-CITE-
26 USC CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-MISC1-
Sec.
4971. Taxes on failure to meet minimum funding standards.
4972. Tax on nondeductible contributions to qualified
employer plans.
4973. Tax on excess contributions to certain tax-favored
accounts and annuities.
4974. Excise tax on certain accumulations in qualified
retirement plans.
4975. Tax on prohibited transactions.
4976. Taxes with respect to funded welfare benefit plans.
4977. Tax on certain fringe benefits provided by an
employer.
4978. Tax on certain dispositions by employee stock
ownership plans and certain cooperatives.
[4978A, 4978B. Repealed.]
4979. Tax on certain excess contributions.
4979A. Tax on certain prohibited allocations of qualified
securities.
4980. Tax on reversion of qualified plan assets to employer.
4980A. Tax on excess distributions from qualified retirement
plans.(!1)
4980B. Failure to satisfy continuation coverage requirements
of group health plans.
4980C. Requirements for issuers of qualified long-term care
insurance contracts.
4980D. Failure to meet certain group health plan
requirements.
4980E. Failure of employer to make comparable Archer MSA
contributions.
4980F. Failure of applicable plans reducing benefit accruals
to satisfy notice requirements.
4980G. Failure of employer to make comparable health savings
account contributions.
AMENDMENTS
2003 - Pub. L. 108-173, title XII, Sec. 1201(d)(4)(B), Dec. 8,
2003, 117 Stat. 2478, added item 4980G.
2002 - Pub. L. 107-147, title IV, Sec. 417(17)(B), Mar. 9, 2002,
116 Stat. 56, substituted "Archer MSA contributions" for "medical
savings account contributions" in item 4980E.
2001 - Pub. L. 107-16, title VI, Sec. 659(a)(2), June 7, 2001,
115 Stat. 139, added item 4980F.
1998 - Pub. L. 105-206, title VI, Sec. 6023(18)(B), July 22,
1998, 112 Stat. 825, substituted "certain tax-favored accounts and
annuities" for "individual retirement accounts, certain section
403(b) contracts, and certain individual retirement annuities" in
item 4973.
1996 - Pub. L. 104-191, title III, Secs. 301(c)(4)(B), 326(b),
title IV, Sec. 402(b), Aug. 21, 1996, 110 Stat. 2050, 2066, 2087,
added items 4980C, 4980D, and 4980E.
Pub. L. 104-188, title I, Sec. 1602(b)(5)(B), Aug. 20, 1996, 110
Stat. 1834, struck out item 4978B "Tax on disposition of employer
securities to which section 133 applied".
1989 - Pub. L. 101-239, title VII, Secs. 7301(d)(2),
7304(a)(2)(C)(iii), Dec. 19, 1989, 103 Stat. 2348, 2353, struck out
item 4978A "Tax on certain dispositions of employer securities to
which section 2057 applied" and added item 4978B.
1988 - Pub. L. 100-647, title I, Sec. 1011A(g)(1)(B), title III,
Sec. 3011(c), Nov. 10, 1988, 102 Stat. 3479, 3625, redesignated
item 4981A as 4980A and added item 4980B.
1987 - Pub. L. 100-203, title X, Sec. 10413(b)(2), Dec. 22, 1987,
101 Stat. 1330-438, added item 4978A.
1986 - Pub. L. 99-514, title XI, Secs. 1117(b)(2), 1121(a)(2),
1131(c)(2), 1132(b), 1133(b), title XVIII, Secs. 1854(a)(9)(C),
1899A(75), Oct. 22, 1986, 100 Stat. 2462, 2465, 2478, 2480, 2483,
2877, 2963, added item 4972, inserted "section" in item 4973,
substituted "Excise tax on certain accumulations in qualified
retirement plans" for "Tax on certain accumulations in individual
retirement accounts" in item 4974, struck out "and allocations"
after "certain dispositions" in item 4978, and added items 4979,
4979A, 4980, and 4981A.
1984 - Pub. L. 98-369, div. A, title IV, Sec. 491(d)(56), title
V, Secs. 511(c)(2), 531(e)(2), 545(b), July 18, 1984, 98 Stat. 852,
862, 886, 896, substituted "and certain individual retirement
annuities" for "certain individual retirement annuities, and
certain retirement bonds" in item 4973 and added items 4976 to
4978.
1982 - Pub. L. 97-248, title II, Sec. 237(c)(2), Sept. 3, 1982,
96 Stat. 511, struck out item 4972 "Tax on excess contributions for
self-employed individuals".
1974 - Pub. L. 93-406, title II, Secs. 1013(b), 2001(f)(2),
2002(h)(3), Sept. 2, 1974, 88 Stat. 920, 957, 970, added chapter
heading and analysis of sections 4971 to 4975.
-SECREF-
CHAPTER REFERRED TO IN OTHER SECTIONS
This chapter is referred to in sections 275, 6161, 6201, 6211,
6212, 6213, 6214, 6344, 6405, 6501, 6512, 6862, 6871, 7422 of this
title.
-FOOTNOTE-
(!1) Section repealed by Pub. L. 105-34 without corresponding
amendment of chapter analysis.
-End-
-CITE-
26 USC Sec. 4971 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4971. Taxes on failure to meet minimum funding standards
-STATUTE-
(a) Initial tax
For each taxable year of an employer who maintains a plan to
which section 412 applies, there is hereby imposed a tax of 10
percent (5 percent in the case of a multiemployer plan) on the
amount of the accumulated funding deficiency under the plan,
determined as of the end of the plan year ending with or within
such taxable year.
(b) Additional tax
In any case in which an initial tax is imposed by subsection (a)
on an accumulated funding deficiency and such accumulated funding
deficiency is not corrected within the taxable period, there is
hereby imposed a tax equal to 100 percent of such accumulated
funding deficiency to the extent not corrected.
(c) Definitions
For purposes of this section -
(1) Accumulated funding deficiency
The term "accumulated funding deficiency" has the meaning given
to such term by the last two sentences of section 412(a).
(2) Correct
The term "correct" means, with respect to an accumulated
funding deficiency, the contribution, to or under the plan, of
the amount necessary to reduce such accumulated funding
deficiency as of the end of a plan year in which such deficiency
arose to zero.
(3) Taxable period
The term "taxable period" means, with respect to an accumulated
funding deficiency, the period beginning with the end of the plan
year in which there is an accumulated funding deficiency and
ending on the earlier of -
(A) the date of mailing of a notice of deficiency with
respect to the tax imposed by subsection (a), or
(B) the date on which the tax imposed by subsection (a) is
assessed.
(d) Notification of the Secretary of Labor
Before issuing a notice of deficiency with respect to the tax
imposed by subsection (a) or (b), the Secretary shall notify the
Secretary of Labor and provide him a reasonable opportunity (but
not more than 60 days) -
(1) to require the employer responsible for contributing to or
under the plan to eliminate the accumulated funding deficiency,
or
(2) to comment on the imposition of such tax.
In the case of a multiemployer plan which is in reorganization
under section 418, the same notice and opportunity shall be
provided to the Pension Benefit Guaranty Corporation.
(e) Liability for tax
(1) In general
Except as provided in paragraph (2), the tax imposed by
subsection (a), (b), or (f) shall be paid by the employer
responsible for contributing to or under the plan the amount
described in section 412(b)(3)(A).
(2) Joint and several liability where employer member of
controlled group
(A) In general
In the case of a plan other than a multiemployer plan, if the
employer referred to in paragraph (1) is a member of a
controlled group, each member of such group shall be jointly
and severally liable for the tax imposed by subsection (a),
(b), or (f).
(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.
(f) Failure to pay liquidity shortfall
(1) In general
In the case of a plan to which section 412(m)(5) applies, there
is hereby imposed a tax of 10 percent of the excess (if any) of -
(A) the amount of the liquidity shortfall for any quarter,
over
(B) the amount of such shortfall which is paid by the
required installment under section 412(m) for such quarter (but
only if such installment is paid on or before the due date for
such installment).
(2) Additional tax
If the plan has a liquidity shortfall as of the close of any
quarter and as of the close of each of the following 4 quarters,
there is hereby imposed a tax equal to 100 percent of the amount
on which tax was imposed by paragraph (1) for such first quarter.
(3) Definitions and special rule
(A) Liquidity shortfall; quarter
For purposes of this subsection, the terms "liquidity
shortfall" and "quarter" have the respective meanings given
such terms by section 412(m)(5).
(B) Special rule
If the tax imposed by paragraph (2) is paid with respect to
any liquidity shortfall for any quarter, no further tax shall
be imposed by this subsection on such shortfall for such
quarter.
(4) Waiver by Secretary
If the taxpayer establishes to the satisfaction of the
Secretary that -
(A) the liquidity shortfall described in paragraph (1) was
due to reasonable cause and not willful neglect, and
(B) reasonable steps have been taken to remedy such liquidity
shortfall,
the Secretary may waive all or part of the tax imposed by this
subsection.
(g) Cross references
For disallowance of deduction for taxes paid under this
section, see section 275.
For liability for tax in case of an employer party to
collective bargaining agreement, see section 413(b)(6).
For provisions concerning notification of Secretary of Labor
of imposition of tax under this section, waiver of the tax
imposed by subsection (b), and other coordination between
Secretary of the Treasury and Secretary of Labor with respect
to compliance with this section, see section 3002(b) of title
III of the Employee Retirement Income Security Act of 1974.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 1013(b), Sept. 2, 1974, 88
Stat. 920; 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. 204,
Sept. 26, 1980, 94 Stat. 1287; Pub. L. 96-596, Sec. 2(a)(1)(J),
(2)(H), Dec. 24, 1980, 94 Stat. 3469, 3471; Pub. L. 100-203, title
IX, Secs. 9304(c)(1), 9305(a), Dec. 22, 1987, 101 Stat. 1330-348,
1330-351; Pub. L. 103-465, title VII, Sec. 751(a)(9)(B), Dec. 8,
1994, 108 Stat. 5020; Pub. L. 104-188, title I, Sec. 1464(a), Aug.
20, 1996, 110 Stat. 1824.)
-REFTEXT-
REFERENCES IN TEXT
Section 3002(b) of title III of the Employee Retirement Income
Security Act of 1974, referred to in subsec. (g), is classified to
section 1202(b) of Title 29, Labor.
-MISC1-
AMENDMENTS
1996 - Subsec. (f)(4). Pub. L. 104-188 added par. (4).
1994 - Subsec. (e)(1), (2)(A). Pub. L. 103-465, Sec.
751(a)(9)(B)(i), substituted "(a), (b), or (f)" for "(a) or (b)".
Subsecs. (f), (g). Pub. L. 103-465, Sec. 751(a)(9)(B)(ii), added
subsec. (f) and redesignated former subsec. (f) as (g).
1987 - Subsec. (a). Pub. L. 100-203, Sec. 9305(a)(2)(A), struck
out at end "The tax imposed by this subsection shall be paid by the
employer responsible for contributing to or under the plan the
amount described in section 412(b)(3)(A)."
Pub. L. 100-203, Sec. 9304(c)(1), substituted "10 percent (5
percent in the case of a multiemployer plan)" for "5 percent".
Subsec. (b). Pub. L. 100-203, Sec. 9305(a)(2)(B), struck out at
end "The tax imposed by this subsection shall be paid by the
employer described in subsection (a)."
Subsecs. (e), (f). Pub. L. 100-203, Sec. 9305(a)(1), added
subsec. (e) and redesignated former subsec. (e) as (f).
1980 - Subsec. (b). Pub. L. 96-596, Sec. 2(a)(1)(J), substituted
"taxable period" for "correction period".
Subsec. (c)(1). Pub. L. 96-364, Sec. 204(1), substituted "last
two sentences" for "last sentence".
Subsec. (c)(3). Pub. L. 96-596, Sec. 2(a)(2)(H), substituted
provision defining taxable period as the period beginning with the
end of the plan year in which there is an accumulated funding
deficiency and ending on the earlier of the date of mailing of a
notice of deficiency with respect to the tax imposed by subsec. (a)
of this section or the date on which the tax imposed by subsec. (a)
of this section is assessed for provision defining correction
period as the period beginning with the end of a plan year in which
there is an accumulated funding deficiency and ending 90 days after
the date of mailing of a notice of deficiency under section 6212 of
this title with respect to the tax imposed by subsec. (b) of this
section, extended by any period in which a deficiency cannot be
assessed under section 6213(a) of this title and by any other
period which the Secretary determines reasonable and necessary to
permit a reduction of the accumulated funding deficiency to zero.
Subsec. (d). Pub. L. 96-364, Sec. 204(2), inserted provisions
relating to a multiemployer plan in reorganization.
1976 - Subsecs. (c), (d). Pub. L. 94-455 struck out "or his
delegate" after "Secretary" wherever appearing.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1464(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall take effect as
if included in the amendment made by clause (ii) of section
751(a)(9)(B) of the Retirement Protection Act of 1994 [Pub. L.
103-465] (108 Stat. 5020)."
EFFECTIVE DATE OF 1994 AMENDMENT
Amendment by 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.
EFFECTIVE DATE OF 1987 AMENDMENT
Section 9304(c)(2) of Pub. L. 100-203 provided that: "The
amendments made by this subsection [amending this section] shall
apply to plan years beginning after 1988."
Amendment by section 9305(a) of Pub. L. 100-203 applicable with
respect to plan years beginning after December 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 1980 AMENDMENTS
For effective date of amendment by Pub. L. 96-596 with respect to
any first tier tax and to any second tier tax, see section 2(d) of
Pub. L. 96-596, set out as an Effective Date note under section
4961 of this title.
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.
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.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 413, 4963, 6503 of this
title.
-End-
-CITE-
26 USC Sec. 4972 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4972. Tax on nondeductible contributions to qualified employer
plans
-STATUTE-
(a) Tax imposed
In the case of any qualified employer plan, there is hereby
imposed a tax equal to 10 percent of the nondeductible
contributions under the plan (determined as of the close of the
taxable year of the employer).
(b) Employer liable for tax
The tax imposed by this section shall be paid by the employer
making the contributions.
(c) Nondeductible contributions
For purposes of this section -
(1) In general
The term "nondeductible contributions" means, with respect to
any qualified employer plan, the sum of -
(A) the excess (if any) of -
(i) the amount contributed for the taxable year by the
employer to or under such plan, over
(ii) the amount allowable as a deduction under section 404
for such contributions (determined without regard to
subsection (e) thereof), and
(B) the amount determined under this subsection for the
preceding taxable year reduced by the sum of -
(i) the portion of the amount so determined returned to the
employer during the taxable year, and
(ii) the portion of the amount so determined deductible
under section 404 for the taxable year (determined without
regard to subsection (e) thereof).
(2) Ordering rule for section 404
For purposes of paragraph (1), the amount allowable as a
deduction under section 404 for any taxable year shall be treated
as -
(A) first from carryforwards to such taxable year from
preceding taxable years (in order of time), and
(B) then from contributions made during such taxable year.
(3) Contributions which may be returned to employer
In determining the amount of nondeductible contributions for
any taxable year, there shall not be taken into account any
contribution for such taxable year which is distributed to the
employer in a distribution described in section 4980(c)(2)(B)(ii)
if such distribution is made on or before the last day on which a
contribution may be made for such taxable year under section
404(a)(6).
(4) Special rule for self-employed individuals
For purposes of paragraph (1), if -
(A) the amount which is required to be contributed to a plan
under section 412 on behalf of an individual who is an employee
(within the meaning of section 401(c)(1)), exceeds
(B) the earned income (within the meaning of section
404(a)(8)) of such individual derived from the trade or
business with respect to which such plan is established,
such excess shall be treated as an amount allowable as a
deduction under section 404.
(5) Pre-1987 contributions
The term "nondeductible contribution" shall not include any
contribution made for a taxable year beginning before January 1,
1987.
(6) Exceptions
In determining the amount of nondeductible contributions for
any taxable year, there shall not be taken into account -
(A) so much of the contributions to 1 or more defined
contribution plans which are not deductible when contributed
solely because of section 404(a)(7) as does not exceed the
greater of -
(i) the amount of contributions not in excess of 6 percent
of compensation (within the meaning of section 404(a) and as
adjusted under section 404(a)(12)) paid or accrued (during
the taxable year for which the contributions were made) to
beneficiaries under the plans, or
(ii) the sum of -
(I) the amount of contributions described in section
401(m)(4)(A), plus
(II) the amount of contributions described in section
402(g)(3)(A), or
(B) so much of the contributions to a simple retirement
account (within the meaning of section 408(p)) or a simple plan
(within the meaning of section 401(k)(11)) which are not
deductible when contributed solely because such contributions
are not made in connection with a trade or business of the
employer.
For purposes of subparagraph (A), the deductible limits under
section 404(a)(7) shall first be applied to amounts contributed
to a defined benefit plan and then to amounts described in
subparagraph (A). Subparagraph (B) shall not apply to
contributions made on behalf of the employer or a member of the
employer's family (as defined in section 447(e)(1)).
(7) Defined benefit plan exception
In determining the amount of nondeductible contributions for
any taxable year, an employer may elect for such year not to take
into account any contributions to a defined benefit plan except
to the extent that such contributions exceed the full-funding
limitation (as defined in section 412(c)(7), determined without
regard to subparagraph (A)(i)(I) thereof). For purposes of this
paragraph, the deductible limits under section 404(a)(7) shall
first be applied to amounts contributed to defined contribution
plans and then to amounts described in this paragraph. If an
employer makes an election under this paragraph for a taxable
year, paragraph (6) shall not apply to such employer for such
taxable year.
(d) Definitions
For purposes of this section -
(1) Qualified employer plan
(A) In general
The term "qualified employer plan" means -
(i) any plan meeting the requirements of section 401(a)
which includes a trust exempt from tax under section 501(a),
(ii) an annuity plan described in section 403(a),
(iii) any simplified employee pension (within the meaning
of section 408(k)), and
(iv) any simple retirement account (within the meaning of
section 408(p)).
(B) Exemption for governmental and tax exempt plans
The term "qualified employer plan" does not include a plan
described in subparagraph (A) or (B) of section 4980(c)(1).
(2) Employer
In the case of a plan which provides contributions or benefits
for employees some or all of whom are self-employed individuals
within the meaning of section 401(c)(1), the term "employer"
means the person treated as the employer under section 401(c)(4).
-SOURCE-
(Added Pub. L. 99-514, title XI, Sec. 1131(c)(1), Oct. 22, 1986,
100 Stat. 2477; amended Pub. L. 100-647, title I, Sec. 1011A(e)(1),
(2), title II, Sec. 2005(a)(1), Nov. 10, 1988, 102 Stat. 3477,
3610; Pub. L. 103-465, title VII, Sec. 755(a), Dec. 8, 1994, 108
Stat. 5023; Pub. L. 104-188, title I, Sec. 1421(b)(9)(D), Aug. 20,
1996, 110 Stat. 1798; Pub. L. 105-34, title XV, Sec. 1507(a), Aug.
5, 1997, 111 Stat. 1067; Pub. L. 107-16, title VI, Secs.
616(b)(2)(B), 637(a), (b), 652(b), 653(a), June 7, 2001, 115 Stat.
103, 118, 130.)
-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-
PRIOR PROVISIONS
A prior section, added Pub. L. 93-406, title II, Sec. 2001(f)(1),
Sept. 2, 1974, 88 Stat. 955; amended Pub. L. 94-455, title XIX,
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97-34,
title III, Sec. 312(e)(3), Aug. 13, 1981, 95 Stat. 285; Pub. L.
97-448, title I, Sec. 103(c)(10)(B), Jan. 12, 1983, 96 Stat. 2377;
Pub. L. 98-369, div. A, title IV, Sec. 491(d)(40), July 18, 1984,
98 Stat. 851, related to tax on excess contributions for
self-employed individuals, prior to repeal applicable to years
beginning after Dec. 31, 1983, by Pub. L. 97-248, title II, Sec.
237(c)(1), Sept. 3, 1982, 96 Stat. 511.
AMENDMENTS
2001 - Subsec. (c)(6). Pub. L. 107-16, Secs. 652(b)(4), 901,
temporarily substituted "Subparagraph (B)" for "Subparagraph (C)"
in concluding provisions. See Effective and Termination Dates of
2001 Amendment note below.
Pub. L. 107-16, Secs. 652(b)(3), 901, which directed the
temporary substitution of "subparagraph (A)" for "subparagraph (B)"
in concluding provisions, was executed by making the substitution
in two places, to reflect the probable intent of Congress. See
Effective and Termination Dates of 2001 Amendment note below.
Pub. L. 107-16, Secs. 652(b)(2), 901, in concluding provisions,
temporarily struck out first sentence which read as follows: "If 1
or more defined benefit plans were taken into account in
determining the amount allowable as a deduction under section 404
for contributions to any defined contribution plan, subparagraph
(B) shall apply only if such defined benefit plans are described in
section 404(a)(1)(D)." See Effective and Termination Dates of 2001
Amendment note below.
Pub. L. 107-16, Secs. 637(b), 901, in concluding provisions,
temporarily inserted at end "Subparagraph (C) shall not apply to
contributions made on behalf of the employer or a member of the
employer's family (as defined in section 447(e)(1))." See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (c)(6)(A). Pub. L. 107-16, Secs. 652(b)(1), 901,
temporarily redesignated subpar. (B) as (A) and struck out former
subpar. (A) which read as follows: "contributions that would be
deductible under section 404(a)(1)(D) if the plan had more than 100
participants if -
"(i) the plan is covered under section 4021 of the Employee
Retirement Income Security Act of 1974, and
"(ii) the plan is terminated under section 4041(b) of such Act
on or before the last day of the taxable year,".
See Effective and Termination Dates of 2001 Amendment note below.
Pub. L. 107-16, Secs. 637(a), 901, temporarily struck out "and"
at end. See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (c)(6)(B). Pub. L. 107-16, Secs. 652(b)(1), 901,
temporarily redesignated subpar. (C) as (B). Former subpar. (B)
redesignated (A). See Effective and Termination Dates of 2001
Amendment note below.
Pub. L. 107-16, Secs. 637(a), 901, temporarily substituted ", or"
for period at end. See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c)(6)(B)(i). Pub. L. 107-16, Secs. 616(b)(2)(B), 901,
temporarily substituted "(within the meaning of section 404(a) and
as adjusted under section 404(a)(12))" for "(within the meaning of
section 404(a))". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c)(6)(C). Pub. L. 107-16, Secs. 652(b)(1), 901,
temporarily redesignated subpar. (C) as (B). See Effective and
Termination Dates of 2001 Amendment note below.
Pub. L. 107-16, Secs. 637(a), 901, temporarily added subpar. (C).
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (c)(7). Pub. L. 107-16, Secs. 653(a), 901, temporarily
added par. (7). See Effective and Termination Dates of 2001
Amendment note below.
1997 - Subsec. (c)(6)(B). Pub. L. 105-34 amended subpar. (B)
generally. Prior to amendment, subpar. (B) read as follows:
"contributions to 1 or more defined contribution plans which are
not deductible when contributed solely because of section
404(a)(7), but only to the extent such contributions do not exceed
6 percent of compensation (within the meaning of section 404(a))
paid or accrued (during the taxable year for which the
contributions were made) to beneficiaries under the plans."
1996 - Subsec. (d)(1)(A)(iv). Pub. L. 104-188 added cl. (iv).
1994 - Subsec. (c)(6). Pub. L. 103-465 added par. (6).
1988 - Subsec. (c). Pub. L. 100-647, Sec. 1011A(e)(1), amended
subsec. (c) generally, revising and restating as pars. (1) to (4)
provisions of former pars. (1) and (2).
Subsec. (c)(4), (5). Pub. L. 100-647, Sec. 2005(a)(1), added par.
(4) and redesignated former par. (4) as (5).
Subsec. (d)(1). Pub. L. 100-647, Sec. 1011A(e)(2), amended par.
(1) generally. Prior to amendment, par. (1) read as follows: "The
term 'qualified employer plan' means -
"(A) any plan meeting the requirements of section 401(a) which
includes a trust exempt from the tax under section 501(a),
"(B) an annuity plan described in section 403(a), and
"(C) any simplified employee pension (within the meaning of
section 408(k))."
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by section 616(b)(2)(B) of Pub. L. 107-16 applicable to
years beginning after Dec. 31, 2001, see section 616(c) of Pub. L.
107-16, set out as a note under section 404 of this title.
Pub. L. 107-16, title VI, Sec. 637(d), June 7, 2001, 115 Stat.
118, provided that: "The amendments made by this section [amending
this section] shall apply to taxable years beginning after December
31, 2001."
Amendment by section 652(b) of Pub. L. 107-16 applicable to plan
years beginning after Dec. 31, 2001, see section 652(c) of Pub. L.
107-16, set out as a note under section 404 of this title.
Pub. L. 107-16, title VI, Sec. 653(b), June 7, 2001, 115 Stat.
130, 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 1997 AMENDMENT
Section 1507(b) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1997."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by 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.
EFFECTIVE DATE OF 1994 AMENDMENT
Section 755(b) of Pub. L. 103-465 provided that:
"(1) Section 4972(c)(6)(a). - Section 4972(c)(6)(A) of the
Internal Revenue Code of 1986 (as added by this section) shall
apply to taxable years ending on or after the date of enactment of
this Act [Dec. 8, 1994].
"(2) Section 4972(c)(6)(b). - Section 4972(c)(6)(B) of such Code
(as added by this section) shall apply to taxable years ending on
or after December 31, 1992."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011A(e)(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.
Amendment by section 2005(a)(1) of Pub. L. 100-647 effective as
if included in the amendment made by section 1131(c) of Pub. L.
99-514, see section 2005(e) of Pub. L. 100-647, as amended, set out
as a note under section 404 of this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1986, with special rules in case of plans maintained pursuant to
collective bargaining agreements, see section 1131(d) of Pub. L.
99-514, as amended, set out as an Effective Date of 1986 Amendment
note under section 404 of this title.
CONSTRUCTION OF 2001 AMENDMENT
Pub. L. 107-16, title VI, Sec. 637(c), June 7, 2001, 115 Stat.
118, provided that: "Nothing in the amendments made by this section
[amending this section] shall be construed to infer the proper
treatment of nondeductible contributions under the laws in effect
before such amendments."
INCREASE IN AMOUNT FOR PLAN TERMINATION INSURANCE UNDER EMPLOYEE
RETIREMENT INSURANCE SECURITY ACT OF 1974
Section 1011A(e)(5) of Pub. L. 100-647 provided that: "In the
case of any taxable year beginning in 1987, the amount under
section 4972(c)(1)(A)(ii) of the 1986 Code for a plan to which
title IV of the Employee Retirement Income Security Act of 1974 [29
U.S.C. 1301 et seq.] applies shall be increased by the amount (if
any) by which, as of the close of the plan year with or within
which such taxable year begins -
"(A) the liabilities of such plan (determined as if the plan
had terminated as of such time), exceed
"(B) the assets of such plan."
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 section 45E of this title.
-End-
-CITE-
26 USC Sec. 4973 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4973. Tax on excess contributions to certain tax-favored
accounts and annuities
-STATUTE-
(a) Tax imposed
In the case of -
(1) an individual retirement account (within the meaning of
section 408(a)),
(2) an Archer MSA (within the meaning of section 220(d)),
(3) an individual retirement annuity (within the meaning of
section 408(b)), a custodial account treated as an annuity
contract under section 403(b)(7)(A) (relating to custodial
accounts for regulated investment company stock),
(4) a Coverdell education savings account (as defined in
section 530), or
(5) a health savings account (within the meaning of section
223(d)),
there is imposed for each taxable year a tax in an amount equal to
6 percent of the amount of the excess contributions to such
individual's accounts or annuities (determined as of the close of
the taxable year). The amount of such tax for any taxable year
shall not exceed 6 percent of the value of the account or annuity
(determined as of the close of the taxable year). In the case of an
endowment contract described in section 408(b), the tax imposed by
this section does not apply to any amount allocable to life,
health, accident, or other insurance under such contract. The tax
imposed by this subsection shall be paid by such individual.
(b) Excess contributions
For purposes of this section, in the case of individual
retirement accounts or individual retirement annuities, the term
"excess contributions" means the sum of -
(1) the excess (if any) of -
(A) the amount contributed for the taxable year to the
accounts or for the annuities (other than a contribution to a
Roth IRA or a rollover contribution described in section
402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16)), over
(B) the amount allowable as a deduction under section 219 for
such contributions, and
(2) the amount determined under this subsection for the
preceding taxable year reduced by the sum of -
(A) the distributions out of the account for the taxable year
which were included in the gross income of the payee under
section 408(d)(1),
(B) the distributions out of the account for the taxable year
to which section 408(d)(5) applies, and
(C) the excess (if any) of the maximum amount allowable as a
deduction under section 219 for the taxable year over the
amount contributed (determined without regard to section
219(f)(6)) to the accounts or for the annuities (including the
amount contributed to a Roth IRA) for the taxable year.
For purposes of this subsection, any contribution which is
distributed from the individual retirement account or the
individual retirement annuity in a distribution to which section
408(d)(4) applies shall be treated as an amount not contributed.
For purposes of paragraphs (1)(B) and (2)(C), the amount allowable
as a deduction under section 219 shall be computed without regard
to section 219(g).
(c) Section 403(b) contracts
For purposes of this section, in the case of a custodial account
referred to in subsection (a)(2), the term "excess contributions"
means the sum of -
(1) the excess (if any) of the amount contributed for the
taxable year to such account (other than a rollover contribution
described in section 403(b)(8) or 408(d)(3)(A)(iii)), over the
lesser of the amount excludable from gross income under section
403(b) or the amount permitted to be contributed under the
limitations contained in section 415 (or under whichever such
section is applicable, if only one is applicable), and
(2) the amount determined under this subsection for the
preceding taxable year, reduced by -
(A) the excess (if any) of the lesser of (i) the amount
excludable from gross income under section 403(b) or (ii) the
amount permitted to be contributed under the limitations
contained in section 415 over the amount contributed to the
account for the taxable year (or under whichever such section
is applicable, if only one is applicable), and
(B) the sum of the distributions out of the account (for all
prior taxable years) which are included in gross income under
section 72(e).
(d) Excess contributions to Archer MSAs
For purposes of this section, in the case of Archer MSAs (within
the meaning of section 220(d)), the term "excess contributions"
means the sum of -
(1) the aggregate amount contributed for the taxable year to
the accounts (other than rollover contributions described in
section 220(f)(5)) which is neither excludable from gross income
under section 106(b) nor allowable as a deduction under section
220 for such year, and
(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of -
(A) the distributions out of the accounts which were included
in gross income under section 220(f)(2), and
(B) the excess (if any) of -
(i) the maximum amount allowable as a deduction under
section 220(b)(1) (determined without regard to section
106(b)) for the taxable year, over
(ii) the amount contributed to the accounts for the taxable
year.
For purposes of this subsection, any contribution which is
distributed out of the Archer MSA in a distribution to which
section 220(f)(3) or section 138(c)(3) applies shall be treated as
an amount not contributed.
(e) Excess contributions to Coverdell education savings accounts
For purposes of this section -
(1) In general
In the case of Coverdell education savings accounts maintained
for the benefit of any one beneficiary, the term "excess
contributions" means the sum of -
(A) the amount by which the amount contributed for the
taxable year to such accounts exceeds $2,000 (or, if less, the
sum of the maximum amounts permitted to be contributed under
section 530(c) by the contributors to such accounts for such
year); and
(B) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of -
(i) the distributions out of the accounts for the taxable
year (other than rollover distributions); and
(ii) the excess (if any) of the maximum amount which may be
contributed to the accounts for the taxable year over the
amount contributed to the accounts for the taxable year.
(2) Special rules
For purposes of paragraph (1), the following contributions
shall not be taken into account:
(A) Any contribution which is distributed out of the
Coverdell education savings account in a distribution to which
section 530(d)(4)(C) applies.
(B) Any rollover contribution.
(f) Excess contributions to Roth IRAs
For purposes of this section, in the case of contributions to a
Roth IRA (within the meaning of section 408A(b)), the term "excess
contributions" means the sum of -
(1) the excess (if any) of -
(A) the amount contributed for the taxable year to Roth IRAs
(other than a qualified rollover contribution described in
section 408A(e)), over
(B) the amount allowable as a contribution under sections
408A(c)(2) and (c)(3), and
(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of -
(A) the distributions out of the accounts for the taxable
year, and
(B) the excess (if any) of the maximum amount allowable as a
contribution under sections 408A(c)(2) and (c)(3) for the
taxable year over the amount contributed by the individual to
all individual retirement plans for the taxable year.
For purposes of this subsection, any contribution which is
distributed from a Roth IRA in a distribution described in section
408(d)(4) shall be treated as an amount not contributed.
(g) Excess contributions to health savings accounts
For purposes of this section, in the case of health savings
accounts (within the meaning of section 223(d)), the term "excess
contributions" means the sum of -
(1) the aggregate amount contributed for the taxable year to
the accounts (other than a rollover contribution described in
section 220(f)(5) or 223(f)(5)) which is neither excludable from
gross income under section 106(d) nor allowable as a deduction
under section 223 for such year, and
(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of -
(A) the distributions out of the accounts which were included
in gross income under section 223(f)(2), and
(B) the excess (if any) of -
(i) the maximum amount allowable as a deduction under
section 223(b) (determined without regard to section 106(d))
for the taxable year, over
(ii) the amount contributed to the accounts for the taxable
year.
For purposes of this subsection, any contribution which is
distributed out of the health savings account in a distribution to
which section 223(f)(3) applies shall be treated as an amount not
contributed.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 2002(d), Sept. 2, 1974, 88
Stat. 966; amended Pub. L. 94-455, title XV, Sec. 1501(b)(8), title
XIX, Sec. 1904(a)(22), Oct. 4, 1976, 90 Stat. 1736, 1814; Pub. L.
95-600, title I, Secs. 156(c)(3), (5), 157(b)(3), (j)(1), title
VII, Sec. 701(aa)(1), Nov. 6, 1978, 92 Stat. 2803, 2804, 2809,
2921; Pub. L. 96-222, title I, Sec. 101(a)(13)(C), (14)(B), Apr. 1,
1980, 94 Stat. 204; Pub. L. 97-34, title III, Secs. 311(h)(7), (9),
(10), 313(b)(2), Aug. 13, 1981, 95 Stat. 282, 286; Pub. L. 98-369,
div. A, title IV, Sec. 491(d)(41)-(44), (55), July 18, 1984, 98
Stat. 851, 852; Pub. L. 99-514, title XI, Sec. 1102(b)(1), title
XVIII, Sec. 1848(f), Oct. 22, 1986, 100 Stat. 2415, 2858; Pub. L.
100-647, title I, Sec. 1011(b)(3), Nov. 10, 1988, 102 Stat. 3456;
Pub. L. 102-318, title V, Sec. 521(b)(41), July 3, 1992, 106 Stat.
313; Pub. L. 104-188, title I, Sec. 1704(t)(70), (72), Aug. 20,
1996, 110 Stat. 1891; Pub. L. 104-191, title III, Sec. 301(e), Aug.
21, 1996, 110 Stat. 2051; Pub. L. 105-33, title IV, Sec.
4006(b)(1), Aug. 5, 1997, 111 Stat. 333; Pub. L. 105-34, title II,
Sec. 213(d), title III, Sec. 302(b), Aug. 5, 1997, 111 Stat. 817,
828; Pub. L. 105-206, title VI, Secs. 6004(d)(10), 6005(b)(8),
6023(18)(A), July 22, 1998, 112 Stat. 795, 799, 825; Pub. L.
106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(6), (b)(2)(C), (6),
(10)], Dec. 21, 2000, 114 Stat. 2763, 2763A-628, 2763A-629; Pub. L.
107-16, title IV, Secs. 401(a)(2), (g)(2)(D), 402(a)(4)(A), title
VI, Sec. 641(e)(11), June 7, 2001, 115 Stat. 57, 60, 121; Pub. L.
107-22, Sec. 1(b)(1)(C), (2)(B), (4), July 26, 2001, 115 Stat. 197;
Pub. L. 108-173, title XII, Sec. 1201(e), Dec. 8, 2003, 117 Stat.
2478.)
-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
2003 - Subsec. (a)(5). Pub. L. 108-173, Sec. 1201(e)(1), added
par. (5).
Subsec. (g). Pub. L. 108-173, Sec. 1201(e)(2), added subsec. (g).
2001 - Subsec. (a)(4). Pub. L. 107-22, Sec. 1(b)(1)(C),
substituted "a Coverdell education savings" for "an education
individual retirement".
Subsec. (b)(1)(A). Pub. L. 107-16, Secs. 641(e)(11), 901,
temporarily substituted "408(d)(3), or 457(e)(16)" for "or
408(d)(3)". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (e). Pub. L. 107-22, Sec. 1(b)(4), substituted "Coverdell
education savings" for "education individual retirement" in
heading.
Pub. L. 107-16, Secs. 402(a)(4)(A), 901, which directed the
temporary substitution of "qualified tuition" for "qualified State
tuition" wherever appearing in subsec. (e), could not be executed
because the term "qualified State tuition" did not appear
subsequent to amendment by section 401(g)(2)(D) of Pub. L. 107-16,
which struck out par. (1)(B). See below, and see Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (e)(1). Pub. L. 107-22, Sec. 1(b)(2)(B), substituted
"Coverdell education savings" for "education individual retirement"
in introductory provisions.
Subsec. (e)(1)(A). Pub. L. 107-16, Secs. 401(a)(2), (g)(2)(D),
901, temporarily substituted "$2,000" for "$500" and inserted "and"
at end. See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (e)(1)(B), (C). Pub. L. 107-16, Secs. 401(g)(2)(D), 901,
temporarily redesignated subpar. (C) as (B) and struck out former
subpar. (B) which read as follows: "if any amount is contributed
(other than a contribution described in section 530(b)(2)(B))
during such year to a qualified State tuition program for the
benefit of such beneficiary, any amount contributed to such
accounts for such taxable year; and". See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (e)(2)(A). Pub. L. 107-22, Sec. 1(b)(2)(B), substituted
"Coverdell education savings" for "education individual
retirement".
2000 - Subsec. (a)(2). Pub. L. 106-554, Sec. 1(a)(7) [title II,
Sec. 202(b)(10)], substituted "an Archer" for "a Archer".
Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(6)],
substituted "Archer MSA" for "medical savings account".
Subsec. (d). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(a)(6), (b)(2)(C), (6)], substituted "Archer MSAs" for "medical
savings accounts" in heading, "Archer MSAs" for "medical savings
accounts" in introductory provisions, and "Archer MSA" for "medical
savings account" in concluding provisions.
1998 - Pub. L. 105-206, Sec. 6023(18)(A), amended section
catchline generally. Prior to amendment, catchline read as follows:
"Tax on excess contributions to individual retirement accounts,
medical savings accounts, certain section 403(b) contracts, and
certain individual retirement annuities".
Subsec. (b)(1)(A). Pub. L. 105-206, Sec. 6005(b)(8)(B)(i),
inserted "a contribution to a Roth IRA or" after "other than".
Subsec. (b)(2)(C). Pub. L. 105-206, Sec. 6005(b)(8)(B)(ii),
inserted "(including the amount contributed to a Roth IRA)" after
"annuities".
Subsec. (e)(1). Pub. L. 105-206, Sec. 6004(d)(10)(A), reenacted
heading without change and amended text of par. (1) generally.
Prior to amendment, text read as follows: "In the case of education
individual retirement accounts maintained for the benefit of any 1
beneficiary, the term 'excess contributions' means -
"(A) the amount by which the amount contributed for the taxable
year to such accounts exceeds $500, and
"(B) any amount contributed to such accounts for any taxable
year if any amount is contributed during such year to a qualified
State tuition program for the benefit of such beneficiary."
Subsec. (e)(2)(B), (C). Pub. L. 105-206, Sec. 6004(d)(10)(B),
redesignated subpar. (C) as (B) and struck out former subpar. (B)
which read as follows: "Any contribution described in section
530(b)(2)(B) to a qualified State tuition program."
Subsec. (f). Pub. L. 105-206, Sec. 6005(b)(8)(C), made technical
amendment to directory language of Pub. L. 105-34, Sec. 302(b). See
1997 Amendment note below.
Subsec. (f)(1)(A). Pub. L. 105-206, Sec. 6005(b)(8)(A)(i),
substituted "Roth IRAs" for "such accounts".
Subsec. (f)(2)(B). Pub. L. 105-206, Sec. 6005(b)(8)(A)(ii),
substituted "by the individual to all individual retirement plans"
for "to the accounts".
1997 - Subsec. (a)(4). Pub. L. 105-34, Sec. 213(d)(1), added par.
(4).
Subsec. (d). Pub. L. 105-33 inserted "or section 138(c)(3)" after
"section 220(f)(3)" in concluding provisions.
Subsec. (e). Pub. L. 105-34, Sec. 213(d)(2), added subsec. (e).
Subsec. (f). Pub. L. 105-34, Sec. 302(b), as amended by Pub. L.
105-206, Sec. 6005(b)(8)(C), added subsec. (f).
1996 - Pub. L. 104-191, Sec. 301(e)(1), inserted "medical savings
accounts," after "accounts," in section catchline.
Subsec. (a). Pub. L. 104-191, Sec. 301(e)(1)-(3), struck out "or"
at end of par. (1), added par. (2), and redesignated former par.
(2) as (3).
Subsec. (b)(1)(A). Pub. L. 104-188, Sec. 1704(t)(72), provided
that section 521(b)(41) of Pub. L. 102-318 shall be applied as if
"section" appeared instead of "sections" in the material proposed
to be stricken. See 1992 Amendment note below.
Pub. L. 104-188, Sec. 1704(t)(70), substituted "section" for
"sections".
Subsec. (d). Pub. L. 104-191, Sec. 301(e)(4), added subsec. (d).
1992 - Subsec. (b)(1)(A). Pub. L. 102-318, which directed the
substitution of "sections 402(c)" for "sections 402(a)(5),
402(a)(7)", was executed by substituting "sections 402(c)" for
"section 402(a)(5), 402(a)(7)". See 1996 Amendment note above.
1988 - Subsec. (b). Pub. L. 100-647 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.
1986 - Subsec. (b). Pub. L. 99-514, Sec. 1102(b)(1), inserted at
end "For purposes of paragraphs (1)(B) and (2)(C), 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)."
Pub. L. 99-514, Sec. 1848(f), in introductory provisions,
substituted "or individual retirement annuities" for ", individual
retirement annuities, or bonds", in par. (1)(A), substituted
"(other than a rollover contribution described in section
402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8), or 408(d)(3)), over"
for "or bonds (other than a rollover contribution described in
section 402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8), 405(d)(3), or
408(d)(3)), over", and in par. (2)(A), struck out "or bonds" after
"for the annuities".
1984 - Pub. L. 98-369, Sec. 491(d)(55), substituted "and certain
individual retirement annuities" for "certain individual retirement
annuities, and certain retirement bonds" in section catchline.
Subsec. (a). Pub. L. 98-369, Sec. 491(d)(41), inserted "or" at
end of par. (1), struck out "or" at end of par. (2), struck out
par. (3) which imposed a tax in the case of a retirement bond,
within the meaning of section 409, established for the benefit of
any individual, and in the concluding provision substituted "or
annuity" for ", annuity, or bond" and "or annuities" for ",
annuities, or bonds".
Subsec. (b). Pub. L. 98-369, Sec. 491(d)(43), substituted in
provision following par. (2)(C) "or the individual retirement
annuity" for ", individual retirement annuity, or bond".
Subsec. (b)(1)(A). Pub. L. 98-369, Sec. 491(d)(42), which
directed the amendment of subpar. (A) by substituting "and
408(d)(3)" for "408(d)(3), and 409(b)(3)(C)" was executed, as the
probable intent of Congress, by substituting "or 408(d)(3))" for
"408(d)(3)), or 409(b)(3)(C)".
Subsec. (c)(1). Pub. L. 98-369, Sec. 491(d)(44), substituted "or
408(d)(3)(A)(iii)" for ", 408(d)(3)(A)(iii), or 409(b)(3)(C)".
1981 - Subsec. (a). Pub. L. 97-34, Sec. 311(h)(9), substituted
"The tax imposed by this subsection shall be paid by such
individual" for "The tax imposed by this subsection shall be paid
by the individual to whom a deduction is allowed for the taxable
year under section 219 (determined without regard to subsection
(b)(1) thereof) or section 220 (determined without regard to
subsection (b)(1) thereof), whichever is appropriate".
Subsec. (b)(1)(A). Pub. L. 97-34, Sec. 313(b)(2), inserted
"405(d)(3)," after "403(b)(8),".
Subsec. (b)(1)(B). Pub. L. 97-34, Sec. 311(h)(7), substituted
"section 219" for "section 219 or 220".
Subsec. (b)(2)(C). Pub. L. 97-34, Sec. 311(h)(7), (10),
substituted "section 219" for "section 219 or 220", and "section
219(f)(6)" for "sections 219(c)(5) and 220(c)(6)".
1980 - Subsec. (b)(1)(A). Pub. L. 96-222, Sec. 101(a)(14)(B),
inserted reference to section 402(a)(7).
Subsec. (c)(1). Pub. L. 96-222, Sec. 101(a)(13)(C), substituted
"409(b)(3)(C)" for "409(d)(3)(C)".
1978 - Subsec. (b)(1)(A). Pub. L. 95-600, Sec. 156(c)(3),
inserted reference to section 403(b)(8).
Subsec. (b)(2). Pub. L. 95-600, Sec. 157(b)(3), substituted
"reduced by the sum of - " for "reduced by the excess (if any) of",
struck out "the maximum amount allowable as a deduction under
section 219 or 220 for the taxable year over the amount contributed
to the accounts or for the annuities or bonds for the taxable years
and reduced by the sum of the distributions out of the account (for
the taxable year and all prior taxable years) which were included
in the gross income of the payee under section 408(d)(1)" in
provision preceding par. (A), and added subpars. (A), (B), and (C).
Subsec. (b). Pub. L. 95-600, Secs. 157(j)(1), 701(aa)(1), struck
out in last sentence "if such distribution consists of an excess
contribution solely because of employer contributions to a plan or
contract described in section 219(b)(2) or by reason of the
application of section 219(b)(1) (without regard to the $1,500
limitation) or section 220(b)(1) (without regard to the $1,750
limitation) and only if such distribution does not exceed the
excess of $1,500 or $1,750 if applicable, over the amount described
in paragraph (1)(B)" after "as an amount not contributed".
Subsec. (c)(1). Pub. L. 95-600, Sec. 156(c)(5), inserted "(other
than a rollover contribution described in section 403(b)(8),
408(d)(3)(A)(iii), or 409(d)(3)(C))" after "account".
1976 - Subsec. (a)(3). Pub. L. 94-455, Secs. 1501(b)(8)(A),
1904(a)(22)(A), substituted "the individual to whom a deduction is
allowed for the taxable year under section 219 (determined without
regard to subsection (b)(1) thereof) or section 220 (determined
without regard to subsection (b)(1) thereof), whichever is
appropriate" for "such individual", effective for taxable years
beginning after December 31, 1976 and substituted "such individual"
for "the individual to whom a deduction is allowed for the taxable
year under section 219 (determined without regard to subsection
(b)(1) thereof) or section 220 (determined without regard to
subsection (b)(1) thereof), whichever is appropriate", effective
for the first day of the first month which begins more than 90 days
after Oct. 4, 1976.
Subsec. (b)(1)(B). Pub. L. 94-455, Sec. 1501(b)(8)(B), inserted
"or 220" after "under section 219".
Subsec. (b)(2). Pub. L. 94-455, Sec. 1501(b)(8)(C), inserted "or
220" after "under section 219" and "the taxable year and" before
"all prior taxable years" and struck out provisions relating to the
treatment of contributions out of individual retirement accounts,
annuities or bonds to which section 408(d)(4) applied.
Subsec. (c). Pub. L. 94-455, Sec. 1904(a)(22)(B), substituted
"subsection (a)(2)" for "subsection (a)(3)" in provisions preceding
par. (1).
EFFECTIVE DATE OF 2003 AMENDMENT
Amendment by Pub. L. 108-173 applicable to taxable years
beginning after Dec. 31, 2003, see section 1201(k) of Pub. L.
108-173, set out as a note under section 62 of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENTS
Amendment by Pub. L. 107-22 effective July 26, 2001, see section
1(c) of Pub. L. 107-22, set out as a note under section 26 of this
title.
Amendment by section 401(a)(2), (g)(2)(D) of Pub. L. 107-16
applicable to taxable years beginning after Dec. 31, 2001, see
section 401(h) of Pub. L. 107-16, set out as a note under section
25A of this title.
Amendment by section 402(a)(4)(A) of Pub. L. 107-16 applicable to
taxable years beginning after Dec. 31, 2001, see section 402(h) of
Pub. L. 107-16, set out as a note under section 72 of this title.
Amendment by section 641(e)(11) 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 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 6023(18)(A) of Pub. L. 105-206 effective
July 22, 1998, see section 6023(32) of Pub. L. 105-206, set out as
a note under section 34 of this title.
Amendment by sections 6004(d)(10) and 6005(b)(8) 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 AMENDMENTS
Amendment by section 213(d) of Pub. L. 105-34 applicable to
taxable years beginning after Dec. 31, 1997, see section 213(f) of
Pub. L. 105-34, set out as a note under section 26 of this title.
Amendment by section 302(b) 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.
Amendment by Pub. L. 105-33 applicable to taxable years beginning
after Dec. 31, 1998, see section 4006(c) of Pub. L. 105-33, set out
as an Effective Date note under section 138 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-191 applicable to taxable years
beginning after Dec. 31, 1996, see section 301(j) of Pub. L.
104-191, set out as a note under section 62 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 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 1102(b)(1) 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 1848(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.
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 1981 AMENDMENT
Amendment by section 311(h)(7), (9), (10) 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.
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.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provision 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 22 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 156(c)(3), (5) 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.
Amendment by section 157(b)(3) of Pub. L. 95-600 applicable to
determination of deductions for taxable years beginning after Dec.
31, 1975, see section 157(b)(4)(A) of Pub. L. 95-600, set out as a
note under section 219 of this title.
Section 157(j)(2) of Pub. L. 95-600 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to
contributions made for taxable years beginning after December 31,
1977."
Section 701(aa)(2) of Pub. L. 95-600 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
as if included in section 1501 of the Tax Reform Act of 1976
[section 1501 of Pub. L. 94-455] at the time of the enactment of
such Act [Oct. 4, 1976]."
Section 703(j)(13) of Pub. L. 95-600 provided that:
"Notwithstanding section 1904(d) of the Tax Reform Act of 1976
[Pub. L. 94-455, set out as an Effective Date of 1976 Amendment
note under section 4041 of this title], the amendment made by
section 1904(a)(22)(A) of such Act [amending this section] shall
take effect on the date of the enactment of such Act [Oct. 4,
1976]."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1501(b)(8) of Pub. L. 94-455 applicable to
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.
Amendment by section 1904(a)(22) of Pub. L. 94-455 effective on
first day of first month which begins more than 90 days after Oct.
4, 1976, see section 1904(d) of Pub. L. 94-455, set out as a note
under section 4041 of this title.
EFFECTIVE DATE
Section 2002(i)(2) of Pub. L. 93-406 provided that: "The
amendments made by subsections (d) through (h) except subsection
(g)(5) and (6) [enacting this section and sections 4974 and 6693 of
this title and amending sections 37, 46, 50, 56, 72, 801, 805, 901,
3401, and 6047 of this title] shall take effect on January 1,
1975."
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 219, 408, 6058 of this
title.
-End-
-CITE-
26 USC Sec. 4974 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4974. Excise tax on certain accumulations in qualified
retirement plans
-STATUTE-
(a) General rule
If the amount distributed during the taxable year of the payee
under any qualified retirement plan or any eligible deferred
compensation plan (as defined in section 457(b)) is less than the
minimum required distribution for such taxable year, there is
hereby imposed a tax equal to 50 percent of the amount by which
such minimum required distribution exceeds the actual amount
distributed during the taxable year. The tax imposed by this
section shall be paid by the payee.
(b) Minimum required distribution
For purposes of this section, the term "minimum required
distribution" means the minimum amount required to be distributed
during a taxable year under section 401(a)(9), 403(b)(10),
408(a)(6), 408(b)(3), or 457(d)(2), as the case may be, as
determined under regulations prescribed by the Secretary.
(c) Qualified retirement plan
For purposes of this section, the term "qualified retirement
plan" means -
(1) a plan described in section 401(a) which includes a trust
exempt from tax under section 501(a),
(2) an annuity plan described in section 403(a),
(3) an annuity contract described in section 403(b),
(4) an individual retirement account described in section
408(a), or
(5) an individual retirement annuity described in section
408(b).
Such term includes any plan, contract, account, or annuity which,
at any time, has been determined by the Secretary to be such a
plan, contract, account, or annuity.
(d) Waiver of tax in certain cases
If the taxpayer establishes to the satisfaction of the Secretary
that -
(1) the shortfall described in subsection (a) in the amount
distributed during any taxable year was due to reasonable error,
and
(2) reasonable steps are being taken to remedy the shortfall,
the Secretary may waive the tax imposed by subsection (a) for the
taxable year.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 2002(e), Sept. 2, 1974, 88
Stat. 967; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95-600, title I, Sec.
157(i)(1), Nov. 6, 1978, 92 Stat. 2808; Pub. L. 99-514, title XI,
Sec. 1121(a)(1), title XVIII, Sec. 1852(a)(7)(B), (C), Oct. 22,
1986, 100 Stat. 2464, 2866.)
-MISC1-
AMENDMENTS
1986 - Pub. L. 99-514, Sec. 1121(a)(1), amended section
generally, substituting provisions imposing an excise tax on
certain accumulations in qualified retirement plans for provisions
imposing an excise tax on certain accumulations in individual
retirement accounts and annuities.
Subsec. (a). Pub. L. 99-514, Sec. 1852(a)(7)(B), substituted
"section 408(a)(6) or 408(b)(3)" for "section 408(a)(6) or (7), or
408(b)(3) or (4)".
Subsec. (b). Pub. L. 99-514, Sec. 1852(a)(7)(C), substituted
"section 408(a)(6) or 408(b)(3)" for "section 408(a)(6) or (7) or
408(b)(3) or (4)".
1978 - Subsec. (c). Pub. L. 95-600 added subsec. (c).
1976 - Subsec. (b). Pub. L. 94-455 struck out "or his delegate"
after "Secretary".
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1121(a)(1) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1988, 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 1852(a)(7)(B), (C) 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 1978 AMENDMENT
Section 157(i)(2) of Pub. L. 95-600 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to
taxable years beginning after December 31, 1975."
EFFECTIVE DATE
Section effective Jan. 1, 1975, see section 2002(i)(2) of Pub. L.
93-406, set out as an Effective Date note under section 4973 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 25B, 72, 408, 457, 6058
of this title; title 23 section 181; title 49 section 41762.
-End-
-CITE-
26 USC Sec. 4975 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4975. Tax on prohibited transactions
-STATUTE-
(a) Initial taxes on disqualified person
There is hereby imposed a tax on each prohibited transaction. The
rate of tax shall be equal to 15 percent of the amount involved
with respect to the prohibited transaction for each year (or part
thereof) in the taxable period. The tax imposed by this subsection
shall be paid by any disqualified person who participates in the
prohibited transaction (other than a fiduciary acting only as
such).
(b) Additional taxes on disqualified person
In any case in which an initial tax is imposed by subsection (a)
on a prohibited transaction and the transaction is not corrected
within the taxable period, there is hereby imposed a tax equal to
100 percent of the amount involved. The tax imposed by this
subsection shall be paid by any disqualified person who
participated in the prohibited transaction (other than a fiduciary
acting only as such).
(c) Prohibited transaction
(1) General rule
For purposes of this section, the term "prohibited transaction"
means any direct or indirect -
(A) sale or exchange, or leasing, of any property between a
plan and a disqualified person;
(B) lending of money or other extension of credit between a
plan and a disqualified person;
(C) furnishing of goods, services, or facilities between a
plan and a disqualified person;
(D) transfer to, or use by or for the benefit of, a
disqualified person of the income or assets of a plan;
(E) act by a disqualified person who is a fiduciary whereby
he deals with the income or assets of a plan in his own
interests or for his own account; or
(F) receipt of any consideration for his own personal account
by any disqualified person who is a fiduciary from any party
dealing with the plan in connection with a transaction
involving the income or assets of the plan.
(2) Special exemption
The Secretary shall establish an exemption procedure for
purposes of this subsection. Pursuant to such procedure, he may
grant a conditional or unconditional exemption of any
disqualified person or transaction, orders of disqualified
persons or transactions, from all or part of the restrictions
imposed by paragraph (1) of this subsection. Action under this
subparagraph may be taken only after consultation and
coordination with the Secretary of Labor. The Secretary may not
grant an exemption under this paragraph unless he finds that such
exemption is -
(A) administratively feasible,
(B) in the interests of the plan and of its participants and
beneficiaries, and
(C) protective of the rights of participants and
beneficiaries of the plan.
Before granting an exemption under this paragraph, the Secretary
shall require adequate notice to be given to interested persons
and shall publish notice in the Federal Register of the pendency
of such exemption and shall afford interested persons an
opportunity to present views. No exemption may be granted under
this paragraph with respect to a transaction described in
subparagraph (E) or (F) of paragraph (1) unless the Secretary
affords an opportunity for a hearing and makes a determination on
the record with respect to the findings required under
subparagraphs (A), (B), and (C) of this paragraph, except that in
lieu of such hearing the Secretary may accept any record made by
the Secretary of Labor with respect to an application for
exemption under section 408(a) of title I of the Employee
Retirement Income Security Act of 1974.
(3) Special rule for individual retirement accounts
An individual for whose benefit an individual retirement
account is established and his beneficiaries shall be exempt from
the tax imposed by this section with respect to any transaction
concerning such account (which would otherwise be taxable under
this section) if, with respect to such transaction, the account
ceases to be an individual retirement account by reason of the
application of section 408(e)(2)(A) or if section 408(e)(4)
applies to such account.
(4) Special rule for Archer MSAs
An individual for whose benefit an Archer MSA (within the
meaning of section 220(d)) is established shall be exempt from
the tax imposed by this section with respect to any transaction
concerning such account (which would otherwise be taxable under
this section) if section 220(e)(2) applies to such transaction.
(5) Special rule for Coverdell education savings accounts
An individual for whose benefit a Coverdell education savings
account is established and any contributor to such account shall
be exempt from the tax imposed by this section with respect to
any transaction concerning such account (which would otherwise be
taxable under this section) if section 530(d) applies with
respect to such transaction.
(6) Special rule for health savings accounts
An individual for whose benefit a health savings account
(within the meaning of section 223(d)) is established shall be
exempt from the tax imposed by this section with respect to any
transaction concerning such account (which would otherwise be
taxable under this section) if, with respect to such transaction,
the account ceases to be a health savings account by reason of
the application of section 223(e)(2) to such account.
(d) Exemptions
Except as provided in subsection (f)(6), the prohibitions
provided in subsection (c) shall not apply to -
(1) any loan made by the plan to a disqualified person who is a
participant or beneficiary of the plan if such loan -
(A) is available to all such participants or beneficiaries on
a reasonably equivalent basis,
(B) is not made available to highly compensated employees
(within the meaning of section 414(q)) in an amount greater
than the amount made available to other employees,
(C) is made in accordance with specific provisions regarding
such loans set forth in the plan,
(D) bears a reasonable rate of interest, and
(E) is adequately secured;
(2) any contract, or reasonable arrangement, made with a
disqualified person for office space, or legal, accounting, or
other services necessary for the establishment or operation of
the plan, if no more than reasonable compensation is paid
therefor;
(3) any loan to an (!1) leveraged employee stock ownership plan
(as defined in subsection (e)(7)), if -
(A) such loan is primarily for the benefit of participants
and beneficiaries of the plan, and
(B) such loan is at a reasonable rate of interest, and any
collateral which is given to a disqualified person by the plan
consists only of qualifying employer securities (as defined in
subsection (e)(8));
(4) the investment of all or part of a plan's assets in
deposits which bear a reasonable interest rate in a bank or
similar financial institution supervised by the United States or
a State, if such bank or other institution is a fiduciary of such
plan and if -
(A) the plan covers only employees of such bank or other
institution and employees of affiliates of such bank or other
institution, or
(B) such investment is expressly authorized by a provision of
the plan or by a fiduciary (other than such bank or institution
or affiliates thereof) who is expressly empowered by the plan
to so instruct the trustee with respect to such investment;
(5) any contract for life insurance, health insurance, or
annuities with one or more insurers which are qualified to do
business in a State if the plan pays no more than adequate
consideration, and if each such insurer or insurers is -
(A) the employer maintaining the plan, or
(B) a disqualified person which is wholly owned (directly or
indirectly) by the employer establishing the plan, or by any
person which is a disqualified person with respect to the plan,
but only if the total premiums and annuity considerations
written by such insurers for life insurance, health insurance,
or annuities for all plans (and their employers) with respect
to which such insurers are disqualified persons (not including
premiums or annuity considerations written by the employer
maintaining the plan) do not exceed 5 percent of the total
premiums and annuity considerations written for all lines of
insurance in that year by such insurers (not including premiums
or annuity considerations written by the employer maintaining
the plan);
(6) the provision of any ancillary service by a bank or similar
financial institution supervised by the United States or a State,
if such service is provided at not more than reasonable
compensation, if such bank or other institution is a fiduciary of
such plan, and if -
(A) such bank or similar financial institution has adopted
adequate internal safeguards which assure that the provision of
such ancillary service is consistent with sound banking and
financial practice, as determined by Federal or State
supervisory authority, and
(B) the extent to which such ancillary service is provided is
subject to specific guidelines issued by such bank or similar
financial institution (as determined by the Secretary after
consultation with Federal and State supervisory authority), and
under such guidelines the bank or similar financial institution
does not provide such ancillary service -
(i) in an excessive or unreasonable manner, and
(ii) in a manner that would be inconsistent with the best
interests of participants and beneficiaries of employee
benefit plans;
(7) the exercise of a privilege to convert securities, to the
extent provided in regulations of the Secretary but only if the
plan receives no less than adequate consideration pursuant to
such conversion;
(8) any transaction between a plan and a common or collective
trust fund or pooled investment fund maintained by a disqualified
person which is a bank or trust company supervised by a State or
Federal agency or between a plan and a pooled investment fund of
an insurance company qualified to do business in a State if -
(A) the transaction is a sale or purchase of an interest in
the fund,
(B) the bank, trust company, or insurance company receives
not more than a reasonable compensation, and
(C) such transaction is expressly permitted by the instrument
under which the plan is maintained, or by a fiduciary (other
than the bank, trust company, or insurance company, or an
affiliate thereof) who has authority to manage and control the
assets of the plan;
(9) receipt by a disqualified person of any benefit to which he
may be entitled as a participant or beneficiary in the plan, so
long as the benefit is computed and paid on a basis which is
consistent with the terms of the plan as applied to all other
participants and beneficiaries;
(10) receipt by a disqualified person of any reasonable
compensation for services rendered, or for the reimbursement of
expenses properly and actually incurred, in the performance of
his duties with the plan, but no person so serving who already
receives full-time pay from an employer or an association of
employers, whose employees are participants in the plan or from
an employee organization whose members are participants in such
plan shall receive compensation from such fund, except for
reimbursement of expenses properly and actually incurred;
(11) service by a disqualified person as a fiduciary in
addition to being an officer, employee, agent, or other
representative of a disqualified person;
(12) the making by a fiduciary of a distribution of the assets
of the trust in accordance with the terms of the plan if such
assets are distributed in the same manner as provided under
section 4044 of title IV of the Employee Retirement Income
Security Act of 1974 (relating to allocation of assets);
(13) any transaction which is exempt from section 406 of such
Act by reason of section 408(e) of such Act (or which would be so
exempt if such section 406 applied to such transaction) or which
is exempt from section 406 of such Act by reason of section
408(b)(12) of such Act;
(14) any transaction required or permitted under part 1 of
subtitle E of title IV or section 4223 of the Employee Retirement
Income Security Act of 1974, but this paragraph shall not apply
with respect to the application of subsection (c)(1) (E) or (F);
or
(15) a merger of multiemployer plans, or the transfer of assets
or liabilities between multiemployer plans, determined by the
Pension Benefit Guaranty Corporation to meet the requirements of
section 4231 of such Act, but this paragraph shall not apply with
respect to the application of subsection (c)(1) (E) or (F).
(e) Definitions
(1) Plan
For purposes of this section, the term "plan" means -
(A) a trust described in section 401(a) which forms a part of
a plan, or a plan described in section 403(a), which trust or
plan is exempt from tax under section 501(a),
(B) an individual retirement account described in section
408(a),
(C) an individual retirement annuity described in section
408(b),
(D) an Archer MSA described in section 220(d),
(E) a health savings account described in section 223(d),
(F) a Coverdell education savings account described in
section 530, or
(G) a trust, plan, account, or annuity which, at any time,
has been determined by the Secretary to be described in any
preceding subparagraph of this paragraph.
(2) Disqualified person
For purposes of this section, the term "disqualified person"
means a person who is -
(A) a fiduciary;
(B) a person providing services to the plan;
(C) an employer any of whose employees are covered by the
plan;
(D) an employee organization any of whose members are covered
by the plan;
(E) an owner, direct or indirect, of 50 percent or more of -
(i) the combined voting power of all classes of stock
entitled to vote or the total value of shares of all classes
of stock of a corporation,
(ii) the capital interest or the profits interest of a
partnership, or
(iii) the beneficial interest of a trust or unincorporated
enterprise,
which is an employer or an employee organization described in
subparagraph (C) or (D);
(F) a member of the family (as defined in paragraph (6)) of
any individual described in subparagraph (A), (B), (C), or (E);
(G) a corporation, partnership, or trust or estate of which
(or in which) 50 percent or more of -
(i) the combined voting power of all classes of stock
entitled to vote or the total value of shares of all classes
of stock of such corporation,
(ii) the capital interest or profits interest of such
partnership, or
(iii) the beneficial interest of such trust or estate,
is owned directly or indirectly, or held by persons described
in subparagraph (A), (B), (C), (D), or (E);
(H) an officer, director (or an individual having powers or
responsibilities similar to those of officers or directors), a
10 percent or more shareholder, or a highly compensated
employee (earning 10 percent or more of the yearly wages of an
employer) of a person described in subparagraph (C), (D), (E),
or (G); or
(I) a 10 percent or more (in capital or profits) partner or
joint venturer of a person described in subparagraph (C), (D),
(E), or (G).
The Secretary, after consultation and coordination with the
Secretary of Labor or his delegate, may by regulation prescribe a
percentage lower than 50 percent for subparagraphs (E) and (G)
and lower than 10 percent for subparagraphs (H) and (I).
(3) Fiduciary
For purposes of this section, the term "fiduciary" means any
person who -
(A) exercises any discretionary authority or discretionary
control respecting management of such plan or exercises any
authority or control respecting management or disposition of
its assets,
(B) renders investment advice for a fee or other
compensation, direct or indirect, with respect to any moneys or
other property of such plan, or has any authority or
responsibility to do so, or
(C) has any discretionary authority or discretionary
responsibility in the administration of such plan.
Such term includes any person designated under section
405(c)(1)(B) of the Employee Retirement Income Security Act of
1974.
(4) Stockholdings
For purposes of paragraphs (2)(E)(i) and (G)(i) there shall be
taken into account indirect stockholdings which would be taken
into account under section 267(c), except that, for purposes of
this paragraph, section 267(c)(4) shall be treated as providing
that the members of the family of an individual are the members
within the meaning of paragraph (6).
(5) Partnerships; trusts
For purposes of paragraphs (2)(E)(ii) and (iii), (G)(ii) and
(iii), and (I) the ownership of profits or beneficial interests
shall be determined in accordance with the rules for constructive
ownership of stock provided in section 267(c) (other than
paragraph (3) thereof), except that section 267(c)(4) shall be
treated as providing that the members of the family of an
individual are the members within the meaning of paragraph (6).
(6) Member of family
For purposes of paragraph (2)(F), the family of any individual
shall include his spouse, ancestor, lineal descendant, and any
spouse of a lineal descendant.
(7) Employee stock ownership plan
The term "employee stock ownership plan" means a defined
contribution plan -
(A) which is a stock bonus plan which is qualified, or a
stock bonus and a money purchase plan both of which are
qualified under section 401(a), and which are designed to
invest primarily in qualifying employer securities; and
(B) which is otherwise defined in regulations prescribed by
the Secretary.
A plan shall not be treated as an employee stock ownership plan
unless it meets the requirements of section 409(h), section
409(o), and, if applicable, section 409(n), section 409(p), and
section 664(g) and, if the employer has a registration-type class
of securities (as defined in section 409(e)(4)), it meets the
requirements of section 409(e).
(8) Qualifying employer security
The term "qualifying employer security" means any employer
security within the meaning of section 409(l). If any moneys or
other property of a plan are invested in shares of an investment
company registered under the Investment Company Act of 1940, the
investment shall not cause that investment company or that
investment company's investment adviser or principal underwriter
to be treated as a fiduciary or a disqualified person for
purposes of this section, except when an investment company or
its investment adviser or principal underwriter acts in
connection with a plan covering employees of the investment
company, its investment adviser, or its principal underwriter.
(9) Section made applicable to withdrawal liability payment funds
For purposes of this section -
(A) In general
The term "plan" includes a trust described in section
501(c)(22).
(B) Disqualified person
In the case of any trust to which this section applies by
reason of subparagraph (A), the term "disqualified person"
includes any person who is a disqualified person with respect
to any plan to which such trust is permitted to make payments
under section 4223 of the Employee Retirement Income Security
Act of 1974.
(f) Other definitions and special rules
For purposes of this section -
(1) Joint and several liability
If more than one person is liable under subsection (a) or (b)
with respect to any one prohibited transaction, all such persons
shall be jointly and severally liable under such subsection with
respect to such transaction.
(2) Taxable period
The term "taxable period" means, with respect to any prohibited
transaction, the period beginning with the date on which the
prohibited transaction occurs and ending on the earliest of -
(A) the date of mailing a notice of deficiency with respect
to the tax imposed by subsection (a) under section 6212,
(B) the date on which the tax imposed by subsection (a) is
assessed, or
(C) the date on which correction of the prohibited
transaction is completed.
(3) Sale or exchange; encumbered property
A transfer or real or personal property by a disqualified
person to a plan shall be treated as a sale or exchange if the
property is subject to a mortgage or similar lien which the plan
assumes or if it is subject to a mortgage or similar lien which a
disqualified person placed on the property within the 10-year
period ending on the date of the transfer.
(4) Amount involved
The term "amount involved" means, with respect to a prohibited
transaction, the greater of the amount of money and the fair
market value of the other property given or the amount of money
and the fair market value of the other property received; except
that, in the case of services described in paragraphs (2) and
(10) of subsection (d) the amount involved shall be only the
excess compensation. For purposes of the preceding sentence, the
fair market value -
(A) in the case of the tax imposed by subsection (a), shall
be determined as of the date on which the prohibited
transaction occurs; and
(B) in the case of the tax imposed by subsection (b), shall
be the highest fair market value during the taxable period.
(5) Correction
The terms "correction" and "correct" mean, with respect to a
prohibited transaction, undoing the transaction to the extent
possible, but in any case placing the plan in a financial
position not worse than that in which it would be if the
disqualified person were acting under the highest fiduciary
standards.
(6) Exemptions not to apply to certain transactions
(A) In general
In the case of a trust described in section 401(a) which is
part of a plan providing contributions or benefits for
employees some or all of whom are owner-employees (as defined
in section 401(c)(3)), the exemptions provided by subsection
(d) (other than paragraphs (9) and (12)) shall not apply to a
transaction in which the plan directly or indirectly -
(i) lends any part of the corpus or income of the plan to,
(ii) pays any compensation for personal services rendered
to the plan to, or
(iii) acquires for the plan any property from, or sells any
property to,
any such owner-employee, a member of the family (as defined in
section 267(c)(4)) of any such owner-employee, or any
corporation in which any such owner-employee owns, directly or
indirectly, 50 percent or more of the total combined voting
power of all classes of stock entitled to vote or 50 percent or
more of the total value of shares of all classes of stock of
the corporation.
(B) Special rules for shareholder-employees, etc.
(i) In general
For purposes of subparagraph (A), the following shall be
treated as owner-employees:
(I) A shareholder-employee.
(II) A participant or beneficiary of an individual
retirement plan (as defined in section 7701(a)(37)).
(III) An employer or association of employees which
establishes such an individual retirement plan under
section 408(c).
(ii) Exception for certain transactions involving
shareholder-employees
Subparagraph (A)(iii) shall not apply to a transaction
which consists of a sale of employer securities to an
employee stock ownership plan (as defined in subsection
(e)(7)) by a shareholder-employee, a member of the family (as
defined in section 267(c)(4)) of such shareholder-employee,
or a corporation in which such a shareholder-employee owns
stock representing a 50 percent or greater interest described
in subparagraph (A).
(iii) Loan exception
For purposes of subparagraph (A)(i), the term
"owner-employee" shall only include a person described in
subclause (II) or (III) of clause (i).
(C) Shareholder-employee
For purposes of subparagraph (B), the term
"shareholder-employee" means an employee or officer of an S
corporation who owns (or is considered as owning within the
meaning of section 318(a)(1)) more than 5 percent of the
outstanding stock of the corporation on any day during the
taxable year of such corporation.
(g) Application of section
This section shall not apply -
(1) in the case of a plan to which a guaranteed benefit policy
(as defined in section 401(b)(2)(B) of the Employee Retirement
Income Security Act of 1974) is issued, to any assets of the
insurance company, insurance service, or insurance organization
merely because of its issuance of such policy;
(2) to a governmental plan (within the meaning of section
414(d)); or
(3) to 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.
In the case of a plan which invests in any security issued by an
investment company registered under the Investment Company Act of
1940, the assets of such plan shall be deemed to include such
security but shall not, by reason of such investment, be deemed to
include any assets of such company.
(h) Notification of Secretary of Labor
Before sending a notice of deficiency with respect to the tax
imposed by subsection (a) or (b), the Secretary shall notify the
Secretary of Labor and provide him a reasonable opportunity to
obtain a correction of the prohibited transaction or to comment on
the imposition of such tax.
(i) Cross reference
For provisions concerning coordination procedures between
Secretary of Labor and Secretary of the Treasury with respect
to application of tax imposed by this section and for authority
to waive imposition of the tax imposed by subsection (b), see
section 3003 of the Employee Retirement Income Security Act of
1974.
-SOURCE-
(Added Pub. L. 93-406, title II, Sec. 2003(a), Sept. 2, 1974, 88
Stat. 971; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95-600, title I, Sec.
141(f)(5), (6), Nov. 6, 1978, 92 Stat. 2795; Pub. L. 96-222, title
I, Sec. 101(a)(7)(C), (K), (L)(iv)(III), (v)(XI), Apr. 1, 1980, 94
Stat. 198-201; Pub. L. 96-364, title II, Secs. 208(b), 209(b),
Sept. 26, 1980, 94 Stat. 1289, 1290; Pub. L. 96-596, Sec.
2(a)(1)(K),(L), (2)(I), (3)(F), Dec. 24, 1980, 94 Stat. 3469, 3471;
Pub. L. 97-448, title III, Sec. 305(d)(5), Jan. 12, 1983, 96 Stat.
2400; Pub. L. 98-369, div. A, title IV, Sec. 491(d)(45), (46),
(e)(7), (8), July 18, 1984, 98 Stat. 851-853; Pub. L. 99-514, title
XI, Sec. 1114(b)(15)(A), title XVIII, Secs. 1854(f)(3)(A),
1899A(51), Oct. 22, 1986, 100 Stat. 2452, 2882, 2961; Pub. L.
101-508, title XI, Sec. 11701(m), Nov. 5, 1990, 104 Stat. 1388-513;
Pub. L. 104-188, title I, Secs. 1453(a), 1702(g)(3), Aug. 20, 1996,
110 Stat. 1817, 1873; Pub. L. 104-191, title III, Sec. 301(f), Aug.
21, 1996, 110 Stat. 2051; Pub. L. 105-34, title II, Sec. 213(b),
title X, Sec. 1074(a), title XV, Secs. 1506(b)(1), 1530(c)(10),
title XVI, Sec. 1602(a)(5), Aug. 5, 1997, 111 Stat. 816, 949, 1065,
1079, 1094; Pub. L. 105-206, title VI, Sec. 6023(19), July 22,
1998, 112 Stat. 825; Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(a)(7), (b)(7), (10)], Dec. 21, 2000, 114 Stat. 2763, 2763A-628,
2763A-629; Pub. L. 107-16, title VI, Secs. 612(a), 656(b), June 7,
2001, 115 Stat. 100, 134; Pub. L. 107-22, Sec. 1(b)(1)(D), (3)(D),
July 26, 2001, 115 Stat. 197; Pub. L. 108-173, title XII, Sec.
1201(f), Dec. 8, 2003, 117 Stat. 2479.)
-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 subsecs. (c)(2), (d)(12) to (15), (e)(3), (9)(B), (g)(1), and
(i) is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829, as amended.
Part 1 of subtitle E of title IV of such Act is classified
generally to part 1 (29 U.S.C. 1381 et seq.) of subtitle E of
subchapter III of chapter 18 of Title 29, Labor. Sections 401, 405,
406, 408, 3003, 4044, 4223, and 4231 of such Act are classified to
sections 1101, 1105, 1106, 1108, 1203, 1344, 1403, and 1411,
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 Investment Company Act of 1940, referred to in subsecs.
(e)(8) and (g), is title I of act Aug. 22, 1940, ch. 686, 54 Stat.
789, as amended, which is classified generally to subchapter I
(Sec. 80a-1 et seq.) of chapter 2D of Title 15, Commerce and Trade.
For complete classification of this Act to the Code, see section
80a-51 of Title 15 and Tables.
-MISC1-
AMENDMENTS
2003 - Subsec. (c)(6). Pub. L. 108-173, Sec. 1201(f)(1), added
par. (6).
Subsec. (e)(1)(E) to (G). Pub. L. 108-173, Sec. 1201(f)(2), added
subpar. (E) and redesignated former subpars. (E) and (F) as (F) and
(G), respectively.
2001 - Subsec. (c)(5). Pub. L. 107-22, Sec. 1(b)(1)(D), (3)(D),
in heading, substituted "Coverdell education savings" for
"education individual retirement" and in text, substituted "a
Coverdell education savings" for "an education individual
retirement".
Subsec. (e)(1)(E). Pub. L. 107-22, Sec. 1(b)(1)(D), substituted
"a Coverdell education savings" for "an education individual
retirement".
Subsec. (e)(7). Pub. L. 107-16, Secs. 656(b), 901, temporarily
inserted ", section 409(p)," after "409(n)" in concluding
provisions. See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (f)(6)(B)(iii). Pub. L. 107-16, Secs. 612(a), 901,
temporarily added cl. (iii). See Effective and Termination Dates of
2001 Amendment note below.
2000 - Subsec. (c)(4). Pub. L. 106-554, Sec. 1(a)(7) [title II,
Sec. 202(b)(10)], substituted "an Archer" for "a Archer".
Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(7), (b)(7)],
substituted "Archer MSAs" for "medical savings accounts" in heading
and "Archer MSA" for "medical savings account" in text.
Subsec. (e)(1)(D). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(b)(10)], substituted "an Archer" for "a Archer".
Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec. 202(a)(7)],
substituted "Archer MSA" for "medical savings account".
1998 - Subsec. (c)(3). Pub. L. 105-206, Sec. 6023(19)(A),
substituted "exempt from the tax" for "exempt for the tax".
Subsec. (i). Pub. L. 105-206, Sec. 6023(19)(B), substituted
"Secretary of the Treasury" for "Secretary of Treasury".
1997 - Subsec. (a). Pub. L. 105-34, Sec. 1074(a), substituted "15
percent" for "10 percent".
Subsec. (c)(4). Pub. L. 105-34, Sec. 1602(a)(5), substituted "if
section 220(e)(2) applies to such transaction." for "if, with
respect to such transaction, the account ceases to be a medical
savings account by reason of the application of section 220(e)(2)
to such account."
Subsec. (c)(5). Pub. L. 105-34, Sec. 213(b)(2), added par. (5).
Subsec. (d). Pub. L. 105-34, Sec. 1506(b)(1)(B)(ii), struck out
concluding provisions which read as follows: "The exemptions
provided by this subsection (other than paragraphs (9) and (12))
shall not apply to any transaction with respect to a trust
described in section 401(a) which is part of a plan providing
contributions or benefits for employees some or all of whom are
owner-employees (as defined in section 401(c)(3)) in which a plan
directly or indirectly lends any part of the corpus or income of
the plan to, pays any compensation for personal services rendered
to the plan to, or acquires for the plan any property from or sells
any property to, any such owner-employee, a member of the family
(as defined in section 267(c)(4)) of any such owner-employee, or a
corporation controlled by any such owner-employee through the
ownership, directly or indirectly, of 50 percent or more of the
total combined voting power of all classes of stock entitled to
vote or 50 percent or more of the total value of shares of all
classes of stock of the corporation. For purposes of the preceding
sentence, a shareholder-employee (as defined in section 1379, as in
effect on the day before the date of the enactment of the
Subchapter S Revision Act of 1982), a participant or beneficiary of
an individual retirement account or an individual retirement
annuity (as defined in section 408), and an employer or association
of employees which establishes such an account or annuity under
section 408(c) shall be deemed to be an owner-employee."
Pub. L. 105-34, Sec. 1506(b)(1)(B)(i), substituted "Except as
provided in subsection (f)(6), the prohibitions" for "The
prohibitions" in introductory provisions.
Subsec. (e)(1)(D) to (F). Pub. L. 105-34, Sec. 213(b)(1), struck
out "or" at end of subpar. (D), added subpar. (E), and redesignated
former subpar. (E) as (F).
Subsec. (e)(7). Pub. L. 105-34, Sec. 1530(c)(10), inserted "and
section 664(g)" after "section 409(n)" in concluding provisions.
Subsec. (f)(6). Pub. L. 105-34, Sec. 1506(b)(1)(A), added par.
(6).
1996 - Subsec. (a). Pub. L. 104-188, Sec. 1453(a), substituted
"10 percent" for "5 percent".
Subsec. (c)(4). Pub. L. 104-191, Sec. 301(f)(1), added par. (4).
Subsec. (d)(13). Pub. L. 104-188, Sec. 1702(g)(3), substituted
"408(b)(12)" for "408(b)".
Subsec. (e)(1). Pub. L. 104-191, Sec. 301(f)(2), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "For purposes of this section, the
term 'plan' means a trust described in section 401(a) which forms a
part of a plan, or a plan described in section 403(a), which trust
or plan is exempt from tax under section 501(a), an individual
retirement account described in section 408(a) or an individual
retirement annuity described in section 408(b) (or a trust, plan,
account, or annuity which, at any time, has been determined by the
Secretary to be such a trust, plan, or account)."
1990 - Subsec. (d)(13). Pub. L. 101-508 inserted before semicolon
at end "or which is exempt from section 406 of such Act by reason
of section 408(b) of such Act".
1986 - Subsec. (d). Pub. L. 99-514, Sec. 1899A(51), inserted a
closing parenthesis after "and (12)" in second sentence.
Subsec. (d)(1)(B). Pub. L. 99-514, Sec. 1114(b)(15)(A),
substituted "highly compensated employees (within the meaning of
section 414(q))" for "highly compensated employees, officers, or
shareholders".
Subsec. (e)(7). Pub. L. 99-514, Sec. 1854(f)(3)(A), inserted ",
section 409(o), and, if applicable, section 409(n)" in last
sentence.
1984 - Subsec. (d). Pub. L. 98-369, Sec. 491(d)(45), substituted
in provision following par. (15) "or an individual retirement
annuity (as defined in section 408)" for ", individual retirement
annuity, or an individual retirement bond (as defined in section
408 or 409)".
Subsec. (e)(1). Pub. L. 98-369, Sec. 491(d)(46), struck out "or
405(a)" after "section 403(a)" and "or a retirement bond described
in section 409" after "section 408(b)", and substituted "or
annuity" for "annuity, or bond" and "or account" for "account, or
bond".
Subsec. (e)(7). Pub. L. 98-369, Sec. 491(e)(7), substituted
"section 409(h)" for "section 409A(h)", "section 409(e)(4)" for
"section 409A(e)(4)", and "section 409(e)" for "section 409A(e)".
Subsec. (e)(8). Pub. L. 98-369, Sec. 491(e)(8), substituted
"section 409(l)" for "section 409A(l)".
1983 - Subsec. (d). Pub. L. 97-448 inserted ", as in effect on
the day before the date of the enactment of the Subchapter S
Revision Act of 1982" after "section 1379" in last sentence.
1980 - Subsec. (b). Pub. L. 96-596, Sec. 2(a)(1)(K), substituted
"taxable period" for "correction period".
Subsec. (d)(14), (15). Pub. L. 96-364, Sec. 208(b), added pars.
(14) and (15).
Subsec. (e)(7). Pub. L. 96-222, Sec. 101(a)(7)(K), (L)(iv)(III),
(v)(XI), substituted references to an employee stock ownership
plan, for references to a leveraged employee stock ownership plan
wherever appearing therein, and substituted provisions relating to
treatment of a plan as an employee stock ownership plan, for
provisions relating to treatment of a plan as a leveraged employee
stock ownership plan.
Subsec. (e)(8). Pub. L. 96-222, Sec. 101(a)(7)(C), substituted
provisions defining "qualifying employer security" within the
meaning of section 409A(l), for provisions defining such term as
stock, or otherwise an equity security, or within the meaning of
section 503(e)(1) to (3).
Subsec. (e)(9). Pub. L. 96-364, Sec. 209(b), added par. (9).
Subsec. (f)(2)(B), (C). Pub. L. 96-596, Sec. 2(a)(2)(I), added
subpar. (B) and redesignated former subpar. (B) as (C).
Subsec. (f)(4)(B). Pub. L. 96-596, Sec. 2(a)(1)(L), substituted
"taxable period" for "correction period".
Subsec. (f)(6). Pub. L. 96-596, Sec. 2(a)(3)(F), struck out par.
(6), which defined correction period, with respect to a prohibited
transaction, as the period beginning on the date on which the
prohibited transaction occurs and ending 90 days after the date of
mailing of a notice of deficiency with respect to the tax imposed
by subsec. (b) of this section under section 6212 of this title,
extended by any period in which a deficiency cannot be assessed
under section 6213(a) of this title and any other period which the
Secretary determines is reasonable and necessary to bring about the
correction of the prohibited transaction.
1978 - Subsec. (d)(3). Pub. L. 95-600, Sec. 141(f)(6),
substituted "leveraged employee" for "employee".
Subsec. (e)(7). Pub. L. 95-600, Sec. 141(f)(5), substituted in
heading "Leveraged employee" for "Employee", and in text,
"leveraged employee" for "employee" and inserted provision that a
plan not be treated as a leveraged employee stock ownership plan
unless it meet the requirements of section 409A(e) and (h).
1976 - Subsecs. (c) to (f). Pub. L. 94-455 struck out "or his
delegate" after "Secretary" wherever appearing.
EFFECTIVE DATE OF 2003 AMENDMENT
Amendment by Pub. L. 108-173 applicable to taxable years
beginning after Dec. 31, 2003, see section 1201(k) of Pub. L.
108-173, set out as a note under section 62 of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENTS
Amendment by Pub. L. 107-22 effective July 26, 2001, see section
1(c) of Pub. L. 107-22, set out as a note under section 26 of this
title.
Pub. L. 107-16, title VI, Sec. 612(c), June 7, 2001, 115 Stat.
100, provided that: "The amendment made by this section [amending
this section and section 1108 of Title 29, Labor] shall apply to
years beginning after December 31, 2001."
Amendment by section 656(b) of Pub. L. 107-16 applicable to plan
years beginning after Dec. 31, 2004, except that in the case of any
employee stock ownership plan established after Mar. 14, 2001, or
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 this title is not in effect on
such date, amendment applicable to plan years ending after Mar. 14,
2001, see section 656(d) of Pub. L. 107-16, set out as a note under
section 409 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 1997 AMENDMENT
Amendment by section 213(b) of Pub. L. 105-34 applicable to
taxable years beginning after Dec. 31, 1997, see section 213(f) of
Pub. L. 105-34, set out as a note under section 26 of this title.
Section 1074(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to
prohibited transactions occurring after the date of the enactment
of this Act [Aug. 5, 1997]."
Amendment by section 1506(b)(1) of Pub. L. 105-34 applicable to
taxable years beginning after Dec. 31, 1997, see section 1506(c) of
Pub. L. 105-34, set out as a note under section 409 of this title.
Amendment by section 1530(c)(10) 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 1602(a)(5) of Pub. L. 105-34 effective as if
included in the provisions of the Health Insurance Portability and
Accountability Act of 1996, Pub. L. 104-191, to which such
amendment relates, see section 1602(i) of Pub. L. 105-34, set out
as a note under section 26 of this title.
EFFECTIVE DATE OF 1996 AMENDMENTS
Amendment by Pub. L. 104-191 applicable to taxable years
beginning after Dec. 31, 1996, see section 301(j) of Pub. L.
104-191, set out as a note under section 62 of this title.
Section 1453(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall apply to
prohibited transactions occurring after the date of the enactment
of this Act [Aug. 20, 1996]."
Amendment by section 1702(g)(3) of 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 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 1986 AMENDMENT
Amendment by section 1114(b)(15)(A) 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 1854(f)(3)(A) of Pub. L. 99-514 effective
Oct. 22, 1986, see section 1854(f)(4)(A) of Pub. L. 99-514, set out
as a note under section 409 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 491(d)(45), (46) 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)(7), (8) 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 on date of enactment of
Subchapter S Revision Act of 1982 [Oct. 19, 1982], see section
311(c)(4) of Pub. L. 97-448, set out as a note under section 1368
of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
For effective date of amendment by Pub. L. 96-596 with respect to
any first tier tax and to any second tier tax, see section 2(d) of
Pub. L. 96-596, set out as an Effective Date note under section
4961 of this title.
Amendment by section 208(b) 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 section 209(b) of Pub. L. 96-364 applicable to
taxable years ending after Sept. 26, 1980, see section 210(c) of
Pub. L. 96-364, set out as an Effective Date note under section 418
of this title.
Section 101(b)(1)(C) of Pub. L. 96-222 provided that: "The
amendment made by subparagraph (C) of subsection (a)(6) [probably
should be '(a)(7)', which amended this section] shall apply to
stock acquired after December 31, 1979."
Amendment by section 101(a)(7)(K), (L)(iv)(III), (v)(XI) of Pub.
L. 96-222 effective, except as otherwise provided, as if it had
been included in the provision 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 141(h) 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; Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"Paragraphs (5) and (6) of subsection (f) [section 141(f)(5), (6)
of Pub. L. 95-600] shall apply -
"(1) insofar as they make the requirements of subsections (e)
and (h)(1)(B) of section 409A [now section 409] of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] applicable to section
4975 of such Code, to stock acquired after December 31, 1979, and
"(2) insofar as they make paragraphs (1)(A) and (2) of section
409A(h) [now section 409(h)] of such Code applicable to such
section 4975, to distributions after December 31, 1978."
EFFECTIVE DATE; SAVINGS PROVISION
Section 2003(c) of Pub. L. 93-406, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1)(A) The amendments made by this section [enacting this
section and amending section 503 of this title] shall take effect
on January 1, 1975.
"(B) If, before the amendments made by this section [enacting
this section and amending section 503 of this title] take effect,
an organization described in section 401(a) of the Internal Revenue
Code of 1986 [formerly I.R.C. 1954] is denied exemption under
section 501(a) of such Code by reason of section 503 of such Code,
the denial of such exemption shall not apply if the disqualified
person elects (in such manner and at such time as the Secretary or
his delegate shall by regulations prescribe) to pay, with respect
to the prohibited transaction (within the meaning of section 503(b)
or (g)) which resulted in such denial of exemption, a tax in the
amount and in the manner provided with respect to the tax imposed
under section 4975 of such Code. An election made under this
subparagraph, once made, shall be irrevocable. The Secretary of the
Treasury or his delegate shall prescribe such regulations as may be
necessary to carry out the purposes of this subparagraph.
"(2) Section 4975 of the Internal Revenue Code of 1986 (relating
to tax on prohibited transactions) shall not apply to -
"(A) a loan of money or other extension of credit between a
plan and a disqualified person under a binding contract in effect
on July 1, 1974 (or pursuant to renewals of such a contract),
until June 30, 1984, if such loan or other extension of credit
remains at least as favorable to the plan as an arm's-length
transaction with an unrelated party would be, and if the
execution of the contract, the making of the loan, or the
extension of credit was not, at the time of such execution,
making, or extension, a prohibited transaction (within the
meaning of section 503(b) of such Code) or the corresponding
provisions of prior law);
"(B) a lease of joint use of property involving the plan and a
disqualified person pursuant to a binding contract in effect on
July 1, 1974 (or pursuant to renewals of such a contract), until
June 30, 1984, if such lease or joint use remains at least as
favorable to the plan as an arm's-length transaction with an
unrelated party would be and if the execution of the contract was
not, at the time of such execution, a prohibited transaction
(within the meaning of section 503(b) of such Code) or the
corresponding provisions of prior law;
"(C) the sale, exchange, or other disposition of property
described in subparagraph (B) between a plan and a disqualified
person before June 30, 1984, if -
"(i) in the case of a sale, exchange, or other disposition of
the property by the plan to the disqualified person, the plan
receives an amount which is not less than the fair market value
of the property at the time of such disposition; and
"(ii) in the case of the acquisition of the property by the
plan, the plan pays an amount which is not in excess of the
fair market value of the property at the time of such
acquisition:
"(D) Until June 30, 1977, the provision of services to which
subparagraphs (A), (B), and (C) do not apply between a plan and a
disqualified person (i) under a binding contract in effect on
July 1, 1974 (or pursuant to renewals of such contract), or (ii)
if the disqualified person ordinarily and customarily furnished
such services on June 30, 1974, if such provision of services
remains at least as favorable to the plan as an arm's-length
transaction with an unrelated party would be and if the provision
of services was not, at the time of such provision, a prohibited
transaction (within the meaning of section 503(b) of such Code)
or the corresponding provisions of prior law; or
"(E) the sale, exchange, or other disposition of property which
is owned by a plan on June 30, 1974, and all times thereafter, to
a disqualified person, if such plan is required to dispose of
such property in order to comply with the provisions of section
407(a)(2)(A) (relating to the prohibition against holding excess
employer securities and employer real property) of the Employee
Retirement Income Security Act of 1974 [29 U.S.C. 1107(a)(2)] and
if the plan receives not less than adequate consideration.
For the purposes of this paragraph, the term 'disqualified person'
has the meaning provided by section 4975(e)(2) 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.
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.
INTENT OF CONGRESS CONCERNING EMPLOYEE STOCK OWNERSHIP PLANS
Section 803(h) of Pub. L. 94-455 provided that: "The Congress, in
a series of laws (the Regional Rail Reorganization Act of 1973, the
Employee Retirement Income Security Act of 1974, the Trade Act of
1974, and the Tax Reduction Act of 1975) and this Act has made
clear its interest in encouraging employee stock ownership plans as
a bold and innovative method of strengthening the free private
enterprise system which will solve the dual problems of securing
capital funds for necessary capital growth and of bringing about
stock ownership by all corporate employees. The Congress is deeply
concerned that the objectives sought by this series of laws will be
made unattainable by regulations and rulings which treat employee
stock ownership plans as conventional retirement plans, which
reduce the freedom of the employee trusts and employers to take the
necessary steps to implement the plans, and which otherwise block
the establishment and success of these plans. Because of the
special purposes for which employee stock ownership plans are
established, it is consistent with the intent of Congress to permit
these plans (whether structured as pension, stock bonus, or
profit-sharing plans) to distribute income on employer securities
currently."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 401, 404, 408, 409, 411,
414, 415, 420, 503, 512, 514, 664, 674, 856, 1042, 2056, 4943,
4947, 4963, 4978, 4980, 6213, 6501, 6503, 6511, 7422 of this title;
title 5 section 8477; title 15 section 632; title 19 sections 2345,
2373; title 29 sections 1054, 1055, 1056, 1101, 1107, 1132, 1203,
1342, 1403; title 45 section 726.
-FOOTNOTE-
(!1) So in original. Probably should be "a".
-End-
-CITE-
26 USC Sec. 4976 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4976. Taxes with respect to funded welfare benefit plans
-STATUTE-
(a) General rule
If -
(1) an employer maintains a welfare benefit fund, and
(2) there is a disqualified benefit provided during any taxable
year,
there is hereby imposed on such employer a tax equal to 100 percent
of such disqualified benefit.
(b) Disqualified benefit
For purposes of subsection (a) -
(1) In general
The term "disqualified benefit" means -
(A) any post-retirement medical benefit or life insurance
benefit provided with respect to a key employee if a separate
account is required to be established for such employee under
section 419A(d) and such payment is not from such account,
(B) any post-retirement medical benefit or life insurance
benefit provided with respect to an individual in whose favor
discrimination is prohibited unless the plan meets the
requirements of section 505(b) with respect to such benefit
(whether or not such requirements apply to such plan), and
(C) any portion of a welfare benefit fund reverting to the
benefit of the employer.
(2) Exception for collective bargaining plans
Paragraph (1)(B) 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 the benefits referred to
in paragraph (1)(B) were the subject of good faith bargaining
between such employee representatives and such employer or
employers.
(3) Exception for nondeductible contributions
Paragraph (1)(C) shall not apply to any amount attributable to
a contribution to the fund which is not allowable as a deduction
under section 419 for the taxable year or any prior taxable year
(and such contribution shall not be included in any carryover
under section 419(d)).
(4) Exception for certain amounts charged against existing
reserve
Subparagraphs (A) and (B) of paragraph (1) shall not apply to
post-retirement benefits charged against an existing reserve for
post-retirement medical or life insurance benefits (as defined in
section 512(a)(3)(E)) or charged against the income on such
reserve.
(c) Definitions
For purposes of this section, the terms used in this section
shall have the same respective meanings as when used in subpart D
of part I of subchapter D of chapter 1.
-SOURCE-
(Added Pub. L. 98-369, div. A, title V, Sec. 511(c)(1), July 18,
1984, 98 Stat. 861; amended Pub. L. 99-514, title XVIII, Sec.
1851(a)(11), Oct. 22, 1986, 100 Stat. 2861; Pub. L. 100-647, title
I, Sec. 1011B(a)(27)(A), (B), title III, Sec. 3021(a)(1)(C), Nov.
10, 1988, 102 Stat. 3487, 3626; Pub. L. 101-140, title II, Sec.
203(a)(2), Nov. 8, 1989, 103 Stat. 830.)
-COD-
CODIFICATION
Pub. L. 101-140 amended this section to read as if the amendments
made by section 1011B(a)(27) of Pub. L. 100-647 (enacting subsec.
(c)) had not been enacted. Subsequent to enactment by Pub. L.
100-647, subsec. (c) was amended by Pub. L. 100-647, Sec.
3021(a)(1)(C). See 1988 Amendment note below.
-MISC1-
AMENDMENTS
1989 - Subsec. (b)(5). Pub. L. 101-140 amended subsec. (b) to
read as if amendments by Pub. L. 100-647, Sec. 1011B(a)(27)(B), had
not been enacted, see 1988 Amendment note below.
Subsecs. (c), (d). Pub. L. 101-140 amended this section to read
as if amendments by Pub. L. 100-647, Sec. 1011B(a)(27)(A), had not
been enacted, see 1988 Amendment note below.
1988 - Subsec. (b)(5). Pub. L. 100-647, Sec. 1011B(a)(27)(B),
added par. (5) relating to limitation in case of benefits to which
section 89 applies.
Subsec. (c). Pub. L. 100-647, Sec. 1011B(a)(27)(A), added subsec.
(c) relating to tax on funded welfare benefit funds which include
discriminatory employee benefit plan. Former subsec. (c)
redesignated (d).
Subsec. (c)(1)(B). Pub. L. 100-647, Sec. 3021(a)(1)(C)(i),
substituted "any testing year (as defined in section 89(j)(13))"
for "any plan year", see Codification note above.
Subsec. (c)(2)(A). Pub. L. 100-647, Sec. 3021(a)(1)(C)(ii),
substituted "testing" for "plan" in cls. (i) and (ii), see
Codification note above.
Subsec. (d). Pub. L. 100-647, Sec. 1011B(a)(27)(A), redesignated
former subsec. (c) as (d).
1986 - Subsec. (b). Pub. L. 99-514 amended subsec. (b) generally.
Prior to amendment, subsec. (b) read as follows: "For purposes of
subsection (a), the term 'disqualified benefit' means -
"(1) any medical benefit or life insurance benefit provided
with respect to a key employee other than from a separate account
established for such owner under section 419A(d), and
"(2) any post-retirement medical or life insurance benefit
unless the plan meets the requirements of section 505(b)(1) with
respect to such benefit, and
"(3) any portion of such fund reverting to the benefit of the
employer."
EFFECTIVE DATE OF 1989 AMENDMENT
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
Amendment by section 1011B(a)(27)(A), (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.
Amendment by section 3021(a)(1)(C) 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 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 applicable to benefits provided after Dec. 31, 1985, see
section 511(e)(7) of Pub. L. 98-369, set out as a note under
section 419 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. 4977 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4977. Tax on certain fringe benefits provided by an employer
-STATUTE-
(a) Imposition of tax
In the case of an employer to whom an election under this section
applies for any calendar year, there is hereby imposed a tax for
such calendar year equal to 30 percent of the excess fringe
benefits.
(b) Excess fringe benefits
For purposes of subsection (a), the term "excess fringe benefits"
means, with respect to any calendar year -
(1) the aggregate value of the fringe benefits provided by the
employer during the calendar year which were not includible in
gross income under paragraphs (1) and (2) of section 132(a), over
(2) 1 percent of the aggregate amount of compensation -
(A) which was paid by the employer during such calendar year
to employees, and
(B) was includible in gross income for purposes of chapter 1.
(c) Effect of election on section 132(a)
If -
(1) an election under this section is in effect with respect to
an employer for any calendar year, and
(2) at all times on or after January 1, 1984, and before the
close of the calendar year involved, substantially all of the
employees of the employer were entitled to employee discounts on
goods or services provided by the employer in 1 line of business,
for purposes of paragraphs (1) and (2) of section 132(a) (but not
for purposes of section 132(h)), all employees of any line of
business of the employer which was in existence on January 1, 1984,
shall be treated as employees of the line of business referred to
in paragraph (2).
(d) Period of election
An election under this section shall apply to the calendar year
for which made and all subsequent calendar years unless revoked by
the employer.
(e) Treatment of controlled groups
All employees treated as employed by a single employer under
subsection (b), (c), or (m) of section 414 shall be treated as
employed by a single employer for purposes of this section.
(f) Section to apply only to employment within the United States
Except as otherwise provided in regulations, this section shall
apply only with respect to employment within the United States.
-SOURCE-
(Added Pub. L. 98-369, div. A, title V, Sec. 531(e)(1), July 18,
1984, 98 Stat. 885; amended Pub. L. 99-514, title XVIII, Sec.
1853(c)(1), (2), Oct. 22, 1986, 100 Stat. 2871; Pub. L. 103-66,
title XIII, Sec. 13213(d)(3)(D), Aug. 10, 1993, 107 Stat. 474; Pub.
L. 104-188, title I, Sec. 1704(t)(66), Aug. 20, 1996, 110 Stat.
1890.)
-MISC1-
AMENDMENTS
1996 - Subsec. (c). Pub. L. 104-188 substituted "section 132(h)"
for "section 132(i)(2)" in closing provisions.
1993 - Subsec. (c). Pub. L. 103-66 substituted "section
132(i)(2)" for "section 132(g)(2)" in closing provisions.
1986 - Subsec. (c)(2). Pub. L. 99-514, Sec. 1853(c)(1), amended
par. (2) generally. Prior to amendment, par. (2) read as follows:
"as of January 1, 1984, substantially all of the employees of the
employer were entitled to employee discounts or services provided
by the employer in 1 line of business,".
Subsec. (f). Pub. L. 99-514, Sec. 1853(c)(2), added subsec. (f).
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable to reimbursements or other
payments in respect of expenses incurred after Dec. 31, 1993, see
section 13213(e) of Pub. L. 103-66, set out as a note under section
62 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 effective Jan. 1, 1985, see section 531(h) of Pub. L.
98-369, set out as a note under section 132 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 SUBSECTION (C) OF THIS SECTION TO AGRICULTURAL
COOPERATIVES INCORPORATED IN 1964
Section 1853(c)(3) of Pub. L. 99-514 provided that: "For purposes
of determining whether the requirements of section 4977(c) of the
Internal Revenue Code of 1954 [now 1986] are met in the case of an
agricultural cooperative incorporated in 1964, there shall not be
taken into account employees of a member of the same controlled
group as such cooperative which became a member during July 1980."
-End-
-CITE-
26 USC Sec. 4978 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4978. Tax on certain dispositions by employee stock ownership
plans and certain cooperatives
-STATUTE-
(a) Tax on dispositions of securities to which section 1042 applies
before close of minimum holding period
If, during the 3-year period after the date on which the employee
stock ownership plan or eligible worker-owned cooperative acquired
any qualified securities in a sale to which section 1042 applied or
acquired any qualified employer securities in a qualified
gratuitous transfer to which section 664(g) applied, such plan or
cooperative disposes of any qualified securities and -
(1) the total number of shares held by such plan or cooperative
after such disposition is less than the total number of employer
securities held immediately after such sale, or
(2) except to the extent provided in regulations, the value of
qualified securities held by such plan or cooperative after such
disposition is less than 30 percent of the total value of all
employer securities as of such disposition 60 (!1) percent of the
total value of all employer securities as of such disposition in
the case of any qualified employer securities acquired in a
qualified gratuitous transfer to which section 664(g) applied),
there is hereby imposed a tax on the disposition equal to the
amount determined under subsection (b).
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) shall be equal
to 10 percent of the amount realized on the disposition.
(2) Limitation
The amount realized taken into account under paragraph (1)
shall not exceed that portion allocable to qualified securities
acquired in the sale to which section 1042 applied or acquired in
the qualified gratuitous transfer to which section 664(g) applied
determined as if such securities were disposed of -
(A) first from qualified securities to which section 1042
applied or to which section 664(g) applied acquired during the
3-year period ending on the date of the disposition, beginning
with the securities first so acquired, and
(B) then from any other employer securities.
If subsection (d) applies to a disposition, the disposition shall
be treated as made from employer securities in the opposite order
of the preceding sentence.
(3) Distributions to employees
The amount realized on any distribution to an employee for less
than fair market value shall be determined as if the qualified
security had been sold to the employee at fair market value.
(c) Liability for payment of taxes
The tax imposed by this subsection shall be paid by -
(1) the employer, or
(2) the eligible worker-owned cooperative,
that made the written statement described in section 664(g)(1)(E)
or in section 1042(b)(3) (as the case may be).
(d) Section not to apply to certain dispositions
(1) Certain distributions to employees
This section shall not apply with respect to any distribution
of qualified securities (or sale of such securities) which is
made by reason of -
(A) the death of the employee,
(B) the retirement of the employee after the employee has
attained 59 1/2 years of age,
(C) the disability of the employee (within the meaning of
section 72(m)(7)), or
(D) the separation of the employee from service for any
period which results in a 1-year break in service (within the
meaning of section 411(a)(6)(A)).
(2) Certain reorganizations
In the case of any exchange of qualified securities in any
reorganization described in section 368(a)(1) for stock of
another corporation, such exchange shall not be treated as a
disposition for purposes of this section.
(3) Liquidation of corporation into cooperative
In the case of any exchange of qualified securities pursuant to
the liquidation of the corporation issuing qualified securities
into the eligible worker-owned cooperative in a transaction which
meets the requirements of section 332 (determined by substituting
"100 percent" for "80 percent" each place it appears in section
332(b)(1)), such exchange shall not be treated as a disposition
for purposes of this section.
(4) Dispositions to meet diversification requirements
This section shall not apply to any disposition of qualified
securities which is required under section 401(a)(28).
(e) Definitions and special rules
For purposes of this section -
(1) Employee stock ownership plan
The term "employee stock ownership plan" has the meaning given
to such term by section 4975(e)(7).
(2) Qualified securities
The term "qualified securities" has the meaning given to such
term by section 1042(c)(1); except that such section shall be
applied without regard to subparagraph (B) thereof for purposes
of applying this section and section 4979A with respect to
securities acquired in a qualified gratuitous transfer (as
defined in section 664(g)(1)).
(3) Eligible worker-owned cooperative
The term "eligible worker-owned cooperative" has the meaning
given to such term by section 1042(c)(2).
(4) Disposition
The term "disposition" includes any distribution.
(5) Employer securities
The term "employer securities" has the meaning given to such
term by section 409(l).
-SOURCE-
(Added Pub. L. 98-369, div. A, title V, Sec. 545(a), July 18, 1984,
98 Stat. 894; amended Pub. L. 99-514, title XVIII, Sec. 1854(e),
Oct. 22, 1986, 100 Stat. 2880; Pub., L. 100-203, title X, Sec.
10413(b)(1), Dec. 22, 1987, 101 Stat. 1330-438; Pub. L. 100-647,
title I, Sec. 1011B(j)(4), Nov. 10, 1988, 102 Stat. 3492; Pub. L.
101-239, title VII, Sec. 7304(a)(2)(C)(ii), Dec. 19, 1989, 103
Stat. 2353; Pub. L. 104-188, title I, Sec. 1602(b)(4), Aug. 20,
1996, 110 Stat. 1834; Pub. L. 105-34, title XV, Sec.
1530(c)(11)-(14), Aug. 5, 1997, 111 Stat. 1079.)
-MISC1-
AMENDMENTS
1997 - Subsec. (a). Pub. L. 105-34, Sec. 1530(c)(11)(A), inserted
"or acquired any qualified employer securities in a qualified
gratuitous transfer to which section 664(g) applied" after "section
1042 applied" in introductory provisions.
Subsec. (a)(2). Pub. L. 105-34, Sec. 1530(c)(11)(B), inserted
before comma at end "60 percent of the total value of all employer
securities as of such disposition in the case of any qualified
employer securities acquired in a qualified gratuitous transfer to
which section 664(g) applied)".
Subsec. (b)(2). Pub. L. 105-34, Sec. 1530(c)(12)(A), inserted "or
acquired in the qualified gratuitous transfer to which section
664(g) applied" after "section 1042 applied" in introductory
provisions.
Subsec. (b)(2)(A). Pub. L. 105-34, Sec. 1530(c)(12)(B), inserted
"or to which section 664(g) applied" after "section 1042 applied".
Subsec. (c). Pub. L. 105-34, Sec. 1530(c)(13), substituted
"written statement described in section 664(g)(1)(E) or in section
1042(b)(3) (as the case may be)" for "written statement described
in section 1042(b)(3)".
Subsec. (e)(2). Pub. L. 105-34, Sec. 1530(c)(14), inserted before
period at end "; except that such section shall be applied without
regard to subparagraph (B) thereof for purposes of applying this
section and section 4979A with respect to securities acquired in a
qualified gratuitous transfer (as defined in section 664(g)(1))".
1996 - Subsec. (b)(2). Pub. L. 104-188 added subpars. (A) and (B)
and closing provisions and struck out former subpars. (A) to (D)
and closing provisions which read as follows:
"(A) first, from section 133 securities (as defined in section
4978B(e)(2)) acquired during the 3-year period ending on the date
of such disposition, beginning with the securities first so
acquired.
"(B) second, from section 133 securities (as so defined)
acquired before such 3-year period unless such securities (or
proceeds from the disposition) have been allocated to accounts of
participants or beneficiaries.
"(C) third, from qualified securities to which section 1042
applied acquired during the 3-year period ending on the date of
the disposition, beginning with the securities first so acquired,
and
"(D) then from any other employer securities.
If subsection (d) or section 4978B(d) applies to a disposition, the
disposition shall be treated as made from employer securities in
the opposite order of the preceding sentence."
1989 - Subsec. (b)(2). Pub. L. 101-239 substituted "determined as
if such securities were disposed of - ", subpars. (A) to (D), and
concluding provision for "(determined as if such securities were
disposed of in the order described in section 4978A(e))".
1988 - Subsec. (d)(4). Pub. L. 100-647 added par. (4).
1987 - Subsec. (b)(2). Pub. L. 100-203 substituted "(determined
as if such securities were disposed of in the order described in
section 4978A(e))" for "(determined as if such securities were
disposed of before any other securities)".
1986 - Subsec. (a)(1). Pub. L. 99-514, Sec. 1854(e)(1),
substituted "than" for "then".
Subsec. (b)(1). Pub. L. 99-514, Sec. 1854(e)(2), substituted
"subsection (a)" for "paragraph (1)".
Subsec. (c). Pub. L. 99-514, Sec. 1854(e)(3), substituted
"section 1042(b)(3)" for "section 1042(a)(2)(B)".
Subsec. (d)(1)(C). Pub. L. 99-514, Sec. 1854(e)(4), substituted
"section 72(m)(7)" for "section 72(m)(5)".
Subsec. (d)(3). Pub. L. 99-514, Sec. 1854(e)(7), added par. (3).
Subsec. (e)(2). Pub. L. 99-514, Sec. 1854(e)(5), substituted
"section 1042(c)(1)" for "section 1042(b)(1)".
Subsec. (e)(3). Pub. L. 99-514, Sec. 1854(e)(6), substituted
"section 1042(c)(2)" for "section 1042(b)(1)".
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by 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 1602(b)(1) of Pub. L. 104-188 applicable to
loans made after Aug. 20, 1996, with exception and provisions
relating to certain refinancings, see section 1602(c) of Pub. L.
104-188, set out as an Effective Date of Repeal note under former
section 133 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 applicable to estates of decedents
dying after Dec. 19, 1989, see section 7304(a)(3) of Pub. L.
101-239, set out as a note under section 409 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
Section 10413(c) of Pub. L. 100-203 provided that: "The
amendments made by this section [enacting section 4978A of this
title and amending this section] shall apply to taxable events
(within the meaning of section 4978A(c) of the Internal Revenue
Code of 1986) occurring after February 26, 1987."
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 545(c) of Pub. L. 98-369 provided that: "The amendments
made by this section [enacting this section] shall apply to taxable
years beginning after the date of enactment of this Act [July 18,
1984]."
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 664, 1042, 4979A of this
title.
-FOOTNOTE-
(!1) So in original. Probably should be preceded by an open
parenthesis.
-End-
-CITE-
26 USC Sec. 4978A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
[Sec. 4978A. Repealed. Pub. L. 101-239, title VII, Sec.
7304(a)(2)(C)(i), Dec. 19, 1989, 103 Stat. 2353]
-MISC1-
Section, added Pub. L. 100-203, title X, Sec. 10413(a), Dec. 22,
1987, 101 Stat. 1330-436; amended Pub. L. 100-647, title VI, Sec.
6060(a), Nov. 10, 1988, 102 Stat. 3699, related to tax on certain
dispositions of employer securities to which section 2057 applied.
EFFECTIVE DATE OF REPEAL
Repeal applicable to estates of decedents dying after Dec. 19,
1989, see section 7304(a)(3) of Pub. L. 101-239, set out as an
Effective Date of 1989 Amendment note under section 409 of this
title.
-End-
-CITE-
26 USC Sec. 4978B 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
[Sec. 4978B. Repealed. Pub. L. 104-188, title I, Sec.
1602(b)(5)(A), Aug. 20, 1996, 110 Stat. 1834]
-MISC1-
Section, added Pub. L. 101-239, title VII, Sec. 7301(d)(1), Dec.
19, 1989, 103 Stat. 2347; amended Pub. L. 101-508, title XI, Sec.
11701(e), Nov. 5, 1990, 104 Stat. 1388-507, related to tax on
disposition of employer securities to which former section 133 of
this title applied.
EFFECTIVE DATE OF REPEAL
Repeal applicable to loans made after Aug. 20, 1996, with
exception and provisions relating to certain refinancings, see
section 1602(c) of Pub. L. 104-188, set out as a note under former
section 133 of this title.
-End-
-CITE-
26 USC Sec. 4979 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4979. Tax on certain excess contributions
-STATUTE-
(a) General rule
In the case of any plan, there is hereby imposed a tax for the
taxable year equal to 10 percent of the sum of -
(1) any excess contributions under such plan for the plan year
ending in such taxable year, and
(2) any excess aggregate contributions under the plan for the
plan year ending in such taxable year.
(b) Liability for tax
The tax imposed by subsection (a) shall be paid by the employer.
(c) Excess contributions
For purposes of this section, the term "excess contributions" has
the meaning given such term by sections 401(k)(8)(B), 408(k)(6)(C),
and 501(c)(18).
(d) Excess aggregate contribution
For purposes of this section, the term "excess aggregate
contribution" has the meaning given to such term by section
401(m)(6)(B). For purposes of determining excess aggregate
contributions under an annuity contract described in section
403(b), such contract shall be treated as a plan described in
subsection (e)(1).
(e) Plan
For purposes of this section, the term "plan" means -
(1) a plan described in section 401(a) which includes a trust
exempt from tax under section 501(a),
(2) any annuity plan described in section 403(a),
(3) any annuity contract described in section 403(b),
(4) a simplified employee pension of an employer which
satisfies the requirements of section 408(k), and
(5) a plan described in section 501(c)(18).
Such term includes any plan which, at any time, has been determined
by the Secretary to be such a plan.
(f) No tax where excess distributed within 2 1/2 months of close
of year
(1) In general
No tax shall be imposed under this section on any excess
contribution or excess aggregate contribution, as the case may
be, to the extent such contribution (together with any income
allocable thereto) is distributed (or, if forfeitable, is
forfeited) before the close of the first 2 1/2 months of the
following plan year.
(2) Year of inclusion
(A) In general
Except as provided in subparagraph (B), any amount
distributed as provided in paragraph (1) shall be treated as
received and earned by the recipient in his taxable year for
which such contribution was made.
(B) De minimis distributions
If the total excess contributions and excess aggregate
contributions distributed to a recipient under a plan for any
plan year are less than $100, such distributions (and any
income allocable thereto) shall be treated as earned and
received by the recipient in his taxable year in which such
distributions were made.
-SOURCE-
(Added Pub. L. 99-514, title XI, Sec. 1117(b)(1), Oct. 22, 1986,
100 Stat. 2461; amended Pub. L. 100-647, title I, Sec.
1011(l)(8)-(11), Nov. 10, 1988, 102 Stat. 3470, 3471.)
-MISC1-
AMENDMENTS
1988 - Subsec. (a)(1). Pub. L. 100-647, Sec. 1011(l)(8), struck
out "a cash or deferred arrangement which is part of" after
"contributions under".
Subsec. (c). Pub. L. 100-647, Sec. 1011(l)(9), struck out
"403(b)," and substituted "408(k)(6)(C)" for "408(k)(8)(B)".
Subsec. (d). Pub. L. 100-647, Sec. 1011(l)(10), inserted sentence
at end relating to determination of excess aggregate contributions
under certain annuity contracts.
Subsec. (f)(2). Pub. L. 100-647, Sec. 1011(l)(11), substituted
"Year of inclusion" for "Included in prior year" as heading, and
amended text generally. Prior to amendment, text read as follows:
"Any amount distributed as provided in paragraph (1) shall be
treated as received and earned by the recipient in his taxable year
for which such contribution was made."
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
Section 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 an Effective Date of 1986 Amendment
note under section 401 of this title.
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out this section, 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 401, 408, 501 of this
title.
-End-
-CITE-
26 USC Sec. 4979A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4979A. Tax on certain prohibited allocations of qualified
securities
-STATUTE-
(a) Imposition of tax
If -
(1) there is a prohibited allocation of qualified securities by
any employee stock ownership plan or eligible worker-owned
cooperative,
(2) there is an allocation described in section 664(g)(5)(A),
(3) there is any allocation of employer securities which
violates the provisions of section 409(p), or a nonallocation
year described in subsection (e)(2)(C) with respect to an
employee stock ownership plan, or
(4) any synthetic equity is owned by a disqualified person in
any nonallocation year,
there is hereby imposed a tax on such allocation or ownership equal
to 50 percent of the amount involved.
(b) Prohibited allocation
For purposes of this section, the term "prohibited allocation"
means -
(1) any allocation of qualified securities acquired in a sale
to which section 1042 applies which violates the provisions of
section 409(n), and
(2) any benefit which accrues to any person in violation of the
provisions of section 409(n).
(c) Liability for tax
The tax imposed by this section shall be paid -
(1) in the case of an allocation referred to in paragraph (1)
or (2) of subsection (a), by -
(A) the employer sponsoring such plan, or
(B) the eligible worker-owned cooperative,
which made the written statement described in section
664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be),
and
(2) in the case of an allocation or ownership referred to in
paragraph (3) or (4) of subsection (a), by the S corporation the
stock in which was so allocated or owned.
(d) Special statute of limitations for tax attributable to certain
allocations
The statutory period for the assessment of any tax imposed by
this section on an allocation described in subsection (a)(2) of
qualified employer securities shall not expire before the date
which is 3 years from the later of -
(1) the 1st allocation of such securities in connection with a
qualified gratuitous transfer (as defined in section 664(g)(1)),
or
(2) the date on which the Secretary is notified of the
allocation described in subsection (a)(2).
(e) Definitions and special rules
For purposes of this section -
(1) Definitions
Except as provided in paragraph (2), terms used in this section
have the same respective meanings as when used in sections 409
and 4978.
(2) Special rules relating to tax imposed by reason of paragraph
(3) or (4) of subsection (a)
(A) Prohibited allocations
The amount involved with respect to any tax imposed by reason
of subsection (a)(3) is the amount allocated to the account of
any person in violation of section 409(p)(1).
(B) Synthetic equity
The amount involved with respect to any tax imposed by reason
of subsection (a)(4) is the value of the shares on which the
synthetic equity is based.
(C) Special rule during first nonallocation year
For purposes of subparagraph (A), the amount involved for the
first nonallocation year of any employee stock ownership plan
shall be determined by taking into account the total value of
all the deemed-owned shares of all disqualified persons with
respect to such plan.
(D) Statute of limitations
The statutory period for the assessment of any tax imposed by
this section by reason of paragraph (3) or (4) of subsection
(a) shall not expire before the date which is 3 years from the
later of -
(i) the allocation or ownership referred to in such
paragraph giving rise to such tax, or
(ii) the date on which the Secretary is notified of such
allocation or ownership.
-SOURCE-
(Added and amended Pub. L. 99-514, title XI, Sec. 1172(b)(2), title
XVIII, Sec. 1854(a)(9)(A), Oct. 22, 1986, 100 Stat. 2514, 2877;
Pub. L. 101-239, title VII, Sec. 7304(a)(2)(D), Dec. 19, 1989, 103
Stat. 2353; Pub. L. 104-188, title I, Sec. 1704(t)(22), Aug. 20,
1996, 110 Stat. 1888; Pub. L. 105-34, title XV, Sec.
1530(c)(15)-(17), Aug. 5, 1997, 111 Stat. 1079, 1080; Pub. L.
107-16, title VI, Sec. 656(c), June 7, 2001, 115 Stat. 134.)
-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
2001 - Subsec. (a). Pub. L. 107-16, Secs. 656(c)(1), 901,
temporarily added pars. (3) and (4) and, in concluding provisions,
substituted "there is hereby imposed a tax on such allocation or
ownership equal to 50 percent of the amount involved." for "there
is hereby imposed a tax on such allocation equal to 50 percent of
the amount involved." See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c). Pub. L. 107-16, Secs. 656(c)(2), 901, temporarily
amended heading and text of subsec. (c) generally. Prior to
amendment, text read as follows: "The tax imposed by this section
shall be paid by -
"(1) the employer sponsoring such plan, or
"(2) the eligible worker-owned cooperative,
which made the written statement described in section 664(g)(1)(E)
or in section 1042(b)(3)(B) (as the case may be)."
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (e). Pub. L. 107-16, Secs. 656(c)(3), 901, temporarily
amended heading and text of subsec. (e) generally. Prior to
amendment, text read as follows: "Terms used in this section have
the same respective meaning as when used in section 4978." See
Effective and Termination Dates of 2001 Amendment note below.
1997 - Subsec. (a). Pub. L. 105-34, Sec. 1530(c)(15), amended
heading and text of subsec. (a) generally. Prior to amendment, text
read as follows: "If there is a prohibited allocation of qualified
securities by any employee stock ownership plan or eligible
worker-owned cooperative, there is hereby imposed a tax on such
allocation equal to 50 percent of the amount involved."
Subsec. (c). Pub. L. 105-34, Sec. 1530(c)(16), amended heading
and text of subsec. (c) generally. Prior to amendment, text read as
follows: "The tax imposed by this section shall be paid by -
"(1) the employer sponsoring such plan, or
"(2) the eligible worker-owned cooperative,
which made the written statement described in section
1042(b)(3)(B)."
Subsecs. (d), (e). Pub. L. 105-34, Sec. 1530(c)(17), added
subsec. (d) and redesignated former subsec. (d) as (e).
1996 - Subsec. (c). Pub. L. 104-188 amended directory language of
Pub. L. 101-239, Sec. 7304(a)(2)(D)(ii). See 1989 Amendment note
below.
1989 - Subsec. (b)(1). Pub. L. 101-239, Sec. 7304(a)(2)(D)(i),
struck out "or section 2057" after "section 1042".
Subsec. (c). Pub. L. 101-239, Sec. 7304(a)(2)(D)(ii), as amended
by Pub. L. 104-188, struck out "or section 2057(d)" after "section
1042(b)(3)(B)" in concluding provisions.
1986 - Subsec. (b)(1). Pub. L. 99-514, Sec. 1172(b)(2)(A),
inserted reference to section 2057.
Subsec. (c). Pub. L. 99-514, Sec. 1172(b)(2)(B), inserted
reference to section 2057(d).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to plan years beginning
after Dec. 31, 2004, except that in the case of any employee stock
ownership plan established after Mar. 14, 2001, or 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 this title is not in effect on such date,
amendment applicable to plan years ending after Mar. 14, 2001, see
section 656(d) of Pub. L. 107-16, set out as a note under section
409 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 1997 AMENDMENT
Amendment by 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 1989 AMENDMENT
Amendment by Pub. L. 101-239 applicable to estates of decedents
dying after Dec. 19, 1989, see section 7304(a)(3) of Pub. L.
101-239, set out as a note under section 409 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1172(b)(2) of Pub. L. 99-514 applicable to
sales after Oct. 22, 1986, with respect to which election is made
by executor of an estate who is required to file the return of the
tax imposed by this title on a date (including extensions) after
Oct. 22, 1986, see section 1172(c) of Pub. L. 99-514, set out as a
note under section 409 of this title.
EFFECTIVE DATE
Section 1854(a)(9)(D) of Pub. L. 99-514 provided that: "The
amendments made by this paragraph [enacting this section and
amending section 1042 of this title] shall apply to sales of
securities after the date of the enactment of this Act [Oct. 22,
1986]."
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 409, 664, 1042, 4978 of
this title.
-End-
-CITE-
26 USC Sec. 4980 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4980. Tax on reversion of qualified plan assets to employer
-STATUTE-
(a) Imposition of tax
There is hereby imposed a tax of 20 percent of the amount of any
employer reversion from a qualified plan.
(b) Liability for tax
The tax imposed by subsection (a) shall be paid by the employer
maintaining the plan.
(c) Definitions and special rules
For purposes of this section -
(1) Qualified plan
The term "qualified plan" means any plan meeting the
requirements of section 401(a) or 403(a), other than -
(A) a plan maintained by an employer if such employer has, at
all times, been exempt from tax under subtitle A, or
(B) a governmental plan (within the meaning of section
414(d)).
Such term shall include any plan which, at any time, has been
determined by the Secretary to be a qualified plan.
(2) Employer reversion
(A) In general
The term "employer reversion" means the amount of cash and
the fair market value of other property received (directly or
indirectly) by an employer from the qualified plan.
(B) Exceptions
The term "employer reversion" shall not include -
(i) except as provided in regulations, any amount
distributed to or on behalf of any employee (or his
beneficiaries) if such amount could have been so distributed
before termination of such plan without violating any
provision of section 401, or
(ii) any distribution to the employer which is allowable
under section 401(a)(2) -
(I) in the case of a multiemployer plan, by reason of
mistakes of law or fact or the return of any withdrawal
liability payment,
(II) in the case of a plan other than a multiemployer
plan, by reason of mistake of fact, or
(III) in the case of any plan, by reason of the failure
of the plan to initially qualify or the failure of
contributions to be deductible.
(3) Exception for employee stock ownership plans
(A) In general
If, upon an employer reversion from a qualified plan, any
applicable amount is transferred from such plan to an employee
stock ownership plan described in section 4975(e)(7) or a tax
credit employee stock ownership plan (as described in section
409), such amount shall not be treated as an employer reversion
for purposes of this section (or includible in the gross income
of the employer) if -
(i) the requirements of subparagraphs (B), (C), and (D) are
met, and
(ii) under the plan, employer securities to which
subparagraph (B) applies must, except to the extent necessary
to meet the requirements of section 401(a)(28), remain in the
plan until distribution to participants in accordance with
the provisions of such plan.
(B) Investment in employer securities
The requirements of this subparagraph are met if, within 90
days after the transfer (or such longer period as the Secretary
may prescribe), the amount transferred is invested in employer
securities (as defined in section 409(l)) or used to repay
loans used to purchase such securities.
(C) Allocation requirements
The requirements of this subparagraph are met if the portion
of the amount transferred which is not allocated under the plan
to accounts of participants in the plan year in which the
transfer occurs -
(i) is credited to a suspense account and allocated from
such account to accounts of participants no less rapidly than
ratably over a period not to exceed 7 years, and
(ii) when allocated to accounts of participants under the
plan, is treated as an employer contribution for purposes of
section 415(c), except that -
(I) the annual addition (as determined under section
415(c)) attributable to each such allocation shall not
exceed the value of such securities as of the time such
securities were credited to such suspense account, and
(II) no additional employer contributions shall be
permitted to an employee stock ownership plan described in
subparagraph (A) of the employer before the allocation of
such amount.
The amount allocated in the year of transfer shall not be less
than the lesser of the maximum amount allowable under section
415 or 1/8 of the amount attributable to the securities
acquired. In the case of dividends on securities held in the
suspense account, the requirements of this subparagraph are met
only if the dividends are allocated to accounts of participants
or paid to participants in proportion to their accounts, or
used to repay loans used to purchase employer securities.
(D) Participants
The requirements of this subparagraph are met if at least
half of the participants in the qualified plan are participants
in the employee stock ownership plan (as of the close of the
1st plan year for which an allocation of the securities is
required).
(E) Applicable amount
For purposes of this paragraph, the term "applicable amount"
means any amount which -
(i) is transferred after March 31, 1985, and before January
1, 1989, or
(ii) is transferred after December 31, 1988, pursuant to a
termination which occurs after March 31, 1985, and before
January 1, 1989.
(F) No credit or deduction allowed
No credit or deduction shall be allowed under chapter 1 for
any amount transferred to an employee stock ownership plan in a
transfer to which this paragraph applies.
(G) Amount transferred to include income thereon, etc.
The amount transferred shall not be treated as meeting the
requirements of subparagraphs (B) and (C) unless amounts
attributable to such amount also meet such requirements.
(4) Time for payment of tax
For purposes of subtitle F, the time for payment of the tax
imposed by subsection (a) shall be the last day of the month
following the month in which the employer reversion occurs.
(d) Increase in tax for failure to establish replacement plan or
increase benefits
(1) In general
Subsection (a) shall be applied by substituting "50 percent"
for "20 percent" with respect to any employer reversion from a
qualified plan unless -
(A) the employer establishes or maintains a qualified
replacement plan, or
(B) the plan provides benefit increases meeting the
requirements of paragraph (3).
(2) Qualified replacement plan
For purposes of this subsection, the term "qualified
replacement plan" means a qualified plan established or
maintained by the employer in connection with a qualified plan
termination (hereinafter referred to as the "replacement plan")
with respect to which the following requirements are met:
(A) Participation requirement
At least 95 percent of the active participants in the
terminated plan who remain as employees of the employer after
the termination are active participants in the replacement
plan.
(B) Asset transfer requirement
(i) 25 percent cushion
A direct transfer from the terminated plan to the
replacement plan is made before any employer reversion, and
the transfer is in an amount equal to the excess (if any) of
-
(I) 25 percent of the maximum amount which the employer
could receive as an employer reversion without regard to
this subsection, over
(II) the amount determined under clause (ii).
(ii) Reduction for increase in benefits
The amount determined under this clause is an amount equal
to the present value of the aggregate increases in the
accrued benefits under the terminated plan of any
participants or beneficiaries pursuant to a plan amendment
which -
(I) is adopted during the 60-day period ending on the
date of termination of the qualified plan, and
(II) takes effect immediately on the termination date.
(iii) Treatment of amount transferred
In the case of the transfer of any amount under clause (i)
-
(I) such amount shall not be includible in the gross
income of the employer,
(II) no deduction shall be allowable with respect to such
transfer, and
(III) such transfer shall not be treated as an employer
reversion for purposes of this section.
(C) Allocation requirements
(i) In general
In the case of any defined contribution plan, the portion
of the amount transferred to the replacement plan under
subparagraph (B)(i) is -
(I) allocated under the plan to the accounts of
participants in the plan year in which the transfer occurs,
or
(II) credited to a suspense account and allocated from
such account to accounts of participants no less rapidly
than ratably over the 7-plan-year period beginning with the
year of the transfer.
(ii) Coordination with section 415 limitation
If, by reason of any limitation under section 415, any
amount credited to a suspense account under clause (i)(II)
may not be allocated to a participant before the close of the
7-year period under such clause -
(I) such amount shall be allocated to the accounts of
other participants, and
(II) if any portion of such amount may not be allocated
to other participants by reason of any such limitation,
shall be allocated to the participant as provided in
section 415.
(iii) Treatment of income
Any income on any amount credited to a suspense account
under clause (i)(II) shall be allocated to accounts of
participants no less rapidly than ratably over the remainder
of the period determined under such clause (after application
of clause (ii)).
(iv) Unallocated amounts at termination
If any amount credited to a suspense account under clause
(i)(II) is not allocated as of the termination date of the
replacement plan -
(I) such amount shall be allocated to the accounts of
participants as of such date, except that any amount which
may not be allocated by reason of any limitation under
section 415 shall be allocated to the accounts of other
participants, and
(II) if any portion of such amount may not be allocated
to other participants under subclause (I) by reason of such
limitation, such portion shall be treated as an employer
reversion to which this section applies.
(3) Pro rata benefit increases
(A) In general
The requirements of this paragraph are met if a plan
amendment to the terminated plan is adopted in connection with
the termination of the plan which provides pro rata increases
in the accrued benefits of all qualified participants which -
(i) have an aggregate present value not less than 20
percent of the maximum amount which the employer could
receive as an employer reversion without regard to this
subsection, and
(ii) take effect immediately on the termination date.
(B) Pro rata increase
For purposes of subparagraph (A), a pro rata increase is an
increase in the present value of the accrued benefit of each
qualified participant in an amount which bears the same ratio
to the aggregate amount determined under subparagraph (A)(i) as
-
(i) the present value of such participant's accrued benefit
(determined without regard to this subsection), bears to
(ii) the aggregate present value of accrued benefits of the
terminated plan (as so determined).
Notwithstanding the preceding sentence, the aggregate increases
in the present value of the accrued benefits of qualified
participants who are not active participants shall not exceed
40 percent of the aggregate amount determined under
subparagraph (A)(i) by substituting "equal to" for "not less
than".
(4) Coordination with other provisions
(A) Limitations
A benefit may not be increased under paragraph (2)(B)(ii) or
(3)(A), and an amount may not be allocated to a participant
under paragraph (2)(C), if such increase or allocation would
result in a failure to meet any requirement under section
401(a)(4) or 415.
(B) Treatment as employer contributions
Any increase in benefits under paragraph (2)(B)(ii) or
(3)(A), or any allocation of any amount (or income allocable
thereto) to any account under paragraph (2)(C), shall be
treated as an annual benefit or annual addition for purposes of
section 415.
(C) 10-year participation requirement
Except as provided by the Secretary, section 415(b)(5)(D)
shall not apply to any increase in benefits by reason of this
subsection to the extent that the application of this
subparagraph does not discriminate in favor of highly
compensated employees (as defined in section 414(q)).
(5) Definitions and special rules
For purposes of this subsection -
(A) Qualified participant
The term "qualified participant" means an individual who -
(i) is an active participant,
(ii) is a participant or beneficiary in pay status as of
the termination date,
(iii) is a participant not described in clause (i) or (ii)
-
(I) who has a nonforfeitable right to an accrued benefit
under the terminated plan as of the termination date, and
(II) whose service, which was creditable under the
terminated plan, terminated during the period beginning 3
years before the termination date and ending with the date
on which the final distribution of assets occurs, or
(iv) is a beneficiary of a participant described in clause
(iii)(II) and has a nonforfeitable right to an accrued
benefit under the terminated plan as of the termination date.
(B) Present value
Present value shall be determined as of the termination date
and on the same basis as liabilities of the plan are determined
on termination.
(C) Reallocation of increase
Except as provided in paragraph (2)(C), if any benefit
increase is reduced by reason of the last sentence of paragraph
(3)(A)(ii) or paragraph (4), the amount of such reduction shall
be allocated to the remaining participants on the same basis as
other increases (and shall be treated as meeting any allocation
requirement of this subsection).
(D) Plans taken into account
For purposes of determining whether there is a qualified
replacement plan under paragraph (2), the Secretary may provide
that -
(i) 2 or more plans may be treated as 1 plan, or
(ii) a plan of a successor employer may be taken into
account.
(E) Special rule for participation requirement
For purposes of paragraph (2)(A), all employers treated as 1
employer under section 414(b), (c), (m), or (o) shall be
treated as 1 employer.
(6) Subsection not to apply to employer in bankruptcy
This subsection shall not apply to an employer who, as of the
termination date of the qualified plan, is in bankruptcy
liquidation under chapter 7 of title 11 of the United States Code
or in similar proceedings under State law.
-SOURCE-
(Added Pub. L. 99-514, title XI, Sec. 1132(a), Oct. 22, 1986, 100
Stat. 2478; amended Pub. L. 100-647, title I, Sec. 1011A(f)(1)-(3),
(6), (7), title V, Sec. 5072(a), title VI, Sec. 6069(a), Nov. 10,
1988, 102 Stat. 3478, 3479, 3681, 3704; Pub. L. 101-508, title XII,
Secs. 12001, 12002(a), Nov. 5, 1990, 104 Stat. 1388-562; Pub. L.
104-188, title I, Sec. 1704(a), Aug. 20, 1996, 110 Stat. 1878.)
-MISC1-
AMENDMENTS
1996 - Subsecs. (a), (d). Pub. L. 104-188 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. Sections 12001 and
12002(a) 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.
1990 - Subsec. (a). Pub. L. 101-508, Sec. 12001, which directed
the substitution of "20 percent" for "15 percent" in "section
4980(a)" without specifying the Internal Revenue Code of 1986, was
executed to subsec. (a) of this section. See 1996 Amendment note
above.
Subsec. (d). Pub. L. 101-508, Sec. 12002(a), which directed the
addition of subsec. (d) to "section 4980" without specifying the
Internal Revenue Code of 1986, was executed to this section. See
1996 Amendment note above.
1988 - Subsec. (a). Pub. L. 100-647, Sec. 6069(a), substituted
"15" for "10".
Subsec. (c)(1)(A). Pub. L. 100-647, Sec. 1011A(f)(1), substituted
"subtitle A" for "this subtitle".
Subsec. (c)(3)(A). Pub. L. 100-647, Sec. 1011A(f)(2), inserted
"or a tax credit employee stock ownership plan (as described in
section 409)" after "section 4975(e)(7)" in introductory text, and
", except to the extent necessary to meet the requirements of
section 401(a)(28)," after "must" in cl. (ii).
Subsec. (c)(3)(C). Pub. L. 100-647, Sec. 1011A(f)(3), struck out
"(by reason of the limitations of section 415)" after "not
allocated" in introductory text, and inserted sentence at end
relating to minimum amount allocated in year of transfer.
Pub. L. 100-647, Sec. 1011A(f)(7), inserted sentence at end
relating to dividends on securities held in suspense account.
Subsec. (c)(3)(F), (G). Pub. L. 100-647, Sec. 1011A(f)(6), added
subpars. (F) and (G).
Subsec. (c)(4). Pub. L. 100-647, Sec. 5072(a), added par. (4).
EFFECTIVE DATE OF 1990 AMENDMENT
Section 12003 of Pub. L. 101-508 provided that:
"(a) In General. - Except as provided in subsection (b), the
amendments made by this subtitle [subtitle A (Secs. 12001-12003) of
title XII of Pub. L. 101-508, amending this section and sections
1002, 1104, and 1344 of Title 29, Labor] shall apply to reversions
occurring after September 30, 1990.
"(b) Exception. - The amendments made by this subtitle shall not
apply to any reversion after September 30, 1990, if -
"(1) in the case of plans subject to title IV of the Employee
Retirement Income Security Act of 1974 [29 U.S.C. 1301 et seq.],
a notice of intent to terminate under such title was provided to
participants (or if no participants, to the Pension Benefit
Guaranty Corporation) before October 1, 1990,
"(2) in the case of plans subject to title I [29 U.S.C. 1001 et
seq.] (and not to title IV) of such Act, a notice of intent to
reduce future accruals under section 204(h) of such Act [29
U.S.C. 1054(h)] was provided to participants in connection with
the termination before October 1, 1990,
"(3) in the case of plans not subject to title I or IV of such
Act, a request for a determination letter with respect to the
termination was filed with the Secretary of the Treasury or the
Secretary's delegate before October 1, 1990, or
"(4) in the case of plans not subject to title I or IV of such
Act and having only 1 participant, a resolution terminating the
plan was adopted by the employer before October 1, 1990."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011A(f)(1)-(3), (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 5072(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
reversions after December 31, 1988."
Section 6069(b) of Pub. L. 100-647 provided that:
"(1) In general. - The amendment made by subsection (a) [amending
this section] shall apply to reversions occurring on or after
October 21, 1988.
"(2) Exception. - The amendment made by subsection (a) shall not
apply to any reversion on or after October 21, 1988, pursuant to a
plan termination if -
"(A) with respect to plans subject to title IV of the Employee
Retirement Income Security Act of 1974 [29 U.S.C. 1301 et seq.],
a notice of intent to terminate required under such title was
provided to participants (or if no participants, to the Pension
Benefit Guaranty Corporation) before October 21, 1988,
"(B) with respect to plans subject to title I of such Act [29
U.S.C. 1001 et seq.], a notice of intent to reduce future
accruals required under section 204(h) of such Act [29 U.S.C.
1054(h)] was provided to participants in connection with the
termination before October 21, 1988,
"(C) with respect to plans not subject to title I or IV of such
Act, the Board of Directors of the employer approved the
termination or the employer took other binding action before
October 21, 1988, or
"(D) such plan termination was directed by a final order of a
court of competent jurisdiction entered before October 21, 1988,
and notice of such order was provided to participants before such
date."
EFFECTIVE DATE
Section 1132(c) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1011A(f)(4), (5), Nov. 10, 1988, 102 Stat. 3479,
provided that:
"(1) In general. - The amendments made by this section [enacting
this section] shall apply to reversions occurring after December
31, 1985.
"(2) Exception where termination date occurred before january 1,
1986. -
"(A) In general. - Except as provided in subparagraph (B), the
amendments made by this section shall not apply to any reversion
after December 31, 1985, which occurs pursuant to a plan
termination where the termination date is before January 1, 1986.
"(B) Election to have amendments apply. - A corporation may
elect to have the amendments made by this section apply to any
reversion after 1985 pursuant to a plan termination occurring
before 1986 if such corporation was incorporated in the State of
Delaware in March, 1978, and became a parent corporation of the
consolidated group on September 19, 1978, pursuant to a merger
agreement recorded in the State of Nevada on September 19, 1978.
"(3) Termination date. - For purposes of paragraph (2), the term
'termination date' is the date of the termination (within the
meaning of section 411(d)(3) of the Internal Revenue Code of 1986)
of the plan.
"(4) Transition rule for certain terminations. -
"(A) In general. - In the case of a taxpayer to which this
paragraph applies, the amendments made by this section shall not
apply to any termination occurring before the date which is 1
year after the date of the enactment of this Act [Oct. 22, 1986].
"(B) Taxpayers to whom paragraph applies. - This paragraph
shall apply to -
"(i) a corporation incorporated on June 13, 1917, which has
its principal place of business in Bartlesville, Oklahoma,
"(ii) a corporation incorporated on January 17, 1917, which
is located in Coatesville, Pennsylvania,
"(iii) a corporation incorporated on January 23, 1928, which
has its principal place of business in New York, New York,
"(iv) a corporation incorporated on April 23, 1956, which has
its principal place of business in Dallas, Texas, and
"(v) a corporation incorporated in the State of Nevada, the
principal place of business of which is in Denver, Colorado,
and which filed for relief from creditors under the United
States Bankruptcy Code on August 28, 1986.
"(5) Special rule for employee stock ownership plans. - Section
4980(c)(3) of the Internal Revenue Code of 1986 (as added by
subsection (a)) shall apply to reversions occurring after March 31,
1985."
TRANSFER OF EXCESS ASSETS FROM QUALIFIED PENSION PLAN TO WELFARE
BENEFIT PLAN
Pub. L. 101-239, title VII, Sec. 7861(b), Dec. 19, 1989, 103
Stat. 2430, provided that:
"(1) Notwithstanding any other provision of law, in the case of
any qualified pension plan and welfare benefit plan described in
paragraph (2), the assets of such pension plan in excess of its
liabilities may be transferred to such welfare benefit plan upon
the termination of such pension plan if such assets are to be used
to provide retiree health benefits.
"(2) For purposes of paragraph (1), a qualified pension plan and
welfare benefit plan are described in this paragraph if -
"(A) both such plans are jointly administered pursuant to a
collective bargaining agreement between the employer maintaining
such plans and one or more employee representatives,
"(B) the welfare benefit plan provides retiree health benefits,
and
"(C) the qualified pension plan has assets in excess of
liabilities (determined on a termination basis) and the welfare
benefit plan has assets which are less than the present value of
the benefits to be provided under the plan (determined as of the
time of termination of the pension plan).
"(3) For purposes of the Internal Revenue Code of 1986, any
transfer of assets to which paragraph (1) applies shall be treated
as a reversion of such assets to the employer maintaining the plan
which is includible in the gross income of such employer and
subject to the tax imposed by section 4980 of such Code."
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 420, 4972, 9705 of this
title; title 29 sections 1104, 1344.
-End-
-CITE-
26 USC Sec. 4980A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
[Sec. 4980A. Repealed. Pub. L. 105-34, title X, Sec. 1073(a), Aug.
5, 1997, 111 Stat. 948]
-MISC1-
Section, added Pub. L. 99-514, title XI, Sec. 1133(a), Oct. 22,
1986, 100 Stat. 2481, Sec. 4981A; renumbered Sec. 4980A and amended
Pub. L. 100-647, title I, Sec. 1011A(g)(1)(A), (2)-(6), (9), Nov.
10, 1988, 102 Stat. 3479-3482; Pub. L. 102-318, title V, Sec.
521(b)(42), July 3, 1992, 106 Stat. 313; Pub. L. 104-188, title I,
Secs. 1401(b)(12), 1452(b), Aug. 20, 1996, 110 Stat. 1789, 1816,
related to tax on excess distributions from qualified retirement
plans.
EFFECTIVE DATE OF REPEAL
Section 1073(c) of Pub. L. 105-34 provided that:
"(1) Excess distribution tax repeal. - Except as provided in
paragraph (2), the repeal made by subsection (a) [repealing this
section] shall apply to excess distributions received after
December 31, 1996.
"(2) Excess retirement accumulation tax repeal. - The repeal made
by subsection (a) with respect to section 4980A(d) of the Internal
Revenue Code of 1986 and the amendments made by subsection (b)
[amending sections 691, 2013, 2053, and 6018 of this title] shall
apply to estates of decedents dying after December 31, 1996."
-End-
-CITE-
26 USC Sec. 4980B 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4980B. Failure to satisfy continuation coverage requirements
of group health plans
-STATUTE-
(a) General rule
There is hereby imposed a tax on the failure of a group health
plan to meet the requirements of subsection (f) with respect to any
qualified beneficiary.
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) on any failure
with respect to a qualified beneficiary shall be $100 for each
day in the noncompliance period with respect to such failure.
(2) Noncompliance period
For purposes of this section, the term "noncompliance period"
means, with respect to any failure, the period -
(A) beginning on the date such failure first occurs, and
(B) ending on the earlier of -
(i) the date such failure is corrected, or
(ii) the date which is 6 months after the last day in the
period applicable to the qualified beneficiary under
subsection (f)(2)(B) (determined without regard to clause
(iii) thereof).
If a person is liable for tax under subsection (e)(1)(B) by
reason of subsection (e)(2)(B) with respect to any failure, the
noncompliance period for such person with respect to such failure
shall not begin before the 45th day after the written request
described in subsection (e)(2)(B) is provided to such person.
(3) Minimum tax for noncompliance period where failure discovered
after notice of examination
Notwithstanding paragraphs (1) and (2) of subsection (c) -
(A) In general
In the case of 1 or more failures with respect to a qualified
beneficiary -
(i) which are not corrected before the date a notice of
examination of income tax liability is sent to the employer,
and
(ii) which occurred or continued during the period under
examination,
the amount of tax imposed by subsection (a) by reason of such
failures with respect to such beneficiary shall not be less
than the lesser of $2,500 or the amount of tax which would be
imposed by subsection (a) without regard to such paragraphs.
(B) Higher minimum tax where violations are more than de
minimis
To the extent violations by the employer (or the plan in the
case of a multiemployer plan) for any year are more than de
minimis, subparagraph (A) shall be applied by substituting
"$15,000" for "$2,500" with respect to the employer (or such
plan).
(c) Limitations on amount of tax
(1) Tax not to apply where failure not discovered exercising
reasonable diligence
No tax shall be imposed by subsection (a) on any failure during
any period for which it is established to the satisfaction of the
Secretary that none of the persons referred to in subsection (e)
knew, or exercising reasonable diligence would have known, that
such failure existed.
(2) Tax not to apply to failures corrected within 30 days
No tax shall be imposed by subsection (a) on any failure if -
(A) such failure was due to reasonable cause and not to
willful neglect, and
(B) such failure is corrected during the 30-day period
beginning on the 1st date any of the persons referred to in
subsection (e) knew, or exercising reasonable diligence would
have known, that such failure existed.
(3) $100 limit on amount of tax for failures on any day with
respect to a qualified beneficiary
(A) In general
Except as provided in subparagraph (B), the maximum amount of
tax imposed by subsection (a) on failures on any day during the
noncompliance period with respect to a qualified beneficiary
shall be $100.
(B) Special rule where more than 1 qualified beneficiary
If there is more than 1 qualified beneficiary with respect to
the same qualifying event, the maximum amount of tax imposed by
subsection (a) on all failures on any day during the
noncompliance period with respect to such qualified
beneficiaries shall be $200.
(4) Overall limitation for unintentional failures
In the case of failures which are due to reasonable cause and
not to willful neglect -
(A) Single employer plans
(i) In general
In the case of failures with respect to plans other than
multiemployer plans, the tax imposed by subsection (a) for
failures during the taxable year of the employer shall not
exceed the amount equal to the lesser of -
(I) 10 percent of the aggregate amount paid or incurred
by the employer (or predecessor employer) during the
preceding taxable year for group health plans, or
(II) $500,000.
(ii) Taxable years in the case of certain controlled groups
For purposes of this subparagraph, if not all persons who
are treated as a single employer for purposes of this section
have the same taxable year, the taxable years taken into
account shall be determined under principles similar to the
principles of section 1561.
(B) Multiemployer plans
(i) In general
In the case of failures with respect to a multiemployer
plan, the tax imposed by subsection (a) for failures during
the taxable year of the trust forming part of such plan shall
not exceed the amount equal to the lesser of -
(I) 10 percent of the amount paid or incurred by such
trust during such taxable year to provide medical care (as
defined in section 213(d)) directly or through insurance,
reimbursement, or otherwise, or
(II) $500,000.
For purposes of the preceding sentence, all plans of which
the same trust forms a part shall be treated as 1 plan.
(ii) Special rule for employers required to pay tax
If an employer is assessed a tax imposed by subsection (a)
by reason of a failure with respect to a multiemployer plan,
the limit shall be determined under subparagraph (A) (and not
under this subparagraph) and as if such plan were not a
multiemployer plan.
(C) Special rule for persons providing benefits
In the case of a person described in subsection (e)(1)(B)
(and not subsection (e)(1)(A)), the aggregate amount of tax
imposed by subsection (a) for failures during a taxable year
with respect to all plans shall not exceed $2,000,000.
(5) Waiver by Secretary
In the case of a failure which is due to reasonable cause and
not to willful neglect, the Secretary may waive part or all of
the tax imposed by subsection (a) to the extent that the payment
of such tax would be excessive relative to the failure involved.
(d) Tax not to apply to certain plans
This section shall not apply to -
(1) any failure of a group health plan to meet the requirements
of subsection (f) with respect to any qualified beneficiary if
the qualifying event with respect to such beneficiary occurred
during the calendar year immediately following a calendar year
during which all employers maintaining such plan normally
employed fewer than 20 employees on a typical business day,
(2) any governmental plan (within the meaning of section
414(d)), or
(3) any church plan (within the meaning of section 414(e)).
(e) Liability for tax
(1) In general
Except as otherwise provided in this subsection, the following
shall be liable for the tax imposed by subsection (a) on a
failure:
(A)(i) In the case of a plan other than a multiemployer plan,
the employer.
(ii) In the case of a multiemployer plan, the plan.
(B) Each person who is responsible (other than in a capacity
as an employee) for administering or providing benefits under
the plan and whose act or failure to act caused (in whole or in
part) the failure.
(2) Special rules for persons described in paragraph (1)(B)
(A) No liability unless written agreement
Except in the case of liability resulting from the
application of subparagraph (B) of this paragraph, a person
described in subparagraph (B) (and not in subparagraph (A)) of
paragraph (1) shall be liable for the tax imposed by subsection
(a) on any failure only if such person assumed (under a legally
enforceable written agreement) responsibility for the
performance of the act to which the failure relates.
(B) Failure to cover qualified beneficiaries where current
employees are covered
A person shall be treated as described in paragraph (1)(B)
with respect to a qualified beneficiary if -
(i) such person provides coverage under a group health plan
for any similarly situated beneficiary under the plan with
respect to whom a qualifying event has not occurred, and
(ii) the -
(I) employer or plan administrator, or
(II) in the case of a qualifying event described in
subparagraph (C) or (E) of subsection (f)(3) where the
person described in clause (i) is the plan administrator,
the qualified beneficiary,
submits to such person a written request that such person
make available to such qualified beneficiary the same
coverage which such person provides to the beneficiary
referred to in clause (i).
(f) Continuation coverage requirements of group health plans
(1) In general
A group health plan meets the requirements of this subsection
only if the coverage of the costs of pediatric vaccines (as
defined under section 2162 of the Public Health Service Act) (!1)
is not reduced below the coverage provided by the plan as of May
1, 1993, and only if each qualified beneficiary who would lose
coverage under the plan as a result of a qualifying event is
entitled to elect, within the election period, continuation
coverage under the plan.
(2) Continuation coverage
For purposes of paragraph (1), the term "continuation coverage"
means coverage under the plan which meets the following
requirements:
(A) Type of benefit coverage
The coverage must consist of coverage which, as of the time
the coverage is being provided, is identical to the coverage
provided under the plan to similarly situated beneficiaries
under the plan with respect to whom a qualifying event has not
occurred. If coverage under the plan is modified for any group
of similarly situated beneficiaries, the coverage shall also be
modified in the same manner for all individuals who are
qualified beneficiaries under the plan pursuant to this
subsection in connection with such group.
(B) Period of coverage
The coverage must extend for at least the period beginning on
the date of the qualifying event and ending not earlier than
the earliest of the following:
(i) Maximum required period
(I) General rule for terminations and reduced hours
In the case of a qualifying event described in paragraph
(3)(B), except as provided in subclause (II), the date
which is 18 months after the date of the qualifying event.
(II) Special rule for multiple qualifying events
If a qualifying event (other than a qualifying event
described in paragraph (3)(F)) occurs during the 18 months
after the date of a qualifying event described in paragraph
(3)(B), the date which is 36 months after the date of the
qualifying event described in paragraph (3)(B).
(III) Special rule for certain bankruptcy proceedings
In the case of a qualifying event described in paragraph
(3)(F) (relating to bankruptcy proceedings), the date of
the death of the covered employee or qualified beneficiary
(described in subsection (g)(1)(D)(iii)), or in the case of
the surviving spouse or dependent children of the covered
employee, 36 months after the date of the death of the
covered employee.
(IV) General rule for other qualifying events
In the case of a qualifying event not described in
paragraph (3)(B) or (3)(F), the date which is 36 months
after the date of the qualifying event.
(V) Medicare entitlement followed by qualifying event
In the case of a qualifying event described in paragraph
(3)(B) that occurs less than 18 months after the date the
covered employee became entitled to benefits under title
XVIII of the Social Security Act, the period of coverage
for qualified beneficiaries other than the covered employee
shall not terminate under this clause before the close of
the 36-month period beginning on the date the covered
employee became so entitled.
In the case of a qualified beneficiary who is determined,
under title II or XVI of the Social Security Act, to have
been disabled at any time during the first 60 days of
continuation coverage under this section, any reference in
subclause (I) or (II) to 18 months is deemed a reference to
29 months (with respect to all qualified beneficiaries), but
only if the qualified beneficiary has provided notice of such
determination under paragraph (6)(C) before the end of such
18 months.
(ii) End of plan
The date on which the employer ceases to provide any group
health plan to any employee.
(iii) Failure to pay premium
The date on which coverage ceases under the plan by reason
of a failure to make timely payment of any premium required
under the plan with respect to the qualified beneficiary. The
payment of any premium (other than any payment referred to in
the last sentence of subparagraph (C)) shall be considered to
be timely if made within 30 days after the date due or within
such longer period as applies to or under the plan.
(iv) Group health plan coverage or medicare entitlement
The date on which the qualified beneficiary first becomes,
after the date of the election -
(I) covered under any other group health plan (as an
employee or otherwise) which does not contain any exclusion
or limitation with respect to any preexisting condition of
such beneficiary (other than such an exclusion or
limitation which does not apply to (or is satisfied by)
such beneficiary by reason of chapter 100 of this title,
part 7 of subtitle B of title I of the Employee Retirement
Income Security Act of 1974, or title XXVII of the Public
Health Service Act), or
(II) in the case of a qualified beneficiary other than a
qualified beneficiary described in subsection (g)(1)(D)
entitled to benefits under title XVIII of the Social
Security Act.
(v) Termination of extended coverage for disability
In the case of a qualified beneficiary who is disabled at
any time during the first 60 days of continuation coverage
under this section, the month that begins more than 30 days
after the date of the final determination under title II or
XVI of the Social Security Act that the qualified beneficiary
is no longer disabled.
(C) Premium requirements
The plan may require payment of a premium for any period of
continuation coverage, except that such premium -
(i) shall not exceed 102 percent of the applicable premium
for such period, and
(ii) may, at the election of the payor, be made in monthly
installments.
In no event may the plan require the payment of any premium
before the day which is 45 days after the day on which the
qualified beneficiary made the initial election for
continuation coverage. In the case of an individual described
in the last sentence of subparagraph (B)(i), any reference in
clause (i) of this subparagraph to "102 percent" is deemed a
reference to "150 percent" for any month after the 18th month
of continuation coverage described in subclause (I) or (II) of
subparagraph (B)(i).
(D) No requirement of insurability
The coverage may not be conditioned upon, or discriminate on
the basis of lack of, evidence of insurability.
(E) Conversion option
In the case of a qualified beneficiary whose period of
continuation coverage expires under subparagraph (B)(i), the
plan must, during the 180-day period ending on such expiration
date, provide to the qualified beneficiary the option of
enrollment under a conversion health plan otherwise generally
available under the plan.
(3) Qualifying event
For purposes of this subsection, the term "qualifying event"
means, with respect to any covered employee, any of the following
events which, but for the continuation coverage required under
this subsection, would result in the loss of coverage of a
qualified beneficiary -
(A) The death of the covered employee.
(B) The termination (other than by reason of such employee's
gross misconduct), or reduction of hours, of the covered
employee's employment.
(C) The divorce or legal separation of the covered employee
from the employee's spouse.
(D) The covered employee becoming entitled to benefits under
title XVIII of the Social Security Act.
(E) A dependent child ceasing to be a dependent child under
the generally applicable requirements of the plan.
(F) A proceeding in a case under title 11, United States
Code, commencing on or after July 1, 1986, with respect to the
employer from whose employment the covered employee retired at
any time.
In the case of an event described in subparagraph (F), a loss of
coverage includes a substantial elimination of coverage with
respect to a qualified beneficiary described in subsection
(g)(1)(D) within one year before or after the date of
commencement of the proceeding.
(4) Applicable premium
For purposes of this subsection -
(A) In general
The term "applicable premium" means, with respect to any
period of continuation coverage of qualified beneficiaries, the
cost to the plan for such period of the coverage for similarly
situated beneficiaries with respect to whom a qualifying event
has not occurred (without regard to whether such cost is paid
by the employer or employee).
(B) Special rule for self-insured plans
To the extent that a plan is a self-insured plan -
(i) In general
Except as provided in clause (ii), the applicable premium
for any period of continuation coverage of qualified
beneficiaries shall be equal to a reasonable estimate of the
cost of providing coverage for such period for similarly
situated beneficiaries which -
(I) is determined on an actuarial basis, and
(II) takes into account such factors as the Secretary may
prescribe in regulations.
(ii) Determination on basis of past cost
If a plan administrator elects to have this clause apply,
the applicable premium for any period of continuation
coverage of qualified beneficiaries shall be equal to -
(I) the cost to the plan for similarly situated
beneficiaries for the same period occurring during the
preceding determination period under subparagraph (C),
adjusted by
(II) the percentage increase or decrease in the implicit
price deflator of the gross national product (calculated by
the Department of Commerce and published in the Survey of
Current Business) for the 12-month period ending on the
last day of the sixth month of such preceding determination
period.
(iii) Clause (ii) not to apply where significant change
A plan administrator may not elect to have clause (ii)
apply in any case in which there is any significant
difference between the determination period and the preceding
determination period, in coverage under, or in employees
covered by, the plan. The determination under the preceding
sentence for any determination period shall be made at the
same time as the determination under subparagraph (C).
(C) Determination period
The determination of any applicable premium shall be made for
a period of 12 months and shall be made before the beginning of
such period.
(5) Election
For purposes of this subsection -
(A) Election period
The term "election period" means the period which -
(i) begins not later than the date on which coverage
terminates under the plan by reason of a qualifying event,
(ii) is of at least 60 days' duration, and
(iii) ends not earlier than 60 days after the later of -
(I) the date described in clause (i), or
(II) in the case of any qualified beneficiary who
receives notice under paragraph (6)(D), the date of such
notice.
(B) Effect of election on other beneficiaries
Except as otherwise specified in an election, any election of
continuation coverage by a qualified beneficiary described in
subparagraph (A)(i) or (B) of subsection (g)(1) shall be deemed
to include an election of continuation coverage on behalf of
any other qualified beneficiary who would lose coverage under
the plan by reason of the qualifying event. If there is a
choice among types of coverage under the plan, each qualified
beneficiary is entitled to make a separate selection among such
types of coverage.
(C) Temporary extension of COBRA election period for certain
individuals
(i) In general
In the case of a nonelecting TAA-eligible individual and
notwithstanding subparagraph (A), such individual may elect
continuation coverage under this subsection during the 60-day
period that begins on the first day of the month in which the
individual becomes a TAA-eligible individual, but only if
such election is made not later than 6 months after the date
of the TAA-related loss of coverage.
(ii) Commencement of coverage; no reach-back
Any continuation coverage elected by a TAA-eligible
individual under clause (i) shall commence at the beginning
of the 60-day election period described in such paragraph and
shall not include any period prior to such 60-day election
period.
(iii) Preexisting conditions
With respect to an individual who elects continuation
coverage pursuant to clause (i), the period -
(I) beginning on the date of the TAA-related loss of
coverage, and
(II) ending on the first day of the 60-day election
period described in clause (i),
shall be disregarded for purposes of determining the 63-day
periods referred to in section 9801(c)(2), section 701(c)(2)
of the Employee Retirement Income Security Act of 1974, and
section 2701(c)(2) of the Public Health Service Act.
(iv) Definitions
For purposes of this subsection:
(I) Nonelecting TAA-eligible individual
The term "nonelecting TAA-eligible individual" means a
TAA-eligible individual who has a TAA-related loss of
coverage and did not elect continuation coverage under this
subsection during the TAA-related election period.
(II) TAA-eligible individual
The term "TAA-eligible individual" means an eligible TAA
recipient (as defined in paragraph (2) of section 35(c))
and an eligible alternative TAA recipient (as defined in
paragraph (3) of such section).
(III) TAA-related election period
The term "TAA-related election period" means, with
respect to a TAA-related loss of coverage, the 60-day
election period under this subsection which is a direct
consequence of such loss.
(IV) TAA-related loss of coverage
The term "TAA-related loss of coverage" means, with
respect to an individual whose separation from employment
gives rise to being an TAA-eligible individual, the loss of
health benefits coverage associated with such separation.
(6) Notice requirement
In accordance with regulations prescribed by the Secretary -
(A) The group health plan shall provide, at the time of
commencement of coverage under the plan, written notice to each
covered employee and spouse of the employee (if any) of the
rights provided under this subsection.
(B) The employer of an employee under a plan must notify the
plan administrator of a qualifying event described in
subparagraph (A), (B), (D), or (F) of paragraph (3) with
respect to such employee within 30 days (or, in the case of a
group health plan which is a multiemployer plan, such longer
period of time as may be provided in the terms of the plan) of
the date of the qualifying event.
(C) Each covered employee or qualified beneficiary is
responsible for notifying the plan administrator of the
occurrence of any qualifying event described in subparagraph
(C) or (E) of paragraph (3) within 60 days after the date of
the qualifying event and each qualified beneficiary who is
determined, under title II or XVI of the Social Security Act,
to have been disabled at any time during the first 60 days of
continuation coverage under this section is responsible for
notifying the plan administrator of such determination within
60 days after the date of the determination and for notifying
the plan administrator within 30 days of the date of any final
determination under such title or titles that the qualified
beneficiary is no longer disabled.
(D) The plan administrator shall notify -
(i) in the case of a qualifying event described in
subparagraph (A), (B), (D), or (F) of paragraph (3), any
qualified beneficiary with respect to such event, and
(ii) in the case of a qualifying event described in
subparagraph (C) or (E) of paragraph (3) where the covered
employee notifies the plan administrator under subparagraph
(C), any qualified beneficiary with respect to such event,
of such beneficiary's rights under this subsection.
The requirements of subparagraph (B) shall be considered
satisfied in the case of a multiemployer plan in connection with
a qualifying event described in paragraph (3)(B) if the plan
provides that the determination of the occurrence of such
qualifying event will be made by the plan administrator. For
purposes of subparagraph (D), any notification shall be made
within 14 days (or, in the case of a group health plan which is a
multiemployer plan, such longer period of time as may be provided
in the terms of the plan) of the date on which the plan
administrator is notified under subparagraph (B) or (C),
whichever is applicable, and any such notification to an
individual who is a qualified beneficiary as the spouse of the
covered employee shall be treated as notification to all other
qualified beneficiaries residing with such spouse at the time
such notification is made.
(7) Covered employee
For purposes of this subsection, the term "covered employee"
means an individual who is (or was) provided coverage under a
group health plan by virtue of the performance of services by the
individual for 1 or more persons maintaining the plan (including
as an employee defined in section 401(c)(1)).
(8) Optional extension of required periods
A group health plan shall not be treated as failing to meet the
requirements of this subsection solely because the plan provides
both -
(A) that the period of extended coverage referred to in
paragraph (2)(B) commences with the date of the loss of
coverage, and
(B) that the applicable notice period provided under
paragraph (6)(B) commences with the date of the loss of
coverage.
(g) Definitions
For purposes of this section -
(1) Qualified beneficiary
(A) In general
The term "qualified beneficiary" means, with respect to a
covered employee under a group health plan, any other
individual who, on the day before the qualifying event for that
employee, is a beneficiary under the plan -
(i) as the spouse of the covered employee, or
(ii) as the dependent child of the employee.
Such term shall also include a child who is born to or placed
for adoption with the covered employee during the period of
continuation coverage under this section.
(B) Special rule for terminations and reduced employment
In the case of a qualifying event described in subsection
(f)(3)(B), the term "qualified beneficiary" includes the
covered employee.
(C) Exception for nonresident aliens
Notwithstanding subparagraphs (A) and (B), the term
"qualified beneficiary" does not include an individual whose
status as a covered employee is attributable to a period in
which such individual was a nonresident alien who received no
earned income (within the meaning of section 911(d)(2)) from
the employer which constituted income from sources within the
United States (within the meaning of section 861(a)(3)). If an
individual is not a qualified beneficiary pursuant to the
previous sentence, a spouse or dependent child of such
individual shall not be considered a qualified beneficiary by
virtue of the relationship of the individual.
(D) Special rule for retirees and widows
In the case of a qualifying event described in subsection
(f)(3)(F), the term "qualified beneficiary" includes a covered
employee who had retired on or before the date of substantial
elimination of coverage and any other individual who, on the
day before such qualifying event, is a beneficiary under the
plan -
(i) as the spouse of the covered employee,
(ii) as the dependent child of the covered employee, or
(iii) as the surviving spouse of the covered employee.
(2) Group health plan
The term "group health plan" has the meaning given such term by
section 5000(b)(1). Such term shall not include any plan
substantially all of the coverage under which is for qualified
long-term care services (as defined in section 7702B(c)).
(3) Plan administrator
The term "plan administrator" has the meaning given the term
"administrator" by section 3(16)(A) of the Employee Retirement
Income Security Act of 1974.
(4) Correction
A failure of a group health plan to meet the requirements of
subsection (f) with respect to any qualified beneficiary shall be
treated as corrected if -
(A) such failure is retroactively undone to the extent
possible, and
(B) the qualified beneficiary is placed in a financial
position which is as good as such beneficiary would have been
in had such failure not occurred.
For purposes of applying subparagraph (B), the qualified
beneficiary shall be treated as if he had elected the most
favorable coverage in light of the expenses he incurred since the
failure first occurred.
-SOURCE-
(Added Pub. L. 100-647, title III, Sec. 3011(a), Nov. 10, 1988, 102
Stat. 3616; amended Pub. L. 101-239, title VI, Secs. 6202(b)(3)(B),
6701(a)-(c), title VII, Secs. 7862(c)(2)(B), (3)(C), (4)(B),
(5)(A), 7891(d)(1)(B), (2)(A), Dec. 19, 1989, 103 Stat. 2233, 2294,
2295, 2432, 2433, 2446; Pub. L. 101-508, title XI, Sec. 11702(f),
Nov. 5, 1990, 104 Stat. 1388-515; Pub. L. 103-66, title XIII, Sec.
13422(a), Aug. 10, 1993, 107 Stat. 566; Pub. L. 104-188, title I,
Sec. 1704(g)(1)(A), (t)(21), Aug. 20, 1996, 110 Stat. 1880, 1888;
Pub. L. 104-191, title III, Sec. 321(d)(1), title IV, Sec. 421(c),
Aug. 21, 1996, 110 Stat. 2058, 2088; Pub. L. 107-210, div. A, title
II, Sec. 203(e)(3), Aug. 6, 2002, 116 Stat. 971.)
-REFTEXT-
REFERENCES IN TEXT
The Public Health Service Act, referred to in subsec. (f)(1),
does not contain a section 2162. The reference probably should be
to section 1928 of the Social Security Act, which is classified to
section 1396s of Title 42, The Public Health and Welfare, and which
relates to pediatric vaccines.
The Social Security Act, referred to in subsec. (f)(2)(B)(i)(IV),
(V), (iv)(II), (v), (3)(D), (6)(C), is act Aug. 14, 1935, ch. 531,
49 Stat. 620, as amended. Titles II, XVI, and XVIII of the Social
Security Act are classified generally to subchapters II (Sec. 401
et seq.), XVI (Sec. 1381 et seq.), and XVIII (Sec. 1395 et seq.),
respectively, of chapter 7 of Title 42. For complete classification
of this Act to the Code, see section 1305 of Title 42 and Tables.
The Employee Retirement Income Security Act of 1974, referred to
in subsecs. (f)(2)(B)(iv)(I), (5)(C)(iii), and (g)(3), is Pub. L.
93-406, Sept. 2, 1974, 88 Stat. 832, as amended. Part 7 of subtitle
B of title I of the Act is classified generally to part 7 (Sec.
1181 et seq.) of subtitle B of subchapter I of chapter 18 of Title
29, Labor. Sections 3(16)(A) and 701(c)(2) of the Act are
classified to sections 1002(16)(A) and 1181(c)(2), 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 Public Health Service Act, referred to in subsec.
(f)(2)(B)(iv)(I), (5)(C)(iii), is act July 1, 1944, ch. 373, 58
Stat. 682, as amended. Title XXVII of the Act is classified
generally to subchapter XXV (Sec. 300gg et seq.) of chapter 6A of
Title 42, The Public Health and Welfare. Section 2701(c)(2) of the
Act is classified to section 300gg(c)(2) of Title 42. For complete
classification of this Act to the Code, see Short Title note set
out under section 201 of Title 42 and Tables.
-MISC1-
AMENDMENTS
2002 - Subsec. (f)(5)(C). Pub. L. 107-210 added subpar. (C).
1996 - Subsec. (f)(2)(B)(i). Pub. L. 104-191, Sec. 421(c)(1)(A),
in concluding provisions, substituted "at any time during the first
60 days of continuation coverage under this section" for "at the
time of a qualifying event described in paragraph (3)(B)", struck
out "with respect to such event" after "(II) to 18 months", and
inserted "(with respect to all qualified beneficiaries)" after "29
months".
Pub. L. 104-188, Sec. 1704(t)(21), made technical amendment to
directory language of Pub. L. 101-239, Sec. 6701(a)(1). See 1989
Amendment note below.
Subsec. (f)(2)(B)(i)(V). Pub. L. 104-188, Sec. 1704(g)(1)(A),
substituted "Medicare entitlement followed by qualifying event" for
"Qualifying event involving medicare entitlement" in heading and
amended text generally. Prior to amendment, text read as follows:
"In the case of an event described in paragraph (3)(D) (without
regard to whether such event is a qualifying event), the period of
coverage for qualified beneficiaries other than the covered
employee for such event or any subsequent qualifying event shall
not terminate before the close of the 36-month period beginning on
the date the covered employee becomes entitled to benefits under
title XVIII of the Social Security Act."
Subsec. (f)(2)(B)(iv)(I). Pub. L. 104-191, Sec. 421(c)(1)(B),
inserted "(other than such an exclusion or limitation which does
not apply to (or is satisfied by) such beneficiary by reason of
chapter 100 of this title, part 7 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974, or title XXVII of
the Public Health Service Act)" before ", or".
Subsec. (f)(2)(B)(v). Pub. L. 104-191, Sec. 421(c)(1)(C),
substituted "at any time during the first 60 days of continuation
coverage under this section" for "at the time of a qualifying event
described in paragraph (3)(B)".
Subsec. (f)(6)(C). Pub. L. 104-191, Sec. 421(c)(2), substituted
"at any time during the first 60 days of continuation coverage
under this section" for "at the time of a qualifying event
described in paragraph (3)(B)".
Subsec. (g)(1)(A). Pub. L. 104-191, Sec. 421(c)(3), inserted at
end "Such term shall also include a child who is born to or placed
for adoption with the covered employee during the period of
continuation coverage under this section."
Subsec. (g)(2). Pub. L. 104-191, Sec. 321(d)(1), inserted at end
"Such term shall not include any plan substantially all of the
coverage under which is for qualified long-term care services (as
defined in section 7702B(c))."
1993 - Subsec. (f)(1). Pub. L. 103-66 inserted "the coverage of
the costs of pediatric vaccines (as defined under section 2162 of
the Public Health Service Act) is not reduced below the coverage
provided by the plan as of May 1, 1993, and only if" after "only
if".
1990 - Subsec. (d)(1). Pub. L. 101-508 amended par. (1)
generally. Prior to amendment, par. (1) read as follows: "any
failure of a group health plan to meet the requirements of
subsection (f) if all employers maintaining such plan normally
employed fewer than 20 employees on a typical business day during
the preceding calendar year,".
1989 - Subsec. (f)(2)(B)(i). Pub. L. 101-239, Sec. 6701(a)(1), as
amended by Pub. L. 104-188, Sec. 1704(t)(21), inserted at end "In
the case of a qualified beneficiary who is determined, under title
II or XVI of the Social Security Act, to have been disabled at the
time of a qualifying event described in paragraph (3)(B), any
reference in subclause (I) or (II) to 18 months with respect to
such event is deemed a reference to 29 months, but only if the
qualified beneficiary has provided notice of such determination
under paragraph (6)(C) before the end of such 18 months."
Subsec. (f)(2)(B)(i)(V). Pub. L. 101-239, Sec. 7862(c)(5)(A),
added subcl. (V).
Subsec. (f)(2)(B)(iv). Pub. L. 101-239, Sec. 7862(c)(3)(C),
substituted "entitlement" for "eligibility" in heading and inserted
"which does not contain any exclusion or limitation with respect to
any preexisting condition of such beneficiary" after "or
otherwise)" in subcl. (I).
Subsec. (f)(2)(B)(v). Pub. L. 101-239, Sec. 6701(a)(2), added cl.
(v).
Subsec. (f)(2)(C). Pub. L. 101-239, Sec. 7862(c)(4)(B), amended
last sentence generally. Prior to amendment, last sentence read as
follows: "If an election is made after the qualifying event, the
plan shall permit payment for continuation coverage during the
period preceding the election to be made within 45 days of the date
of the election."
Pub. L. 101-239, Sec. 6701(b), inserted at end "In the case of an
individual described in the last sentence of subparagraph (B)(i),
any reference in clause (i) of this subparagraph to '102 percent'
is deemed a reference to '150 percent' for any month after the 18th
month of continuation coverage described in subclause (I) or (II)
of subparagraph (B)(i)."
Subsec. (f)(6). Pub. L. 101-239, Sec. 7891(d)(1)(B)(ii), inserted
after and below subpar. (D) the following new flush sentence "The
requirements of subparagraph (B) shall be considered satisfied in
the case of a multiemployer plan in connection with a qualifying
event described in paragraph (3)(B) if the plan provides that the
determination of the occurrence of such qualifying event will be
made by the plan administrator."
Pub. L. 101-239, Sec. 7891(d)(1)(B)(i)(II), inserted "(or, in the
case of a group health plan which is a multiemployer plan, such
longer period of time as may be provided in the terms of the plan)"
after "14 days" in last sentence.
Subsec. (f)(6)(B). Pub. L. 101-239, Sec. 7891(d)(1)(B)(i)(I),
inserted "(or, in the case of a group health plan which is a
multiemployer plan, such longer period of time as may be provided
in the terms of the plan)" after "30 days".
Subsec. (f)(6)(C). Pub. L. 101-239, Sec. 6701(c), inserted before
period at end "and each qualified beneficiary who is determined,
under title II or XVI of the Social Security Act, to have been
disabled at the time of a qualifying event described in paragraph
(3)(B) is responsible for notifying the plan administrator of such
determination within 60 days after the date of the determination
and for notifying the plan administrator within 30 days of the date
of any final determination under such title or titles that the
qualified beneficiary is no longer disabled".
Subsec. (f)(7). Pub. L. 101-239, Sec. 7862(c)(2)(B), substituted
"the performance of services by the individual for 1 or more
persons maintaining the plan (including as an employee defined in
section 401(c)(1))" for "the individual's employment or previous
employment with an employer".
Subsec. (f)(8). Pub. L. 101-239, Sec. 7891(d)(2)(A), added par.
(8).
Subsec. (g)(2). Pub. L. 101-239, Sec. 6202(b)(3)(B), substituted
"section 5000(b)(1)" for "section 162(i)".
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-210 applicable to petitions for
certification filed under part 2 or 3 of subchapter II of chapter
12 of Title 19, Customs Duties, on or after the date that is 90
days after Aug. 6, 2002, except as otherwise provided, see section
151 of Pub. L. 107-210, set out as a note preceding section 2271 of
Title 19.
EFFECTIVE DATE OF 1996 AMENDMENTS
Amendment by section 321(d)(1) of Pub. L. 104-191 applicable to
contracts issued after Dec. 31, 1996, see section 321(f) of Pub. L.
104-191, set out as an Effective Date note under section 7702B of
this title.
Section 421(d) of Pub. L. 104-191 provided that: "The amendments
made by this section [amending this section, sections 1162, 1166,
and 1167 of Title 29, Labor, and sections 300bb-2, 300bb-6, and
300bb-8 of Title 42, The Public Health and Welfare] shall become
effective on January 1, 1997, regardless of whether the qualifying
event occurred before, on, or after such date."
Section 1704(g)(2) of Pub. L. 104-188 provided that: "The
amendments made by this subsection [amending this section, section
1162 of Title 29, Labor, and section 300bb-2 of Title 42, The
Public Health and Welfare] shall apply to plan years beginning
after December 31, 1989."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13422(b) of Pub. L. 103-66 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to plan years beginning after the date of the enactment of
this Act [Aug. 10, 1993]."
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 effective 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
11702(j) of Pub. L. 101-508, set out as a note under section 59 of
this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by section 6202(b)(3)(B) of Pub. L. 101-239 applicable
to items and services furnished after Dec. 19, 1989, see section
6202(b)(5) of Pub. L. 101-239, set out as a note under section 162
of this title.
Section 6701(d) of Pub. L. 101-239 provided that: "The amendments
made by this section [amending this section] shall apply to plan
years beginning on or after the date of the enactment of this Act
[Dec. 19, 1989], regardless of whether the qualifying event
occurred before, on, or after such date."
Section 7862(c)(2)(C) of Pub. L. 101-239 provided that: "The
amendments made by this paragraph [amending this section and
section 1167 of Title 29, Labor] shall apply to plan years
beginning after December 31, 1989."
Amendment by section 7862(c)(3)(C) of Pub. L. 101-239 applicable
to (i) qualifying events occurring after Dec. 31, 1989, and (ii) in
the case of qualified beneficiaries who elected continuation
coverage after Dec. 31, 1988, the period for which the required
premium was paid (or was attempted to be paid but was rejected as
such), see section 7862(c)(3)(D) of Pub. L. 101-239, set out as a
note under section 162 of this title.
Section 7862(c)(4)(C) of Pub. L. 101-239 provided that: "The
amendments made by this paragraph [amending this section and
section 1162 of Title 29, Labor] shall apply to plan years
beginning after December 31, 1989."
Section 7862(c)(5)(C) of Pub. L. 101-239 provided that: "The
amendments made by this paragraph [amending this section and
section 1162 of Title 29] shall apply to plan years beginning after
December 31, 1989."
Section 7891(d)(1)(C) of Pub. L. 101-239 provided that: "The
amendments made by this paragraph [amending this section and
section 1166 of Title 29] shall apply with respect to plan years
beginning on or after January 1, 1990."
Section 7891(d)(2)(C) of Pub. L. 101-239 provided that: "The
amendments made by this paragraph [amending this section and
section 1167 of Title 29] shall apply with respect to plan years
beginning on or after January 1, 1990."
EFFECTIVE DATE
Section 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 an
Effective Date of 1988 Amendment note under section 162 of this
title.
CONSTRUCTION OF 2002 AMENDMENT
Nothing in amendment by Pub. L. 107-210, other than provisions
relating to COBRA continuation coverage and reporting requirements,
to be construed as creating new mandate on any party regarding
health insurance coverage, see section 203(f) of Pub. L. 107-210,
set out as a note under section 2918 of Title 29, Labor.
NOTIFICATION OF CHANGES IN CONTINUATION COVERAGE
Section 421(e) of Pub. L. 104-191 provided that: "Not later than
November 1, 1996, each group health plan (covered under title XXII
of the Public Health Service Act [42 U.S.C. 300bb-1 et seq.], part
6 of subtitle B of title I of the Employee Retirement Income
Security Act of 1974 [29 U.S.C. 1161 et seq.], and section 4980B(f)
of the Internal Revenue Code of 1986) shall notify each qualified
beneficiary who has elected continuation coverage under such title,
part or section of the amendments made by this section [amending
this section, sections 1162, 1166, and 1167 of Title 29, Labor, and
sections 300bb-2, 300bb-6, and 300bb-8 of Title 42, The Public
Health and Welfare]."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 35, 51A, 106, 414, 9707,
9832 of this title; title 29 sections 1191b, 2918; title 38 section
4317; title 42 sections 300gg-91, 1396a, 1396e.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC Sec. 4980C 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4980C. Requirements for issuers of qualified long-term care
insurance contracts
-STATUTE-
(a) General rule
There is hereby imposed on any person failing to meet the
requirements of subsection (c) or (d) a tax in the amount
determined under subsection (b).
(b) Amount
(1) In general
The amount of the tax imposed by subsection (a) shall be $100
per insured for each day any requirement of subsection (c) or (d)
is not met with respect to each qualified long-term care
insurance contract.
(2) Waiver
In the case of a failure which is due to reasonable cause and
not to willful neglect, the Secretary may waive part or all of
the tax imposed by subsection (a) to the extent that payment of
the tax would be excessive relative to the failure involved.
(c) Responsibilities
The requirements of this subsection are as follows:
(1) Requirements of model provisions
(A) Model regulation
The following requirements of the model regulation must be
met:
(i) Section 13 (relating to application forms and
replacement coverage).
(ii) Section 14 (relating to reporting requirements),
except that the issuer shall also report at least annually
the number of claims denied during the reporting period for
each class of business (expressed as a percentage of claims
denied), other than claims denied for failure to meet the
waiting period or because of any applicable preexisting
condition.
(iii) Section 20 (relating to filing requirements for
marketing).
(iv) Section 21 (relating to standards for marketing),
including inaccurate completion of medical histories, other
than sections 21C(1) and 21C(6) thereof, except that -
(I) in addition to such requirements, no person shall, in
selling or offering to sell a qualified long-term care
insurance contract, misrepresent a material fact; and
(II) no such requirements shall include a requirement to
inquire or identify whether a prospective applicant or
enrollee for long-term care insurance has accident and
sickness insurance.
(v) Section 22 (relating to appropriateness of recommended
purchase).
(vi) Section 24 (relating to standard format outline of
coverage).
(vii) Section 25 (relating to requirement to deliver
shopper's guide).
(B) Model Act
The following requirements of the model Act must be met:
(i) Section 6F (relating to right to return), except that
such section shall also apply to denials of applications and
any refund shall be made within 30 days of the return or
denial.
(ii) Section 6G (relating to outline of coverage).
(iii) Section 6H (relating to requirements for certificates
under group plans).
(iv) Section 6I (relating to policy summary).
(v) Section 6J (relating to monthly reports on accelerated
death benefits).
(vi) Section 7 (relating to incontestability period).
(C) Definitions
For purposes of this paragraph, the terms "model regulation"
and "model Act" have the meanings given such terms by section
7702B(g)(2)(B).
(2) Delivery of policy
If an application for a qualified long-term care insurance
contract (or for a certificate under such a contract for a group)
is approved, the issuer shall deliver to the applicant (or
policyholder or certificateholder) the contract (or certificate)
of insurance not later than 30 days after the date of the
approval.
(3) Information on denials of claims
If a claim under a qualified long-term care insurance contract
is denied, the issuer shall, within 60 days of the date of a
written request by the policyholder or certificateholder (or
representative) -
(A) provide a written explanation of the reasons for the
denial, and
(B) make available all information directly relating to such
denial.
(d) Disclosure
The requirements of this subsection are met if the issuer of a
long-term care insurance policy discloses in such policy and in the
outline of coverage required under subsection (c)(1)(B)(ii) that
the policy is intended to be a qualified long-term care insurance
contract under section 7702B(b).
(e) Qualified long-term care insurance contract defined
For purposes of this section, the term "qualified long-term care
insurance contract" has the meaning given such term by section
7702B.
(f) Coordination with State requirements
If a State imposes any requirement which is more stringent than
the analogous requirement imposed by this section or section
7702B(g), the requirement imposed by this section or section
7702B(g) shall be treated as met if the more stringent State
requirement is met.
-SOURCE-
(Added Pub. L. 104-191, title III, Sec. 326(a), Aug. 21, 1996, 110
Stat. 2065.)
-MISC1-
EFFECTIVE DATE
Section 327 of title III of Pub. L. 104-191 provided that:
"(a) In General. - The provisions of, and amendments made by,
this part [part II (Secs. 325-327) of subtitle C of title III of
Pub. L. 104-191, enacting this section and amending section 7702B
of this title] shall apply to contracts issued after December 31,
1996. The provisions of section 321(f) [set out as an Effective
Date note under section 7702B of this title] (relating to
transition rule) shall apply to such contracts.
"(b) Issuers. - The amendments made by section 326 [enacting this
section] shall apply to actions taken after December 31, 1996."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 101, 7702B of this title.
-End-
-CITE-
26 USC Sec. 4980D 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4980D. Failure to meet certain group health plan requirements
-STATUTE-
(a) General rule
There is hereby imposed a tax on any failure of a group health
plan to meet the requirements of chapter 100 (relating to group
health plans requirements).
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) on any failure
shall be $100 for each day in the noncompliance period with
respect to each individual to whom such failure relates.
(2) Noncompliance period
For purposes of this section, the term "noncompliance period"
means, with respect to any failure, the period -
(A) beginning on the date such failure first occurs, and
(B) ending on the date such failure is corrected.
(3) Minimum tax for noncompliance period where failure discovered
after notice of examination
Notwithstanding paragraphs (1) and (2) of subsection (c) -
(A) In general
In the case of 1 or more failures with respect to an
individual -
(i) which are not corrected before the date a notice of
examination of income tax liability is sent to the employer,
and
(ii) which occurred or continued during the period under
examination,
the amount of tax imposed by subsection (a) by reason of such
failures with respect to such individual shall not be less than
the lesser of $2,500 or the amount of tax which would be
imposed by subsection (a) without regard to such paragraphs.
(B) Higher minimum tax where violations are more than de
minimis
To the extent violations for which any person is liable under
subsection (e) for any year are more than de minimis,
subparagraph (A) shall be applied by substituting "$15,000" for
"$2,500" with respect to such person.
(C) Exception for church plans
This paragraph shall not apply to any failure under a church
plan (as defined in section 414(e)).
(c) Limitations on amount of tax
(1) Tax not to apply where failure not discovered exercising
reasonable diligence
No tax shall be imposed by subsection (a) on any failure during
any period for which it is established to the satisfaction of the
Secretary that the person otherwise liable for such tax did not
know, and exercising reasonable diligence would not have known,
that such failure existed.
(2) Tax not to apply to failures corrected within certain periods
No tax shall be imposed by subsection (a) on any failure if -
(A) such failure was due to reasonable cause and not to
willful neglect, and
(B)(i) in the case of a plan other than a church plan (as
defined in section 414(e)), such failure is corrected during
the 30-day period beginning on the first date the person
otherwise liable for such tax knew, or exercising reasonable
diligence would have known, that such failure existed, and
(ii) in the case of a church plan (as so defined), such
failure is corrected before the close of the correction period
(determined under the rules of section 414(e)(4)(C)).
(3) Overall limitation for unintentional failures
In the case of failures which are due to reasonable cause and
not to willful neglect -
(A) Single employer plans
(i) In general
In the case of failures with respect to plans other than
specified multiple employer health plans, the tax imposed by
subsection (a) for failures during the taxable year of the
employer shall not exceed the amount equal to the lesser of -
(I) 10 percent of the aggregate amount paid or incurred
by the employer (or predecessor employer) during the
preceding taxable year for group health plans, or
(II) $500,000.
(ii) Taxable years in the case of certain controlled groups
For purposes of this subparagraph, if not all persons who
are treated as a single employer for purposes of this section
have the same taxable year, the taxable years taken into
account shall be determined under principles similar to the
principles of section 1561.
(B) Specified multiple employer health plans
(i) In general
In the case of failures with respect to a specified
multiple employer health plan, the tax imposed by subsection
(a) for failures during the taxable year of the trust forming
part of such plan shall not exceed the amount equal to the
lesser of -
(I) 10 percent of the amount paid or incurred by such
trust during such taxable year to provide medical care (as
defined in section 9832(d)(3)) directly or through
insurance, reimbursement, or otherwise, or
(II) $500,000.
For purposes of the preceding sentence, all plans of which
the same trust forms a part shall be treated as one plan.
(ii) Special rule for employers required to pay tax
If an employer is assessed a tax imposed by subsection (a)
by reason of a failure with respect to a specified multiple
employer health plan, the limit shall be determined under
subparagraph (A) (and not under this subparagraph) and as if
such plan were not a specified multiple employer health plan.
(4) Waiver by Secretary
In the case of a failure which is due to reasonable cause and
not to willful neglect, the Secretary may waive part or all of
the tax imposed by subsection (a) to the extent that the payment
of such tax would be excessive relative to the failure involved.
(d) Tax not to apply to certain insured small employer plans
(1) In general
In the case of a group health plan of a small employer which
provides health insurance coverage solely through a contract with
a health insurance issuer, no tax shall be imposed by this
section on the employer on any failure (other than a failure
attributable to section 9811) which is solely because of the
health insurance coverage offered by such issuer.
(2) Small employer
(A) In general
For purposes of paragraph (1), the term "small employer"
means, with respect to a calendar year and a plan year, an
employer who employed an average of at least 2 but not more
than 50 employees on business days during the preceding
calendar year and who employs at least 2 employees on the first
day of the plan year. For purposes of the preceding sentence,
all persons treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 shall be treated as one
employer.
(B) Employers not in existence in preceding year
In the case of an employer which was not in existence
throughout the preceding calendar year, the determination of
whether such employer is a small employer shall be based on the
average number of employees that it is reasonably expected such
employer will employ on business days in the current calendar
year.
(C) Predecessors
Any reference in this paragraph to an employer shall include
a reference to any predecessor of such employer.
(3) Health insurance coverage; health insurance issuer
For purposes of paragraph (1), the terms "health insurance
coverage" and "health insurance issuer" have the respective
meanings given such terms by section 9832.
(e) Liability for tax
The following shall be liable for the tax imposed by subsection
(a) on a failure:
(1) Except as otherwise provided in this subsection, the
employer.
(2) In the case of a multiemployer plan, the plan.
(3) In the case of a failure under section 9803 (relating to
guaranteed renewability) with respect to a plan described in
subsection (f)(2)(B), the plan.
(f) Definitions
For purposes of this section -
(1) Group health plan
The term "group health plan" has the meaning given such term by
section 9832(a).
(2) Specified multiple employer health plan
The term "specified multiple employer health plan" means a
group health plan which is -
(A) any multiemployer plan, or
(B) any multiple employer welfare arrangement (as defined in
section 3(40) of the Employee Retirement Income Security Act of
1974, as in effect on the date of the enactment of this
section).
(3) Correction
A failure of a group health plan shall be treated as corrected
if -
(A) such failure is retroactively undone to the extent
possible, and
(B) the person to whom the failure relates is placed in a
financial position which is as good as such person would have
been in had such failure not occurred.
-SOURCE-
(Added Pub. L. 104-191, title IV, Sec. 402(a), Aug. 21, 1996, 110
Stat. 2084; amended Pub. L. 105-34, title XV, Sec. 1531(b)(2), Aug.
5, 1997, 111 Stat. 1085.)
-REFTEXT-
REFERENCES IN TEXT
Section 3(40) of the Employee Retirement Income Security Act of
1974, referred to in subsec. (f)(2)(B), is classified to section
1002(40) of Title 29, Labor.
The date of the enactment of this section, referred to in subsec.
(f)(2)(B), is the date of enactment of Pub. L. 104-191, which was
approved Aug. 21, 1996.
-MISC1-
AMENDMENTS
1997 - Subsec. (a). Pub. L. 105-34, Sec. 1531(b)(2)(A),
substituted "plans" for "plan portability, access, and
renewability".
Subsec. (c)(3)(B)(i)(I). Pub. L. 105-34, Sec. 1531(b)(2)(B),
substituted "9832(d)(3)" for "9805(d)(3)".
Subsec. (d)(1). Pub. L. 105-34, Sec. 1531(b)(2)(C), inserted
"(other than a failure attributable to section 9811)" after "on any
failure".
Subsec. (d)(3). Pub. L. 105-34, Sec. 1531(b)(2)(D), substituted
"section 9832" for "section 9805".
Subsec. (f)(1). Pub. L. 105-34, Sec. 1531(b)(2)(E), substituted
"section 9832(a)" for "section 9805(a)".
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1531(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [enacting sections 9811 and 9812 of this
title, amending this section and sections 9801 and 9831 of this
title, and renumbering sections 9804 to 9806 of this title as
sections 9831 to 9833 of this title] shall apply with respect to
group health plans for plan years beginning on or after January 1,
1998."
EFFECTIVE DATE
Section 402(c) of Pub. L. 104-191 provided that: "The amendments
made by this section [enacting this section] shall apply to
failures under chapter 100 of the Internal Revenue Code of 1986 (as
added by section 401 of this Act)."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 9812 of this title.
-End-
-CITE-
26 USC Sec. 4980E 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4980E. Failure of employer to make comparable Archer MSA
contributions
-STATUTE-
(a) General rule
In the case of an employer who makes a contribution to the Archer
MSA of any employee with respect to coverage under a high
deductible health plan of the employer during a calendar year,
there is hereby imposed a tax on the failure of such employer to
meet the requirements of subsection (d) for such calendar year.
(b) Amount of tax
The amount of the tax imposed by subsection (a) on any failure
for any calendar year is the amount equal to 35 percent of the
aggregate amount contributed by the employer to Archer MSAs of
employees for taxable years of such employees ending with or within
such calendar year.
(c) Waiver by Secretary
In the case of a failure which is due to reasonable cause and not
to willful neglect, the Secretary may waive part or all of the tax
imposed by subsection (a) to the extent that the payment of such
tax would be excessive relative to the failure involved.
(d) Employer required to make comparable MSA contributions for all
participating employees
(1) In general
An employer meets the requirements of this subsection for any
calendar year if the employer makes available comparable
contributions to the Archer MSAs of all comparable participating
employees for each coverage period during such calendar year.
(2) Comparable contributions
(A) In general
For purposes of paragraph (1), the term "comparable
contributions" means contributions -
(i) which are the same amount, or
(ii) which are the same percentage of the annual deductible
limit under the high deductible health plan covering the
employees.
(B) Part-year employees
In the case of an employee who is employed by the employer
for only a portion of the calendar year, a contribution to the
Archer MSA of such employee shall be treated as comparable if
it is an amount which bears the same ratio to the comparable
amount (determined without regard to this subparagraph) as such
portion bears to the entire calendar year.
(3) Comparable participating employees
For purposes of paragraph (1), the term "comparable
participating employees" means all employees -
(A) who are eligible individuals covered under any high
deductible health plan of the employer, and
(B) who have the same category of coverage.
For purposes of subparagraph (B), the categories of coverage are
self-only and family coverage.
(4) Part-time employees
(A) In general
Paragraph (3) shall be applied separately with respect to
part-time employees and other employees.
(B) Part-time employee
For purposes of subparagraph (A), the term "part-time
employee" means any employee who is customarily employed for
fewer than 30 hours per week.
(e) Controlled groups
For purposes of this section, all persons treated as a single
employer under subsection (b), (c), (m), or (o) of section 414
shall be treated as 1 employer.
(f) Definitions
Terms used in this section which are also used in section 220
have the respective meanings given such terms in section 220.
-SOURCE-
(Added Pub. L. 104-191, title III, Sec. 301(c)(4)(A), Aug. 21,
1996, 110 Stat. 2049; amended Pub. L. 106-554, Sec. 1(a)(7) [title
II, Sec. 202(a)(8), (b)(2)(D)], Dec. 21, 2000, 114 Stat. 2763,
2763A-629; Pub. L. 107-147, title IV, Sec. 417(17)(A), Mar. 9,
2002, 116 Stat. 56.)
-MISC1-
AMENDMENTS
2002 - Pub. L. 107-147 substituted "Archer MSA contributions" for
"medical savings account contributions" in section catchline.
2000 - Subsec. (a). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(a)(8)], substituted "Archer MSA" for "medical savings account".
Subsecs. (b), (d)(1). Pub. L. 106-554, Sec. 1(a)(7) [title II,
Sec. 202(b)(2)(D)], substituted "Archer MSAs" for "medical savings
accounts".
Subsec. (d)(2)(B). Pub. L. 106-554, Sec. 1(a)(7) [title II, Sec.
202(a)(8)], substituted "Archer MSA" for "medical savings account".
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1996, see section 301(j) of Pub. L. 104-191, set out as an
Effective Date of 1996 Amendment note under section 62 of this
title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 106, 4980G of this title.
-End-
-CITE-
26 USC Sec. 4980F 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4980F. Failure of applicable plans reducing benefit accruals
to satisfy notice requirements
-STATUTE-
(a) Imposition of tax
There is hereby imposed a tax on the failure of any applicable
pension plan to meet the requirements of subsection (e) with
respect to any applicable individual.
(b) Amount of tax
(1) In general
The amount of the tax imposed by subsection (a) on any failure
with respect to any applicable individual shall be $100 for each
day in the noncompliance period with respect to such failure.
(2) Noncompliance period
For purposes of this section, the term "noncompliance period"
means, with respect to any failure, the period beginning on the
date the failure first occurs and ending on the date the notice
to which the failure relates is provided or the failure is
otherwise corrected.
(c) Limitations on amount of tax
(1) Tax not to apply where failure not discovered and reasonable
diligence exercised
No tax shall be imposed by subsection (a) on any failure during
any period for which it is established to the satisfaction of the
Secretary that any person subject to liability for the tax under
subsection (d) did not know that the failure existed and
exercised reasonable diligence to meet the requirements of
subsection (e).
(2) Tax not to apply to failures corrected within 30 days
No tax shall be imposed by subsection (a) on any failure if -
(A) any person subject to liability for the tax under
subsection (d) exercised reasonable diligence to meet the
requirements of subsection (e), and
(B) such person provides the notice described in subsection
(e) during the 30-day period beginning on the first date such
person knew, or exercising reasonable diligence would have
known, that such failure existed.
(3) Overall limitation for unintentional failures
(A) In general
If the person subject to liability for tax under subsection
(d) exercised reasonable diligence to meet the requirements of
subsection (e), the tax imposed by subsection (a) for failures
during the taxable year of the employer (or, in the case of a
multiemployer plan, the taxable year of the trust forming part
of the plan) shall not exceed $500,000. For purposes of the
preceding sentence, all multiemployer plans of which the same
trust forms a part shall be treated as 1 plan.
(B) Taxable years in the case of certain controlled groups
For purposes of this paragraph, if all persons who are
treated as a single employer for purposes of this section do
not have the same taxable year, the taxable years taken into
account shall be determined under principles similar to the
principles of section 1561.
(4) Waiver by Secretary
In the case of a failure which is due to reasonable cause and
not to willful neglect, the Secretary may waive part or all of
the tax imposed by subsection (a) to the extent that the payment
of such tax would be excessive or otherwise inequitable relative
to the failure involved.
(d) Liability for tax
The following shall be liable for the tax imposed by subsection
(a):
(1) In the case of a plan other than a multiemployer plan, the
employer.
(2) In the case of a multiemployer plan, the plan.
(e) Notice requirements for plans significantly reducing benefit
accruals
(1) In general
If an applicable pension plan is amended to provide for a
significant reduction in the rate of future benefit accrual, the
plan administrator shall provide the notice described in
paragraph (2) to each applicable individual (and to each employee
organization representing applicable individuals).
(2) Notice
The notice required by paragraph (1) shall be written in a
manner calculated to be understood by the average plan
participant and shall provide sufficient information (as
determined in accordance with regulations prescribed by the
Secretary) to allow applicable individuals to understand the
effect of the plan amendment. The Secretary may provide a
simplified form of notice for, or exempt from any notice
requirement, a plan -
(A) which has fewer than 100 participants who have accrued a
benefit under the plan, or
(B) which offers participants the option to choose between
the new benefit formula and the old benefit formula.
(3) Timing of notice
Except as provided in regulations, the notice required by
paragraph (1) shall be provided within a reasonable time before
the effective date of the plan amendment.
(4) Designees
Any notice under paragraph (1) may be provided to a person
designated, in writing, by the person to which it would otherwise
be provided.
(5) Notice before adoption of amendment
A plan shall not be treated as failing to meet the requirements
of paragraph (1) merely because notice is provided before the
adoption of the plan amendment if no material modification of the
amendment occurs before the amendment is adopted.
(f) Definitions and special rules
For purposes of this section -
(1) Applicable individual
The term "applicable individual" means, with respect to any
plan amendment -
(A) each participant in the plan, and
(B) any beneficiary who is an alternate payee (within the
meaning of section 414(p)(8)) under an applicable qualified
domestic relations order (within the meaning of section
414(p)(1)(A)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced by such plan
amendment.
(2) Applicable pension plan
The term "applicable pension plan" means -
(A) any defined benefit plan described in section 401(a)
which includes a trust exempt from tax under section 501(a), or
(B) an individual account plan which is subject to the
funding standards of section 412.
Such term shall not include a governmental plan (within the
meaning of section 414(d)) or 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.
(3) Early retirement
A plan amendment which eliminates or reduces any early
retirement benefit or retirement-type subsidy (within the meaning
of section 411(d)(6)(B)(i)) shall be treated as having the effect
of reducing the rate of future benefit accrual.
(g) New technologies
The Secretary may by regulations allow any notice under
subsection (e) to be provided by using new technologies.
-SOURCE-
(Added Pub. L. 107-16, title VI, Sec. 659(a)(1), June 7, 2001, 115
Stat. 137; amended Pub. L. 107-147, title IV, Sec. 411(u)(1), Mar.
9, 2002, 116 Stat. 51.)
-STATAMEND-
TERMINATION OF SECTION
For termination of section by section 901 of Pub. L. 107-16, see
Effective and Termination Dates note below.
-MISC1-
AMENDMENTS
2002 - Subsec. (e)(1). Pub. L. 107-147, Sec. 411(u)(1)(A),
substituted "the notice described in paragraph (2)" for "written
notice".
Subsec. (f)(2)(A). Pub. L. 107-147, Sec. 411(u)(1)(B), amended
subpar. (A) generally. Prior to amendment, subpar. (A) read as
follows: "any defined benefit plan, or".
Subsec. (f)(3). Pub. L. 107-147, Sec. 411(u)(1)(C), struck out
"significantly" before "reduces" and before "reducing".
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
Pub. L. 107-16, title VI, Sec. 659(c), June 7, 2001, 115 Stat.
141, as amended by Pub. L. 107-147, title IV, Sec. 411(u)(3), Mar.
9, 2002, 116 Stat. 52, provided that:
"(1) In general. - The amendments made by this section [enacting
this section and amending section 1054 of Title 29, Labor] shall
apply to plan amendments taking effect on or after the date of the
enactment of this Act [June 7, 2001].
"(2) Transition. - Until such time as the Secretary of the
Treasury issues regulations under sections 4980F(e)(2) and (3) of
the Internal Revenue Code of 1986, and section 204(h) of the
Employee Retirement Income Security Act of 1974 [29 U.S.C.
1054(h)], as added by the amendments made by this section, a plan
shall be treated as meeting the requirements of such sections if it
makes a good faith effort to comply with such requirements.
"(3) Special notice rule. -
"(A) In general. - The period for providing any notice required
by the amendments made by this section shall not end before the
date which is 3 months after the date of the enactment of this
Act.
"(B) Reasonable notice. - The amendments made by this section
shall not apply to any plan amendment taking effect on or after
the date of the enactment of this Act if, before April 25, 2001,
notice was provided to participants and beneficiaries adversely
affected by the plan amendment (and their representatives) which
was reasonably expected to notify them of the nature and
effective date of the plan amendment."
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.
-End-
-CITE-
26 USC Sec. 4980G 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 43 - QUALIFIED PENSION, ETC., PLANS
-HEAD-
Sec. 4980G. Failure of employer to make comparable health savings
account contributions
-STATUTE-
(a) General rule
In the case of an employer who makes a contribution to the health
savings account of any employee during a calendar year, there is
hereby imposed a tax on the failure of such employer to meet the
requirements of subsection (b) for such calendar year.
(b) Rules and requirements
Rules and requirements similar to the rules and requirements of
section 4980E shall apply for purposes of this section.
(c) Regulations
The Secretary shall issue regulations to carry out the purposes
of this section, including regulations providing special rules for
employers who make contributions to Archer MSAs and health savings
accounts during the calendar year.
-SOURCE-
(Added Pub. L. 108-173, title XII, Sec. 1201(d)(4)(A), Dec. 8,
2003, 117 Stat. 2478.)
-MISC1-
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
2003, see section 1201(k) of Pub. L. 108-173, set out as an
Effective Date of 2003 Amendment note under section 62 of this
title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 106 of this title.
-End-
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