-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 Repealed.]                                         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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