections (b), (c), (m), and (o) of
section 414.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 1013(a), Sept. 2, 1974, 88
Stat. 914; amended Pub. L. 94-455, title XIX, Secs. 1901(a)(63),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1775, 1834; Pub. L. 96-364,
title II, Secs. 203, 208(c), Sept. 26, 1980, 94 Stat. 1285, 1289;
Pub. L. 98-369, div. A, title IV, Sec. 491(d)(25), July 18, 1984,
98 Stat. 850; Pub. L. 99-272, title XI, Secs. 11015(a)(2), (b)(2),
11016(c)(4), Apr. 7, 1986, 100 Stat. 265, 267, 273; Pub. L.
100-203, title IX, Secs. 9301(a), 9303(a), (d)(1), 9304(a)(1),
(b)(1), (e)(1), 9305(b)(1), 9306(a)(1), (b)(1), (c)(1), (d)(1),
(e)(1), 9307(a)(1), (b)(1), (e)(1), Dec. 22, 1987, 101 Stat.
1330-331, 1330-333, 1330-342 to 1330-344, 1330-348, 1330-351,
1330-352, 1330-354 to 1330-357; Pub. L. 100-647, title II, Sec.
2005(a)(2)(A), (d)(1), Nov. 10, 1988, 102 Stat. 3610, 3612; Pub. L.
101-239, title VII, Sec. 7881(a)(1)(A), (2)(A), (3)(A), (4)(A),
(5)(A), (6)(A), (b)(1)(A), (2)(A), (3)(A), (4)(A), (6)(A), (c)(1),
(d)(1)(A), Dec. 19, 1989, 103 Stat. 2435-2439; Pub. L. 103-465,
title VII, Secs. 751(a)(1)-(9)(A), (10), 752(a), 753(a), 754(a),
768(a), Dec. 8, 1994, 108 Stat. 5012-5019, 5021-5023, 5040; Pub. L.
105-34, title XV, Sec. 1521(a), (c)(1), (3)(A), title XVI, Sec.
1604(b)(2)(A), Aug. 5, 1997, 111 Stat. 1069, 1070, 1097; Pub. L.
107-16, title VI, Secs. 651(a), 661(a), June 7, 2001, 115 Stat.
129, 141; Pub. L. 107-147, title IV, Secs. 405(a), 411(v)(1), Mar.
9, 2002, 116 Stat. 42, 52.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of the Multiemployer Pension Plan
Amendments Act of 1980, referred to in subsec. (b)(6), means the
date of the enactment of Pub. L. 96-364, which was approved Sept.
26, 1980.
The Employee Retirement Income Security Act of 1974, referred to
in subsecs. (b)(7)(A), (C), (D), (c)(5)(B)(ii), (e), (f)(3),
(4)(A), (j), and (n)(2), (4)(C), is Pub. L. 93-406, Sept. 2, 1974,
88 Stat. 829, as amended. Title IV of the Act is classified
generally to subchapter III (Sec. 1301 et seq.) of chapter 18 of
Title 29, Labor. Part 1 of subtitle E of title IV of the Act is
classified generally to part 1 (Sec. 1381 et seq.) of subtitle E of
subchapter III of chapter 18 of Title 29. Sections 3, 302, 303,
304, 4001, 4006, 4021, 4041A, 4068, 4222, and 4223 of the Act are
classified to sections 1002, 1082, 1083, 1084, 1301, 1306, 1321,
1341a, 1368, 1402, and 1403 of Title 29, respectively. For complete
classification of this Act to the Code, see Short Title note set
out under section 1001 of Title 29 and Tables.
The Social Security Act, referred to in subsecs. (c)(4)(A) and
(l)(7)(C)(iii)(II), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as
amended, which is classified generally to chapter 7 (Sec. 301 et
seq.) of Title 42, The Public Health and Welfare. Title II of the
Act is classified generally to subchapter II (Sec. 401 et seq.) of
chapter 7 of Title 42. For complete classification of this Act to
the Code, see section 1305 of Title 42 and Tables.
The Retirement Protection Act of 1994, referred to in subsec.
(l)(11), is subtitle F (Secs. 750-781) of title VII of Pub. L.
103-465, Dec. 8, 1994, 108 Stat. 5012. For complete classification
of this Act to the Code, see Short Title of 1994 Amendment note set
out under section 1 of this title and Tables.
The date of the enactment of the Retirement Protection Act of
1994, referred to in subsec. (n)(2), is the date of enactment of
subtitle F (Secs. 750-781) of title VII of Pub. L. 103-465, which
was approved Dec. 8, 1994.
-MISC1-
AMENDMENTS
2002 - Subsec. (c)(9)(B)(ii). Pub. L. 107-147, Sec. 411(v)(1)(A),
substituted "100 percent" for "125 percent".
Subsec. (c)(9)(B)(iv). Pub. L. 107-147, Sec. 411(v)(1)(B), added
cl. (iv).
Subsec. (l)(7)(C)(i)(III). Pub. L. 107-147, Sec. 405(a)(1), added
subcl. (III).
Subsec. (m)(7). Pub. L. 107-147, Sec. 405(a)(2), added par. (7).
2001 - Subsec. (c)(7)(A)(i)(I). Pub. L. 107-16, Secs. 651(a)(1),
901, temporarily substituted "in the case of plan years beginning
before January 1, 2004, the applicable percentage" for "the
applicable percentage". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c)(7)(F). Pub. L. 107-16, Secs. 651(a)(2), 901,
temporarily reenacted heading and introductory provisions without
change and amended table generally, substituting present provisions
for provisions which had set out applicable percentage of 155 in
the case of any plan year beginning in 1999 or 2000, 160 in the
case of any plan year beginning in 2001 or 2002, 165 in the case of
any plan year beginning in 2003 or 2004, and 170 in the case of any
plan year beginning in 2005 and succeeding years. See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (c)(9). Pub. L. 107-16, Secs. 661(a), 901, temporarily
reenacted heading without change and amended text of par. (9)
generally. Prior to amendment, text read as follows: "For purposes
of this section, a determination of experience gains and losses and
a valuation of the plan's liability shall be made not less
frequently than once every year, except that such determination
shall be made more frequently to the extent required in particular
cases under regulations prescribed by the Secretary." See Effective
and Termination Dates of 2001 Amendment note below.
1997 - Subsec. (b)(2)(E). Pub. L. 105-34, Sec. 1521(c)(1), added
subpar. (E).
Subsec. (c)(7)(A)(i)(I). Pub. L. 105-34, Sec. 1521(a)(A),
substituted "the applicable percentage" for "150 percent".
Subsec. (c)(7)(D). Pub. L. 105-34, Sec. 1521(c)(3)(A), inserted
"and" at end of cl. (i), substituted a period for ", and" at end of
cl. (ii), and struck out cl. (iii) which read as follows: "for the
treatment under this section of contributions which would be
required to be made under the plan but for the provisions of
subparagraph (A)(i)(I)."
Subsec. (c)(7)(F). Pub. L. 105-34, Sec. 1521(a)(B), added subpar.
(F).
Subsec. (m)(5)(E)(ii)(II). Pub. L. 105-34, Sec. 1604(b)(2)(A),
substituted "subclause (I)" for "clause (i)".
1994 - Subsec. (c)(5). Pub. L. 103-465, Sec. 752(a), designated
existing provisions as subpar. (A), inserted subpar. heading, and
added subpar. (B).
Subsec. (c)(7)(A)(i)(I). Pub. L. 103-465, Sec. 751(a)(10)(A),
inserted "(including the expected increase in current liability due
to benefits accruing during the plan year)" after "current
liability".
Subsec. (c)(7)(B). Pub. L. 103-465, Sec. 751(a)(10)(C), reenacted
subpar. (B) heading without change and amended text generally.
Prior to amendment, text read as follows: "For purposes of
subparagraphs (A) and (D), the term 'current liability' has the
meaning given such term by subsection (l)(7) (without regard to
subparagraph (D) thereof)."
Subsec. (c)(7)(E). Pub. L. 103-465, Sec. 751(a)(10)(B), added
subpar. (E).
Subsec. (c)(12). Pub. L. 103-465, Sec. 753(a), added par. (12).
Subsec. (l)(1). Pub. L. 103-465, Sec. 751(a)(1)(A), (2)(B), in
introductory provisions, substituted "to which this subsection
applies under paragraph (9)" for "which has an unfunded current
liability", and amended concluding provisions generally. Prior to
amendment, concluding provisions read as follows: "Such increase
shall not exceed the amount necessary to increase the funded
current liability percentage to 100 percent."
Subsec. (l)(1)(A)(ii). Pub. L. 103-465, Sec. 751(a)(2)(A),
amended cl. (ii) generally. Prior to amendment, cl. (ii) read as
follows: "the sum of the charges for such plan year under
subparagraphs (B) (other than clauses (iv) and (v) thereof), (C),
and (D) of subsection (b)(2), reduced by the sum of the credits for
such plan year under subparagraph (B)(i) of subsection (b)(3),
plus".
Subsec. (l)(2)(C). Pub. L. 103-465, Sec. 751(a)(3), added subpar.
(C).
Subsec. (l)(2)(D). Pub. L. 103-465, Sec. 751(a)(7)(B)(i), added
subpar. (D).
Subsec. (l)(3)(D), (E). Pub. L. 103-465, Sec. 751(a)(4)(A), added
subpars. (D) and (E).
Subsec. (l)(4)(B)(i). Pub. L. 103-465, Sec. 751(a)(4)(B),
(7)(B)(iii), inserted ", the unamortized portion of the additional
unfunded old liability, the unamortized portion of each unfunded
mortality increase," after "old liability".
Subsec. (l)(4)(C). Pub. L. 103-465, Sec. 751(a)(5), substituted
".40" for ".25" in cl. (i) and "60" for "35" in cl. (ii).
Subsec. (l)(5)(A). Pub. L. 103-465, Sec. 751(a)(6)(A)(i),
substituted "greatest of" for "greater of" in introductory
provisions.
Subsec. (l)(5)(A)(iii). Pub. L. 103-465, Sec.
751(a)(6)(A)(ii)-(iv), added cl. (iii).
Subsec. (l)(5)(E). Pub. L. 103-465, Sec. 751(a)(6)(B), added
subpar. (E).
Subsec. (l)(7)(C). Pub. L. 103-465, Sec. 751(a)(7)(A), amended
subpar. (C) generally. Prior to amendment, subpar. (C) read as
follows: "(C) Interest rates used. - The rate of interest used to
determine current liability shall be the rate of interest used
under subsection (b)(5)."
Subsec. (l)(9). Pub. L. 103-465, Sec. 751(a)(1)(B), added par.
(9).
Subsec. (l)(10). Pub. L. 103-465, Sec. 751(a)(7)(B)(ii), added
par. (10).
Subsec. (l)(11). Pub. L. 103-465, Sec. 751(a)(8), added par.
(11).
Subsec. (m)(1). Pub. L. 103-465, Sec. 754(a), in introductory
provisions, inserted "which has a funded current liability
percentage (as defined in subsection (l)(8)) for the preceding plan
year of less than 100 percent" before "fails" and substituted "the
plan year" for "any plan year".
Subsec. (m)(4)(D)(ii). Pub. L. 103-465, Sec. 751(a)(6)(C)(i),
substituted "greatest of" for "greater of" in introductory
provisions.
Subsec. (m)(4)(D)(ii)(III). Pub. L. 103-465, Sec.
751(a)(6)(C)(ii)-(iv), added subcl. (III).
Subsec. (m)(5), (6). Pub. L. 103-465, Sec. 751(a)(9)(A), added
par. (5) and redesignated former par. (5) as (6).
Subsec. (n)(2). Pub. L. 103-465, Sec. 768(a)(1), inserted at end
"This subsection shall not apply to any plan to which section 4021
of the Employee Retirement Income Security Act of 1974 does not
apply (as such section is in effect on the date of the enactment of
the Retirement Protection Act of 1994)."
Subsec. (n)(3). Pub. L. 103-465, Sec. 768(a)(2), reenacted par.
(3) heading without change and amended text generally. Prior to
amendment, text read as follows: "For purposes of paragraph (1),
the amount of the lien shall be equal to the lesser of -
"(A) the amount by which the unpaid balances described in
paragraph (1)(B) (including interest) exceed $1,000,000, or
"(B) the aggregate unpaid balance of required installments and
other payments required under this section (including interest) -
"(i) for plan years beginning after 1987, and
"(ii) for which payment has not been made before the due
date."
Subsec. (n)(4)(B). Pub. L. 103-465, Sec. 768(a)(3), struck out
"60th day following the" before "due date".
1989 - Subsec. (b)(5)(B)(iii). Pub. L. 101-239, Sec.
7881(d)(1)(A), struck out "for purposes of this section and for
purposes of determining current liability," before "the interest
rate" in introductory provisions.
Subsec. (c)(9). Pub. L. 101-239, Sec. 7881(a)(6)(A), substituted
"Annual" for "3-year" in heading and "every year" for "every 3
years" in text.
Subsec. (c)(10)(A). Pub. L. 101-239, Sec. 7881(b)(1)(A),
substituted "Defined benefit plans" for "Plans" in heading and
"defined benefit plan other" for "plan other" in introductory
provisions.
Subsec. (c)(10)(B). Pub. L. 101-239, Sec. 7881(b)(2)(A),
substituted "Other" for "Multiemployer" in heading and "plan not
described in subparagraph (A)" for "multiemployer plan" in text.
Subsec. (d)(1)(A)(ii). Pub. L. 101-239, Sec. 7881(b)(6)(A)(ii),
substituted "costs (including adjustments under subsection
(b)(5)(B))" for "costs".
Subsec. (f)(4)(A). Pub. L. 101-239, Sec. 7881(c)(1), substituted
"for benefit liabilities" for "the benefit liabilities".
Subsec. (l)(3)(C)(ii)(II). Pub. L. 101-239, Sec. 7881(a)(1)(A),
substituted "reducing (but not below zero)" for "reducing".
Subsec. (l)(4)(B)(i). Pub. L. 101-239, Sec. 7881(a)(2)(A),
substituted "liability and the unamortized portion of the unfunded
existing benefit increase liability" for "liability".
Subsec. (l)(5)(C). Pub. L. 101-239, Sec. 7881(a)(3)(A),
substituted "the first plan year beginning after December 31, 1988"
for "October 17, 1987".
Subsec. (l)(7)(D)(iii)(III). Pub. L. 101-239, Sec.
7881(a)(4)(A)(i), added subcl. (III).
Subsec. (l)(7)(D)(iv). Pub. L. 101-239, Sec. 7881(a)(4)(A)(ii),
added cl. (iv).
Subsec. (l)(8)(A)(ii). Pub. L. 101-239, Sec. 7881(a)(5)(A)(i),
struck out "reduced by any credit balance in the funding standard
account" after "under subsection (c)(2)".
Subsec. (l)(8)(E). Pub. L. 101-239, Sec. 7881(a)(5)(A)(ii), added
subpar. (E).
Subsec. (m)(1). Pub. L. 101-239, Sec. 7881(b)(3)(A), substituted
"defined benefit plan (other than" for "plan (other than" in
introductory provisions.
Subsec. (m)(1)(B). Pub. L. 101-239, Sec. 7881(b)(6)(A)(i),
amended subpar. (B) generally. Prior to amendment, subpar. (B) read
as follows: "the rate under subsection (b)(5)."
Subsec. (m)(4)(D). Pub. L. 101-239, Sec. 7881(b)(4)(A), amended
subpar. (D) generally. Prior to amendment, subpar. (D) read as
follows: "In the case of a plan with any unpredictable contingent
event benefit liabilities -
"(i) such liabilities shall not be taken into account in
computing the required annual payment under subparagraph (B), and
"(ii) each required installment shall be increased by the
greater of -
"(I) the amount of benefits described in subsection
(l)(5)(A)(i) paid during the 3-month period preceding the month
in which the due date for such installment occurs, or
"(II) 25 percent of the amount determined under subsection
(l)(5)(A)(ii) for the plan year."
1988 - Subsec. (l)(3)(C)(i), (iii). Pub. L. 100-647, Sec.
2005(a)(2)(A), (d)(1), amended cl. (i) identically, substituting
"October 29" for "October 17" and amended cl. (iii) identically,
substituting "October 28" for "October 16".
1987 - Subsec. (b)(2). Pub. L. 100-203, Sec. 9303(a)(2), inserted
at end "For additional requirements in the case of plans other than
multiemployer plans, see subsection (l)."
Subsec. (b)(2)(B)(iv). Pub. L. 100-203, Sec. 9307(a)(1)(A),
substituted "5 plan years (15 plan years in the case of a
multiemployer plan)" for "15 plan years".
Subsec. (b)(2)(B)(v). Pub. L. 100-203, Sec. 9307(a)(1)(B),
substituted "10 plan years (30 plan years in the case of a
multiemployer plan)" for "30 plan years".
Subsec. (b)(2)(C), (3)(B)(ii). Pub. L. 100-203, Sec.
9307(a)(1)(A), substituted "5 plan years (15 plan years in the case
of a multiemployer plan)" for "15 plan years".
Subsec. (b)(3)(B)(iii). Pub. L. 100-203, Sec. 9307(a)(1)(B),
substituted "10 plan years (30 plan years in the case of a
multiemployer plan)" for "30 plan years".
Subsec. (b)(5). Pub. L. 100-203, Sec. 9307(e)(1), amended par.
(5) generally. Prior to amendment, par. (5) read as follows: "The
funding standard account (and items therein) shall be charged or
credited (as determined under regulations prescribed by the
Secretary) with interest at the appropriate rate consistent with
the rate or rates of interest used under the plan to determine
costs."
Subsec. (c)(2)(B). Pub. L. 100-203, Sec. 9303(d)(1), inserted at
end "In the case of a plan other than a multiemployer plan, this
subparagraph shall not apply, but the Secretary may by regulations
provide that the value of any dedicated bond portfolio of such plan
shall be determined by using the interest rate under subsection
(b)(5)."
Subsec. (c)(3). Pub. L. 100-203, Sec. 9307(b)(1), amended par.
(3) generally. Prior to amendment, par. (3) read as follows: "For
purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be determined on
the basis of actuarial assumptions and methods which, in the
aggregate, are reasonable (taking into account the experience of
the plan and reasonable expectations) and which, in combination,
offer the actuary's best estimate of anticipated experience under
the plan."
Subsec. (c)(7). Pub. L. 100-203, Sec. 9301(a), substituted
"Full-funding" for "Full funding" in heading and amended text
generally. Prior to amendment, text read as follows: "For purposes
of paragraph (6), the term full funding limitation means the excess
(if any) of -
"(A) the accrued liability (including normal cost) under the
plan (determined under the entry age normal funding method if
such accrued liability cannot be directly calculated under the
funding method used for the plan), over
"(B) the lesser of the fair market value of the plan's assets
or the value of such assets determined under paragraph (2)."
Subsec. (c)(10). Pub. L. 100-203, Sec. 9304(a)(1), amended par.
(10) generally. Prior to amendment, par. (10) read as follows: "For
purposes of this section, any contributions for a plan year made by
an employer after the last day of such plan year, but not later
than two and one-half months after such day, shall be deemed to
have been made on such last day. For purposes of this paragraph,
such two and one-half month period may be extended for not more
than six months under regulations prescribed by the Secretary."
Subsec. (c)(11). Pub. L. 100-203, Sec. 9305(b)(1), added par.
(11).
Subsec. (d)(1). Pub. L. 100-203, Sec. 9306(a)(1)(B), struck out
"substantial" after "in case of" in heading, and substituted
"temporary substantial business hardship (substantial business
hardship in the case of a multiemployer plan)" for "substantial
business hardship" in text.
Pub. L. 100-203, Sec. 9306(b)(1), substituted "more than 3 of any
15 (5 of any 15 in the case of a multiemployer plan)" for "more
than 5 of any 15".
Pub. L. 100-203, Sec. 9306(c)(1)(A), substituted "The interest
rate used for purposes of computing the amortization charge
described in subsection (b)(2)(C) for any plan year shall be - "
and subpars. (A) and (B) for "The interest rate used for purposes
of computing the amortization charge described in section
412(b)(2)(C) for a variance granted under this subsection shall be
the rate determined under section 6621(b)."
Subsec. (d)(2). Pub. L. 100-203, Sec. 9306(a)(1)(B), struck out
"substantial" after "Determination of" in heading, and substituted
"temporary substantial business hardship (substantial business
hardship in the case of a multiemployer plan)" for "substantial
business hardship" in introductory provisions.
Subsec. (d)(4). Pub. L. 100-203, Sec. 9306(a)(1)(A), added par.
(4).
Subsec. (d)(5). Pub. L. 100-203, Sec. 9306(a)(1)(C), added par.
(5).
Subsec. (e). Pub. L. 100-203, Sec. 9306(c)(1)(B), substituted
last two sentences for "The interest rate applicable under any
arrangement entered into by the Secretary in connection with an
extension granted under this subsection shall be the rate
determined under section 6621(b)."
Subsec. (f)(3)(C)(i). Pub. L. 100-203, Sec. 9306(e)(1),
substituted "$1,000,000" for "$2,000,000" at end.
Subsec. (f)(4)(A). Pub. L. 100-203, Sec. 9306(d)(1), substituted
"plan, and each participant, beneficiary, and alternate payee
(within the meaning of section 414(p)(8)). Such notice shall
include a description of the extent to which the plan is funded for
benefits which are guaranteed under title IV of such Act and the
benefit liabilities." for "plan."
Subsec. (l). Pub. L. 100-203, Sec. 9303(a)(1), added subsec. (l).
Subsec. (m). Pub. L. 100-203, Sec. 9304(b)(1), added subsec. (m).
Subsec. (n). Pub. L. 100-203, Sec. 9304(e)(1), added subsec. (n).
1986 - Subsec. (d)(1). Pub. L. 99-272, Sec. 11015(b)(2)(A),
inserted provision that the interest rate used for purposes of
computing the amortization charge described in section 412(b)(2)(C)
for a variance granted under this subsection be the rate determined
under section 6621(b).
Subsec. (e). Pub. L. 99-272, Sec. 11015(b)(2)(B), inserted
provision that the interest rate applicable under any arrangement
entered into by the Secretary in connection with an extension
granted under this subsection be the rate determined under section
6621(b).
Subsec. (f). Pub. L. 99-272, Sec. 11015(a)(2), substituted in
heading "Requirements relating to waivers and extensions" for
"Benefits may not be increased during waiver or extension period"
and in par. (1) heading "Benefits may not be increased during
waiver or extension period" for "In general", and added par. (3).
Pub. L. 99-272, Sec. 11016(c)(4), added par. (4).
1984 - Subsec. (a)(2). Pub. L. 98-369 struck out "or 405(a)"
after "section 403(a)".
1980 - Subsec. (a). Pub. L. 96-364, Sec. 208(c), inserted
provisions relating to plan years where multiemployer plan is in
reorganization.
Subsec. (b). Pub. L. 96-364, Sec. 203(1), (2), struck out in
pars. (2)(B)(ii), (iii), and (3)(B)(i) provisions respecting
applicability of multiemployer plans with 40 plan years and in
pars. (2)(B)(iv) and (3)(B)(ii) provisions respecting applicability
of multiemployer plans with 20 year plans and added pars. (6) and
(7).
Subsecs. (j), (k). Pub. L. 96-364, Sec. 203(3), added subsecs.
(j) and (k).
1976 - Subsecs. (a) to (d). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (h). Pub. L. 94-455, Sec. 1901(a)(63), substituted
reference to Sept. 2, 1974, for reference to the date of enactment
of the Employee Retirement Income Security Act of 1974 in par. (5)
and substituted reference to Sept. 1, 1974, for reference to the
day before the date of enactment of the Employee Retirement Income
Security Act of 1974 in the provisions following par. (6).
Subsec. (i). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out "or
his delegate" after "Secretary".
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by section 411(v)(1) of Pub. L. 107-147 effective as if
included in the provisions of the Economic Growth and Tax Relief
Reconciliation Act of 2001, Pub. L. 107-16, to which such amendment
relates, see section 411(x) of Pub. L. 107-147, set out as a note
under section 25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title VI, Sec. 651(c), June 7, 2001, 115 Stat.
129, provided that: "The amendments made by this section [amending
this section and section 1082 of Title 29, Labor] shall apply to
plan years beginning after December 31, 2001."
Pub. L. 107-16, title VI, Sec. 661(c), June 7, 2001, 115 Stat.
142, provided that: "The amendments made by this section [amending
this section and section 1082 of Title 29, Labor] shall apply to
plan years beginning after December 31, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1521(d)(1) of Pub. L. 105-34 provided that: "The
amendments made by this section [amending this section and section
1082 of Title 29, Labor] shall apply to plan years beginning after
December 31, 1998."
Section 1604(b)(4) of Pub. L. 105-34 provided that: "The
amendments made by this subsection [amending this section, section
6621 of this title, section 1082 of Title 29, Labor, and provisions
set out as a note under section 411 of this title] shall take
effect as if included in the sections of the Uruguay Round
Agreements Act [Pub. L. 103-465] to which they relate."
EFFECTIVE DATE OF 1994 AMENDMENT
Amendment by section 751(a)(1)-(9)(A), (10) of Pub. L. 103-465
applicable to plan years beginning after Dec. 31, 1994, see section
751(b)(1) of Pub. L. 103-465, set out as a note under section 401
of this title.
Section 752(b) of Pub. L. 103-465 provided that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to changes in assumptions for plan years
beginning after October 28, 1993.
"(2) Certain changes cease to be effective. - In the case of
changes in assumptions for plan years beginning after December 31,
1992, and on or before October 28, 1993, such changes shall cease
to be effective for plan years beginning after December 31, 1994,
if -
"(A) such change would have required the approval of the
Secretary of the Treasury had such amendment applied to such
change, and
"(B) such change is not so approved."
Section 753(b) of Pub. L. 103-465 provided that: "The amendment
made by this section [amending this section] shall apply to plan
years beginning after December 31, 1994, with respect to collective
bargaining agreements in effect on or after January 1, 1995."
Section 754(b) of Pub. L. 103-465 provided that: "The amendment
made by this section [amending this section] shall apply to plan
years beginning after the date of enactment of this Act [Dec. 8,
1994]."
Section 768(c) of Pub. L. 103-465 provided that: "The amendments
made by this section [amending this section and section 1082 of
Title 29, Labor] shall be effective for installments and other
payments required under section 412 of the Internal Revenue Code of
1986 or under part 3 of subtitle B [of title I] of the Employee
Retirement Income Security Act of 1974 [29 U.S.C. 1081 et seq.]
that become due on or after the date of enactment [Dec. 8, 1994]."
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Pension Protection
Act, Pub. L. 100-203, Secs. 9302-9346, to which such amendment
relates, see section 7882 of Pub. L. 101-239, set out as a note
under section 401 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective as if included in the
amendments made by the provisions of the Omnibus Budget
Reconciliation Act of 1987, Pub. L. 100-203, to which it relates,
see section 2005(e) of Pub. L. 100-647, as amended, set out as a
note under section 404 of this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Section 9301(c)(1), (2) of Pub. L. 100-203 provided that:
"(1) In general. - The amendments made by this section [amending
this section and section 1082 of Title 29, Labor] shall apply to
years beginning after December 31, 1987.
"(2) Regulations. - The Secretary of the Treasury or his delegate
shall prescribe such regulations as are necessary to carry out the
amendments made by this section no later than August 15, 1988."
Section 9303(e) of Pub. L. 100-203, as amended by Pub. L.
101-239, title VII, Sec. 7881(a)(7), Dec. 19, 1989, 103 Stat. 2436,
provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [amending this section and section
1082 of Title 29, Labor] shall apply with respect to plan years
beginning after December 31, 1988.
"(2) Subsections (c) and (d). - The amendments made by
subsections (c) [set out below] and (d) [amending this section and
section 1082 of Title 29] shall apply with respect to years
beginning after December 31, 1987.
"(3) Special rule for steel companies. -
"(A) In general. - For any plan year beginning before January
1, 1994, any increase in the funding standard account under
section 412(l) of the 1986 Code or section 302(d) of ERISA (as
added by this section) [29 U.S.C. 1082(d)] with respect to any
steel employee plan shall not exceed the sum of -
"(i) the required percentage of the current liability under
such plan, plus
"(ii) the amount determined under subparagraph (C)(i) for
such plan year.
"(B) Required percentage. - For purposes of subparagraph (A),
the term 'required percentage' means, with respect to any plan
year, the excess (if any) of -
"(i) the sum of -
"(I) the funded current liability percentage as of the
beginning of the 1st plan year beginning after December 31,
1988 (determined without regard to any plan amendment adopted
after June 30, 1987), plus
"(II) 1 percentage point for the plan year for which the
determination under this paragraph is being made and for each
prior plan year beginning after December 31, 1988, over
"(ii) the funded current liability percentage as of the
beginning of the plan year for which such determination is
being made.
"(C) Special rules for contingent events. - In the case of any
unpredictable contingent event benefit with respect to which the
event on which such benefits are contingent occurs after December
17, 1987 -
"(i) Amortization amount. - For purposes of subparagraph
(A)(ii), the amount determined under this clause for any plan
year is the amount which would be determined if the
unpredictable contingent event benefit liability were amortized
in equal annual installments over 10 plan years (beginning with
the plan year in which such event occurs).
"(ii) Benefit and contributions not taken into account. - For
purposes of subparagraph (B), in determining the funded current
liability percentage for any plan year, there shall not be
taken into account -
"(I) the unpredictable contingent event benefit liability,
or
"(II) any amount contributed to the plan which is
attributable to clause (i) (and any income allocable to such
amount).
"(D) Steel employee plan. - For purposes of this paragraph, the
term 'steel employee plan' means any plan if -
"(i) such plan is maintained by a steel company, and
"(ii) substantially all of the employees covered by such plan
are employees of such company.
"(E) Other definitions. - For purposes of this paragraph -
"(i) Steel company. - The term 'steel company' means any
corporation described in section 806(b) of the Steel Import
Stabilization Act [section 806(b) of Pub. L. 98-573, 19 U.S.C.
2253 note].
"(ii) Other definitions. - The terms 'current liability',
'funded current liability percentage', and 'unpredictable
contingent event benefit' have the meanings given such terms by
section 412(l) of the 1986 Code (as added by this section).
"(F) Special rule. - The provisions of this paragraph shall
apply in the case of a company which was originally incorporated
on April 25, 1927, in Michigan and reincorporated on June 3,
1968, in Delaware in the same manner as if such company were a
steel company."
Section 9304(a)(3) of Pub. L. 100-203 provided that: "The
amendments made by this subsection [amending this section and
section 1082 of Title 29, Labor] shall apply to plan years
beginning after December 31, 1987."
Section 9304(b)(3) of Pub. L. 100-203 provided that: "The
amendments made by this subsection [amending this section and
section 1082 of Title 29] shall apply with respect to plan years
beginning after 1988."
Section 9304(e)(3) of Pub. L. 100-203 provided that: "The
amendments made by this subsection [amending this section and
section 1082 of Title 29] shall apply to plan years beginning after
December 31, 1987."
Section 9305(d) of Pub. L. 100-203 provided that: "The amendments
made by this section [amending this section and sections 414 and
4971 of this title and section 1082 of Title 29] shall apply with
respect to plan years beginning after December 31, 1987."
Section 9306(f) of Pub. L. 100-203, as amended by Pub. L.
101-239, title VII, Sec. 7881(c)(3), Dec. 19, 1989, 103 Stat. 2439,
provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [amending this section and sections
1083, 1084, and 1085a of Title 29, Labor] shall apply in the case
of -
"(A) any application submitted after December 17, 1987, and
"(B) any waiver granted pursuant to such an application.
"(2) Special rule for application requirement. -
"(A) In general. - The amendments made by subsections (a)(1)(A)
and (a)(2)(A) [amending this section and section 1083 of Title
29] shall apply to plan years beginning after December 31, 1987.
"(B) Transitional rule for years beginning in 1988. - In the
case of any plan year beginning during calendar 1988, section
412(d)(4) of the 1986 Code and section 303(d)(1) of ERISA [29
U.S.C. 1083(d)(1)] (as added by subsection (a)(1) [and (2)])
shall be applied by substituting '6th month' for '3rd month'.
"(3) Subsection (b). - The amendments made by subsection (b)
[amending this section and section 1083 of Title 29] shall apply to
waivers for plan years beginning after December 31, 1987. For
purposes of applying such amendments, the number of waivers which
may be granted for plan years after December 31, 1987, shall be
determined without regard to any waivers granted for plan years
beginning before January 1, 1988.
"(4) Subsection (d). - The amendments made by subsection (d)
[amending this section and section 1083 of Title 29] shall apply to
applications submitted more than 90 days after the date of the
enactment of this Act [Dec. 22, 1987]."
Amendment by section 9307(a)(1), (b)(1), (e)(1) of Pub. L.
100-203 applicable to years beginning after Dec. 31, 1987, except
that subsec. (b)(2)(B)(iv) and (3)(B)(ii) of this section (as
amended by section 9307(a)(1)(A) of Pub. L. 100-203) is applicable
to gains and losses established in years beginning after Dec. 31,
1987, see section 9307(f) of Pub. L. 100-203, as amended, set out
as a note under section 404 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 11015(a)(2) of Pub. L. 99-272 applicable
with respect to applications for waivers, extensions, and
modifications filed on or after Apr. 7, 1986, see section
11015(a)(3) of Pub. L. 99-272, set out as an Effective Date note
under section 1085a of Title 29, Labor.
Amendment by sections 11015(b)(2) and 11016(c)(4) of Pub. L.
99-272 effective Jan. 1, 1986, with certain exceptions, see section
11019 of Pub. L. 99-272, set out as a note under section 1341 of
Title 29.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to obligations issued
after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 98-369, set
out as a note under section 62 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-364 effective Sept. 26, 1980, see section
210(a) of Pub. L. 96-364, set out as an Effective Date note under
section 418 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(63) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE
Section applicable, except as otherwise provided in section
1017(c) through (i) of Pub. L. 93-406, for plan years beginning
after Sept. 2, 1974, and, in the case of plans in existence on Jan.
1, 1974, for plan years beginning after Dec. 31, 1975, see section
1017 of Pub. L. 93-406, set out as an Effective Date; Transitional
Rules note under section 410 of this title.
REGULATIONS
Section 769 of Pub. L. 103-465, as amended by Pub. L. 105-34,
title XV, Sec. 1508(a), Aug. 5, 1997, 111 Stat. 1067, provided
that:
"(a) Funding Rules Not To Apply to Certain Plans. - Any changes
made by this Act [Pub. L. 103-465] to section 412 of the Internal
Revenue Code of 1986 or to part 3 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974 [29 U.S.C. 1081 et
seq.] shall not apply to -
"(1) a plan which is, on the date of enactment of this Act
[Dec. 8, 1994], subject to a restoration payment schedule order
issued by the Pension Benefit Guaranty Corporation that meets the
requirements of section 1.412(c)(1)-3 of the Treasury
Regulations, or
"(2) a plan established by an affected air carrier (as defined
under section 4001(a)(14)(C)(ii)(I) of such Act [29 U.S.C.
1301(a)(14)(C)(ii)(I)]) and assumed by a new plan sponsor
pursuant to the terms of a written agreement with the Pension
Benefit Guaranty Corporation dated January 5, 1993, and approved
by the United States Bankruptcy Court for the District of
Delaware on December 30, 1992.
"(b) Change in Actuarial Method. - Any amortization installments
for bases established under section 412(b) of the Internal Revenue
Code of 1986 and section 302(b) of the Employee Retirement Income
Security Act of 1974 [29 U.S.C. 1082(b)] for plan years beginning
after December 31, 1987, and before January 1, 1993, by reason of
nonelective changes under the frozen entry age actuarial cost
method shall not be included in the calculation of offsets under
section 412(l)(1)(A)(ii) of such Code and section 302(d)(1)(A)(ii)
of such Act for the 1st 5 plan years beginning after December 31,
1994.
"(c) Transition Rules for Certain Plans. -
"(1) In general. - In the case of a plan that -
"(A) was not required to pay a variable rate premium for the
plan year beginning in 1996;
"(B) has not, in any plan year beginning after 1995 and
before 2009, merged with another plan (other than a plan
sponsored by an employer that was in 1996 within the controlled
group of the plan sponsor); and
"(C) is sponsored by a company that is engaged primarily in
the interurban or interstate passenger bus service,
the transition rules described in paragraph (2) shall apply for
any plan year beginning after 1996 and before 2010.
"(2) Transition rules. - The transition rules described in this
paragraph are as follows:
"(A) For purposes of section 412(l)(9)(A) of the Internal
Revenue Code of 1986 and section 302(d)(9)(A) of the Employee
Retirement Income Security Act of 1974 -
"(i) the funded current liability percentage for any plan
year beginning after 1996 and before 2005 shall be treated as
not less than 90 percent if for such plan year the funded
current liability percentage is at least 85 percent, and
"(ii) the funded current liability percentage for any plan
year beginning after 2004 and before 2010 shall be treated as
not less than 90 percent if for such plan year the funded
current liability percentage satisfies the minimum percentage
determined according to the following table:
"In the case of a plan The minimum per-
year beginning in: centage is:
2005 86 percent
2006 87 percent
2007 88 percent
2008 89 percent
2009 and thereafter 90 percent.
"(B) Sections 412(c)(7)(E)(i)(I) of such Code and
302(c)(7)(E)(i)(I) of such Act shall be applied -
"(i) by substituting '85 percent' for '90 percent' for plan
years beginning after 1996 and before 2005, and
"(ii) by substituting the minimum percentage specified in
the table contained in subparagraph (A)(ii) for '90 percent'
for plan years beginning after 2004 and before 2010.
"(C) In the event the funded current liability percentage of
a plan is less than 85 percent for any plan year beginning
after 1996 and before 2005, the transition rules under
subparagraphs (A) and (B) shall continue to apply to the plan
if contributions for such a plan year are made to the plan in
an amount equal to the lesser of -
"(i) the amount necessary to result in a funded current
liability percentage of 85 percent, or
"(ii) the greater of -
"(I) 2 percent of the plan's current liability as of the
beginning of such plan year, or
"(II) the amount necessary to result in a funded current
liability percentage of 80 percent as of the end of such plan
year.
For the plan year beginning in 2005 and for each of the 3
succeeding plan years, the transition rules under subparagraphs
(A) and (B) shall continue to apply to the plan for such plan
year only if contributions to the plan for such plan year equal
at least the expected increase in current liability due to
benefits accruing during such plan year."
[Section 1508(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending section 769 of Pub. L. 103-465, set
out above] shall apply to plan years beginning after December 31,
1996."]
Section 9303(c) of Pub. L. 100-203 provided that: "Effective with
respect to plan years beginning after December 31, 1987, the
provisions of the regulations prescribed under section 412(c)(2) of
the 1986 Code which permit asset valuations to be based on a range
between 85 percent and 115 percent of average value shall have no
force and effect with respect to plans other than multiemployer
plans (as defined in section 414(f) of the 1986 Code). The
Secretary of the Treasury or his delegate shall amend such
regulations to carry out the purposes of the preceding sentence."
SPECIAL RULE FOR UNAMORTIZED BALANCES UNDER EXISTING LAW
Section 1521(d)(2) of Pub. L. 105-34 provided that: "The
unamortized balance (as of the close of the plan year preceding the
plan's first year beginning in 1999) of any amortization base
established under section 412(c)(7)(D)(iii) of such Code [26 U.S.C.
412(c)(7)(D)(iii)] and section 302(c)(7)(D)(iii) of such Act [29
U.S.C. 1082(c)(7)(D)(iii)] (as repealed by subsection (c)(3)) for
any plan year beginning before 1999 shall be amortized in equal
annual installments (until fully amortized) over a period of years
equal to the excess of -
"(A) 20 years, over
"(B) the number of years since the amortization base was
established."
ALTERNATIVE AMORTIZATION METHOD FOR CERTAIN MULTIEMPLOYER PLANS
Section 1013(d) of Pub. L. 93-406, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) General rule. - In the case of any multiemployer plan (as
defined in section 414(f) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954]) to which section 412 of such Code
applies, if -
"(A) on January 1, 1974, the contributions under the plan
were based on a percentage of pay,
"(B) the actuarial assumptions with respect to pay are
reasonably related to past and projected experience, and
"(C) the rates of interest under the plan are determined on
the basis of reasonable actuarial assumptions,
the plan may elect (in such manner and at such time as may be
provided under regulations prescribed by the Secretary of the
Treasury or his delegate) to fund the unfunded past service
liability under the plan existing as of the date 12 months
following the first date on which such section 412 first applies
to the plan by charging the funding standard account with an
equal annual percentage of the aggregate pay of all participants
in the plan in lieu of the level dollar charges to such account
required under clauses (i), (ii), and (iii) of section
412(b)(2)(B) of such Code and section 302(b)(2)(B)(i), (ii), and
(iii) of this Act [section 1082(b)(2)(B)(i), (ii), and (iii) of
Title 29, Labor].
"(2) Limitation. - In the case of a plan which makes an
election under paragraph (1), the aggregate of the charges
required under such paragraph for a plan year shall not be less
than the interest on the unfunded past service liabilities
described in clauses (i), (ii), and (iii) of section 412(b)(2)(B)
of the Internal Revenue Code of 1986."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 401, 404, 404A, 411, 413,
414, 415, 418, 418B, 418D, 420, 4971, 4972, 4980F, 6059, 6110, 6692
of this title; title 29 sections 1054, 1082, 1083, 1085a, 1202,
1301, 1303, 1306, 1310, 1341, 1342, 1343, 1362, 1393, 1421, 1423,
1425.
-FOOTNOTE-
(!1) So in original. Probably should be followed by a closing
parenthesis.
(!2) So in original. Probably should be subsection "(l)".
-End-
-CITE-
26 USC Sec. 413 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart B - Special Rules
-HEAD-
Sec. 413. Collectively bargained plans, etc.
-STATUTE-
(a) Application of subsection (b)
Subsection (b) applies to -
(1) a plan maintained pursuant to an agreement which the
Secretary of Labor finds to be a collective-bargaining agreement
between employee representatives and one or more employers, and
(2) each trust which is a part of such plan.
(b) General rule
If this subsection applies to a plan, notwithstanding any other
provision of this title -
(1) Participation
Section 410 shall be applied as if all employees of each of the
employers who are parties to the collective-bargaining agreement
and who are subject to the same benefit computation formula under
the plan were employed by a single employer.
(2) Discrimination, etc.
Sections 401(a)(4) and 411(d)(3) shall be applied as if all
participants who are subject to the same benefit computation
formula and who are employed by employers who are parties to the
collective bargaining agreement were employed by a single
employer.
(3) Exclusive benefit
For purposes of section 401(a), in determining whether the plan
of an employer is for the exclusive benefit of his employees and
their beneficiaries, all plan participants shall be considered to
be his employees.
(4) Vesting
Section 411 (other than subsection (d)(3)) shall be applied as
if all employers who have been parties to the
collective-bargaining agreement constituted a single employer,
except that the application of any rules with respect to breaks
in service shall be made under regulations prescribed by the
Secretary of Labor.
(5) Funding
The minimum funding standard provided by section 412 shall be
determined as if all participants in the plan were employed by a
single employer.
(6) Liability for funding tax
For a plan year the liability under section 4971 of each
employer who is a party to the collective bargaining agreement
shall be determined in a reasonable manner not inconsistent with
regulations prescribed by the Secretary -
(A) first on the basis of their respective delinquencies in
meeting required employer contributions under the plan, and
(B) then on the basis of their respective liabilities for
contributions under the plan.
For purposes of this subsection and the last sentence of section
4971(a), an employer's withdrawal liability under part 1 of
subtitle E of title IV of the Employee Retirement Income Security
Act of 1974 shall not be treated as a liability for contributions
under the plan.
(7) Deduction limitations
Each applicable limitation provided by section 404(a) shall be
determined as if all participants in the plan were employed by a
single employer. The amounts contributed to or under the plan by
each employer who is a party to the agreement, for the portion of
his taxable year which is included within such a plan year, shall
be considered not to exceed such a limitation if the anticipated
employer contributions for such plan year (determined in a manner
consistent with the manner in which actual employer contributions
for such plan year are determined) do not exceed such limitation.
If such anticipated contributions exceed such a limitation, the
portion of each such employer's contributions which is not
deductible under section 404 shall be determined in accordance
with regulations prescribed by the Secretary.
(8) Employees of labor unions
For purposes of this subsection, employees or employee
representatives shall be treated as employees of an employer
described in subsection (a)(1) if such representatives meet the
requirements of sections 401(a)(4) and 410 with respect to such
employees.
(9) Plans covering a professional employee
Notwithstanding subsection (a), in the case of a plan (and
trust forming part thereof) which covers any professional
employee, paragraph (1) shall be applied by substituting "section
410(a)" for "section 410", and paragraph (2) shall not apply.
(c) Plans maintained by more than one employer
In the case of a plan maintained by more than one employer -
(1) Participation
Section 410(a) shall be applied as if all employees of each of
the employers who maintain the plan were employed by a single
employer.
(2) Exclusive benefit
For purposes of section 401(a), in determining whether the plan
of an employer is for the exclusive benefit of his employees and
their beneficiaries all plan participants shall be considered to
be his employees.
(3) Vesting
Section 411 shall be applied as if all employers who maintain
the plan constituted a single employer, except that the
application of any rules with respect to breaks in service shall
be made under regulations prescribed by the Secretary of Labor.
(4) Funding
(A) In general
In the case of a plan established after December 31, 1988,
each employer shall be treated as maintaining a separate plan
for purposes of section 412 unless such plan uses a method for
determining required contributions which provides that any
employer contributes not less than the amount which would be
required if such employer maintained a separate plan.
(B) Other plans
In the case of a plan not described in subparagraph (A), the
requirements of section 412 shall be determined as if all
participants in the plan were employed by a single employer
unless the plan administrator elects not later than the close
of the first plan year of the plan beginning after the date of
enactment of the Technical and Miscellaneous Revenue Act of
1988 to have the provisions of subparagraph (A) apply. An
election under the preceding sentence shall take effect for the
plan year in which made and, once made, may be revoked only
with the consent of the Secretary.
(5) Liability for funding tax
For a plan year the liability under section 4971 of each
employer who maintains the plan shall be determined in a
reasonable manner not inconsistent with regulations prescribed by
the Secretary -
(A) first on the basis of their respective delinquencies in
meeting required employer contributions under the plan, and
(B) then on the basis of their respective liabilities for
contributions under the plan.
(6) Deduction limitations
(A) In general
In the case of a plan established after December 31, 1988,
each applicable limitation provided by section 404(a) shall be
determined as if each employer were maintaining a separate
plan.
(B) Other plans
(i) In general
In the case of a plan not described in subparagraph (A),
each applicable limitation provided by section 404(a) shall
be determined as if all participants in the plan were
employed by a single employer, except that if an election is
made under paragraph (4)(B), subparagraph (A) shall apply to
such plan.
(ii) Special rule
If this subparagraph applies, the amounts contributed to or
under the plan by each employer who maintains the plan (for
the portion of the taxable year included within a plan year)
shall be considered not to exceed any such limitation if the
anticipated employer contributions for such plan year
(determined in a reasonable manner not inconsistent with
regulations prescribed by the Secretary) do not exceed such
limitation. If such anticipated contributions exceed such a
limitation, the portion of each such employer's contributions
which is not deductible under section 404 shall be determined
in accordance with regulations prescribed by the Secretary.
(7) Allocations
(A) In general
Except as provided in subparagraph (B), allocations of
amounts under paragraphs (4), (5), and (6) among the employers
maintaining the plan shall not be inconsistent with regulations
prescribed for this purpose by the Secretary.
(B) Assets and liabilities of plan
For purposes of applying paragraphs (4)(A) and (6)(A), the
assets and liabilities of each plan shall be treated as the
assets and liabilities which would be allocated to a plan
maintained by the employer if the employer withdrew from the
multiple employer plan.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 1014, Sept. 2, 1974, 88 Stat.
924; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct.
4, 1976, 90 Stat. 1834; Pub. L. 96-364, title II, Sec. 208(d),
Sept. 26, 1980, 94 Stat. 1290; Pub. L. 100-647, title I, Sec.
1011(h)(10), title VI, Sec. 6058(a)-(c), Nov. 10, 1988, 102 Stat.
3466, 3698, 3699; Pub. L. 101-508, title XI, Sec. 11704(a)(4), Nov.
5, 1990, 104 Stat. 1388-518.)
-REFTEXT-
REFERENCES IN TEXT
The Employee Retirement Income Security Act of 1974, referred to
in subsec. (b)(6), is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829,
as amended. Part 1 of subtitle E of title IV of the Employee
Retirement Income Security Act of 1974 is classified generally to
part 1 (Sec. 1381 et seq.) of subtitle E of subchapter III of
chapter 18 of Title 29, Labor. For complete classification of this
Act to the Code, see Short Title note set out under section 1001 of
Title 29 and Tables.
The date of enactment of the Technical and Miscellaneous Revenue
Act of 1988, referred to in subsec. (c)(4)(B), is the date of
enactment of Pub. L. 100-647, which was approved Nov. 10, 1988.
-MISC1-
AMENDMENTS
1990 - Subsec. (c)(7)(B). Pub. L. 101-508 substituted "Assets"
for "Asset" in heading.
1988 - Subsec. (b)(9). Pub. L. 100-647, Sec. 1011(h)(10), added
par. (9).
Subsec. (c). Pub. L. 100-647, Sec. 6058(c), struck out at end
"Allocations of amounts under paragraphs (4), (5), and (6), among
the employers maintaining the plan, shall not be inconsistent with
regulations prescribed for this purpose by the Secretary."
Subsec. (c)(4). Pub. L. 100-647, Sec. 6058(a), amended par. (4)
generally. Prior to amendment, par. (4) read as follows: "The
minimum funding standard provided by section 412 shall be
determined as if all participants in the plan were employed by a
single employer."
Subsec. (c)(6). Pub. L. 100-647, Sec. 6058(b), amended par. (6)
generally. Prior to amendment, par. (6) read as follows: "Each
applicable limitation provided by section 404(a) shall be
determined as if all participants in the plan were employed by a
single employer. The amounts contributed to or under the plan by
each employer who maintains the plan, for the portion of this
taxable year which is included within such a plan year, shall be
considered not to exceed such a limitation if the anticipated
employer contributions for such plan year (determined in a
reasonable manner not inconsistent with regulations prescribed by
the Secretary) do not exceed such limitation. If such anticipated
contributions exceed such a limitation, the portion of each such
employer's contributions which is not deductible under section 404
shall be determined in accordance with regulations prescribed by
the Secretary."
Subsec. (c)(7). Pub. L. 100-647, Sec. 6058(c), added par. (7).
1980 - Subsec. (b)(6). Pub. L. 96-364 inserted provisions
relating to withdrawal liability of employer.
1976 - Subsecs. (b), (c). Pub. L. 94-455 struck out "or his
delegate" after "Secretary".
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011(h)(10) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 6058(d) of Pub. L. 100-647 provided that: "Except as
provided in paragraph (2), the amendments made by this section
[amending this section] shall apply to plan years beginning after
the date of the enactment of this Act [Nov. 10, 1988]."
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-364 effective Sept. 26, 1980, see section
210(a) of Pub. L. 96-364, set out as an Effective Date note under
section 418 of this title.
EFFECTIVE DATE
Section applicable, except as otherwise provided in section
1017(c) through (i) of Pub. L. 93-406, for plan years beginning
after Sept. 2, 1974, and, in the case of plans in existence on Jan.
1, 1974, for plan years beginning after Dec. 31, 1975, see section
1017 of Pub. L. 93-406, set out as an Effective Date; Transitional
Rules note under section 410 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 412, 4971 of this title;
title 29 section 1082.
-End-
-CITE-
26 USC Sec. 414 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart B - Special Rules
-HEAD-
Sec. 414. Definitions and special rules
-STATUTE-
(a) Service for predecessor employer
For purposes of this part -
(1) in any case in which the employer maintains a plan of a
predecessor employer, service for such predecessor shall be
treated as service for the employer, and
(2) in any case in which the employer maintains a plan which is
not the plan maintained by a predecessor employer, service for
such predecessor shall, to the extent provided in regulations
prescribed by the Secretary, be treated as service for the
employer.
(b) Employees of controlled group of corporations
For purposes of sections 401, 408(k), 408(p), 410, 411, 415, and
416, all employees of all corporations which are members of a
controlled group of corporations (within the meaning of section
1563(a), determined without regard to section 1563(a)(4) and
(e)(3)(C)) shall be treated as employed by a single employer. With
respect to a plan adopted by more than one such corporation, the
applicable limitations provided by section 404(a) shall be
determined as if all such employers were a single employer, and
allocated to each employer in accordance with regulations
prescribed by the Secretary.
(c) Employees of partnerships, proprietorships, etc., which are
under common control
For purposes of sections 401, 408(k), 408(p), 410, 411, 415, and
416, under regulations prescribed by the Secretary, all employees
of trades or businesses (whether or not incorporated) which are
under common control shall be treated as employed by a single
employer. The regulations prescribed under this subsection shall be
based on principles similar to the principles which apply in the
case of subsection (b).
(d) Governmental plan
For purposes of this part, the term "governmental plan" means a
plan established and maintained for its employees by the Government
of the United States, by the government of any State or political
subdivision thereof, or by any agency or instrumentality of any of
the foregoing. The term "governmental plan" also includes any plan
to which the Railroad Retirement Act of 1935 or 1937 applies and
which is financed by contributions required under that Act and any
plan of an international organization which is exempt from taxation
by reason of the International Organizations Immunities Act (59
Stat. 669).
(e) Church plan
(1) In general
For purposes of this part, the term "church plan" means a plan
established and maintained (to the extent required in paragraph
(2)(B)) for its employees (or their beneficiaries) by a church or
by a convention or association of churches which is exempt from
tax under section 501.
(2) Certain plans excluded
The term "church plan" does not include a plan -
(A) which is established and maintained primarily for the
benefit of employees (or their beneficiaries) of such church or
convention or association of churches who are employed in
connection with one or more unrelated trades or businesses
(within the meaning of section 513); or
(B) if less than substantially all of the individuals
included in the plan are individuals described in paragraph (1)
or (3)(B) (or their beneficiaries).
(3) Definitions and other provisions
For purposes of this subsection -
(A) Treatment as church plan
A plan established and maintained for its employees (or their
beneficiaries) by a church or by a convention or association of
churches includes a plan maintained by an organization, whether
a civil law corporation or otherwise, the principal purpose or
function of which is the administration or funding of a plan or
program for the provision of retirement benefits or welfare
benefits, or both, for the employees of a church or a
convention or association of churches, if such organization is
controlled by or associated with a church or a convention or
association of churches.
(B) Employee defined
The term employee of a church or a convention or association
of churches shall include -
(i) a duly ordained, commissioned, or licensed minister of
a church in the exercise of his ministry, regardless of the
source of his compensation;
(ii) an employee of an organization, whether a civil law
corporation or otherwise, which is exempt from tax under
section 501 and which is controlled by or associated with a
church or a convention or association of churches; and
(iii) an individual described in subparagraph (E).
(C) Church treated as employer
A church or a convention or association of churches which is
exempt from tax under section 501 shall be deemed the employer
of any individual included as an employee under subparagraph
(B).
(D) Association with church
An organization, whether a civil law corporation or
otherwise, is associated with a church or a convention or
association of churches if it shares common religious bonds and
convictions with that church or convention or association of
churches.
(E) Special rule in case of separation from plan
If an employee who is included in a church plan separates
from the service of a church or a convention or association of
churches or an organization described in clause (ii) of
paragraph (3)(B), the church plan shall not fail to meet the
requirements of this subsection merely because the plan -
(i) retains the employee's accrued benefit or account for
the payment of benefits to the employee or his beneficiaries
pursuant to the terms of the plan; or
(ii) receives contributions on the employee's behalf after
the employee's separation from such service, but only for a
period of 5 years after such separation, unless the employee
is disabled (within the meaning of the disability provisions
of the church plan or, if there are no such provisions in the
church plan, within the meaning of section 72(m)(7)) at the
time of such separation from service.
(4) Correction of failure to meet church plan requirements
(A) In general
If a plan established and maintained for its employees (or
their beneficiaries) by a church or by a convention or
association of churches which is exempt from tax under section
501 fails to meet one or more of the requirements of this
subsection and corrects its failure to meet such requirements
within the correction period, the plan shall be deemed to meet
the requirements of this subsection for the year in which the
correction was made and for all prior years.
(B) Failure to correct
If a correction is not made within the correction period, the
plan shall be deemed not to meet the requirements of this
subsection beginning with the date on which the earliest
failure to meet one or more of such requirements occurred.
(C) Correction period defined
The term "correction period" means -
(i) the period, ending 270 days after the date of mailing
by the Secretary of a notice of default with respect to the
plan's failure to meet one or more of the requirements of
this subsection;
(ii) any period set by a court of competent jurisdiction
after a final determination that the plan fails to meet such
requirements, or, if the court does not specify such period,
any reasonable period determined by the Secretary on the
basis of all the facts and circumstances, but in any event
not less than 270 days after the determination has become
final; or
(iii) any additional period which the Secretary determines
is reasonable or necessary for the correction of the default,
whichever has the latest ending date.
(5) Special rules for chaplains and self-employed ministers
(A) Certain ministers may participate
For purposes of this part -
(i) In general
A duly ordained, commissioned, or licensed minister of a
church is described in paragraph (3)(B) if, in connection
with the exercise of their ministry, the minister -
(I) is a self-employed individual (within the meaning of
section 401(c)(1)(B), or
(II) is employed by an organization other than an
organization which is described in section 501(c)(3) and
with respect to which the minister shares common religious
bonds.
(ii) Treatment as employer and employee
For purposes of sections 403(b)(1)(A) and 404(a)(10), a
minister described in clause (i)(I) shall be treated as
employed by the minister's own employer which is an
organization described in section 501(c)(3) and exempt from
tax under section 501(a).
(B) Special rules for applying section 403(b) to self-employed
ministers
In the case of a minister described in subparagraph (A)(i)(I)
-
(i) the minister's includible compensation under section
403(b)(3) shall be determined by reference to the minister's
earned income (within the meaning of section 401(c)(2)) from
such ministry rather than the amount of compensation which is
received from an employer, and
(ii) the years (and portions of years) in which such
minister was a self-employed individual (within the meaning
of section 401(c)(1)(B)) with respect to such ministry shall
be included for purposes of section 403(b)(4).
(C) Effect on non-denominational plans
If a duly ordained, commissioned, or licensed minister of a
church in the exercise of his or her ministry participates in a
church plan (within the meaning of this section) and in the
exercise of such ministry is employed by an employer not
otherwise participating in such church plan, then such employer
may exclude such minister from being treated as an employee of
such employer for purposes of applying sections 401(a)(3),
401(a)(4), and 401(a)(5), as in effect on September 1, 1974,
and sections 401(a)(4), 401(a)(5), 401(a)(26), 401(k)(3),
401(m), 403(b)(1)(D) (including section 403(b)(12)), and 410 to
any stock bonus, pension, profit-sharing, or annuity plan
(including an annuity described in section 403(b) or a
retirement income account described in section 403(b)(9)). The
Secretary shall prescribe such regulations as may be necessary
or appropriate to carry out the purpose of, and prevent the
abuse of, this subparagraph.
(D) Compensation taken into account only once
If any compensation is taken into account in determining the
amount of any contributions made to, or benefits to be provided
under, any church plan, such compensation shall not also be
taken into account in determining the amount of any
contributions made to, or benefits to be provided under, any
other stock bonus, pension, profit-sharing, or annuity plan
which is not a church plan.
(E) Exclusion
In the case of a contribution to a church plan made on behalf
of a minister described in subparagraph (A)(i)(II), such
contribution shall not be included in the gross income of the
minister to the extent that such contribution would not be so
included if the minister was an employee of a church.
(f) Multiemployer plan
(1) Definition
For purposes of this part, the term "multiemployer plan" means
a plan -
(A) to which more than one employer is required to
contribute,
(B) which is maintained pursuant to one or more collective
bargaining agreements between one or more employee
organizations and more than one employer, and
(C) which satisfies such other requirements as the Secretary
of Labor may prescribe by regulation.
(2) Cases of common control
For purposes of this subsection, all trades or businesses
(whether or not incorporated) which are under common control
within the meaning of subsection (c) are considered a single
employer.
(3) Continuation of status after termination
Notwithstanding paragraph (1), a plan is a multiemployer plan
on and after its termination date under title IV of the Employee
Retirement Income Security Act of 1974 if the plan was a
multiemployer plan under this subsection for the plan year
preceding its termination date.
(4) Transitional rule
For any plan year which began before the date of the enactment
of the Multiemployer Pension Plan Amendments Act of 1980, the
term "multiemployer plan" means a plan described in this
subsection as in effect immediately before that date.
(5) Special election
Within one year after the date of the enactment of the
Multiemployer Pension Plan Amendments Act of 1980, a
multiemployer plan may irrevocably elect, pursuant to procedures
established by the Pension Benefit Guaranty Corporation and
subject to the provisions of section 4403(b) and (c) of the
Employee Retirement Income Security Act of 1974, that the plan
shall not be treated as a multiemployer plan for any purpose
under such Act or this title, if for each of the last 3 plan
years ending prior to the effective date of the Multiemployer
Pension Plan Amendments Act of 1980 -
(A) the plan was not a multiemployer plan because the plan
was not a plan described in section 3(37)(A)(iii) of the
Employee Retirement Income Security Act of 1974 and section
414(f)(1)(C) (as such provisions were in effect on the day
before the date of the enactment of the Multiemployer Pension
Plan Amendments Act of 1980); and
(B) the plan had been identified as a plan that was not a
multiemployer plan in substantially all its filings with the
Pension Benefit Guaranty Corporation, the Secretary of Labor
and the Secretary.
(g) Plan administrator
For purposes of this part, the term "plan administrator" means -
(1) the person specifically so designated by the terms of the
instrument under which the plan is operated;
(2) in the absence of a designation referred to in paragraph
(1) -
(A) in the case of a plan maintained by a single employer,
such employer,
(B) in the case of a plan maintained by two or more employers
or jointly by one or more employers and one or more employee
organizations, the association, committee, joint board of
trustees, or other similar group of representatives of the
parties who maintained the plan, or
(C) in any case to which subparagraph (A) or (B) does not
apply, such other person as the Secretary may by regulation,
prescribe.
(h) Tax treatment of certain contributions
(1) In general
Effective with respect to taxable years beginning after
December 31, 1973, for purposes of this title, any amount
contributed -
(A) to an employees' trust described in section 401(a), or
(B) under a plan described in section 403(a), shall not be
treated as having been made by the employer if it is designated
as an employee contribution.
(2) Designation by units of government
For purposes of paragraph (1), in the case of any plan
established by the government of any State or political
subdivision thereof, or by any agency or instrumentality of any
of the foregoing, where the contributions of employing units are
designated as employee contributions but where any employing unit
picks up the contributions, the contributions so picked up shall
be treated as employer contributions.
(i) Defined contribution plan
For purposes of this part, the term "defined contribution plan"
means a plan which provides for an individual account for each
participant and for benefits based solely on the amount contributed
to the participant's account, and any income, expenses, gains and
losses, and any forfeitures of accounts of other participants which
may be allocated to such participant's account.
(j) Defined benefit plan
For purposes of this part, the term "defined benefit plan" means
any plan which is not a defined contribution plan.
(k) Certain plans
A defined benefit plan which provides a benefit derived from
employer contributions which is based partly on the balance of the
separate account of a participant shall -
(1) for purposes of section 410 (relating to minimum
participation standards), be treated as a defined contribution
plan.
(2) for purposes of sections 72(d) (relating to treatment of
employee contributions as separate contract), 411(a)(7)(A)
(relating to minimum vesting standards), 415 (relating to
limitations on benefits and contributions under qualified plans),
and 401(m) (relating to nondiscrimination tests for matching
requirements and employee contributions), be treated as
consisting of a defined contribution plan to the extent benefits
are based on the separate account of a participant and as a
defined benefit plan with respect to the remaining portion of
benefits under the plan, and
(3) for purposes of section 4975 (relating to tax on prohibited
transactions), be treated as a defined benefit plan.
(l) Merger and consolidations of plans or transfers of plan assets
(1) In general
A trust which forms a part of a plan shall not constitute a
qualified trust under section 401 and a plan shall be treated as
not described in section 403(a) unless in the case of any merger
or consolidation of the plan with, or in the case of any transfer
of assets or liabilities of such plan to, any other trust plan
after September 2, 1974, each participant in the plan would (if
the plan then terminated) receive a benefit immediately after the
merger, consolidation, or transfer which is equal to or greater
than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the
plan had then terminated). The preceding sentence does not apply
to any multiemployer plan with respect to any transaction to the
extent that participants either before or after the transaction
are covered under a multiemployer plan to which Title IV of the
Employee Retirement Income Security Act of 1974 applies.
(2) Allocation of assets in plan spin-offs, etc.
(A) In general
In the case of a plan spin-off of a defined benefit plan, a
trust which forms part of -
(i) the original plan, or
(ii) any plan spun off from such plan,
shall not constitute a qualified trust under this section
unless the applicable percentage of excess assets are allocated
to each of such plans.
(B) Applicable percentage
For purposes of subparagraph (A), the term "applicable
percentage" means, with respect to each of the plans described
in clauses (i) and (ii) of subparagraph (A), the percentage
determined by dividing -
(i) the excess (if any) of -
(I) the amount determined under section 412(c)(7)(A)(i)
with respect to the plan, over
(II) the amount of the assets required to be allocated to
the plan after the spin-off (without regard to this
paragraph), by
(ii) the sum of the excess amounts determined separately
under clause (i) for all such plans.
(C) Excess assets
For purposes of subparagraph (A), the term "excess assets"
means an amount equal to the excess (if any) of -
(i) the fair market value of the assets of the original
plan immediately before the spin-off, over
(ii) the amount of assets required to be allocated after
the spin-off to all plans (determined without regard to this
paragraph).
(D) Certain spun-off plans not taken into account
(i) In general
A plan involved in a spin-off which is described in clause
(ii), (iii), or (iv) shall not be taken into account for
purposes of this paragraph, except that the amount determined
under subparagraph (C)(ii) shall be increased by the amount
of assets allocated to such plan.
(ii) Plans transferred out of controlled groups
A plan is described in this clause if, after such spin-off,
such plan is maintained by an employer who is not a member of
the same controlled group as the employer maintaining the
original plan.
(iii) Plans transferred out of multiple employer plans
A plan as described in this clause if, after the spin-off,
any employer maintaining such plan (and any member of the
same controlled group as such employer) does not maintain any
other plan remaining after the spin-off which is also
maintained by another employer (or member of the same
controlled group as such other employer) which maintained the
plan in existence before the spin-off.
(iv) Terminated plans
A plan is described in this clause if, pursuant to the
transaction involving the spin-off, the plan is terminated.
(v) Controlled group
For purposes of this subparagraph, the term "controlled
group" means any group treated as a single employer under
subsection (b), (c), (m), or (o).
(E) Paragraph not to apply to multiemployer plans
This paragraph does not apply to any multiemployer plan with
respect to any spin-off to the extent that participants either
before or after the spin-off are covered under a multiemployer
plan to which title IV of the Employee Retirement Income
Security Act of 1974 applies.
(F) Application to similar transaction
Except as provided by the Secretary, rules similar to the
rules of this paragraph shall apply to transactions similar to
spin-offs.
(G) Special rules for bridge banks
For purposes of this paragraph, in the case of a bridge bank
established under section 11(i) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(i)) -
(i) such bank shall be treated as a member of any
controlled group which includes any insured bank (as defined
in section 3(h) of such Act (12 U.S.C. 1813(h))) -
(I) which maintains a defined benefit plan,
(II) which is closed by the appropriate bank regulatory
authorities, and
(III) any asset and liabilities of which are received by
the bridge bank, and
(ii) the requirements of this paragraph shall not be
treated as met with respect to such plan unless during the
180-day period beginning on the date such insured bank is
closed -
(I) the bridge bank has the right to require the plan to
transfer (subject to the provisions of this paragraph) not
more than 50 percent of the excess assets (as defined in
subparagraph (C)) to a defined benefit plan maintained by
the bridge bank with respect to participants or former
participants (including retirees and beneficiaries) in the
original plan employed by the bridge bank or formerly
employed by the closed bank, and
(II) no other merger, spin-off, termination, or similar
transaction involving the portion of the excess assets
described in subclause (I) may occur without the prior
written consent of the bridge bank.
(m) Employees of an affiliated service group
(1) In general
For purposes of the employee benefit requirements listed in
paragraph (4), except to the extent otherwise provided in
regulations, all employees of the members of an affiliated
service group shall be treated as employed by a single employer.
(2) Affiliated service group
For purposes of this subsection, the term "affiliated service
group" means a group consisting of a service organization
(hereinafter in this paragraph referred to as the "first
organization") and one or more of the following:
(A) any service organization which -
(i) is a shareholder or partner in the first organization,
and
(ii) regularly performs services for the first organization
or is regularly associated with the first organization in
performing services for third persons, and
(B) any other organization if -
(i) a significant portion of the business of such
organization is the performance of services (for the first
organization, for organizations described in subparagraph
(A), or for both) of a type historically performed in such
service field by employees, and
(ii) 10 percent or more of the interests in such
organization is held by persons who are highly compensated
employees (within the meaning of section 414(q)) of the first
organization or an organization described in subparagraph
(A).
(3) Service organizations
For purposes of this subsection, the term "service
organization" means an organization the principal business of
which is the performance of services.
(4) Employee benefit requirements
For purposes of this subsection, the employee benefit
requirements listed in this paragraph are -
(A) paragraphs (3), (4), (7), (16), (17), and (26) of section
401(a), and
(B) sections 408(k), 408(p), 410, 411, 415, and 416.
(5) Certain organizations performing management functions
For purposes of this subsection, the term "affiliated service
group" also includes a group consisting of -
(A) an organization the principal business of which is
performing, on a regular and continuing basis, management
functions for 1 organization (or for 1 organization and other
organizations related to such 1 organization), and
(B) the organization (and related organizations) for which
such functions are so performed by the organization described
in subparagraph (A).
For purposes of this paragraph, the term "related organizations"
has the same meaning as the term "related persons" when used in
section 144(a)(3).
(6) Other definitions
For purposes of this subsection -
(A) Organization defined
The term "organization" means a corporation, partnership, or
other organization.
(B) Ownership
In determining ownership, the principles of section 318(a)
shall apply.
(n) Employee leasing
(1) In general
For purposes of the requirements listed in paragraph (3), with
respect to any person (hereinafter in this subsection referred to
as the "recipient") for whom a leased employee performs services
-
(A) the leased employee shall be treated as an employee of
the recipient, but
(B) contributions or benefits provided by the leasing
organization which are attributable to services performed for
the recipient shall be treated as provided by the recipient.
(2) Leased employee
For purposes of paragraph (1), the term "leased employee" means
any person who is not an employee of the recipient and who
provides services to the recipient if -
(A) such services are provided pursuant to an agreement
between the recipient and any other person (in this subsection
referred to as the "leasing organization"),
(B) such person has performed such services for the recipient
(or for the recipient and related persons) on a substantially
full-time basis for a period of at least 1 year, and
(C) such services are performed under primary direction or
control by the recipient.
(3) Requirements
For purposes of this subsection, the requirements listed in
this paragraph are -
(A) paragraphs (3), (4), (7), (16), (17), and (26) of section
401(a),
(B) sections 408(k), 408(p), 410, 411, 415, and 416, and
(C) sections 79, 106, 117(d), 120, 125, 127, 129, 132, 137,
274(j), 505, and 4980B.
(4) Time when first considered as employee
(A) In general
In the case of any leased employee, paragraph (1) shall apply
only for purposes of determining whether the requirements
listed in paragraph (3) are met for periods after the close of
the period referred to in paragraph (2)(B).
(B) Years of service
In the case of a person who is an employee of the recipient
(whether by reason of this subsection or otherwise), for
purposes of the requirements listed in paragraph (3), years of
service for the recipient shall be determined by taking into
account any period for which such employee would have been a
leased employee but for the requirements of paragraph (2)(B).
(5) Safe harbor
(A) In general
In the case of requirements described in subparagraphs (A)
and (B) of paragraph (3), this subsection shall not apply to
any leased employee with respect to services performed for a
recipient if -
(i) such employee is covered by a plan which is maintained
by the leasing organization and meets the requirements of
subparagraph (B), and
(ii) leased employees (determined without regard to this
paragraph) do not constitute more than 20 percent of the
recipient's nonhighly compensated work force.
(B) Plan requirements
A plan meets the requirements of this subparagraph if -
(i) such plan is a money purchase pension plan with a
nonintegrated employer contribution rate for each participant
of at least 10 percent of compensation,
(ii) such plan provides for full and immediate vesting, and
(iii) each employee of the leasing organization (other than
employees who perform substantially all of their services for
the leasing organization) immediately participates in such
plan.
Clause (iii) shall not apply to any individual whose
compensation from the leasing organization in each plan year
during the 4-year period ending with the plan year is less than
$1,000.
(C) Definitions
For purposes of this paragraph -
(i) Highly compensated employee
The term "highly compensated employee" has the meaning
given such term by section 414(q).
(ii) Nonhighly compensated work force
The term "nonhighly compensated work force" means the
aggregate number of individuals (other than highly
compensated employees) -
(I) who are employees of the recipient (without regard to
this subsection) and have performed services for the
recipient (or for the recipient and related persons) on a
substantially full-time basis for a period of at least 1
year, or
(II) who are leased employees with respect to the
recipient (determined without regard to this paragraph).
(iii) Compensation
The term "compensation" has the same meaning as when used
in section 415; except that such term shall include -
(I) any employer contribution under a qualified cash or
deferred arrangement to the extent not included in gross
income under section 402(e)(3) or 402(h)(1)(B),
(II) any amount which the employee would have received in
cash but for an election under a cafeteria plan (within the
meaning of section 125), and
(III) any amount contributed to an annuity contract
described in section 403(b) pursuant to a salary reduction
agreement (within the meaning of section 3121(a)(5)(D)).
(6) Other rules
For purposes of this subsection -
(A) Related persons
The term "related persons" has the same meaning as when used
in section 144(a)(3).
(B) Employees of entities under common control
The rules of subsections (b), (c), (m), and (o) shall apply.
(o) Regulations
The Secretary shall prescribe such regulations (which may provide
rules in addition to the rules contained in subsections (m) and
(n)) as may be necessary to prevent the avoidance of any employee
benefit requirement listed in subsection (m)(4) or (n)(3) or any
requirement under section 457 through the use of -
(1) separate organizations,
(2) employee leasing, or
(3) other arrangements.
The regulations prescribed under subsection (n) shall include
provisions to minimize the recordkeeping requirements of subsection
(n) in the case of an employer which has no top-heavy plans (within
the meaning of section 416(g)) and which uses the services of
persons (other than employees) for an insignificant percentage of
the employer's total workload.
(p) Qualified domestic relations order defined
For purposes of this subsection and section 401(a)(13) -
(1) In general
(A) Qualified domestic relations order
The term "qualified domestic relations order" means a
domestic relations order -
(i) which creates or recognizes the existence of an
alternate payee's right to, or assigns to an alternate payee
the right to, receive all or a portion of the benefits
payable with respect to a participant under a plan, and
(ii) with respect to which the requirements of paragraphs
(2) and (3) are met.
(B) Domestic relations order
The term "domestic relations order" means any judgment,
decree, or order (including approval of a property settlement
agreement) which -
(i) relates to the provision of child support, alimony
payments, or marital property rights to a spouse, former
spouse, child, or other dependent of a participant, and
(ii) is made pursuant to a State domestic relations law
(including a community property law).
(2) Order must clearly specify certain facts
A domestic relations order meets the requirements of this
paragraph only if such order clearly specifies -
(A) the name and the last known mailing address (if any) of
the participant and the name and mailing address of each
alternate payee covered by the order,
(B) the amount or percentage of the participant's benefits to
be paid by the plan to each such alternate payee, or the manner
in which such amount or percentage is to be determined,
(C) the number of payments or period to which such order
applies, and
(D) each plan to which such order applies.
(3) Order may not alter amount, form, etc., of benefits
A domestic relations order meets the requirements of this
paragraph only if such order -
(A) does not require a plan to provide any type or form of
benefit, or any option, not otherwise provided under the plan,
(B) does not require the plan to provide increased benefits
(determined on the basis of actuarial value), and
(C) does not require the payment of benefits to an alternate
payee which are required to be paid to another alternate payee
under another order previously determined to be a qualified
domestic relations order.
(4) Exception for certain payments made after earliest retirement
age
(A) In general
A domestic relations order shall not be treated as failing to
meet the requirements of subparagraph (A) of paragraph (3)
solely because such order requires that payment of benefits be
made to an alternate payee -
(i) in the case of any payment before a participant has
separated from service, on or after the date on which the
participant attains (or would have attained) the earliest
retirement age,
(ii) as if the participant had retired on the date on which
such payment is to begin under such order (but taking into
account only the present value of the benefits actually
accrued and not taking into account the present value of any
employer subsidy for early retirement), and
(iii) in any form in which such benefits may be paid under
the plan to the participant (other than in the form of a
joint and survivor annuity with respect to the alternate
payee and his or her subsequent spouse).
For purposes of clause (ii), the interest rate assumption used
in determining the present value shall be the interest rate
specified in the plan or, if no rate is specified, 5 percent.
(B) Earliest retirement age
For purposes of this paragraph, the term "earliest retirement
age" means the earlier of -
(i) the date on which the participant is entitled to a
distribution under the plan, or
(ii) the later of -
(I) the date the participant attains age 50, or
(II) the earliest date on which the participant could
begin receiving benefits under the plan if the participant
separated from service.
(5) Treatment of former spouse as surviving spouse for purposes
of determining survivor benefits
To the extent provided in any qualified domestic relations
order -
(A) the former spouse of a participant shall be treated as a
surviving spouse of such participant for purposes of sections
401(a)(11) and 417 (and any spouse of the participant shall not
be treated as a spouse of the participant for such purposes),
and
(B) if married for at least 1 year, the surviving former
spouse shall be treated as meeting the requirements of section
417(d).
(6) Plan procedures with respect to orders
(A) Notice and determination by administrator
In the case of any domestic relations order received by a
plan -
(i) the plan administrator shall promptly notify the
participant and each alternate payee of the receipt of such
order and the plan's procedures for determining the qualified
status of domestic relations orders, and
(ii) within a reasonable period after receipt of such
order, the plan administrator shall determine whether such
order is a qualified domestic relations order and notify the
participant and each alternate payee of such determination.
(B) Plan to establish reasonable procedures
Each plan shall establish reasonable procedures to determine
the qualified status of domestic relations orders and to
administer distributions under such qualified orders.
(7) Procedures for period during which determination is being
made
(A) In general
During any period in which the issue of whether a domestic
relations order is a qualified domestic relations order is
being determined (by the plan administrator, by a court of
competent jurisdiction, or otherwise), the plan administrator
shall separately account for the amounts (hereinafter in this
paragraph referred to as the "segregated amounts") which would
have been payable to the alternate payee during such period if
the order had been determined to be a qualified domestic
relations order.
(B) Payment to alternate payee if order determined to be
qualified domestic relations order
If within the 18-month period described in subparagraph (E)
the order (or modification thereof) is determined to be a
qualified domestic relations order, the plan administrator
shall pay the segregated amounts (including any interest
thereon) to the person or persons entitled thereto.
(C) Payment to plan participant in certain cases
If within the 18-month period described in subparagraph (E) -
(i) it is determined that the order is not a qualified
domestic relations order, or
(ii) the issue as to whether such order is a qualified
domestic relations order is not resolved,
then the plan administrator shall pay the segregated amounts
(including any interest thereon) to the person or persons who
would have been entitled to such amounts if there had been no
order.
(D) Subsequent determination or order to be applied
prospectively only
Any determination that an order is a qualified domestic
relations order which is made after the close of the 18-month
period described in subparagraph (E) shall be applied
prospectively only.
(E) Determination of 18-month period
For purposes of this paragraph, the 18-month period described
in this subparagraph is the 18-month period beginning with the
date on which the first payment would be required to be made
under the domestic relations order.
(8) Alternate payee defined
The term "alternate payee" means any spouse, former spouse,
child or other dependent of a participant who is recognized by a
domestic relations order as having a right to receive all, or a
portion of, the benefits payable under a plan with respect to
such participant.
(9) Subsection not to apply to plans to which section 401(a)(13)
does not apply
This subsection shall not apply to any plan to which section
401(a)(13) does not apply. For purposes of this title, except as
provided in regulations, any distribution from an annuity
contract under section 403(b) pursuant to a qualified domestic
relations order shall be treated in the same manner as a
distribution from a plan to which section 401(a)(13) applies.
(10) Waiver of certain distribution requirements
With respect to the requirements of subsections (a) and (k) of
section 401, section 403(b), section 409(d), and section 457(d),
a plan shall not be treated as failing to meet such requirements
solely by reason of payments to an alternative payee pursuant to
a qualified domestic relations order.
(11) Application of rules to certain other plans
For purposes of this title, a distribution or payment from a
governmental plan (as defined in subsection (d)) or a church plan
(as described in subsection (e)) or an eligible deferred
compensation plan (within the meaning of section 457(b)) shall be
treated as made pursuant to a qualified domestic relations order
if it is made pursuant to a domestic relations order which meets
the requirement of clause (i) of paragraph (1)(A).
(12) Tax treatment of payments from a section 457 plan
If a distribution or payment from an eligible deferred
compensation plan described in section 457(b) is made pursuant to
a qualified domestic relations order, rules similar to the rules
of section 402(e)(1)(A) shall apply to such distribution or
payment.
(13) Consultation with the Secretary
In prescribing regulations under this subsection and section
401(a)(13), the Secretary of Labor shall consult with the
Secretary.
(q) Highly compensated employee
(1) In general
The term "highly compensated employee" means any employee who -
(A) was a 5-percent owner at any time during the year or the
preceding year, or
(B) for the preceding year -
(i) had compensation from the employer in excess of
$80,000, and
(ii) if the employer elects the application of this clause
for such preceding year, was in the top-paid group of
employees for such preceding year.
The Secretary shall adjust the $80,000 amount under subparagraph
(B) at the same time and in the same manner as under section
415(d), except that the base period shall be the calendar quarter
ending September 30, 1996.
(2) 5-percent owner
An employee shall be treated as a 5-percent owner for any year
if at any time during such year such employee was a 5-percent
owner (as defined in section 416(i)(1)) of the employer.
(3) Top-paid group
An employee is in the top-paid group of employees for any year
if such employee is in the group consisting of the top 20 percent
of the employees when ranked on the basis of compensation paid
during such year.
(4) Compensation
For purposes of this subsection, the term "compensation" has
the meaning given such term by section 415(c)(3).
(5) Excluded employees
For purposes of subsection (r) and for purposes of determining
the number of employees in the top-paid group, the following
employees shall be excluded -
(A) employees who have not completed 6 months of service,
(B) employees who normally work less than 17 1/2 hours per
week,
(C) employees who normally work during not more than 6 months
during any year,
(D) employees who have not attained age 21, and
(E) except to the extent provided in regulations, employees
who are included in a unit of employees covered by an agreement
which the Secretary of Labor finds to be a collective
bargaining agreement between employee representatives and the
employer.
Except as provided by the Secretary, the employer may elect to
apply subparagraph (A), (B), (C), or (D) by substituting a
shorter period of service, smaller number of hours or months, or
lower age for the period of service, number of hours or months,
or age (as the case may be) than that specified in such
subparagraph.
(6) Former employees
A former employee shall be treated as a highly compensated
employee if -
(A) such employee was a highly compensated employee when such
employee separated from service, or
(B) such employee was a highly compensated employee at any
time after attaining age 55.
(7) Coordination with other provisions
Subsections (b), (c), (m), (n), and (o) shall be applied before
the application of this section.
(8) Special rule for nonresident aliens
For purposes of this subsection and subsection (r), employees
who are nonresident aliens and who receive no earned income
(within the meaning of section 911(d)(2)) from the employer which
constitutes income from sources within the United States (within
the meaning of section 861(a)(3)) shall not be treated as
employees.
(9) Certain employees not considered highly compensated and
excluded employees under pre-ERISA rules for church plans
In the case of a church plan (as defined in subsection (e)), no
employee shall be considered an officer, a person whose principal
duties consist of supervising the work of other employees, or a
highly compensated employee for any year unless such employee is
a highly compensated employee under paragraph (1) for such year.
(r) Special rules for separate line of business
(1) In general
For purposes of sections 129(d)(8) and 410(b), an employer
shall be treated as operating separate lines of business during
any year if the employer for bona fide business reasons operates
separate lines of business.
(2) Line of business must have 50 employees, etc.
A line of business shall not be treated as separate under
paragraph (1) unless -
(A) such line of business has at least 50 employees who are
not excluded under subsection (q)(5),
(B) the employer notifies the Secretary that such line of
business is being treated as separate for purposes of paragraph
(1), and
(C) such line of business meets guidelines prescribed by the
Secretary or the employer receives a determination from the
Secretary that such line of business may be treated as separate
for purposes of paragraph (1).
(3) Safe harbor rule
(A) In general
The requirements of subparagraph (C) of paragraph (2) shall
not apply to any line of business if the highly compensated
employee percentage with respect to such line of business is -
(i) not less than one-half, and
(ii) not more than twice,
the percentage which highly compensated employees are of all
employees of the employer. An employer shall be treated as
meeting the requirements of clause (i) if at least 10 percent
of all highly compensated employees of the employer perform
services solely for such line of business.
(B) Determination may be based on preceding year
The requirements of subparagraph (A) shall be treated as met
with respect to any line of business if such requirements were
met with respect to such line of business for the preceding
year and if -
(i) no more than a de minimis number of employees were
shifted to or from the line of business after the close of
the preceding year, or
(ii) the employees shifted to or from the line of business
after the close of the preceding year contained a
substantially proportional number of highly compensated
employees.
(4) Highly compensated employee percentage defined
For purposes of this subsection, the term "highly compensated
employee percentage" means the percentage which highly
compensated employees performing services for the line of
business are of all employees performing services for the line of
business.
(5) Allocation of benefits to line of business
For purposes of this subsection, benefits which are
attributable to services provided to a line of business shall be
treated as provided by such line of business.
(6) Headquarters personnel, etc.
The Secretary shall prescribe rules providing for -
(A) the allocation of headquarters personnel among the lines
of business of the employer, and
(B) the treatment of other employees providing services for
more than 1 line of business of the employer or not in lines of
business meeting the requirements of paragraph (2).
(7) Separate operating units
For purposes of this subsection, the term "separate line of
business" includes an operating unit in a separate geographic
area separately operated for a bona fide business reason.
(8) Affiliated service groups
This subsection shall not apply in the case of any affiliated
service group (within the meaning of section 414(m)).
(s) Compensation
For purposes of any applicable provision -
(1) In general
Except as provided in this subsection, the term "compensation"
has the meaning given such term by section 415(c)(3).
(2) Employer may elect not to treat certain deferrals as
compensation
An employer may elect not to include as compensation any amount
which is contributed by the employer pursuant to a salary
reduction agreement and which is not includible in the gross
income of an employee under section 125, 132(f)(4), 402(e)(3),
402(h), or 403(b).
(3) Alternative determination of compensation
The Secretary shall by regulation provide for alternative
methods of determining compensation which may be used by an
employer, except that such regulations shall provide that an
employer may not use an alternative method if the use of such
method discriminates in favor of highly compensated employees
(within the meaning of subsection (q)).
(4) Applicable provision
For purposes of this subsection, the term "applicable
provision" means any provision which specifically refers to this
subsection.
(t) Application of controlled group rules to certain employee
benefits
(1) In general
All employees who are treated as employed by a single employer
under subsection (b), (c), or (m) shall be treated as employed by
a single employer for purposes of an applicable section. The
provisions of subsection (o) shall apply with respect to the
requirements of an applicable section.
(2) Applicable section
For purposes of this subsection, the term "applicable section"
means section 79, 106, 117(d), 120, 125, 127, 129, 132, 137,
274(j), 505, or 4980B.
(u) Special rules relating to veterans' reemployment rights under
USERRA
(1) Treatment of certain contributions made pursuant to veterans'
reemployment rights
If any contribution is made by an employer or an employee under
an individual account plan with respect to an employee, or by an
employee to a defined benefit plan that provides for employee
contributions, and such contribution is required by reason of
such employee's rights under chapter 43 of title 38, United
States Code, resulting from qualified military service, then -
(A) such contribution shall not be subject to any otherwise
applicable limitation contained in section 402(g), 402(h),
403(b), 404(a), 404(h), 408, 415, or 457, and shall not be
taken into account in applying such limitations to other
contributions or benefits under such plan or any other plan,
with respect to the year in which the contribution is made,
(B) such contribution shall be subject to the limitations
referred to in subparagraph (A) with respect to the year to
which the contribution relates (in accordance with rules
prescribed by the Secretary), and
(C) such plan shall not be treated as failing to meet the
requirements of section 401(a)(4), 401(a)(26), 401(k)(3),
401(k)(11), 401(k)(12), 401(m), 403(b)(12), 408(k)(3),
408(k)(6), 408(p), 410(b), or 416 by reason of the making of
(or the right to make) such contribution.
For purposes of the preceding sentence, any elective deferral or
employee contribution made under paragraph (2) shall be treated
as required by reason of the employee's rights under such chapter
43.
(2) Reemployment rights under USERRA with respect to elective
deferrals
(A) In general
For purposes of this subchapter and section 457, if an
employee is entitled to the benefits of chapter 43 of title 38,
United States Code, with respect to any plan which provides for
elective deferrals, the employer sponsoring the plan shall be
treated as meeting the requirements of such chapter 43 with
respect to such elective deferrals only if such employer -
(i) permits such employee to make additional elective
deferrals under such plan (in the amount determined under
subparagraph (B) or such lesser amount as is elected by the
employee) during the period which begins on the date of the
reemployment of such employee with such employer and has the
same length as the lesser of -
(I) the product of 3 and the period of qualified military
service which resulted in such rights, and
(II) 5 years, and
(ii) makes a matching contribution with respect to any
additional elective deferral made pursuant to clause (i)
which would have been required had such deferral actually
been made during the period of such qualified military
service.
(B) Amount of makeup required
The amount determined under this subparagraph with respect to
any plan is the maximum amount of the elective deferrals that
the individual would have been permitted to make under the plan
in accordance with the limitations referred to in paragraph
(1)(A) during the period of qualified military service if the
individual had continued to be employed by the employer during
such period and received compensation as determined under
paragraph (7). Proper adjustment shall be made to the amount
determined under the preceding sentence for any elective
deferrals actually made during the period of such qualified
military service.
(C) Elective deferral
For purposes of this paragraph, the term "elective deferral"
has the meaning given such term by section 402(g)(3); except
that such term shall include any deferral of compensation under
an eligible deferred compensation plan (as defined in section
457(b)).
(D) After-tax employee contributions
References in subparagraphs (A) and (B) to elective deferrals
shall be treated as including references to employee
contributions.
(3) Certain retroactive adjustments not required
For purposes of this subchapter and subchapter E, no provision
of chapter 43 of title 38, United States Code, shall be construed
as requiring -
(A) any crediting of earnings to an employee with respect to
any contribution before such contribution is actually made, or
(B) any allocation of any forfeiture with respect to the
period of qualified military service.
(4) Loan repayment suspensions permitted
If any plan suspends the obligation to repay any loan made to
an employee from such plan for any part of any period during
which such employee is performing service in the uniformed
services (as defined in chapter 43 of title 38, United States
Code), whether or not qualified military service, such suspension
shall not be taken into account for purposes of section 72(p),
401(a), or 4975(d)(1).
(5) Qualified military service
For purposes of this subsection, the term "qualified military
service" means any service in the uniformed services (as defined
in chapter 43 of title 38, United States Code) by any individual
if such individual is entitled to reemployment rights under such
chapter with respect to such service.
(6) Individual account plan
For purposes of this subsection, the term "individual account
plan" means any defined contribution plan (!1) (including any
tax-sheltered annuity plan under section 403(b), any simplified
employee pension under section 408(k), any qualified salary
reduction arrangement under section 408(p), and any eligible
deferred compensation plan (as defined in section 457(b)).
(7) Compensation
For purposes of sections 403(b)(3), 415(c)(3), and 457(e)(5),
an employee who is in qualified military service shall be treated
as receiving compensation from the employer during such period of
qualified military service equal to -
(A) the compensation the employee would have received during
such period if the employee were not in qualified military
service, determined based on the rate of pay the employee would
have received from the employer but for absence during the
period of qualified military service, or
(B) if the compensation the employee would have received
during such period was not reasonably certain, the employee's
average compensation from the employer during the 12-month
period immediately preceding the qualified military service
(or, if shorter, the period of employment immediately preceding
the qualified military service).
(8) USERRA requirements for qualified retirement plans
For purposes of this subchapter and section 457, an employer
sponsoring a retirement plan shall be treated as meeting the
requirements of chapter 43 of title 38, United States Code, only
if each of the following requirements is met:
(A) An individual reemployed under such chapter is treated
with respect to such plan as not having incurred a break in
service with the employer maintaining the plan by reason of
such individual's period of qualified military service.
(B) Each period of qualified military service served by an
individual is, upon reemployment under such chapter, deemed
with respect to such plan to constitute service with the
employer maintaining the plan for the purpose of determining
the nonforfeitability of the individual's accrued benefits
under such plan and for the purpose of determining the accrual
of benefits under such plan.
(C) An individual reemployed under such chapter is entitled
to accrued benefits that are contingent on the making of, or
derived from, employee contributions or elective deferrals only
to the extent the individual makes payment to the plan with
respect to such contributions or deferrals. No such payment may
exceed the amount the individual would have been permitted or
required to contribute had the individual remained continuously
employed by the employer throughout the period of qualified
military service. Any payment to such plan shall be made during
the period beginning with the date of reemployment and whose
duration is 3 times the period of the qualified military
service (but not greater than 5 years).
(9) Plans not subject to title 38
This subsection shall not apply to any retirement plan to which
chapter 43 of title 38, United States Code, does not apply.
(10) References
For purposes of this section, any reference to chapter 43 of
title 38, United States Code, shall be treated as a reference to
such chapter as in effect on December 12, 1994 (without regard to
any subsequent amendment).
(v) Catch-up contributions for individuals age 50 or over
(1) In general
An applicable employer plan shall not be treated as failing to
meet any requirement of this title solely because the plan
permits an eligible participant to make additional elective
deferrals in any plan year.
(2) Limitation on amount of additional deferrals
(A) In general
A plan shall not permit additional elective deferrals under
paragraph (1) for any year in an amount greater than the lesser
of -
(i) the applicable dollar amount, or
(ii) the excess (if any) of -
(I) the participant's compensation (as defined in section
415(c)(3)) for the year, over
(II) any other elective deferrals of the participant for
such year which are made without regard to this subsection.
(B) Applicable dollar amount
For purposes of this paragraph -
(i) In the case of an applicable employer plan other than a
plan described in section 401(k)(11) or 408(p), the
applicable dollar amount shall be determined in accordance
with the following table:
For taxable years The applicable
beginning in: dollar amount is:
2002 $1,000
2003 $2,000
2004 $3,000
2005 $4,000
2006 and thereafter $5,000.
(ii) In the case of an applicable employer plan described
in section 401(k)(11) or 408(p), the applicable dollar amount
shall be determined in accordance with the following table:
For taxable years The applicable
beginning in: dollar amount is:
2002 $500
2003 $1,000
2004 $1,500
2005 $2,000
2006 and thereafter $2,500.
(C) Cost-of-living adjustment
In the case of a year beginning after December 31, 2006, the
Secretary shall adjust annually the $5,000 amount in
subparagraph (B)(i) and the $2,500 amount in subparagraph
(B)(ii) for increases in the cost-of-living at the same time
and in the same manner as adjustments under section 415(d);
except that the base period taken into account shall be the
calendar quarter beginning July 1, 2005, and any increase under
this subparagraph which is not a multiple of $500 shall be
rounded to the next lower multiple of $500.
(D) Aggregation of plans
For purposes of this paragraph, plans described in clauses
(i), (ii), and (iv) of paragraph (6)(A) that are maintained by
the same employer (as determined under subsection (b), (c), (m)
or (o)) shall be treated as a single plan, and plans described
in clause (iii) of paragraph (6)(A) that are maintained by the
same employer shall be treated as a single plan.
(3) Treatment of contributions
In the case of any contribution to a plan under paragraph (1) -
(A) such contribution shall not, with respect to the year in
which the contribution is made -
(i) be subject to any otherwise applicable limitation
contained in sections 401(a)(30), 402(h), 403(b), 408,
415(c), and 457(b)(2) (determined without regard to section
457(b)(3)), or
(ii) be taken into account in applying such limitations to
other contributions or benefits under such plan or any other
such plan, and
(B) except as provided in paragraph (4), such plan shall not
be treated as failing to meet the requirements of section
401(a)(4), 401(k)(3), 401(k)(11), 403(b)(12), 408(k), 410(b),
or 416 by reason of the making of (or the right to make) such
contribution.
(4) Application of nondiscrimination rules
(A) In general
An applicable employer plan shall be treated as failing to
meet the nondiscrimination requirements under section 401(a)(4)
with respect to benefits, rights, and features unless the plan
allows all eligible participants to make the same election with
respect to the additional elective deferrals under this
subsection.
(B) Aggregation
For purposes of subparagraph (A), all plans maintained by
employers who are treated as a single employer under subsection
(b), (c), (m), or (o) of section 414 shall be treated as 1
plan, except that a plan described in clause (i) of section
410(b)(6)(C) shall not be treated as a plan of the employer
until the expiration of the transition period with respect to
such plan (as determined under clause (ii) of such section).
(5) Eligible participant
For purposes of this subsection, the term "eligible
participant" means a participant in a plan -
(A) who would attain age 50 by the end of the taxable year,
(B) with respect to whom no other elective deferrals may
(without regard to this subsection) be made to the plan for the
plan (or other applicable) year by reason of the application of
any limitation or other restriction described in paragraph (3)
or comparable limitation or restriction contained in the terms
of the plan.
(6) Other definitions and rules
For purposes of this subsection -
(A) Applicable employer plan
The term "applicable employer plan" means -
(i) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a),
(ii) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b),
(iii) an eligible deferred compensation plan under section
457 of an eligible employer described in section
457(e)(1)(A), and
(iv) an arrangement meeting the requirements of section
408(k) or (p).
(B) Elective deferral
The term "elective deferral" has the meaning given such term
by subsection (u)(2)(C).
(C) Exception for section 457 plans
This subsection shall not apply to a participant for any year
for which a higher limitation applies to the participant under
section 457(b)(3).
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 1015, Sept. 2, 1974, 88 Stat.
925; amended Pub. L. 94-455, title XIX, Secs. 1901(a)(64),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1775, 1834; Pub. L. 95-600,
title I, Sec. 152(d), Nov. 6, 1978, 92 Stat. 2799; Pub. L. 96-364,
title II, Secs. 207, 208(a), title IV, Sec. 407(b), Sept. 26, 1980,
94 Stat. 1288, 1289, 1305; Pub. L. 96-605, title II, Sec. 201(a),
Dec. 28, 1980, 94 Stat. 3526; Pub. L. 96-613, Sec. 5(a), Dec. 28,
1980, 94 Stat. 3580; Pub. L. 97-248, title II, Secs. 240(c),
246(a), 248(a), Sept. 3, 1982, 96 Stat. 520, 525, 526; Pub. L.
98-369, div. A, title IV, Sec. 491(d)(26), (27), title V, Sec.
526(a)(1), (b)(1), (d)(1), (2), title VII, Sec. 713(i), July 18,
1984, 98 Stat. 850, 874, 875, 960; Pub. L. 98-397, title II, Sec.
204(b), Aug. 23, 1984, 98 Stat. 1445; Pub. L. 99-514, title XI,
Secs. 1114(a), (b)(11), 1115(a), 1117(c), 1146(a), (b), 1151(e)(1),
(i), title XIII, Sec. 1301(j)(4), title XVIII, Secs. 1852(f),
1898(c)(2)(A), (4)(A), (6)(A), (7)(A)(ii)-(vii), 1899A(12), Oct.
22, 1986, 100 Stat. 2448, 2451, 2452, 2462, 2491, 2506, 2507, 2657,
2868, 2951, 2953, 2954, 2958; Pub. L. 100-203, title IX, Sec.
9305(c), Dec. 22, 1987, 101 Stat. 1330-352; Pub. L. 100-647, title
I, Secs. 1011(d)(8), (e)(4), (h)(5), (i)(1)-(4)(A), (j)(1), (2),
1011A(b)(3), 1011B(a)(16), (17), (19), (20), 1018(t)(8)(E)-(G),
title II, Sec. 2005(c)(1), (2), title III, Secs. 3011(b)(4), (5),
3021(b)(1), (2)(A), title VI, Sec. 6067(a), Nov. 10, 1988, 102
Stat. 3460, 3461, 3465, 3467, 3468, 3473, 3485, 3589, 3611, 3612,
3625, 3631, 3632, 3703; Pub. L. 101-140, title II, Secs. 203(a)(6),
204(b)(2), Nov. 8, 1989, 103 Stat. 831, 833; Pub. L. 101-239, title
VII, Secs. 7811(m)(5), 7813(b), 7841(a)(2), Dec. 19, 1989, 103
Stat. 2412, 2413, 2427; Pub. L. 101-508, title XI, Sec.
11703(b)(1), Nov. 5, 1990, 104 Stat. 1388-517; Pub. L. 102-318,
title V, Sec. 521(b)(20)-(22), July 3, 1992, 106 Stat. 311; (As
amended Pub. L. 104-188, title I, Secs. 1421(b)(9)(C), 1431(a),
(b)(1), (c)(1)(A), (D), (E), 1434(b), 1454(a), 1461(a), 1462(a),
1704(n)(1), Aug. 20, 1996, 110 Stat. 1798, 1802, 1803, 1807, 1817,
1822, 1824, 1883; Pub. L. 105-34, title XV, Sec. 1522(a), title
XVI, Sec. 1601(d)(6)(A), (7), (h)(2)(D)(i), (ii), Aug. 5, 1997, 111
Stat. 1070, 1089, 1090, 1092; Pub. L. 105-206, title VI, Sec.
6018(c), July 22, 1998, 112 Stat. 822; Pub. L. 106-554, Sec.
1(a)(7) [title III, Sec. 314(e)(2)], Dec. 21, 2000, 114 Stat. 2763,
2763A-643; Pub. L. 107-16, title VI, Secs. 631(a), 635(a)-(c), June
7, 2001, 115 Stat. 111, 117; Pub. L. 107-147, title IV, Sec.
411(o)(3)-(8), Mar. 9, 2002, 116 Stat. 48, 49.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The Railroad Retirement Act of 1935 or 1937, referred to in
subsec. (d), means act Aug. 29, 1935, ch. 812, 49 Stat. 867, known
as the Railroad Retirement Act of 1935. The Railroad Retirement Act
of 1935 was amended generally by act June 24, 1937, ch. 382, part
I, 50 Stat. 307, and was known as the Railroad Retirement Act of
1937. The Railroad Retirement Act of 1937 was amended generally and
redesignated the Railroad Retirement Act of 1974 by Pub. L. 93-444,
title I, Oct. 16, 1974, 88 Stat. 1305 and is classified generally
to subchapter IV (Sec. 231 et seq.) of chapter 9 of Title 45,
Railroads. For complete classification of this Act to the Code, see
Tables.
The International Organizations Immunities Act (59 Stat. 669),
referred to in subsec. (d), is act Dec. 29, 1945, ch. 652, title I,
59 Stat. 669, as amended, which is classified principally to
subchapter XVIII (Sec. 288 et seq.) of chapter 7 of Title 22,
Foreign Relations and Intercourse. The Act also amended several
other laws including the Internal Revenue Code of 1939. For
exemption from taxation of income of international organizations
and of the compensation of employees thereof, see sections 892 and
893 of this title. For complete classification of this Act to the
Code, see Short Title note set out under section 288 of Title 22
and Tables.
The Employee Retirement Income Security Act of 1974, referred to
in subsecs. (f) (3), (5) and (l)(1), (2)(E), is Pub. L. 93-406,
Sept. 2, 1974, 88 Stat. 829, as amended. Title IV of the Employee
Retirement Income Security Act of 1974 is classified principally to
subchapter III (Sec. 1301 et seq.) of chapter 18 of Title 29,
Labor. Section 3(37)(A)(iii) of the Employee Retirement Income
Security Act of 1974 is classified to section 1002(37)(A)(iii) of
Title 29. Section 4403(b) and (c) of the Employee Retirement Income
Security Act of 1974 probably means section 4303(b) and (c) of such
Act which is classified to section 1453(b) and (c) of Title 29. For
complete classification of this Act to the Code, see Short Title
note set out under section 1001 of Title 29 and Tables.
The date of the enactment of the Multiemployer Pension Plan
Amendments Act of 1980, referred to in subsec. (f)(4), (5), means
the date of the enactment of Pub. L. 96-364, which was approved
Sept. 26, 1980.
Effective date of the Multiemployer Pension Plan Amendments Act
of 1980, referred to in subsec. (f)(5), probably means the date of
enactment of the Multiemployer Pension Plan Amendments Act of 1980,
which was approved Sept. 26, 1980.
-MISC1-
AMENDMENTS
2002 - Subsec. (v)(2)(D). Pub. L. 107-147, Sec. 411(o)(3), added
subpar. (D).
Subsec. (v)(3)(A)(i). Pub. L. 107-147, Sec. 411(o)(4),
substituted "sections 401(a)(30), 402(h), 403(b), 408, 415(c), and
457(b)(2) (determined without regard to section 457(b)(3))" for
"section 402(g), 402(h), 403(b), 404(a), 404(h), 408(k), 408(p),
415, or 457".
Subsec. (v)(3)(B). Pub. L. 107-147, Sec. 411(o)(5), substituted
"section 401(a)(4), 401(k)(3), 401(k)(11), 403(b)(12), 408(k),
410(b), or 416" for "section 401(a)(4), 401(a)(26), 401(k)(3),
401(k)(11), 401(k)(12), 403(b)(12), 408(k), 408(p), 408B, 410(b),
or 416".
Subsec. (v)(4)(B). Pub. L. 107-147, Sec. 411(o)(6), inserted
before period at end ", except that a plan described in clause (i)
of section 410(b)(6)(C) shall not be treated as a plan of the
employer until the expiration of the transition period with respect
to such plan (as determined under clause (ii) of such section)".
Subsec. (v)(5). Pub. L. 107-147, Sec. 411(o)(7)(A), struck out ",
with respect to any plan year," before "a participant" in
introductory provisions.
Subsec. (v)(5)(A). Pub. L. 107-147, Sec. 411(o)(7)(B), amended
subpar. (A) generally. Prior to amendment, subpar (A) read as
follows: "who has attained the age of 50 before the close of the
plan year, and".
Subsec. (v)(5)(B). Pub. L. 107-147, Sec. 411(o)(7)(C),
substituted "plan (or other applicable) year" for "plan year".
Subsec. (v)(6)(C). Pub. L. 107-147, Sec. 411(o)(8), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "This subsection shall not apply
to an applicable employer plan described in subparagraph (A)(iii)
for any year to which section 457(b)(3) applies."
2001 - Subsec. (p)(10). Pub. L. 107-16, Secs. 635(b), 901,
temporarily substituted "section 409(d), and section 457(d)" for
"and section 409(d)". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (p)(11). Pub. L. 107-16, Secs. 635(a), 901, in heading
temporarily substituted "certain other plans" for "governmental and
church plans" and in text temporarily inserted "or an eligible
deferred compensation plan (within the meaning of section 457(b))"
after "subsection (e))". See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (p)(12), (13). Pub. L. 107-16, Secs. 635(c), 901,
temporarily added par. (12) and redesignated former par. (12) as
(13). See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (v). Pub. L. 107-16, Secs. 631(a), 901, temporarily added
subsec. (v). See Effective and Termination Dates of 2001 Amendment
note below.
2000 - Subsec. (s)(2). Pub. L. 106-554 substituted "section 125,
132(f)(4), 402(e)(3)" for "section 125, 402(e)(3)".
1998 - Subsec. (q)(5). Pub. L. 105-206 made technical amendment
to Pub. L. 104-188, Sec. 1434(c)(1)(E). See 1996 Amendment note
below.
1997 - Subsec. (e)(5)(A). Pub. L. 105-34, Sec. 1601(d)(6)(A),
amended heading and text of subpar. (A) generally. Prior to
amendment, text read as follows: "For purposes of this part -
"(i) In general. - An employee of a church or a convention or
association of churches shall include a duly ordained,
commissioned, or licensed minister of a church who, in connection
with the exercise of his or her ministry -
"(I) is a self-employed individual (within the meaning of
section 401(c)(1)(B)), or
"(II) is employed by an organization other than an
organization described in section 501(c)(3).
"(ii) Treatment as employer and employee. -
"(I) Self-employed. - A minister described in clause (i)(I)
shall be treated as his or her own employer which is an
organization described in section 501(c)(3) and which is exempt
from tax under section 501(a).
"(II) Others. - A minister described in clause (i)(II) shall
be treated as employed by an organization described in section
501(c)(3) and exempt from tax under section 501(a)."
Subsec. (e)(5)(C). Pub. L. 105-34, Sec. 1522(a)(1), substituted
"not otherwise participating" for "not eligible to participate".
Subsec. (e)(5)(E). Pub. L. 105-34, Sec. 1522(a)(2), added subpar.
(E).
Subsec. (n)(3)(C). Pub. L. 105-34, Sec. 1601(h)(2)(D)(i),
inserted "137," after "132,".
Subsec. (q)(7), (9). Pub. L. 105-34, Sec. 1601(d)(7),
redesignated par. (7), relating to certain employees not considered
highly compensated and excluded employees under pre-ERISA rules for
church plans, as (9).
Subsec. (t)(2). Pub. L. 105-34, Sec. 1601(h)(2)(D)(ii), inserted
"137," after "132,".
1996 - Subsecs. (b), (c). Pub. L. 104-188, Sec. 1421(b)(9)(C),
inserted "408(p)," after "408(k),".
Subsec. (e)(5). Pub. L. 104-188, Sec. 1461(a), added par. (5).
Subsec. (m)(4)(B). Pub. L. 104-188, Sec. 1421(b)(9)(C), inserted
"408(p)," after "408(k),".
Subsec. (n)(2)(C). Pub. L. 104-188, Sec. 1454(a), amended subpar.
(C) generally. Prior to amendment, subpar. (C) read as follows:
"such services are of a type historically performed, in the
business field of the recipient, by employees."
Subsec. (n)(3)(B). Pub. L. 104-188, Sec. 1421(b)(9)(C), inserted
"408(p)," after "408(k),".
Subsec. (q)(1). Pub. L. 104-188, Sec. 1431(a), amended par. (1)
generally. Prior to amendment, par. (1) read as follows: "In
general. - The term 'highly compensated employee' means any
employee who, during the year or the preceding year -
"(A) was at any time a 5-percent owner,
"(B) received compensation from the employer in excess of
$75,000,
"(C) received compensation from the employer in excess of
$50,000 and was in the top-paid group of employees for such year,
or
"(D) was at any time an officer and received compensation
greater than 50 percent of the amount in effect under section
415(b)(1)(A) for such year.
The Secretary shall adjust the $75,000 and $50,000 amounts under
this paragraph at the same time and in the same manner as under
section 415(d)."
Subsec. (q)(2), (3). Pub. L. 104-188, Sec. 1431(c)(1)(A),
redesignated pars. (3) and (4) as (2) and (3), respectively, and
struck out former par. (2) which read as follows: "Special rule for
current year. - In the case of the year for which the relevant
determination is being made, an employee not described in
subparagraph (B), (C), or (D) of paragraph (1) for the preceding
year (without regard to this paragraph) shall not be treated as
described in subparagraph (B), (C), or (D) of paragraph (1) unless
such employee is a member of the group consisting of the 100
employees paid the greatest compensation during the year for which
such determination is being made."
Subsec. (q)(4). Pub. L. 104-188, Sec. 1434(b)(1), amended heading
and text of par. (4) generally. Prior to amendment, text read as
follows: "For purposes of this subsection -
"(A) In general. - The term 'compensation' means compensation
within the meaning of section 415(c)(3).
"(B) Certain provisions not taken into account. - The
determination under subparagraph (A) shall be made -
"(i) without regard to sections 125, 402(e)(3), and
402(h)(1)(B), and
"(ii) in the case of employer contributions made pursuant to
a salary reduction agreement, without regard to section
403(b)."
Pub. L. 104-188, Sec. 1431(c)(1)(A), redesignated par. (7) as
(4).
Subsec. (q)(5). Pub. L. 104-188, Sec. 1434(c)(1)(E), as amended
by Pub. L. 105-206, Sec. 6018(c), struck out "under paragraph (4)
or the number of officers taken into account under paragraph (5)"
after "top-paid group" in introductory provisions.
Pub. L. 104-188, Sec. 1431(c)(1)(A), redesignated par. (8) as (5)
and struck out former par. (5) which read as follows: "Special
rules for treatment of officers. -
"(A) Not more than 50 officers taken into account. - For
purposes of paragraph (1)(D), no more than 50 employees (or, if
lesser, the greater of 3 employees or 10 percent of the
employees) shall be treated as officers.
"(B) At least 1 officer taken into account. - If for any year
no officer of the employer is described in paragraph (1)(D), the
highest paid officer of the employer for such year shall be
treated as described in such paragraph."
Subsec. (q)(6). Pub. L. 104-188, Sec. 1431(b)(1), (c)(1)(A),
redesignated par. (9) as (6) and struck out former par. (6) which
related to treatment of families of 5-percent owners or of highly
compensated employees.
Subsec. (q)(7). Pub. L. 104-188, Sec. 1462(a), added par. (7)
relating to certain employees not considered highly compensated and
excluded employees under pre-ERISA rules for church plans.
Pub. L. 104-188, Sec. 1431(c)(1)(A), redesignated par. (10),
relating to coordination with other provisions, as (7). Former par.
(7) redesignated (4).
Subsec. (q)(8) to (12). Pub. L. 104-188, Sec. 1431(c)(1)(A),
redesignated pars. (8) to (11) as (5) to (8), respectively, and
struck out par. (12) which related to simplified method for
determining highly compensated employees.
Subsec. (r)(2)(A). Pub. L. 104-188, Sec. 1431(c)(1)(D),
substituted "subsection (q)(5)" for "subsection (q)(8)".
Subsec. (s)(2). Pub. L. 104-188, Sec. 1434(b)(2), inserted "not"
after "elect" in heading and in text.
Subsec. (u). Pub. L. 104-188, Sec. 1704(n)(1), added subsec. (u).
1992 - Subsec. (n)(5)(C)(iii)(I). Pub. L. 102-318, Sec.
521(b)(20), substituted "402(e)(3)" for "402(a)(8)".
Subsec. (q)(7)(B)(i). Pub. L. 102-318, Sec. 521(b)(21),
substituted "402(e)(3)" for "402(a)(8)".
Subsec. (s)(2). Pub. L. 102-318, Sec. 521(b)(22), substituted
"402(e)(3)" for "402(a)(8)".
1990 - Subsec. (n)(2)(B). Pub. L. 101-508 struck out "(6 months
in the case of core health benefits)" after "1 year".
1989 - Subsec. (n)(3)(C). Pub. L. 101-239, Sec. 7813(b), amended
directory language of Pub. L. 100-647, Sec. 3011(b)(4), see 1988
Amendment note below.
Pub. L. 101-140, Sec. 203(a)(6)(A), struck out "89," after "79,".
Subsec. (p)(10). Pub. L. 101-239, Sec. 7811(m)(5), inserted
"section" before "403(b)".
Subsec. (p)(11). Pub. L. 101-239, Sec. 7841(a)(2), added par.
(11) and redesignated former par. (11) as (12).
Subsec. (r)(1). Pub. L. 101-140, Sec. 204(b)(2), substituted
"sections 129(d)(8) and 410(b)" for "section 410(b)".
Pub. L. 101-140, Sec. 203(a)(6)(B), substituted "section 410(b)"
for "sections 89 and 410(b)".
Subsec. (t)(2). Pub. L. 101-239, Sec. 7813(b), amended directory
language of Pub. L. 100-647, Sec. 3011(b)(5), see 1988 Amendment
note below.
Pub. L. 101-140, Sec. 203(a)(6)(C), struck out "89," after "79,".
1988 - Subsec. (k)(2). Pub. L. 100-647, Sec. 1011A(b)(3),
inserted "72(d) (relating to treatment of employee contributions as
separate contract)," after "purposes of sections".
Subsec. (l). Pub. L. 100-647, Sec. 2005(c)(1), (2), substituted
"Merger" for "Mergers" in heading, designated existing provision as
par. (1), inserted par. (1) heading, and added par. (2).
Subsec. (l)(2)(G). Pub. L. 100-647, Sec. 6067(a), added subpar.
(G).
Subsec. (m)(4)(A). Pub. L. 100-647, Sec. 1011(h)(5), substituted
"(16), (17), and (26)" for "and (16)".
Subsec. (m)(4)(C), (D). Pub. L. 100-647, Sec. 1011B(a)(16),
struck out subpars. (C) and (D) which read as follows:
"(C) section 105(h), and
"(D) section 125."
Subsec. (n)(3)(A). Pub. L. 100-647, Sec. 1011(h)(5), substituted
"(16), (17), and (26)" for "and (16)".
Subsec. (n)(3)(C). Pub. L. 100-647, Sec. 3011(b)(4), as amended
by Pub. L. 101-239, Sec. 7813(b), struck out "162(i)(2), 162(k),"
after "132," and substituted "505, and 4980B" for "and 505".
Pub. L. 100-647, Sec. 1011B(a)(19), inserted "162(i)(2), 162(k),"
after "132,".
Subsec. (o). Pub. L. 100-647, Sec. 1011(e)(4), inserted "or any
requirement under section 457" after "or (n)(3)".
Subsec. (p)(4)(B). Pub. L. 100-647, Sec. 1018(t)(8)(E),
substituted "means the earlier of" for "means earlier of" and
struck out "in" at beginning of cls. (i) and (ii).
Subsec. (p)(9). Pub. L. 100-647, Sec. 1018(t)(8)(G), inserted at
end "For purposes of this title, except as provided in regulations,
any distribution from an annuity contract under section 403(b)
pursuant to a qualified domestic relations order shall be treated
in the same manner as a distribution from a plan to which section
401(a)(13) applies."
Subsec. (p)(10). Pub. L. 100-647, Sec. 1018(t)(8)(F), inserted ",
403(b)," after "section 401".
Subsec. (q)(1). Pub. L. 100-647, Sec. 1011(i)(1), inserted at end
"The Secretary shall adjust the $75,000 and $50,000 amounts under
this paragraph at the same time and in the same manner as under
section 415(d)."
Subsec. (q)(1)(D). Pub. L. 100-647, Sec. 1011(d)(8), substituted
"50" for "150" and "415(b)(1)(A)" for "415(c)(1)(A)".
Subsec. (q)(6)(C). Pub. L. 100-647, Sec. 1011(i)(2), added
subpar. (C).
Subsec. (q)(8). Pub. L. 100-647, Sec. 1011(i)(4)(A), inserted "or
the number of officers taken into account under paragraph (5)"
after "under paragraph (4)".
Pub. L. 100-647, Sec. 1011(i)(3)(A)(ii), substituted "Except as
provided by the Secretary, the employer" for "The employer" in last
sentence.
Subsec. (q)(8)(F). Pub. L. 100-647, Sec. 1011(i)(3)(A)(i), struck
out subpar. (F) which read as follows: "employees who are
nonresident aliens and who receive no earned income (within the
meaning of section 911(d)(2)) from the employer which constitutes
income from sources within the United States (within the meaning of
section 861(a)(3))."
Subsec. (q)(11). Pub. L. 100-647, Sec. 1011(i)(3)(B), added par.
(11).
Subsec. (q)(12). Pub. L. 100-647, Sec. 3021(b)(1), added par.
(12).
Subsec. (r)(3). Pub. L. 100-647, Sec. 3021(b)(2)(A), amended par.
(3) generally. Prior to amendment, par. (3) read as follows: "The
requirements of subparagraph (C) of paragraph (2) shall not apply
to any line of business if the highly compensated employee
percentage with respect to such line of business is -
"(A) not less than one-half, and
"(B) not more than twice,
the percentage which highly compensated employees are of all
employees of the employer. An employer shall be treated as meeting
the requirements of subparagraph (A) if at least 10 percent of all
highly compensated employees of the employer perform services
solely for such line of business."
Subsec. (s). Pub. L. 100-647, Sec. 1011(j)(1), substituted "any
applicable provision" for "this part" in introductory provisions.
Subsec. (s)(1). Pub. L. 100-647, Sec. 1011(j)(1), amended par.
(1) generally. Prior to amendment, par. (1) read as follows: "The
term 'compensation' means compensation for service performed for an
employer which (taking into account the provisions of this chapter)
is currently includible in gross income."
Subsec. (s)(2) to (4). Pub. L. 100-647, Sec. 1011(j)(2), added
par. (4), redesignated former pars. (3) and (4) as (2) and (3),
respectively, and struck out former par. (2) which read as follows:
"The Secretary shall prescribe regulations for the determination of
the compensation of an employee who is a self-employed individual
(within the meaning of section 401(c)(1)) which are based on the
principles of paragraph (1)."
Subsec. (t)(1). Pub. L. 100-647, Sec. 1011B(a)(20), struck out
"of section 414" before "shall be treated" and "shall apply with".
Subsec. (t)(2). Pub. L. 100-647, Sec. 3011(b)(5), as amended by
Pub. L. 101-239, Sec. 7813(b), struck out "162(i)(2), 162(k),"
after "132," and substituted "505, or 4980B" for "or 505".
Pub. L. 100-647, Sec. 1011B(a)(17), inserted "162(i)(2), 162(k),"
after "132,".
1987 - Subsec. (b). Pub. L. 100-203 struck out "the minimum
funding standard of section 412, the tax imposed by section 4971,
and" after "one such corporation,".
1986 - Subsec. (k)(2). Pub. L. 99-514, Sec. 1117(c), inserted
reference to section 401(m) (relating to nondiscrimination tests
for matching requirements and employee contributions).
Subsec. (m)(2)(B)(ii). Pub. L. 99-514, Sec. 1114(b)(11),
substituted "highly compensated employees (within the meaning of
section 414(q))" for "officers, highly compensated employees, or
owners".
Subsec. (m)(5). Pub. L. 99-514, Sec. 1301(j)(4), substituted
"section 144(a)(3)" for "section 103(b)(6)(C)".
Subsec. (m)(7). Pub. L. 99-514, Sec. 1852(f), amended directory
language of Pub. L. 98-369, Sec. 526(d)(2), to correct an error,
and did not involve any change in text. See 1984 Amendment note
below.
Subsec. (n)(1). Pub. L. 99-514, Sec. 1151(i)(1), substituted
"requirements" for "pension requirements".
Pub. L. 99-514, Sec. 1146(b)(2), struck out "except to the extent
otherwise provided in regulations," after "listed in paragraph
(3),".
Subsec. (n)(2)(B). Pub. L. 99-514, Sec. 1151(i)(2), inserted "(6
months in the case of core health benefits)" after "1 year".
Subsec. (n)(3). Pub. L. 99-514, Sec. 1151(i)(3), substituted
"Requirements" for "Pension requirements" in heading, substituted
"requirements" for "pension requirements" in text, and added
subpar. (C).
Subsec. (n)(4). Pub. L. 99-514, Sec. 1146(a)(2), substituted
"Time when first considered as employee" for "Time when leased
employee is first considered as employee" in heading and amended
text generally. Prior to amendment, text read as follows: "In the
case of any leased employee, paragraph (1) shall apply only for
purposes of determining whether the pension requirements listed in
paragraph (3) are met for periods after the close of the 1-year
period referred to in paragraph (2); except that years of service
for the recipient shall be determined by taking into account the
entire period for which the leased employee performed services for
the recipient (or related persons)."
Subsec. (n)(5). Pub. L. 99-514, Sec. 1146(a)(1), amended par. (5)
generally. Prior to amendment, par. (5) read as follows: "This
subsection shall not apply to any leased employee if such employee
is covered by a plan which is maintained by the leasing
organization if, with respect to such employee, such plan -
"(A) is a money purchase pension plan with a nonintegrated
employer contribution rate of at least 7 1/2 percent, and
"(B) provides for immediate participation and for full and
immediate vesting."
Subsec. (n)(6). Pub. L. 99-514, Sec. 1301(j)(4), substituted
"section 144(a)(3)" for "section 103(b)(6)(C)" in subpar. (A).
Pub. L. 99-514, Sec. 1146(a)(3), substituted "Other rules" for
"Related persons" in heading and amended text generally. Prior to
amendment, text read as follows: "For purposes of this subsection,
the term "related persons" has the same meaning as when used in
section 103(b)(6)(C)."
Subsec. (o). Pub. L. 99-514, Sec. 1146(b)(1), inserted provision
relating to regulations to minimize recordkeeping requirements in
case of employer which has no top-heavy plans and uses the services
of persons other than employees for an insignificant percentage of
the employer's total workload.
Subsec. (p)(1)(B)(i). Pub. L. 99-514, Sec. 1898(c)(7)(A)(ii),
inserted "former spouse,".
Subsec. (p)(3)(B). Pub. L. 99-514, Sec. 1899A(12), struck out the
comma after "benefits".
Subsec. (p)(4)(A). Pub. L. 99-514, Sec. 1898(c)(7)(A)(vi),
substituted "A" for "In the case of any payment before a
participant has separated from service, a" in introductory
provisions and inserted "in the case of any payment before a
participant has separated from service," in cl. (i).
Subsec. (p)(4)(B). Pub. L. 99-514, Sec. 1898(c)(7)(A)(vii),
amended subpar. (B) generally. Prior to amendment, subpar. (B) read
as follows: "For purposes of this paragraph, the term 'earliest
retirement age' has the meaning given such term by section
417(f)(3), except that in the case of any defined contribution
plan, the earliest retirement age shall be the date which is 10
years before the normal retirement age (within the meaning of
section 411(a)(8))."
Subsec. (p)(5). Pub. L. 99-514, Sec. 1898(c)(7)(A)(v), struck out
last sentence which read as follows: "A plan shall not be treated
as failing to meet the requirements of subsection (a) or (k) of
section 401 which prohibit payment of benefits before termination
of employment solely by reason of payments to an alternate payee
pursuant to a qualified domestic relations order."
Subsec. (p)(5)(A). Pub. L. 99-514, Sec. 1898(c)(6)(A), inserted
"(and any spouse of the participant shall not be treated as a
spouse of the participant for such purposes)".
Subsec. (p)(5)(B). Pub. L. 99-514, Sec. 1898(c)(7)(A)(iv),
substituted "the surviving former spouse" for "the surviving
spouse".
Subsec. (p)(6)(A)(i). Pub. L. 99-514, Sec. 1898(c)(7)(A)(iii),
substituted "each alternate payee" for "any other alternate payee".
Subsec. (p)(7)(A). Pub. L. 99-514, Sec. 1898(c)(2)(A)(i),
substituted "shall separately account for the amounts (hereinafter
in this paragraph referred to as the 'segregated amounts')" for
"shall segregate in a separate account in the plan or in an escrow
account the amounts".
Subsec. (p)(7)(B). Pub. L. 99-514, Sec. 1898(c)(2)(A)(ii),
substituted "the 18-month period described in subparagraph (E)" for
"18 months" and "including any interest" for "plus any interest".
Subsec. (p)(7)(C). Pub. L. 99-514, Sec. 1898(c)(2)(A)(iii),
substituted "the 18-month period described in subparagraph (E)" for
"18 months" and "including any interest" for "plus any interest".
Subsec. (p)(7)(D). Pub. L. 99-514, Sec. 1898(c)(2)(A)(iv),
inserted "described in subparagraph (E)".
Subsec. (p)(7)(E). Pub. L. 99-514, Sec. 1898(c)(2)(A)(v), added
subpar. (E).
Subsec. (p)(9). Pub. L. 99-514, Sec. 1898(c)(4)(A), added par.
(9). Former par. (9) redesignated (11).
Subsec. (p)(10). Pub. L. 99-514, Sec. 1898(c)(7)(A)(v), added
par. (10).
Subsec. (p)(11). Pub. L. 99-514, Sec. 1898(c)(4)(A), redesignated
former par. (9) as (11).
Subsec. (q). Pub. L. 99-514, Sec. 1114(a), added subsec. (q).
Subsecs. (r), (s). Pub. L. 99-514, Sec. 1115(a), added subsecs.
(r) and (s).
Subsec. (t). Pub. L. 99-514, Sec. 1151(e)(1), added subsec. (t).
1984 - Subsec. (h)(1)(B). Pub. L. 98-369, Sec. 491(d)(26), struck
out "or 405(a)" after "section 403(a)".
Subsec. (l). Pub. L. 98-369, Sec. 491(d)(27), struck out "or 405"
after "section 403(a)".
Subsec. (m)(6)(B). Pub. L. 98-369, Sec. 526(a)(1), substituted
"section 318(a)" for "section 267(c)".
Subsec. (m)(7). Pub. L. 98-369, Sec. 526(d)(2), as amended by
Pub. L. 99-514, Sec. 1852(f), struck out par. (7) relating to
regulations. See subsec. (o) of this section.
Subsec. (n)(2). Pub. L. 98-369, Secs. 526(b)(1), 713(i), made
identical amendments, substituting "any person who is not an
employee of the recipient and" for "any person" in text preceding
subpar. (A).
Subsec. (o). Pub. L. 98-369, Sec. 526(d)(1), added subsec. (o).
Subsec. (p). Pub. L. 98-397 added subsec. (p).
1982 - Subsecs. (b), (c). Pub. L. 97-248, Sec. 240(c)(1),
inserted reference to section 416.
Subsec. (m)(4)(B). Pub. L. 97-248, Sec. 240(c)(2), inserted
reference to section 416.
Subsec. (m)(5) to (7). Pub. L. 97-248, Sec. 246(a), added par.
(5) and redesignated former pars. (5) and (6) as (6) and (7),
respectively.
Subsec. (n). Pub. L. 97-248, Sec. 248(a), added subsec. (n).
1980 - Subsec. (e). Pub. L. 96-364, Sec. 407(b), substituted
provisions defining "church plan" with respect to general
requirements, exclusion of certain plans, definitions and other
provisions, and correction of failures to meet church plan
requirements, for provisions defining "church plan" with respect to
general requirements, certain unrelated business or multiemployer
plans, and special temporary rules for certain church agencies
under church plan.
Subsec. (f). Pub. L. 96-364, Sec. 207, substituted provisions
setting forth definition, cases of common control, continuation of
status after termination, transitional rule, and special election
with respect to a multiemployer plan, for provisions setting forth
definition and special rules with respect to a multiemployer plan.
Subsec. (l). Pub. L. 96-364, Sec. 208(a), substituted provisions
relating to applicability to multiemployer plans subject to title
IV of the Employee Retirement Income Security Act of 1974 of
provisions of preceding sentence, for provisions relating to
applicability of paragraph to multiemployer plans to extent
determined by Corporation.
Subsec. (m). Pub. L. 96-605 and Pub. L. 96-613 added an identical
subsec. (m).
1978 - Subsecs. (b), (c). Pub. L. 95-600 inserted "408(k)," after
"sections 401," wherever appearing.
1976 - Subsecs. (a) to (c). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (f). Pub. L. 94-455, Sec. 1901(a)(64)(A), substituted
"Plan" for "plan" in heading.
Subsec. (g)(2)(C). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (l). Pub. L. 94-455, Sec. 1901(a)(64)(B), substituted
reference to Sept. 2, 1974, for reference to the date of enactment
of the Employee Retirement Income Security Act of 1974.
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title VI, Sec. 631(b), June 7, 2001, 115 Stat.
113, provided that: "The amendment made by this section [amending
this section] shall apply to contributions in taxable years
beginning after December 31, 2001."
Pub. L. 107-16, title VI, Sec. 635(d), June 7, 2001, 115 Stat.
117, provided that: "The amendment made by this section [amending
this section] shall apply to transfers, distributions, and payments
made after December 31, 2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 2000 AMENDMENT
Amendment by Pub. L. 106-554 effective as if included in the
provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 1(a)(7) [title III, Sec.
314(g)] of Pub. L. 106-554, set out as a note under section 56 of
this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by section 6018 of Pub. L. 105-206 effective as if
included in the provisions of the Small Business Job Protection Act
of 1996, Pub. L. 104-188, to which such amendment relates, see
section 6018(h) of Pub. L. 105-206, set out as a note under section
23 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1522(b) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to years
beginning after December 31, 1997."
Amendment by section 1601(d)(6)(A), (7), (h)(2)(D)(i), (ii) of
Pub. L. 105-34 effective as if included in the provisions of the
Small Business Job Protection Act of 1996, Pub. L. 104-188, to
which it relates, see section 1601(j) of Pub. L. 105-34, set out as
a note under section 23 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1421(b)(9)(C) of Pub. L. 104-188 applicable
to taxable years beginning after Dec. 31, 1996, see section 1421(e)
of Pub. L. 104-188, set out as a note under section 72 of this
title.
Section 1431(d) of Pub. L. 104-188 provided that:
"(1) In general. - The amendments made by this section [amending
this section, sections 129, 401, 404, 408, and 416 of this title,
and provisions set out as a note below] shall apply to years
beginning after December 31, 1996, except that in determining
whether an employee is a highly compensated employee for years
beginning in 1997, such amendments shall be treated as having been
in effect for years beginning in 1996.
"(2) Family aggregation. - The amendments made by subsection (b)
[amending this section and sections 401 and 404 of this title]
shall apply to years beginning after December 31, 1996."
Section 1434(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section and section 415 of this
title] shall apply to years beginning after December 31, 1997."
Section 1454(b) of Pub. L. 104-188 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to years
beginning after December 31, 1996, but shall not apply to any
relationship determined under an Internal Revenue Service ruling
issued before the date of the enactment of this Act [Aug. 20, 1996]
pursuant to section 414(n)(2)(C) of the Internal Revenue Code of
1986 (as in effect on the day before such date) not to involve a
leased employee."
Amendment by section 1461(a) of Pub. L. 104-188 applicable to
years beginning after Dec. 31, 1996, see section 1461(c) of Pub. L.
104-188, set out as a note under section 404 of this title.
Section 1462(c) of Pub. L. 104-188 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to years
beginning after December 31, 1996."
Section 1704(n)(3) of Pub. L. 104-188 provided that: "The
amendments made by this subsection [amending this section and
section 1108 of Title 29, Labor] shall be effective as of December
12, 1994."
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-318 applicable to distributions after
Dec. 31, 1992, see section 521(e) of Pub. L. 102-318, set out as a
note under section 402 of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11703(b)(2) of Pub. L. 101-508 provided that: "The
amendment made by subsection (a) [probably means par. (1), which
amended this section] shall take effect as if included in the
amendments made by section 1151 of the Tax Reform Act of 1986 [Pub.
L. 99-514]."
EFFECTIVE DATE OF 1989 AMENDMENTS
Amendment by sections 7811(m)(5) and 7813(b) of Pub. L. 101-239
effective, except as otherwise provided, as if included in the
provision of the Technical and Miscellaneous Revenue Act of 1988,
Pub. L. 100-647, to which such amendment relates, see section 7817
of Pub. L. 101-239, set out as a note under section 1 of this
title.
Amendment by section 7841(a)(2) of Pub. L. 101-239 applicable to
transfers after Dec. 19, 1989, in taxable years ending after such
date, see section 7841(a)(3) of Pub. L. 101-239, set out as a note
under section 408 of this title.
Amendment by section 203(a)(6) of Pub. L. 101-140 effective as if
included in section 1151 of Pub. L. 99-514, see section 203(c) of
Pub. L. 101-140, set out as a note under section 79 of this title.
Amendment by section 204(b)(2) of Pub. L. 101-140 applicable to
years beginning after Dec. 31, 1988, see section 204(d)(1) of Pub.
L. 101-140, set out as a note under section 129 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1011(d)(8), (e)(4), (h)(5), (i)(1)-(4)(A),
(j)(1), (2), 1011A(b)(3), 1011B(a)(16), (17), (19), (20), and
1018(t)(8)(E)-(G) of Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
Section 2005(c)(3) of Pub. L. 100-647 provided that:
"(A) Except as provided in subparagraph (B), the amendments made
by this subsection [amending this section] shall apply with respect
to transactions occurring after July 26, 1988.
"(B) The amendments made by this subsection shall not apply to
any transaction occurring after July 26, 1988, if on or before such
date the board of directors of the employer, approves such
transaction or the employer took similar binding action."
Amendment by section 3011(b)(4), (5) of Pub. L. 100-647
applicable to taxable years beginning after Dec. 31, 1988, but not
applicable to any plan for any plan year to which section 162(k) of
this title (as in effect on the day before Nov. 10, 1988) did not
apply by reason of section 10001(e)(2) of Pub. L. 99-272, see
section 3011(d) of Pub. L. 100-647, set out as a note under section
162 of this title.
Amendment by section 3021(b)(1), (2)(A) of Pub. L. 100-647
applicable to years beginning after Dec. 31, 1986, see section
3021(d)(2) of Pub. L. 100-647, set out as a note under section 129
of this title.
Section 6067(c) of Pub. L. 100-647, as amended by Pub. L.
101-239, title VII, Sec. 7816(k), Dec. 19, 1989, 103 Stat. 2421,
provided that: "The amendment made by this section [amending this
section] shall take effect as if included in the amendments made by
section 2005(c) of this Act [amending this section]."
EFFECTIVE DATE OF 1987 AMENDMENT
Amendment by Pub. L. 100-203 applicable with respect to plan
years beginning after Dec. 31, 1987, see section 9305(d) of Pub. L.
100-203, set out as a note under section 412 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1114(c) of Pub. L. 99-514, as amended by Pub. L. 104-188,
title I, Sec. 1431(c)(2), Aug. 20, 1996, 110 Stat. 1803; Pub. L.
107-16, title VI, Sec. 663(a), June 7, 2001, 115 Stat. 142,
provided that:
"(1) In general. - Except as provided in this subsection, the
amendment made by this section [amending this section and sections
106, 274, 423, and 501 of this title] shall apply to years
beginning after December 31, 1986.
"(2) Conforming amendments to employee benefit provisions. - The
amendments made by paragraphs (2), (3), (4), (5), and (16) of
subsection (b) [amending sections 117, 120, 127, 129, 132, and 505
of this title] shall apply to years beginning after December 31,
1987.
"(3) Conforming amendments to pension provisions. - The
amendments made by paragraphs (7), (8), (9), (10), (11), (12), and
(15) of subsection (b) [amending this section and sections 401,
404A, 406, 407, 411, 415, and 4975 of this title and section 1108
of Title 29, Labor] shall apply to years beginning after December
31, 1988."
[Pub. L. 107-16, title VI, Sec. 663(b), June 7, 2001, 115 Stat.
143, provided that: "The repeal made by subsection (a) [repealing
par. (4) of section 1114(c) of Pub. L. 99-514, set out above] shall
apply to plan years beginning after December 31, 2001."]
Section 1115(b) of Pub. L. 99-514 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to years
beginning after December 31, 1986."
Amendment by section 1117(c) of Pub. L. 99-514 applicable to plan
years beginning after Dec. 31, 1986, with special provisions for
plans maintained pursuant to collective bargaining agreements
ratified before Mar. 1, 1986, and for annuity contracts under
section 403(b) of this title, see section 1117(d) of Pub. L.
99-514, set out as a note under section 401 of this title.
Section 1146(c) of Pub. L. 99-514 provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [amending this section] shall apply
to taxable years beginning after December 31, 1983.
"(2) Subsection (a)(1). - The amendment made by subsection (a)(1)
shall apply to services performed after December 31, 1986.
"(3) Recordkeeping requirements. - In the case of years beginning
before the date of the enactment of this Act [Oct. 22, 1986], the
last sentence of section 414(o) shall be applied without regard to
the requirement that an insignificant percentage of the workload be
performed by persons other than employees."
Amendment by section 1151(e)(1), (i) of Pub. L. 99-514
applicable, with certain qualifications and exceptions, to years
beginning after Dec. 31, 1988, see section 1151(k) of Pub. L.
99-514, as amended, set out as a note under section 79 of this
title.
Amendment by section 1301(j)(4) of Pub. L. 99-514 applicable to
bonds issued after Aug. 15, 1986, except as otherwise provided, see
sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective
Date; Transitional Rules note under section 141 of this title.
Amendment by section 1852(f) of Pub. L. 99-514 effective, except
as otherwise provided, as if included in the provisions of the Tax
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment
relates, see section 1881 of Pub. L. 99-514, set out as a note
under section 48 of this title.
Amendment by section 1898(c)(2)(A), (4)(A), (6)(A),
(7)(A)(ii)-(vii) of Pub. L. 99-514 effective as if included in the
provision of the Retirement Equity Act of 1984, Pub. L. 98-397, to
which such amendment relates, except as otherwise provided, see
section 1898(j) of Pub. L. 99-514, set out as a note under section
401 of this title.
EFFECTIVE DATE OF 1984 AMENDMENTS
Amendment by Pub. L. 98-397 effective Jan. 1, 1985, except as
otherwise provided, see section 303(d) of Pub. L. 98-397, set out
as a note under section 1001 of Title 29, Labor.
Amendment by section 491(d)(26), (27) of Pub. L. 98-369
applicable to obligations issued after Dec. 31, 1983, see section
491(f)(1) of Pub. L. 98-369, set out as a note under section 62 of
this title.
Section 526(a)(2) of Pub. L. 98-369 provided that: "The amendment
made by this subsection [amending this section] shall apply to
taxable years beginning after December 31, 1984."
Section 526(b)(2) of Pub. L. 98-369 provided that: "The amendment
made by this subsection [amending this section] shall apply to
taxable years beginning after December 31, 1983."
Section 526(d)(3) of Pub. L. 98-369 provided that: "The
amendments made by this subsection [amending this section] shall
take effect on the date of the enactment of this Act [July 18,
1984]."
Amendment by section 713(i) of Pub. L. 98-369 effective as if
included in the provision of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, to which such amendment
relates, see section 715 of Pub. L. 98-369, set out as a note under
section 31 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by section 240(c) of Pub. L. 97-248, applicable to
years beginning after Dec. 31, 1983, see section 241(a) of Pub. L.
97-248, set out as a note under section 416 of this title.
Section 246(b) of Pub. L. 97-248 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1983."
Section 248(b) of Pub. L. 97-248 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1983."
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 201(c) of Pub. L. 96-605 and section 5(c) of Pub. L.
96-613, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and sections
105 and 125 of this title] shall apply to plan years ending after
November 30, 1980.
"(2) Plans in existence on november 30, 1980. - In the case of a
plan in existence on November 30, 1980, the amendments made by this
section [amending this section and sections 105 and 125 of this
title] shall apply to plan years beginning after November 30,
1980."
Section 407(c) of Pub. L. 96-364 provided that: "The amendments
made by this section [amending this section and section 1002 of
Title 29, Labor] shall be effective as of January 1, 1974."
Amendment by sections 207 and 208(a) of Pub. L. 96-364 effective
Sept. 26, 1980, see section 210(a) of Pub. L. 96-364, set out as an
Effective Date note under section 418 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-600 applicable to taxable years beginning
after Dec. 31, 1978, see section 152(h) of Pub. L. 95-600, set out
as a note under section 408 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(64) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE
Section applicable, except as otherwise provided in section
1017(c) through (i) of Pub. L. 93-406, for plan years beginning
after Sept. 2, 1974, and, in the case of plans in existence on Jan.
1, 1974, for plan years beginning after Dec. 31, 1975, see section
1017 of Pub. L. 93-406, set out as an Effective Date; Transitional
Rules note under section 410 of this title.
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by sections
1114, 1115, and 1117 of Pub. L. 99-514, see section 1141 of Pub. L.
99-514, set out as a note under section 401 of this title.
SAMPLE LANGUAGE FOR SPOUSAL CONSENT AND QUALIFIED DOMESTIC
RELATIONS FORMS
Section 1457 of Pub. L. 104-188 provided that:
"(a) Development of Sample Language. - Not later than January 1,
1997, the Secretary of the Treasury shall develop -
"(1) sample language for inclusion in a form for the spousal
consent required under section 417(a)(2) of the Internal Revenue
Code of 1986 and section 205(c)(2) of the Employee Retirement
Income Security Act of 1974 [29 U.S.C. 1055(c)(2)] which -
"(A) is written in a manner calculated to be understood by
the average person, and
"(B) discloses in plain form -
"(i) whether the waiver to which the spouse consents is
irrevocable, and
"(ii) whether such waiver may be revoked by a qualified
domestic relations order, and
"(2) sample language for inclusion in a form for a qualified
domestic relations order described in section 414(p)(1)(A) of
such Code and section 206(d)(3)(B)(i) of such Act [29 U.S.C.
1056(d)(3)(B)(i)] which -
"(A) meets the requirements contained in such sections, and
"(B) the provisions of which focus attention on the need to
consider the treatment of any lump sum payment, qualified joint
and survivor annuity, or qualified preretirement survivor
annuity.
"(b) Publicity. - The Secretary of the Treasury shall include
publicity for the sample language developed under subsection (a) in
the pension outreach efforts undertaken by the Secretary."
SAFEHARBOR AUTHORITY
Section 1462(b) of Pub. L. 104-188 provided that: "The Secretary
of the Treasury may design nondiscrimination and coverage safe
harbors for church plans."
APPLICATION OF LINE OF BUSINESS TEST FOR PERIOD BEFORE GUIDELINES
ISSUED
Section 204(b)(1) of Pub. L. 101-140 provided that: "In the case
of any plan year beginning on or before the date the Secretary of
the Treasury or his delegate issues guidelines and begins issuing
determinations under section 414(r)(2)(C) of the Internal Revenue
Code of 1986, an employer shall be treated as operating separate
lines of business if the employer reasonably determines that it
meets the requirements of section 414(r) (other than paragraph
(2)(C) thereof) of such Code."
[Section 204(d)(3) of Pub. L. 101-140 provided that: "The
provisions of subsection (b)(1) [set out above] shall apply to
years beginning after December 31, 1986."]
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
STUDY REFLECTING ALLOCATION OF ASSETS
Section 6067(b) of Pub. L. 100-647 directed Secretary of the
Treasury or his delegate, in consultation with Federal Deposit
Insurance Corporation, to conduct a study with respect to proper
method of allocating assets in case of a transaction to which the
amendment made by such section and, not later than Jan. 1, 1990
(due date extended to Jan. 1, 1992, by Pub. L. 101-508, title XI,
Sec. 11831(b), Nov. 5, 1990, 104 Stat. 1388-559) to report results
of such study to Committee on Ways and Means of House of
Representatives and to Committee on Finance of Senate.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 41, 45E, 45F, 72, 79,
105, 108, 117, 120, 125, 127, 129, 132, 170, 220, 264, 274, 401,
402, 403, 404, 404A, 406, 407, 408, 410, 411, 412, 415, 416, 419A,
423, 448, 457, 501, 505, 818, 943, 1402, 3121, 3306, 3405, 4971,
4975, 4977, 4980, 4980B, 4980D, 4980E, 4980F, 5000, 6047, 6057,
6058, 6059, 6692, 7528, 7702, 9802, 9803, 9832 of this title; title
4 section 114; title 5 sections 8351, 8432, 8440; title 8 section
1182; title 11 section 101; title 15 sections 77c, 78c, 80a-3,
80b-3, 7244; title 23 section 181; title 29 sections 623, 1002,
1054, 1082, 1083, 1108, 1144a, 1167, 1185a, 1301, 1307, 1321, 1344,
1453; title 42 sections 300gg-91, 409, 1395w-25, 1395y; title 49
section 41762.
-FOOTNOTE-
(!1) So in original. There is no closing parenthesis.
-End-
-CITE-
26 USC Sec. 415 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart B - Special Rules
-HEAD-
Sec. 415. Limitations on benefits and contribution under qualified
plans
-STATUTE-
(a) General rule
(1) Trusts
A trust which is a part of a pension, profitsharing, or stock
bonus plan shall not constitute a qualified trust under section
401(a) if -
(A) in the case of a defined benefit plan, the plan provides
for the payment of benefits with respect to a participant which
exceed the limitation of subsection (b), or
(B) in the case of a defined contribution plan, contributions
and other additions under the plan with respect to any
participant for any taxable year exceed the limitation of
subsection (c).
(2) Section applies to certain annuities and accounts
In the case of -
(A) an employee annuity plan described in section 403(a),
(B) an annuity contract described in section 403(b), or
(C) a simplified employee pension described in section
408(k),
such a contract, plan, or pension shall not be considered to be
described in section 403(a), 403(b), or 408(k), as the case may
be, unless it satisfies the requirements of subparagraph (A) or
subparagraph (B) of paragraph (1), whichever is appropriate, and
has not been disqualified under subsection (g). In the case of an
annuity contract described in section 403(b), the preceding
sentence shall apply only to the portion of the annuity contract
which exceeds the limitation of subsection (b) or the limitation
of subsection (c), whichever is appropriate.
(b) Limitation for defined benefit plans
(1) In general
Benefits with respect to a participant exceed the limitation of
this subsection if, when expressed as an annual benefit (within
the meaning of paragraph (2)), such annual benefit is greater
than the lesser of -
(A) $160,000, or
(B) 100 percent of the participant's average compensation for
his high 3 years.
(2) Annual benefit
(A) In general
For purposes of paragraph (1), the term "annual benefit"
means a benefit payable annually in the form of a straight life
annuity (with no ancillary benefits) under a plan to which
employees do not contribute and under which no rollover
contributions (as defined in sections 402(c), 403(a)(4),
403(b)(8), 408(d)(3), and 457(e)(16)) are made.
(B) Adjustment for certain other forms of benefit
If the benefit under the plan is payable in any form other
than the form described in subparagraph (A), or if the
employees contribute to the plan or make rollover contributions
(as defined in sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3), and 457(e)(16)), the determinations as to whether
the limitation described in paragraph (1) has been satisfied
shall be made, in accordance with regulations prescribed by the
Secretary by adjusting such benefit so that it is equivalent to
the benefit described in subparagraph (A). For purposes of this
subparagraph, any ancillary benefit which is not directly
related to retirement income benefits shall not be taken into
account; and that portion of any joint and survivor annuity
which constitutes a qualified joint and survivor annuity (as
defined in section 417) shall not be taken into account.
(C) Adjustment to $160,000 limit where benefit begins before
age 62
If the retirement income benefit under the plan begins before
age 62, the determination as to whether the $160,000 limitation
set forth in paragraph (1)(A) has been satisfied shall be made,
in accordance with regulations prescribed by the Secretary, by
reducing the limitation of paragraph (1)(A) so that such
limitation (as so reduced) equals an annual benefit (beginning
when such retirement income benefit begins) which is equivalent
to a $160,000 annual benefit beginning at age 62.
(D) Adjustment to $160,000 limit where benefit begins after age
65
If the retirement income benefit under the plan begins after
age 65, the determination as to whether the $160,000 limitation
set forth in paragraph (1)(A) has been satisfied shall be made,
in accordance with regulations prescribed by the Secretary, by
increasing the limitation of paragraph (1)(A) so that such
limitation (as so increased) equals an annual benefit
(beginning when such retirement income benefit begins) which is
equivalent to a $160,000 annual benefit beginning at age 65.
(E) Limitation on certain assumptions
(i) For purposes of adjusting any limitation under
subparagraph (C) and, except as provided in clause (ii), for
purposes of adjusting any benefit under subparagraph (B), the
interest rate assumption shall not be less than the greater of
5 percent or the rate specified in the plan.
(ii) For purposes of adjusting any benefit under subparagraph
(B) for any form of benefit subject to section 417(e)(3), the
applicable interest rate (as defined in section 417(e)(3))
shall be substituted for "5 percent" in clause (i).
(iii) For purposes of adjusting any limitation under
subparagraph (D), the interest rate assumption shall not be
greater than the lesser of 5 percent or the rate specified in
the plan.
(iv) For purposes of this subsection, no adjustments under
subsection (d)(1) shall be taken into account before the year
for which such adjustment first takes effect.
(v) For purposes of adjusting any benefit or limitation under
subparagraph (B), (C), or (D), the mortality table used shall
be the table prescribed by the Secretary. Such table shall be
based on the prevailing commissioners' standard table
(described in section 807(d)(5)(A)) used to determine reserves
for group annuity contracts issued on the date the adjustment
is being made (without regard to any other subparagraph of
section 807(d)(5)).
[(F) Repealed. Pub. L. 107-16, title VI, Sec. 611(a)(5)(A),
June 7, 2001, 115 Stat. 97]
(G) Special limitation for qualified police or firefighters
In the case of a qualified participant, subparagraph (C) of
this paragraph shall not apply.
(H) Qualified participant defined
For purposes of subparagraph (G), the term "qualified
participant" means a participant -
(i) in a defined benefit plan which is maintained by a
State or political subdivision thereof,
(ii) with respect to whom the period of service taken into
account in determining the amount of the benefit under such
defined benefit plan includes at least 15 years of service of
the participant -
(I) as a full-time employee of any police department or
fire department which is organized and operated by the
State or political subdivision maintaining such defined
benefit plan to provide police protection, firefighting
services, or emergency medical services for any area within
the jurisdiction of such State or political subdivision, or
(II) as a member of the Armed Forces of the United
States.
(I) Exemption for survivor and disability benefits provided
under governmental plans
Subparagraph (C) of this paragraph and paragraph (5) shall
not apply to -
(i) income received from a governmental plan (as defined in
section 414(d)) as a pension, annuity, or similar allowance
as the result of the recipient becoming disabled by reason of
personal injuries or sickness, or
(ii) amounts received from a governmental plan by the
beneficiaries, survivors, or the estate of an employee as the
result of the death of the employee.
(3) Average compensation for high 3 years
For purposes of paragraph (1), a participant's high 3 years
shall be the period of consecutive calendar years (not more than
3) during which the participant both was an active participant in
the plan and had the greatest aggregate compensation from the
employer. In the case of an employee within the meaning of
section 401(c)(1), the preceding sentence shall be applied by
substituting for "compensation from the employer" the following:
"the participant's earned income (within the meaning of section
401(c)(2) but determined without regard to any exclusion under
section 911)".
(4) Total annual benefits not in excess of $10,000
Notwithstanding the preceding provisions of this subsection,
the benefits payable with respect to a participant under any
defined benefit plan shall be deemed not to exceed the limitation
of this subsection if -
(A) the retirement benefits payable with respect to such
participant under such plan and under all other defined benefit
plans of the employer do not exceed $10,000 for the plan year,
or for any prior plan year, and
(B) the employer has not at any time maintained a defined
contribution plan in which the participant participated.
(5) Reduction for participation or service of less than 10 years
(A) Dollar limitation
In the case of an employee who has less than 10 years of
participation in a defined benefit plan, the limitation
referred to in paragraph (1)(A) shall be the limitation
determined under such paragraph (without regard to this
paragraph) multiplied by a fraction -
(i) the numerator of which is the number of years (or part
thereof) of participation in the defined benefit plan of the
employer, and
(ii) the denominator of which is 10.
(B) Compensation and benefits limitations
The provisions of subparagraph (A) shall apply to the
limitations under paragraphs (1)(B) and (4), except that such
subparagraph shall be applied with respect to years of service
with an employer rather than years of participation in a plan.
(C) Limitation on reduction
In no event shall subparagraph (A) or (B) reduce the
limitations referred to in paragraphs (1) and (4) to an amount
less than 1/10 of such limitation (determined without regard
to this paragraph).
(D) Application to changes in benefit structure
To the extent provided in regulations, subparagraph (A) shall
be applied separately with respect to each change in the
benefit structure of a plan.
(6) Computation of benefits and contributions
The computation of -
(A) benefits under a defined contribution plan, for purposes
of section 401(a)(4),
(B) contributions made on behalf of a participant in a
defined benefit plan, for purposes of section 401(a)(4), and
(C) contributions and benefits provided for a participant in
a plan described in section 414(k), for purposes of this
section
shall not be made on a basis inconsistent with regulations
prescribed by the Secretary.
(7) Benefits under certain collectively bargained plans
For a year, the limitation referred to in paragraph (1)(B)
shall not apply to benefits with respect to a participant under a
defined benefit plan (other than a multiemployer plan) -
(A) which is maintained for such year pursuant to a
collective bargaining agreement between employee
representatives and one or more employers,
(B) which, at all times during such year, has at least 100
participants,
(C) under which benefits are determined solely by reference
to length of service, the particular years during which service
was rendered, age at retirement, and date of retirement,
(D) which provides that an employee who has at least 4 years
of service has a nonforfeitable right to 100 percent of his
accrued benefit derived from employer contributions, and
(E) which requires, as a condition of participation in the
plan, that an employee complete a period of not more than 60
consecutive days of service with the employer or employers
maintaining the plan.
This paragraph shall not apply to a participant whose
compensation for any 3 years during the 10-year period
immediately preceding the year in which he separates from service
exceeded the average compensation for such 3 years of all
participants in such plan. This paragraph shall not apply to a
participant for any period for which he is a participant under
another plan to which this section applies which is maintained by
an employer maintaining this plan. For any year for which the
paragraph applies to benefits with respect to a participant,
paragraph (1)(A) and subsection (d)(1)(A) shall be applied with
respect to such participant by substituting one-half the amount
otherwise applicable for such year under paragraph (1)(A) for
"$160,000".
(8) Social security retirement age defined
For purposes of this subsection, the term "social security
retirement age" means the age used as the retirement age under
section 216(l) of the Social Security Act, except that such
section shall be applied -
(A) without regard to the age increase factor, and
(B) as if the early retirement age under section 216(l)(2) of
such Act were 62.
(9) Special rule for commercial airline pilots
(A) In general
Except as provided in subparagraph (B), in the case of any
participant who is a commercial airline pilot, if, as of the
time of the participant's retirement, regulations prescribed by
the Federal Aviation Administration require an individual to
separate from service as a commercial airline pilot after
attaining any age occurring on or after age 60 and before age
62, paragraph (2)(C) shall be applied by substituting such age
for age 62.
(B) Individuals who separate from service before age 60
If a participant described in subparagraph (A) separates from
service before age 60, the rules of paragraph (2)(C) shall
apply.
(10) Special rule for State and local government plans
(A) Limitation to equal accrued benefit
In the case of a plan maintained for its employees by any
State or political subdivision thereof, or by any agency or
instrumentality of the foregoing, the limitation with respect
to a qualified participant under this subsection shall not be
less than the accrued benefit of the participant under the plan
(determined without regard to any amendment of the plan made
after October 14, 1987).
(B) Qualified participant
For purposes of this paragraph, the term "qualified
participant" means a participant who first became a participant
in the plan maintained by the employer before January 1, 1990.
(C) Election
(i) In general
This paragraph shall not apply to any plan unless each
employer maintaining the plan elects before the close of the
1st plan year beginning after December 31, 1989, to have this
subsection (other than paragraph (2)(G)).
(ii) Revocation of election
An election under clause (i) may be revoked not later than
the last day of the third plan year beginning after the date
of the enactment of this clause. The revocation shall apply
to all plan years to which the election applied and to all
subsequent plan years. Any amount paid by a plan in a taxable
year ending after the revocation shall be includible in
income in such taxable year under the rules of this chapter
in effect for such taxable year, except that, for purposes of
applying the limitations imposed by this section, any portion
of such amount which is attributable to any taxable year
during which the election was in effect shall be treated as
received in such taxable year.
(11) Special limitation rule for governmental and multiemployer
plans
In the case of a governmental plan (as defined in section
414(d)) or a multiemployer plan (as defined in section 414(f)),
subparagraph (B) of paragraph (1) shall not apply.
(c) Limitation for defined contribution plans
(1) In general
Contributions and other additions with respect to a participant
exceed the limitation of this subsection if, when expressed as an
annual addition (within the meaning of paragraph (2)) to the
participant's account, such annual addition is greater than the
lesser of -
(A) $40,000, or
(B) 100 percent of the participant's compensation.
(2) Annual addition
For purposes of paragraph (1), the term "annual addition" means
the sum of any year of -
(A) employer contributions,
(B) the employee contributions, and
(C) forfeitures.
For the purposes of this paragraph, employee contributions under
subparagraph (B) are determined without regard to any rollover
contributions (as defined in sections 402(c), 403(a)(4),
403(b)(8), 408(d)(3), and 457(e)(16)) without regard to employee
contributions to a simplified employee pension which are
excludable from gross income under section 408(k)(6).
Subparagraph (B) of paragraph (1) shall not apply to any
contribution for medical benefits (within the meaning of section
419A(f)(2)) after separation from service which is treated as an
annual addition.
(3) Participant's compensation
For purposes of paragraph (1) -
(A) In general
The term "participant's compensation" means the compensation
of the participant from the employer for the year.
(B) Special rule for self-employed individuals
In the case of an employee within the meaning of section
401(c)(1), subparagraph (A) shall be applied by substituting
"the participant's earned income (within the meaning of section
401(c)(2) but determined without regard to any exclusion under
section 911)" for "compensation of the participant from the
employer".
(C) Special rules for permanent and total disability
In the case of a participant in any defined contribution plan
-
(i) who is permanently and totally disabled (as defined in
section 22(e)(3)),
(ii) who is not a highly compensated employee (within the
meaning of section 414(q)), and
(iii) with respect to whom the employer elects, at such
time and in such manner as the Secretary may prescribe, to
have this subparagraph apply,
the term "participant's compensation" means the compensation
the participant would have received for the year if the
participant was paid at the rate of compensation paid
immediately before becoming permanently and totally disabled.
This subparagraph shall apply only if contributions made with
respect to amounts treated as compensation under this
subparagraph are nonforfeitable when made. If a defined
contribution plan provides for the continuation of
contributions on behalf of all participants described in clause
(i) for a fixed or determinable period, this subparagraph shall
be applied without regard to clauses (ii) and (iii).
(D) Certain deferrals included
The term "participant's compensation" shall include -
(i) any elective deferral (as defined in section
402(g)(3)), and
(ii) any amount which is contributed or deferred by the
employer at the election of the employee and which is not
includible in the gross income of the employee by reason of
section 125, 132(f)(4), or 457.
(E) Annuity contracts
In the case of an annuity contract described in section
403(b), the term "participant's compensation" means the
participant's includible compensation determined under section
403(b)(3).
[(4) Repealed. Pub. L. 107-16, title VI, Sec. 632(a)(3)(E), June
7, 2001, 115 Stat. 114]
[(5) Repealed. Pub. L. 97-248, title II, Sec. 238(d)(5), Sept. 3,
1982, 96 Stat. 513]
(6) Special rule for employee stock ownership plans
If no more than one-third of the employer contributions to an
employee stock ownership plan (as described in section
4975(e)(7)) for a year which are deductible under paragraph (9)
of section 404(a) are allocated to highly compensated employees
(within the meaning of section 414(q)), the limitations imposed
by this section shall not apply to -
(A) forfeitures of employer securities (within the meaning of
section 409) under such an employee stock ownership plan if
such securities were acquired with the proceeds of a loan (as
described in section 404(a)(9)(A)), or
(B) employer contributions to such an employee stock
ownership plan which are deductible under section 404(a)(9)(B)
and charged against the participant's account.
The amount of any qualified gratuitous transfer (as defined in
section 664(g)(1)) allocated to a participant for any limitation
year shall not exceed the limitations imposed by this section,
but such amount shall not be taken into account in determining
whether any other amount exceeds the limitations imposed by this
section.
(7) Special rules relating to church plans
(A) Alternative contribution limitation
(i) In general
Notwithstanding any other provision of this subsection, at
the election of a participant who is an employee of a church
or a convention or association of churches, including an
organization described in section 414(e)(3)(B)(ii),
contributions and other additions for an annuity contract or
retirement income account described in section 403(b) with
respect to such participant, when expressed as an annual
addition to such participant's account, shall be treated as
not exceeding the limitation of paragraph (1) if such annual
addition is not in excess of $10,000.
(ii) $40,000 aggregate limitation
The total amount of additions with respect to any
participant which may be taken into account for purposes of
this subparagraph for all years may not exceed $40,000.
(B) Number of years of service for duly ordained, commissioned,
or licensed ministers or lay employees
For purposes of this paragraph -
(i) all years of service by -
(I) a duly ordained, commissioned, or licensed minister
of a church, or
(II) a lay person,
as an employee of a church, a convention or association of
churches, including an organization described in section
414(e)(3)(B)(ii), shall be considered as years of service for
1 employer, and
(ii) all amounts contributed for annuity contracts by each
such church (or convention or association of churches) or
such organization during such years for such minister or lay
person shall be considered to have been contributed by 1
employer.
(C) Foreign missionaries
In the case of any individual described in subparagraph (D)
performing services outside the United States, contributions
and other additions for an annuity contract or retirement
income account described in section 403(b) with respect to such
employee, when expressed as an annual addition to such
employee's account, shall not be treated as exceeding the
limitation of paragraph (1) if such annual addition is not in
excess of the greater of $3,000 or the employee's includible
compensation determined under section 403(b)(3).
(D) Annual addition
For purposes of this paragraph, the term "annual addition"
has the meaning given such term by paragraph (2).
(E) Church, convention or association of churches
For purposes of this paragraph, the terms "church" and
"convention or association of churches" have the same meaning
as when used in section 414(e).
(d) Cost-of-living adjustments
(1) In general
The Secretary shall adjust annually -
(A) the $160,000 amount in subsection (b)(1)(A),
(B) in the case of a participant who is separated from
service, the amount taken into account under subsection
(b)(1)(B), and
(C) the $40,000 amount in subsection (c)(1)(A),
for increases in the cost-of-living in accordance with
regulations prescribed by the Secretary.
(2) Method
The regulations prescribed under paragraph (1) shall provide
for -
(A) an adjustment with respect to any calendar year based on
the increase in the applicable index for the calendar quarter
ending September 30 of the preceding calendar year over such
index for the base period, and
(B) adjustment procedures which are similar to the procedures
used to adjust benefit amounts under section 215(i)(2)(A) of
the Social Security Act.
(3) Base period
For purposes of paragraph (2) -
(A) $160,000 amount
The base period taken into account for purposes of paragraph
(1)(A) is the calendar quarter beginning July 1, 2001.
(B) Separations after December 31, 1994
The base period taken into account for purposes of paragraph
(1)(B) with respect to individuals separating from service with
the employer after December 31, 1994, is the calendar quarter
beginning July 1 of the calendar year preceding the calendar
year in which such separation occurs.
(C) Separations before January 1, 1995
The base period taken into account for purposes of paragraph
(1)(B) with respect to individuals separating from service with
the employer before January 1, 1995, is the calendar quarter
beginning October 1 of the calendar year preceding the calendar
year in which such separation occurs.
(D) $40,000 amount
The base period taken into account for purposes of paragraph
(1)(C) is the calendar quarter beginning July 1, 2001.
(4) Rounding
(A) $160,000 amount
Any increase under subparagraph (A) of paragraph (1) which is
not a multiple of $5,000 shall be rounded to the next lowest
multiple of $5,000.
(B) $40,000 amount
Any increase under subparagraph (C) of paragraph (1) which is
not a multiple of $1,000 shall be rounded to the next lowest
multiple of $1,000.
[(e) Repealed. Pub. L. 104-188, title I, Sec. 1452(a), Aug. 20,
1996, 110 Stat. 1816]
(f) Combining of plans
(1) In general
For purposes of applying the limitations of subsections (b) and
(c) -
(A) all defined benefit plans (whether or not terminated) of
an employer are to be treated as one defined benefit plan, and
(B) all defined contribution plans (whether or not
terminated) of an employer are to be treated as one defined
contribution plan.
(2) Annual compensation taken into account for defined benefit
plans
If the employer has more than one defined benefit plan -
(A) subsection (b)(1)(B) shall be applied separately with
respect to each such plan, but
(B) in applying subsection (b)(1)(B) to the aggregate of such
defined benefit plans for purposes of this subsection, the high
3 years of compensation taken into account shall be the period
of consecutive calendar years (not more than 3) during which
the individual had the greatest aggregate compensation from the
employer.
(3) Exception for multiemployer plans
Notwithstanding paragraph (1) and subsection (g), a
multiemployer plan (as defined in section 414(f)) shall not be
combined or aggregated -
(A) with any other plan which is not a multiemployer plan for
purposes of applying subsection (b)(1)(B) to such other plan,
or
(B) with any other multiemployer plan for purposes of
applying the limitations established in this section.
(g) Aggregation of plans
Except as provided in subsection (f)(3), the Secretary, in
applying the provisions of this section to benefits or
contributions under more than one plan maintained by the same
employer, and to any trusts, contracts, accounts, or bonds referred
to in subsection (a)(2), with respect to which the participant has
the control required under section 414(b) or (c), as modified by
subsection (h), shall, under regulations prescribed by the
Secretary, disqualify one or more trusts, plans, contracts,
accounts, or bonds, or any combination thereof until such benefits
or contributions do not exceed the limitations contained in this
section. In addition to taking into account such other factors as
may be necessary to carry out the purposes of subsection (f), the
regulations prescribed under this paragraph shall provide that no
plan which has been terminated shall be disqualified until all
other trusts, plans, contracts, accounts, or bonds have been
disqualified.
(h) 50 percent control
For purposes of applying subsections (b) and (c) of section 414
to this section, the phrase "more than 50 percent" shall be
substituted for the phrase "at least 80 percent" each place it
appears in section 1563(a)(1).
(i) Records not available for past periods
Where for the period before January 1, 1976, or (if later) the
first day of the first plan year of the plan, the records necessary
for the application of this section are not available, the
Secretary may by regulations prescribe alternate methods for
determining the amounts to be taken into account for such period.
(j) Regulations; definition of year
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this section, including, but
not limited to, regulations defining the term "year" for purposes
of any provision of this section.
(k) Special rules
(1) Defined benefit plan and defined contribution plan
For purposes of this title, the term "defined contribution
plan" or "defined benefit plan" means a defined contribution plan
(within the meaning of section 414(i)) or a defined benefit plan
(within the meaning of section 414(j)), whichever applies, which
is -
(A) a plan described in section 401(a) which includes a trust
which is exempt from tax under section 501(a),
(B) an annuity plan described in section 403(a),
(C) an annuity contract described in section 403(b), or
(D) a simplified employee pension.
(2) Contributions to provide cost-of-living protection under
defined benefit plans
(A) In general
In the case of a defined benefit plan which maintains a
qualified cost-of-living arrangement -
(i) any contribution made directly by an employee under
such an arrangement shall not be treated as an annual
addition for purposes of subsection (c), and
(ii) any benefit under such arrangement which is allocable
to an employer contribution which was transferred from a
defined contribution plan and to which the requirements of
subsection (c) were applied shall, for purposes of subsection
(b), be treated as a benefit derived from an employee
contribution (and subsection (c) shall not again apply to
such contribution by reason of such transfer).
(B) Qualified cost-of-living arrangement defined
For purposes of this paragraph, the term "qualified
cost-of-living arrangement" means an arrangement under a
defined benefit plan which -
(i) provides a cost-of-living adjustment to a benefit
provided under such plan or a separate plan subject to the
requirements of section 412, and
(ii) meets the requirements of subparagraphs (C), (D), (E),
and (F) and such other requirements as the Secretary may
prescribe.
(C) Determination of amount of benefit
An arrangement meets the requirement of this subparagraph
only if the cost-of-living adjustment of participants is based
-
(i) on increases in the cost-of-living after the annuity
starting date, and
(ii) on average cost-of-living increases determined by
reference to 1 or more indexes prescribed by the Secretary,
except that the arrangement may provide that the increase for
any year will not be less than 3 percent of the retirement
benefit (determined without regard to such increase).
(D) Arrangement elective; time for election
An arrangement meets the requirements of this subparagraph
only if it is elective, it is available under the same terms to
all participants, and it provides that such election may at
least be made in the year in which the participant -
(i) attains the earliest retirement age under the defined
benefit plan (determined without regard to any requirement of
separation from service), or
(ii) separates from service.
(E) Nondiscrimination requirements
An arrangement shall not meet the requirements of this
subparagraph if the Secretary finds that a pattern of
discrimination exists with respect to participation.
(F) Special rules for key employees
(i) In general
An arrangement shall not meet the requirements of this
paragraph if any key employee is eligible to participate.
(ii) Key employee
For purposes of this subparagraph, the term "key employee"
has the meaning given such term by section 416(i)(1), except
that in the case of a plan other than a top-heavy plan
(within the meaning of section 416(g)), such term shall not
include an individual who is a key employee solely by reason
of section 416(i)(1)(A)(i).
(3) Repayments of cashouts under governmental plans
In the case of any repayment of contributions (including
interest thereon) to the governmental plan with respect to an
amount previously refunded upon a forfeiture of service credit
under the plan or under another governmental plan maintained by a
State or local government employer within the same State, any
such repayment shall not be taken into account for purposes of
this section.
(4) Special rules for sections 403(b) and 408
For purposes of this section, any annuity contract described in
section 403(b) for the benefit of a participant shall be treated
as a defined contribution plan maintained by each employer with
respect to which the participant has the control required under
subsection (b) or (c) of section 414 (as modified by subsection
(h)). For purposes of this section, any contribution by an
employer to a simplified employee pension plan for an individual
for a taxable year shall be treated as an employer contribution
to a defined contribution plan for such individual for such year.
(l) Treatment of certain medical benefits
(1) In general
For purposes of this section, contributions allocated to any
individual medical account which is part of a pension or annuity
plan shall be treated as an annual addition to a defined
contribution plan for purposes of subsection (c). Subparagraph
(B) of subsection (c)(1) shall not apply to any amount treated as
an annual addition under the preceding sentence.
(2) Individual medical benefit account
For purposes of paragraph (1), the term "individual medical
benefit account" means any separate account -
(A) which is established for a participant under a pension or
annuity plan, and
(B) from which benefits described in section 401(h) are
payable solely to such participant, his spouse, or his
dependents.
(m) Treatment of qualified governmental excess benefit arrangements
(1) Governmental plan not affected
In determining whether a governmental plan (as defined in
section 414(d)) meets the requirements of this section, benefits
provided under a qualified governmental excess benefit
arrangement shall not be taken into account. Income accruing to a
governmental plan (or to a trust that is maintained solely for
the purpose of providing benefits under a qualified governmental
excess benefit arrangement) in respect of a qualified
governmental excess benefit arrangement shall constitute income
derived from the exercise of an essential governmental function
upon which such governmental plan (or trust) shall be exempt from
tax under section 115.
(2) Taxation of participant
For purposes of this chapter -
(A) the taxable year or years for which amounts in respect of
a qualified governmental excess benefit arrangement are
includible in gross income by a participant, and
(B) the treatment of such amounts when so includible by the
participant,
shall be determined as if such qualified governmental excess
benefit arrangement were treated as a plan for the deferral of
compensation which is maintained by a corporation not exempt from
tax under this chapter and which does not meet the requirements
for qualification under section 401.
(3) Qualified governmental excess benefit arrangement
For purposes of this subsection, the term "qualified
governmental excess benefit arrangement" means a portion of a
governmental plan if -
(A) such portion is maintained solely for the purpose of
providing to participants in the plan that part of the
participant's annual benefit otherwise payable under the terms
of the plan that exceeds the limitations on benefits imposed by
this section,
(B) under such portion no election is provided at any time to
the participant (directly or indirectly) to defer compensation,
and
(C) benefits described in subparagraph (A) are not paid from
a trust forming a part of such governmental plan unless such
trust is maintained solely for the purpose of providing such
benefits.
(n) Special rules relating to purchase of permissive service credit
(1) In general
If an employee makes 1 or more contributions to a defined
benefit governmental plan (within the meaning of section 414(d))
to purchase permissive service credit under such plan, then the
requirements of this section shall be treated as met only if -
(A) the requirements of subsection (b) are met, determined by
treating the accrued benefit derived from all such
contributions as an annual benefit for purposes of subsection
(b), or
(B) the requirements of subsection (c) are met, determined by
treating all such contributions as annual additions for
purposes of subsection (c).
(2) Application of limit
For purposes of -
(A) applying paragraph (1)(A), the plan shall not fail to
meet the reduced limit under subsection (b)(2)(C) solely by
reason of this subsection, and
(B) applying paragraph (1)(B), the plan shall not fail to
meet the percentage limitation under subsection (c)(1)(B)
solely by reason of this subsection.
(3) Permissive service credit
For purposes of this subsection -
(A) In general
The term "permissive service credit" means service credit -
(i) recognized by the governmental plan for purposes of
calculating a participant's benefit under the plan,
(ii) which such participant has not received under such
governmental plan, and
(iii) which such participant may receive only by making a
voluntary additional contribution, in an amount determined
under such governmental plan, which does not exceed the
amount necessary to fund the benefit attributable to such
service credit.
(B) Limitation on nonqualified service credit
A plan shall fail to meet the requirements of this section if
-
(i) more than 5 years of permissive service credit
attributable to nonqualified service are taken into account
for purposes of this subsection, or
(ii) any permissive service credit attributable to
nonqualified service is taken into account under this
subsection before the employee has at least 5 years of
participation under the plan.
(C) Nonqualified service
For purposes of subparagraph (B), the term "nonqualified
service" means service for which permissive service credit is
allowed other than -
(i) service (including parental, medical, sabbatical, and
similar leave) as an employee of the Government of the United
States, any State or political subdivision thereof, or any
agency or instrumentality of any of the foregoing (other than
military service or service for credit which was obtained as
a result of a repayment described in subsection (k)(3)),
(ii) service (including parental, medical, sabbatical, and
similar leave) as an employee (other than as an employee
described in clause (i)) of an educational organization
described in section 170(b)(1)(A)(ii) which is a public,
private, or sectarian school which provides elementary or
secondary education (through grade 12), as determined under
State law,
(iii) service as an employee of an association of employees
who are described in clause (i), or
(iv) military service (other than qualified military
service under section 414(u)) recognized by such governmental
plan.
In the case of service described in clauses (!1) (i), (ii), or
(iii), such service will be nonqualified service if recognition
of such service would cause a participant to receive a
retirement benefit for the same service under more than one
plan.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 2004(a)(2), Sept. 2, 1974, 88
Stat. 979; amended Pub. L. 94-455, title VIII, Sec. 803(b)(4), (f),
title XV, Secs. 1501(b)(3), 1502(a)(1), 1511(a), title XIX, Secs.
1901(a)(65), (b)(8)(D), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat.
1584, 1589, 1735-1737, 1741, 1775, 1794, 1834; Pub. L. 95-600,
title I, Secs. 141(f)(7), 152(g), 153(a), Nov. 6, 1978, 92 Stat.
2795, 2800; Pub. L. 96-222, title I, Sec. 101(a)(7)(L)(i)(VII),
(iv)(I), (10)(I), (J)(iii), (11), 94 Stat. 199, 200, 203, 204; Pub.
L. 96-605, title II, Sec. 222(a), Dec. 28, 1980, 94 Stat. 3528;
Pub. L. 97-34, title III, Secs. 311(g)(4), (h)(3), 333(b)(1), Aug.
13, 1981, 95 Stat. 281, 282, 297; Pub. L. 97-248, title II, Secs.
235(a)-(e), 238(d)(5), 251(c)(1), (2), 253(a), Sept. 3, 1982, 96
Stat. 505-507, 513, 530, 532; Pub. L. 98-21, title I, Sec.
122(c)(5), Apr. 20, 1983, 97 Stat. 87; Pub. L. 98-369, div. A,
title I, Sec. 15, title IV, Sec. 491(d)(28)-(32), (e)(6), title
(V), Sec. 528(a), title VII, Sec. 713(a)(1), (3), (d)(4)(B), (7),
(k), July 18, 1984, 98 Stat. 505, 850, 853, 876, 955, 956, 958,
960; Pub. L. 99-514, title XI, Secs. 1106(a)-(c)(1), (e)-(g),
1108(g)(5), 1114(b)(12), 1174(d)(1), (2), title XVIII, Secs.
1847(b)(4), 1852(h)(2), (3), 1875(c)(9), (11), 1898(b)(15)(C),
1899A(13), Oct. 22, 1986, 100 Stat. 2420, 2422, 2424, 2425, 2434,
2451, 2518, 2856, 2869, 2895, 2951, 2958; Pub. L. 100-647, title I,
Secs. 1011(d)(2), (3), (6), (7), 1018(t)(3)(B), (8)(D), title VI,
Secs. 6054(a), 6059(a), Nov. 10, 1988, 102 Stat. 3459, 3460, 3588,
3589, 3696, 3699; Pub. L. 101-239, title VII, Sec. 7304(c)(1), Dec.
19, 1989, 103 Stat. 2353; Pub. L. 102-318, title V, Sec.
521(b)(23)-(25), July 3, 1992, 106 Stat. 311, 312; Pub. L. 103-465,
title VII, Secs. 732(b), 767(b), Dec. 8, 1994, 108 Stat. 5004,
5038; Pub. L. 104-188, title I, Secs. 1434(a), 1444(a), (b)(1),
(c), (d), 1446(a), 1449(b), 1452(a), (c)(1)-(6), 1704(t)(75), Aug.
20, 1996, 110 Stat. 1807, 1809-1811, 1814, 1816, 1891; Pub. L.
105-34, title XV, Secs. 1526(a), (b), 1527(a), 1530(c)(3), (4),
Aug. 5, 1997, 111 Stat. 1072-1074, 1078; Pub. L. 106-554, Sec.
1(a)(7) [title III, Sec. 314(e)(1)], Dec. 21, 2000, 114 Stat. 2763,
2763A-643; Pub. L. 107-16, title VI, Secs. 611(a), (b), (h),
632(a)(1), (3)(C)-(F), (b)(1), 641(e)(9), (10), 654(a), (b), June
7, 2001, 115 Stat. 96, 97, 100, 113-115, 121, 130, 131; Pub. L.
107-147, title IV, Sec. 411(p)(4), Mar. 9, 2002, 116 Stat. 50.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The Social Security Act, referred to in subsecs. (b)(8) and
(d)(2)(B), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended,
which is classified generally to chapter 7 (Sec. 301 et seq.) of
Title 42, The Public Health and Welfare. Sections 215(i)(2)(A) and
216(l) of the Act enacted sections 415(i)(2)(A) and 416(l) of Title
42, respectively. For complete classification of this Act to the
Code, see Tables.
The date of the enactment of this clause, referred to in subsec.
(b)(10)(C)(ii), is the date of enactment of Pub. L. 104-188, which
was approved Aug. 20, 1996.
-MISC1-
AMENDMENTS
2002 - Subsec. (c)(7). Pub. L. 107-147 amended heading and text
of par. (7) generally, substituting provisions relating to special
rules relating to church plans for provisions relating to certain
contributions by church plans not treated as exceeding limit and
adding provisions relating to foreign missionaries and definitions
of "church" and "convention or association of churches".
2001 - Subsec. (a)(2). Pub. L. 107-16, Secs. 632(a)(3)(C), 901,
temporarily struck out ", and the amount of the contribution for
such portion shall reduce the exclusion allowance as provided in
section 403(b)(2)" before period at end. See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (b)(1)(A). Pub. L. 107-16, Secs. 611(a)(1)(A), 901,
temporarily substituted "$160,000" for "$90,000". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (b)(2)(A), (B). Pub. L. 107-16, Secs. 641(e)(9), 901,
temporarily substituted "403(b)(8), 408(d)(3), and 457(e)(16)" for
"and 408(d)(3)". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (b)(2)(C). Pub. L. 107-16, Secs. 611(a)(1)(B), (2), 901,
in heading temporarily substituted "$160,000" for "$90,000" and
"age 62" for "the social security retirement age" and in text
temporarily substituted "age 62" for "the social security
retirement age" in two places, "$160,000" for "$90,000" in two
places, and struck out at end "The reduction under this
subparagraph shall be made in such manner as the Secretary may
prescribe which is consistent with the reduction for old-age
insurance benefits commencing before the social security retirement
age under the Social Security Act." See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (b)(2)(D). Pub. L. 107-16, Secs. 611(a)(1)(B), (3), 901,
in heading temporarily substituted "$160,000" for "$90,000" and
"age 65" for "the social security retirement age" and in text
temporarily substituted "age 65" for "the social security
retirement age" in two places and "$160,000" for "$90,000" in two
places. See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (b)(2)(F). Pub. L. 107-16, Secs. 611(a)(5)(A), 901,
temporarily struck out subpar. (F), which related to the
application of subpars. (C) and (D) in the case of a governmental
plan, a plan maintained by a tax-exempt organization, or a
qualified merchant marine plan and defined "qualified merchant
marine plan". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (b)(7). Pub. L. 107-16, Secs. 654(a)(2), 901, temporarily
inserted "(other than a multiemployer plan)" after "defined benefit
plan" in introductory provisions. See Effective and Termination
Dates of 2001 Amendment note below.
Pub. L. 107-16, Secs. 611(a)(1)(C), 901, temporarily substituted
"one-half the amount otherwise applicable for such year under
paragraph (1)(A) for '$160,000' " for "the greater of $68,212 or
one-half the amount otherwise applicable for such year under
paragraph (1)(A) for '$90,000' " in concluding provisions. See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (b)(9). Pub. L. 107-16, Secs. 611(a)(5)(B), 901,
temporarily amended par. (9) generally, substituting present
provisions for provisions which provided that, in the case of any
participant who was a commercial airline pilot, the rule of par.
(2)(F)(i)(II) would apply, and if, as of the time of the
participant's retirement, regulations prescribed by the Federal
Aviation Administration required an individual to separate from
service as a commercial airline pilot after attaining any age
occurring on or after age 60 and before the social security
retirement age, par. (2)(C) would be applied by substituting such
age for the social security retirement age, and provisions which
provided that if a participant separated from service before age
60, the rules of par. (2)(F) would apply. See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (b)(10)(C)(i). Pub. L. 107-16, Secs. 611(a)(5)(C), 901,
temporarily struck out "applied without regard to paragraph (2)(F)"
before period at end. See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (b)(11). Pub. L. 107-16, Secs. 654(a)(1), 901,
temporarily amended heading and text of par. (11) generally. Prior
to amendment, text read as follows: "In the case of a governmental
plan (as defined in section 414(d)), subparagraph (B) of paragraph
(1) shall not apply." See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c)(1)(A). Pub. L. 107-16, Secs. 611(b)(1), 901,
temporarily substituted "$40,000" for "$30,000". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (c)(1)(B). Pub. L. 107-16, Secs. 632(a)(1), 901,
temporarily substituted "100 percent" for "25 percent". See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (c)(2). Pub. L. 107-16, Secs. 641(e)(10), 901,
temporarily substituted "408(d)(3), and 457(e)(16)" for "and
408(d)(3)" in concluding provisions. See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (c)(3)(E). Pub. L. 107-16, Secs. 632(a)(3)(D), 901,
temporarily added subpar. (E). See Effective and Termination Dates
of 2001 Amendment note below.
Subsec. (c)(4). Pub. L. 107-16, Secs. 632(a)(3)(E), 901,
temporarily struck out par. (4), which related to special election
for section 403(b) contracts purchased by educational
organizations, hospitals, home health service agencies, certain
churches, and other organizations.
Subsec. (c)(7). Pub. L. 107-16, Secs. 632(a)(3)(F), 901,
temporarily amended par. (7) generally, redesignating cls. (i) and
(ii) of subpar. (B) as subpars. (A) and (B), respectively,
reenacting subpar. (C) without change, striking out former subpar.
(A), which directed that any contribution or addition with respect
to any participant, when expressed as an annual addition, which was
allocable to the application of section 403(b)(2)(D) to such
participant for such year, would be treated as not exceeding the
limitations of par. (1), and striking out former subpar. (B), cl.
(iii), which prohibited making of election under this subpar. for
any year if an election had been made under former par. (4)(A) for
such year. See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (d)(1)(A). Pub. L. 107-16, Secs. 611(a)(4)(A), 901,
temporarily substituted "$160,000" for "$90,000". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (d)(1)(C). Pub. L. 107-16, Secs. 611(b)(2)(A), 901,
temporarily substituted "$40,000" for "$30,000". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (d)(3)(A). Pub. L. 107-16, Secs. 611(a)(4)(B), 901, in
heading temporarily substituted "$160,000" for "$90,000" and in
text temporarily substituted "July 1, 2001" for "October 1, 1986".
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(3)(D). Pub. L. 107-16, Secs. 611(b)(2)(B), 901, in
heading temporarily substituted "$40,000" for "$30,000" and in text
temporarily substituted "July 1, 2001" for "October 1, 1993". See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(4). Pub. L. 107-16, Secs. 611(h), 901, temporarily
reenacted heading without change and amended text of par. (4)
generally. Prior to amendment, text read as follows: "Any increase
under subparagraph (A) or (C) of paragraph (1) which is not a
multiple of $5,000 shall be rounded to the next lowest multiple of
$5,000." See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (f)(3). Pub. L. 107-16, Secs. 654(b)(1), 901, temporarily
added par. (3). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (g). Pub. L. 107-16, Secs. 654(b)(2), 901, temporarily
substituted "Except as provided in subsection (f)(3), the
Secretary" for "The Secretary". See Effective and Termination Dates
of 2001 Amendment note below.
Subsec. (k)(4). Pub. L. 107-16, Secs. 632(b)(1), 901, temporarily
added par. (4). See Effective and Termination Dates of 2001
Amendment note below.
2000 - Subsec. (c)(3)(D)(ii). Pub. L. 106-554 substituted
"section 125, 132(f)(4), or" for "section 125 or".
1997 - Subsec. (b)(2)(G). Pub. L. 105-34, Sec. 1527(a),
substituted "participant, subparagraph (C) of this paragraph shall
not apply." for "participant -
"(i) subparagraph (C) shall not reduce the limitation of
paragraph (1)(A) to an amount less than $50,000, and
"(ii) the rules of subparagraph (F) shall apply.
The Secretary shall adjust the $50,000 amount in clause (i) at the
same time and in the same manner as under section 415(d)."
Subsec. (c)(6). Pub. L. 105-34, Sec. 1530(c)(3), inserted
concluding provisions "The amount of any qualified gratuitous
transfer (as defined in section 664(g)(1)) allocated to a
participant for any limitation year shall not exceed the
limitations imposed by this section, but such amount shall not be
taken into account in determining whether any other amount exceeds
the limitations imposed by this section."
Subsec. (e)(6), (7). Pub. L. 105-34, Sec. 1530(c)(4), added par.
(6) and redesignated former par. (6) as (7).
Subsec. (k)(3). Pub. L. 105-34, Sec. 1526(b), added par. (3).
Subsec. (n). Pub. L. 105-34, Sec. 1526(a), added subsec. (n).
1996 - Subsec. (a)(1). Pub. L. 104-188, Sec. 1452(c)(1), inserted
"or" at end of subpar. (A), struck out ", or" at end of subpar.
(B), and struck out subpar. (C) which read as follows: "in any case
in which an individual is a participant in both a defined benefit
plan and a defined contribution plan maintained by the employer,
the trust has been disqualified under subsection (g)."
Subsec. (b)(2)(E)(i). Pub. L. 104-188, Sec. 1449(b)(1),
substituted "For purposes of adjusting any limitation under
subparagraph (C) and, except as provided in clause (ii), for
purposes of adjusting any benefit under subparagraph (B)," for
"Except as provided in clause (ii), for purposes of adjusting any
benefit or limitation under subparagraph (B) or (C),".
Subsec. (b)(2)(E)(ii). Pub. L. 104-188, Sec. 1449(b)(2),
substituted "For purposes of adjusting any benefit under
subparagraph (B) for any form of benefit subject to section
417(e)(3)," for "For purposes of adjusting the benefit or
limitation of any form of benefit subject to section 417(e)(3),".
Subsec. (b)(2)(I). Pub. L. 104-188, Sec. 1444(c), added subpar.
(I).
Subsec. (b)(5)(B). Pub. L. 104-188, Sec. 1452(c)(2), struck out
"and subsection (e)" after "and (4)".
Subsec. (b)(10)(C). Pub. L. 104-188, Sec. 1444(d), designated
existing provisions as cl. (i), inserted heading, and added cl.
(ii).
Subsec. (b)(11). Pub. L. 104-188, Sec. 1444(a), added par. (11).
Subsec. (c)(3)(C). Pub. L. 104-188, Sec. 1446(a), inserted at end
"If a defined contribution plan provides for the continuation of
contributions on behalf of all participants described in clause (i)
for a fixed or determinable period, this subparagraph shall be
applied without regard to clauses (ii) and (iii)."
Subsec. (c)(3)(D). Pub. L. 104-188, Sec. 1434(a), added subpar.
(D).
Subsec. (e). Pub. L. 104-188, Sec. 1452(a), struck out subsec.
(e) which related to limitation in case of a defined benefit plan
and a defined contribution plan for same employee.
Subsec. (f)(1). Pub. L. 104-188, Sec. 1452(c)(3), in introductory
provisions, substituted "subsections (b) and (c)" for "subsections
(b), (c), and (e)".
Subsec. (g). Pub. L. 104-188, Sec. 1452(c)(4), in last sentence,
substituted "subsection (f)" for "subsections (e) and (f)".
Subsec. (k)(1)(C) to (F). Pub. L. 104-188, Sec. 1704(t)(75),
inserted "or" at end of subpar. (C), redesignated subpar. (F) as
(D), and struck out former subpars. (D) and (E) which read as
follows:
"(D) an individual retirement account described in section
408(a),
"(E) an individual retirement annuity described in section
408(b), or".
Subsec. (k)(2)(A)(i). Pub. L. 104-188, Sec. 1452(c)(5), amended
cl. (i) generally. Prior to amendment, cl. (i) read as follows:
"any contribution made directly by an employee under such
arrangement -
"(I) shall not be treated as an annual addition for purposes of
subsection (c), but
"(II) shall be so treated for purposes of subsection (e), and".
Subsec. (k)(2)(A)(ii). Pub. L. 104-188, Sec. 1452(c)(6),
substituted "subsection (c)" for "subsections (c) and (e)" before
"shall not again".
Subsec. (m). Pub. L. 104-188, Sec. 1444(b)(1), added subsec. (m).
1994 - Subsec. (b)(2)(E). Pub. L. 103-465, Sec. 767(b), added
cls. (i), (ii), and (v), redesignated former cls. (ii) and (iii) as
(iii) and (iv), respectively, and struck out former cl. (i) which
read as follows: "For purposes of adjusting any benefit or
limitation under subparagraph (B) or (C), the interest rate
assumption shall not be less than the greater of 5 percent or the
rate specified in the plan."
Subsec. (c)(1)(A). Pub. L. 103-465, Sec. 732(b)(2), struck out
"(or, if greater, 1/4 of the dollar limitation in effect under
subsection (b)(1)(A))" after "$30,000".
Subsec. (d). Pub. L. 103-465, Sec. 732(b)(1), amended subsec. (d)
generally, substituting present provisions for provisions
authorizing annual cost-of-living adjustments, outlining base
periods, and providing for a freeze on adjustment to defined
contribution and benefit limits.
1992 - Subsecs. (b)(2)(A), (B), (c)(2). Pub. L. 102-318
substituted "402(c)" for "402(a)(5)".
1989 - Subsec. (c)(6). Pub. L. 101-239 substituted "Special rule
for employee stock ownership plans" for "Special limitation for
employee stock ownership plan" in heading and amended text
generally, substituting introductory provisions and subpars. (A)
and (B) for former subpars. (A) to (C).
1988 - Subsec. (b)(2)(H)(ii). Pub. L. 100-647, Sec. 6059(a),
substituted "15" for "20".
Subsec. (b)(5)(B). Pub. L. 100-647, Sec. 1011(d)(6), inserted
"and subsection (e)" after "paragraphs (1)(B) and (4)".
Subsec. (b)(5)(D). Pub. L. 100-647, Sec. 1011(d)(2), substituted
"subparagraph (A)" for "this paragraph".
Subsec. (b)(10). Pub. L. 100-647, Sec. 6054(a), added par. (10).
Subsec. (c)(6)(A). Pub. L. 100-647, Sec. 1011(d)(7), substituted
"paragraph (1)(A)" for "paragraph (c)(1)(A) (as adjusted for such
year pursuant to subsection (d)(1))" and for "paragraph (c)(1)(A)
(as so adjusted)".
Subsec. (k). Pub. L. 100-647, Sec. 1018(t)(8)(D), repealed Pub.
L. 99-514, Sec. 1899A(13), see 1986 Amendment note below.
Subsec. (k)(2)(C)(ii). Pub. L. 100-647, Sec. 1011(d)(3)(A),
substituted "to such increase" for "to the arrangement".
Subsec. (k)(2)(D). Pub. L. 100-647, Sec. 1011(d)(3)(B), added
subpar. (D) and struck out former subpar. (D) which read as
follows: "An arrangement meets the requirements of this
subparagraph only if it is elective, it is available under the same
terms to all participants, and it provides that such election may
be made in -
"(i) the year in which the participant -
"(I) attains the earliest retirement age under the defined
benefit plan (determined without regard to any requirement of
separation from service), or
"(II) separates from service, or
"(ii) both such years."
Subsec. (l)(1). Pub. L. 100-647, Sec. 1018(t)(3)(B), made
technical correction to directory language of Pub. L. 99-514, Sec.
1852(h)(2). See 1986 Amendment note below.
1986 - Subsec. (b)(2)(B). Pub. L. 99-514, Sec. 1898(b)(15)(C),
substituted reference to section 417 for reference to section
401(a)(11)(G)(iii).
Subsec. (b)(2)(C). Pub. L. 99-514, Sec. 1106(b)(1)(A),
substituted in heading and in two places in text "the social
security retirement age" for "age 62" and substituted new last
sentence for "The reduction under this subparagraph shall not
reduce the limitation of paragraph (1)(A) below -
"(i) if the benefit begins at or after age 55, $75,000, or
"(ii) if the benefit begins before age 55, the amount which is
the equivalent of the $75,000 limitation for age 55."
Subsec. (b)(2)(D). Pub. L. 99-514, Sec. 1106(b)(1)(A)(i),
substituted in heading and in two places in text "the social
security retirement age" for "age 65".
Subsec. (b)(2)(E)(iii). Pub. L. 99-514, Sec. 1875(c)(9),
substituted "this subsection" for "adjusting any benefit or
limitation under subparagraph (B), (C), or (D)".
Subsec. (b)(2)(F) to (H). Pub. L. 99-514, Sec. 1106(b)(2), added
subpars. (F) to (H).
Subsec. (b)(5). Pub. L. 99-514, Sec. 1106(f), substituted
"Reduction for participation or service of less than 10 years" for
"Reduction for service less than 10 years" in heading and amended
text generally. Prior to amendment, text read as follows: "In the
case of an employee who has less than 10 years of service with the
employer, the limitation referred to in paragraph (1), and the
limitation referred to in paragraph (4), shall be the limitation
determined under such paragraph (without regard to this paragraph),
multiplied by a fraction, the numerator of which is the number of
years (or part thereof) of service with the employer and the
denominator of which is 10."
Subsec. (b)(8). Pub. L. 99-514, Sec. 1106(b)(1)(B), added par.
(8).
Subsec. (b)(9). Pub. L. 99-514, Sec. 1106(b)(3), added par. (9).
Subsec. (c)(1)(A). Pub. L. 99-514, Sec. 1106(a), amended subpar.
(A) generally, inserting "(or, if greater, 1/4 of the dollar
limitation in effect under subsection (b)(1)(A))".
Subsec. (c)(2). Pub. L. 99-514, Sec. 1108(g)(5), substituted
"which are excludable from gross income under section 408(k)(6)"
for "allowable as a deduction under section 219(a), and without
regard to deductible employee contributions within the meaning of
section 72(o)(5)" in last sentence.
Pub. L. 99-514, Sec. 1106(e)(2), inserted at end "Subparagraph
(B) of paragraph (1) shall not apply to any contribution for
medical benefits (within the meaning of section 419A(f)(2)) after
separation from service which is treated as an annual addition."
Subsec. (c)(2)(B). Pub. L. 99-514, Sec. 1106(e)(1), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "the lesser of -
"(i) the amount of the employee contributions in excess of 6
percent of his compensation, or
"(ii) one-half of the employee contributions, and".
Subsec. (c)(3)(C). Pub. L. 99-514, Sec. 1875(c)(11), substituted
"any defined contribution plan" for "a profit-sharing or stock
bonus plan".
Subsec. (c)(3)(C)(i). Pub. L. 99-514, Sec. 1847(b)(4),
substituted "section 22(e)(3)" for "section 37(e)(3)".
Subsec. (c)(3)(C)(ii). Pub. L. 99-514, Sec. 1114(b)(12),
substituted "a highly compensated employee (within the meaning of
section 414(q))" for "an officer, owner, or highly compensated".
Subsec. (c)(4)(A) to (C). Pub. L. 99-514, Sec. 1106(b)(4),
inserted "a health and welfare service agency," after "a home
health service agency,".
Subsec. (c)(6)(A). Pub. L. 99-514, Sec. 1174(d)(1), substituted
"highly compensated employees (within the meaning of section
414(q))" for "the group of employees consisting of officers,
shareholders owning more than 10 percent of the employer's stock
(determined under subparagraph (B)(iv)), or employees described in
subparagraph (B)(iii)".
Subsec. (c)(6)(B)(iii), (iv). Pub. L. 99-514, Sec. 1174(d)(2)(A),
struck out cls. (iii) and (iv) which read as follows:
"(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 pursuant to subsection (d)(1)), determined
without regard to subparagraph (A) of this paragraph, 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."
Subsec. (c)(6)(C). Pub. L. 99-514, Sec. 1174(d)(2)(B),
substituted "highly compensated employees (within the meaning of
section 414(q))" for "the group of employees consisting of
officers, shareholders owning more than 10 percent of the
employer's stock (determined under subparagraph (B)(iv)), or
employees described in subparagraph (B)(iii)".
Subsec. (d)(1)(B), (C). Pub. L. 99-514, Sec. 1106(g)(1),
redesignated subpar. (C) as (B) and struck out former subpar. (B),
which related to the $30,000 amount in subsection (c)(1)(A).
Subsec. (d)(2)(A). Pub. L. 99-514, Sec. 1106(g)(2)(A),
substituted "subparagraph (A)" for "subparagraphs (A) and (B)".
Subsec. (d)(2)(B). Pub. L. 99-514, Sec. 1106(g)(2)(B),
substituted "subparagraph (B)" for "subparagraph (C)".
Subsec. (d)(3). Pub. L. 99-514, Sec. 1106(g)(3), substituted
"subparagraph (A)" for "subparagraph (A) or (B)".
Subsec. (k). Pub. L. 99-514, Sec. 1899A(13), which directed the
general amendment of subsec. (k) by striking out par. (1)
designation and redesignating subpars. (A) to (F) as pars. (1) to
(6), respectively, was repealed by Pub. L. 100-647, Sec.
1018(t)(8)(D).
Subsec. (k)(2). Pub. L. 99-514, Sec. 1106(c)(1), added par. (2)
relating to contributions to provide cost-of-living protection
under defined benefit plans.
Subsec. (l). Pub. L. 99-514, Sec. 1852(h)(3), substituted "a
pension or annuity plan" for "a defined benefit plan" in pars. (1)
and (2)(A).
Pub. L. 99-514, Sec. 1852(h)(2), as amended by Pub. L. 100-647,
Sec. 1018(t)(3)(B), inserted at end of par. (1) "Subparagraph (B)
of subsection (c)(1) shall not apply to any amount treated as an
annual addition under the preceding sentence."
1984 - Subsec. (a)(2). Pub. L. 98-369, Sec. 491(d)(28), struck
out subpar. (D) which related to application of this section to a
plan described in section 405(a), and in provision following
subpar. (C) struck out "405(a)," after "403(b),".
Subsec. (b)(2)(A), (B). Pub. L. 98-369, Sec. 491(d)(29), (30),
substituted "and 408(d)(3)" for "408(d)(3) and 409(b)(3)(C)".
Subsec. (b)(2)(C). Pub. L. 98-369, Sec. 713(a)(1)(A), substituted
provision respecting determination as to whether $90,000 limitation
has been satisfied by reducing the limitation of par. (1)(A) so
that such limitation (as so reduced) equals an annual benefit
(beginning when such retirement income benefit begins) which is
equivalent to a $90,000 annual benefit beginning at age 62 for
provision for such determination by adjusting the benefit so that
it is equivalent to such a benefit beginning at age 62.
Subsec. (b)(2)(D). Pub. L. 98-369, Sec. 713(a)(1)(B), substituted
"limit" for "limitation" in heading, and in text substituted
provision respecting determination as to whether $90,000 limitation
has been satisfied by increasing the limitation of par. (1)(A) so
that such limitation (as so increased) equals an annual benefit
(beginning when such retirement income benefit begins) which is
equivalent to a $90,000 annual benefit beginning at age 65 for
provision for such determination by adjusting the benefit so that
it is equivalent to such a benefit beginning at age 65.
Subsec. (b)(2)(E). Pub. L. 98-369, Sec. 713(a)(1)(C), provided in
cls. (i) and (iii) for adjustment of any limitation and substituted
in cl. (ii) "any limitation" for "any benefit".
Subsec. (c)(2). Pub. L. 98-369, Sec. 491(d)(31), substituted "and
408(d)(3)" for "405(d)(3), 408(d)(3), and 409(b)(3)(C)".
Subsec. (c)(3)(C). Pub. L. 98-369, Sec. 713(k), inserted in
introductory text "in a profit-sharing or stock bonus plan", and
substituted in last sentence "if contributions made with respect to
amounts treated as compensation under this subparagraph" for "if
contributions made with respect to such participant".
Subsec. (c)(6)(B)(ii). Pub. L. 98-369, Sec. 491(e)(6),
substituted "section 409" for "section 409A".
Subsec. (c)(6)(C). Pub. L. 98-369, Sec. 713(d)(4)(B)(i)-(iii),
substituted "paragraph (9)" for "paragraph (10)" of section 404(a),
section "404(a)(9)(A)" for "404(a)(10)(A)", and section
"404(a)(9)(B)" for "404(a)(10)(B)".
Subsec. (c)(7), (8). Pub. L. 98-369, Sec. 713(d)(7)(A),
redesignated par. (8) as (7), and struck out former par. (7)
relating to certain level premium annuity contracts under plans
benefiting owner-employees.
Subsec. (d)(2)(A). Pub. L. 98-369, Sec. 15(b), substituted "1986"
for "1984".
Subsec. (d)(3). Pub. L. 98-369, Sec. 15(a), substituted "January
1, 1988" for "January 1, 1986".
Subsec. (e)(3)(B)(ii)(II). Pub. L. 98-369, Sec. 713(d)(7)(B),
struck out reference to subsec. (c)(8).
Subsec. (e)(6)(C). Pub. L. 98-369, Sec. 713(a)(3), added subpar.
(C).
Subsec. (k)(1). Pub. L. 98-369, Sec. 491(d)(32), struck out
subpars. (C) and (H), which included a qualified bond purchase plan
described in section 405(a) and an individual retirement bond
described in section 409 within the term "defined contribution
plan" or "defined benefit plan", respectively, and redesignated
subpars. (D) to (G) as (C) to (F), respectively.
Subsec. (l). Pub. L. 98-369, Sec. 528(a), added subsec. (l).
1983 - Subsec. (c)(3)(C)(i). Pub. L. 98-21 substituted "section
37(e)(3)" for "section 105(d)(4)".
1982 - Subsec. (b)(1)(A). Pub. L. 97-248, Sec. 235(a)(1),
substituted "$90,000" for "$75,000".
Subsec. (b)(2)(C). Pub. L. 97-248, Sec. 235(a)(3)(A), (e)(1),
(2), inserted provisions relating to reduction under this
subparagraph, and substituted "$90,000" for "$75,000" and "62" for
"55", wherever appearing.
Subsec. (b)(2)(D), (E). Pub. L. 97-248, Sec. 235(e)(3), (4),
added subpars. (D) and (E).
Subsec. (b)(7). Pub. L. 97-248, Sec. 235(a)(3)(B), substituted
"the greater of $68,212 or one-half the amount otherwise applicable
for such year under paragraph (1)(A) for '$90,000' " for " '37,500'
for '75,000' ".
Subsec. (c)(1)(A). Pub. L. 97-248, Sec. 235(a)(2), substituted
"$30,000" for "$25,000".
Subsec. (c)(3). Pub. L. 97-248, Sec. 253(a), designated existing
provisions as subpars. (A) and (B) and added subpar. (C).
Subsec. (c)(4). Pub. L. 97-248, Sec. 251(c)(1), substituted ",
home health service agencies, and certain churches, etc." for "and
home health service agencies" in heading, in subpar. (A) inserted
"(as determined for purposes of section 403(b)(2))" after "by
taking into account his service for the employer", substituted "a
home health service agency, or a church, convention or association
of churches, or an organization described in section
414(e)(3)(B)(ii)" for "or a home health service agency" in subpars.
(A), (B) and (C), respectively, and, in subpar. (D), added cl.
(iv).
Subsec. (c)(5). Pub. L. 97-248, Sec. 238(d)(5), struck out par.
(5) relating to application with section 404(e)(4).
Subsec. (c)(8). Pub. L. 97-248, Sec. 251(c)(2), added par. (8).
Subsec. (d)(1). Pub. L. 97-248, Sec. 235(b)(1), substituted
"benefit amounts" for "primary insurance amounts" in provision
following subpar. (C).
Pub. L. 97-248, Sec. 235(b)(3), substituted "$90,000" for
"$75,000" in subpar. (A), and in subpar. (B) substituted "$30,000"
for "$25,000".
Subsec. (d)(2)(A). Pub. L. 97-248, Sec. 235(b)(2)(B), substituted
"1984" for "1974".
Subsec. (d)(3). Pub. L. 97-248, Sec. 235(b)(2)(A), added par.
(3).
Subsec. (e)(1). Pub. L. 97-248, Sec. 235(c)(1), substituted "1.0"
for "1.4".
Subsec. (e)(2)(B). Pub. L. 97-248, Sec. 235(c)(2)(A), substituted
provisions that for purposes of this subsection, the defined
benefit plan fraction for any year has a denominator which is the
lesser of the product of 1.25 multiplied by the dollar limitation
in effect under subsec. (b)(1)(A) for such year, or the product of
1.4 multiplied by the amount which may be taken into account under
subsec. (b)(1)(B) with respect to such individual under the plan
for such year, for provisions that such benefit plan fraction had a
denominator which was the projected annual benefit of the
participant under the plan (determined as of the close of the year)
if the plan provided the maximum benefit allowable under subsec.
(b).
Subsec. (e)(3)(B). Pub. L. 97-248, Sec. 235(c)(2)(B), substituted
provision that the defined contribution plan fraction for any year
has a denominator which, determined for such year and for each
prior year of service with the employer, is the lesser of either
the product of 1.25 multiplied by the dollar limitation in effect
under subsec. (c)(1)(A) for such year (determined without regard to
subsec. (c)(6)), or the product of 1.4 multiplied by the amount
which may be taken into account under subsec. (c)(1)(B) (or subsec.
(c)(7) or (8), if applicable) with respect to such individual under
such plan for such year, for provision that the denominator of such
fraction was the sum of the maximum amount of annual additions to
the participant's account which could have been made under subsec.
(c) for such year and for each prior year of service with the
employer (determined without regard to subsec. (c)(6)).
Subsec. (e)(6). Pub. L. 97-248, Sec. 235(d), added par. (6).
1981 - Subsec. (a)(2). Pub. L. 97-34, Sec. 311(g)(4)(A), struck
out in provision preceding subpar. (A) "Except as provided in
paragraph (3)", redesignated former subpar. (E) as (C), and in
subpar. (C) as so designated, inserted "described in section
408(k), or", redesignated former subpar. (F) as (D), struck out
former subpars. (C), relating to an individual retirement account
described under section 408(a), (D), relating to an individual
retirement annuity described in section 408(b), and (G), relating
to a retirement bond described in section 409, and in provision
following subpar. (D), substituted "such a contract, plan, or
pension," for "such contract, annuity plan, account, annuity, plan,
or bond" and "408(k)" for "408(a), 408(b), or 409".
Subsec. (a)(3). Pub. L. 97-34, Sec. 311(h)(3), struck out par.
(3) which provided that par. (2) not apply to an account, annuity,
or bond described in section 408(a), 408(b), or 409, established
for the benefit of the spouse of the individual contributing to
such account, or for such annuity or bond, if a deduction is
allowed under section 220 to such individual with respect to such
contribution for such year.
Subsec. (c)(2). Pub. L. 97-34, Sec. 311(g)(4)(B), included in
provision following subpar. (C) references to sections 403(b)(8)
and 405(d)(3) and inserted "without regard to employee
contributions to a simplified employee pension allowable as a
deduction under section 219(a), and without regard to deductible
employee contributions within the meaning of section 72(o)(5)".
Subsec. (c)(6)(C). Pub. L. 97-34, Sec. 333(b)(1), added subpar.
(C).
Subsec. (e)(5). Pub. L. 97-34, Sec. 311(g)(4)(C), struck out ",
any individual retirement account described in section 408(a), any
individual retirement annuity described in section 408(b), and any
retirement bond described in section 409," before "for the
benefit".
1980 - Subsec. (b)(7). Pub. L. 96-222, Sec. 101(a)(11),
substituted in subpar. (C) "under which benefits are determined
solely by reference to length of service, the particular years
during which service was rendered, age at retirement, and date of
retirement" for "benefits under which are determined by multiplying
a specified amount (which is the same amount for each participant)
by the number of the participant's years of service" and inserted
in text following subpar. (E) provisions requiring that this
paragraph not apply to a participant for any period for which he is
a participant under another plan to which this section applies
which is maintained by an employer maintaining this plan.
Subsec. (c)(6)(A). Pub. L. 96-605 inserted ", or purchased with
cash contributed," after "securities contributed".
Subsec. (c)(6)(B)(i). Pub. L. 96-222, Sec. 101(a)(7)(L)(i)(VII),
(iv)(I), substituted "a tax credit employee stock ownership plan"
for "an ESOP" and struck out "leveraged" before "employee".
Subsec. (e)(5). Pub. L. 96-222, Sec. 101(a)(10)(I), inserted
provisions requiring that for purposes of this section, any
contribution by an employer to a simplified employee pension for an
individual for a taxable year be treated as an employer
contribution to a defined contribution plan for such individual for
such year.
1978 - Subsec. (a)(2). Pub. L. 95-600, Sec. 152(g)(1), (2), as
amended by Pub. L. 96-222, Sec. 101(a)(10)(J)(iii), added subpar.
(E), redesignated former subpars. (E) and (F) as (F) and (G),
respectively, and in provision following subpar. (G) as so
redesignated, inserted "408(k)," after "408(b),".
Subsec. (b)(7). Pub. L. 95-600, Sec. 153(a), added par. (7).
Subsec. (c)(6)(B)(i). Pub. L. 95-600, Sec. 141(f)(7), substituted
"leveraged employee stock ownership plan (within the meaning of
section 4975(e)(7)) or an ESOP" for "a plan which meets the
requirements of section 4975(e)(7) or section 301(d) of the Tax
Reduction Act of 1975".
Subsec. (c)(6)(B)(ii). Pub. L. 95-600, Sec. 141(f)(7),
substituted "has the meaning given to such term by section 409A"
for "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".
Subsec. (e)(5). Pub. L. 95-600, Sec. 152(g)(3), inserted "any
simplified employee pension," after "section 408(b),".
Subsec. (k)(1)(G), (H). Pub. L. 95-600, Sec. 152(g)(4), added
subpar. (G) and redesignated former subpar. (G) as (H).
1976 - Subsec. (a)(2). Pub. L. 94-455, Sec. 1501(b)(3)(A),
substituted "Except as provided in paragraph (3), in the case" for
"In the case".
Subsec. (a)(3). Pub. L. 94-455, Sec. 1501(b)(3)(B), added par.
(3).
Subsec. (b)(2)(A). Pub. L. 94-455, Sec. 1901(a)(65)(A), inserted
closing parenthesis after "409(b)(3)(C)".
Subsec. (b)(2)(B). Pub. L. 94-455, Secs. 1901(a)(65)(B),
1906(b)(13)(A), struck out "or his delegate" after "Secretary" and
substituted "section 401(a)(11)(G)(iii)" for "section
401(a)(11)(H)(iii)".
Subsec. (b)(2)(C), (6). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (c)(4). Pub. L. 94-455, Secs. 1901(b)(8)(D),
1906(b)(13)(A), substituted "educational organizations" for
"educational institutions" in the heading and "educational
organization" for "educational institution" in subpars. (A), (B),
and (C), struck out "or his delegate" after "Secretary" in subpar.
(D)(i), and substituted "For purposes of this paragraph the term
'educational organization' means an educational organization
described in section 170(b)(1)(A)(ii)" for "For purposes of this
paragraph the term 'educational institution' means an educational
institution as defined in section 151(e)(4)" in subpar. (D)(ii).
Subsec. (c)(5). Pub. L. 94-455, Sec. 1502(a)(1), added par. (5).
Subsec. (c)(6). Pub. L. 94-455, Sec. 803(f)(1), added par. (6).
Subsec. (c)(7). Pub. L. 94-455, Sec. 1511(a), added par. (7).
Subsec. (d)(1). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
Subsec. (e)(3)(B). Pub. L. 94-455, Sec. 803(f)(2), substituted
"with the employer determined without regard to paragraph (6) of
such subsection)" for "with the employer".
Subsec. (e)(5). Pub. L. 94-455, Sec. 803(b)(4), substituted "For
purposes of this section" for "For purposes of this subsection".
Subsecs. (g), (i), (j). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
-CHANGE-
CHANGE OF NAME
Secretary of Health, Education, and Welfare redesignated
Secretary of Health and Human Services by section 3508(b) of Title
20, Education.
-MISC2-
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title VI, Sec. 611(i), June 7, 2001, 115 Stat.
100, as amended by Pub. L. 107-147, title IV, Sec. 411(j)(3), Mar.
9, 2002, 116 Stat. 47, provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 401, 402, 404, 408, 457, 501, and 505 of
this title] shall apply to years beginning after December 31, 2001.
"(2) Defined benefit plans. - The amendments made by subsection
(a) [amending this section] shall apply to years ending after
December 31, 2001."
"(3) Special rule. - In the case of plan that, on June 7, 2001,
incorporated by reference the limitation of section 415(b)(1)(A) of
the Internal Revenue Code of 1986, section 411(d)(6) of such Code
and section 204(g)(1) of the Employee Retirement Income Security
Act of 1974 [29 U.S.C. 1054(g)(1)] do not apply to a plan amendment
that -
"(A) is adopted on or before June 30, 2002,
"(B) reduces benefits to the level that would have applied
without regard to the amendments made by subsection (a) of this
section, and
"(C) is effective no earlier than the years described in
paragraph (2)."
Amendment by section 632(a)(1), (3)(C)-(F) of Pub. L. 107-16
applicable to years beginning after Dec. 31, 2001, see section
632(a)(4) of Pub. L. 107-16, set out as a note under section 72 of
this title.
Pub. L. 107-16, title VI, Sec. 632(b)(2), June 7, 2001, 115 Stat.
115, provided that:
"(A) In general. - The amendment made by paragraph (1) [amending
this section] shall apply to limitation years beginning after
December 31, 1999.
"(B) Exclusion allowance. - Effective for limitation years
beginning in 2000, in the case of any annuity contract described in
section 403(b) of the Internal Revenue Code of 1986, the amount of
the contribution disqualified by reason of section 415(g) of such
Code shall reduce the exclusion allowance as provided in section
403(b)(2) of such Code."
Amendment by section 641(e)(9), (10) of Pub. L. 107-16 applicable
to distributions after Dec. 31, 2001, see section 641(f)(1) of Pub.
L. 107-16, set out as a note under section 402 of this title.
Pub. L. 107-16, title VI, Sec. 654(c), June 7, 2001, 115 Stat.
131, provided that: "The amendments made by this section [amending
this section] shall apply to years beginning after December 31,
2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 2000 AMENDMENT
Amendment by Pub. L. 106-554 effective as if included in the
provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 1(a)(7) [title III, Sec.
314(g)] of Pub. L. 106-554, set out as a note under section 56 of
this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1526(c) of Pub. L. 105-34 provided that:
"(1) In general. - The amendments made by this section [amending
this section] shall apply to permissive service credit
contributions made in years beginning after December 31, 1997.
"(2) Transition rule. -
"(A) In general. - In the case of an eligible participant in a
governmental plan (within the meaning of section 414(d) of the
Internal Revenue Code of 1986), the limitations of section
415(c)(1) of such Code shall not be applied to reduce the amount
of permissive service credit which may be purchased to an amount
less than the amount which was allowed to be purchased under the
terms of the plan as in effect on the date of the enactment of
this Act [Aug. 5, 1997].
"(B) Eligible participant. - For purposes of subparagraph (A),
an eligible participant is an individual who first became a
participant in the plan before the first plan year beginning
after the last day of the calendar year in which the next regular
session (following the date of the enactment of this Act) of the
governing body with authority to amend the plan ends."
Section 1527(b) of Pub. L. 105-34 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to years
beginning after December 31, 1996."
Amendment by section 1530(c)(3), (4) of Pub. L. 105-34 applicable
to transfers made by trusts to, or for the use of, an employee
stock ownership plan after Aug. 5, 1997, see section 1530(d) of
Pub. L. 105-34, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1434(a) of Pub. L. 104-188 applicable to
years beginning after Dec. 31, 1997, see section 1434(c) of Pub. L.
104-188, set out as a note under section 414 of this title.
Section 1444(e) of Pub. L. 104-188 provided that:
"(1) In general. - The amendments made by subsections (a), (b),
and (c) [amending this section and section 457 of this title] shall
apply to years beginning after December 31, 1994. The amendments
made by subsection (d) [amending this section] shall apply with
respect to revocations adopted after the date of the enactment of
this Act [Aug. 20, 1997].
"(2) Treatment for years beginning before january 1, 1995. -
Nothing in the amendments made by this section shall be construed
to imply that a governmental plan (as defined in section 414(d) of
the Internal Revenue Code of 1986) fails to satisfy the
requirements of section 415 of such Code for any taxable year
beginning before January 1, 1995."
Section 1446(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall apply to years
beginning after December 31, 1996."
Section 1449(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section and provisions set out
as a note under section 411 of this title] shall take effect as if
included in the provisions of section 767 of the Uruguay Round
Agreements Act [Pub. L. 103-465]."
Section 1452(d) of Pub. L. 104-188 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section and sections
416 and 4980A of this title] shall apply to limitation years
beginning after December 31, 1999.
"(2) Excess distributions. - The amendment made by subsection (b)
[amending section 4980A of this title] shall apply to years
beginning after December 31, 1996."
EFFECTIVE DATE OF 1994 AMENDMENT
Amendment by section 732(b) of Pub. L. 103-465 applicable to
years beginning after Dec. 31, 1994, and, to the extent of
providing for the rounding of indexed amounts, not applicable to
any year to the extent the rounding would require the indexed
amount to be reduced below the amount in effect for years beginning
in 1994, see section 732(e) of Pub. L. 103-465, set out as a note
under section 401 of this title.
Amendment by section 767(b) of Pub. L. 103-465 applicable to plan
years and limitation years beginning after Dec. 31, 1994, except
that employer may elect to treat such amendment as effective on or
after Dec. 8, 1994, with provisions relating to reduction of
accrued benefits, exception, and timing of plan amendment, see
section 767(d) of Pub. L. 103-465, as amended, set out as a note
under section 411 of this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-318 applicable to distributions after
Dec. 31, 1992, see section 521(e) of Pub. L. 102-318, set out as a
note under section 402 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7304(c)(2) of Pub. L. 101-239 provided that: "The
amendment made by this subsection [amending this section] shall
apply to years beginning after July 12, 1989."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1011(d)(2), (3), (6), (7) and
1018(t)(3)(B), (8)(D) of Pub. L. 100-647 effective, except as
otherwise provided, as if included in the provision of the Tax
Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 6054(b) of Pub. L. 100-647, as amended by Pub. L.
101-239, title VII, Sec. 7816(h), Dec. 19, 1989, 103 Stat. 2421,
provided that:
"(1) In general. - Except as provided in this subsection, the
amendment made by this section [amending this section] shall apply
to years beginning after December 31, 1982.
"(2) Election. - Section 415(b)(10)(C) of the 1986 Code (as added
by subsection (a)) shall not apply to any year beginning before
January 1, 1990."
Section 6059(b) of Pub. L. 100-647 provided that: "The amendment
made by this section [amending this section] shall apply as if
included in the amendments made by section 1106(b)(2) of the Reform
Act [Pub. L. 99-514]."
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1106(i) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011(d)(5), title VI, Sec. 6062(a), Nov. 10, 1988,
102 Stat. 3460, 3700, provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [amending this section and sections
401, 402, 404, 416, and 818 of this title] shall apply to years
beginning after December 31, 1986.
"(2) Collective bargaining agreements. - In the case of a plan in
effect before March 1, 1986, pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or
more employers, the amendments made by this section (other than
subsection (d)) shall not apply to contributions or benefits
pursuant to such agreement in years beginning before October 1,
1991.
"(3) Right to higher accrued defined benefit preserved. -
"(A) In general. - In the case of an individual who is a
participant (as of the 1st day of the 1st year to which the
amendments made by this section apply) in a defined benefit plan
which is in existence on May 6, 1986, and with respect to which
the requirements of section 415 of the Internal Revenue Code of
1986 have been met for all plan years, if such individual's
current accrued benefit under the plan exceeds the limitation of
subsection (b) of section 415 of such Code (as amended by this
section), then (in the case of such plan), for purposes of
subsections (b) and (e) of such section, the limitation of such
subsection (b)(1)(A) with respect to such individual shall be
equal to such current accrued benefit.
"(B) Current accrued benefit defined. -
"(i) In general. - For purposes of this paragraph, the term
'current accrued benefit' means the individual's accrued
benefit (at the close of the last year to which the amendments
made by this section do not apply) when expressed as an annual
benefit (within the meaning of section 415(b)(2) of such Code).
"(ii) Special rule. - For purposes of determining the amount
of any individual's current accrued benefit -
"(I) no change in the terms and conditions of the plan
after May 5, 1986, and
"(II) no cost-of-living adjustment occurring after May 5,
1986,
shall be taken into account. For purposes of subclause (I), any
change in the terms and conditions of the plan pursuant to a
collective bargaining agreement ratified before May 6, 1986,
shall be treated as a change made before May 6, 1986.
"(4) Transition rule where the sum of defined contribution and
defined benefit plan fractions exceeds 1.0. - In the case of a plan
which satisfied the requirements of section 415 of the Internal
Revenue Code of 1986 for its last year beginning before January 1,
1987, the Secretary of the Treasury or his delegate shall prescribe
regulations under which an amount is subtracted from the numerator
of the defined contribution plan fraction (not exceeding such
numerator) so that the sum of the defined benefit plan fraction and
the defined contribution plan fraction computed under section
415(e)(1) of such Code does not exceed 1.0 for such year
(determined as if the amendments made by this section were in
effect for such year).
"(5) Effective date for subsection (d). -
"(A) In general. - Except as provided in subparagraph (B), the
amendment made by subsection (d) [amending sections 401, 404,
416, and 818 of this title] shall apply to benefits accruing in
years beginning after December 31, 1988.
"(B) Collective bargaining agreements. - In the case of a plan
described in paragraph (2), the amendments made by subsection (d)
shall apply to benefits accruing in years beginning on or after
the earlier of -
"(i) the later of -
"(I) the date determined under paragraph (2)(A), or
"(II) January 1, 1989, or
"(ii) January 1, 1991.
"(6) Special rule for amendment made by subsection (e). - The
amendment made by subsection (e) [amending this section] shall not
require the recomputation, for purposes of section 415(e) of the
Internal Revenue Code of 1986, of the annual addition for any year
beginning before 1987."
[Section 6062(b) of Pub. L. 100-647 provided that: "The amendment
made by this section [amending section 1106(i) of Pub. L. 99-514,
set out above] shall take effect as if included in the provisions
of section 1106 of the Reform Act [Pub. L. 99-514]."]
Amendment by section 1108(g)(5) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1986, see section 1108(h) of Pub. L.
99-514, set out as a note under section 219 of this title.
Amendment by section 1114(b)(12) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1988, see section 1114(c)(3) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Section 1174(d)(3) of Pub. L. 99-514 provided that: "The
amendments made by this subsection [amending this section] shall
apply to years beginning after December 31, 1986."
Amendment by sections 1847(b)(4), 1852(h)(2), (3), and
1875(c)(9), (11) of Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
Amendment by section 1898(b)(15)(C) of Pub. L. 99-514 effective
as if included in the provision of the Retirement Equity Act of
1984, Pub. L. 98-397, to which such amendment relates, except as
otherwise provided, see section 1898(j) of Pub. L. 99-514, set out
as a note under section 401 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 15 of Pub. L. 98-369 applicable to taxable
years ending after Dec. 31, 1983, see section 18(a) of Pub. L.
98-369, set out as a note under section 48 of this title.
Amendment by section 491(d)(28)-(32) of Pub. L. 98-369 applicable
to obligations issued after Dec. 31, 1983, see section 491(f)(1) of
Pub. L. 98-369, set out as a note under section 62 of this title.
Amendment by section 491(e)(6) of Pub. L. 98-369 effective Jan.
1, 1984, see section 491(f)(3) of Pub. L. 98-369, set out as a note
under section 401 of this title.
Amendment by section 528(a) of Pub. L. 98-369 applicable to years
beginning after Mar. 31, 1984, see section 528(c) of Pub. L.
98-369, set out as a note under section 401 of this title.
Amendment by section 713 of Pub. L. 98-369 effective as if
included in the provision of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, to which such amendment
relates, see section 715 of Pub. L. 98-369, set out as a note under
section 31 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 98-21 applicable to taxable years beginning
after Dec. 31, 1983, except that if an individual's annuity
starting date was deferred under section 105(d)(6) of this title as
in effect on the day before Apr. 20, 1983, such deferral shall end
on the first day of such individual's first taxable year beginning
after Dec. 31, 1983, see section 122(d) of Pub. L. 98-21, set out
as a note under section 22 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Section 235(g) of Pub. L. 97-248, as amended by Pub. L. 97-448,
title III, Sec. 306(a)(10), Jan. 12, 1983, 96 Stat. 2404; Pub. L.
98-369, div. A, title VII, Sec. 713(a)(2), (4), (f)(3), July 18,
1984, 98 Stat. 956, 959; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100
Stat. 2095, provided that:
"(1) In general. -
"(A) New plans. - In the case of any plan which is not in
existence on July 1, 1982, the amendments made by this section
[amending this section and section 404 of this title] shall apply
to years ending after July 1, 1982.
"(B) Existing plans. -
"(i) In the case of any plan which is in existence on July 1,
1982, the amendments made by this section [amending this
section and section 404 of this title] shall apply to years
beginning after December 31, 1982.
"(ii) Plan requirements. - A plan shall not be treated as
failing to meet the requirements of section 401(a)(16) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] for any
year beginning before January 1, 1984, merely because such plan
provides for benefit or contribution limits which are in excess
of the limitations under section 415 of such Code, as amended
by this section. The preceding sentence shall not apply to any
plan which provides such limits in excess of the limitation
under section 415 of such Code before such amendments.
"(2) Amendments related to cost-of-living adjustments. -
"(A) In general. - Except as provided in subparagraph (B), the
amendments made by subsection (b) [amending this section] shall
apply to adjustments for years beginning after December 31, 1982.
"(B) Adjustment procedures. - The amendments made by
subsections (b)(1) and (b)(2)(B) [amending this section] shall
apply to adjustments for years beginning after December 31, 1985.
"(3) Transition rule where the sum of defined contribution and
defined benefit plan fractions exceeds 1.0. - In the case of a plan
which satisfied the requirements of section 415 of the Internal
Revenue Code of 1986 for the last year beginning before January 1,
1983, the Secretary of the Treasury or his delegate shall prescribe
regulations under which an amount is subtracted from the numerator
of the defined contribution plan fraction (not exceeding such
numerator) so that the sum of the defined benefit plan fraction and
the defined contribution plan fraction computed under section
415(e)(1) of the Internal Revenue Code of 1986 (as amended by the
Tax Equity and Fiscal Responsibility Act of 1982) does not exceed
1.0 for such year. A similar rule shall apply with respect to the
last plan year beginning before January 1, 1984, for purposes of
applying section 416(h) of the Internal Revenue Code of 1986.
"(4) Right to higher accrued defined benefit preserved. -
"(A) In general. - In the case of an individual who is a
participant before January 1, 1983, in a defined benefit plan
which is in existence on July 1, 1982, and with respect to which
the requirements of section 415 of such Code have been met for
all years, if such individual's current accrued benefit under
such plan exceeds the limitation of subsection (b) of section 415
of the Internal Revenue Code of 1986 (as amended by this
section), then (in the case of such plan) for purposes of
subsections (b) and (e) of such section, the limitation of such
subsection (b) with respect to such individual shall be equal to
such current accrued benefit.
"(B) Current accrued benefit defined. -
"(i) In general. - For purposes of this paragraph, the term
'current accrued benefit' means the individual's accrued
benefit (at the close of the last year beginning before January
1, 1983) when expressed as an annual benefit (within the
meaning of section 415(b)(2) of such Code as in effect before
the amendments made by this Act). In the case of any plan
described in the first sentence of paragraph (5), the preceding
sentence shall be applied by substituting for 'January 1, 1983'
the applicable date determined under paragraph (5).
"(ii) Special rule. - For purposes of determining the amount
of any individual's current accrued benefit -
"(I) no change in the terms and conditions of the plan
after July 1, 1982, and
"(II) no cost-of-living adjustment occurring after July 1,
1982,
shall be taken into account. For purposes of subclause (I), any
change in the terms and conditions of the plan pursuant to a
collective bargaining agreement entered into before July 1, 1982,
and ratified before September 3, 1982, shall be treated as a
change made before July 1, 1982.
"(5) Special rule for collective bargaining agreements. - In the
case of a plan maintained on the date of the enactment of this Act
[Sept. 3, 1982] pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers, the amendments made by this section [amending this
section and section 404 of this title] and section 242 [amending
section 401 of this title and enacting a provision set out as a
note under section 401 of this title] (relating to age 70 1/2 )
shall not apply to years beginning before the earlier of -
"(A) the date on which the last of the collective bargaining
agreements relating to the plan terminates (determined without
regard to any extension thereof agreed to after the date of the
enactment of this Act [Sept. 3, 1982]), or
"(B) January 1, 1986.
For purposes of subparagraph (A), any plan amendment made pursuant
to a collective bargaining agreement relating to the plan which
amends the plan solely to conform to any requirement added by this
section and section 242 shall not be treated as a termination of
such collective bargaining agreement."
Amendment by section 238(d)(5) of Pub. L. 97-248 applicable to
years beginning after Dec. 31, 1983, see section 241 of Pub. L.
97-248, set out as an Effective Date note under section 416 of this
title.
Amendment by section 251(c)(1), (2) of Pub. L. 97-248 applicable
to years beginning after Dec. 31, 1981, see section 251(e)(3) of
Pub. L. 97-248, set out as a note under section 403 of this title.
Amendment by section 253(a) of Pub. L. 97-248 applicable to
taxable years beginning after Dec. 31, 1981, see section 253(c) of
Pub. L. 97-248, set out as a note under section 404 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 311(g)(4), (h)(3) of Pub. L. 97-34
applicable to years beginning after Dec. 31, 1981, see section
311(i)(4) of Pub. L. 97-34, set out as a note under section 219 of
this title.
Section 333(b)(2) of Pub. L. 97-34 provided that: "The amendment
made by this subsection [amending this section] shall apply to
years beginning after December 31, 1981."
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 222(b) of Pub. L. 96-605 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to years beginning after December 31, 1980."
Section 101(b)(1)(G) of Pub. L. 96-222 provided that: "The
amendment made by subparagraph (I) of subsection (a)(10) [amending
this section] shall apply to taxable years beginning after the date
of the enactment of this Act [Apr. 1, 1980]."
Amendment by section 101(a)(7)(L)(i)(VII), (iv)(i), (10)(J)(iii),
(11) of Pub. L. 96-222 effective, except as otherwise provided, as
if it had been included in the provisions of the Revenue Act of
1978, Pub. L. 95-600, to which such amendment relates, see section
201 of Pub. L. 96-222, set out as a note under section 32 of this
title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 141(f)(7) of Pub. L. 95-600 effective for
years beginning after Dec. 31, 1978, and with respect to qualified
investment for taxable years beginning after Dec. 31, 1978, see
section 141(g)(1) of Pub. L. 95-600, set out as an Effective Date
note under section 409 of this title.
Section 141(g)(5) of Pub. L. 95-600, as added by Pub. L. 96-222,
title I, Sec. 101(a)(7)(B), Apr. 1, 1980, 94 Stat. 197, provided
that: "The amendment made by subsection (f)(7) [amending this
section] shall apply to years beginning after December 31, 1978."
Amendment by section 152(g) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 152(h) of
Pub. L. 95-600, set out as a note under section 408 of this title.
Section 153(b) of Pub. L. 95-600 provided that: "The amendment
made by this section [amending this section] shall apply to years
beginning after December 31, 1978."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 803(b)(4), (f) of Pub. L. 94-455 effective
for years beginning after Dec. 31, 1975, see section 803(j) of Pub.
L. 94-455, set out as a note under section 46 of this title.
Amendment by section 1501(b)(3) of Pub. L. 94-455 effective for
years beginning after Dec. 31, 1976, see section 1501(d) of Pub. L.
94-455, set out as a note under section 62 of this title.
Section 1502(b) of Pub. L. 94-455 provided that: "The amendment
made by subsection (a)(1) [amending this section] shall apply to
years beginning after December 31, 1975. The amendment made by
subsection (a)(2) [amending section 404 of this title] shall apply
to taxable years beginning after December 31, 1975."
Section 1511(b) of Pub. L. 94-455 provided that: "The amendment
made by this section [amending this section] shall apply for years
beginning after December 31, 1975."
Amendment by section 1901(a)(65), (b)(8)(D) of Pub. L. 94-455
effective for taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
EFFECTIVE DATE; TRANSITION PROVISIONS
Section 2004(d) of Pub. L. 93-406, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) General rule. - The amendments made by this section
[enacting this section, amending sections 401, 403, 404, 405, and
805 of this title, and enacting provisions set out as notes under
this section] shall apply to years beginning after December 31,
1975. The Secretary of the Treasury shall prescribe such
regulations as may be necessary to carry out the provisions of
this paragraph.
"(2) Transition rule for defined benefit plans. - In the case
of an individual who was an active participant in a defined
benefit plan before October 3, 1973, if -
"(A) the annual benefit (within the meaning of section
415(b)(2) of the Internal Revenue Code of 1986 [formerly I.R.C.
1954]) payable to such participant on retirement does not
exceed 100 percent of his annual rate of compensation on the
earlier of (i) October 2, 1973, or (ii) the date on which he
separated from the service of the employer,
"(B) such annual benefit is no greater than the annual
benefit which would have been payable to such participant on
retirement if (i) all the terms and conditions of such plan in
existence on such date had remained in existence until such
retirement, and (ii) his compensation taken into account for
any period after October 2, 1973, had not exceeded his annual
rate of compensation on such date, and
"(C) in the case of a participant who separated from the
service of the employer prior to October 2, 1973, such annual
benefit is no greater than his vested accrued benefit as of the
date he separated from the service,
then such annual benefit shall be treated as not exceeding the
limitation of subsection (b) of section 415 of the Internal
Revenue Code of 1986."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
PLANS MAY INCORPORATE SECTION 415 LIMITATIONS BY REFERENCE
Section 1106(h) of Pub. L. 99-514 provided that: "Notwithstanding
any other provision of law, except as provided in regulations
prescribed by the Secretary of the Treasury or his delegate, a plan
may incorporate by reference the limitations under section 415 of
the Internal Revenue Code of 1986."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
SPECIAL RULE FOR CERTAIN PLANS IN EFFECT ON SEPTEMBER 2, 1974
Section 2004(a)(3) of Pub. L. 93-406, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "In
any case in which, on the date of enactment of this Act [Sept. 2,
1974], an individual is a participant in both a defined benefit
plan and a defined contribution plan maintained by the same
employer, and the sum of the defined benefit plan fraction and the
defined contribution plan fraction for the year during which such
date occurs exceeds 1.4, the sum of such fractions may continue to
exceed 1.4 if -
"(A) the defined benefit plan fraction is not increased, by
amendment of the plan or otherwise, after
"(B) no contributions are made under the defined contribution
plan after such date.
A trust which is part of a pension, profit-sharing, or stock bonus
plan described in the preceding sentence shall not be treated as
not constituting a qualified trust under section 401(a) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] on account of
the provisions of section 415(e) of such Code, as long as it is
described in the preceding sentence of this subsection."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 45A, 219, 401, 402, 403,
404, 408, 409, 411, 414, 416, 419A, 457, 664, 4973, 4980 of this
title; title 4 section 114; title 5 section 8432; title 29 sections
1002, 1321; title 45 sections 726, 1347.
-FOOTNOTE-
(!1) So in original. Probably should be "clause".
-End-
-CITE-
26 USC Sec. 416 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart B - Special Rules
-HEAD-
Sec. 416. Special rules for top-heavy plans
-STATUTE-
(a) General rule
A trust shall not constitute a qualified trust under section
401(a) for any plan year if the plan of which it is a part is a
top-heavy plan for such plan year unless such plan meets -
(1) the vesting requirements of subsection (b), and
(2) the minimum benefit requirements of subsection (c).
(b) Vesting requirements
(1) In general
A plan satisfies the requirements of this subsection if it
satisfies the requirements of either of the following
subparagraphs:
(A) 3-year vesting
A plan satisfies the requirements of this subparagraph if an
employee who has completed at least 3 years of service with the
employer or employers maintaining the plan has a nonforfeitable
right to 100 percent of his accrued benefit derived from
employer contributions.
(B) 6-year graded vesting
A plan satisfies the requirements of this subparagraph if an
employee has a nonforfeitable right to a percentage of his
accrued benefit derived from employer contributions determined
under the following table:
The
nonforfeitable
Years of service percentage is:
2 20
3 40
4 60
5 80
6 or more 100
(2) Certain rules made applicable
Except to the extent inconsistent with the provisions of this
subsection, the rules of section 411 shall apply for purposes of
this subsection.
(c) Plan must provide minimum benefits
(1) Defined benefit plans
(A) In general
A defined benefit plan meets the requirements of this
subsection if the accrued benefit derived from employer
contributions of each participant who is a non-key employee,
when expressed as an annual retirement benefit, is not less
than the applicable percentage of the participant's average
compensation for years in the testing period.
(B) Applicable percentage
For purposes of subparagraph (A), the term "applicable
percentage" means the lesser of -
(i) 2 percent multiplied by the number of years of service
with the employer, or
(ii) 20 percent.
(C) Years of service
For purposes of this paragraph -
(i) In general
Except as provided in clause (ii) or (iii), years of
service shall be determined under the rules of paragraphs
(4), (5), and (6) of section 411(a).
(ii) Exception for years during which plan was not top-heavy
A year of service with the employer shall not be taken into
account under this paragraph if -
(I) the plan was not a top-heavy plan for any plan year
ending during such year of service, or
(II) such year of service was completed in a plan year
beginning before January 1, 1984.
(iii) Exception for plan under which no key employee (or
former key employee) benefits for plan year
For purposes of determining an employee's years of service
with the employer, any service with the employer shall be
disregarded to the extent that such service occurs during a
plan year when the plan benefits (within the meaning of
section 410(b)) no key employee or former key employee.
(D) Average compensation for high 5 years
For purposes of this paragraph -
(i) In general
A participant's testing period shall be the period of
consecutive years (not exceeding 5) during which the
participant had the greatest aggregate compensation from the
employer.
(ii) Year must be included in year of service
The years taken into account under clause (i) shall be
properly adjusted for years not included in a year of
service.
(iii) Certain years not taken into account
Except to the extent provided in the plan, a year shall not
be taken into account under clause (i) if -
(I) such year ends in a plan year beginning before
January 1, 1984, or
(II) such year begins after the close of the last year in
which the plan was a top-heavy plan.
(E) Annual retirement benefit
For purposes of this paragraph, the term "annual retirement
benefit" means a benefit payable annually in the form of a
single life annuity (with no ancillary benefits) beginning at
the normal retirement age under the plan.
(2) Defined contribution plans
(A) In general
A defined contribution plan meets the requirements of the
subsection if the employer contribution for the year for each
participant who is a non-key employee is not less than 3
percent of such participant's compensation (within the meaning
of section 415). Employer matching contributions (as defined in
section 401(m)(4)(A)) shall be taken into account for purposes
of this subparagraph (and any reduction under this sentence
shall not be taken into account in determining whether section
401(k)(4)(A) applies).
(B) Special rule where maximum contribution less than 3 percent
(i) In general
The percentage referred to in subparagraph (A) for any year
shall not exceed the percentage at which contributions are
made (or required to be made) under the plan for the year for
the key employee for whom such percentage is the highest for
the year.
(ii) Treatment of aggregation groups
(I) For purposes of this subparagraph, all defined
contribution plans required to be included in an aggregation
group under subsection (g)(2)(A)(i) shall be treated as one
plan.
(II) This subparagraph shall not apply to any plan required
to be included in an aggregation group if such plan enables a
defined benefit plan required to be included in such group to
meet the requirements of section 401(a)(4) or 410.
[(d) Repealed. Pub. L. 99-514, title XI, Sec. 1106(d)(3)(B)(i),
Oct. 22, 1986, 100 Stat. 2424]
(e) Plan must meet requirements without taking into account social
security and similar contributions and benefits
A top-heavy plan shall not be treated as meeting the requirement
of subsection (b) or (c) unless such plan meets such requirement
without taking into account contributions or benefits under chapter
2 (relating to tax on self-employment income), chapter 21 (relating
to Federal Insurance Contributions Act), title II of the Social
Security Act, or any other Federal or State law.
(f) Coordination where employer has 2 or more plans
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section
where the employer has 2 or more plans including (but not limited
to) regulations to prevent inappropriate omissions or required
duplication of minimum benefits or contributions.
(g) Top-heavy plan defined
For purposes of this section -
(1) In general
(A) Plans not required to be aggregated
Except as provided in subparagraph (B), the term "top-heavy
plan" means, with respect to any plan year -
(i) any defined benefit plan if, as of the determination
date, the present value of the cumulative accrued benefits
under the plan for key employees exceeds 60 percent of the
present value of the cumulative accrued benefits under the
plan for all employees, and
(ii) any defined contribution plan if, as of the
determination date, the aggregate of the accounts of key
employees under the plan exceeds 60 percent of the aggregate
of the accounts of all employees under such plan.
(B) Aggregated plans
Each plan of an employer required to be included in an
aggregation group shall be treated as a top-heavy plan if such
group is a top-heavy group.
(2) Aggregation
For purposes of this subsection -
(A) Aggregation group
(i) Required aggregation
The term "aggregation group" means -
(I) each plan of the employer in which a key employee is
a participant, and
(II) each other plan of the employer which enables any
plan described in subclause (I) to meet the requirements of
section 401(a)(4) or 410.
(ii) Permissive aggregation
The employer may treat any plan not required to be included
in an aggregation group under clause (i) as being part of
such group if such group would continue to meet the
requirements of sections 401(a)(4) and 410 with such plan
being taken into account.
(B) Top-heavy group
The term "top-heavy group" means any aggregation group if -
(i) the sum (as of the determination date) of -
(I) the present value of the cumulative accrued benefits
for key employees under all defined benefit plans included
in such group, and
(II) the aggregate of the accounts of key employees under
all defined contribution plans included in such group,
(ii) exceeds 60 percent of a similar sum determined for all
employees.
(3) Distributions during last year before determination date
taken into account
(A) In general
For purposes of determining -
(i) the present value of the cumulative accrued benefit for
any employee, or
(ii) the amount of the account of any employee,
such present value or amount shall be increased by the
aggregate distributions made with respect to such employee
under the plan during the 1-year period ending on the
determination date. The preceding sentence shall also apply to
distributions under a terminated plan which if it had not been
terminated would have been required to be included in an
aggregation group.
(B) 5-year period in case of in-service distribution
In the case of any distribution made for a reason other than
severance from employment, death, or disability, subparagraph
(A) shall be applied by substituting "5-year period" for
"1-year period".
(4) Other special rules
For purposes of this subsection -
(A) Rollover contributions to plan not taken into account
Except to the extent provided in regulations, any rollover
contribution (or similar transfer) initiated by the employee
and made after December 31, 1983, to a plan shall not be taken
into account with respect to the transferee plan for purposes
of determining whether such plan is a top-heavy plan (or
whether any aggregation group which includes such plan is a
top-heavy group).
(B) Benefits not taken into account if employee ceases to be
key employee
If any individual is a non-key employee with respect to any
plan for any plan year, but such individual was a key employee
with respect to such plan for any prior plan year, any accrued
benefit for such employee (and the account of such employee)
shall not be taken into account.
(C) Determination date
The term "determination date" means, with respect to any plan
year -
(i) the last day of the preceding plan year, or
(ii) in the case of the first plan year of any plan, the
last day of such plan year.
(D) Years
To the extent provided in regulations, this section shall be
applied on the basis of any year specified in such regulations
in lieu of plan years.
(E) Benefits not taken into account if employee not employed
for last year before determination date
If any individual has not performed services for the employer
maintaining the plan at any time during the 1-year period
ending on the determination date, any accrued benefit for such
individual (and the account of such individual) shall not be
taken into account.
(F) Accrued benefits treated as accruing ratably
The accrued benefit of any employee (other than a key
employee) shall be determined -
(i) under the method which is used for accrual purposes for
all plans of the employer, or
(ii) if there is no method described in clause (i), as if
such benefit accrued not more rapidly than the slowest
accrual rate permitted under section 411(b)(1)(C).
(G) Simple retirement accounts
The term "top-heavy plan" shall not include a simple
retirement account under section 408(p).
(H) Cash or deferred arrangements using alternative methods of
meeting nondiscrimination requirements
The term "top-heavy plan" shall not include a plan which
consists solely of -
(i) a cash or deferred arrangement which meets the
requirements of section 401(k)(12), and
(ii) matching contributions with respect to which the
requirements of section 401(m)(11) are met.
If, but for this subparagraph, a plan would be treated as a
top-heavy plan because it is a member of an aggregation group
which is a top-heavy group, contributions under the plan may be
taken into account in determining whether any other plan in the
group meets the requirements of subsection (c)(2).
[(h) Repealed. Pub. L. 104-188, title I, Sec. 1452(c)(7), Aug. 20,
1996, 110 Stat. 1816]
(i) Definitions
For purposes of this section -
(1) Key employee
(A) In general
The term "key employee" means an employee who, at any time
during the plan year, is -
(i) an officer of the employer having an annual
compensation greater than $130,000,
(ii) a 5-percent owner of the employer, or
(iii) a 1-percent owner of the employer having an annual
compensation from the employer of more than $150,000.
For purposes of clause (i), no more than 50 employees (or, if
lesser, the greater of 3 or 10 percent of the employees) shall
be treated as officers. in (!1) the case of plan years
beginning after December 31, 2002, the $130,000 amount in
clause (i) shall be adjusted at the same time and in the same
manner as under section 415(d), except that the base period
shall be the calendar quarter beginning July 1, 2001, and any
increase under this sentence which is not a multiple of $5,000
shall be rounded to the next lower multiple of $5,000. Such
term shall not include any officer or employee of an entity
referred to in section 414(d) (relating to governmental plans).
For purposes of determining the number of officers taken into
account under clause (i), employees described in section
414(q)(5) shall be excluded.
(B) Percentage owners
(i) 5-percent owner
For purposes of this paragraph, the term "5-percent owner"
means -
(I) if the employer is a corporation, any person who owns
(or is considered as owning within the meaning of section
318) more than 5 percent of the outstanding stock of the
corporation or stock possessing more than 5 percent of the
total combined voting power of all stock of the
corporation, or
(II) if the employer is not a corporation, any person who
owns more than 5 percent of the capital or profits interest
in the employer.
(ii) 1-percent owner
For purposes of this paragraph, the term "1-percent owner"
means any person who would be described in clause (i) if "1
percent" were substituted for "5 percent" each place it
appears in clause (i).
(iii) Constructive ownership rules
For purposes of this subparagraph -
(I) subparagraph (C) of section 318(a)(2) shall be
applied by substituting "5 percent" for "50 percent", and
(II) in the case of any employer which is not a
corporation, ownership in such employer shall be determined
in accordance with regulations prescribed by the Secretary
which shall be based on principles similar to the
principles of section 318 (as modified by subclause (I)).
(C) Aggregation rules do not apply for purposes of determining
ownership in the employer
The rules of subsections (b), (c), and (m) of section 414
shall not apply for purposes of determining ownership in the
employer.
(D) Compensation
For purposes of this paragraph, the term "compensation" has
the meaning given such term by section 414(q)(4).
(2) Non-key employee
The term "non-key employee" means any employee who is not a key
employee.
(3) Self-employed individuals
In the case of a self-employed individual described in section
401(c)(1) -
(A) such individual shall be treated as an employee, and
(B) such individual's earned income (within the meaning of
section 401(c)(2)) shall be treated as compensation.
(4) Treatment of employees covered by collective bargaining
agreements
The requirements of subsections (b), (c), and (d) shall not
apply with respect to any employee included in a unit of
employees covered by an agreement which the Secretary of Labor
finds to be a collective bargaining agreement between employee
representatives and 1 or more employers if there is evidence that
retirement benefits were the subject of good faith bargaining
between such employee representatives and such employer or
employers.
(5) Treatment of beneficiaries
The terms "employee"' and "key employee" include their
beneficiaries.
(6) Treatment of simplified employee pensions
(A) Treatment as defined contribution plans
A simplified employee pension shall be treated as a defined
contribution plan.
(B) Election to have determinations based on employer
contributions
In the case of a simplified employee pension, at the election
of the employer, paragraphs (1)(A)(ii) and (2)(B) of subsection
(g) shall be applied by taking into account aggregate employer
contributions in lieu of the aggregate of the accounts of
employees.
-SOURCE-
(Added Pub. L. 97-248, title II, Sec. 240(a), Sept. 3, 1982, 96
Stat. 514; amended Pub. L. 98-369, div. A, title V, Sec. 524(a)(1),
(b)(1), (c)(1), title VII, Sec. 713(f)(1), (4), (5)(A), (6), July
18, 1984, 98 Stat. 872, 958-960; Pub. L. 99-514, title XI, Secs.
1106(d)(3)(A), (B), 1118(a), title XVIII, Sec. 1852(d), Oct. 22,
1986, 100 Stat. 2424, 2463, 2867; Pub. L. 100-647, title I, Sec.
1011(d)(8), (i)(4)(B), (j)(3)(A), Nov. 10, 1988, 102 Stat. 3460,
3467, 3468; Pub. L. 104-188, title I, Secs. 1421(b)(7),
1431(c)(1)(B), (C), 1452(c)(7), Aug. 20, 1996, 110 Stat. 1797,
1803, 1816; Pub. L. 107-16, title VI, Sec. 613(a)-(e), June 7,
2001, 115 Stat. 100-102; Pub. L. 107-147, title IV, Sec. 411(k),
Mar. 9, 2002, 116 Stat. 47.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The Federal Insurance Contributions Act, referred to in subsec.
(e), is act Aug. 16, 1954, ch. 736, Secs. 3101, 3102, 3111, 3112,
3121 to 3128, 68A Stat. 415, as amended, which is classified
generally to chapter 21 (Sec. 3101 et seq.) of this title. For
complete classification of this Act to the Code, see section 3128
of this title and Tables.
The Social Security Act, referred to in subsec. (e), is act Aug.
14, 1935, ch. 531, 49 Stat. 620, as amended. Title II of the Social
Security Act is classified generally to subchapter II (Sec. 401 et
seq.) of chapter 7 of Title 42, The Public Health and Welfare. For
complete classification of this Act to the Code, see section 1305
of Title 42 and Tables.
-MISC1-
AMENDMENTS
2002 - Subsec. (c)(1)(C)(iii). Pub. L. 107-147, Sec. 411(k)(1),
substituted "Exception for plan under which no key employee (or
former key employee) benefits for plan year" for "Exception for
frozen plan" in heading.
Subsec. (g)(3)(B). Pub. L. 107-147, Sec. 411(k)(2), substituted
"severance from employment" for "separation from service".
2001 - Subsec. (c)(1)(C)(i). Pub. L. 107-16, Secs. 613(e)(A),
901, temporarily substituted "clause (ii) or (iii)" for "clause
(ii)". See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (c)(1)(C)(iii). Pub. L. 107-16, Secs. 613(e)(B), 901,
temporarily added cl. (iii). See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (c)(2)(A). Pub. L. 107-16, Secs. 613(b), 901, temporarily
inserted at end "Employer matching contributions (as defined in
section 401(m)(4)(A)) shall be taken into account for purposes of
this subparagraph (and any reduction under this sentence shall not
be taken into account in determining whether section 401(k)(4)(A)
applies)." See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (g)(3). Pub. L. 107-16, Secs. 613(c)(1), 901, temporarily
amended heading and text of par. (3) generally. Prior to amendment,
text read as follows: "For purposes of determining -
"(A) the present value of the cumulative accrued benefit for
any employee, or
"(B) the amount of the account of any employee,
such present value or amount shall be increased by the aggregate
distributions made with respect to such employee under the plan
during the 5-year period ending on the determination date. The
preceding sentence shall also apply to distributions under a
terminated plan which if it had not been terminated would have been
required to be included in an aggregation group."
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (g)(4)(E). Pub. L. 107-16, Secs. 613(c)(2), 901, in
heading temporarily substituted "last year before determination
date" for "last 5 years" and in text temporarily substituted
"1-year period" for "5-year period". See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (g)(4)(H). Pub. L. 107-16, Secs. 613(d), 901, temporarily
added subpar. (H). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (i)(1)(A). Pub. L. 107-16, Secs. 613(a)(1)(D), 901, in
concluding provisions, temporarily substituted "in the case of plan
years beginning after December 31, 2002, the $130,000 amount in
clause (i) shall be adjusted at the same time and in the same
manner as under section 415(d), except that the base period shall
be the calendar quarter beginning July 1, 2001, and any increase
under this sentence which is not a multiple of $5,000 shall be
rounded to the next lower multiple of $5,000." for "For purposes of
clause (ii), if 2 employees have the same interest in the employer,
the employee having greater annual compensation from the employer
shall be treated as having a larger interest." See Effective and
Termination Dates of 2001 Amendment note below.
Pub. L. 107-16, Secs. 613(a)(1)(A), 901, temporarily struck out
"or any of the 4 preceding plan years" after "plan year" in
introductory provisions. See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (i)(1)(A)(i). Pub. L. 107-16, Secs. 613(a)(1)(B), 901,
temporarily added cl. (i) and struck out former cl. (i) which read
as follows: "an officer of the employer having an annual
compensation greater than 50 percent of the amount in effect under
section 415(b)(1)(A) for any such plan year,". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (i)(1)(A)(ii)-(iv). Pub. L. 107-16, Secs. 613(a)(1)(C),
901, temporarily redesignated cls. (iii) and (iv) as (ii) and
(iii), respectively, and struck out former cl. (ii) which read as
follows: "1 of the 10 employees having annual compensation from the
employer of more than the limitation in effect under section
415(c)(1)(A) and owning (or considered as owning within the meaning
of section 318) the largest interests in the employer,". See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (i)(1)(B)(iii). Pub. L. 107-16, Secs. 613(a)(2), 901,
temporarily struck out "and subparagraph (A)(ii)" after "this
subparagraph" in introductory provisions. See Effective and
Termination Dates of 2001 Amendment note below.
1996 - Subsec. (g)(4)(G). Pub. L. 104-188, Sec. 1421(b)(7), added
subpar. (G).
Subsec. (h). Pub. L. 104-188, Sec. 1452(c)(7), struck out subsec.
(h) which related to adjustments in section 415 limits for
top-heavy plans.
Subsec. (i)(1)(A). Pub. L. 104-188, Sec. 1431(c)(1)(C),
substituted "section 414(q)(5)" for "section 414(q)(8)" in closing
provisions.
Subsec. (i)(1)(D). Pub. L. 104-188, Sec. 1431(c)(1)(B),
substituted "section 414(q)(4)" for "section 414(q)(7)".
1988 - Subsec. (i)(1)(A). Pub. L. 100-647, Sec. 1011(i)(4)(B),
inserted at end "For purposes of determining the number of officers
taken into account under clause (i), employees described in section
414(q)(8) shall be excluded."
Subsec. (i)(1)(A)(i). Pub. L. 100-647, Sec. 1011(d)(8),
substituted "50" for "150" and "415(b)(1)(A)" for "415(c)(1)(A)".
Subsec. (i)(1)(D). Pub. L. 100-647, Sec. 1011(j)(3)(A), added
subpar. (D).
1986 - Subsec. (a)(3). Pub. L. 99-514, Sec. 1106(d)(3)(A), struck
out par. (3) which read as follows: "the limitation on compensation
requirement of subsection (d)."
Subsec. (c)(2)(B)(ii), (iii). Pub. L. 99-514, Sec.
1106(d)(3)(B)(ii), redesignated cl. (iii) as (ii) and struck out
former cl. (ii) which read as follows: "Determination of
percentage. - The determination referred to in clause (i) shall be
determined for each key employee by dividing the contributions for
such employee by so much of his total compensation for the year as
does not exceed $200,000."
Subsec. (d). Pub. L. 99-514, Sec. 1106(d)(3)(B)(i), repealed
subsec. (d) which provided for a $200,000 limitation on the amount
of annual compensation of each employee taken into account.
Subsec. (g)(4)(E). Pub. L. 99-514, Sec. 1852(d)(2), amended
subpar. (E) generally. Prior to amendment, subpar. (E) read as
follows: "If any individual has not received any compensation from
any employer maintaining the plan (other than benefits under the
plan) at any time during the 5-year period ending on the
determination date, any accrued benefit for such individual (and
the account of such individual) shall not be taken into account."
Subsec. (g)(4)(F). Pub. L. 99-514, Sec. 1118(a), added subpar.
(F).
Subsec. (i)(1)(A). Pub. L. 99-514, Sec. 1852(d)(1), inserted at
end "Such term shall not include any officer or employee of an
entity referred to in section 414(d) (relating to governmental
plans)."
1984 - Subsec. (c)(2)(C). Pub. L. 98-369, Sec. 524(c)(1), struck
out subpar. (C) which provided that for purposes of this paragraph,
any employer contribution attributable to a salary reduction or
similar arrangement shall not be taken into account.
Subsec. (d)(2). Pub. L. 98-369, Sec. 713(f)(5)(A), inserted "at
the same time and".
Subsec. (f). Pub. L. 98-369, Sec. 713(f)(6)(A), substituted
"required" for "require".
Subsec. (g)(3). Pub. L. 98-369, Sec. 713(f)(4), inserted at end
"The preceding sentence shall also apply to distributions under a
terminated plan which if it had not been terminated would have been
required to be included in an aggregation group."
Subsec. (g)(4)(E). Pub. L. 98-369, Sec. 524(b)(1), added subpar.
(E).
Subsec. (i)(1)(A). Pub. L. 98-369, Sec. 713(f)(1)(A), (C),
substituted in provisions preceding cl. (i) "an employee" for "any
participant in an employer plan" and inserted at end thereof
provision for treatment of an employee with the greater annual
compensation as having a larger interest in the employer where, for
purposes of cl. (ii), 2 employees have the same interest in the
employer.
Subsec. (i)(1)(A)(i). Pub. L. 98-369, Sec. 524(a)(1), inserted
"having an annual compensation greater than 150 percent of the
amount in effect under section 415(c)(1)(A) for any plan year".
Subsec. (i)(1)(A)(ii). Pub. L. 98-369, Sec. 713(f)(1)(B),
required a key employee to have annual compensation from the
employer of more than the limitation in effect under section
415(c)(1)(A).
Subsec. (i)(1)(B)(iii). Pub. L. 98-369, Sec. 713(f)(6)(B),
substituted subparagraph "(A)(ii)" for "(A)(ii)(II)".
Subsec. (i)(1)(C). Pub. L. 98-369, Sec. 713(f)(1)(A), substituted
in heading "ownership in the employer" for "5-percent or 1-percent
owners".
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title VI, Sec. 613(f), June 7, 2001, 115 Stat.
102, provided that: "The amendments made by this section [amending
this section] shall apply to years beginning after December 31,
2001."
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1421(b)(7) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1996, see section 1421(e) of
Pub. L. 104-188, set out as a note under section 72 of this title.
Amendment by section 1431(c)(1)(B), (C) of Pub. L. 104-188
applicable to years beginning after Dec. 31, 1996, except that in
determining whether an employee is a highly compensated employee
for years beginning in 1997, such amendment to be treated as having
been in effect for years beginning in 1996, see section 1431(d)(1)
of Pub. L. 104-188, set out as a note under section 414 of this
title.
Amendment by section 1452(c)(7) of Pub. L. 104-188 applicable to
limitation years beginning after Dec. 31, 1999, see section 1452(d)
of Pub. L. 104-188, set out as a note under section 415 of this
title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1011(j)(3)(B) of Pub. L. 100-647 provided that: "The
amendment made by this paragraph [amending this section] shall
apply to years beginning after December 31, 1988."
Amendment by section 1011(d)(8), (i)(4)(B) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1106(d)(3)(A), (B) of Pub. L. 99-514
applicable to benefits accruing in years beginning after Dec. 31,
1988, except as otherwise provided, see section 1106(i)(5) of Pub.
L. 99-514, set out as a note under section 415 of this title.
Section 1118(b) of Pub. L. 99-514 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to plan
years beginning after December 31, 1986."
Amendment by section 1852(d) of Pub. L. 99-514 effective, except
as otherwise provided, as if included in the provisions of the Tax
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment
relates, see section 1881 of Pub. L. 99-514, set out as a note
under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 524(a)(2) of Pub. L. 98-369 provided that: "The amendment
made by this subsection [amending this section] shall apply to plan
years beginning after December 31, 1983."
Section 524(b)(2) of Pub. L. 98-369 provided that: "The amendment
made by this subsection [amending this section] shall apply to plan
years beginning after December 31, 1984."
Section 524(c)(2) of Pub. L. 98-369 provided that: "The amendment
made by this subsection [amending this section] shall apply to plan
years beginning after December 31, 1984."
Amendment by section 713 of Pub. L. 98-369 effective as if
included in the provision of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, to which such amendment
relates, see section 715 of Pub. L. 98-369, set out as a note under
section 31 of this title.
EFFECTIVE DATE
Section 241 of Pub. L. 97-248 provided that:
"(a) General Rule. - Except as provided in subsection (b), the
amendments made by this part [part II (Secs. 237-241) of subtitle C
of title II of Pub. L. 97-248, enacting this section, amending
sections 72, 401, 404, 408, 414, 415, and 1379 of this title, and
repealing section 4972 of this title] shall apply to years
beginning after December 31, 1983.
"(b) Allowance of Exclusion of Death Benefit for Self-Employed
Individuals. - The amendment made by section 239 [amending section
101 of this title] shall apply with respect to decedents dying
after December 31, 1983."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 45A, 72, 79, 125, 280F,
401, 408, 414, 415, 419A, 420, 469, 1396 of this title.
-FOOTNOTE-
(!1) So in original. Probably should be capitalized.
-End-
-CITE-
26 USC Sec. 417 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart B - Special Rules
-HEAD-
Sec. 417. Definitions and special rules for purposes of minimum
survivor annuity requirements
-STATUTE-
(a) Election to waive qualified joint and survivor annuity or
qualified preretirement survivor annuity
(1) In general
A plan meets the requirements of section 401(a)(11) only if -
(A) under the plan, each participant -
(i) may elect at any time during the applicable election
period to waive the qualified joint and survivor annuity form
of benefit or the qualified preretirement survivor annuity
form of benefit (or both), and
(ii) may revoke any such election at any time during the
applicable election period, and
(B) the plan meets the requirements of paragraphs (2), (3),
and (4) of this subsection.
(2) Spouse must consent to election
Each plan shall provide that an election under paragraph
(1)(A)(i) shall not take effect unless -
(A)(i) the spouse of the participant consents in writing to
such election, (ii) such election designates a beneficiary (or
a form of benefits) which may not be changed without spousal
consent (or the consent of the spouse expressly permits
designations by the participant without any requirement of
further consent by the spouse), and (iii) the spouse's consent
acknowledges the effect of such election and is witnessed by a
plan representative or a notary public, or
(B) it is established to the satisfaction of a plan
representative that the consent required under subparagraph (A)
may not be obtained because there is no spouse, because the
spouse cannot be located, or because of such other
circumstances as the Secretary may by regulations prescribe.
Any consent by a spouse (or establishment that the consent of a
spouse may not be obtained) under the preceding sentence shall be
effective only with respect to such spouse.
(3) Plan to provide written explanations
(A) Explanation of joint and survivor annuity
Each plan shall provide to each participant, within a
reasonable period of time before the annuity starting date (and
consistent with such regulations as the Secretary may
prescribe), a written explanation of -
(i) the terms and conditions of the qualified joint and
survivor annuity,
(ii) the participant's right to make, and the effect of, an
election under paragraph (1) to waive the joint and survivor
annuity form of benefit,
(iii) the rights of the participant's spouse under
paragraph (2), and
(iv) the right to make, and the effect of, a revocation of
an election under paragraph (1).
(B) Explanation of qualified preretirement survivor annuity
(i) In general
Each plan shall provide to each participant, within the
applicable period with respect to such participant (and
consistent with such regulations as the Secretary may
prescribe), a written explanation with respect to the
qualified preretirement survivor annuity comparable to that
required under subparagraph (A).
(ii) Applicable period
For purposes of clause (i), the term "applicable period"
means, with respect to a participant, whichever of the
following periods ends last:
(I) The period beginning with the first day of the plan
year in which the participant attains age 32 and ending
with the close of the plan year preceding the plan year in
which the participant attains age 35.
(II) A reasonable period after the individual becomes a
participant.
(III) A reasonable period ending after paragraph (5)
ceases to apply to the participant.
(IV) A reasonable period ending after section 401(a)(11)
applies to the participant.
In the case of a participant who separates from service
before attaining age 35, the applicable period shall be a
reasonable period after separation.
(4) Requirement of spousal consent for using plan assets as
security for loans
Each plan shall provide that, if section 401(a)(11) applies to
a participant when part or all of the participant's accrued
benefit is to be used as security for a loan, no portion of the
participant's accrued benefit may be used as security for such
loan unless -
(A) the spouse of the participant (if any) consents in
writing to such use during the 90-day period ending on the date
on which the loan is to be so secured, and
(B) requirements comparable to the requirements of paragraph
(2) are met with respect to such consent.
(5) Special rules where plan fully subsidizes costs
(A) In general
The requirements of this subsection shall not apply with
respect to the qualified joint and survivor annuity form of
benefit or the qualified preretirement survivor annuity form of
benefit, as the case may be, if such benefit may not be waived
(or another beneficiary selected) and if the plan fully
subsidizes the costs of such benefit.
(B) Definition
For purposes of subparagraph (A), a plan fully subsidizes the
costs of a benefit if under the plan the failure to waive such
benefit by a participant would not result in a decrease in any
plan benefits with respect to such participant and would not
result in increased contributions from such participant.
(6) Applicable election period defined
For purposes of this subsection, the term "applicable election
period" means -
(A) in the case of an election to waive the qualified joint
and survivor annuity form of benefit, the 90-day period ending
on the annuity starting date, or
(B) in the case of an election to waive the qualified
preretirement survivor annuity, the period which begins on the
first day of the plan year in which the participant attains age
35 and ends on the date of the participant's death.
In the case of a participant who is separated from service, the
applicable election period under subparagraph (B) with respect to
benefits accrued before the date of such separation from service
shall not begin later than such date.
(7) Special rules relating to time for written explanation
Notwithstanding any other provision of this subsection -
(A) Explanation may be provided after annuity starting date
(i) In general
A plan may provide the written explanation described in
paragraph (3)(A) after the annuity starting date. In any case
to which this subparagraph applies, the applicable election
period under paragraph (6) shall not end before the 30th day
after the date on which such explanation is provided.
(ii) Regulatory authority
The Secretary may by regulations limit the application of
clause (i), except that such regulations may not limit the
period of time by which the annuity starting date precedes
the provision of the written explanation other than by
providing that the annuity starting date may not be earlier
than termination of employment.
(B) Waiver of 30-day period
A plan may permit a participant to elect (with any applicable
spousal consent) to waive any requirement that the written
explanation be provided at least 30 days before the annuity
starting date (or to waive the 30-day requirement under
subparagraph (A)) if the distribution commences more than 7
days after such explanation is provided.
(b) Definition of qualified joint and survivor annuity
For purposes of this section and section 401(a)(11), the term
"qualified joint and survivor annuity" means an annuity -
(1) for the life of the participant with a survivor annuity for
the life of the spouse which is not less than 50 percent of (and
is not greater than 100 percent of) the amount of the annuity
which is payable during the joint lives of the participant and
the spouse, and
(2) which is the actuarial equivalent of a single annuity for
the life of the participant.
Such term also includes any annuity in a form having the effect of
an annuity described in the preceding sentence.
(c) Definition of qualified preretirement survivor annuity
For purposes of this section and section 401(a)(11) -
(1) In general
Except as provided in paragraph (2), the term "qualified
preretirement survivor annuity" means a survivor annuity for the
life of the surviving spouse of the participant if -
(A) the payments to the surviving spouse under such annuity
are not less than the amounts which would be payable as a
survivor annuity under the qualified joint and survivor annuity
under the plan (or the actuarial equivalent thereof) if -
(i) in the case of a participant who dies after the date on
which the participant attained the earliest retirement age,
such participant had retired with an immediate qualified
joint and survivor annuity on the day before the
participant's date of death, or
(ii) in the case of a participant who dies on or before the
date on which the participant would have attained the
earliest retirement age, such participant had -
(I) separated from service on the date of death,
(II) survived to the earliest retirement age,
(III) retired with an immediate qualified joint and
survivor annuity at the earliest retirement age, and
(IV) died on the day after the day on which such
participant would have attained the earliest retirement
age, and
(B) under the plan, the earliest period for which the
surviving spouse may receive a payment under such annuity is
not later than the month in which the participant would have
attained the earliest retirement age under the plan.
In the case of an individual who separated from service before
the date of such individual's death, subparagraph (A)(ii)(I)
shall not apply.
(2) Special rule for defined contribution plans
In the case of any defined contribution plan or participant
described in clause (ii) or (iii) of section 401(a)(11)(B), the
term "qualified preretirement survivor annuity" means an annuity
for the life of the surviving spouse the actuarial equivalent of
which is not less than 50 percent of the portion of the account
balance of the participant (as of the date of death) to which the
participant had a nonforfeitable right (within the meaning of
section 411(a)).
(3) Security interests taken into account
For purposes of paragraphs (1) and (2), any security interest
held by the plan by reason of a loan outstanding to the
participant shall be taken into account in determining the amount
of the qualified preretirement survivor annuity.
(d) Survivor annuities need not be provided if participant and
spouse married less than 1 year
(1) In general
Except as provided in paragraph (2), a plan shall not be
treated as failing to meet the requirements of section 401(a)(11)
merely because the plan provides that a qualified joint and
survivor annuity (or a qualified preretirement survivor annuity)
will not be provided unless the participant and spouse had been
married throughout the 1-year period ending on the earlier of -
(A) the participant's annuity starting date, or
(B) the date of the participant's death.
(2) Treatment of certain marriages within 1 year of annuity
starting date for purposes of qualified joint and survivor
annuities
For purposes of paragraph (1), if -
(A) a participant marries within 1 year before the annuity
starting date, and
(B) the participant and the participant's spouse in such
marriage have been married for at least a 1-year period ending
on or before the date of the participant's death,
such participant and such spouse shall be treated as having been
married throughout the 1-year period ending on the participant's
annuity starting date.
(e) Restrictions on cash-outs
(1) Plan may require distribution if present value not in excess
of dollar limit
A plan may provide that the present value of a qualified joint
and survivor annuity or a qualified preretirement survivor
annuity will be immediately distributed if such value does not
exceed the amount that can be distributed without the
participant's consent under section 411(a)(11). No distribution
may be made under the preceding sentence after the annuity
starting date unless the participant and the spouse of the
participant (or where the participant has died, the surviving
spouse) consents in writing to such distribution.
(2) Plan may distribute benefit in excess of dollar limit only
with consent
If -
(A) the present value of the qualified joint and survivor
annuity or the qualified preretirement survivor annuity exceeds
the amount that can be distributed without the participant's
consent under section 411(a)(11), and
(B) the participant and the spouse of the participant (or
where the participant has died, the surviving spouse) consent
in writing to the distribution,
the plan may immediately distribute the present value of such
annuity.
(3) Determination of present value
(A) In general
(i) Present value
Except as provided in subparagraph (B), for purposes of
paragraphs (1) and (2), the present value shall not be less
than the present value calculated by using the applicable
mortality table and the applicable interest rate.
(ii) Definitions
For purposes of clause (i) -
(I) Applicable mortality table
The term "applicable mortality table" means the table
prescribed by the Secretary. Such table shall be based on
the prevailing commissioners' standard table (described in
section 807(d)(5)(A)) used to determine reserves for group
annuity contracts issued on the date as of which present
value is being determined (without regard to any other
subparagraph of section 807(d)(5)).
(II) Applicable interest rate
The term "applicable interest rate" means the annual rate
of interest on 30-year Treasury securities for the month
before the date of distribution or such other time as the
Secretary may by regulations prescribe.
(B) Exception
In the case of a distribution from a plan that was adopted
and in effect before the date of the enactment of the
Retirement Protection Act of 1994, the present value of any
distribution made before the earlier of -
(i) the later of the date a plan amendment applying
subparagraph (A) is adopted or made effective, or
(ii) the first day of the first plan year beginning after
December 31, 1999,
shall be calculated, for purposes of paragraphs (1) and (2),
using the interest rate determined under the regulations of the
Pension Benefit Guaranty Corporation for determining the
present value of a lump sum distribution on plan termination
that were in effect on September 1, 1993, and using the
provisions of the plan as in effect on the day before such date
of enactment; but only if such provisions of the plan met the
requirements of section 417(e)(3) as in effect on the day
before such date of enactment.
(f) Other definitions and special rules
For purposes of this section and section 401(a)(11) -
(1) Vested participant
The term "vested participant" means any participant who has a
nonforfeitable right (within the meaning of section 411(a)) to
any portion of such participant's accrued benefit.
(2) Annuity starting date
(A) In general
The term "annuity starting date" means -
(i) the first day of the first period for which an amount
is payable as an annuity, or
(ii) in the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred
which entitle the participant to such benefit.
(B) Special rule for disability benefits
For purposes of subparagraph (A), the first day of the first
period for which a benefit is to be received by reason of
disability shall be treated as the annuity starting date only
if such benefit is not an auxiliary benefit.
(3) Earliest retirement age
The term "earliest retirement age" means the earliest date on
which, under the plan, the participant could elect to receive
retirement benefits.
(4) Plan may take into account increased costs
A plan may take into account in any equitable manner (as
determined by the Secretary) any increased costs resulting from
providing a qualified joint or survivor annuity or a qualified
preretirement survivor annuity.
(5) Distributions by reason of security interests
If the use of any participant's accrued benefit (or any portion
thereof) as security for a loan meets the requirements of
subsection (a)(4), nothing in this section or section 411(a)(11)
shall prevent any distribution required by reason of a failure to
comply with the terms of such loan.
(6) Requirements for certain spousal consents
No consent of a spouse shall be effective for purposes of
subsection (e)(1) or (e)(2) (as the case may be) unless
requirements comparable to the requirements for spousal consent
to an election under subsection (a)(1)(A) are met.
(7) Consultation with the Secretary of Labor
In prescribing regulations under this section and section
401(a)(11), the Secretary shall consult with the Secretary of
Labor.
-SOURCE-
(Added Pub. L. 98-397, title II, Sec. 203(b), Aug. 23, 1984, 98
Stat. 1441; amended Pub. L. 99-514, title XI, Sec. 1139(b), title
XVIII, Sec. 1898(b)(1)(A), (4)(A), (5)(A), (6)(A), (8)(A), (9)(A),
(10)(A), (11)(A), (12)(A), (15)(A), (B), Oct. 22, 1986, 100 Stat.
2487, 2944, 2945, 2947-2951; Pub. L. 100-647, title I, Sec.
1018(u)(9), Nov. 10, 1988, 102 Stat. 3590; Pub. L. 101-239, title
VII, Sec. 7862(d)(1)(A), Dec. 19, 1989, 103 Stat. 2433; Pub. L.
103-465, title VII, Sec. 767(a)(2), Dec. 8, 1994, 108 Stat. 5038;
Pub. L. 104-188, title I, Sec. 1451(a), Aug. 20, 1996, 110 Stat.
1815; Pub. L. 105-34, title X, Sec. 1071(a)(2), Aug. 5, 1997, 111
Stat. 948; Pub. L. 107-147, title IV, Sec. 411(r)(1), Mar. 9, 2002,
116 Stat. 51.)
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of the Retirement Protection Act of
1994, referred to in subsec. (e)(3)(B), is the date of enactment of
subtitle F (Secs. 750-781) of title VII of Pub. L. 103-465, which
was approved Dec. 8, 1994.
-MISC1-
AMENDMENTS
2002 - Subsec. (e)(1). Pub. L. 107-147, Sec. 411(r)(1)(A),
substituted "exceed the amount that can be distributed without the
participant's consent under section 411(a)(11)" for "exceed the
dollar limit under section 411(a)(11)(A)".
Subsec. (e)(2)(A). Pub. L. 107-147, Sec. 411(r)(1)(B),
substituted "exceeds the amount that can be distributed without the
participant's consent under section 411(a)(11)" for "exceeds the
dollar limit under section 411(a)(11)(A)".
1997 - Subsec. (e)(1), (2). Pub. L. 105-34 substituted "dollar
limit" for "$3,500" in headings of pars. (1) and (2) and "the
dollar limit under section 411(a)(11)(A)" for "$3,500" in text of
pars. (1) and (2)(A).
1996 - Subsec. (a)(7). Pub. L. 104-188 added par. (7).
1994 - Subsec. (e)(3). Pub. L. 103-465 amended par. (3)
generally, substituting present provisions for provisions directing
that present value be calculated by using a rate no greater than
the applicable interest rate or 120 percent of such rate, depending
upon amount of vested accrued benefit, and defining "applicable
interest rate".
1989 - Subsec. (a)(3)(B)(ii). Pub. L. 101-239 added sentence at
end and struck out former subcl. (V) which read as follows: "A
reasonable period after separation from service in case of a
participant who separates before attaining age 35."
1988 - Subsec. (e)(3)(A). Pub. L. 100-647 substituted "clause
(ii)" for "subclause (II)" in last sentence.
1986 - Subsec. (a)(1). Pub. L. 99-514, Sec. 1898(b)(15)(A),
substituted "section 401(a)(11)" for "section 401(a)(ii)".
Subsec. (a)(1)(B). Pub. L. 99-514, Sec. 1898(b)(4)(A)(i),
substituted "paragraphs (2), (3), and (4)" for "paragraphs (2) and
(3)".
Subsec. (a)(2)(A). Pub. L. 99-514, Sec. 1898(b)(6)(A), amended
subpar. (A) generally. Prior to amendment, subpar. (A) read as
follows: "the spouse of the participant consents in writing to such
election, and the spouse's consent acknowledges the effect of such
election and is witnessed by a plan representative or a notary
public, or".
Subsec. (a)(3)(B). Pub. L. 99-514, Sec. 1898(b)(5)(A), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "Each plan shall provide to each participant, within the
period beginning with the first day of the plan year in which the
participant attains age 32 and ending with the close of the plan
year preceding the plan year in which the participant attains age
35 (and consistent with such regulations as the Secretary may
prescribe), a written explanation with respect to the qualified
preretirement survivor annuity comparable to that required under
subparagraph (A)."
Subsec. (a)(4). Pub. L. 99-514, Sec. 1898(b)(4)(A)(ii), added
par. (4). Former par. (4) redesignated (5).
Subsec. (a)(5), (6). Pub. L. 99-514, Sec. 1898(b)(4)(A)(ii),
(11)(A), redesignated former par. (4) as (5) and inserted in
subpar. (A) "if such benefit may not be waived (or another
beneficiary selected) and" before "if the plan". Former par. (5)
redesignated (6).
Subsec. (c)(1). Pub. L. 99-514, Sec. 1898(b)(15)(B), substituted
"survivor annuity for the life of" for "survivor annuity or the
life of".
Pub. L. 99-514, Sec. 1898(b)(1)(A), inserted "In the case of an
individual who separated from service before the date of such
individual's death, subparagraph (A)(ii)(I) shall not apply."
Subsec. (c)(2). Pub. L. 99-514, Sec. 1898(b)(9)(A)(i),
substituted "the portion of the account balance of the participant
(as of the date of death) to which the participant had a
nonforfeitable right (within the meaning of section 411(a))" for
"the account balance of the participant as of the date of death".
Subsec. (c)(3). Pub. L. 99-514, Sec. 1898(b)(9)(A)(ii), added
par. (3).
Subsec. (e)(3). Pub. L. 99-514, Sec. 1139(b), amended par. (3)
generally. Prior to amendment, par. (3) read as follows: "For
purposes of paragraphs (1) and (2), the present value of a
qualified joint and survivor annuity or a qualified preretirement
survivor annuity shall be determined as of the date of the
distribution and by using an interest rate not greater than the
interest rate which would be used (as of the date of the
distribution) by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of a lump sum
distribution on plan termination."
Subsec. (f)(1). Pub. L. 99-514, Sec. 1898(b)(8)(A), substituted
"such participant's accrued benefit" for "the accrued benefit
derived from employer contributions".
Subsec. (f)(2). Pub. L. 99-514, Sec. 1898(b)(12)(A), amended par.
(2) generally. Prior to amendment, par. (2) read as follows: "The
term 'annuity starting date' means the first day of the first
period for which an amount is received as an annuity (whether by
reason of retirement or disability)."
Subsec. (f)(5). Pub. L. 99-514, Sec. 1898(b)(4)(A)(iii), added
par. (5) and redesignated former par. (5) as (6).
Subsec. (f)(6), (7). Pub. L. 99-514, Sec. 1898(b)(10)(A), added
par. (6) and redesignated former par. (6) as (7).
Pub. L. 99-514, Sec. 1898(b)(4)(A)(iii), redesignated former par.
(5) as (6).
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable to plan years beginning
after Aug. 5, 1997, see section 1071(c) of Pub. L. 105-34, set out
as a note under section 411 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1451(c) of Pub. L. 104-188 provided that: "The amendments
made by this section [amending this section and section 1055 of
Title 29, Labor] shall apply to plan years beginning after December
31, 1996."
EFFECTIVE DATE OF 1994 AMENDMENT
Amendment by Pub. L. 103-465 applicable to plan years and
limitation years beginning after Dec. 31, 1994, except that
employer may elect to treat such amendment as effective on or after
Dec. 8, 1994, with provisions relating to reduction of accrued
benefits, exception, and timing of plan amendment, see section
767(d) of Pub. L. 103-465, as amended, set out as a note under
section 411 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 7863 of Pub. L. 101-239, set
out as a note under section 106 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1139(b) of Pub. L. 99-514 applicable to
distributions in plan years beginning after Dec. 31, 1984, except
that such amendments shall not apply to any distributions in plan
years beginning after Dec. 31, 1984, and before Jan. 1, 1987, if
such distributions were made in accordance with the requirements of
the regulations issued under the Retirement Equity Act of 1984,
Pub. L. 98-397, with additional provisions relating to reductions
in accrued benefits, see section 1139(d) of Pub. L. 99-514, set out
as a note under section 411 of this title.
Section 1898(b)(4)(C) of Pub. L. 99-514 provided that:
"(i) The amendments made by this paragraph [amending this section
and section 1055 of Title 29, Labor] shall apply with respect to
loans made after August 18, 1985.
"(ii) In the case of any loan which was made on or before August
18, 1985, and which is secured by a portion of the participant's
accrued benefit, nothing in the amendments made by sections 103 and
203 of the Retirement Equity Act of 1984 [sections 103 and 203 of
Pub. L. 98-397, enacting this section and amending section 401 of
this title and section 1055 of Title 29] shall prevent any
distribution required by reason of a failure to comply with the
terms of such loan.
"(iii) For purposes of this subparagraph, any loan which is
revised, extended, renewed, or renegotiated after August 18, 1985,
shall be treated as made after August 18, 1985.
Section 1898(b)(6)(C) of Pub. L. 99-514 provided that: "The
amendments made by this paragraph [amending this section and
section 1055 of Title 29, Labor] shall apply to plan years
beginning after the date of the enactment of this Act [Oct. 22,
1986]."
Section 1898(b)(8)(C) of Pub. L. 99-514, as added by Pub. L.
101-239, title VII, Sec. 7862(d)(2), Dec. 19, 1989, 103 Stat. 2434,
provided that: "The amendments made by this paragraph [amending
this section and section 1055 of Title 29, Labor] shall apply to
distributions after the date of the enactment of this Act [Oct. 22,
1986]."
Amendment by section 1898(b)(1)(A), (5)(A), (9)(A), (10)(A),
(11)(A), (12)(A), (15)(A), (B) of Pub. L. 99-514 effective as if
included in the provision of the Retirement Equity Act of 1984,
Pub. L. 98-397, to which such amendment relates, except as
otherwise provided, see section 1898(j) of Pub. L. 99-514, set out
as a note under section 401 of this title.
EFFECTIVE DATE
Section applicable to plan years beginning after Dec. 31, 1984,
except as otherwise provided, see sections 302 and 303 of Pub. L.
98-397, set out as an Effective Date of 1984 Amendment note under
section 1001 of Title 29, Labor.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 401, 409, 411, 414, 415,
2503 of this title.
-End-
-CITE-
26 USC Subpart C - Special Rules for Multiemployer Plans 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart C - Special Rules for Multiemployer Plans
-HEAD-
SUBPART C - SPECIAL RULES FOR MULTIEMPLOYER PLANS
-MISC1-
Sec.
418. Reorganization status.
418A. Notice of reorganization and funding requirements.
418B. Minimum contribution requirement.
418C. Overburden credit against minimum contribution
requirement.
418D. Adjustments in accrued benefits.
418E. Insolvent plans.
AMENDMENTS
1980 - Pub. L. 96-364, title II, Sec. 202(a), Sept. 26, 1980, 94
Stat. 1271, added subpart C heading "Special Rules for
Multiemployer Plans" and items 418 to 418E.
-SECREF-
SUBPART REFERRED TO IN OTHER SECTIONS
This subpart is referred to in title 29 section 1202.
-End-
-CITE-
26 USC Sec. 418 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart C - Special Rules for Multiemployer Plans
-HEAD-
Sec. 418. Reorganization status
-STATUTE-
(a) General rule
A multiemployer plan is in reorganization for a plan year if the
plan's reorganization index for that year is greater than zero.
(b) Reorganization index
For purposes of this subpart -
(1) In general
A plan's reorganization index for any plan year is the excess
of -
(A) the vested benefits charge for such year, over
(B) the net charge to the funding standard account for such
year.
(2) Net charge to funding standard account
The net charge to the funding standard account for any plan
year is the excess (if any) of -
(A) the charges to the funding standard account for such year
under section 412(b)(2), over
(B) the credits to the funding standard account under section
412(b)(3)(B).
(3) Vested benefits charge
The vested benefits charge for any plan year is the amount
which would be necessary to amortize the plan's unfunded vested
benefits as of the end of the base plan year in equal annual
installments -
(A) over 10 years, to the extent such benefits are
attributable to persons in pay status, and
(B) over 25 years, to the extent such benefits are
attributable to other participants.
(4) Determination of vested benefits charge
(A) In general
The vested benefits charge for a plan year shall be based on
an actuarial valuation of the plan as of the end of the base
plan year, adjusted to reflect -
(i) any -
(I) decrease of 5 percent or more in the value of plan
assets, or increase of 5 percent or more in the number of
persons in pay status, during the period beginning on the
first day of the plan year following the base plan year and
ending on the adjustment date, or
(II) at the election of the plan sponsor, actuarial
valuation of the plan as of the adjustment date or any
later date not later than the last day of the plan year for
which the determination is being made,
(ii) any change in benefits under the plan which is not
otherwise taken into account under this subparagraph and
which is pursuant to any amendment -
(I) adopted before the end of the plan year for which the
determination is being made, and
(II) effective after the end of the base plan year and on
or before the end of the plan year referred to in subclause
(I), and
(iii) any other event (including an event described in
subparagraph (B)(i)(I)) which, as determined in accordance
with regulations prescribed by the Secretary, would
substantially increase the plan's vested benefit charge.
(B) Certain changes in benefit levels
(i) In general
In determining the vested benefits charge for a plan year
following a plan year in which the plan was not in
reorganization, any change in benefits which -
(I) results from the changing of a group of participants
from one benefit level to another benefit level under a
schedule of plan benefits as a result of changes in a
collective bargaining agreement, or
(II) results from any other change in a collective
bargaining agreement,
shall not be taken into account except to the extent provided
in regulations prescribed by the Secretary.
(ii) Plan in reorganization
Except as otherwise determined by the Secretary, in
determining the vested benefits charge for any plan year
following any plan year in which the plan was in
reorganization, any change in benefits -
(I) described in clause (i)(I), or
(II) described in clause (i)(II) as determined under
regulations prescribed by the Secretary,
shall, for purposes of subparagraph (A)(ii), be treated as a
change in benefits pursuant to an amendment to a plan.
(5) Base plan year
(A) In general
The base plan year for any plan year is -
(i) if there is a relevant collective bargaining agreement,
the last plan year ending at least 6 months before the
relevant effective date, or
(ii) if there is no relevant collective bargaining
agreement, the last plan year ending at least 12 months
before the beginning of the plan year.
(B) Relevant collective bargaining agreement
A relevant collective bargaining agreement is a collective
bargaining agreement -
(i) which is in effect for at least 6 months during the
plan year, and
(ii) which has not been in effect for more than 36 months
as of the end of the plan year.
(C) Relevant effective date
The relevant effective date is the earliest of the effective
dates for the relevant collective bargaining agreements.
(D) Adjustment date
The adjustment date is the date which is -
(i) 90 days before the relevant effective date, or
(ii) if there is no relevant effective date, 90 days before
the beginning of the plan year.
(6) Person in pay status
The term "person in pay status" means -
(A) a participant or beneficiary on the last day of the base
plan year who, at any time during such year, was paid an early,
late, normal, or disability retirement benefit (or a death
benefit related to a retirement benefit), and
(B) to the extent provided in regulations prescribed by the
Secretary, any other person who is entitled to such a benefit
under the plan.
(7) Other definitions and special rules
(A) Unfunded vested benefits
The term "unfunded vested benefits" means, in connection with
a plan, an amount (determined in accordance with regulations
prescribed by the Secretary) equal to -
(i) the value of vested benefits under the plan, less
(ii) the value of the assets of the plan.
(B) Vested benefits
The term "vested benefits" means any nonforfeitable benefit
(within the meaning of section 4001(a)(8) of the Employee
Retirement Income Security Act of 1974).
(C) Allocation of assets
In determining the plan's unfunded vested benefits, plan
assets shall first be allocated to the vested benefits
attributable to persons in pay status.
(D) Treatment of certain benefit reductions
The vested benefits charge shall be determined without regard
to reductions in accrued benefits under section 418D which are
first effective in the plan year.
(E) Withdrawal liability
For purposes of this part, any outstanding claim for
withdrawal liability shall not be considered a plan asset,
except as otherwise provided in regulations prescribed by the
Secretary.
(c) Prohibition of nonannuity payments
Except as provided in regulations prescribed by the Pension
Benefit Guaranty Corporation, while a plan is in reorganization a
benefit with respect to a participant (other than a death benefit)
which is attributable to employer contributions and which has a
value of more than $1,750 may not be paid in a form other than an
annuity which (by itself or in combination with social security,
railroad retirement, or workers' compensation benefits) provides
substantially level payments over the life of the participant.
(d) Terminated plans
Any multiemployer plan which terminates under section 4041A(a)(2)
of the Employee Retirement Income Security Act of 1974 shall not be
considered in reorganization after the last day of the plan year in
which the plan is treated as having terminated.
-SOURCE-
(Added Pub. L. 96-364, title II, Sec. 202(a), Sept. 26, 1980, 94
Stat. 1271.)
-REFTEXT-
REFERENCES IN TEXT
Section 4001(a)(8) of the Employee Retirement Income Security Act
of 1974, referred to in subsec. (b)(7)(B), is classified to section
1301(a)(8) of Title 29, Labor.
Section 4041A(a)(2) of the Employee Retirement Income Security
Act of 1974, referred to in subsec. (d), is classified to section
1341a(a)(2) of Title 29.
-MISC1-
EFFECTIVE DATE
Section 210 of title II of Pub. L. 96-364 provided that:
"(a) Except as otherwise provided in this section, the amendments
made by this title [amending sections 401, 404, 411 to 414, 4971,
and 4975 of this title] shall take effect on the date of the
enactment of this Act [Sept. 26, 1980].
"(b) Subpart C of part I of subchapter D of chapter 1 of such
Code (as added by this Act) [sections 418 to 418E of this title]
shall take effect, with respect to each plan, on the first day of
the first plan year beginning on or after the earlier of -
"(1) the date on which the last collective-bargaining agreement
providing for employer contributions under the plan, which was in
effect on the date of the enactment of this Act [Sept. 26, 1980],
expires, without regard to extensions agreed to after such date
of enactment, or
"(2) 3 years after the date of the enactment of this Act [Sept.
26, 1980].
"(c) The amendments made by section 209 [enacting section 194 of
this title, and amending sections 501 and 4975 of this title] shall
apply to taxable years ending after the date of the enactment of
this Act [Sept. 26, 1980]."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 418B, 418E, 4971 of this
title.
-End-
-CITE-
26 USC Sec. 418A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart C - Special Rules for Multiemployer Plans
-HEAD-
Sec. 418A. Notice of reorganization and funding requirements
-STATUTE-
(a) Notice requirement
(1) In general
If -
(A) a multiemployer plan is in reorganization for a plan
year, and
(B) section 418B would require an increase in contributions
for such plan year,
the plan sponsor shall notify the persons described in paragraph
(2) that the plan is in reorganization and that, if contributions
to the plan are not increased, accrued benefits under the plan
may be reduced or an excise tax may be imposed (or both such
reduction and imposition may occur).
(2) Persons to whom notice is to be given
The persons described in this paragraph are -
(A) each employer who has an obligation to contribute under
the plan (within the meaning of section 4212(a) of the Employee
Retirement Income Security Act of 1974), and
(B) each employee organization which, for purposes of
collective bargaining, represents plan participants employed by
such an employer.
(3) Overburden credit not taken into account
The determination under paragraph (1)(B) shall be made without
regard to the overburden credit provided by section 418C.
(b) Additional requirements
The Pension Benefit Guaranty Corporation may prescribe additional
or alternative requirements for assuring, in the case of a plan
with respect to which notice is required by subsection (a)(1), that
the persons described in subsection (a)(2) -
(1) receive appropriate notice that the plan is in
reorganization,
(2) are adequately informed of the implications of
reorganization status, and
(3) have reasonable access to information relevant to the
plan's reorganization status.
-SOURCE-
(Added Pub. L. 96-364, title II, Sec. 202(a), Sept. 26, 1980, 94
Stat. 1274.)
-REFTEXT-
REFERENCES IN TEXT
Section 4212(a) of the Employee Retirement Income Security Act of
1974, referred to in subsec. (a)(2)(A), is classified to section
1392(a) of Title 29, Labor.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 418E of this title.
-End-
-CITE-
26 USC Sec. 418B 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart C - Special Rules for Multiemployer Plans
-HEAD-
Sec. 418B. Minimum contribution requirement
-STATUTE-
(a) Accumulated funding deficiency in reorganization
(1) In general
For any plan year in which a multiemployer plan is in
reorganization -
(A) the plan shall continue to maintain its funding standard
account, and
(B) the plan's accumulated funding deficiency under section
412(a) for such plan year shall be equal to the excess (if any)
of -
(i) the sum of the minimum contribution requirement for
such plan year (taking into account any overburden credit
under section 418C(a)) plus the plan's accumulated funding
deficiency for the preceding plan year (determined under this
section if the plan was in reorganization during such plan
year or under section 412(a) if the plan was not in
reorganization), over
(ii) amounts considered contributed by employers to or
under the plan for the plan year (increased by any amount
waived under subsection (f) for the plan year).
(2) Treatment of withdrawal liability payments
For purposes of paragraph (1), withdrawal liability payments
(whether or not received) which are due with respect to
withdrawals before the end of the base plan year shall be
considered amounts contributed by the employer to or under the
plan if, as of the adjustment date, it was reasonable for the
plan sponsor to anticipate that such payments would be made
during the plan year.
(b) Minimum contribution requirement
(1) In general
Except as otherwise provided in this section for purposes of
this subpart the minimum contribution requirement for a plan year
in which a plan is in reorganization is an amount equal to the
excess of -
(A) the sum of -
(i) the plan's vested benefits charge for the plan year;
and
(ii) the increase in normal cost for the plan year
determined under the entry age normal funding method which is
attributable to plan amendments adopted while the plan was in
reorganization, over
(B) the amount of the overburden credit (if any) determined
under section 418C for the plan year.
(2) Adjustment for reductions in contribution base units
If the plan's current contribution base for the plan year is
less than the plan's valuation contribution base for the plan
year, the minimum contribution requirement for such plan year
shall be equal to the product of the amount determined under
paragraph (1) (after any adjustment required by this subpart
other than this paragraph) multiplied by a fraction -
(A) the numerator of which is the plan's current contribution
base for the plan year, and
(B) the denominator of which is the plan's valuation
contribution base for the plan year.
(3) Special rule where cash-flow amount exceeds vested benefits
charge
(A) In general
If the vested benefits charge for a plan year of a plan in
reorganization is less than the plan's cash-flow amount for the
plan year, the plan's minimum contribution requirement for the
plan year is the amount determined under paragraph (1)
(determined before the application of paragraph (2)) after
substituting the term "cash-flow amount" for the term "vested
benefits charge" in paragraph (1)(A).
(B) Cash-flow amount
For purposes of subparagraph (A), a plan's cash-flow amount
for a plan year is an amount equal to -
(i) the amount of the benefits payable under the plan for
the base plan year, plus the amount of the plan's
administrative expenses for the base plan year, reduced by
(ii) the value of the available plan assets for the base
plan year determined under regulations prescribed by the
Secretary,
adjusted in a manner consistent with section 418(b)(4).
(c) Current contribution base; valuation contribution base
(1) Current contribution base
For purposes of this subpart, a plan's current contribution
base for a plan year is the number of contribution base units
with respect to which contributions are required to be made under
the plan for that plan year, determined in accordance with
regulations prescribed by the Secretary.
(2) Valuation contribution base
(A) In general
Except as provided in subparagraph (B), for purposes of this
subpart a plan's valuation contribution base is the number of
contribution base units for which contributions were received
for the base plan year -
(i) adjusted to reflect declines in the contribution base
which have occurred (or could reasonably be anticipated) as
of the adjustment date for the plan year referred to in
paragraph (1),
(ii) adjusted upward (in accordance with regulations
prescribed by the Secretary) for any contribution base
reduction in the base plan year caused by a strike or lockout
or by unusual events, such as fire, earthquake, or severe
weather conditions, and
(iii) adjusted (in accordance with regulations prescribed
by the Secretary) for reductions in the contribution base
resulting from transfers of liabilities.
(B) Insolvent plans
For any plan year -
(i) in which the plan is insolvent (within the meaning of
section 418E(b)(1)), and
(ii) beginning with the first plan year beginning after the
expiration of all relevant collective bargaining agreements
which were in effect in the plan year in which the plan
became insolvent,
the plan's valuation contribution base is the greater of the
number of contribution base units for which contributions were
received for the first or second plan year preceding the first
plan year in which the plan is insolvent, adjusted as provided
in clause (ii) or (iii) of subparagraph (A).
(3) Contribution base unit
For purposes of this subpart, the term "contribution base unit"
means a unit with respect to which an employer has an obligation
to contribute under a multiemployer plan (as defined in
regulations prescribed by the Secretary).
(d) Limitation on required increases in rate of employer
contributions
(1) In general
Under regulations prescribed by the Secretary, the minimum
contribution requirement applicable to any plan for any plan year
which is determined under subsection (b) (without regard to
subsection (b)(2)) shall not exceed an amount which is equal to
the sum of -
(A) the greater of -
(i) the funding standard requirement for such plan year, or
(ii) 107 percent of -
(I) if the plan was not in reorganization in the
preceding plan year, the funding standard requirement for
such preceding plan year, or
(II) if the plan was in reorganization in the preceding
plan year, the sum of the amount determined under this
subparagraph for the preceding plan year and the amount (if
any) determined under subparagraph (B) for the preceding
plan year, plus
(B) if for the plan year a change in benefits is first
required to be considered in computing the charges under
section 412(b)(2)(A) or (B), the sum of -
(i) the increase in normal cost for a plan year determined
under the entry age normal funding method due to increases in
benefits described in section 418(b)(4)(A)(ii) (determined
without regard to section 418(b)(4)(B)(ii)), and
(ii) the amount necessary to amortize in equal annual
installments the increase in the value of vested benefits
under the plan due to increases in benefits described in
clause (i) over -
(I) 10 years, to the extent such increase in value is
attributable to persons in pay status, or
(II) 25 years, to the extent such increase in value is
attributable to other participants.
(2) Funding standard requirement
For purposes of paragraph (1), the funding standard requirement
for any plan year is an amount equal to the net charge to the
funding standard account for such plan year (as defined in
section 418(b)(2)).
(3) Special rule for certain plans
(A) In general
In the case of a plan described in section 4216(b) of the
Employee Retirement Income Security Act of 1974, if a plan
amendment which increases benefits is adopted after January 1,
1980 -
(i) paragraph (1) shall apply only if the plan is a plan
described in subparagraph (B), and
(ii) the amount under paragraph (1) shall be determined
without regard to subparagraph (1)(B).
(B) Eligible plans
A plan is described in this subparagraph if -
(i) the rate of employer contributions under the plan for
the first plan year beginning on or after the date on which
an amendment increasing benefits is adopted, multiplied by
the valuation contribution base for that plan year, equals or
exceeds the sum of -
(I) the amount that would be necessary to amortize fully,
in equal annual installments, by July 1, 1986, the unfunded
vested benefits attributable to plan provisions in effect
on July 1, 1977 (determined as of the last day of the base
plan year); and
(II) the amount that would be necessary to amortize
fully, in equal annual installments, over the period
described in subparagraph (C), beginning with the first day
of the first plan year beginning on or after the date on
which the amendment is adopted, the unfunded vested
benefits (determined as of the last day of the base plan
year) attributable to each plan amendment after July 1,
1977; and
(ii) the rate of employer contributions for each subsequent
plan year is not less than the lesser of -
(I) the rate which when multiplied by the valuation
contribution base for that subsequent plan year produces
the annual amount that would be necessary to complete the
amortization schedule described in clause (i), or
(II) the rate for the plan year immediately preceding
such subsequent plan year, plus 5 percent of such rate.
(C) Period
The period determined under this subparagraph is the lesser
of -
(i) 12 years, or
(ii) a period equal in length to the average of the
remaining expected lives of all persons receiving benefits
under the plan.
(4) Exception in case of certain benefit increases
Paragraph (1) shall not apply with respect to a plan, other
than a plan described in paragraph (3), for the period of
consecutive plan years in each of which the plan is in
reorganization, beginning with a plan year in which occurs the
earlier of the date of the adoption or the effective date of any
amendment of the plan which increases benefits with respect to
service performed before the plan year in which the adoption of
the amendment occurred.
(e) Certain retroactive plan amendments
In determining the minimum contribution requirement with respect
to a plan for a plan year under subsection (b), the vested benefits
charge may be adjusted to reflect a plan amendment reducing
benefits under section 412(c)(8).
(f) Waiver of accumulated funding deficiency
(1) In general
The Secretary may waive any accumulated funding deficiency
under this section in accordance with the provisions of section
412(d)(1).
(2) Treatment of waiver
Any waiver under paragraph (1) shall not be treated as a waived
funding deficiency (within the meaning of section 412(d)(3)).
(g) Actuarial assumptions must be reasonable
For purposes of making any determination under this subpart, the
requirements of section 412(c)(3) shall apply.
-SOURCE-
(Added Pub. L. 96-364, title II, Sec. 202(a), Sept. 26, 1980, 94
Stat. 1274.)
-REFTEXT-
REFERENCES IN TEXT
Section 4216(b) of the Employee Retirement Income Security Act of
1974, referred to in subsec. (d)(3)(A), is classified to section
1396(b) of Title 29, Labor.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 412, 418A, 418C, 418D,
418E of this title; title 29 section 1082.
-End-
-CITE-
26 USC Sec. 418C 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart C - Special Rules for Multiemployer Plans
-HEAD-
Sec. 418C. Overburden credit against minimum contribution
requirement
-STATUTE-
(a) General rule
For purposes of determining the contribution under section 418B
(before the application of section 418B(b)(2) or (d)), the plan
sponsor of a plan which is overburdened for the plan year shall
apply an overburden credit against the plan's minimum contribution
requirement for the plan year (determined without regard to section
418B(b)(2) or (d) and without regard to this section).
(b) Definition of overburdened plan
A plan is overburdened for a plan year if -
(1) the average number of pay status participants under the
plan in the base plan year exceeds the average of the number of
active participants in the base plan year and the 2 plan years
preceding the base plan year, and
(2) the rate of employer contributions under the plan equals or
exceeds the greater of -
(A) such rate for the preceding plan year, or
(B) such rate for the plan year preceding the first year in
which the plan is in reorganization.
(c) Amount of overburden credit
The amount of the overburden credit for a plan year is the
product of -
(1) one-half of the average guaranteed benefit paid for the
base plan year, and
(2) the overburden factor for the plan year.
The amount of the overburden credit for a plan year shall not
exceed the amount of the minimum contribution requirement for such
year (determined without regard to this section).
(d) Overburden factor
For purposes of this section, the overburden factor of a plan for
the plan year is an amount equal to -
(1) the average number of pay status participants for the base
plan year, reduced by
(2) the average of the number of active participants for the
base plan year and for each of the 2 plan years preceding the
base plan year.
(e) Definitions
For purposes of this section -
(1) Pay status participant
The term "pay status participant" means, with respect to a
plan, a participant receiving retirement benefits under the plan.
(2) Number of active participants
The number of active participants for a plan year shall be the
sum of -
(A) the number of active employees who are participants in
the plan and on whose behalf contributions are required to be
made during the plan year;
(B) the number of active employees who are not participants
in the plan but who are in an employment unit covered by a
collective bargaining agreement which requires the employees'
employer to contribute to the plan unless service in such
employment unit was never covered under the plan or a
predecessor thereof, and
(C) the total number of active employees attributed to
employers who made payments to the plan for the plan year of
withdrawal liability pursuant to part 1 of subtitle E of title
IV of the Employee Retirement Income Security Act of 1974,
determined by dividing -
(i) the total amount of such payments, by
(ii) the amount equal to the total contributions received
by the plan during the plan year divided by the average
number of active employees who were participants in the plan
during the plan year.
The Secretary shall by regulations provide alternative methods of
determining active participants where (by reason of irregular
employment, contributions on a unit basis, or otherwise) this
paragraph does not yield a representative basis for determining
the credit.
(3) Average number
The term "average number" means, with respect to pay status
participants for a plan year, a number equal to one-half the sum
of -
(A) the number with respect to the plan as of the beginning
of the plan year, and
(B) the number with respect to the plan as of the end of the
plan year.
(4) Average guaranteed benefit
The average guaranteed benefit paid is 12 times the average
monthly pension payment guaranteed under section 4022A(c)(1) of
the Employee Retirement Income Security Act of 1974 determined
under the provisions of the plan in effect at the beginning of
the first plan year in which the plan is in reorganization and
without regard to section 4022A(c)(2).
(5) First year in reorganization
The first year in which the plan is in reorganization is the
first of a period of 1 or more consecutive plan years in which
the plan has been in reorganization not taking into account any
plan years the plan was in reorganization prior to any period of
3 or more consecutive plan years in which the plan was not in
reorganization.
(f) No overburden credit in case of certain reductions in
contributions
(1) In general
Notwithstanding any other provision of this section, a plan is
not eligible for an overburden credit for a plan year if the
Secretary finds that the plan's current contribution base for any
plan year was reduced, without a corresponding reduction in the
plan's unfunded vested benefits attributable to pay status
participants, as a result of a change in an agreement providing
for employer contributions under the plan.
(2) Treatment of certain withdrawals
For purposes of paragraph (1), a complete or partial withdrawal
of an employer (within the meaning of part 1 of subtitle E of
title IV of the Employee Retirement Income Security Act of 1974)
does not impair a plan's eligibility for an overburden credit,
unless the Secretary finds that a contribution base reduction
described in paragraph (1) resulted from a transfer of
liabilities to another plan in connection with the withdrawal.
(g) Mergers
Notwithstanding any other provision of this section, if 2 or more
multiemployer plans merge, the amount of the overburden credit
which may be applied under this section with respect to the plan
resulting from the merger for any of the 3 plan years ending after
the effective date of the merger shall not exceed the sum of the
used overburden credit for each of the merging plans for its last
plan year ending before the effective date of the merger. For
purposes of the preceding sentence, the used overburden credit is
that portion of the credit which does not exceed the excess of the
minimum contribution requirement determined without regard to any
overburden credit under this section over the employer
contributions required under the plan.
-SOURCE-
(Added Pub. L. 96-364, title II, Sec. 202(a), Sept. 26, 1980, 94
Stat. 1278.)
-REFTEXT-
REFERENCES IN TEXT
The Employee Retirement Income Security Act of 1974, referred to
in subsecs. (e)(2)(C), (4), and (f)(2), is Pub. L. 93-406, Sept. 2,
1974, 88 Stat. 829, as amended. Part 1 of subtitle E of title IV of
the Employee Retirement Income Security Act of 1974 is classified
generally to part 1 (Sec. 1381 et seq.) of subtitle E of subchapter
III of chapter 18 of Title 29, Labor. Section 4022A of the Employee
Retirement Income Security Act of 1974 is classified to section
1322a of Title 29. For complete classification of this Act to the
Code, see Short Title note set out under section 1001 of Title 29
and Tables.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 418A, 418B of this title.
-End-
-CITE-
26 USC Sec. 418D 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart C - Special Rules for Multiemployer Plans
-HEAD-
Sec. 418D. Adjustments in accrued benefits
-STATUTE-
(a) Adjustments in accrued benefits
(1) In general
Notwithstanding section 411, a multiemployer plan in
reorganization may be amended, in accordance with this section,
to reduce or eliminate accrued benefits attributable to employer
contributions which, under section 4022A(b) of the Employee
Retirement Income Security Act of 1974, are not eligible for the
Pension Benefit Guaranty Corporation's guarantee. The preceding
sentence shall only apply to accrued benefits under plan
amendments (or plans) adopted after March 26, 1980, or under
collective bargaining agreement entered into after March 26,
1980.
(2) Adjustment of vested benefits charge
In determining the minimum contribution requirement with
respect to a plan for a plan year under section 418B(b), the
vested benefits charge may be adjusted to reflect a plan
amendment reducing benefits under this section or section
412(c)(8), but only if the amendment is adopted and effective no
later than 2 1/2 months after the end of the plan year, or
within such extended period as the Secretary may prescribe by
regulations under section 412(c)(10).
(b) Limitation on reduction
(1) In general
Accrued benefits may not be reduced under this section unless -
(A) notice has been given, at least 6 months before the first
day of the plan year in which the amendment reducing benefits
is adopted, to -
(i) plan participants and beneficiaries,
(ii) each employer who has an obligation to contribute
(within the meaning of section 4212(a) of the Employee
Retirement Income Security Act of 1974) under the plan, and
(iii) each employee organization which, for purposes of
collective bargaining, represents plan participants employed
by such an employer,
that the plan is in reorganization and that, if contributions
under the plan are not increased, accrued benefits under the
plan will be reduced or an excise tax will be imposed on
employers;
(B) in accordance with regulations prescribed by the
Secretary -
(i) any category of accrued benefits is not reduced with
respect to inactive participants to a greater extent
proportionally that such category of accrued benefits is
reduced with respect to active participants,
(ii) benefits attributable to employer contributions other
than accrued benefits and the rate of future benefit accruals
are reduced at least to an extent equal to the reduction in
accrued benefits of inactive participants, and
(iii) in any case in which the accrued benefit of a
participant or beneficiary is reduced by changing the benefit
form or the requirements which the participant or beneficiary
must satisfy to be entitled to the benefit, such reduction is
not applicable to -
(I) any participant or beneficiary in pay status on the
effective date of the amendment, or the beneficiary of such
a participant, or
(II) any participant who has attained normal retirement
age, or who is within 5 years of attaining normal
retirement age, on the effective date of the amendment, or
the beneficiary of any such participant; and
(C) the rate of employer contributions for the plan year in
which the amendment becomes effective and for all succeeding
plan years in which the plan is in reorganization equals or
exceeds the greater of -
(i) the rate of employer contributions, calculated without
regard to the amendment, for the plan year in which the
amendment becomes effective, or
(ii) the rate of employer contributions for the plan year
preceding the plan year in which the amendment becomes
effective.
(2) Information required to be included in notice
The plan sponsors shall include in any notice required to be
sent to plan participants and beneficiaries under paragraph (1)
information as to the rights and remedies of plan participants
and beneficiaries as well as how to contact the Department of
Labor for further information and assistance where appropriate.
(c) No recoupment
A plan may not recoup a benefit payment which is in excess of the
amount payable under the plan because of an amendment retroactively
reducing accrued benefits under this section.
(d) Benefit increases under multiemployer plan in reorganization
(1) Restoration of previously reduced benefits
(A) In general
A plan which has been amended to reduce accrued benefits
under this section may be amended to increase or restore
accrued benefits, or the rate of future benefit accruals, only
if the plan is amended to restore levels of previously reduced
accrued benefits of inactive participants and of participants
who are within 5 years of attaining normal retirement age to at
least the same extent as any such increase in accrued benefits
or in the rate of future benefit accruals.
(B) Benefit increases and benefit restorations
For purposes of this subsection, in the case of a plan which
has been amended under this section to reduce accrued benefits
-
(i) an increase in a benefit, or in the rate of future
benefit accruals, shall be considered a benefit increase to
the extent that the benefit, or the accrual rate, is thereby
increased above the highest benefit level, or accrual rate,
which was in effect under the terms of the plan before the
effective date of the amendment reducing accrued benefits,
and
(ii) an increase in a benefit, or in the rate of future
benefit accruals, shall be considered a benefit restoration
to the extent that the benefit, or the accrual rate, is not
thereby increased above the highest benefit level, or accrual
rate, which was in effect under the terms of the plan
immediately before the effective date of the amendment
reducing accrued benefits.
(2) Uniformity in benefit restoration
If a plan is amended to partially restore previously reduced
accrued benefit levels, or the rate of future benefit accruals,
the benefits of inactive participants shall be restored in at
least the same proportions as other accrued benefits which are
restored.
(3) No benefit increases in year of benefit reduction
No benefit increase under a plan may take effect in a plan year
in which an amendment reducing accrued benefits under the plan,
in accordance with this section, is adopted or first becomes
effective.
(4) Retroactive payments
A plan is not required to make retroactive benefit payments
with respect to that portion of an accrued benefit which was
reduced and subsequently restored under this section.
(e) Inactive participant
For purposes of this section, the term "inactive participant"
means a person not in covered service under the plan who is in pay
status under the plan or who has a nonforfeitable benefit under the
plan.
(f) Regulations
The Secretary may prescribe rules under which, notwithstanding
any other provision of this section, accrued benefit reductions or
benefit increases for different participant groups may be varied
equitably to reflect variations in contribution rates and other
relevant factors reflecting differences in negotiated levels of
financial support for plan benefit obligations.
-SOURCE-
(Added Pub. L. 96-364, title II, Sec. 202(a), Sept. 26, 1980, 94
Stat. 1280.)
-REFTEXT-
REFERENCES IN TEXT
Section 4022A(b) of the Employee Retirement Income Security Act
of 1974, referred to in subsec. (a)(1), is classified to section
1322a(b) of Title 29, Labor.
Section 4212(a) of the Employee Retirement Income Security Act of
1974, referred to in subsec. (b)(1)(A)(ii), is classified to
section 1392(a) of Title 29.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 411, 418 of this title.
-End-
-CITE-
26 USC Sec. 418E 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart C - Special Rules for Multiemployer Plans
-HEAD-
Sec. 418E. Insolvent plans
-STATUTE-
(a) Suspension of certain benefit payments
Notwithstanding section 411, in any case in which benefit
payments under an insolvent multiemployer plan exceed the resource
benefit level, any such payments of benefits which are not basic
benefits shall be suspended, in accordance with this section, to
the extent necessary to reduce the sum of such payments and the
payments of such basic benefits to the greater of the resource
benefit level or the level of basic benefits, unless an alternative
procedure is prescribed by the Pension Benefit Guaranty Corporation
under section 4022A(g)(5) of the Employee Retirement Income
Security Act of 1974.
(b) Definitions
For purposes of this section, for a plan year -
(1) Insolvency
A multiemployer plan is insolvent if the plan's available
resources are not sufficient to pay benefits under the plan when
due for the plan year, or if the plan is determined to be
insolvent under subsection (d).
(2) Resource benefit level
The term "resource benefit level" means the level of monthly
benefits determined under subsections (c)(1) and (3) and (d)(3)
to be the highest level which can be paid out of the plan's
available resources.
(3) Available resources
The term "available resources" means the plan's cash,
marketable assets, contributions, withdrawal liability payments,
and earnings, less reasonable administrative expenses and amounts
owed for such plan year to the Pension Benefit Guaranty
Corporation under section 4261(b)(2) of the Employee Retirement
Income Security Act of 1974.
(4) Insolvency year
The term "insolvency year" means a plan year in which a plan is
insolvent.
(c) Benefit payments under insolvent plans
(1) Determination of resource benefit level
The plan sponsor of a plan in reorganization shall determine in
writing the plan's resource benefit level for each insolvency
year, based on the plan sponsor's reasonable projection of the
plan's available resources and the benefits payable under the
plan.
(2) Uniformity of the benefit suspension
The suspension of benefit payments under this section shall, in
accordance with regulations prescribed by the Secretary, apply in
substantially uniform proportions to the benefits of all persons
in pay status (within the meaning of section 418(b)(6)) under the
plan, except that the Secretary may prescribe rules under which
benefit suspensions for different participant groups may be
varied equitably to reflect variations in contribution rates and
other relevant factors including differences in negotiated levels
of financial support for plan benefit obligations.
(3) Resource benefit level below level of basic benefits
Notwithstanding paragraph (2), if a plan sponsor determines in
writing a resource benefit level for a plan year which is below
the level of basic benefits, the payment of all benefits other
than basic benefits shall be suspended for that plan year.
(4) Excess resources
(A) In general
If, by the end of an insolvency year, the plan sponsor
determines in writing that the plan's available resources in
that insolvency year could have supported benefit payments
above the resource benefit level for that insolvency year, the
plan sponsor shall distribute the excess resources to the
participants and beneficiaries who received benefit payments
from the plan in that insolvency year, in accordance with
regulations prescribed by the Secretary.
(B) Excess resources
For purposes of this paragraph, the term "excess resources"
means available resources above the amount necessary to support
the resource benefit level, but no greater than the amount
necessary to pay benefits for the plan year at the benefit
levels under the plan.
(5) Unpaid benefits
If, by the end of an insolvency year, any benefit has not been
paid at the resource benefit level, amounts up to the resource
benefit level which were unpaid shall be distributed to the
participants and beneficiaries, in accordance with regulations
prescribed by the Secretary, to the extent possible taking into
account the plan's total available resources in that insolvency
year.
(6) Retroactive payments
Except as provided in paragraph (4) or (5), a plan is not
required to make retroactive benefit payments with respect to
that portion of a benefit which was suspended under this section.
(d) Plan sponsor determination
(1) Triennial test
As of the end of the first plan year in which a plan is in
reorganization, and at least every 3 plan years thereafter
(unless the plan is no longer in reorganization), the plan
sponsor shall compare the value of plan assets (determined in
accordance with section 418B(b)(3)(B)(ii)) for that plan year
with the total amount of benefit payments made under the plan for
that plan year. Unless the plan sponsor determines that the value
of plan assets exceeds 3 times the total amount of benefit
payments, the plan sponsor shall determine whether the plan will
be insolvent in any of the next 3 plan years.
(2) Determination of insolvency
If, at any time, the plan sponsor of a plan in reorganization
reasonably determines, taking into account the plan's recent and
anticipated financial experience, that the plan's available
resources are not sufficient to pay benefits under the plan when
due for the next plan year, the plan sponsor shall make such
determination available to interested parties.
(3) Determination of resource benefit level
The plan sponsor of a plan in reorganization shall determine in
writing for each insolvency year the resource benefit level and
the level of basic benefits no later than 3 months before the
insolvency year.
(e) Notice requirements
(1) Impending insolvency
If the plan sponsor of a plan in reorganization determines
under subsection (d)(1) or (2) that the plan may become insolvent
(within the meaning of subsection (b)(1)), the plan sponsor shall
-
(A) notify the Secretary, the Pension Benefit Guaranty
Corporation, the parties described in section 418A(a)(2), and
the plan participants and beneficiaries of that determination,
and
(B) inform the parties described in section 418A(a)(2) and
the plan participants and beneficiaries that if insolvency
occurs certain benefit payments will be suspended, but that
basic benefits will continue to be paid.
(2) Resource benefit level
No later than 2 months before the first day of each insolvency
year, the plan sponsor of a plan in reorganization shall notify
the Secretary, the Pension Benefit Guaranty Corporation, the
parties described in section 418A(a)(2), and the plan
participants and beneficiaries of the resource benefit level
determined in writing for that insolvency year.
(3) Potential need for financial assistance
In any case in which the plan sponsor anticipates that the
resource benefit level for an insolvency year may not exceed the
level of basic benefits, the plan sponsor shall notify the
Pension Benefit Guaranty Corporation.
(4) Regulations
Notice required by this subsection shall be given in accordance
with regulations prescribed by the Pension Benefit Guaranty
Corporation, except that notice to the Secretary shall be given
in accordance with regulations prescribed by the Secretary.
(5) Corporation may prescribe time
The Pension Benefit Guaranty Corporation may prescribe a time
other than the time prescribed by this section for the making of
a determination or the filing of a notice under this section.
(f) Financial assistance
(1) Permissive application
If the plan sponsor of an insolvent plan for which the resource
benefit level is above the level of basic benefits anticipates
that, for any month in an insolvency year, the plan will not have
funds sufficient to pay basic benefits, the plan sponsor may
apply for financial assistance from the Pension Benefit Guaranty
Corporation under section 4261 of the Employee Retirement Income
Security Act of 1974.
(2) Mandatory application
A plan sponsor who has determined a resource benefit level for
an insolvency year which is below the level of basic benefits
shall apply for financial assistance from the Pension Benefit
Guaranty Corporation under section 4261 of the Employee
Retirement Income Security Act of 1974.
(g) Financial assistance
Any amount of any financial assistance from the Pension Benefit
Guaranty Corporation to any plan, and any repayment of such amount,
shall be taken into account under this subpart in such manner as
determined by the Secretary.
-SOURCE-
(Added Pub. L. 96-364, title II, Sec. 202(a), Sept. 26, 1980, 94
Stat. 1282.)
-REFTEXT-
REFERENCES IN TEXT
Section 4022A(g)(5) of the Employee Retirement Income Security
Act of 1974, referred to in subsec. (a), is classified to section
1322a(g)(5) of Title 29, Labor.
Section 4261 of the Employee Retirement Income Security Act of
1974, referred to in subsecs. (b)(3) and (f), is classified to
section 1431 of Title 29.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 411, 418B of this title;
title 29 section 1322a.
-End-
-CITE-
26 USC Subpart D - Treatment of Welfare Benefit Funds 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart D - Treatment of Welfare Benefit Funds
-HEAD-
SUBPART D - TREATMENT OF WELFARE BENEFIT FUNDS
-MISC1-
Sec.
419. Treatment of funded welfare benefit plans.
419A. Qualified asset account; limitation on additions to
account.
-SECREF-
SUBPART REFERRED TO IN OTHER SECTIONS
This subpart is referred to in section 4976 of this title.
-End-
-CITE-
26 USC Sec. 419 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart D - Treatment of Welfare Benefit Funds
-HEAD-
Sec. 419. Treatment of funded welfare benefit plans
-STATUTE-
(a) General rule
Contributions paid or accrued by an employer to a welfare benefit
fund -
(1) shall not be deductible under this chapter, but
(2) if they would otherwise be deductible, shall (subject to
the limitation of subsection (b)) be deductible under this
section for the taxable year in which paid.
(b) Limitation
The amount of the deduction allowable under subsection (a)(2) for
any taxable year shall not exceed the welfare benefit fund's
qualified cost for the taxable year.
(c) Qualified cost
For purposes of this section -
(1) In general
Except as otherwise provided in this subsection, the term
"qualified cost" means, with respect to any taxable year, the sum
of -
(A) the qualified direct cost for such taxable year, and
(B) subject to the limitation of section 419A(b), any
addition to a qualified asset account for the taxable year.
(2) Reduction for funds after-tax income
In the case of any welfare benefit fund, the qualified cost for
any taxable year shall be reduced by such fund's after-tax income
for such taxable year.
(3) Qualified direct cost
(A) In general
The term "qualified direct cost" means, with respect to any
taxable year, the aggregate amount (including administrative
expenses) which would have been allowable as a deduction to the
employer with respect to the benefits provided during the
taxable year, if -
(i) such benefits were provided directly by the employer,
and
(ii) the employer used the cash receipts and disbursements
method of accounting.
(B) Time when benefits provided
For purposes of subparagraph (A), a benefit shall be treated
as provided when such benefit would be includible in the gross
income of the employee if provided directly by the employer (or
would be so includible but for any provision of this chapter
excluding such benefit from gross income).
(C) 60-month amortization of child care facilities
(i) In general
In determining qualified direct costs with respect to any
child care facility for purposes of subparagraph (A), in lieu
of depreciation the adjusted basis of such facility shall be
allowable as a deduction ratably over a period of 60 months
beginning with the month in which the facility is placed in
service.
(ii) Child care facility
The term "child care facility" means any tangible property
which qualifies under regulations prescribed by the Secretary
as a child care center primarily for children of employees of
the employer; except that such term shall not include any
property -
(I) not of a character subject to depreciation; or
(II) located outside the United States.
(4) After-tax income
(A) In general
The term "after-tax income" means, with respect to any
taxable year, the gross income of the welfare benefit fund
reduced by the sum of -
(i) the deductions allowed by this chapter which are
directly connected with the production of such gross income,
and
(ii) the tax imposed by this chapter on the fund for the
taxable year.
(B) Treatment of certain amounts
In determining the gross income of any welfare benefit fund -
(i) contributions and other amounts received from employees
shall be taken into account, but
(ii) contributions from the employer shall not be taken
into account.
(5) Item only taken into account once
No item may be taken into account more than once in determining
the qualified cost of any welfare benefit fund.
(d) Carryover of excess contributions
If -
(1) the amount of the contributions paid (or deemed paid under
this subsection) by the employer during any taxable year to a
welfare benefit fund, exceeds
(2) the limitation of subsection (b),
such excess shall be treated as an amount paid by the employer to
such fund during the succeeding taxable year.
(e) Welfare benefit fund
For purposes of this section -
(1) In general
The term "welfare benefit fund" means any fund -
(A) which is part of a plan of an employer, and
(B) through which the employer provides welfare benefits to
employees or their beneficiaries.
(2) Welfare benefit
The term "welfare benefit" means any benefit other than a
benefit with respect to which -
(A) section 83(h) applies,
(B) section 404 applies (determined without regard to section
404(b)(2)), or
(C) section 404A applies.
(3) Fund
The term "fund" means -
(A) any organization described in paragraph (7), (9), (17),
or (20) of section 501(c),
(B) any trust, corporation, or other organization not exempt
from the tax imposed by this chapter, and
(C) to the extent provided in regulations, any account held
for an employer by any person.
(4) Treatment of amounts held pursuant to certain insurance
contracts
(A) In general
Notwithstanding paragraph (3)(C), the term "fund" shall not
include amounts held by an insurance company pursuant to an
insurance contract if -
(i) such contract is a life insurance contract described in
section 264(a)(1), or
(ii) such contract is a qualified nonguaranteed contract.
(B) Qualified nonguaranteed contract
(i) In general
For purposes of this paragraph, the term "qualified
nonguaranteed contract" means any insurance contract
(including a reasonable premium stabilization reserve held
thereunder) if -
(I) there is no guarantee of a renewal of such contract,
and
(II) other than insurance protection, the only payments
to which the employer or employees are entitled are
experience rated refunds or policy dividends which are not
guaranteed and which are determined by factors other than
the amount of welfare benefits paid to (or on behalf of)
the employees of the employer or their beneficiaries.
(ii) Limitation
In the case of any qualified nonguaranteed contract,
subparagraph (A) shall not apply unless the amount of any
experience rated refund or policy dividend payable to an
employer with respect to a policy year is treated by the
employer as received or accrued in the taxable year in which
the policy year ends.
(f) Method of contributions, etc., having the effect of a plan
If -
(1) there is no plan, but
(2) there is a method or arrangement of employer contributions
or benefits which has the effect of a plan,
this section shall apply as if there were a plan.
(g) Extension to plans for independent contractors
If any fund would be a welfare benefit fund (as modified by
subsection (f)) but for the fact that there is no employee-employer
relationship -
(1) this section shall apply as if there were such a
relationship, and
(2) any reference in this section to the employer shall be
treated as a reference to the person for whom services are
provided, and any reference in this section to an employee shall
be treated as a reference to the person providing the services.
-SOURCE-
(Added Pub. L. 98-369, div. A, title V, Sec. 511(a), July 18, 1984,
98 Stat. 854; amended Pub. L. 99-514, title XVIII, Sec. 1851(a)(1),
(8)(A), (b)(2)(C)(iv), Oct. 22, 1986, 100 Stat. 2858, 2860, 2863;
Pub. L. 100-203, title IX, Sec. 10201(b)(4), Dec. 22, 1987, 101
Stat. 1330-387; Pub. L. 100-647, title I, Sec. 1018(t)(2)(C), Nov.
10, 1988, 102 Stat. 3587.)
-MISC1-
AMENDMENTS
1988 - Subsec. (a)(1). Pub. L. 100-647 substituted "chapter" for
"subchapter".
1987 - Subsec. (e)(2)(D). Pub. L. 100-203 struck out subpar. (D)
which related to a benefit with respect to which an election under
section 463 applies.
1986 - Subsec. (a)(1). Pub. L. 99-514, Sec. 1851(b)(2)(C)(iv)(I),
substituted "under this subchapter" for "under section 162 or 212".
Subsec. (a)(2). Pub. L. 99-514, Sec. 1851(b)(2)(C)(iv)(II),
substituted "they would otherwise be deductible" for "they satisfy
the requirements of either of such sections".
Subsec. (e)(4). Pub. L. 99-514, Sec. 1851(a)(8)(A), added par.
(4).
Subsec. (g)(1). Pub. L. 99-514, Sec. 1851(a)(1), substituted
"such a relationship" for "such a plan".
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Amendment by Pub. L. 100-203 applicable to taxable years
beginning after Dec. 31, 1987, see section 10201(c)(1) of Pub. L.
100-203, set out as a note under section 404 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
EFFECTIVE DATE
Section 511(e) of Pub. L. 98-369, as amended by Pub. L. 99-514,
title XVIII, Sec. 1851(a)(12), (14), Oct. 22, 1986, 100 Stat. 2862,
provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [enacting this
subpart] shall apply to contributions paid or accrued after
December 31, 1985, in taxable years ending after such date.
"(2) Special rule for collective bargaining agreements. - In the
case of plan maintained pursuant to 1 or more collective bargaining
agreements -
"(A) between employee representatives and 1 or more employers,
and
"(B) in effect on July 1, 1985 (or ratified on or before such
date),
the amendments made by this section shall not apply to years
beginning before the date on which the last of the collective
bargaining agreements relating to the plan terminates (determined
without regard to any extension thereof agreed to after July 1,
1985).
"(3) Special rule for paragraph (2). - For purposes of paragraph
(2), any plan amendment made pursuant to a collective bargaining
agreement relating to the plan which amends the plan solely to
conform to any requirement added by this section shall not be
treated as a termination of such collective bargaining agreement.
"(4) Special effective date for contributions of facilities. -
Notwithstanding paragraphs (1) and (2), the amendments made by this
section shall apply in the case of -
"(A) any contribution after June 22, 1984, of a facility to a
welfare benefit fund, and
"(B) any other contribution after June 22, 1984, to a welfare
benefit fund to be used to acquire or improve a facility.
"(5) Binding contract exceptions to paragraph (4). - Paragraph
(4) shall not apply to any facility placed in service before
January 1, 1987 -
"(A) which is acquired or improved by the fund (or contributed
to the fund) pursuant to a binding contract in effect on June 22,
1984, and at all times thereafter, or
"(B) the construction of which by or for the fund began before
June 22, 1984.
"(6) Amendments related to tax on unrelated business income. -
The amendments made by subsection (b) [amending section 512 of this
title] shall apply with respect to taxable years ending after
December 31, 1985. For purposes of section 15 of the Internal
Revenue Code of 1954 [now 1986], such amendments shall be treated
as a change in the rate of a tax imposed by chapter 1 of such Code.
"(7) Amendments related to excise taxes on certain welfare
benefit plans. - The amendments made by subsection (c) [enacting
section 4976 of this title] shall apply to benefits provided after
December 31, 1985."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
EFFECTIVE DATE OF REGULATIONS
Section 1851(a)(8)(B) of Pub. L. 99-514 provided that: "Except in
the case of a reserve for post-retirement medical or life insurance
benefits and any other arrangement between an insurance company and
an employer under which the employer has a contractual right to a
refund or dividend based solely on the experience of such employer,
any account held for an employer by any person and defined as a
fund in regulations issued pursuant to section 419(e)(3)(C) of the
Internal Revenue Code of 1954 [now 1986] shall be considered a
'fund' no earlier than 6 months following the date such regulations
are published in final form."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 162, 401, 404, 419A, 420,
808, 1239, 4976 of this title.
-End-
-CITE-
26 USC Sec. 419A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart D - Treatment of Welfare Benefit Funds
-HEAD-
Sec. 419A. Qualified asset account; limitation on additions to
account
-STATUTE-
(a) General rule
For purposes of this subpart and section 512, the term "qualified
asset account" means any account consisting of assets set aside to
provide for the payment of -
(1) disability benefits,
(2) medical benefits,
(3) SUB or severance pay benefits, or
(4) life insurance benefits.
(b) Limitation on additions to account
No addition to any qualified asset account may be taken into
account under section 419(c)(1)(B) to the extent such addition
results in the amount in such account exceeding the account limit.
(c) Account limit
For purposes of this section -
(1) In general
Except as otherwise provided in this subsection, the account
limit for any qualified asset account for any taxable year is the
amount reasonably and actuarially necessary to fund -
(A) claims incurred but unpaid (as of the close of such
taxable year) for benefits referred to in subsection (a), and
(B) administrative costs with respect to such claims.
(2) Additional reserve for post-retirement medical and life
insurance benefits
The account limit for any taxable year may include a reserve
funded over the working lives of the covered employees and
actuarially determined on a level basis (using assumptions that
are reasonable in the aggregate) as necessary for -
(A) post-retirement medical benefits to be provided to
covered employees (determined on the basis of current medical
costs), or
(B) post-retirement life insurance benefits to be provided to
covered employees.
(3) Amount taken into account for SUB or severance pay benefits
(A) In general
The account limit for any taxable year with respect to SUB or
severance pay benefits is 75 percent of the average annual
qualified direct costs for SUB or severance pay benefits for
any 2 of the immediately preceding 7 taxable years (as selected
by the fund).
(B) Special rule for certain new plans
In the case of any new plan for which SUB or severance pay
benefits are not available to any key employee, the Secretary
shall, by regulations, provide for an interim amount to be
taken into account under paragraph (1).
(4) Limitation on amounts to be taken into account
(A) Disability benefits
For purposes of paragraph (1), disability benefits payable to
any individual shall not be taken into account to the extent
such benefits are payable at an annual rate in excess of the
lower of -
(i) 75 percent of such individual's average compensation
for his high 3 years (within the meaning of section
415(b)(3)), or
(ii) the limitation in effect under section 415(b)(1)(A).
(B) Limitation on SUB or severance pay benefits
For purposes of paragraph (3), any SUB or severance pay
benefit payable to any individual shall not be taken into
account to the extent such benefit is payable at an annual rate
in excess of 150 percent of the limitation in effect under
section 415(c)(1)(A).
(5) Special limitation where no actuarial certification
(A) In general
Unless there is an actuarial certification of the account
limit determined under this subsection for any taxable year,
the account limit for such taxable year shall not exceed the
sum of the safe harbor limits for such taxable year.
(B) Safe harbor limits
(i) Short-term disability benefits
In the case of short-term disability benefits, the safe
harbor limit for any taxable year is 17.5 percent of the
qualified direct costs (other than insurance premiums) for
the immediately preceding taxable year with respect to such
benefits.
(ii) Medical benefits
In the case of medical benefits, the safe harbor limit for
any taxable year is 35 percent of the qualified direct costs
(other than insurance premiums) for the immediately preceding
taxable year with respect to medical benefits.
(iii) SUB or severance pay benefits
In the case of SUB or severance pay benefits, the safe
harbor limit for any taxable year is the amount determined
under paragraph (3).
(iv) Long-term disability or life insurance benefits
In the case of any long-term disability benefit or life
insurance benefit, the safe harbor limit for any taxable year
shall be the amount prescribed by regulations.
(d) Requirement of separate accounts for post-retirement medical or
life insurance benefits provided to key employees
(1) In general
In the case of any employee who is a key employee -
(A) a separate account shall be established for any medical
benefits or life insurance benefits provided with respect to
such employee after retirement, and
(B) medical benefits and life insurance benefits provided
with respect to such employee after retirement may only be paid
from such separate account.
The requirements of this paragraph shall apply to the first
taxable year for which a reserve is taken into account under
subsection (c)(2) and to all subsequent taxable years.
(2) Coordination with section 415
For purposes of section 415, any amount attributable to medical
benefits allocated to an account established under paragraph (1)
shall be treated as an annual addition to a defined contribution
plan for purposes of section 415(c). Subparagraph (B) of section
415(c)(1) shall not apply to any amount treated as an annual
addition under the preceding sentence.
(3) Key employee
For purposes of this section, the term "key employee" means any
employee who, at any time during the plan year or any preceding
plan year, is or was a key employee as defined in section 416(i).
(e) Special limitations on reserves for medical benefits or life
insurance benefits provided to retired employees
(1) Reserve must be nondiscriminatory
No reserve may be taken into account under subsection (c)(2)
for post-retirement medical benefits or life insurance benefits
to be provided to covered employees unless the plan meets the
requirements of section 505(b) with respect to such benefits
(whether or not such requirements apply to such plan). The
preceding sentence shall not apply to any plan maintained
pursuant to an agreement between employee representatives and 1
or more employers if the Secretary finds that such agreement is a
collective bargaining agreement and that post-retirement medical
benefits or life insurance benefits were the subject of good
faith bargaining between such employee representatives and such
employer or employers.
(2) Limitation on amount of life insurance benefits
Life insurance benefits shall not be taken into account under
subsection (c)(2) to the extent the aggregate amount of such
benefits to be provided with respect to the employee exceeds
$50,000.
(f) Definitions and other special rules
For purposes of this section -
(1) SUB or severance pay benefit
The term "SUB or severance pay benefit" means -
(A) any supplemental unemployment compensation benefit (as
defined in section 501(c)(17)(D)), and
(B) any severance pay benefit.
(2) Medical benefit
The term "medical benefit" means a benefit which consists of
the providing (directly or through insurance) of medical care (as
defined in section 213(d)).
(3) Life insurance benefit
The term "life insurance benefit" includes any other death
benefit.
(4) Valuation
For purposes of this section, the amount of the qualified asset
account shall be the value of the assets in such account (as
determined under regulations).
(5) Special rule for collective bargained and employee pay-all
plans
No account limits shall apply in the case of any qualified
asset account under a separate welfare benefit fund -
(A) under a collective bargaining agreement, or
(B) an employee pay-all plan under section 501(c)(9) if -
(i) such plan has at least 50 employees (determined without
regard to subsection (h)(1)), and
(ii) no employee is entitled to a refund with respect to
amounts in the fund, other than a refund based on the
experience of the entire fund.
(6) Exception for 10-or-more employer plans
(A) In general
This subpart shall not apply in the case of any welfare
benefit fund which is part of a 10 or more employer plan. The
preceding sentence shall not apply to any plan which maintains
experience-rating arrangements with respect to individual
employers.
(B) 10 or more employer plan
For purposes of subparagraph (A), the term "10 or more
employer plan" means a plan -
(i) to which more than 1 employer contributes, and
(ii) to which no employer normally contributes more than 10
percent of the total contributions contributed under the plan
by all employers.
(7) Adjustments for existing excess reserves
(A) Increase in account limit
The account limit for any of the first 4 taxable years to
which this section applies shall be increased by the applicable
percentage of any existing excess reserves.
(B) Applicable percentage
For purposes of subparagraph (A) -
The applicable
In the case of: percentage is:
The first taxable year to which this section
applies 80
The second taxable year to which this section
applies 60
The third taxable year to which this section
applies 40
The fourth taxable year to which this section
applies 20.
(C) Existing excess reserve
For purposes of computing the increase under subparagraph (A)
for any taxable year, the term "existing excess reserve" means
the excess (if any) of -
(i) the amount of assets set aside at the close of the
first taxable year ending after July 18, 1984, for purposes
described in subsection (a), over
(ii) the account limit determined under this section
(without regard to this paragraph) for the taxable year for
which such increase is being computed.
(D) Funds to which paragraph applies
This paragraph shall apply only to a welfare benefit fund
which, as of July 18, 1984, had assets set aside for purposes
described in subsection (a).
(g) Employer taxed on income of welfare benefit fund in certain
cases
(1) In general
In the case of any welfare benefit fund which is not an
organization described in paragraph (7), (9), (17), or (20) of
section 501(c), the employer shall include in gross income for
any taxable year an amount equal to such fund's deemed unrelated
income for the fund's taxable year ending within the employer's
taxable year.
(2) Deemed unrelated income
For purposes of paragraph (1), the deemed unrelated income of
any welfare benefit fund shall be the amount which would have
been its unrelated business taxable income under section
512(a)(3) if such fund were an organization described in
paragraph (7), (9), (17), or (20) of section 501(c).
(3) Coordination with section 419
If any amount is included in the gross income of an employer
for any taxable year under paragraph (1) with respect to any
welfare benefit fund -
(A) the amount of the tax imposed by this chapter which is
attributable to the amount so included shall be treated as a
contribution paid to such welfare benefit fund on the last day
of such taxable year, and
(B) the tax so attributable shall be treated as imposed on
the fund for purposes of section 419(c)(4)(A).
(h) Aggregation rules
For purposes of this subpart -
(1) Aggregation of funds
(A) Mandatory aggregation
For purposes of subsections (c)(4), (d)(2), and (e)(2), all
welfare benefit funds of an employer shall be treated as 1
fund.
(B) Permissive aggregation for purposes not specified in
subparagraph (A)
For purposes of this section (other than the provisions
specified in subparagraph (A)), at the election of the
employer, 2 or more welfare benefit funds of such employer may
(to the extent not inconsistent with the purposes of this
subpart and section 512) be treated as 1 fund.
(2) Treatment of related employers
Rules similar to the rules of subsections (b), (c), (m), and
(n) of section 414 shall apply.
(i) Regulations
The Secretary shall prescribe such regulations as may be
appropriate to carry out the purposes of this subpart. Such
regulations may provide that the plan administrator of any welfare
benefit fund which is part of a plan to which more than 1 employer
contributes shall submit such information to the employers
contributing to the fund as may be necessary to enable the
employers to comply with the provisions of this section.
-SOURCE-
(Added Pub. L. 98-369, div. A, title V, Sec. 511(a), July 18, 1984,
98 Stat. 856; amended Pub. L. 99-514, title XVIII, Sec. 1851(a)(2),
(3)(A), (4)-(7), (9), (13), Oct. 22, 1986, 100 Stat. 2858-2860,
2862; Pub. L. 100-647, title I, Sec. 1018(t)(1)(C), (2)(A),
(u)(12), Nov. 10, 1988, 102 Stat. 3587, 3590; Pub. L. 104-188,
title I, Sec. 1704(t)(60), Aug. 20, 1996, 110 Stat. 1890.)
-MISC1-
AMENDMENTS
1996 - Subsec. (c)(3). Pub. L. 104-188 substituted "severance"
for "severence" in heading.
1988 - Subsec. (a). Pub. L. 100-647, Sec. 1018(u)(12), made
technical amendment to directory language of Pub. L. 99-514, Sec.
1851(a)(6)(B). See 1986 Amendment note below.
Subsec. (f)(5). Pub. L. 100-647, Sec. 1018(t)(2)(A), repealed
Pub. L. 99-514, Sec. 1851(a)(4). See 1986 Amendment note below.
Pub. L. 100-647, Sec. 1018(t)(1)(C), substituted "account" for
"accounts".
1986 - Subsec. (a). Pub. L. 99-514, Sec. 1851(a)(6)(B), as
amended by Pub. L. 100-647, Sec. 1018(u)(12), inserted "and section
512" after "this subpart".
Subsec. (c)(5)(A). Pub. L. 99-514, Sec. 1851(a)(5), substituted
"under this subsection" for "under paragraph (1)".
Subsec. (d)(1). Pub. L. 99-514, Sec. 1851(a)(2)(B), inserted "The
requirements of this paragraph shall apply to the first taxable
year for which a reserve is taken into account under subsection
(c)(2) and to all subsequent taxable years."
Subsec. (d)(2). Pub. L. 99-514, Sec. 1851(a)(2)(A), inserted
"Subparagraph (B) of section 415(c)(1) shall not apply to any
amount treated as an annual addition under the preceding sentence."
Subsec. (e). Pub. L. 99-514, Sec. 1851(a)(3)(A), amended subsec.
(e) generally. Prior to amendment, par. (1), benefits must be
nondiscriminatory, read as follows: "No reserve may be taken into
account under subsection (c)(2) for post-retirement medical
benefits or life insurance benefits to be provided to covered
employees unless the plan meets the requirements of section
505(b)(1) with respect to such benefits.", and par. (2), taxable
life insurance benefits not taken into account, read as follows:
"No life insurance benefit may be taken into account under
subsection (c)(2) to the extent -
"(A) such benefit is includible in gross income under section
79, or
"(B) such benefit would be includible in gross income under
section 101(b) (determined by substituting '$50,000' for
'$5,000')."
Subsec. (f)(5). Pub. L. 99-514, Sec. 1851(a)(13), amended par.
(5) generally. Prior to amendment, par. (5) read as follows:
"Higher limit in case of collectively bargained plans. - Not later
than July 1, 1985, the Secretary shall by regulations provide for
special account limits in the case of any qualified asset account
under a welfare benefit fund established under a collective
bargaining agreement."
Pub. L. 99-514, Sec. 1851(a)(4), which directed amendment of par.
(5) by substituting "welfare benefit fund maintained pursuant to"
for "welfare benefit fund established under", was repealed by Pub.
L. 100-647, Sec. 1018(t)(2)(A).
Subsec. (f)(7)(C), (D). Pub. L. 99-514, Sec. 1851(a)(7), added
subpars. (C) and (D) and struck out former subpar. (C) which read
as follows: "For purposes of this paragraph, the term 'existing
excess reserve' means the excess (if any) of -
"(i) the amount of assets set aside for purposes described in
subsection (a) as of the close of the first taxable year ending
after the date of the enactment of the Tax Reform Act of 1984,
over
"(ii) the account limit which would have applied under this
section to such taxable year if this section had applied to such
taxable year."
Subsec. (g)(3). Pub. L. 99-514, Sec. 1851(a)(9), added par. (3).
Subsec. (h)(1). Pub. L. 99-514, Sec. 1851(a)(6)(A), amended par.
(1) generally. Prior to amendment, par. (1) read as follows: "At
the election of the employer, 2 or more welfare benefit funds of
such employer may be treated as 1 fund."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
APPLICATION OF SECTION 419A(E) TO GROUP-TERM LIFE INSURANCE
Section 1851(a)(3)(B) of Pub. L. 99-514, as amended by Pub. L.
100-647, title I, Sec. 1018(t)(2)(D), Nov. 10, 1988, 102 Stat.
3587, provided that: "Subsection (e) of section 419A, section 505,
and section 4976(b)(1)(B) of the Internal Revenue Code of 1954 [now
1986] (as amended by subparagraph (A)) shall not apply to any
group-term life insurance to the extent that the amendments made by
section 223(a) of the Tax Reform Act of 1984 [section 223(a) of
Pub. L. 98-369, amending section 79 of this title] do not apply to
such insurance by reason of paragraph (2) of section 223(d) of such
Act [set out as a note under section 79 of this title]."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 401, 415, 419, 512, 4976
of this title.
-End-
-CITE-
26 USC Subpart E - Treatment of Transfers to Retiree
Health Accounts 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart E - Treatment of Transfers to Retiree Health Accounts
-HEAD-
SUBPART E - TREATMENT OF TRANSFERS TO RETIREE HEALTH ACCOUNTS
-MISC1-
Sec.
420. Transfers of excess pension assets to retiree health
accounts.
-End-
-CITE-
26 USC Sec. 420 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
Subpart E - Treatment of Transfers to Retiree Health Accounts
-HEAD-
Sec. 420. Transfers of excess pension assets to retiree health
accounts
-STATUTE-
(a) General rule
If there is a qualified transfer of any excess pension assets of
a defined benefit plan (other than a multiemployer plan) to a
health benefits account which is part of such plan -
(1) a trust which is part of such plan shall not be treated as
failing to meet the requirements of subsection (a) or (h) of
section 401 solely by reason of such transfer (or any other
action authorized under this section),
(2) no amount shall be includible in the gross income of the
employer maintaining the plan solely by reason of such transfer,
(3) such transfer shall not be treated -
(A) as an employer reversion for purposes of section 4980, or
(B) as a prohibited transaction for purposes of section 4975,
and
(4) the limitations of subsection (d) shall apply to such
employer.
(b) Qualified transfer
For purposes of this section -
(1) In general
The term "qualified transfer" means a transfer -
(A) of excess pension assets of a defined benefit plan to a
health benefits account which is part of such plan in a taxable
year beginning after December 31, 1990,
(B) which does not contravene any other provision of law, and
(C) with respect to which the following requirements are met
in connection with the plan -
(i) the use requirements of subsection (c)(1),
(ii) the vesting requirements of subsection (c)(2), and
(iii) the minimum cost requirements of subsection (c)(3).
(2) Only 1 transfer per year
(A) In general
No more than 1 transfer with respect to any plan during a
taxable year may be treated as a qualified transfer for
purposes of this section.
(B) Exception
A transfer described in paragraph (4) shall not be taken into
account for purposes of subparagraph (A).
(3) Limitation on amount transferred
The amount of excess pension assets which may be transferred in
a qualified transfer shall not exceed the amount which is
reasonably estimated to be the amount the employer maintaining
the plan will pay (whether directly or through reimbursement) out
of such account during the taxable year of the transfer for
qualified current retiree health liabilities.
(4) Special rule for 1990
(A) In general
Subject to the provisions of subsection (c), a transfer shall
be treated as a qualified transfer if such transfer -
(i) is made after the close of the taxable year preceding
the employer's first taxable year beginning after December
31, 1990, and before the earlier of -
(I) the due date (including extensions) for the filing of
the return of tax for such preceding taxable year, or
(II) the date such return is filed, and
(ii) does not exceed the expenditures of the employer for
qualified current retiree health liabilities for such
preceding taxable year.
(B) Deduction reduced
The amount of the deductions otherwise allowable under this
chapter to an employer for the taxable year preceding the
employer's first taxable year beginning after December 31,
1990, shall be reduced by the amount of any qualified transfer
to which this paragraph applies.
(C) Coordination with reduction rule
Subsection (e)(1)(B) shall not apply to a transfer described
in subparagraph (A).
(5) Expiration
No transfer made after December 31, 2005, shall be treated as a
qualified transfer.
(c) Requirements of plans transferring assets
(1) Use of transferred assets
(A) In general
Any assets transferred to a health benefits account in a
qualified transfer (and any income allocable thereto) shall be
used only to pay qualified current retiree health liabilities
(other than liabilities of key employees not taken into account
under subsection (e)(1)(D)) for the taxable year of the
transfer (whether directly or through reimbursement).
(B) Amounts not used to pay for health benefits
(i) In general
Any assets transferred to a health benefits account in a
qualified transfer (and any income allocable thereto) which
are not used as provided in subparagraph (A) shall be
transferred out of the account to the transferor plan.
(ii) Tax treatment of amounts
Any amount transferred out of an account under clause (i) -
(I) shall not be includible in the gross income of the
employer for such taxable year, but
(II) shall be treated as an employer reversion for
purposes of section 4980 (without regard to subsection (d)
thereof).
(C) Ordering rule
For purposes of this section, any amount paid out of a health
benefits account shall be treated as paid first out of the
assets and income described in subparagraph (A).
(2) Requirements relating to pension benefits accruing before
transfer
(A) In general
The requirements of this paragraph are met if the plan
provides that the accrued pension benefits of any participant
or beneficiary under the plan become nonforfeitable in the same
manner which would be required if the plan had terminated
immediately before the qualified transfer (or in the case of a
participant who separated during the 1-year period ending on
the date of the transfer, immediately before such separation).
(B) Special rule for 1990
In the case of a qualified transfer described in subsection
(b)(4), the requirements of this paragraph are met with respect
to any participant who separated from service during the
taxable year to which such transfer relates by recomputing such
participant's benefits as if subparagraph (A) had applied
immediately before such separation.
(3) Minimum cost requirements
(A) In general
The requirements of this paragraph are met if each group
health plan or arrangement under which applicable health
benefits are provided provides that the applicable employer
cost for each taxable year during the cost maintenance period
shall not be less than the higher of the applicable employer
costs for each of the 2 taxable years immediately preceding the
taxable year of the qualified transfer.
(B) Applicable employer cost
For purposes of this paragraph, the term "applicable employer
cost" means, with respect to any taxable year, the amount
determined by dividing -
(i) the qualified current retiree health liabilities of the
employer for such taxable year determined -
(I) without regard to any reduction under subsection
(e)(1)(B), and
(II) in the case of a taxable year in which there was no
qualified transfer, in the same manner as if there had been
such a transfer at the end of the taxable year, by
(ii) the number of individuals to whom coverage for
applicable health benefits was provided during such taxable
year.
(C) Election to compute cost separately
An employer may elect to have this paragraph applied
separately with respect to individuals eligible for benefits
under title XVIII of the Social Security Act at any time during
the taxable year and with respect to individuals not so
eligible.
(D) Cost maintenance period
For purposes of this paragraph, the term "cost maintenance
period" means the period of 5 taxable years beginning with the
taxable year in which the qualified transfer occurs. If a
taxable year is in two or more overlapping cost maintenance
periods, this paragraph shall be applied by taking into account
the highest applicable employer cost required to be provided
under subparagraph (A) for such taxable year.
(E) Regulations
The Secretary shall prescribe such regulations as may be
necessary to prevent an employer who significantly reduces
retiree health coverage during the cost maintenance period from
being treated as satisfying the minimum cost requirement of
this subsection.
(d) Limitations on employer
For purposes of this title -
(1) Deduction limitations
No deduction shall be allowed -
(A) for the transfer of any amount to a health benefits
account in a qualified transfer (or any retransfer to the plan
under subsection (c)(1)(B)),
(B) for qualified current retiree health liabilities paid out
of the assets (and income) described in subsection (c)(1), or
(C) for any amounts to which subparagraph (B) does not apply
and which are paid for qualified current retiree health
liabilities for the taxable year to the extent such amounts are
not greater than the excess (if any) of -
(i) the amount determined under subparagraph (A) (and
income allocable thereto), over
(ii) the amount determined under subparagraph (B).
(2) No contributions allowed
An employer may not contribute after December 31, 1990, any
amount to a health benefits account or welfare benefit fund (as
defined in section 419(e)(1)) with respect to qualified current
retiree health liabilities for which transferred assets are
required to be used under subsection (c)(1).
(e) Definition and special rules
For purposes of this section -
(1) Qualified current retiree health liabilities
For purposes of this section -
(A) In general
The term "qualified current retiree health liabilities"
means, with respect to any taxable year, the aggregate amounts
(including administrative expenses) which would have been
allowable as a deduction to the employer for such taxable year
with respect to applicable health benefits provided during such
taxable year if -
(i) such benefits were provided directly by the employer,
and
(ii) the employer used the cash receipts and disbursements
method of accounting.
For purposes of the preceding sentence, the rule of section
419(c)(3)(B) shall apply.
(B) Reductions for amounts previously set aside
The amount determined under subparagraph (A) shall be reduced
by the amount which bears the same ratio to such amount as -
(i) the value (as of the close of the plan year preceding
the year of the qualified transfer) of the assets in all
health benefits accounts or welfare benefit funds (as defined
in section 419(e)(1)) set aside to pay for the qualified
current retiree health liability, bears to
(ii) the present value of the qualified current retiree
health liabilities for all plan years (determined without
regard to this subparagraph).
(C) Applicable health benefits
The term "applicable health benefits" means health benefits
or coverage which are provided to -
(i) retired employees who, immediately before the qualified
transfer, are entitled to receive such benefits upon
retirement and who are entitled to pension benefits under the
plan, and
(ii) their spouses and dependents.
(D) Key employees excluded
If an employee is a key employee (within the meaning of
section 416(i)(1)) with respect to any plan year ending in a
taxable year, such employee shall not be taken into account in
computing qualified current retiree health liabilities for such
taxable year or in calculating applicable employer cost under
subsection (c)(3)(B).
(2) Excess pension assets
The term "excess pension assets" means the excess (if any) of -
(A) the amount determined under section 412(c)(7)(A)(ii),
over
(B) the greater of -
(i) the amount determined under section 412(c)(7)(A)(i), or
(ii) 125 percent of current liability (as defined in
section 412(c)(7)(B)).
The determination under this paragraph shall be made as of the
most recent valuation date of the plan preceding the qualified
transfer.
(3) Health benefits account
The term "health benefits account" means an account established
and maintained under section 401(h).
(4) Coordination with section 412
In the case of a qualified transfer to a health benefits
account -
(A) any assets transferred in a plan year on or before the
valuation date for such year (and any income allocable thereto)
shall, for purposes of section 412, be treated as assets in the
plan as of the valuation date for such year, and
(B) the plan shall be treated as having a net experience loss
under section 412(b)(2)(B)(iv) in an amount equal to the amount
of such transfer (reduced by any amounts transferred back to
the pension plan under subsection (c)(1)(B)) and for which
amortization charges begin for the first plan year after the
plan year in which such transfer occurs, except that such
section shall be applied to such amount by substituting "10
plan years" for "5 plan years".
-SOURCE-
(Added Pub. L. 101-508, title XII, Sec. 12011(a), Nov. 5, 1990, 104
Stat. 1388-567; amended Pub. L. 103-465, title VII, Sec.
731(a)-(c)(3), Dec. 8, 1994, 108 Stat. 5003, 5004; Pub. L. 104-188,
title I, Sec. 1704(a), (t)(32), Aug. 20, 1996, 110 Stat. 1878,
1889; Pub. L. 106-170, title V, Sec. 535(a)(1), (b), Dec. 17, 1999,
113 Stat. 1934.)
-REFTEXT-
REFERENCES IN TEXT
The Social Security Act, referred to in subsec. (c)(3)(C), is act
Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended. Title XVIII of
the Act is classified generally to subchapter XVIII (Sec. 1395 et
seq.) of chapter 7 of Title 42, The Public Health and Welfare. For
complete classification of this Act to the Code, see section 1305
of Title 42 and Tables.
-MISC1-
AMENDMENTS
1999 - Subsec. (b)(1)(C)(iii). Pub. L. 106-170, Sec.
535(b)(2)(A), substituted "cost" for "benefits".
Subsec. (b)(5). Pub. L. 106-170, Sec. 535(a)(1), substituted
"made after December 31, 2005" for "in any taxable year beginning
after December 31, 2000".
Subsec. (c)(3). Pub. L. 106-170, Sec. 535(b)(1), amended heading
and text of par. (3) generally, substituting present provisions for
provisions relating to maintenance of benefit requirements.
Subsec. (e)(1)(D). Pub. L. 106-170, Sec. 535(b)(2)(B),
substituted "or in calculating applicable employer cost under
subsection (c)(3)(B)" for "and shall not be subject to the minimum
benefit requirements of subsection (c)(3)".
1996 - Pub. L. 104-188, Sec. 1704(a), provided that, except as
otherwise expressly provided, whenever in title XII of Pub. L.
101-508 an amendment or repeal is expressed in terms of an
amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986. Section 12011(a) of
title XII of Pub. L. 101-508 directed the amendment of part I of
subchapter D of chapter 1 by adding this subpart, including this
section, without specifying that amendment was to the Internal
Revenue Code of 1986.
Subsec. (e)(1)(C). Pub. L. 104-188, Sec. 1704(t)(32), substituted
"means" for "mean".
1994 - Subsec. (b)(1)(C)(iii). Pub. L. 103-465, Sec. 731(c)(1),
substituted "benefits" for "cost".
Subsec. (b)(5). Pub. L. 103-465, Sec. 731(a), substituted "2000"
for "1995".
Subsec. (c)(3). Pub. L. 103-465, Sec. 731(b), amended par. (3)
generally, substituting present provisions for provisions outlining
minimum cost requirements for plans, providing for elections to
compute costs separately, and defining "applicable employer cost"
and "cost maintenance period".
Subsec. (e)(1)(B). Pub. L. 103-465, Sec. 731(c)(2), reenacted
subpar. (B) heading without change and amended text generally.
Prior to amendment, text read as follows: "The amount determined
under subparagraph (A) shall be reduced by any amount previously
contributed to a health benefits account or welfare benefit fund
(as defined in section 419(e)(1)) to pay for the qualified current
retiree health liabilities. The portion of any reserves remaining
as of the close of December 31, 1990, shall be allocated on a pro
rata basis to qualified current retiree health liabilities."
Subsec. (e)(1)(D). Pub. L. 103-465, Sec. 731(c)(3), substituted
"and shall not be subject to the minimum benefit requirements of
subsection (c)(3)" for "or in calculating applicable employer cost
under subsection (c)(3)(B)".
EFFECTIVE DATE OF 1999 AMENDMENT
Pub. L. 106-170, title V, Sec. 535(c), Dec. 17, 1999, 113 Stat.
1935, provided that:
"(1) In general. - The amendments made by this section [amending
this section and sections 1021, 1103, and 1108 of Title 29, Labor]
shall apply to qualified transfers occurring after the date of the
enactment of this Act [Dec. 17, 1999].
"(2) Transition rule. - If the cost maintenance period for any
qualified transfer after the date of the enactment of this Act
[Dec. 17, 1999] includes any portion of a benefit maintenance
period for any qualified transfer on or before such date, the
amendments made by subsection (b) [amending this section] shall not
apply to such portion of the cost maintenance period (and such
portion shall be treated as a benefit maintenance period)."
EFFECTIVE DATE OF 1994 AMENDMENT
Section 731(d) of Pub. L. 103-465 provided that:
"(1) Extension. - The amendments made by subsections (a) and
(c)(3) [amending this section] shall apply to taxable years
beginning after December 31, 1995.
"(2) Benefits. - The amendments made by subsections (b) and
(c)(1) and (2) [amending this section] shall apply to qualified
transfers occurring after the date of the enactment of this Act
[Dec. 8, 1994]."
EFFECTIVE DATE
Section 12011(c) of Pub. L. 101-508 provided that:
"(1) In general. - The amendments made by this section [enacting
this section and amending section 401 of this title] shall apply to
transfers in taxable years beginning after December 31, 1990.
"(2) Waiver of estimated tax penalties. - No addition to tax
shall be made under section 6654 or section 6655 of the Internal
Revenue Code of 1986 for the taxable year preceding the taxpayer's
1st taxable year beginning after December 31, 1990, with respect to
any underpayment to the extent such underpayment was created or
increased by reason of section 420(b)(4)(B) of such Code (as added
by subsection (a))."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 401 of this title; title
29 sections 1021, 1082, 1103, 1108.
-End-
-CITE-
26 USC PART II - CERTAIN STOCK OPTIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART II - CERTAIN STOCK OPTIONS
-HEAD-
PART II - CERTAIN STOCK OPTIONS
-MISC1-
Sec.
421. General rules.
422. Incentive stock options.
423. Employee stock purchase plans.
424. Definitions and special rules.
AMENDMENTS
1990 - Pub. L. 101-508, title XI, Sec. 11801(b)(6),
(c)(9)(A)(ii), Nov. 5, 1990, 104 Stat. 1388-522, 1388-524, struck
out items 422 "Qualified stock options" and 424 "Restricted stock
options" and redesignated items 422A and 425 as 422 and 424,
respectively.
1981 - Pub. L. 97-34, title II, Sec. 251(b)(6), Aug. 13, 1981, 95
Stat. 259, added item 422A.
1964 - Pub. L. 88-272, title II, Sec. 221(a), Feb. 26, 1964, 78
Stat. 63, substituted "CERTAIN STOCK OPTIONS" for "MISCELLANEOUS
PROVISIONS" in part II heading, and "General rules" for "Employee
stock options" in item 421, and added items 422-425.
-End-
-CITE-
26 USC Sec. 421 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART II - CERTAIN STOCK OPTIONS
-HEAD-
Sec. 421. General rules
-STATUTE-
(a) Effect of qualifying transfer
If a share of stock is transferred to an individual in a transfer
in respect of which the requirements of section 422(a) or 423(a)
are met -
(1) no income shall result at the time of the transfer of such
share to the individual upon his exercise of the option with
respect to such share;
(2) no deduction under section 162 (relating to trade or
business expenses) shall be allowable at any time to the employer
corporation, a parent or subsidiary corporation of such
corporation, or a corporation issuing or assuming a stock option
in a transaction to which section 424(a) applies, with respect to
the share so transferred; and
(3) no amount other than the price paid under the option shall
be considered as received by any of such corporations for the
share so transferred.
(b) Effect of disqualifying disposition
If the transfer of a share of stock to an individual pursuant to
his exercise of an option would otherwise meet the requirements of
section 422(a) or 423(a) except that there is a failure to meet any
of the holding period requirements of section 422(a)(1) or
423(a)(1), then any increase in the income of such individual or
deduction from the income of his employer corporation for the
taxable year in which such exercise occurred attributable to such
disposition, shall be treated as an increase in income or a
deduction from income in the taxable year of such individual or of
such employer corporation in which such disposition occurred.
(c) Exercise by estate
(1) In general
If an option to which this part applies is exercised after the
death of the employee by the estate of the decedent, or by a
person who acquired the right to exercise such option by bequest
or inheritance or by reason of the death of the decedent, the
provisions of subsection (a) shall apply to the same extent as if
the option had been exercised by the decedent, except that -
(A) the holding period and employment requirements of
sections 422(a) and 423(a) shall not apply, and
(B) any transfer by the estate of stock acquired shall be
considered a disposition of such stock for purposes of section
423(c).
(2) Deduction for estate tax
If an amount is required to be included under section 423(c) in
gross income of the estate of the deceased employee or of a
person described in paragraph (1), there shall be allowed to the
estate or such person a deduction with respect to the estate tax
attributable to the inclusion in the taxable estate of the
deceased employee of the net value for estate tax purposes of the
option. For this purpose, the deduction shall be determined under
section 691(c) as if the option acquired from the deceased
employee were an item of gross income in respect of the decedent
under section 691 and as if the amount includible in gross income
under section 423(c) were an amount included in gross income
under section 691 in respect of such item of gross income.
(3) Basis of shares acquired
In the case of a share of stock acquired by the exercise of an
option to which paragraph (1) applies -
(A) the basis of such share shall include so much of the
basis of the option as is attributable to such share; except
that the basis of such share shall be reduced by the excess (if
any) of (i) the amount which would have been includible in
gross income under section 423(c) if the employee had exercised
the option on the date of his death and had held the share
acquired pursuant to such exercise at the time of his death,
over (ii) the amount which is includible in gross income under
such section; and
(B) the last sentence of section 423(c) shall apply only to
the extent that the amount includible in gross income under
such section exceeds so much of the basis of the option as is
attributable to such share.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 142; Pub. L. 85-320, Sec. 1,
Feb. 11, 1958, 72 Stat. 4; Pub. L. 85-866, title I, Secs. 25,
26(a), Sept. 2, 1958, 72 Stat. 1623, 1624; Pub. L. 88-272, title
II, Sec. 221(a), Feb. 26, 1964, 78 Stat. 63; Pub. L. 97-34, title
II, Sec. 251(b)(1), Aug. 13, 1981, 95 Stat. 259; Pub. L. 101-508,
title XI, Sec. 11801(c)(9)(B), Nov. 5, 1990, 104 Stat. 1388-524.)
-MISC1-
AMENDMENTS
1990 - Subsec. (a). Pub. L. 101-508, Sec. 11801(c)(9)(B)(i)(I),
substituted "422(a) or 423(a)" for "422(a), 422A(a), 423(a), or
424(a)" in introductory provisions.
Subsec. (a)(1). Pub. L. 101-508, Sec. 11801(c)(9)(B)(i)(II),
struck out "except as provided in section 422(c)(1)," before "no
income".
Subsec. (a)(2). Pub. L. 101-508, Sec. 11801(c)(9)(B)(i)(III),
substituted "424(a)" for "425(a)".
Subsec. (b). Pub. L. 101-508, Sec. 11801(c)(9)(B)(ii),
substituted "422(a) or 423(a)" for "422(a), 422A(a), 423(a), or
424(a)" and "422(a)(1) or 423(a)(1)," for "422(a)(1), 422A(a)(1),
423(a)(1), or 424(a)(1),".
Subsec. (c)(1)(A). Pub. L. 101-508, Sec. 11801(c)(9)(B)(iii)(I),
substituted "422(a) and 423(a)" for "422(a), 422A(a), 423(a), and
424(a)".
Subsec. (c)(1)(B). Pub. L. 101-508, Sec. 11801(c)(9)(B)(iii)(II),
substituted "section 423(c)" for "sections 423(c) and 424(c)(1)".
Subsec. (c)(2), (3)(A). Pub. L. 101-508, Sec.
11801(c)(9)(B)(iii)(III), substituted "423(c)" for "422(c)(1),
423(c), or 424(c)(1)" wherever appearing.
Subsec. (c)(3)(B). Pub. L. 101-508, Sec. 11801(c)(9)(B)(iii)(IV),
(V), substituted "section 423(c)" for "sections 422(c)(1), 423(c),
and 424(c)(1)" and "such section" for "such sections".
1981 - Subsecs. (a), (b), (c)(1)(A). Pub. L. 97-34 inserted
references to section 422A(a) in subsecs. (a), (b), and (c)(1)(A)
and to section 422A(a)(1) in subsec. (b).
1964 - Pub. L. 88-272 amended section generally, and among other
changes, inserted provisions relating to the effect of a qualifying
transfer, and to the basis of shares acquired when an option is
exercised by an estate, and omitted provisions relating to
treatment of restricted stock options, a special rule where option
price was between 85 percent and 95 percent of value of stock,
acquisition of new stock, definitions, modification, extension, or
renewal of option, and corporate reorganizations, liquidations,
etc. See sections 421 to 425 of this title.
1958 - Subsec. (a). Pub. L. 85-866, Sec. 25, inserted sentence
authorizing substitution of "grantor corporation" or "corporation
issuing or assuming a stock option in a transaction to which
subsection (g) is applicable" for "employer corporation".
Subsec. (d)(6)(C). Pub. L. 85-320 added subpar. (C).
Subsec. (d)(1)(A)(ii). Pub. L. 85-866, Sec. 26(a)(1), substituted
"in the case of a variable price option" for "in case the purchase
price of the stock under the option is fixed or determinable under
a formula in which the only variable is the value of the stock at
any time during a period of 6 months which includes the time the
option is exercised" and inserted "fair" before "market value".
Subsec. (d)(7). Pub. L. 85-866, Sec. 26(a)(2), added par. (7).
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable with respect to options
granted on or after Jan. 1, 1976, and exercised on or after Jan. 1,
1981, or outstanding on Jan. 1, 1981, or granted on or after Jan.
1, 1976, and outstanding Aug. 13, 1981, see section 251(c) of Pub.
L. 97-34, set out as an Effective Date note under section 422 of
this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 221(e) of Pub. L. 88-272, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) Except as provided in paragraphs (2) and (3), the amendments
made by this section [enacting sections 422 to 425 and 6039,
amending this section, sections 402, 691, 6652, 6678, and the
analysis preceding sections 401 and 6031, and renumbering section
3039 as 3040 of this title] shall apply to taxable years ending
after December 31, 1963.
"(2) The amendments made by paragraphs (1) and (3) of subsection
(b) [enacting section 3039, renumbering former section 3039 as
3040, and amending section 6678 of this title] and paragraph (2) of
section 6652(a) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] (as amended by paragraph (2) of subsection (b)), shall
apply to stock transferred pursuant to options exercised on or
after January 1, 1964.
"(3) In the case of an option granted after December 31, 1963,
and before January 1, 1965 -
"(A) paragraphs (1) and (2) of section 422(b) of the Internal
Revenue Code of 1986 (as added by subsection (a)), shall not
apply, and
"(B) paragraph (1) of section 425(h) of such Code (as added by
subsection (a)), shall not apply to any change in the terms of
such option made before January 1, 1965, to permit such option to
qualify under paragraphs (3), (4), and (5) of such section
422(b)."
EFFECTIVE DATE OF 1958 AMENDMENTS
Amendment by section 25 of Pub. L. 85-866 applicable to taxable
years beginning after Dec. 31, 1953, and ending after Aug. 16,
1954, see section 1(c)(1) of Pub. L. 85-866, set out as a note
under section 165 of this title.
Section 26(b) of Pub. L. 85-866 provided that: "The amendments
made by subsection (a) [amending this section] shall apply with
respect to taxable years ending after September 30, 1958."
Section 3 of Pub. L. 85-320 provided that: "The amendments made
by this Act [amending this section and section 1014 of this title]
shall apply with respect to taxable years ending after December 31,
1956, but only in the case of employees dying after such date."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 56, 83, 422, 423, 691 of
this title.
-End-
-CITE-
26 USC Sec. 422 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART II - CERTAIN STOCK OPTIONS
-HEAD-
Sec. 422. Incentive stock options
-STATUTE-
(a) In general
Section 421(a) shall apply with respect to the transfer of a
share of stock to an individual pursuant to his exercise of an
incentive stock option if -
(1) no disposition of such share is made by him within 2 years
from the date of the granting of the option nor within 1 year
after the transfer of such share to him, and
(2) at all times during the period beginning on the date of the
granting of the option and ending on the day 3 months before the
date of such exercise, such individual was an employee of either
the corporation granting such option, a parent or subsidiary
corporation of such corporation, or a corporation or a parent or
subsidiary corporation of such corporation issuing or assuming a
stock option in a transaction to which section 424(a) applies.
(b) Incentive stock option
For purposes of this part, the term "incentive stock option"
means an option granted to an individual for any reason connected
with his employment by a corporation, if granted by the employer
corporation or its parent or subsidiary corporation, to purchase
stock of any of such corporations, but only if -
(1) the option is granted pursuant to a plan which includes the
aggregate number of shares which may be issued under options and
the employees (or class of employees) eligible to receive
options, and which is approved by the stockholders of the
granting corporation within 12 months before or after the date
such plan is adopted;
(2) such option is granted within 10 years from the date such
plan is adopted, or the date such plan is approved by the
stockholders, whichever is earlier;
(3) such option by its terms is not exercisable after the
expiration of 10 years from the date such option is granted;
(4) the option price is not less than the fair market value of
the stock at the time such option is granted;
(5) such option by its terms is not transferable by such
individual otherwise than by will or the laws of descent and
distribution, and is exercisable, during his lifetime, only by
him; and
(6) such individual, at the time the option is granted, does
not own stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the employer
corporation or of its parent or subsidiary corporation.
Such term shall not include any option if (as of the time the
option is granted) the terms of such option provide that it will
not be treated as an incentive stock option.
(c) Special rules
(1) Good faith efforts to value of stock
If a share of stock is transferred pursuant to the exercise by
an individual of an option which would fail to qualify as an
incentive stock option under subsection (b) because there was a
failure in an attempt, made in good faith, to meet the
requirement of subsection (b)(4), the requirement of subsection
(b)(4) shall be considered to have been met. To the extent
provided in regulations by the Secretary, a similar rule shall
apply for purposes of subsection (d).
(2) Certain disqualifying dispositions where amount realized is
less than value at exercise
If -
(A) an individual who has acquired a share of stock by the
exercise of an incentive stock option makes a disposition of
such share within either of the periods described in subsection
(a)(1), and
(B) such disposition is a sale or exchange with respect to
which a loss (if sustained) would be recognized to such
individual,
then the amount which is includible in the gross income of such
individual, and the amount which is deductible from the income of
his employer corporation, as compensation attributable to the
exercise of such option shall not exceed the excess (if any) of
the amount realized on such sale or exchange over the adjusted
basis of such share.
(3) Certain transfers by insolvent individuals
If an insolvent individual holds a share of stock acquired
pursuant to his exercise of an incentive stock option, and if
such share is transferred to a trustee, receiver, or other
similar fiduciary in any proceeding under title 11 or any other
similar insolvency proceeding, neither such transfer, nor any
other transfer of such share for the benefit of his creditors in
such proceeding, shall constitute a disposition of such share for
purposes of subsection (a)(1).
(4) Permissible provisions
An option which meets the requirements of subsection (b) shall
be treated as an incentive stock option even if -
(A) the employee may pay for the stock with stock of the
corporation granting the option,
(B) the employee has a right to receive property at the time
of exercise of the option, or
(C) the option is subject to any condition not inconsistent
with the provisions of subsection (b).
Subparagraph (B) shall apply to a transfer of property (other
than cash) only if section 83 applies to the property so
transferred.
(5) 10-percent shareholder rule
Subsection (b)(6) shall not apply if at the time such option is
granted the option price is at least 110 percent of the fair
market value of the stock subject to the option and such option
by its terms is not exercisable after the expiration of 5 years
from the date such option is granted.
(6) Special rule when disabled
For purposes of subsection (a)(2), in the case of an employee
who is disabled (within the meaning of section 22(e)(3)), the
3-month period of subsection (a)(2) shall be 1 year.
(7) Fair market value
For purposes of this section, the fair market value of stock
shall be determined without regard to any restriction other than
a restriction which, by its terms, will never lapse.
(d) $100,000 per year limitation
(1) In general
To the extent that the aggregate fair market value of stock
with respect to which incentive stock options (determined without
regard to this subsection) are exercisable for the 1st time by
any individual during any calendar year (under all plans of the
individual's employer corporation and its parent and subsidiary
corporations) exceeds $100,000, such options shall be treated as
options which are not incentive stock options.
(2) Ordering rule
Paragraph (1) shall be applied by taking options into account
in the order in which they were granted.
(3) Determination of fair market value
For purposes of paragraph (1), the fair market value of any
stock shall be determined as of the time the option with respect
to such stock is granted.
-SOURCE-
(Added Pub. L. 97-34, title II, Sec. 251(a), Aug. 13, 1981, 95
Stat. 256, Sec. 422A; amended Pub. L. 97-448, title I, Sec.
102(j)(1)-(4), Jan. 12, 1983, 96 Stat. 2373; Pub. L. 98-369, div.
A, title V, Sec. 555(a)(1), div. B, title VI, Sec. 2662(f)(1), July
18, 1984, 98 Stat. 897, 1159; Pub. L. 99-514, title III, Sec.
321(a), (b), title XVIII, Sec. 1847(b)(5), Oct. 22, 1986, 100 Stat.
2220, 2856; Pub. L. 100-647, title I, Sec. 1003(d)(1)(A), (2), Nov.
10, 1988, 102 Stat. 3384; renumbered Sec. 422 and amended Pub. L.
101-508, title XI, Sec. 11801(c)(9)(A)(i), (C), Nov. 5, 1990, 104
Stat. 1388-524, 1388-525.)
-MISC1-
PRIOR PROVISIONS
A prior section 422, added Pub. L. 88-272, title II, Sec. 221(a),
Feb. 26, 1964, 78 Stat. 64; amended Pub. L. 94-455, title VI, Sec.
603(a), (b), title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat.
1574, 1834; Pub. L. 96-589, Sec. 6(i)(3), Dec. 24, 1980, 94 Stat.
3410, related to qualified stock options, prior to repeal by Pub.
L. 101-508, title XI, Sec. 11801(a)(20), Nov. 5, 1990, 104 Stat.
1388-521. For savings provision, see section 11821(b) of Pub. L.
101-508, set out as a note under section 29 of this title.
AMENDMENTS
1990 - Pub. L. 101-508, Sec. 11801(c)(9)(A)(i), renumbered
section 422A of this title as this section.
Subsec. (a)(2). Pub. L. 101-508, Sec. 11801(c)(9)(C)(i),
substituted "424(a)" for "425(a)".
Subsec. (c)(5) to (8). Pub. L. 101-508, Sec. 11801(c)(9)(C)(ii),
redesignated pars. (6) to (8) as (5) to (7), respectively, and
struck out former par. (5) "Coordination with sections 422 and 424"
which read as follows: "Sections 422 and 424 shall not apply to an
incentive stock option."
1988 - Subsec. (b). Pub. L. 100-647, Sec. 1003(d)(1)(A), inserted
at end "Such term shall not include any option if (as of the time
the option is granted) the terms of such option provide that it
will not be treated as an incentive stock option."
Subsec. (b)(7). Pub. L. 100-647, Sec. 1003(d)(2)(B), struck out
par. (7) which read as follows: "under the terms of the plan, the
aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options
are exercisable for the 1st time by such individual during any
calendar year (under all such plans of the individual's employer
corporation and its parent and subsidiary corporations) shall not
exceed $100,000."
Subsec. (c)(1). Pub. L. 100-647, Sec. 1003(d)(2)(C), substituted
"subsection (d)" for "paragraph (7) of subsection (b)".
Subsec. (d). Pub. L. 100-647, Sec. 1003(d)(2)(A), added subsec.
(d).
1986 - Subsec. (b)(7). Pub. L. 99-514, Sec. 321(a), added par.
(7) and struck out former par. (7) which read as follows: "such
option by its terms is not exercisable while there is outstanding
(within the meaning of subsection (c)(7)) any incentive stock
option which was granted, before the granting of such option, to
such individual to purchase stock in his employer corporation or in
a corporation which (at the time of the granting of such option) is
a parent or subsidiary corporation of the employer corporation, or
in a predecessor corporation of any of such corporations; and".
Subsec. (b)(8). Pub. L. 99-514, Sec. 321(a), struck out par. (8)
which read as follows: "in the case of an option granted after
December 31, 1980, under the terms of the plan the aggregate fair
market value (determined as of the time the option is granted) of
the stock for which any employee may be granted incentive stock
options in any calendar year (under all such plans of his employer
corporation and its parent and subsidiary corporation) shall not
exceed $100,000 plus any unused limit carryover to such year."
Subsec. (c)(1). Pub. L. 99-514, Sec. 321(b)(2), substituted
"paragraph (7) of subsection (b)" for "paragraph (8) of subsection
(b) and paragraph (4) of this subsection".
Subsec. (c)(4). Pub. L. 99-514, Sec. 321(b)(1), redesignated par.
(5) as (4) and struck out former par. (4) relating to carryover of
unused limit.
Subsec. (c)(5), (6). Pub. L. 99-514, Sec. 321(b)(1)(B),
redesignated pars. (6) and (8) as (5) and (6), respectively. Former
par. (5) redesignated (4).
Subsec. (c)(7). Pub. L. 99-514, Sec. 321(b)(1), redesignated par.
(9) as (7) and struck out former par. (7) which provided that for
purposes of subsec. (b)(7) any incentive stock option be treated as
outstanding until such option was exercised in full or expired by
reason of lapse of time.
Subsec. (c)(8). Pub. L. 99-514, Sec. 321(b)(1)(B), redesignated
par. (10) as (8). Former par. (8) redesignated (6).
Subsec. (c)(9). Pub. L. 99-514, Sec. 321(b)(1)(B), redesignated
par. (9) as (7).
Pub. L. 99-514, Sec. 1847(b)(5), substituted "section 22(e)(3)"
for "section 37(e)(3)".
Subsec. (c)(10). Pub. L. 99-514, Sec. 321(b)(1)(B), redesignated
par. (10) as (8).
1984 - Subsec. (c)(9). Pub. L. 98-369, Sec. 2662(f)(1),
substituted "section 37(e)(3)" for "section 105(d)(4)".
Subsec. (c)(10). Pub. L. 98-369, Sec. 555(a)(1), added par. (10).
1983 - Subsec. (b)(8). Pub. L. 97-448, Sec. 102(j)(1),
substituted "granted incentive stock options" for "granted
options".
Subsec. (c)(1). Pub. L. 97-448, Sec. 102(j)(2), substituted "Good
faith efforts to value stock" for "Exercise of option when price is
less than value of stock" as par. (1) heading and inserted sentence
providing that, to the extent provided in regulations by the
Secretary, a rule similar to that already enunciated in the
paragraph applies for purposes of par. (8) of subsec. (b) and par.
(4) of subsec. (c).
Subsec. (c)(2)(A). Pub. L. 97-448, Sec. 102(j)(3), substituted
"either of the periods" for "the 2-year period".
Subsec. (c)(4)(A)(ii). Pub. L. 97-448, Sec. 102(j)(4),
substituted "granted incentive stock options" for "granted
options".
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 321(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section] shall apply to options
granted after December 31, 1986."
Amendment by section 1847(b)(5) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 555(c)(1) of Pub. L. 98-369, as amended by Pub. L.
99-514, title XVIII, Sec. 1855(a)(1), Oct. 22, 1986, 100 Stat.
2882, provided that: "The amendment made by subsection (a)(1)
[amending this section] shall apply to options granted after March
20, 1984, except that such subsection shall not apply to any
incentive stock option granted before September 20, 1984, pursuant
to a plan adopted or corporate action taken by the board of
directors of the grantor corporation before May 15, 1984."
Amendment by section 2662 of Pub. L. 98-369 effective as though
included in the enactment of the Social Security Amendments of
1983, Pub. L. 98-21, see section 2664(a) of Pub. L. 98-369, set out
as a note under section 401 of Title 42, The Public Health and
Welfare.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE
Section 251(c) of Pub. L. 97-34, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) Options to which section applies. -
"(A) In general. - Except as provided in subparagraph (B), the
amendments made by this section [enacting this section and
amending sections 421, 425 [now 424], and 6039 of this title]
shall apply with respect to options granted on or after January
1, 1976, and exercised on or after January 1, 1981, or
outstanding on such date.
"(B) Election and designation of options. - In the case of an
option granted before January 1, 1981, the amendments made by
this section shall apply only if the corporation granting such
option elects (in the manner and at the time prescribed by the
Secretary of the Treasury or his delegate) to have the amendments
made by this section apply to such option. The aggregate fair
market value (determined at the time the option is granted) of
the stock for which any employee was granted options (under all
plans of his employer corporation and its parent and subsidiary
corporations) to which the amendments made by this section apply
by reason of this subparagraph shall not exceed $50,000 per
calendar year ans shall not exceed $200,000 in the aggregate.
"(2) Changes in terms of options. - In the case of an option
granted on or after January 1, 1976, and outstanding on the date of
the enactment of this Act [Aug. 13, 1981], paragraph (1) of section
425(h) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
shall not apply to any change in the terms of such option (or the
terms of the plan under which granted, including shareholder
approval) made within 1 year after such date of enactment to permit
such option to qualify as a incentive stock option."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
TREATMENT OF OPTIONS AS INCENTIVE STOCK OPTIONS
Section 1003(d)(1)(B) of Pub. L. 100-647 provided that: "In the
case of an option granted after December 31, 1986, and on or before
the date of the enactment of this Act [Nov. 10, 1988], such option
shall not be treated as an incentive stock option if the terms of
such option are amended before the date 90 days after such date of
enactment to provide that such option will not be treated as an
incentive stock option."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 56, 421, 424, 1042, 6039
of this title.
-End-
-CITE-
26 USC Sec. 422A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART II - CERTAIN STOCK OPTIONS
-HEAD-
[Sec. 422A. Renumbered Sec. 422]
-STATUTE-
-End-
-CITE-
26 USC Sec. 423 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART II - CERTAIN STOCK OPTIONS
-HEAD-
Sec. 423. Employee stock purchase plans
-STATUTE-
(a) General rule
Section 421(a) shall apply with respect to the transfer of a
share of stock to an individual pursuant to his exercise of an
option granted after December 31, 1963, under an employee stock
purchase plan (as defined in subsection (b)) if -
(1) no disposition of such share is made by him within 2 years
after the date of the granting of the option nor within 1 year
after the transfer of such share to him; and
(2) at all times during the period beginning with the date of
the granting of the option and ending on the day 3 months before
the date of such exercise, he is an employee of the corporation
granting such option, a parent or subsidiary corporation of such
corporation, or a corporation or a parent or subsidiary
corporation of such corporation issuing or assuming a stock
option in a transaction to which section 424(a) applies.
(b) Employee stock purchase plan
For purposes of this part, the term "employee stock purchase
plan" means a plan which meets the following requirements:
(1) the plan provides that options are to be granted only to
employees of the employer corporation or of its parent or
subsidiary corporation to purchase stock in any such corporation;
(2) such plan is approved by the stockholders of the granting
corporation within 12 months before or after the date such plan
is adopted;
(3) under the terms of the plan, no employee can be granted an
option if such employee, immediately after the option is granted,
owns stock possessing 5 percent or more of the total combined
voting power or value of all classes of stock of the employer
corporation or of its parent or subsidiary corporation. For
purposes of this paragraph, the rules of section 424(d) shall
apply in determining the stock ownership of an individual, and
stock which the employee may purchase under outstanding options
shall be treated as stock owned by the employee;
(4) under the terms of the plan, options are to be granted to
all employees of any corporation whose employees are granted any
of such options by reason of their employment by such
corporation, except that there may be excluded -
(A) employees who have been employed less than 2 years,
(B) employees whose customary employment is 20 hours or less
per week,
(C) employees whose customary employment is for not more than
5 months in any calendar year, and
(D) highly compensated employees (within the meaning of
section 414(q));
(5) under the terms of the plan, all employees granted such
options shall have the same rights and privileges, except that
the amount of stock which may be purchased by any employee under
such option may bear a uniform relationship to the total
compensation, or the basic or regular rate of compensation, of
employees, and the plan may provide that no employee may purchase
more than a maximum amount of stock fixed under the plan;
(6) under the terms of the plan, the option price is not less
than the lesser of -
(A) an amount equal to 85 percent of the fair market value of
the stock at the time such option is granted, or
(B) an amount which under the terms of the option may not be
less than 85 percent of the fair market value of the stock at
the time such option is exercised;
(7) under the terms of the plan, such option cannot be
exercised after the expiration of -
(A) 5 years from the date such option is granted if, under
the terms of such plan, the option price is to be not less than
85 percent of the fair market value of such stock at the time
of the exercise of the option, or
(B) 27 months from the date such option is granted, if the
option price is not determinable in the manner described in
subparagraph (A)
(8) under the terms of the plan, no employee may be granted an
option which permits his rights to purchase stock under all such
plans of his employer corporation and its parent and subsidiary
corporations to accrue at a rate which exceeds $25,000 of fair
market value of such stock (determined at the time such option is
granted) for each calendar year in which such option is
outstanding at any time. For purposes of this paragraph -
(A) the right to purchase stock under an option accrues when
the option (or any portion thereof) first becomes exercisable
during the calendar year;
(B) the right to purchase stock under an option accrues at
the rate provided in the option, but in no case may such rate
exceed $25,000 of fair market value of such stock (determined
at the time such option is granted) for any one calendar year;
and
(C) a right to purchase stock which has accrued under one
option granted pursuant to the plan may not be carried over to
any other option; and
(9) under the terms of the plan, such option is not
transferable by such individual otherwise than by will or the
laws of descent and distribution, and is exercisable, during his
lifetime, only by him.
For purposes of paragraphs (3) to (9), inclusive, where additional
terms are contained in an offering made under a plan, such
additional terms shall, with respect to options exercised under
such offering, be treated as a part of the terms of such plan.
(c) Special rule where option price is between 85 percent and 100
percent of value of stock
If the option price of a share of stock acquired by an individual
pursuant to a transfer to which subsection (a) applies was less
than 100 percent of the fair market value of such share at the time
such option was granted, then, in the event of any disposition of
such share by him which meets the holding period requirements of
subsection (a), or in the event of his death (whenever occurring)
while owning such share, there shall be included as compensation
(and not as gain upon the sale or exchange of a capital asset) in
his gross income, for the taxable year in which falls the date of
such disposition or for the taxable year closing with his death,
whichever applies, an amount equal to the lesser of -
(1) the excess of the fair market value of the share at the
time of such disposition or death over the amount paid for the
share under the option, or
(2) the excess of the fair market value of the share at the
time the option was granted over the option price.
If the option price is not fixed or determinable at the time the
option is granted, then for purposes of this subsection, the option
price shall be determined as if the option were exercised at such
time. In the case of the disposition of such share by the
individual, the basis of the share in his hands at the time of such
disposition shall be increased by an amount equal to the amount so
includible in his gross income.
-SOURCE-
(Added Pub. L. 88-272, title II, Sec. 221(a), Feb. 26, 1964, 78
Stat. 67; amended Pub. L. 94-455, title XIV, Sec. 1402(b)(1)(E),
(2), Oct. 4, 1976, 90 Stat. 1732; Pub. L. 98-369, div. A, title X,
Sec. 1001(b)(5), (e), July 18, 1984, 98 Stat. 1011, 1012; Pub. L.
99-514, title XI, Sec. 1114(b)(13), Oct. 22, 1986, 100 Stat. 2451;
Pub. L. 101-508, title XI, Sec. 11801(c)(9)(D), (E), Nov. 5, 1990,
104 Stat. 1388-525.)
-MISC1-
AMENDMENTS
1990 - Subsec. (a). Pub. L. 101-508, Sec. 11801(c)(9)(D)(i),
struck out "(other than a restricted stock option granted pursuant
to a plan described in section 424(c)(3)(B))" after "December 31,
1963".
Subsec. (a)(2). Pub. L. 101-508, Sec. 11801(c)(9)(D)(ii),
substituted "424(a)" for "425(a)".
Subsec. (b)(3). Pub. L. 101-508, Sec. 11801(c)(9)(E), substituted
"424(d)" for "425(d)".
1986 - Subsec. (b)(4)(D). Pub. L. 99-514 substituted "highly
compensated employees (within the meaning of section 414(q))" for
"officers, persons whose principal duties consist of supervising
the work of other employees, or highly compensated employees".
1984 - Subsec. (a)(1). Pub. L. 98-369 substituted "6 months" for
"1 year", applicable to property acquired after June 22, 1984, and
before Jan. 1, 1988. See Effective Date of 1984 Amendment note
below.
1976 - Subsec. (a)(1). Pub. L. 94-455, Sec. 1402(b)(2), provided
that "9 months" would be changed to "1 year".
Pub. L. 94-455, Sec. 1402(b)(1)(E), provided that "6 months"
would be changed to "9 months" for taxable years beginning in 1977.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to years beginning after
Dec. 31, 1986, see section 1114(c)(1) of Pub. L. 99-514, set out as
a note under section 414 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to property acquired after
June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub.
L. 98-369, set out as a note under section 166 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Section 1402(b)(1) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning in 1977.
Section 1402(b)(2) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning after Dec. 31, 1977.
EFFECTIVE DATE
Section applicable to taxable years ending after Dec. 31, 1963,
see section 221(e) of Pub. L. 88-272, set out as an Effective Date
of 1964 Amendment note under section 421 of this title.
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 421, 424, 1042, 6039 of
this title.
-End-
-CITE-
26 USC Sec. 424 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART II - CERTAIN STOCK OPTIONS
-HEAD-
Sec. 424. Definitions and special rules
-STATUTE-
(a) Corporate reorganizations, liquidations, etc.
For purposes of this part, the term "issuing or assuming a stock
option in a transaction to which section 424(a) applies" means a
substitution of a new option for the old option, or an assumption
of the old option, by an employer corporation, or a parent or
subsidiary of such corporation, by reason of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization, or liquidation, if -
(1) the excess of the aggregate fair market value of the shares
subject to the option immediately after the substitution or
assumption over the aggregate option price of such shares is not
more than the excess of the aggregate fair market value of all
shares subject to the option immediately before such substitution
or assumption over the aggregate option price of such shares, and
(2) the new option or the assumption of the old option does not
give the employee additional benefits which he did not have under
the old option.
For purposes of this subsection, the parent-subsidiary relationship
shall be determined at the time of any such transaction under this
subsection.
(b) Acquisition of new stock
For purposes of this part, if stock is received by an individual
in a distribution to which section 305, 354, 355, 356, or 1036 (or
so much of section 1031 as relates to section 1036) applies, and
such distribution was made with respect to stock transferred to him
upon his exercise of the option, such stock shall be considered as
having been transferred to him on his exercise of such option. A
similar rule shall be applied in the case of a series of such
distributions.
(c) Disposition
(1) In general
Except as provided in paragraphs (2), (3), and (4), for
purposes of this part, the term "disposition" includes a sale,
exchange, gift, or a transfer of legal title, but does not
include -
(A) a transfer from a decedent to an estate or a transfer by
request or inheritance;
(B) an exchange to which section 354, 355, 356, or 1036 (or
so much of section 1031 as relates to section 1036) applies; or
(C) a mere pledge or hypothecation.
(2) Joint tenancy
The acquisition of a share of stock in the name of the employee
and another jointly with the right of survivorship or a
subsequent transfer of a share of stock into such joint ownership
shall not be deemed a disposition, but a termination of such
joint tenancy (except to the extent such employee acquires
ownership of such stock) shall be treated as a disposition by him
occurring at the time such joint tenancy is terminated.
(3) Special rule where incentive stock is acquired through use of
other statutory option stock
(A) Nonrecognition sections not to apply
If -
(i) there is a transfer of statutory option stock in
connection with the exercise of any incentive stock option,
and
(ii) the applicable holding period requirements (under
section 422(a)(1) or 423(a)(1)) are not met before such
transfer,
then no section referred to in subparagraph (B) of paragraph
(1) shall apply to such transfer.
(B) Statutory option stock
For purpose of subparagraph (A), the term "statutory option
stock" means any stock acquired through the exercise of an
incentive stock option or an option granted under an employee
stock purchase plan.
(4) Transfers between spouses or incident to divorce
In the case of any transfer described in subsection (a) of
section 1041 -
(A) such transfer shall not be treated as a disposition for
purposes of this part, and
(B) the same tax treatment under this part with respect to
the transferred property shall apply to the transferee as would
have applied to the transferor.
(d) Attribution of stock ownership
For purposes of this part, in applying the percentage limitations
of sections 422(b)(6) and 423(b)(3) -
(1) the individual with respect to whom such limitation is
being determined shall be considered as owning the stock owned,
directly or indirectly, by or for his brothers and sisters
(whether by the whole or half blood), spouse, ancestors, and
lineal descendants; and
(2) stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust, shall be considered
as being owned proportionately by or for its shareholders,
partners, or beneficiaries.
(e) Parent corporation
For purposes of this part, the term "parent corporation" means
any corporation (other than the employer corporation) in an
unbroken chain of corporations ending with the employer corporation
if, at the time of the granting of the option, each of the
corporations other than the employer corporation owns stock
possessing 50 percent or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain.
(f) Subsidiary corporation
For purposes of this part, the term "subsidiary corporation"
means any corporation (other than the employer corporation) in an
unbroken chain of corporations beginning with the employer
corporation if, at the time of the granting of the option, each of
the corporations other than the last corporation in the unbroken
chain owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(g) Special rule for applying subsections (e) and (f)
In applying subsections (e) and (f) for purposes of section (!1)
422(a)(2) and 423(a)(2), there shall be substituted for the term
"employer corporation" wherever it appears in subsection (e) and
(f) the term "grantor corporation" or the term "corporation issuing
or assuming a stock option in a transaction to which section 424(a)
applies" as the case may be.
(h) Modification, extension, or renewal of option
(1) In general
For purposes of this part, if the terms of any option to
purchase stock are modified, extended, or renewed, such
modification, extension, or renewal shall be considered as the
granting of a new option.
(2) Special rule for section 423 options
In the case of the transfer of stock pursuant to the exercise
of an option to which section 423 applies and which has been so
modified, extended, or renewed, the fair market value of such
stock at the time of the granting of the option shall be
considered as whichever of the following is the highest -
(A) the fair market value of such stock on the date of the
original granting of the option,
(B) the fair market value of such stock on the date of the
making of such modification, extension, or renewal, or
(C) the fair market value of such stock at the time of the
making of any intervening modification, extension, or renewal.
(3) Definition of modification
The term "modification" means any change in the terms of the
option which gives the employee additional benefits under the
option, but such term shall not include a change in the terms of
the option -
(A) attributable to the issuance or assumption of an option
under subsection (a);
(B) to permit the option to qualify under section 423(b)(9);
or
(C) in the case of an option not immediately exercisable in
full, to accelerate the time at which the option may be
exercised.
(i) Stockholder approval
For purposes of this part, if the grant of an option is subject
to approval by stockholders, the date of grant of the option shall
be determined as if the option had not been subject to such
approval.
(j) Cross references
For provisions requiring the reporting of certain acts with
respect to a qualified stock option, an incentive stock option,
options granted under employer stock purchase plans, or a
restricted stock option, see section 6039.
-SOURCE-
(Added Pub. L. 88-272, title II, Sec. 221(a), Feb. 26, 1964, 78
Stat. 71, Sec. 425; amended Pub. L. 97-34, title II, Sec.
251(b)(2)-(4), Aug. 13, 1981, 95 Stat. 259; Pub. L. 97-448, title
I, Sec. 102(j)(5), (6), Jan. 12, 1983, 96 Stat. 2373; Pub. L.
98-369, div. A, title V, Sec. 555(b), July 18, 1984, 98 Stat. 898;
Pub. L. 100-647, title I, Sec. 1018(l)(1), (2), Nov. 10, 1988, 102
Stat. 3584; Pub. L. 101-239, title VII, Sec. 7811(m)(6), Dec. 19,
1989, 103 Stat. 2412; renumbered Sec. 424 and amended Pub. L.
101-508, title XI, Sec. 11801(c)(9)(A)(i), (F), Nov. 5, 1990, 104
Stat. 1388-524, 1388-525; Pub. L. 104-188, title I, Sec.
1702(h)(13), Aug. 20, 1996, 110 Stat. 1874.)
-MISC1-
PRIOR PROVISIONS
A prior section 424, added Pub. L. 88-272, title II, Sec. 221(a),
Feb. 26, 1964, 78 Stat. 69; amended Pub. L. 94-455, title VI, Sec.
603(c), title XIV, Sec. 1402(b)(1)(F), (2), Oct. 4, 1976, 90 Stat.
1574, 1732, related to restricted stock options, prior to repeal by
Pub. L. 101-508, title XI, Sec. 11801(a)(21), Nov. 5, 1990, 104
Stat. 1388-521. For savings provisions, see section 11821(b) of
Pub. L. 101-508, set out as a note under section 29 of this title.
AMENDMENTS
1996 - Subsec. (c)(3)(B). Pub. L. 104-188 substituted "an
incentive stock option or an option granted under an employee stock
purchase plan" for "a qualified stock option, an incentive stock
option, an option granted under an employee stock purchase plan, or
a restricted stock option".
1990 - Pub. L. 101-508, Sec. 11801(c)(9)(A)(i), renumbered
section 425 of this title as this section.
Subsec. (a). Pub. L. 101-508, Sec. 11801(c)(9)(F)(i), substituted
"424(a)" for "425(a)".
Subsec. (c)(3)(A)(ii). Pub. L. 101-508, Sec. 11801(c)(9)(F)(ii),
substituted "422(a)(1) or 423(a)(1)" for "422(a)(1), 422A(a)(1),
423(a)(1), or 424(a)(1)".
Subsec. (d). Pub. L. 101-508, Sec. 11801(c)(9)(F)(iii),
substituted "422(b)(6) and 423(b)(3)" for "422(b)(7), 422A(b)(6),
423(b)(3), and 424(b)(3)".
Subsec. (g). Pub. L. 101-508, Sec. 11801(c)(9)(F)(iv),
substituted "422(a)(2) and 423(a)(2)" for "422(a)(2), 422A(a)(2),
423(a)(2), and 424(a)(2)" and "424(a)" for "425(a)".
Subsec. (h)(2). Pub. L. 101-508, Sec. 11801(c)(9)(F)(v)(I), added
par. (2) and struck out former par. (2) which related to special
rules for sections 423 and 424 options and to an exception that
such rules would not apply with respect to a modification,
extension or renewal of a restricted stock option before Jan. 1,
1964, if the aggregate of the monthly fair market value for 12
consecutive months before date of modification, etc., divided by 12
is an amount less than 80% of the fair market value of such stock
on the date of original granting or the date of modification, etc.,
whichever is higher.
Subsec. (h)(3). Pub. L. 101-508, Sec. 11801(c)(9)(F)(v)(III),
struck out at end "If a restricted stock option is exercisable
after the expiration of 10 years from the date such option is
granted, subparagraph (B) shall not apply unless the terms of the
option are also changed to make it not exercisable after the
expiration of such period."
Subsec. (h)(3)(B). Pub. L. 101-508, Sec. 11801(c)(9)(F)(v)(II),
substituted "section 423(b)(9)" for "sections 422(b)(6), 423(b)(9),
and 424(b)(2)".
1989 - Subsec. (c)(1). Pub. L. 101-239 made technical correction
to Pub. L. 100-647, Sec. 1018(l)(2), see 1988 Amendment note below.
1988 - Subsec. (c)(1). Pub. L. 100-647, Sec. 1018(l)(2), as
amended by Pub. L. 101-239, substituted "paragraphs (2), (3), and
(4)" for "paragraphs (2) and (3)".
Subsec. (c)(4). Pub. L. 100-647, Sec. 1018(l)(1), added par. (4).
1984 - Subsec. (h)(3)(B). Pub. L. 98-369 struck out reference to
section 422A(b)(5).
1983 - Subsec. (c)(1). Pub. L. 97-448, Sec. 102(j)(6)(B),
substituted "paragraphs (2) and (3)" for "paragraph (2)".
Subsec. (c)(3). Pub. L. 97-448, Sec. 102(j)(6)(A), added par.
(3).
Subsec. (j). Pub. L. 97-448, Sec. 102(j)(5), inserted reference
to an incentive stock option.
1981 - Subsec. (d). Pub. L. 97-34, Sec. 251(b)(2), inserted
reference to section 422A(b)(6).
Subsec. (g). Pub. L. 97-34, Sec. 251(b)(3), inserted reference to
section 422A(a)(2).
Subsec. (h)(3)(B). Pub. L. 97-34, Sec. 251(b)(4), inserted
reference to section 422A(b)(5).
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective, except as otherwise
expressly provided, as if included in the provision of the Revenue
Reconciliation Act of 1990, Pub. L. 101-508, title XI, to which
such amendment relates, see section 1702(i) of Pub. L. 104-188, set
out as a note under section 38 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 555(c)(3) of Pub. L. 98-369, as amended by Pub. L.
99-514, title XVIII, Sec. 1855(a)(4), Oct. 22, 1986, 100 Stat.
2882, provided that: "The amendment made by subsection (b)
[amending this section] shall apply with respect to modifications
of options after March 20, 1984."
EFFECTIVE DATE OF 1983 AMENDMENT
Section 102(j)(6) of Pub. L. 97-448 provided that the amendment
made by that section is effective only with respect to transfers
after March 15, 1982.
Amendment by section 102(j)(5) of title I of Pub. L. 97-448
effective, except as otherwise provided, as if it had been included
in the provision of the Economic Recovery Tax Act of 1981, Pub. L.
97-34, to which such amendment relates, see section 109 of Pub. L.
97-448, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable with respect to options
granted on or after Jan. 1, 1976, and exercised on or after Jan. 1,
1981, or outstanding on Jan. 1, 1981, or granted on or after Jan.
1, 1976, and outstanding Aug. 13, 1981, see section 251(c) of Pub.
L. 97-34, set out as an Effective Date note under section 422 of
this title.
EFFECTIVE DATE
Section applicable to taxable years ending after Dec. 31, 1963,
except in cases of options granted after Dec. 31, 1963, and before
Jan. 1, 1965, in which case par. (1) of subsec. (h) shall not apply
to any change in the terms of such option made before Jan. 1, 1965,
to permit such option to qualify under pars. (3), (4), and (5) of
section 422(b), see section 221(e) of Pub. L. 88-272, set out as an
Effective Date of 1964 Amendment note under section 421 of this
title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 402, 421, 422, 423 of
this title.
-FOOTNOTE-
(!1) So in original. Probably should be "sections".
-End-
-CITE-
26 USC Sec. 425 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART II - CERTAIN STOCK OPTIONS
-HEAD-
[Sec. 425. Renumbered Sec. 424]
-STATUTE-
-End-
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