Qualified pension, profit-sharing, and stock bonus plans
Requirements for qualification
A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section—
if contributions are made to the trust by such employer, or employees, or both, or by another employer who is entitled to deduct his contributions under section 404(a)(3)(B) (relating to deduction for contributions to profit-sharing and stock bonus plans), or by a charitable remainder trust pursuant to a qualified gratuitous transfer (as defined in section 664(g)(1)), for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with such plan;
if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries (but this paragraph shall not be construed, in the case of a multiemployer plan, to prohibit the return of a contribution within 6 months after the plan administrator determines that the contribution was made by a mistake of fact or law (other than a mistake relating to whether the plan is described in section 401(a) or the trust which is part of such plan is exempt from taxation under section 501(a), or the return of any withdrawal liability payment determined to be an overpayment within 6 months of such determination));
if the plan of which such trust is a part satisfies the requirements of section 410 (relating to minimum participation standards); and
if the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). For purposes of this paragraph, there shall be excluded from consideration employees described in section 410(b)(3)(A) and (C).
Special rules relating to nondiscrimination requirements.—
Salaried or clerical employees.—
A classification shall not be considered discriminatory within the meaning of paragraph (4) or section 410(b)(2)(A)(i) merely because it is limited to salaried or clerical employees.
Contributions and benefits may bear uniform relationship to compensation.—
A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the contributions or benefits of, or on behalf of, the employees under the plan bear a uniform relationship to the compensation (within the meaning of section 414(s)) of such employees.
Certain disparity permitted.—
A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the contributions or benefits of, or on behalf of, the employees under the plan favor highly compensated employees (as defined in section 414(q)) in the manner permitted under subsection (l).
Integrated defined benefit plan.—
In general.—
A defined benefit plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the plan provides that the employer-derived accrued retirement benefit for any participant under the plan may not exceed the excess (if any) of—
the participant’s final pay with the employer, over
the employer-derived retirement benefit created under Federal law attributable to service by the participant with the employer.
For purposes of this clause, the employer-derived retirement benefit created under Federal law shall be treated as accruing ratably over 35 years.
Final pay.—
For purposes of this subparagraph, the participant’s final pay is the compensation (as defined in section 414(q)(4)) paid to the participant by the employer for any year—
which ends during the 5-year period ending with the year in which the participant separated from service for the employer, and
for which the participant’s total compensation from the employer was highest.
2 or more plans treated as single plan.—
For purposes of determining whether 2 or more plans of an employer satisfy the requirements of paragraph (4) when considered as a single plan—
Contributions.—
If the amount of contributions on behalf of the employees allowed as a deduction under section 404 for the taxable year with respect to such plans, taken together, bears a uniform relationship to the compensation (within the meaning of section 414(s)) of such employees, the plans shall not be considered discriminatory merely because the rights of employees to, or derived from, the employer contributions under the separate plans do not become nonforfeitable at the same rate.
Benefits.—
If the employees’ rights to benefits under the separate plans do not become nonforfeitable at the same rate, but the levels of benefits provided by the separate plans satisfy the requirements of regulations prescribed by the Secretary to take account of the differences in such rates, the plans shall not be considered discriminatory merely because of the difference in such rates.
Social security retirement age.—
For purposes of testing for discrimination under paragraph (4)—
the social security retirement age (as defined in section 415(b)(8)) shall be treated as a uniform retirement age, and
subsidized early retirement benefits and joint and survivor annuities shall not be treated as being unavailable to employees on the same terms merely because such benefits or annuities are based in whole or in part on an employee’s social security retirement age (as so defined).
Governmental plans.—
Paragraphs (3) and (4) shall not apply to a governmental plan (within the meaning of section 414(d)).
A plan shall be considered as meeting the requirements of paragraph (3) during the whole of any taxable year of the plan if on one day in each quarter it satisfied such requirements.
A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part satisfies the requirements of section 411 (relating to minimum vesting standards).
A trust forming part of a defined benefit plan shall not constitute a qualified trust under this section unless the plan provides that forfeitures must not be applied to increase the benefits any employee would otherwise receive under the plan.
Required distributions.—
In general.—
A trust shall not constitute a qualified trust under this subsection unless the plan provides that the entire interest of each employee—
will be distributed to such employee not later than the required beginning date, or
will be distributed, beginning not later than the required beginning date, in accordance with regulations, over the life of such employee or over the lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary).
Required distribution where employee dies before entire interest is distributed.—
Where distributions have begun under subparagraph (A)(ii).—
A trust shall not constitute a qualified trust under this section unless the plan provides that if—
the distribution of the employee’s interest has begun in accordance with subparagraph (A)(ii), and
the employee dies before his entire interest has been distributed to him,
the remaining portion of such interest will be distributed at least as rapidly as under the method of distributions being used under subparagraph (A)(ii) as of the date of his death.
5-year rule for other cases.—
A trust shall not constitute a qualified trust under this section unless the plan provides that, if an employee dies before the distribution of the employee’s interest has begun in accordance with subparagraph (A)(ii), the entire interest of the employee will be distributed within 5 years after the death of such employee.
Exception to 5-year rule for certain amounts payable over life of beneficiary.—
If—
any portion of the employee’s interest is payable to (or for the benefit of) a designated beneficiary,
such portion will be distributed (in accordance with regulations) over the life of such designated beneficiary (or over a period not extending beyond the life expectancy of such beneficiary), and
such distributions begin not later than 1 year after the date of the employee’s death or such later date as the Secretary may by regulations prescribe,
for purposes of clause (ii), the portion referred to in subclause (I) shall be treated as distributed on the date on which such distributions begin.
Special rule for surviving spouse of employee.—
If the designated beneficiary referred to in clause (iii)(I) is the surviving spouse of the employee—
the date on which the distributions are required to begin under clause (iii)(III) shall not be earlier than the date on which the employee would have attained the applicable age, and
if the surviving spouse dies before the distributions to such spouse begin, this subparagraph shall be applied as if the surviving spouse were the employee.
Required beginning date.—
For purposes of this paragraph—
In general.—
The term “required beginning date” means April 1 of the calendar year following the later of—
the calendar year in which the employee attains the applicable age, or
the calendar year in which the employee retires.
Exception.—
Subclause (II) of clause (i) shall not apply—
except as provided in section 409(d), in the case of an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains the applicable age, or
for purposes of section 408(a)(6) or (b)(3).
Actuarial adjustment.—
In the case of an employee to whom clause (i)(II) applies who retires in a calendar year after the calendar year in which the employee attains age 70½, the employee’s accrued benefit shall be actuarially increased to take into account the period after age 70½ in which the employee was not receiving any benefits under the plan.
Exception for governmental and church plans.—
Clauses (ii) and (iii) shall not apply in the case of a governmental plan or church plan. For purposes of this clause, the term “church plan” means a plan maintained by a church for church employees, and the term “church” means any church (as defined in section 3121(w)(3)(A)) or qualified church-controlled organization (as defined in section 3121(w)(3)(B)).
Applicable age.—
In the case of an individual who attains age 72 after
In the case of an individual who attains age 74 after
Life expectancy.—
For purposes of this paragraph, the life expectancy of an employee and the employee’s spouse (other than in the case of a life annuity) may be redetermined but not more frequently than annually.
Definitions and rules relating to designated beneficiaries.—
For purposes of this paragraph—
Designated beneficiary.—
The term “designated beneficiary” means any individual designated as a beneficiary by the employee.
Eligible designated beneficiary.—
The term “eligible designated beneficiary” means, with respect to any employee, any designated beneficiary who is—
the surviving spouse of the employee,
subject to clause (iii), a child of the employee who has not reached majority (within the meaning of subparagraph (F)),
disabled (within the meaning of section 72(m)(7)),
a chronically ill individual (within the meaning of section 7702B(c)(2), except that the requirements of subparagraph (A)(i) thereof shall only be treated as met if there is a certification that, as of such date, the period of inability described in such subparagraph with respect to the individual is an indefinite one which is reasonably expected to be lengthy in nature), or
an individual not described in any of the preceding subclauses who is not more than 10 years younger than the employee.
The determination of whether a designated beneficiary is an eligible designated beneficiary shall be made as of the date of death of the employee.
Special rule for children.—
Subject to subparagraph (F), an individual described in clause (ii)(II) shall cease to be an eligible designated beneficiary as of the date the individual reaches majority and any remainder of the portion of the individual’s interest to which subparagraph (H)(ii) applies shall be distributed within 10 years after such date.
Treatment of payments to children.—
Under regulations prescribed by the Secretary, for purposes of this paragraph, any amount paid to a child shall be treated as if it had been paid to the surviving spouse if such amount will become payable to the surviving spouse upon such child reaching majority (or other designated event permitted under regulations).
Treatment of incidental death benefit distributions.—
For purposes of this title, any distribution required under the incidental death benefit requirements of this subsection shall be treated as a distribution required under this paragraph.
Special rules for certain defined contribution plans.—
In the case of a defined contribution plan, if an employee dies before the distribution of the employee’s entire interest—
In general.—
Except in the case of a beneficiary who is not a designated beneficiary, subparagraph (B)(ii)—
shall be applied by substituting “10 years” for “5 years”, and
shall apply whether or not distributions of the employee’s interests have begun in accordance with subparagraph (A).
Exception for eligible designated beneficiaries.—
Subparagraph (B)(iii) shall apply only in the case of an eligible designated beneficiary.
Rules upon death of eligible designated beneficiary.—
If an eligible designated beneficiary dies before the portion of the employee’s interest to which this subparagraph applies is entirely distributed, the exception under clause (ii) shall not apply to any beneficiary of such eligible designated beneficiary and the remainder of such portion shall be distributed within 10 years after the death of such eligible designated beneficiary.
Special rule in case of certain trusts for disabled or chronically ill beneficiaries.—
In the case of an applicable multi-beneficiary trust, if under the terms of the trust—
it is to be divided immediately upon the death of the employee into separate trusts for each beneficiary, or
no beneficiary (other than a 1
for purposes of a trust described in subclause (I), clause (ii) shall be applied separately with respect to the portion of the employee’s interest that is payable to any eligible designated beneficiary described in subclause (III) or (IV) of subparagraph (E)(ii); and, for purposes of a trust described in subclause (II), subparagraph (B)(iii) shall apply to the distribution of the employee’s interest and any beneficiary who is not such an eligible designated beneficiary shall be treated as a beneficiary of the eligible designated beneficiary upon the death of such eligible designated beneficiary.
Applicable multi-beneficiary trust.—
For purposes of this subparagraph, the term “applicable multi-beneficiary trust” means a trust—
which has more than one beneficiary,
all of the beneficiaries of which are treated as designated beneficiaries for purposes of determining the distribution period pursuant to this paragraph, and
at least one of the beneficiaries of which is an eligible designated beneficiary described in subclause (III) or (IV) of subparagraph (E)(ii).
For purposes of the preceding sentence, in the case of a trust the terms of which are described in clause (iv)(II), any beneficiary which is an organization described in section 408(d)(8)(B)(i) shall be treated as a designated beneficiary described in subclause (II).
Application to certain eligible retirement plans.—
For purposes of applying the provisions of this subparagraph in determining amounts required to be distributed pursuant to this paragraph, all eligible retirement plans (as defined in section 402(c)(8)(B), other than a defined benefit plan described in clause (iv) or (v) thereof or a qualified trust which is a part of a defined benefit plan) shall be treated as a defined contribution plan.
Temporary waiver of minimum required distribution.—
In general.—
The requirements of this paragraph shall not apply for calendar year 2020 to—
a defined contribution plan which is described in this subsection or in section 403(a) or 403(b),
a defined contribution plan which is an eligible deferred compensation plan described in section 457(b) but only if such plan is maintained by an employer described in section 457(e)(1)(A), or
an individual retirement plan.
Special rule for required beginning dates in 2020.—
Clause (i) shall apply to any distribution which is required to be made in calendar year 2020 by reason of—
a required beginning date occurring in such calendar year, and
such distribution not having been made before
Special rules regarding waiver period.—
For purposes of this paragraph—
the required beginning date with respect to any individual shall be determined without regard to this subparagraph for purposes of applying this paragraph for calendar years after 2020, and
if clause (ii) of subparagraph (B) applies, the 5-year period described in such clause shall be determined without regard to calendar year 2020.
Certain increases in payments under a commercial annuity.—
Nothing in this section shall prohibit a commercial annuity (within the meaning of section 3405(e)(6)) that is issued in connection with any eligible retirement plan (within the meaning of section 402(c)(8)(B), other than a defined benefit plan) from providing one or more of the following types of payments on or after the annuity starting date:
annuity payments that increase by a constant percentage, applied not less frequently than annually, at a rate that is less than 5 percent per year,
a lump sum payment that—
results in a shortening of the payment period with respect to an annuity or a full or partial commutation of the future annuity payments, provided that such lump sum is determined using reasonable actuarial methods and assumptions, as determined in good faith by the issuer of the contract, or
accelerates the receipt of annuity payments that are scheduled to be received within the ensuing 12 months, regardless of whether such acceleration shortens the payment period with respect to the annuity, reduces the dollar amount of benefits to be paid under the contract, or results in a suspension of annuity payments during the period being accelerated,
an amount which is in the nature of a dividend or similar distribution, provided that the issuer of the contract determines such amount using reasonable actuarial methods and assumptions, as determined in good faith by the issuer of the contract, when calculating the initial annuity payments and the issuer’s experience with respect to those factors, or
a final payment upon death that does not exceed the excess of the total amount of the consideration paid for the annuity payments, less the aggregate amount of prior distributions or payments from or under the contract.
Other requirements.—
Plans benefiting owner-employees.—
In the case of any plan which provides contributions or benefits for employees some or all of whom are owner-employees (as defined in subsection (c)(3)), a trust forming part of such plan shall constitute a qualified trust under this section only if the requirements of subsection (d) are also met.
Top-heavy plans.—
In general.—
In the case of any top-heavy plan, a trust forming part of such plan shall constitute a qualified trust under this section only if the requirements of section 416 are met.
Plans which may become top-heavy.—
Except to the extent provided in regulations, a trust forming part of a plan (whether or not a top-heavy plan) shall constitute a qualified trust under this section only if such plan contains provisions—
which will take effect if such plan becomes a top-heavy plan, and
which meet the requirements of section 416.
Exemption for governmental plans.—
This subparagraph shall not apply to any governmental plan.
Requirement of joint and survivor annuity and preretirement survivor annuity.—
In general.—
In the case of any plan to which this paragraph applies, except as provided in section 417, a trust forming part of such plan shall not constitute a qualified trust under this section unless—
in the case of a vested participant who does not die before the annuity starting date, the accrued benefit payable to such participant is provided in the form of a qualified joint and survivor annuity, and
in the case of a vested participant who dies before the annuity starting date and who has a surviving spouse, a qualified preretirement survivor annuity is provided to the surviving spouse of such participant.
Plans to which paragraph applies.—
This paragraph shall apply to—
any defined benefit plan,
any defined contribution plan which is subject to the funding standards of section 412, and
any participant under any other defined contribution plan unless—
such plan provides that the participant’s nonforfeitable accrued benefit (reduced by any security interest held by the plan by reason of a loan outstanding to such participant) is payable in full, on the death of the participant, to the participant’s surviving spouse (or, if there is no surviving spouse or the surviving spouse consents in the manner required under section 417(a)(2), to a designated beneficiary),
such participant does not elect a payment of benefits in the form of a life annuity, and
with respect to such participant, such plan is not a direct or indirect transferee (in a transfer after
Clause (iii)(III) shall apply only with respect to the transferred assets (and income therefrom) if the plan separately accounts for such assets and any income therefrom.
Exception for certain ESOP benefits.—
In general.—
In the case of—
a tax credit employee stock ownership plan (as defined in section 409(a)), or
an employee stock ownership plan (as defined in section 4975(e)(7)),
subparagraph (A) shall not apply to that portion of the employee’s accrued benefit to which the requirements of section 409(h) apply.
Nonforfeitable benefit must be paid in full, etc.—
In the case of any participant, clause (i) shall apply only if the requirements of subclauses (I), (II), and (III) of subparagraph (B)(iii) are met with respect to such participant.
Special rule where participant and spouse married less than 1 year.—
A plan shall not be treated as failing to meet the requirements of subparagraphs (B)(iii) or (C) merely because the plan provides that benefits will not be payable to the surviving spouse of the participant unless the participant and such spouse had been married throughout the 1-year period ending on the earlier of the participant’s annuity starting date or the date of the participant’s death.
Exception for plans described in section 404(c).—
This paragraph shall not apply to a plan which the Secretary has determined is a plan described in section 404(c) (or a continuation thereof) in which participation is substantially limited to individuals who, before
Cross reference.—
For—
provisions under which participants may elect to waive the requirements of this paragraph, and
other definitions and special rules for purposes of this paragraph,
see section 417.
A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that in the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan after
Assignment and alienation.—
In general.—
A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated. For purposes of the preceding sentence, there shall not be taken into account any voluntary and revocable assignment of not to exceed 10 percent of any benefit payment made by any participant who is receiving benefits under the plan unless the assignment or alienation is made for purposes of defraying plan administration costs. For purposes of this paragraph a loan made to a participant or beneficiary shall not be treated as an assignment or alienation if such loan is secured by the participant’s accrued nonforfeitable benefit and is exempt from the tax imposed by section 4975 (relating to tax on prohibited transactions) by reason of section 4975(d)(1). This paragraph shall take effect on
Special rules for domestic relations orders.—
Subparagraph (A) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, except that subparagraph (A) shall not apply if the order is determined to be a qualified domestic relations order.
Special rule for certain judgments and settlements.—
Subparagraph (A) shall not apply to any offset of a participant’s benefits provided under a plan against an amount that the participant is ordered or required to pay to the plan if—
the order or requirement to pay arises—
under a judgment of conviction for a crime involving such plan,
under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or
pursuant to a settlement agreement between the Secretary of Labor and the participant, or a settlement agreement between the Pension Benefit Guaranty Corporation and the participant, in connection with a violation (or alleged violation) of part 4 of such subtitle by a fiduciary or any other person,
the judgment, order, decree, or settlement agreement expressly provides for the offset of all or part of the amount ordered or required to be paid to the plan against the participant’s benefits provided under the plan, and
in a case in which the survivor annuity requirements of section 401(a)(11) apply with respect to distributions from the plan to the participant, if the participant has a spouse at the time at which the offset is to be made—
either such spouse has consented in writing to such offset and such consent is witnessed by a notary public or representative of the plan (or it is established to the satisfaction of a plan representative that such consent may not be obtained by reason of circumstances described in section 417(a)(2)(B)), or an election to waive the right of the spouse to either a qualified joint and survivor annuity or a qualified preretirement survivor annuity is in effect in accordance with the requirements of section 417(a),
such spouse is ordered or required in such judgment, order, decree, or settlement to pay an amount to the plan in connection with a violation of part 4 of such subtitle, or
in such judgment, order, decree, or settlement, such spouse retains the right to receive the survivor annuity under a qualified joint and survivor annuity provided pursuant to section 401(a)(11)(A)(i) and under a qualified preretirement survivor annuity provided pursuant to section 401(a)(11)(A)(ii), determined in accordance with subparagraph (D).
A plan shall not be treated as failing to meet the requirements of this subsection, subsection (k), section 403(b), or section 409(d) solely by reason of an offset described in this subparagraph.
Survivor annuity.—
In general.—
The survivor annuity described in subparagraph (C)(iii)(III) shall be determined as if—
the participant terminated employment on the date of the offset,
there was no offset,
the plan permitted commencement of benefits only on or after normal retirement age,
the plan provided only the minimum-required qualified joint and survivor annuity, and
the amount of the qualified preretirement survivor annuity under the plan is equal to the amount of the survivor annuity payable under the minimum-required qualified joint and survivor annuity.
Definition.—
For purposes of this subparagraph, the term “minimum-required qualified joint and survivor annuity” means the qualified joint and survivor annuity which is the actuarial equivalent of the participant’s accrued benefit (within the meaning of section 411(a)(7)) and under which the survivor annuity is 50 percent of the amount of the annuity which is payable during the joint lives of the participant and the spouse.
A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that, unless the participant otherwise elects, the payment of benefits under the plan to the participant will begin not later than the 60th day after the latest of the close of the plan year in which—
the date on which the participant attains the earlier of age 65 or the normal retirement age specified under the plan,
occurs the 10th anniversary of the year in which the participant commenced participation in the plan, or
the participant terminates his service with the employer.
In the case of a plan which provides for the payment of an early retirement benefit, a trust forming a part of such plan shall not constitute a qualified trust under this section unless a participant who satisfied the service requirements for such early retirement benefit, but separated from the service (with any nonforfeitable right to an accrued benefit) before satisfying the age requirement for such early retirement benefit, is entitled upon satisfaction of such age requirement to receive a benefit not less than the benefit to which he would be entitled at the normal retirement age, actuarially, reduced under regulations prescribed by the Secretary.
A trust shall not constitute a qualified trust under this section unless under the plan of which such trust is a part—
in the case of a participant or beneficiary who is receiving benefits under such plan, or
in the case of a participant who is separated from the service and who has nonforfeitable rights to benefits,
such benefits are not decreased by reason of any increase in the benefit levels payable under title II of the Social Security Act or any increase in the wage base under such title II, if such increase takes place after
A trust shall not constitute a qualified trust under this section if the plan of which such trust is a part provides for benefits or contributions which exceed the limitations of section 415.
Compensation limit.—
In general.—
A trust shall not constitute a qualified trust under this section unless, under the plan of which such trust is a part, the annual compensation of each employee taken into account under the plan for any year does not exceed $200,000.
Cost-of-living adjustment.—
The Secretary shall adjust annually the $200,000 amount in subparagraph (A) for increases in the cost-of-living at the same time and in the same manner as adjustments under section 415(d); except that the base period shall be the calendar quarter beginning
A trust shall not constitute a qualified trust under this section if under the plan of which such trust is a part any part of a participant’s accrued benefit derived from employer contributions (whether or not otherwise nonforfeitable), is forfeitable solely because of withdrawal by such participant of any amount attributable to the benefit derived from contributions made by such participant. The preceding sentence shall not apply to the accrued benefit of any participant unless, at the time of such withdrawal, such participant has a nonforfeitable right to at least 50 percent of such accrued benefit (as determined under section 411). The first sentence of this paragraph shall not apply to the extent that an accrued benefit is permitted to be forfeited in accordance with section 411(a)(3)(D)(iii) (relating to proportional forfeitures of benefits accrued before
A trust forming part of a pension plan shall not be treated as failing to constitute a qualified trust under this section merely because the pension plan of which such trust is a part makes 1 or more distributions within 1 taxable year to a distributee on account of a termination of the plan of which the trust is a part, or in the case of a profit-sharing or stock bonus plan, a complete discontinuance of contributions under such plan. This paragraph shall not apply to a defined benefit plan unless the employer maintaining such plan files a notice with the Pension Benefit Guaranty Corporation (at the time and in the manner prescribed by the Pension Benefit Guaranty Corporation) notifying the Corporation of such payment or distribution and the Corporation has approved such payment or distribution or, within 90 days after the date on which such notice was filed, has failed to disapprove such payment or distribution. For purposes of this paragraph, rules similar to the rules of section 402(a)(6)(B) (as in effect before its repeal by section 521 of the Unemployment Compensation Amendments of 1992) shall apply.
If a defined contribution plan (other than a profit-sharing plan)—
is established by an employer whose stock is not readily tradable on an established market, and
after acquiring securities of the employer, more than 10 percent of the total assets of the plan are securities of the employer,
any trust forming part of such plan shall not constitute a qualified trust under this section unless the plan meets the requirements of subsection (e) of section 409. The requirements of subsection (e) of section 409 shall not apply to any employees of an employer who are participants in any defined contribution plan established and maintained by such employer if the stock of such employer is not readily tradable on an established market and the trade or business of such employer consists of publishing on a regular basis a newspaper for general circulation. For purposes of the preceding sentence, subsections (b), (c), (m), and (o) of section 414 shall not apply except for determining whether stock of the employer is not readily tradable on an established market.
A stock bonus plan shall not be treated as meeting the requirements of this section unless such plan meets the requirements of subsections (h) and (o) of section 409, except that in applying section 409(h) for purposes of this paragraph, the term “employer securities” shall include any securities of the employer held by the plan.
Any group trust which otherwise meets the requirements of this section shall not be treated as not meeting such requirements on account of the participation or inclusion in such trust of the moneys of any plan or governmental unit described in section 818(a)(6).
Requirement that actuarial assumptions be specified.—
A defined benefit plan shall not be treated as providing definitely determinable benefits unless, whenever the amount of any benefit is to be determined on the basis of actuarial assumptions, such assumptions are specified in the plan in a way which precludes employer discretion.
Additional participation requirements.—
In general.—
In the case of a trust which is a part of a defined benefit plan, such trust shall not constitute a qualified trust under this subsection unless on each day of the plan year such trust benefits at least the lesser of—
50 employees of the employer, or
the greater of—
40 percent of all employees of the employer, or
2 employees (or if there is only 1 employee, such employee).
Treatment of excludable employees.—
In general.—
A plan may exclude from consideration under this paragraph employees described in paragraphs (3) and (4)(A) of section 410(b).
Separate application for certain excludable employees.—
If employees described in section 410(b)(4)(B) are covered under a plan which meets the requirements of subparagraph (A) separately with respect to such employees, such employees may be excluded from consideration in determining whether any plan of the employer meets such requirements if—
the benefits for such employees are provided under the same plan as benefits for other employees,
the benefits provided to such employees are not greater than comparable benefits provided to other employees under the plan, and
no highly compensated employee (within the meaning of section 414(q)) is included in the group of such employees for more than 1 year.
Special rule for collective bargaining units.—
Except to the extent provided in regulations, a plan covering only employees described in section 410(b)(3)(A) may exclude from consideration any employees who are not included in the unit or units in which the covered employees are included.
Paragraph not to apply to multiemployer plans.—
Except to the extent provided in regulations, this paragraph shall not apply to employees in a multiemployer plan (within the meaning of section 414(f)) who are covered by collective bargaining agreements.
Special rule for certain dispositions or acquisitions.—
Rules similar to the rules of section 410(b)(6)(C) shall apply for purposes of this paragraph.
Separate lines of business.—
At the election of the employer and with the consent of the Secretary, this paragraph may be applied separately with respect to each separate line of business of the employer. For purposes of this paragraph, the term “separate line of business” has the meaning given such term by section 414(r) (without regard to paragraph (2)(A) or (7) thereof).
Exception for governmental plans.—
This paragraph shall not apply to a governmental plan (within the meaning of section 414(d)).
Regulations.—
The Secretary may by regulation provide that any separate benefit structure, any separate trust, or any other separate arrangement is to be treated as a separate plan for purposes of applying this paragraph.
Protected participants.—
In general.—
A plan shall be deemed to satisfy the requirements of subparagraph (A) if—
the plan is amended—
to cease all benefit accruals, or
to provide future benefit accruals only to a closed class of participants,
the plan satisfies subparagraph (A) (without regard to this subparagraph) as of the effective date of the amendment, and
the amendment was adopted before
Plans described.—
A plan is described in this clause if the plan would be described in subsection (o)(1)(C), as applied for purposes of subsection (o)(1)(B)(iii)(IV) and by treating the effective date of the amendment as the date the class was closed for purposes of subsection (o)(1)(C).
Special rules.—
For purposes of clause (i)(II), in applying section 410(b)(6)(C), the amendments described in clause (i) shall not be treated as a significant change in coverage under section 410(b)(6)(C)(i)(II).
Spun-off plans.—
For purposes of this subparagraph, if a portion of a plan described in clause (i) is spun off to another employer, the treatment under clause (i) of the spun-off plan shall continue with respect to the other employer.
Determinations as to profit-sharing plans.—
Contributions need not be based on profits.—
The determination of whether the plan under which any contributions are made is a profit-sharing plan shall be made without regard to current or accumulated profits of the employer and without regard to whether the employer is a tax-exempt organization.
Plan must designate type.—
In the case of a plan which is intended to be a money purchase pension plan or a profit-sharing plan, a trust forming part of such plan shall not constitute a qualified trust under this subsection unless the plan designates such intent at such time and in such manner as the Secretary may prescribe.
Additional requirements relating to employee stock ownership plans.—
In general.—
In the case of a trust which is part of an employee stock ownership plan (within the meaning of section 4975(e)(7)) or a plan which meets the requirements of section 409(a), such trust shall not constitute a qualified trust under this section unless such plan meets the requirements of subparagraphs (B) and (C).
Diversification of investments.—
In general.—
A plan meets the requirements of this subparagraph if each qualified participant in the plan may elect within 90 days after the close of each plan year in the qualified election period to direct the plan as to the investment of at least 25 percent of the participant’s account in the plan (to the extent such portion exceeds the amount to which a prior election under this subparagraph applies). In the case of the election year in which the participant can make his last election, the preceding sentence shall be applied by substituting “50 percent” for “25 percent”.
Method of meeting requirements.—
A plan shall be treated as meeting the requirements of clause (i) if—
the portion of the participant’s account covered by the election under clause (i) is distributed within 90 days after the period during which the election may be made, or
the plan offers at least 3 investment options (not inconsistent with regulations prescribed by the Secretary) to each participant making an election under clause (i) and within 90 days after the period during which the election may be made, the plan invests the portion of the participant’s account covered by the election in accordance with such election.
Qualified participant.—
For purposes of this subparagraph, the term “qualified participant” means any employee who has completed at least 10 years of participation under the plan and has attained age 55.
Qualified election period.—
For purposes of this subparagraph, the term “qualified election period” means the 6-plan-year period beginning with the later of—
the 1st plan year in which the individual first became a qualified participant, or
the 1st plan year beginning after
For purposes of the preceding sentence, an employer may elect to treat an individual first becoming a qualified participant in the 1st plan year beginning in 1987 as having become a participant in the 1st plan year beginning in 1988.
Exception.—
This subparagraph shall not apply to an applicable defined contribution plan (as defined in paragraph (35)(E)).
Use of independent appraiser.—
A plan meets the requirements of this subparagraph if all valuations of employer securities which are not readily tradable on an established securities market with respect to activities carried on by the plan are by an independent appraiser. For purposes of the preceding sentence, the term “independent appraiser” means any appraiser meeting requirements similar to the requirements of the regulations prescribed under section 170(a)(1).
Benefit limitations.—
In the case of a defined benefit plan (other than a multiemployer plan or a CSEC plan) to which the requirements of section 412 apply, the trust of which the plan is a part shall not constitute a qualified trust under this subsection unless the plan meets the requirements of section 436.
Limitations on elective deferrals.—
In the case of a trust which is part of a plan under which elective deferrals (within the meaning of section 402(g)(3)) may be made with respect to any individual during a calendar year, such trust shall not constitute a qualified trust under this subsection unless the plan provides that the amount of such deferrals under such plan and all other plans, contracts, or arrangements of an employer maintaining such plan may not exceed the amount of the limitation in effect under section 402(g)(1)(A) for taxable years beginning in such calendar year.
Direct transfer of eligible rollover distributions.—
In general.—
A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that if the distributee of any eligible rollover distribution—
elects to have such distribution paid directly to an eligible retirement plan, and
specifies the eligible retirement plan to which such distribution is to be paid (in such form and at such time as the plan administrator may prescribe),
such distribution shall be made in the form of a direct trustee-to-trustee transfer to the eligible retirement plan so specified.
Certain mandatory distributions.—
In general.—
In case of a trust which is part of an eligible plan, such trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that if—
a distribution described in clause (ii) in excess of $1,000 is made, and
the distributee does not make an election under subparagraph (A) and does not elect to receive the distribution directly,
the plan administrator shall make such transfer to an individual retirement plan of a designated trustee or issuer and shall notify the distributee in writing (either separately or as part of the notice under section 402(f)) that the distribution may be transferred to another individual retirement plan.
Eligible plan.—
For purposes of clause (i), the term “eligible plan” means a plan which provides that any nonforfeitable accrued benefit for which the present value (as determined under section 411(a)(11)) does not exceed $5,000 shall be immediately distributed to the participant.
Limitation.—
Subparagraphs (A) and (B) shall apply only to the extent that the eligible rollover distribution would be includible in gross income if not transferred as provided in subparagraph (A) (determined without regard to sections 402(c), 403(a)(4), 403(b)(8), and 457(e)(16)). The preceding sentence shall not apply to such distribution if the plan to which such distribution is transferred—
is a qualified trust which is part of a plan which is a defined contribution plan and agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible, or
is an eligible retirement plan described in clause (i) or (ii) of section 402(c)(8)(B).
Eligible rollover distribution.—
For purposes of this paragraph, the term “eligible rollover distribution” has the meaning given such term by section 402(f)(2)(A).
Eligible retirement plan.—
For purposes of this paragraph, the term “eligible retirement plan” has the meaning given such term by section 402(c)(8)(B), except that a qualified trust shall be considered an eligible retirement plan only if it is a defined contribution plan, the terms of which permit the acceptance of rollover distributions.
Treatment of failure to make certain payments if plan has liquidity shortfall.—
In general.—
A trust forming part of a pension plan to which section 430(j)(4) or 433(f)(5) applies shall not be treated as failing to constitute a qualified trust under this section merely because such plan ceases to make any payment described in subparagraph (B) during any period that such plan has a liquidity shortfall (as defined in section 430(j)(4) or 433(f)(5)).
Payments described.—
A payment is described in this subparagraph if such payment is—
any payment, in excess of the monthly amount paid under a single life annuity (plus any social security supplements described in the last sentence of section 411(a)(9)), to a participant or beneficiary whose annuity starting date (as defined in section 417(f)(2)) occurs during the period referred to in subparagraph (A),
any payment for the purchase of an irrevocable commitment from an insurer to pay benefits, and
any other payment specified by the Secretary by regulations.
Period of shortfall.—
For purposes of this paragraph, a plan has a liquidity shortfall during the period that there is an underpayment of an installment under section 430(j)(3) or 433(f) by reason of section 430(j)(4)(A) or 433(f)(5), respectively.
Prohibition on benefit increases while sponsor is in bankruptcy.—
In general.—
A trust which is part of a plan to which this paragraph applies shall not constitute a qualified trust under this section if an amendment to such plan is adopted while the employer is a debtor in a case under title 11, United States Code, or similar Federal or State law, if such amendment increases liabilities of the plan by reason of—
any increase in benefits,
any change in the accrual of benefits, or
any change in the rate at which benefits become nonforfeitable under the plan,
with respect to employees of the debtor, and such amendment is effective prior to the effective date of such employer’s plan of reorganization.
Exceptions.—
This paragraph shall not apply to any plan amendment if—
the plan, were such amendment to take effect, would have a funding target attainment percentage (as defined in section 430(d)(2)) of 100 percent or more,
the Secretary determines that such amendment is reasonable and provides for only de minimis increases in the liabilities of the plan with respect to employees of the debtor,
such amendment only repeals an amendment described in section 412(d)(2), or
such amendment is required as a condition of qualification under this part.
Plans to which this paragraph applies.—
This paragraph shall apply only to plans (other than multiemployer plans or CSEC plans) covered under section 4021 of the Employee Retirement Income Security Act of 1974.
Employer.—
For purposes of this paragraph, the term “employer” means the employer referred to in section 412(b)(1), without regard to section 412(b)(2).
Benefits of missing participants on plan termination.—
In the case of a plan covered by title IV of the Employee Retirement Income Security Act of 1974, a trust forming part of such plan shall not be treated as failing to constitute a qualified trust under this section merely because the pension plan of which such trust is a part, upon its termination, transfers benefits of missing participants to the Pension Benefit Guaranty Corporation in accordance with section 4050 of such Act.
Diversification requirements for certain defined contribution plans.—
In general.—
A trust which is part of an applicable defined contribution plan shall not be treated as a qualified trust unless the plan meets the diversification requirements of subparagraphs (B), (C), and (D).
Employee contributions and elective deferrals invested in employer securities.—
In the case of the portion of an applicable individual’s account attributable to employee contributions and elective deferrals which is invested in employer securities, a plan meets the requirements of this subparagraph if the applicable individual may elect to direct the plan to divest any such securities and to reinvest an equivalent amount in other investment options meeting the requirements of subparagraph (D).
Employer contributions invested in employer securities.—
In the case of the portion of the account attributable to employer contributions other than elective deferrals which is invested in employer securities, a plan meets the requirements of this subparagraph if each applicable individual who—
is a participant who has completed at least 3 years of service, or
is a beneficiary of a participant described in clause (i) or of a deceased participant,
may elect to direct the plan to divest any such securities and to reinvest an equivalent amount in other investment options meeting the requirements of subparagraph (D).
Investment options.—
In general.—
The requirements of this subparagraph are met if the plan offers not less than 3 investment options, other than employer securities, to which an applicable individual may direct the proceeds from the divestment of employer securities pursuant to this paragraph, each of which is diversified and has materially different risk and return characteristics.
Treatment of certain restrictions and conditions.—
Time for making investment choices.—
A plan shall not be treated as failing to meet the requirements of this subparagraph merely because the plan limits the time for divestment and reinvestment to periodic, reasonable opportunities occurring no less frequently than quarterly.
Certain restrictions and conditions not allowed.—
Except as provided in regulations, a plan shall not meet the requirements of this subparagraph if the plan imposes restrictions or conditions with respect to the investment of employer securities which are not imposed on the investment of other assets of the plan. This subclause shall not apply to any restrictions or conditions imposed by reason of the application of securities laws.
Applicable defined contribution plan.—
For purposes of this paragraph—
In general.—
The term “applicable defined contribution plan” means any defined contribution plan which holds any publicly traded employer securities.
Exception for certain esops.—
Such term does not include an employee stock ownership plan if—
there are no contributions to such plan (or earnings thereunder) which are held within such plan and are subject to subsection (k) or (m), and
such plan is a separate plan for purposes of section 414(l) with respect to any other defined benefit plan or defined contribution plan maintained by the same employer or employers.
Exception for one participant plans.—
Such term does not include a one-participant retirement plan.
One-participant retirement plan.—
For purposes of clause (iii), the term “one-participant retirement plan” means a retirement plan that on the first day of the plan year—
covered only one individual (or the individual and the individual’s spouse) and the individual (or the individual and the individual’s spouse) owned 100 percent of the plan sponsor (whether or not incorporated), or
covered only one or more partners (or partners and their spouses) in the plan sponsor.
Certain plans treated as holding publicly traded employer securities.—
In general.—
Except as provided in regulations or in clause (ii), a plan holding employer securities which are not publicly traded employer securities shall be treated as holding publicly traded employer securities if any employer corporation, or any member of a controlled group of corporations which includes such employer corporation, has issued a class of stock which is a publicly traded employer security.
Exception for certain controlled groups with publicly traded securities.—
Clause (i) shall not apply to a plan if—
no employer corporation, or parent corporation of an employer corporation, has issued any publicly traded employer security, and
no employer corporation, or parent corporation of an employer corporation, has issued any special class of stock which grants particular rights to, or bears particular risks for, the holder or issuer with respect to any corporation described in clause (i) which has issued any publicly traded employer security.
Definitions.—
For purposes of this subparagraph, the term—
“controlled group of corporations” has the meaning given such term by section 1563(a), except that “50 percent” shall be substituted for “80 percent” each place it appears,
“employer corporation” means a corporation which is an employer maintaining the plan, and
“parent corporation” has the meaning given such term by section 424(e).
Other definitions.—
For purposes of this paragraph—
Applicable individual.—
The term “applicable individual” means—
any participant in the plan, and
any beneficiary who has an account under the plan with respect to which the beneficiary is entitled to exercise the rights of a participant.
Elective deferral.—
The term “elective deferral” means an employer contribution described in section 402(g)(3)(A).
Employer security.—
The term “employer security” has the meaning given such term by section 407(d)(1) of the Employee Retirement Income Security Act of 1974.
Employee stock ownership plan.—
The term “employee stock ownership plan” has the meaning given such term by section 4975(e)(7).
Publicly traded employer securities.—
The term “publicly traded employer securities” means employer securities which are readily tradable on an established securities market.
Year of service.—
The term “year of service” has the meaning given such term by section 411(a)(5).
Transition rule for securities attributable to employer contributions.—
Rules phased in over 3 years.—
In general.—
In the case of the portion of an account to which subparagraph (C) applies and which consists of employer securities acquired in a plan year beginning before
Exception for certain participants aged 55 or over.—
Subclause (I) shall not apply to an applicable individual who is a participant who has attained age 55 and completed at least 3 years of service before the first plan year beginning after
Applicable percentage.—
For purposes of clause (i), the applicable percentage shall be determined as follows:
Plan year to which subparagraph (C) applies: | The applicable percentage is: |
|---|---|
1st | 33 |
2d | 66 |
3d and following | 100. |
Distributions during working retirement.—
In general.—
A trust forming part of a pension plan shall not be treated as failing to constitute a qualified trust under this section solely because the plan provides that a distribution may be made from such trust to an employee who has attained age 59½ and who is not separated from employment at the time of such distribution.
Certain employees in the building and construction industry.—
Subparagraph (A) shall be applied by substituting “age 55” for “age 59½” in the case of a multiemployer plan described in section 4203(b)(1)(B)(i) of the Employee Retirement Income Security Act of 1974, with respect to individuals who were participants in such plan on or before
the trust to which subparagraph (A) applies was in existence before
before
Death benefits under userra-qualified active military service.—
A trust shall not constitute a qualified trust unless the plan provides that, in the case of a participant who dies while performing qualified military service (as defined in section 414(u)), the survivors of the participant are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the plan had the participant resumed and then terminated employment on account of death.
Portability of lifetime income.—
In general.—
Except as may be otherwise provided by regulations, a trust forming part of a defined contribution plan shall not be treated as failing to constitute a qualified trust under this section solely by reason of allowing—
qualified distributions of a lifetime income investment, or
distributions of a lifetime income investment in the form of a qualified plan distribution annuity contract,
on or after the date that is 90 days prior to the date on which such lifetime income investment is no longer authorized to be held as an investment option under the plan.
Definitions.—
For purposes of this subsection—
the term “qualified distribution” means a direct trustee-to-trustee transfer described in paragraph (31)(A) to an eligible retirement plan (as defined in section 402(c)(8)(B)),
the term “lifetime income investment” means an investment option which is designed to provide an employee with election rights—
which are not uniformly available with respect to other investment options under the plan, and
which are to a lifetime income feature available through a contract or other arrangement offered under the plan (or under another eligible retirement plan (as so defined), if paid by means of a direct trustee-to-trustee transfer described in paragraph (31)(A) to such other eligible retirement plan),
the term “lifetime income feature” means—
a feature which guarantees a minimum level of income annually (or more frequently) for at least the remainder of the life of the employee or the joint lives of the employee and the employee’s designated beneficiary, or
an annuity payable on behalf of the employee under which payments are made in substantially equal periodic payments (not less frequently than annually) over the life of the employee or the joint lives of the employee and the employee’s designated beneficiary, and
the term “qualified plan distribution annuity contract” means an annuity contract purchased for a participant and distributed to the participant by a plan or contract described in subparagraph (B) of section 402(c)(8) (without regard to clauses (i) and (ii) thereof).
Paragraphs (11), (12), (13), (14), (15), (19), and (20) shall apply only in the case of a plan to which section 411 (relating to minimum vesting standards) applies without regard to subsection (e)(2) of such section.
Certain plan amendments
Certain retroactive changes in plan
Adoption of plan
Definitions and rules relating to self-employed individuals and owner-employees
For purposes of this section—
Self-employed individual treated as employee
In general
Self-employed individual
The term “self-employed individual” means, with respect to any taxable year, an individual who has earned income (as defined in paragraph (2)) for such taxable year. To the extent provided in regulations prescribed by the Secretary, such term also includes, for any taxable year—
an individual who would be a self-employed individual within the meaning of the preceding sentence but for the fact that the trade or business carried on by such individual did not have net profits for the taxable year, and
an individual who has been a self-employed individual within the meaning of the preceding sentence for any prior taxable year.
Earned income
In general
The term “earned income” means the net earnings from self-employment (as defined in section 1402(a)), but such net earnings shall be determined—
only with respect to a trade or business in which personal services of the taxpayer are a material income-producing factor,
without regard to paragraphs (4) and (5) of section 1402(c),
in the case of any individual who is treated as an employee under subparagraph (A), (C), or (D) of section 3121(d)(3), without regard to section 1402(c)(2),
without regard to items which are not included in gross income for purposes of this chapter, and the deductions properly allocable to or chargeable against such items,
with regard to the deductions allowed by section 404 to the taxpayer, and
with regard to the deduction allowed to the taxpayer by section 164(f).
For purposes of this subparagraph, section 1402, as in effect for a taxable year ending on
Repealed]
Income from disposition of certain property
Owner-employee
The term “owner-employee” means an employee who—
owns the entire interest in an unincorporated trade or business, or
in the case of a partnership, is a partner who owns more than 10 percent of either the capital interest or the profits interest in such partnership.
To the extent provided in regulations prescribed by the Secretary, such term also means an individual who has been an owner-employee within the meaning of the preceding sentence.
Employer
Contributions on behalf of owner-employees
The term “contribution on behalf of an owner-employee” includes, except as the context otherwise requires, a contribution under a plan—
by the employer for an owner-employee, and
by an owner-employee as an employee.
Special rule for certain fishermen
Contribution limit on owner-employees
Repealed. Pub. L. 98–369, div. A, title VII, § 713(d)(3), July 18, 1984, 98 Stat. 958]
Certain custodial accounts and contracts
For purposes of this title, a custodial account, an annuity contract, or a contract (other than a life, health or accident, property, casualty, or liability insurance contract) issued by an insurance company qualified to do business in a State shall be treated as a qualified trust under this section if—
the custodial account or contract would, except for the fact that it is not a trust, constitute a qualified trust under this section, and
in the case of a custodial account the assets thereof are held by a bank (as defined in section 408(n)) or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will hold the assets will be consistent with the requirements of this section.
For purposes of this title, in the case of a custodial account or contract treated as a qualified trust under this section by reason of this subsection, the person holding the assets of such account or holding such contract shall be treated as the trustee thereof.
Annuity defined
Medical, etc., benefits for retired employees and their spouses and dependents
Under regulations prescribed by the Secretary, and subject to the provisions of section 420, a pension or annuity plan may provide for the payment of benefits for sickness, accident, hospitalization, and medical expenses of retired employees, their spouses and their dependents, but only if—
such benefits are subordinate to the retirement benefits provided by the plan,
a separate account is established and maintained for such benefits,
the employer’s contributions to such separate account are reasonable and ascertainable,
it is impossible, at any time prior to the satisfaction of all liabilities under the plan to provide such benefits, for any part of the corpus or income of such separate account to be (within the taxable year or thereafter) used for, or diverted to, any purpose other than the providing of such benefits,
notwithstanding the provisions of subsection (a)(2), upon the satisfaction of all liabilities under the plan to provide such benefits, any amount remaining in such separate account must, under the terms of the plan, be returned to the employer, and
in the case of an employee who is a key employee, a separate account is established and maintained for such benefits payable to such employee (and his spouse and dependents) and such benefits (to the extent attributable to plan years beginning after
For purposes of paragraph (6), the term “key employee” means any employee, who at any time during the plan year or any preceding plan year during which contributions were made on behalf of such employee, is or was a key employee as defined in section 416(i). In no event shall the requirements of paragraph (1) be treated as met if the aggregate actual contributions for medical benefits, when added to actual contributions for life insurance protection under the plan, exceed 25 percent of the total actual contributions to the plan (other than contributions to fund past service credits) after the date on which the account is established. For purposes of this subsection, the term “dependent” shall include any individual who is a child (as defined in section 152(f)(1)) of a retired employee who as of the end of the calendar year has not attained age 27.
Certain union-negotiated pension plans
In the case of a trust forming part of a pension plan which has been determined by the Secretary to constitute a qualified trust under subsection (a) and to be exempt from taxation under section 501(a) for a period beginning after contributions were first made to or for such trust, if it is shown to the satisfaction of the Secretary that—
such trust was created pursuant to a collective bargaining agreement between employee representatives and one or more employers,
any disbursements of contributions, made to or for such trust before the time as of which the Secretary determined that the trust constituted a qualified trust, substantially complied with the terms of the trust, and the plan of which the trust is a part, as subsequently qualified, and
before the time as of which the Secretary determined that the trust constitutes a qualified trust, the contributions to or for such trust were not used in a manner which would jeopardize the interests of its beneficiaries,
then such trust shall be considered as having constituted a qualified trust under subsection (a) and as having been exempt from taxation under section 501(a) for the period beginning on the date on which contributions were first made to or for such trust and ending on the date such trust first constituted (without regard to this subsection) a qualified trust under subsection (a).
Repealed. Pub. L. 97–248, title II, § 238(b), Sept. 3, 1982, 96 Stat. 512]
Cash or deferred arrangements
General rule
Qualified cash or deferred arrangement
A qualified cash or deferred arrangement is any arrangement which is part of a profit-sharing or stock bonus plan, a pre-ERISA money purchase plan, or a rural cooperative plan which meets the requirements of subsection (a)—
under which a covered employee may elect to have the employer make payments as contributions to a trust under the plan on behalf of the employee, or to the employee directly in cash;
under which amounts held by the trust which are attributable to employer contributions made pursuant to the employee’s election—
may not be distributable to participants or other beneficiaries earlier than—
severance from employment, death, or disability,
an event described in paragraph (10),
in the case of a profit-sharing or stock bonus plan, the attainment of age 59½,
subject to the provisions of paragraph (14), upon hardship of the employee,
in the case of a qualified reservist distribution (as defined in section 72(t)(2)(G)(iii)), the date on which a period referred to in subclause (III) of such section begins, or
except as may be otherwise provided by regulations, with respect to amounts invested in a lifetime income investment (as defined in subsection (a)(38)(B)(ii)), the date that is 90 days prior to the date that such lifetime income investment may no longer be held as an investment option under the arrangement,
will not be distributable merely by reason of the completion of a stated period of participation or the lapse of a fixed number of years, and
except as may be otherwise provided by regulations, in the case of amounts described in clause (i)(VI), will be distributed only in the form of a qualified distribution (as defined in subsection (a)(38)(B)(i)) or a qualified plan distribution annuity contract (as defined in subsection (a)(38)(B)(iv)),
which provides that an employee’s right to his accrued benefit derived from employer contributions made to the trust pursuant to his election is nonforfeitable, and
which does not require, as a condition of participation in the arrangement, that an employee complete a period of service with the employer (or employers) maintaining the plan extending beyond the close of the earlier of—
the period permitted under section 410(a)(1) (determined without regard to subparagraph (B)(i) thereof), or
subject to the provisions of paragraph (15), the first period of 3 consecutive 12-month periods during each of which the employee has at least 500 hours of service.
Application of participation and discrimination standards
A cash or deferred arrangement shall not be treated as a qualified cash or deferred arrangement unless—
those employees eligible to benefit under the arrangement satisfy the provisions of section 410(b)(1), and
the actual deferral percentage for eligible highly compensated employees (as defined in paragraph (5)) for the plan year bears a relationship to the actual deferral percentage for all other eligible employees for the preceding plan year which meets either of the following tests:
The actual deferral percentage for the group of eligible highly compensated employees is not more than the actual deferral percentage of all other eligible employees multiplied by 1.25.
The excess of the actual deferral percentage for the group of eligible highly compensated employees over that of all other eligible employees is not more than 2 percentage points, and the actual deferral percentage for the group of eligible highly compensated employees is not more than the actual deferral percentage of all other eligible employees multiplied by 2.
If 2 or more plans which include cash or deferred arrangements are considered as 1 plan for purposes of section 401(a)(4) or 410(b), the cash or deferred arrangements included in such plans shall be treated as 1 arrangement for purposes of this subparagraph.
If any highly compensated employee is a participant under 2 or more cash or deferred arrangements of the employer, for purposes of determining the deferral percentage with respect to such employee, all such cash or deferred arrangements shall be treated as 1 cash or deferred arrangement. An arrangement may apply clause (ii) by using the plan year rather than the preceding plan year if the employer so elects, except that if such an election is made, it may not be changed except as provided by the Secretary.
For purposes of subparagraph (A), the actual deferral percentage for a specified group of employees for a plan year shall be the average of the ratios (calculated separately for each employee in such group) of—
the amount of employer contributions actually paid over to the trust on behalf of each such employee for such plan year, to
the employee’s compensation for such plan year.
A cash or deferred arrangement shall be treated as meeting the requirements of subsection (a)(4) with respect to contributions if the requirements of subparagraph (A)(ii) are met.
For purposes of subparagraph (B), the employer contributions on behalf of any employee—
shall include any employer contributions made pursuant to the employee’s election under paragraph (2), and
under such rules as the Secretary may prescribe, may, at the election of the employer, include—
matching contributions (as defined in 401(m)(4)(A)) which meet the requirements of paragraph (2)(B) and (C), and
qualified nonelective contributions (within the meaning of section 401(m)(4)(C)).
For purposes of this paragraph, in the case of the first plan year of any plan (other than a successor plan), the amount taken into account as the actual deferral percentage of nonhighly compensated employees for the preceding plan year shall be—
3 percent, or
if the employer makes an election under this subclause, the actual deferral percentage of nonhighly compensated employees determined for such first plan year.
Special rule for early participation.—
If an employer elects to apply section 410(b)(4)(B) in determining whether a cash or deferred arrangement meets the requirements of subparagraph (A)(i), the employer may, in determining whether the arrangement meets the requirements of subparagraph (A)(ii), exclude from consideration all eligible employees (other than highly compensated employees) who have not met the minimum age and service requirements of section 410(a)(1)(A).
Governmental plan.—
A governmental plan (within the meaning of section 414(d)) shall be treated as meeting the requirements of this paragraph.
Other requirements
Benefits (other than matching contributions) must not be contingent on election to defer
Eligibility of State and local governments and tax-exempt organizations
Tax-exempts eligible
Governments ineligible
Treatment of Indian tribal governments
Coordination with other plans
Highly compensated employee
Pre-ERISA money purchase plan
For purposes of this subsection, the term “pre-ERISA money purchase plan” means a pension plan—
which is a defined contribution plan (as defined in section 414(i)),
which was in existence on
under which neither the employee contributions nor the employer contributions may exceed the levels provided for by the contribution formula in effect under the plan on such date.
Rural cooperative plan
For purposes of this subsection—
In general
The term “rural cooperative plan” means any pension plan—
which is a defined contribution plan (as defined in section 414(i)), and
which is established and maintained by a rural cooperative.
Rural cooperative defined
For purposes of subparagraph (A), the term “rural cooperative” means—
any organization which—
is engaged primarily in providing electric service on a mutual or cooperative basis, or
is engaged primarily in providing electric service to the public in its area of service and which is exempt from tax under this subtitle or which is a State or local government (or an agency or instrumentality thereof), other than a municipality (or an agency or instrumentality thereof),
any organization described in paragraph (4) or (6) of section 501(c) and at least 80 percent of the members of which are organizations described in clause (i),
a cooperative telephone company described in section 501(c)(12),
any organization which—
is a mutual irrigation or ditch company described in section 501(c)(12) (without regard to the 85 percent requirement thereof), or
is a district organized under the laws of a State as a municipal corporation for the purpose of irrigation, water conservation, or drainage, and
an organization which is a national association of organizations described in clause (i), (ii),,2
Special rule for certain distributions
Arrangement not disqualified if excess contributions distributed
In general
A cash or deferred arrangement shall not be treated as failing to meet the requirements of clause (ii) of paragraph (3)(A) for any plan year if, before the close of the following plan year—
the amount of the excess contributions for such plan year (and any income allocable to such contributions through the end of such year) is distributed, or
to the extent provided in regulations, the employee elects to treat the amount of the excess contributions as an amount distributed to the employee and then contributed by the employee to the plan.
Any distribution of excess contributions (and income) may be made without regard to any other provision of law.
Excess contributions
For purposes of subparagraph (A), the term “excess contributions” means, with respect to any plan year, the excess of—
the aggregate amount of employer contributions actually paid over to the trust on behalf of highly compensated employees for such plan year, over
the maximum amount of such contributions permitted under the limitations of clause (ii) of paragraph (3)(A) (determined by reducing contributions made on behalf of highly compensated employees in order of the actual deferral percentages beginning with the highest of such percentages).
Method of distributing excess contributions
Additional tax under section 72(t) not to apply
Treatment of matching contributions forfeited by reason of excess deferral or contribution or permissible withdrawal
Cross reference
Compensation
Distributions upon termination of plan
In general
Distributions must be lump sum distributions
In general
Lump-sum distribution
For purposes of this subparagraph, the term “lump-sum distribution” has the meaning given such term by section 402(e)(4)(D) (without regard to subclauses (I), (II), (III), and (IV) of clause (i) thereof). Such term includes a distribution of an annuity contract from—
a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501(a), or
an annuity plan described in section 403(a).
Adoption of simple plan to meet nondiscrimination tests
In general
A cash or deferred arrangement maintained by an eligible employer shall be treated as meeting the requirements of paragraph (3)(A)(ii) if such arrangement meets—
the contribution requirements of subparagraph (B),
the exclusive plan requirements of subparagraph (C), and
the vesting requirements of section 408(p)(3).
Contribution requirements
In general
The requirements of this subparagraph are met if, under the arrangement—
an employee may elect to have the employer make elective contributions for the year on behalf of the employee to a trust under the plan in an amount which is expressed as a percentage of compensation of the employee but which in no event exceeds the amount in effect under section 408(p)(2)(A)(ii),
the employer is required to make a matching contribution to the trust for the year in an amount equal to so much of the amount the employee elects under subclause (I) as does not exceed 3 percent of compensation for the year, and
no other contributions may be made other than contributions described in subclause (I) or (II).
Employer may elect 2-percent nonelective contribution
Administrative requirements
In general
Notice of election period
Exclusive plan requirement
Definitions and special rule
Definitions
Coordination with top-heavy rules
Alternative methods of meeting nondiscrimination requirements
In general
A cash or deferred arrangement shall be treated as meeting the requirements of paragraph (3)(A)(ii) if such arrangement—
meets the contribution requirements of subparagraph (B) and the notice requirements of subparagraph (D), or
meets the contribution requirements of subparagraph (C).
Matching contributions
In general
The requirements of this subparagraph are met if, under the arrangement, the employer makes matching contributions on behalf of each employee who is not a highly compensated employee in an amount equal to—
100 percent of the elective contributions of the employee to the extent such elective contributions do not exceed 3 percent of the employee’s compensation, and
50 percent of the elective contributions of the employee to the extent that such elective contributions exceed 3 percent but do not exceed 5 percent of the employee’s compensation.
Rate for highly compensated employees
Alternative plan designs
If the rate of any matching contribution with respect to any rate of elective contribution is not equal to the percentage required under clause (i), an arrangement shall not be treated as failing to meet the requirements of clause (i) if—
the rate of an employer’s matching contribution does not increase as an employee’s rate of elective contributions increase, and
the aggregate amount of matching contributions at such rate of elective contribution is at least equal to the aggregate amount of matching contributions which would be made if matching contributions were made on the basis of the percentages described in clause (i).
Nonelective contributions
Notice requirement
An arrangement meets the requirements of this paragraph if, under the arrangement, each employee eligible to participate is, within a reasonable period before any year, given written notice of the employee’s rights and obligations under the arrangement which—
is sufficiently accurate and comprehensive to apprise the employee of such rights and obligations, and
is written in a manner calculated to be understood by the average employee eligible to participate.
Other requirements
Withdrawal and vesting restrictions
Social security and similar contributions not taken into account
Timing of plan amendment for employer making nonelective contributions
In general
Except as provided in clause (ii), a plan may be amended after the beginning of a plan year to provide that the requirements of subparagraph (C) shall apply to the arrangement for the plan year, but only if the amendment is adopted—
at any time before the 30th day before the close of the plan year, or
at any time before the last day under paragraph (8)(A) for distributing excess contributions for the plan year.
Exception where plan provided for matching contributions
4-percent contribution requirement
Other plans
Alternative method for automatic contribution arrangements to meet nondiscrimination requirements
In general
Qualified automatic contribution arrangement
For purposes of this paragraph, the term “qualified automatic contribution arrangement” means a cash or deferred arrangement—
which is described in subparagraph (D)(i)(I) and meets the applicable requirements of subparagraphs (C) through (E), or
which is described in subparagraph (D)(i)(II) and meets the applicable requirements of subparagraphs (C) and (D).
Automatic deferral
In general
Election out
The election treated as having been made under clause (i) shall cease to apply with respect to any employee if such employee makes an affirmative election—
to not have such contributions made, or
to make elective contributions at a level specified in such affirmative election.
Qualified percentage
For purposes of this subparagraph, the term “qualified percentage” means, with respect to any employee, any percentage determined under the arrangement if such percentage is applied uniformly, does not exceed 15 percent (10 percent during the period described in subclause (I)), and is at least—
3 percent during the period ending on the last day of the first plan year which begins after the date on which the first elective contribution described in clause (i) is made with respect to such employee,
4 percent during the first plan year following the plan year described in subclause (I),
5 percent during the second plan year following the plan year described in subclause (I), and
6 percent during any subsequent plan year.
Automatic deferral for current employees not required
Clause (i) may be applied without taking into account any employee who—
was eligible to participate in the arrangement (or a predecessor arrangement) immediately before the date on which such arrangement becomes a qualified automatic contribution arrangement (determined after application of this clause), and
had an election in effect on such date either to participate in the arrangement or to not participate in the arrangement.
Matching or nonelective contributions
In general
The requirements of this subparagraph are met if, under the arrangement, the employer—
makes matching contributions on behalf of each employee who is not a highly compensated employee in an amount equal to the sum of 100 percent of the elective contributions of the employee to the extent that such contributions do not exceed 1 percent of compensation plus 50 percent of so much of such contributions as exceed 1 percent but do not exceed 6 percent of compensation, or
is required, without regard to whether the employee makes an elective contribution or employee contribution, to make a contribution to a defined contribution plan on behalf of each employee who is not a highly compensated employee and who is eligible to participate in the arrangement in an amount equal to at least 3 percent of the employee’s compensation.
Application of rules for matching contributions
Withdrawal and vesting restrictions
An arrangement shall not be treated as meeting the requirements of clause (i) unless, with respect to employer contributions (including matching contributions) taken into account in determining whether the requirements of clause (i) are met—
any employee who has completed at least 2 years of service (within the meaning of section 411(a)) has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from such employer contributions, and
the requirements of subparagraph (B) of paragraph (2) are met with respect to all such employer contributions.
Application of certain other rules
Notice requirements
In general
The requirements of this subparagraph are met if, within a reasonable period before each plan year, each employee eligible to participate in the arrangement for such year receives written notice of the employee’s rights and obligations under the arrangement which—
is sufficiently accurate and comprehensive to apprise the employee of such rights and obligations, and
is written in a manner calculated to be understood by the average employee to whom the arrangement applies.
Timing and content requirements
A notice shall not be treated as meeting the requirements of clause (i) with respect to an employee unless—
the notice explains the employee’s right under the arrangement to elect not to have elective contributions made on the employee’s behalf (or to elect to have such contributions made at a different percentage),
in the case of an arrangement under which the employee may elect among 2 or more investment options, the notice explains how contributions made under the arrangement will be invested in the absence of any investment election by the employee, and
the employee has a reasonable period of time after receipt of the notice described in subclauses (I) and (II) and before the first elective contribution is made to make either such election.
Timing of plan amendment for employer making nonelective contributions
In general
Except as provided in clause (ii), a plan may be amended after the beginning of a plan year to provide that the requirements of subparagraph (D)(i)(II) shall apply to the arrangement for the plan year, but only if the amendment is adopted—
at any time before the 30th day before the close of the plan year, or
at any time before the last day under paragraph (8)(A) for distributing excess contributions for the plan year.
Exception where plan provided for matching contributions
4-percent contribution requirement
Special rules relating to hardship withdrawals
For purposes of paragraph (2)(B)(i)(IV)—
Amounts which may be withdrawn
The following amounts may be distributed upon hardship of the employee:
Contributions to a profit-sharing or stock bonus plan to which section 402(e)(3) applies.
Qualified nonelective contributions (as defined in subsection (m)(4)(C)).
Qualified matching contributions described in paragraph (3)(D)(ii)(I).
Earnings on any contributions described in clause (i), (ii), or (iii).
No requirement to take available loan
Employee certification
In determining whether a distribution is upon the hardship of an employee, the administrator of the plan may rely on a written certification by the employee that the distribution is—
on account of a financial need of a type which is deemed in regulations prescribed by the Secretary to be an immediate and heavy financial need, and
not in excess of the amount required to satisfy such financial need, and
that the employee has no alternative means reasonably available to satisfy such financial need. The Secretary may provide by regulations for exceptions to the rule of the preceding sentence in cases where the plan administrator has actual knowledge to the contrary of the employee’s certification, and for procedures for addressing cases of employee misrepresentation.
Special rules for participation requirement for long-term, part-time workers
For purposes of paragraph (2)(D)(ii)—
Age requirement must be met
Nondiscrimination and top-heavy rules not to apply
Nondiscrimination rules
In the case of employees who are eligible to participate in the arrangement solely by reason of paragraph (2)(D)(ii)—
notwithstanding subsection (a)(4), an employer shall not be required to make nonelective or matching contributions on behalf of such employees even if such contributions are made on behalf of other employees eligible to participate in the arrangement, and
an employer may elect to exclude such employees from the application of subsection (a)(4), paragraphs (3), (12), and (13), paragraphs (2), (11), and (12) of subsection (m), and section 410(b).
Top-heavy rules
Vesting
Employees who become full-time employees
Exception for employees under collectively bargained plans, etc.
Special rules
Time of participation
12-month periods
Permitted disparity in plan contributions or benefits
In general
The requirements of this subsection are met with respect to a plan if—
in the case of a defined contribution plan, the requirements of paragraph (2) are met, and
in the case of a defined benefit plan, the requirements of paragraph (3) are met.
Defined contribution plan
In general
A defined contribution plan meets the requirements of this paragraph if the excess contribution percentage does not exceed the base contribution percentage by more than the lesser of—
the base contribution percentage, or
the greater of—
5.7 percentage points, or
the percentage equal to the portion of the rate of tax under section 3111(a) (in effect as of the beginning of the year) which is attributable to old-age insurance.
Contribution percentages
For purposes of this paragraph—
Excess contribution percentage
Base contribution percentage
Defined benefit plan
A defined benefit plan meets the requirements of this paragraph if—
Excess plans
In general
In the case of a plan other than an offset plan—
the excess benefit percentage does not exceed the base benefit percentage by more than the maximum excess allowance,
any optional form of benefit, preretirement benefit, actuarial factor, or other benefit or feature provided with respect to compensation in excess of the integration level is provided with respect to compensation not in excess of such level, and
benefits are based on average annual compensation.
Benefit percentages
Offset plans
In the case of an offset plan, the plan provides that—
a participant’s accrued benefit attributable to employer contributions (within the meaning of section 411(c)(1)) may not be reduced (by reason of the offset) by more than the maximum offset allowance, and
benefits are based on average annual compensation.
Definitions relating to paragraph (3)
For purposes of paragraph (3)—
Maximum excess allowance
The maximum excess allowance is equal to—
in the case of benefits attributable to any year of service with the employer taken into account under the plan, ¾ of a percentage point, and
in the case of total benefits, ¾ of a percentage point, multiplied by the participant’s years of service (not in excess of 35) with the employer taken into account under the plan.
In no event shall the maximum excess allowance exceed the base benefit percentage.
Maximum offset allowance
The maximum offset allowance is equal to—
in the case of benefits attributable to any year of service with the employer taken into account under the plan, ¾ percent of the participant’s final average compensation, and
in the case of total benefits, ¾ percent of the participant’s final average compensation, multiplied by the participant’s years of service (not in excess of 35) with the employer taken into account under the plan.
In no event shall the maximum offset allowance exceed 50 percent of the benefit which would have accrued without regard to the offset reduction.
Reductions
In general
The Secretary shall prescribe regulations requiring the reduction of the ¾ percentage factor under subparagraph (A) or (B)—
in the case of a plan other than an offset plan which has an integration level in excess of covered compensation, or
with respect to any participant in an offset plan who has final average compensation in excess of covered compensation.
Basis of reductions
Offset plan
Other definitions and special rules
For purposes of this subsection—
Integration level
In general
Limitation
Level to apply to all participants
Multiple integration levels
Compensation
Average annual compensation
The term “average annual compensation” means the participant’s highest average annual compensation for—
any period of at least 3 consecutive years, or
if shorter, the participant’s full period of service.
Final average compensation
In general
The term “final average compensation” means the participant’s average annual compensation for—
the 3-consecutive year period ending with the current year, or
if shorter, the participant’s full period of service.
Limitation
Covered compensation
In general
Computation for any year
Social security retirement age
Regulations
The Secretary shall prescribe such regulations as are necessary or appropriate to carry out the purposes of this subsection, including—
in the case of a defined benefit plan which provides for unreduced benefits commencing before the social security retirement age (as defined in section 415(b)(8)), rules providing for the reduction of the maximum excess allowance and the maximum offset allowance, and
in the case of an employee covered by 2 or more plans of the employer which fail to meet the requirements of subsection (a)(4) (without regard to this subsection), rules preventing the multiple use of the disparity permitted under this subsection with respect to any employee.
For purposes of clause (i), unreduced benefits shall not include benefits for disability (within the meaning of section 223(d) of the Social Security Act).
Special rule for plan maintained by railroads
Nondiscrimination test for matching contributions and employee contributions
In general
Requirements
Contribution percentage requirement
A plan meets the contribution percentage requirement of this paragraph for any plan year only if the contribution percentage for eligible highly compensated employees for such plan year does not exceed the greater of—
125 percent of such percentage for all other eligible employees for the preceding plan year, or
the lesser of 200 percent of such percentage for all other eligible employees for the preceding plan year, or such percentage for all other eligible employees for the preceding plan year plus 2 percentage points.
This subparagraph may be applied by using the plan year rather than the preceding plan year if the employer so elects, except that if such an election is made, it may not be changed except as provided by the Secretary.
Multiple plans treated as a single plan
Contribution percentage
For purposes of paragraph (2), the contribution percentage for a specified group of employees for a plan year shall be the average of the ratios (calculated separately for each employee in such group) of—
the sum of the matching contributions and employee contributions paid under the plan on behalf of each such employee for such plan year, to
the employee’s compensation (within the meaning of section 414(s)) for such plan year.
Under regulations, an employer may elect to take into account (in computing the contribution percentage) elective deferrals and qualified nonelective contributions under the plan or any other plan of the employer. If matching contributions are taken into account for purposes of subsection (k)(3)(A)(ii) for any plan year, such contributions shall not be taken into account under subparagraph (A) for such year. Rules similar to the rules of subsection (k)(3)(E) shall apply for purposes of this subsection.
Definitions
For purposes of this subsection—
Matching contribution
The term “matching contribution” means—
any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee contribution made by such employee, and
any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee’s elective deferral.
Elective deferral
Qualified nonelective contributions
The term “qualified nonelective contribution” means any employer contribution (other than a matching contribution) with respect to which—
the employee may not elect to have the contribution paid to the employee in cash instead of being contributed to the plan, and
the requirements of subparagraphs (B) and (C) of subsection (k)(2) are met.
Employees taken into consideration
In general
Certain nonparticipants
Special rule for early participation
Plan not disqualified if excess aggregate contributions distributed before end of following plan year
In general
Excess aggregate contributions
For purposes of subparagraph (A), the term “excess aggregate contributions” means, with respect to any plan year, the excess of—
the aggregate amount of the matching contributions and employee contributions (and any qualified nonelective contribution or elective contribution taken into account in computing the contribution percentage) actually made on behalf of highly compensated employees for such plan year, over
the maximum amount of such contributions permitted under the limitations of paragraph (2)(A) (determined by reducing contributions made on behalf of highly compensated employees in order of their contribution percentages beginning with the highest of such percentages).
Method of distributing excess aggregate contributions
Coordination with subsection (k) and 402(g)
The determination of the amount of excess aggregate contributions with respect to a plan shall be made after—
first determining the excess deferrals (within the meaning of section 402(g)), and
then determining the excess contributions under subsection (k).
Treatment of distributions
Additional tax of section 72(t) not applicable
Exclusion of employee contributions
Highly compensated employee
Regulations
Alternative method of satisfying tests
A defined contribution plan shall be treated as meeting the requirements of paragraph (2) with respect to matching contributions if the plan—
meets the contribution requirements of subparagraph (B) of subsection (k)(11),
meets the exclusive plan requirements of subsection (k)(11)(C), and
meets the vesting requirements of section 408(p)(3).
Additional alternative method of satisfying tests
In general
A defined contribution plan shall be treated as meeting the requirements of paragraph (2) with respect to matching contributions if the plan—
meets the contribution requirements of subparagraph (B) or (C) of subsection (k)(12),
meets the notice requirements of subsection (k)(12)(D), and
meets the requirements of subparagraph (B).
Limitation on matching contributions
The requirements of this subparagraph are met if—
matching contributions on behalf of any employee may not be made with respect to an employee’s contributions or elective deferrals in excess of 6 percent of the employee’s compensation,
the rate of an employer’s matching contribution does not increase as the rate of an employee’s contributions or elective deferrals increase, and
the matching contribution with respect to any highly compensated employee at any rate of an employee contribution or rate of elective deferral is not greater than that with respect to an employee who is not a highly compensated employee.
Alternative method for automatic contribution arrangements
A defined contribution plan shall be treated as meeting the requirements of paragraph (2) with respect to matching contributions if the plan—
is a qualified automatic contribution arrangement (as defined in subsection (k)(13)),
meets the notice requirements of subsection (k)(13)(E), and
meets the requirements of paragraph (11)(B).
Cross reference
Coordination with qualified domestic relations orders
Special rules for applying nondiscrimination rules to protect older, longer service and grandfathered participants
Testing of defined benefit plans with closed classes of participants
Benefits, rights, or features provided to closed classes
A defined benefit plan which provides benefits, rights, or features to a closed class of participants shall not fail to satisfy the requirements of subsection (a)(4) by reason of the composition of such closed class or the benefits, rights, or features provided to such closed class, if—
for the plan year as of which the class closes and the 2 succeeding plan years, such benefits, rights, and features satisfy the requirements of subsection (a)(4) (without regard to this subparagraph but taking into account the rules of subparagraph (I)),
after the date as of which the class was closed, any plan amendment which modifies the closed class or the benefits, rights, and features provided to such closed class does not discriminate significantly in favor of highly compensated employees, and
the class was closed before
Aggregate testing with defined contribution plans permitted on a benefits basis
In general
For purposes of determining compliance with subsection (a)(4) and section 410(b), a defined benefit plan described in clause (iii) may be aggregated and tested on a benefits basis with 1 or more defined contribution plans, including with the portion of 1 or more defined contribution plans which—
provides matching contributions (as defined in subsection (m)(4)(A)),
provides annuity contracts described in section 403(b) which are purchased with matching contributions or nonelective contributions, or
consists of an employee stock ownership plan (within the meaning of section 4975(e)(7)) or a tax credit employee stock ownership plan (within the meaning of section 409(a)).
Special rules for matching contributions
For purposes of clause (i), if a defined benefit plan is aggregated with a portion of a defined contribution plan providing matching contributions—
such defined benefit plan must also be aggregated with any portion of such defined contribution plan which provides elective deferrals described in subparagraph (A) or (C) of section 402(g)(3), and
such matching contributions shall be treated in the same manner as nonelective contributions, including for purposes of applying the rules of subsection (l).
Plans described
A defined benefit plan is described in this clause if—
the plan provides benefits to a closed class of participants,
for the plan year as of which the class closes and the 2 succeeding plan years, the plan satisfies the requirements of section 410(b) and subsection (a)(4) (without regard to this subparagraph but taking into account the rules of subparagraph (I)),
after the date as of which the class was closed, any plan amendment which modifies the closed class or the benefits provided to such closed class does not discriminate significantly in favor of highly compensated employees, and
the class was closed before
Plans described
A plan is described in this subparagraph if, taking into account any predecessor plan—
such plan has been in effect for at least 5 years as of the date the class is closed, and
during the 5-year period preceding the date the class is closed, there has not been a substantial increase in the coverage or value of the benefits, rights, or features described in subparagraph (A) or in the coverage or benefits under the plan described in subparagraph (B)(iii) (whichever is applicable).
Determination of substantial increase for benefits, rights, and features
In applying subparagraph (C)(ii) for purposes of subparagraph (A)(iii), a plan shall be treated as having had a substantial increase in coverage or value of the benefits, rights, or features described in subparagraph (A) during the applicable 5-year period only if, during such period—
the number of participants covered by such benefits, rights, or features on the date such period ends is more than 50 percent greater than the number of such participants on the first day of the plan year in which such period began, or
such benefits, rights, and features have been modified by 1 or more plan amendments in such a way that, as of the date the class is closed, the value of such benefits, rights, and features to the closed class as a whole is substantially greater than the value as of the first day of such 5-year period, solely as a result of such amendments.
Determination of substantial increase for aggregate testing on benefits basis
In applying subparagraph (C)(ii) for purposes of subparagraph (B)(iii)(IV), a plan shall be treated as having had a substantial increase in coverage or benefits during the applicable 5-year period only if, during such period—
the number of participants benefitting under the plan on the date such period ends is more than 50 percent greater than the number of such participants on the first day of the plan year in which such period began, or
the average benefit provided to such participants on the date such period ends is more than 50 percent greater than the average benefit provided on the first day of the plan year in which such period began.
Certain employees disregarded
For purposes of subparagraphs (D) and (E), any increase in coverage or value or in coverage or benefits, whichever is applicable, which is attributable to such coverage and value or coverage and benefits provided to employees—
who became participants as a result of a merger, acquisition, or similar event which occurred during the 7-year period preceding the date the class is closed, or
who became participants by reason of a merger of the plan with another plan which had been in effect for at least 5 years as of the date of the merger,
shall be disregarded, except that clause (ii) shall apply for purposes of subparagraph (D) only if, under the merger, the benefits, rights, or features under 1 plan are conformed to the benefits, rights, or features of the other plan prospectively.
Rules relating to average benefit
For purposes of subparagraph (E)—
the average benefit provided to participants under the plan will be treated as having remained the same between the 2 dates described in subparagraph (E)(ii) if the benefit formula applicable to such participants has not changed between such dates, and
if the benefit formula applicable to 1 or more participants under the plan has changed between such 2 dates, then the average benefit under the plan shall be considered to have increased by more than 50 percent only if—
the total amount determined under section 430(b)(1)(A)(i) for all participants benefitting under the plan for the plan year in which the 5-year period described in subparagraph (E) ends, exceeds
the total amount determined under section 430(b)(1)(A)(i) for all such participants for such plan year, by using the benefit formula in effect for each such participant for the first plan year in such 5-year period,
by more than 50 percent. In the case of a CSEC plan (as defined in section 414(y)), the normal cost of the plan (as determined under section 433(j)(1)(B)) shall be used in lieu of the amount determined under section 430(b)(1)(A)(i).
Treatment as single plan
Special rules
For purposes of subparagraphs (A)(i) and (B)(iii)(II), the following rules shall apply:
In applying section 410(b)(6)(C), the closing of the class of participants shall not be treated as a significant change in coverage under section 410(b)(6)(C)(i)(II).
2 or more plans shall not fail to be eligible to be aggregated and treated as a single plan solely by reason of having different plan years.
Changes in the employee population shall be disregarded to the extent attributable to individuals who become employees or cease to be employees, after the date the class is closed, by reason of a merger, acquisition, divestiture, or similar event.
Aggregation and all other testing methodologies otherwise applicable under subsection (a)(4) and section 410(b) may be taken into account.
The rule of clause (ii) shall also apply for purposes of determining whether plans to which subparagraph (B)(i) applies may be aggregated and treated as 1 plan for purposes of determining whether such plans meet the requirements of subsection (a)(4) and section 410(b).
Spun-off plans
For purposes of this paragraph, if a portion of a defined benefit plan described in subparagraph (A) or (B)(iii) is spun off to another employer and the spun-off plan continues to satisfy the requirements of—
subparagraph (A)(i) or (B)(iii)(II), whichever is applicable, if the original plan was still within the 3-year period described in such subparagraph at the time of the spin off, and
subparagraph (A)(ii) or (B)(iii)(III), whichever is applicable,
the treatment under subparagraph (A) or (B) of the spun-off plan shall continue with respect to such other employer.
Testing of defined contribution plans
Testing on a benefits basis
A defined contribution plan shall be permitted to be tested on a benefits basis if—
such defined contribution plan provides make-whole contributions to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated,
for the plan year of the defined contribution plan as of which the class eligible to receive such make-whole contributions closes and the 2 succeeding plan years, such closed class of participants satisfies the requirements of section 410(b)(2)(A)(i) (determined by applying the rules of paragraph (1)(I)),
after the date as of which the class was closed, any plan amendment to the defined contribution plan which modifies the closed class or the allocations, benefits, rights, and features provided to such closed class does not discriminate significantly in favor of highly compensated employees, and
the class was closed before
Aggregation with plans including matching contributions
In general
With respect to 1 or more defined contribution plans described in subparagraph (A), for purposes of determining compliance with subsection (a)(4) and section 410(b), the portion of such plans which provides make-whole contributions or other nonelective contributions may be aggregated and tested on a benefits basis with the portion of 1 or more other defined contribution plans which—
provides matching contributions (as defined in subsection (m)(4)(A)),
provides annuity contracts described in section 403(b) which are purchased with matching contributions or nonelective contributions, or
consists of an employee stock ownership plan (within the meaning of section 4975(e)(7)) or a tax credit employee stock ownership plan (within the meaning of section 409(a)).
Special rules for matching contributions
Special rules for testing defined contribution plan features providing matching contributions to certain older, longer service participants
Spun-off plans
Definitions and special rule
For purposes of this subsection—
Make-whole contributions
References to closed class of participants
Highly compensated employee
Cross reference
Source
(Aug. 16, 1954, ch. 736, 68A Stat. 134; Pub. L. 87–792, § 2,Notes
Inflation Adjusted Items for Certain Years
Amendment of Section
Editorial Notes
References in Text
Amendments
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section, sections 403 and 416 of this title and sections 1052 and 1053 of Title 29, Labor, and provisions set out as a note under this section] shall apply to plan years beginning after
Subsection (d) and (e).—
The amendments made by subsections (d) and (e) [amending section 416 of this title and provisions set out as a note under this section] shall take effect as if included in the enactment of section 112 of the Setting Every Community Up for Retirement Enhancement Act of 2019 [div. O of Pub. L. 116–94].”
Effective Date of 2020 Amendment
In general.—
The amendments made by this section [amending this section and section 402 of this title] shall apply for calendar years beginning after
Provisions relating to plan or contract amendments.—
In general.—
If this paragraph applies to any plan or contract amendment—
such plan or contract shall not fail to be treated as being operated in accordance with the terms of the plan during the period described in subparagraph (B)(ii) solely because the plan operates in accordance with this section, and
except as provided by the Secretary of the Treasury (or the Secretary’s delegate), such plan or contract shall not fail to meet the requirements of section 411(d)(6) of the Internal Revenue Code of 1986 and section 204(g) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1054(g)] by reason of such amendment.
Amendments to which paragraph applies.—
In general.—
This paragraph shall apply to any amendment to any plan or annuity contract which—
is made pursuant to the amendments made by this section, and
is made on or before the last day of the first plan year beginning on or after
In the case of a governmental plan, subclause (II) shall be applied by substituting ‘2027’ for ‘2025’.
Conditions.—
This paragraph shall not apply to any amendment unless during the period beginning on the effective date of the amendment and ending on
Effective Date of 2019 Amendment
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section] shall take effect on the date of the enactment of this Act [
Special rules.—
Election of earlier application.—
At the election of the plan sponsor, the amendments made by this section shall apply to plan years beginning after
Closed classes of participants.—
For purposes of paragraphs (1)(A)(iii), (1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) of the Internal Revenue Code of 1986 (as added by this section), a closed class of participants shall be treated as being closed before
Certain post-enactment plan amendments.—
A plan shall not be treated as failing to be eligible for the application of section 401(o)(1)(A), 401(o)(1)(B)(iii), or 401(a)(26) of such Code (as added by this section) to such plan solely because in the case of—
such section 401(o)(1)(A), the plan was amended before the date of the enactment of this Act to eliminate 1 or more benefits, rights, or features, and is further amended after such date of enactment to provide such previously eliminated benefits, rights, or features to a closed class of participants, or
such section 401(o)(1)(B)(iii) or section 401(a)(26), the plan was amended before the date of the enactment of this Act to cease all benefit accruals, and is further amended after such date of enactment to provide benefit accruals to a closed class of participants.
Any such section shall only apply if the plan otherwise meets the requirements of such section and in applying such section, the date the class of participants is closed shall be the effective date of the later amendment.”
In general.—
Except as provided in this subsection, the amendments made by this section [amending this section] shall apply to distributions with respect to employees who die after
Collective bargaining exception.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before the date of enactment of this Act [
the later of—
the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof agreed to on or after the date of the enactment of this Act), or
For purposes of subparagraph (A)(i), any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination of such collective bargaining agreement.
Governmental plans.—
In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), paragraph (1) shall be applied by substituting ‘
Exception for certain existing annuity contracts.—
In general.—
The amendments made by this section shall not apply to a qualified annuity which is a binding annuity contract in effect on the date of enactment of this Act and at all times thereafter.
Qualified annuity.—
For purposes of this paragraph, the term ‘qualified annuity’ means, with respect to an employee, an annuity—
which is a commercial annuity (as defined in section 3405(e)(6) of the Internal Revenue Code of 1986);
under which the annuity payments are made over the life of the employee or over the joint lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the joint life expectancy of such employee and a designated beneficiary) in accordance with the regulations described in section 401(a)(9)(A)(ii) of such Code (as in effect before such amendments) and which meets the other requirements of section 401(a)(9) of such Code (as so in effect) with respect to such payments; and
with respect to which—
annuity payments to the employee have begun before the date of enactment of this Act, and the employee has made an irrevocable election before such date as to the method and amount of the annuity payments to the employee or any designated beneficiaries; or
if subclause (I) does not apply, the employee has made an irrevocable election before the date of enactment of this Act as to the method and amount of the annuity payments to the employee or any designated beneficiaries.
Exception for certain beneficiaries.—
In general.—
If an employee dies before the effective date, then, in applying the amendments made by this section to such employee’s designated beneficiary who dies after such date—
such amendments shall apply to any beneficiary of such designated beneficiary; and
the designated beneficiary shall be treated as an eligible designated beneficiary for purposes of applying section 401(a)(9)(H)(ii) of the Internal Revenue Code of 1986 (as in effect after such amendments).
Effective date.—
For purposes of this paragraph, the term ‘effective date’ means the first day of the first calendar year to which the amendments made by this section apply to a plan with respect to employees dying on or after such date.”
Effective Date of 2018 Amendment
Effective Date of 2014 Amendment
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
In general.—
The amendments made by this section [amending this section and section 402 of this title] shall apply for calendar years beginning after
Provisions relating to plan or contract amendments.—
In general.—
If this paragraph applies to any pension plan or contract amendment, such pension plan or contract shall not fail to be treated as being operated in accordance with the terms of the plan during the period described in subparagraph (B)(ii) solely because the plan operates in accordance with this section.
Amendments to which paragraph applies.—
In general.—
This paragraph shall apply to any amendment to any pension plan or annuity contract which—
is made pursuant to the amendments made by this section, and
is made on or before the last day of the first plan year beginning on or after
In the case of a governmental plan, subclause (II) shall be applied by substituting ‘2012’ for ‘2011’.
Conditions.—
This paragraph shall not apply to any amendment unless during the period beginning on the effective date of the amendment and ending on
In general.—
The amendments made by this section [amending this section and sections 403, 404, 414, and 457 of this title] shall apply with respect to deaths and disabilities occurring on or after
Provisions relating to plan amendments.—
In general.—
If this subparagraph applies to any plan or contract amendment, such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in subparagraph (B)(iii).
Amendments to which subparagraph (A) applies.—
In general.—
Subparagraph (A) shall apply to any amendment to any plan or annuity contract which is made—
pursuant to the amendments made by subsection (a) [amending this section] or pursuant to any regulation issued by the Secretary of the Treasury under subsection (a), and
on or before the last day of the first plan year beginning on or after
In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), this clause shall be applied by substituting ‘2012’ for ‘2010’ in subclause (II).
Conditions.—
This paragraph shall not apply to any amendment unless—
the plan or contract is operated as if such plan or contract amendment were in effect for the period described in clause (iii), and
such plan or contract amendment applies retroactively for such period.
Period described.—
The period described in this clause is the period—
beginning on the effective date specified by the plan, and
ending on the date described in clause (i)(II) (or, if earlier, the date the plan or contract amendment is adopted).”
Effective Date of 2006 Amendment
In general.—
The amendments made by this section [amending this section and sections 411, 414, 420, 4971, 4972, and 6059 of this title] shall apply to plan years beginning after 2007.
Excise tax.—
The amendments made by subsection (e) [amending sections 4971 and 4972 of this title] shall apply to taxable years beginning after 2007, but only with respect to plan years described in paragraph (1) which end with or within any such taxable year.”
In general.—
Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section, sections 409 and 4980 of this title, and sections 1054 and 1107 of Title 29, Labor] shall apply to plan years beginning after
Special rule for collectively bargained agreements.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified on or before the date of the enactment of this Act [
the later of—
the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after such date of enactment), or
Special rule for certain employer securities held in an esop.—
In general.—
In the case of employer securities to which this paragraph applies, the amendments made by this section [amending this section, sections 409 and 4980 of this title, and sections 1054 and 1107 of Title 29, Labor] shall apply to plan years beginning after the earlier of—
the first date on which the fair market value of such securities exceeds the guaranteed minimum value described in subparagraph (B)(ii).
Applicable securities.—
This paragraph shall apply to employer securities which are attributable to employer contributions other than elective deferrals, and which, on
consist of preferred stock, and
are within an employee stock ownership plan (as defined in section 4975(e)(7) of the Internal Revenue Code of 1986), the terms of which provide that the value of the securities cannot be less than the guaranteed minimum value specified by the plan on such date.
Coordination with transition rule.—
In applying section 401(a)(35)(H) of the Internal Revenue Code of 1986 and section 204(j)(7) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1054(j)(7)] (as added by this section) to employer securities to which this paragraph applies, the applicable percentage shall be determined without regard to this paragraph.”
Effective Date of 2004 Amendment
Effective Date of 2002 Amendment
Effective Date of 2001 Amendment
Effective Date of 2000 Amendment
Effective Date of 1997 Amendment
In general.—
The amendments made by this section [amending this section and sections 403 and 410 of this title] apply to taxable years beginning on or after the date of enactment of this Act [
Treatment for years beginning before date of enactment.—
A governmental plan (within the meaning of section 414(d) of the Internal Revenue Code of 1986) shall be treated as satisfying the requirements of sections 401(a)(3), 401(a)(4), 401(a)(26), 401(k), 401(m), 403(b)(1)(D) and (b)(12)(A)(i), and 410 of such Code for all taxable years beginning before the date of enactment of this Act.”
Effective Date of 1996 Amendment
In general.—
The amendments made by this section [amending this section] shall apply to years beginning after
Exceptions.—
The amendments made by subsections (c), (d), and (e) [amending this section] shall apply to years beginning after
Distributions.—
The amendments made by subsection (a) [amending this section] shall apply to distributions after the date of the enactment of this Act [
Public utility districts.—
The amendments made by subsection (b) [amending this section] shall apply to plan years beginning after
Effective Date of 1994 Amendment
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 402, 408, and 415 of this title] shall apply to years beginning after
Rounding not to result in decreases.—
The amendments made by this section providing for the rounding of indexed amounts shall not apply to any year to the extent the rounding would require the indexed amount to be reduced below the amount in effect for years beginning in 1994.”
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 404, 412, and 4971 of this title] shall apply to plan years beginning after
Reference.—
The amendment made by subsection (a)(11) [amending section 404 of this title] shall take effect on the date of the enactment of this Act [
Effective Date of 1993 Amendment
In general.—
Except as provided in this subsection, the amendments made by this section [amending this section and sections 404, 408, and 505 of this title] shall apply to benefits accruing in plan years beginning after
Collectively bargained plans.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before the date of the enactment of this Act [
the latest of—
the date on which the last of such collective bargaining agreements terminates (without regard to any extension, amendment, or modification of such agreements on or after such date of enactment), or
in the case of a plan maintained pursuant to collective bargaining under the Railway Labor Act [45 U.S.C. 151 et seq.], the date of execution of an extension or replacement of the last of such collective bargaining agreements in effect on such date of enactment, or
Transition rule for state and local plans.—
In general.—
In the case of an eligible participant in a governmental plan (within the meaning of section 414(d) of the Internal Revenue Code of 1986), the dollar limitation under section 401(a)(17) of such Code shall not apply to the extent the amount of compensation which is allowed to be taken into account under the plan would be reduced below the amount which was allowed to be taken into account under the plan as in effect on
Eligible participant.—
For purposes of subparagraph (A), an eligible participant is an individual who first became a participant in the plan during a plan year beginning before the 1st plan year beginning after the earlier of—
the plan year in which the plan is amended to reflect the amendments made by this section, or
Plan must be amended to incorporate limits.—
This paragraph shall not apply to any eligible participant of a plan unless the plan is amended so that the plan incorporates by reference the dollar limitation under section 401(a)(17) of the Internal Revenue Code of 1986, effective with respect to noneligible participants for plan years beginning after
Effective Date of 1992 Amendment
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 402 to 404, 3402, 3405, 6047, and 6652 of this title] shall apply to distributions after
Transition rule for certain annuity contracts.—
If, as of
90 days after the first day after
Effective Date of 1990 Amendment
Effective Date of 1989 Amendment
In general.—
The amendment made by this section [amending this section] shall apply to contributions after
Transition.—
The amendment made by this section shall not apply to contributions made before
the employer requested before
the request sets forth a method under which the amount of contributions to the account are to be determined on the basis of cost,
such method is permissible under section 401(h) of such Code under the provisions of General Counsel Memorandum 39785, and
the Internal Revenue Service issued before
Effective Date of 1988 Amendment
Except as provided in clause (ii), the amendments made by this paragraph [amending this section and sections 403, 408, and 501 of this title] shall apply to plan years beginning after
In the case of a plan described in section 1105(c)(2) of the Reform Act [section 1105(c)(2) of Pub. L. 99–514, set out as an Effective Date of 1986 Amendment note under section 402 of this title], the amendments made by this paragraph shall not apply to contributions made pursuant to an agreement described in such section for plan years beginning before the earlier of—
the later of
Subparagraph (A)(i) of section 401(k)(10) of the 1986 Code (as added by subparagraph (B)) shall apply to distributions after
Subparagraph (B) of section 401(k)(10) of the 1986 Code (as added by subparagraph (B)) shall apply to distributions after
Effective Date of 1987 Amendment
In general.—
Except as provided in this subsection, the amendments made by this section [enacting section 1085b of Title 29, Labor, and amending this section] shall apply to plan amendments adopted after the date of the enactment of this Act [
Collective bargaining agreements.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before the date of the enactment of this Act, the amendments made by this section shall not apply to plan amendments adopted pursuant to collective bargaining agreements ratified before the date of enactment (without regard to any extension, amendment, or modification of such agreements on or after such date of enactment).”
Effective Date of 1986 Amendment
Subsection (a).—
The amendments made by subsection (a) [amending this section] shall apply to benefits attributable to plan years beginning after
Subsection (b).—
The amendments made by subsection (b) [amending this section] shall apply to years beginning after
Special rule for collective bargaining agreements.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before
the later of—
the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after
In general.—
The amendments made by this section [amending this section and sections 402, 404, 406, 407, 410, and 818 of this title] shall apply to plan years beginning after
Special rule for collective bargaining agreements.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before
the later of—
the date on which the last of such collective bargaining agreement terminates (determined without regard to any extension thereof after
Waiver of excise tax on reversions.—
In general.—
If—
a plan is in existence on
such plan would fail to meet the requirements of section 401(a)(26) of the Internal Revenue Code of 1986 (as added by subsection (b)) if such section were in effect for the plan year including
there is no transfer of assets to or liabilities from the plan or spinoff or merger involving such plan after
then no tax shall be imposed under section 4980 of such Code on any employer reversion by reason of the termination or merger of such plan before the 1st year to which the amendment made by subsection (b) applies.
Interest rate for determining accrued benefit of highly compensated employees for certain purposes.—
In the case of a termination, transfer, or distribution of assets of a plan described in subparagraph (A)(ii) before the 1st year to which the amendment made by subsection (b) applies—
Amount eligible for rollover, income averaging, or tax-free transfer.—
For purposes of determining any eligible amount, the present value of the accrued benefit of any highly compensated employee shall be determined by using an interest rate not less than the highest of—
the applicable rate under the plan’s method in effect under the plan on
the highest rate (as of the date of the termination, transfer, or distribution) determined under any of the methods applicable under the plan at any time after
5 percent.
Eligible amount.—
For purposes of clause (i), the term ‘eligible amount’ means any amount with respect to a highly compensated employee which—
may be rolled over under section 402(a)(5) of such Code,
is eligible for income averaging under section 402(e)(1) of such Code, or capital gains treatment under section 402(a)(2) or 403(a)(2) of such Code (as in effect before this Act), or
may be transferred to another plan without inclusion in gross income.
Amounts subject to early withdrawal or excess distribution tax.—
For purposes of sections 72(t) and 4980A of such Code, there shall not be taken into account the excess (if any) of—
the amount distributed to a highly compensated employee by reason of such termination or distribution, over
the amount determined by using the interest rate applicable under clause (i).
Distributions of annuity contracts.—
If an annuity contract purchased after
the purchase price of such contract, over
the present value of the benefits payable under such contract determined by using the interest rate applicable under clause (i).
Such excess shall not be taken into account for purposes of sections 72(t) and 4980A of such Code.
Highly compensated employee.—
For purposes of this subparagraph, the term ‘highly compensated employee’ has the meaning given such term by section 414(q) of such Code.
Special rule for plans which may not terminate.—
To the extent provided in regulations prescribed by the Secretary of the Treasury or his delegate, if a plan is prohibited from terminating under title IV of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1301 et seq.] before the 1st year to which the amendment made by subsection (b) would apply, the amendment made by subsection (b) shall only apply to years after the 1st year in which the plan is able to terminate.”
In general.—
Except as provided in this subsection, the amendments made by this section [amending this section] shall apply to years beginning after
Nondiscrimination rules.—
In general.—
Except as provided in subparagraph (B), the amendments made by subsections (a), (b)(4), and (d) [amending this section], and the provisions of section 401(k)(4)(B) of the Internal Revenue Code of 1986 (as added by this section), shall apply to years beginning after
Transition rules for certain governmental and tax-exempt plans.—
Subparagraph (B) of section 401(k)(4) of the Internal Revenue Code of 1986 (relating to governments and tax-exempt organizations not eligible for cash or deferred arrangements), as added by this section, shall not apply to any cash or deferred arrangement adopted by—
a State or local government or political subdivision thereof, or any agency or instrumentality thereof, before
a tax-exempt organization before
In the case of an arrangement described in clause (i), the amendments made by subsections (a), (b)(4), and (d) shall apply to years beginning after
Aggregation and excess contributions.—
The amendments made by subsections (c) and (e) [amending this section] shall apply to years beginning after
Collective bargaining agreements.—
In general.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before
the later of—
the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after
Special rule for nondiscrimination rules.—
In the case of a plan described in subparagraph (A), the amendments and provisions described in paragraph (2) shall not apply to years beginning before the earlier of—
the date determined under subparagraph (A)(i)(II), or
Special rule for qualified offset arrangements.—
In general.—
A cash or deferred arrangement shall not be treated as failing to meet the requirements of section 401(k)(4) of the Internal Revenue Code of 1986 (as added by this section) to the extent such arrangement is part of a qualified offset arrangement consisting of such cash or deferred arrangement and a defined benefit plan.
Qualified offset arrangement.—
For purposes of subparagraph (A), a cash or deferred arrangement is part of a qualified offset arrangement with a defined benefit plan to the extent such offset arrangement satisfies each of the following conditions with respect to the employer maintaining the arrangement on
The benefit under the defined benefit plan is directly and uniformly conditioned on the initial elective deferrals (up to 4 percent of compensation).
The benefit provided under the defined benefit plan (before the offset) is at least 60 percent of an employee’s cumulative elective deferrals (up to 4 percent of compensation).
The benefit under the defined benefit plan is reduced by the benefit attributable to the employee’s elective deferrals under the plan (up to 4 percent of compensation) and the income allocable thereto. The interest rate used to calculate the reduction shall not exceed the greater of the rate under section 411(a)(11)(B)(ii) of such Code or the interest rate applicable under section 411(c)(2)(C)(iii) of such Code, taking into account section 411(c)(2)(D) of such Code.
For purposes of applying section 401(k)(3) of such Code to the cash or deferred arrangement, the benefits under the defined benefit plan conditioned on initial elective deferrals may be treated as matching contributions under such rules as the Secretary of the Treasury or his delegate may prescribe. The Secretary shall provide rules for the application of this paragraph in the case of successor plans.
Definition of employer.—
For purposes of this paragraph, the term ‘employer’ includes any research and development center which is federally funded and engaged in cancer research, but only with respect to employees of contractor-operators whose salaries are reimbursed as direct costs against the operator’s contract to perform work at such center.
Withdrawals on sale of assets.—
Subclauses (II), (III), and (IV) of section 401(k)(2)(B)(i) of the Internal Revenue Code of 1986 (as added by subsection (b)(1)) shall apply to distributions after
Distributions before plan amendment.—
In general.—
If a plan amendment is required to allow a plan to make any distribution described in section 401(k)(8) of the Internal Revenue Code of 1986, any such distribution which is made before the close of the 1st plan year for which such amendment is required to be in effect under section 1140 [set out as a note below], shall be treated as made in accordance with the provisions of such plan.
Distributions pursuant to model amendment.—
Secretary to prescribe amendment.—
The Secretary of the Treasury or his delegate shall prescribe an amendment which allows a plan to make any distribution described in section 401(k)(8) of such Code.
Adoption by plan.—
If a plan adopts the amendment prescribed under clause (i) and makes a distribution in accordance with such amendment, such distribution shall be treated as made in accordance with the provisions of the plan.”
In general.—
The amendments made by this section [enacting section 4979 of this title and amending this section and section 414 of this title] shall apply to plan years beginning after
Collective bargaining agreements.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before
the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after
Annuity contracts.—
In the case of an annuity contract under section 403(b) of the Internal Revenue Code of 1986—
the amendments made by this section shall apply to plan years beginning after
in the case of a collective bargaining agreement described in paragraph (2), the amendments made by this section shall not apply to years beginning before the earlier of—
the later of—
the date determined under paragraph (2)(B), or
Distributions before plan amendment.—
In general.—
If a plan amendment is required to allow a plan to make any distribution described in section 401(m)(6) of the Internal Revenue Code of 1986, any such distribution which is made before the close of the 1st plan year for which such amendment is required to be in effect under section 1140 [set out as a note below] shall be treated as made in accordance with the provisions of the plan.
Distributions pursuant to model amendment.—
Secretary to prescribe amendment.—
The Secretary of the Treasury or his delegate shall prescribe an amendment which allows a plan to make any distribution described in section 401(m)(6) of the Internal Revenue Code of 1986.
Adoption by plan.—
If a plan adopts the amendment prescribed under clause (i) and makes a distribution in accordance with such amendment, such distribution shall be treated as made in accordance with the provisions of the plan.”
In general.—
Except as provided in this subsection, the amendments made by this section [amending this section and sections 402, 408, and 4974 of this title] shall apply to years beginning after
Subsection (c).—
The amendments made by subsection (c) [amending sections 402 and 408 of this title] shall apply to years beginning after
Collective bargaining agreements.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before
the later of—
the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after
Transition rules.—
The amendments made by subsections (a) and (b) [amending this section and section 4974 of this title] shall not apply with respect to any benefits with respect to which a designation is in effect under section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 [section 242(b)(2) of Pub. L. 97–248, formerly set out as a note below].
Except as provided in clause (ii), the amendment made by subsection (b) [amending this section] shall not apply in the case of any individual who has attained age 70½ before
Clause (i) shall not apply to any individual who is a 5-percent owner (as defined in section 416(i) of the Internal Revenue Code of 1986), at any time during—
the plan year ending with or within the calendar year in which such owner attains age 66½, and
any subsequent plan year.
Plans may incorporate section 401(a)(9) requirements by reference.—
Notwithstanding any other provision of law, except as provided in regulations prescribed by the Secretary of the Treasury or his delegate, a plan may incorporate by reference the requirements of section 401(a)(9) of the Internal Revenue Code of 1986.”
Effective Date of 1984 Amendment
In general.—
The amendments made by this section [amending this section and sections 72, 403, and 408 of this title and repealing provisions set out as a note under this section] shall apply to years beginning after
Repeal of section 242 of tefra.—
The amendment made by subsection (a)(2) [repealing section 242 of Pub. L. 97–248, which amended this section and enacted provisions formerly set out below] shall take effect as if included in the Tax Equity and Fiscal Responsibility Act of 1982 [Pub. L. 97–248].
Transition rule.—
A trust forming part of a plan shall not be disqualified under paragraph (9) of section 401(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], as amended by subsection (a)(1), by reason of distributions under a designation (before
Special rule for governmental plans.—
In the case of a governmental plan (within the meaning of section 414(d) of the Internal Revenue Code of 1986), paragraph (1) shall be applied by substituting ‘1986’ for ‘1984’.
Special rule for collective bargaining agreements.—
In the case of a plan maintained pursuant to one or more collective bargaining agreements ratified on or before the date of the enactment of this Act [
the date on which the last of the collective bargaining agreements relating to the plan terminates (determined without regard to any extension thereof agreed to after the date of the enactment of this Act), or
For purposes of subparagraph (A), any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination of such collective bargaining agreement.”
Subsection (a).—
In general.—
Except as provided in subparagraph (B), the amendment made by subsection (a) [amending this section] shall apply to plan years beginning after
Exception for certain existing plans.—
The amendment made by subsection (a) shall not apply to any plan—
which was maintained by a State on
with respect to which a determination letter had been issued by the Secretary on
Subsection (b).—
In general.—
The amendments made by this section [amending this section] shall apply with respect to plan years beginning after the date of the enactment of this Act [
Transitional rule.—
Rules similar to the rules under section 135(c)(2) of the Revenue Act of 1978 [section 135(c)(2) of Pub. L. 95–600, set out below] shall apply with respect to any pre-ERISA money purchase plan (as defined in section 401(k)(5) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) for plan years beginning after
Effective Date of 1983 Amendment
Effective Date of 1982 Amendment
Effective Date of 1981 Amendment
Effective Date of 1980 Amendment
Effective Date of 1978 Amendment
Effective Date of 1976 Amendment
Effective Date of 1974 Amendment
The amendments made by subsection (c) [amending this section] apply to
taxable years beginning after
any other taxable years beginning after
The amendments made by subsection (d) [amending this section] apply to taxable years beginning after
The amendments made by subsections (e) and (f) [enacting section 4972 of this title and amending this section and section 72 of this title] apply to contributions made in taxable years beginning after
Effective Date of 1971 Amendment
Effective Date of 1966 Amendment
Effective Date of 1965 Amendment
Effective Date of 1964 Amendment
Effective Date of 1962 Amendment
Short Title of 1962 Amendment
Regulations
permitting a plan to make matching contributions for qualified student loan payments, as defined in sections 401(m)(4)(D) and 408(p)(2)(F) of the Internal Revenue Code of 1986, as added by this section, at a different frequency than matching contributions are otherwise made under the plan, provided that the frequency is not less than annually;
permitting employers to establish reasonable procedures to claim matching contributions for such qualified student loan payments under the plan, including an annual deadline (not earlier than 3 months after the close of each plan year) by which a claim must be made; and
promulgating model amendments which plans may adopt to implement matching contributions on such qualified student loan payments for purposes of sections 401(m), 408(p), 403(b), and 457(b) of the Internal Revenue Code of 1986.”
In General.—
Not later than the date which is 18 months after the date of the enactment of this Act [
Repeal 25-percent premium limit.—
The Secretary (or delegate) shall amend Q&A–17(b)(3) of Treas. Reg. section 1.401(a)(9)–6 and Q&A–12(b)(3) of Treas. Reg. section 1.408–8 to eliminate the requirement that premiums for qualifying longevity annuity contracts be limited to 25 percent of an individual’s account balance, and to make such corresponding changes to the regulations and related forms as are necessary to reflect the elimination of this requirement.
Increase dollar limitation.—
In general.—
The Secretary (or delegate) shall amend Q&A–17(b)(2)(i) of Treas. Reg. section 1.401(a)(9)–6 and Q&A–12(b)(2)(i) of Treas. Reg. section 1.408–8 to increase the dollar limitation on premiums for qualifying longevity annuity contracts from $125,000 to $200,000, and to make such corresponding changes to the regulations and related forms as are necessary to reflect this increase in the dollar limitation.
Adjustments for inflation.—
The Secretary (or delegate) shall amend Q&A–17(d)(2)(i) of Treas. Reg. section 1.401(a)(9)–6 to provide that, in the case of calendar years beginning on or after January 1 of the second year following the year of enactment of this Act [div. T of Pub. L. 117–328], the $200,000 dollar limitation (as increased by subparagraph (A)) will be adjusted at the same time and in the same manner as the limits are adjusted under section 415(d) of the Internal Revenue Code of 1986, except that the base period shall be the calendar quarter beginning July 1 of the year of enactment of this Act, and any increase to such dollar limitation which is not a multiple of $10,000 will be rounded to the next lowest multiple of $10,000.
Facilitate joint and survivor benefits.—
The Secretary (or delegate) shall amend Q&A–17(c) of Treas. Reg. section 1.401(a)(9)–6, and make such corresponding changes to the regulations and related forms as are necessary, to provide that, in the case of a qualifying longevity annuity contract which was purchased with joint and survivor annuity benefits for the individual and the individual’s spouse which were permissible under the regulations at the time the contract was originally purchased, a divorce occurring after the original purchase and before the annuity payments commence under the contract will not affect the permissibility of the joint and survivor annuity benefits or other benefits under the contract, or require any adjustment to the amount or duration of benefits payable under the contract, provided that any qualified domestic relations order (within the meaning of section 414(p) of the Internal Revenue Code of 1986) or, in the case of an arrangement not subject to section 414(p) of such Code or section 206(d) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1056(d)], any divorce or separation instrument (as defined in subsection (b))—
provides that the former spouse is entitled to the survivor benefits under the contract;
provides that the former spouse is treated as a surviving spouse for purposes of the contract;
does not modify the treatment of the former spouse as the beneficiary under the contract who is entitled to the survivor benefits; or
does not modify the treatment of the former spouse as the measuring life for the survivor benefits under the contract.
Permit short free look period.—
The Secretary (or delegate) shall amend Q&A–17(a)(4) of Treas. Reg. section 1.401(a)(9)–6 to ensure that such Q&A does not preclude a contract from including a provision under which an employee may rescind the purchase of the contract within a period not exceeding 90 days from the date of purchase.
Divorce or Separation Instrument.—
For purposes of subsection (a)(3), the term ‘divorce or separation instrument’ means—
a decree of divorce or separate maintenance or a written instrument incident to such a decree;
a written separation agreement; or
a decree (not described in paragraph (1)) requiring a spouse to make payments for the support or maintenance of the other spouse.
Effective Dates, Enforcement, and Interpretations.—
Effective dates.—
Paragraphs (1) and (2) of subsection (a) shall be effective with respect to contracts purchased or received in an exchange on or after the date of the enactment of this Act.
Paragraphs (3) and (4) of subsection (a) shall be effective with respect to contracts purchased or received in an exchange on or after
Enforcement and interpretations.—
Prior to the date on which the Secretary of the Treasury issues final regulations pursuant to subsection (a)—
the Secretary (or delegate) shall administer and enforce the law in accordance with subsection (a) and the effective dates in paragraph (1) of this subsection; and
taxpayers may rely upon their reasonable good faith interpretations of subsection (a).
Regulatory Successor Provision.—
Any reference to a regulation under this section shall be treated as including a reference to any successor regulation thereto.”
Eliminating a Penalty on Partial Annuitization.—
The Secretary of the Treasury (or the Secretary’s delegate) shall amend the regulations under section 401(a)(9) of the Internal Revenue Code of 1986 to provide that if an employee’s benefit is in the form of an individual account under a defined contribution plan, the plan may allow the employee to elect to have the amount required to be distributed from such account under such section for a year to be calculated as the excess of the total required amount for such year over the annuity amount for such year.
Definitions.—
For purposes of this section—
Total required amount.—
The term ‘total required amount’, with respect to a year, means the amount which would be required to be distributed under Treas. Reg. section 1.401(a)(9)–5 (or any successor regulation) for the year, determined by treating the account balance as of the last valuation date in the immediately preceding calendar year as including the value on that date of all annuity contracts which were purchased with a portion of the account and from which payments are made in accordance with Treas. Reg. section 1.401(a)(9)–6.
Annuity amount.—
The term ‘annuity amount’, with respect to a year, is the total amount distributed in the year from all annuity contracts described in paragraph (1).
Conforming Regulatory Amendments.—
The Secretary of the Treasury (or the Secretary’s delegate) shall amend the regulations under sections 403(b)(10), 408(a)(6), 408(b)(3), and 457(d)(2) of the Internal Revenue Code of 1986 to conform to the amendments described in subsection (a). Such conforming amendments shall treat all individual retirement plans (as defined in section 7701(a)(37) of such Code) which an individual holds as the owner, or which an individual holds as a beneficiary of the same decedent, as one such plan for purposes of the amendments described in subsection (a). Such conforming amendments shall also treat all contracts described in section 403(b) of such Code which an individual holds as an employee, or which an individual holds as a beneficiary of the same decedent, as one such contract for such purposes.
Effective Date.—
The modifications and amendments required under subsections (a) and (c) shall be deemed to have been made as of the date of the enactment of this Act [
all applicable laws shall be applied in all respects as though the actions which the Secretary of the Treasury (or the Secretary’s delegate) is required to take under such subsections had been taken, and
until such time as such actions are taken, taxpayers may rely upon their reasonable good faith interpretations of this section.”
“Not later than 2 years after the date of enactment of this Act [
includes the required content;
clearly identifies the issues addressed therein;
is furnished at the time and with the frequency required for each such notice; and
is presented in a manner that is reasonably calculated to be understood by the average plan participant and that does not obscure or fail to highlight the primary information required for each notice.
This section shall not be interpreted as preventing the consolidation of any other notices required under the Employee Retirement Income Security Act of 1974 [Pub. L. 93–406, see Tables for classification], or Internal Revenue Code of 1986, to the extent otherwise permitted by the Secretary of Labor or the Secretary of the Treasury (or either such Secretary’s delegate), as applicable.”
In General.—
Not later than 1 year after the date of the enactment of this Act [
delete the 6-month prohibition on contributions imposed by paragraph (2) thereof, and
make any other modifications necessary to carry out the purposes of section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986.
Effective Date.—
The revised regulations under this section shall apply to plan years beginning after
a hardship for purposes of section 403(b)(11)(B) of such Code; or
an unforeseen financial emergency for purposes of sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii), and 457(d)(1)(A)(iii) of such Code.”
Automatic rollover safe harbor.—
Not later than 3 years after the date of enactment of this Act [
Use of low-cost individual retirement plans.—
The Secretary of the Treasury and the Secretary of Labor may provide, and shall give consideration to providing, special relief with respect to the use of low-cost individual retirement plans for purposes of transfers under section 401(a)(31)(B) of the Internal Revenue Code of 1986 and for other uses that promote the preservation of assets for retirement income purposes.”
section 1111 [amending this section], relating to application of nondiscrimination rules to integrated plans,
section 1112 [amending this section and sections 402, 404, 406, 407, 410, and 818 of this title], relating to coverage requirements for qualified plans,
section 1113 [amending sections 410 and 411 of this title and sections 1052 to 1054 of Title 29, Labor], relating to minimum vesting standards,
section 1114 [amending this section, sections 106, 117, 120, 127, 129, 132, 274, 404A, 406, 407, 411, 414, 415, 423, 501, 505, and 4975 of this title, and section 1108 of Title 29], relating to the definition of highly compensated employee,
section 1115 [amending section 414 of this title], relating to separate lines of business and the definition of compensation,
section 1116 [amending this section], relating to rules for section 401(k) plans,
section 1117 [enacting section 4979 of this title and amending this section and section 414 of this title], relating to nondiscrimination requirements for employer matching and employer contribution,
section 1120 [amending section 403 of this title], relating to nondiscrimination requirements for tax sheltered annuities, and
section 1133 [enacting section 4981A [now 4980A] of this title], relating to tax on excess distributions.”
Reports by Secretary
In general.—
The Secretary of the Treasury shall, not later than
Data described.—
For purposes of the report required under paragraph (1), the Secretary of the Treasury shall collect data and information on—
the number of plans described in section 408(p) or 401(k)(11) of the Internal Revenue Code of 1986 that are maintained or established during a year;
the number of participants eligible to participate in such plans for such year;
median contribution amounts for the participants described in subparagraph (B);
the types of investments that are most common under such plans; and
the fee levels charged in connection with the maintenance of accounts under such plans.
Such data and information shall be collected separately for each type of plan. For purposes of collecting such data, the Secretary of the Treasury may use such data as is otherwise available to the Secretary for publication and may use such approaches as are appropriate under the circumstances, including the use of voluntary surveys and collaboration on studies.”
Expansion of Employee Plans Compliance Resolution System
In General.—
Except as otherwise provided in the Internal Revenue Code of 1986, regulations, or other guidance of general applicability prescribed by the Secretary of the Treasury or the Secretary’s delegate (referred to in this section as the ‘Secretary’), any eligible inadvertent failure to comply with the rules applicable under section 401(a), 403(a), 403(b), 408(p), or 408(k) of such Code may be self-corrected under the Employee Plans Compliance Resolution System (as described in Revenue Procedure 2021–30, or any successor guidance, and hereafter in this section referred to as the ‘EPCRS’), except to the extent that (1) such failure was identified by the Secretary prior to any actions which demonstrate a specific commitment to implement a self-correction with respect to such failure, or (2) the self-correction is not completed within a reasonable period after such failure is identified. For purposes of self-correction of an eligible inadvertent failure, the correction period under section 9.02 of Revenue Procedure 2021–30 (or any successor guidance), except as otherwise provided under such Code, regulations, or other guidance of general applicability prescribed by the Secretary, is indefinite and has no last day, other than with respect to failures identified by the Secretary prior to any actions which demonstrate a specific commitment to implement a self-correction with respect to such failure or with respect to a self-correction that is not completed within a reasonable period, as described in the preceding sentence.
Loan Errors.—
In the case of an eligible inadvertent failure relating to a loan from a plan to a participant—
such failure may be self-corrected under subsection (a) according to the rules of section 6.07 of Revenue Procedure 2021–30 (or any successor guidance), including the provisions related to whether a deemed distribution must be reported on Form 1099–R,
the Secretary of Labor shall treat any such failure which is so self-corrected under subsection (a) as meeting the requirements of the Voluntary Fiduciary Correction Program of the Department of Labor if, with respect to the violation of the fiduciary standards of the Employee Retirement Income Security Act of 1974 [Pub. L. 93–406, see Tables for classification], there is a similar loan error eligible for correction under EPCRS and the loan error is corrected in such manner, and
the Secretary of Labor may impose reporting or other procedural requirements with respect to parties that intend to rely on the Voluntary Fiduciary Correction Program for self-corrections described in paragraph (2).
EPCRS for IRAs.—
The Secretary shall expand the EPCRS to allow custodians of individual retirement plans (as defined in section 7701(a)(37) of the Internal Revenue Code of 1986) to address eligible inadvertent failures with respect to an individual retirement plan (as so defined), including (but not limited to)—
waivers of the excise tax which would otherwise apply under section 4974 of the Internal Revenue Code of 1986, and
rules permitting a nonspouse beneficiary to return distributions to an inherited individual retirement plan described in section 408(d)(3)(C) of the Internal Revenue Code of 1986 in a case where, due to an inadvertent error by a service provider, the beneficiary had reason to believe that the distribution could be rolled over without inclusion in income of any part of the distributed amount.
Correction Methods for Eligible Inadvertent Failures.—
The Secretary shall issue guidance on correction methods that are required to be used to correct eligible inadvertent failures, including general principles of correction if a specific correction method is not specified by the Secretary.
Eligible Inadvertent Failure.—
For purposes of this section—
In general.—
Except as provided in paragraph (2), the term ‘eligible inadvertent failure’ means a failure that occurs despite the existence of practices and procedures which—
satisfy the standards set forth in section 4.04 of Revenue Procedure 2021–30 (or any successor guidance), or
satisfy similar standards in the case of an individual retirement plan.
Exception.—
The term ‘eligible inadvertent failure’ shall not include any failure which is egregious, relates to the diversion or misuse of plan assets, or is directly or indirectly related to an abusive tax avoidance transaction.
Application of Certain Requirements for Correcting Errors.—
This section shall not apply to any failure unless the correction of such failure under this section is made in conformity with the general principles that apply to corrections of such failures under the Internal Revenue Code of 1986, including regulations or other guidance issued thereunder and including those principles and corrections set forth in Revenue Procedure 2021–30 (or any successor guidance).
Issuance of Guidance.—
The Secretary of the Treasury, or the Secretary’s delegate, shall revise Revenue Procedure 2021–30 (or any successor guidance) to take into account the provisions of this section not later than the date which is 2 years after the date of enactment of this Act [
Disclosure to Treasury of Long-Term Care Insurance Products
Special Rules for Multiple Employer Plans of Certain Cooperatives
General Rule.—
Except as provided in this section, if a plan in existence on
the first plan year for which the plan ceases to be an eligible cooperative plan or an eligible charity plan, or
Interest Rate.—
In applying section 302(b)(5)(B) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1082(b)(5)(B)] and section 412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this subtitle and subtitle B) to an eligible cooperative plan or an eligible charity plan for plan years beginning after
Eligible Cooperative Plan Defined.—
For purposes of this section, a plan shall be treated as an eligible cooperative plan for a plan year if the plan is maintained by more than 1 employer and at least 85 percent of the employers are—
rural cooperatives (as defined in section 401(k)(7)(B) of such Code without regard to clause (iv) thereof), or
organizations which are—
cooperative organizations described in section 1381(a) of such Code which are more than 50-percent owned by agricultural producers or by cooperatives owned by agricultural producers, or
more than 50-percent owned, or controlled by, one or more cooperative organizations described in subparagraph (A).
A plan shall also be treated as an eligible cooperative plan for any plan year for which it is described in section 210(a) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1060(a)] and is maintained by a rural telephone cooperative association described in section 3(40)(B)(v) of such Act [29 U.S.C. 1002(40)(B)(v)].
Eligible Charity Plan Defined.—
In general.—
For purposes of this section, a plan shall be treated as an eligible charity plan for a plan year if the plan is maintained by more than one employer (determined without regard to section 414(c) of the Internal Revenue Code) and 100 percent of the employers are described in section 501(c)(3) of such Code.
Election not to be an eligible charity plan.—
A plan sponsor may elect for a plan to cease to be treated as an eligible charity plan for plan years beginning after
Election to use funding options available to other plan sponsors.—
A plan sponsor that makes the election described in paragraph (2) may elect for a plan to apply the rules described in subparagraphs (B), (C), and (D) for plan years beginning after
Under the rules described in this subparagraph, for the first plan year beginning after
an 11-year shortfall amortization base,
a 12-year shortfall amortization base, and
a 7-year shortfall amortization base.
Under the rules described in this subparagraph, section 303(c)(2)(A) and (B) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1083(c)(2)(A), (B)], and section 430(c)(2)(A) and (B) of the Internal Revenue Code of 1986 shall be applied by—
in the case of an 11-year shortfall amortization base, substituting ‘11-plan-year period’ for ‘7-plan-year period’ wherever such phrase appears, and
in the case of a 12-year shortfall amortization base, substituting ‘12-plan-year period’ for ‘7-plan-year period’ wherever such phrase appears.
Under the rules described in this subparagraph, section 303(c)(7) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1083(c)(7)] and section 430(c)(7) of the Internal Revenue Code of 1986 shall apply to a plan for which an election has been made under subparagraph (A). Such provisions shall apply in the following manner:
The first plan year beginning after
All references in section 303(c)(7) of such Act [29 U.S.C. 1083(c)(7)] and section 430(c)(7) of such Code to ‘
For purposes of this paragraph, the 11-year amortization base is an amount, determined for the first plan year beginning after
the plan had never been an eligible charity plan,
the plan sponsor had made the election described in section 303(c)(2)(D)(i) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1083(c)(2)(D)(i)] and in section 430(c)(2)(D)(i) of the Internal Revenue Code of 1986 to have section 303(c)(2)(D)(i) of such Act and section 430(c)(2)(D)(iii) of such Code apply with respect to the shortfall amortization base for the first plan year beginning after
no event had occurred under paragraph (6) or (7) of section 303(c) of such Act [29 U.S.C. 1083(c)(6), (7)] or paragraph (6) or (7) of section 430(c) of such Code that, as of the first day of the first plan year beginning after
For purposes of this paragraph, the 12-year amortization base is an amount, determined for the first plan year beginning after
the plan had never been an eligible charity plan,
the plan sponsor had made the election described in section 303(c)(2)(D)(i) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1083(c)(2)(D)(i)] and in section 430(c)(2)(D)(i) of the Internal Revenue Code of 1986 to have section 303(c)(2)(D)(i) of such Act and section 430(c)(2)(D)(iii) of such Code apply with respect to the shortfall amortization base for the first plan year beginning after
no event had occurred under paragraph (6) or (7) of section 303(c) of such Act [29 U.S.C. 1083(c)(6), (7)] or paragraph (6) or (7) of section 430(c) of such Code that, as of the first day of the first plan year beginning after
For purposes of this paragraph, the 7-year shortfall amortization base is an amount, determined for the first plan year beginning after
the shortfall amortization base for the first plan year beginning after
the sum of the 11-year shortfall amortization base and the 12-year shortfall amortization base.
Retroactive election.—
Not later than
Temporary Relief for Certain PBGC Settlement Plans
General Rule.—
Except as provided in this section, if a plan in existence on
Interest Rate.—
In applying section 302(b)(5)(B) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1082(b)(5)(B)] and section 412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this subtitle and subtitle B), to a PBGC settlement plan for plan years beginning after
PBGC Settlement Plan.—
For purposes of this section, the term ‘PBGC settlement plan’ means a defined benefit plan (other than a multiemployer plan) to which section 302 of such Act [29 U.S.C. 1082] and section 412 of such Code apply and—
which was sponsored by an employer which was in bankruptcy, giving rise to a claim by the Pension Benefit Guaranty Corporation of not greater than $150,000,000, and the sponsorship of which was assumed by another employer that was not a member of the same controlled group as the bankrupt sponsor and the claim of the Pension Benefit Guaranty Corporation was settled or withdrawn in connection with the assumption of the sponsorship, or
which, by agreement with the Pension Benefit Guaranty Corporation, was spun off from a plan subsequently terminated by such Corporation under section 4042 of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1342].”
Special Rules for Plans of Certain Government Contractors
General Rule.—
Except as provided in this section, if a plan is an eligible government contractor plan, this subtitle [subtitle A (§§ 101 to 108) of title I of Pub. L. 109–280, enacting sections 1082 and 1083 of Title 29, Labor, amending sections 1021, 1023, 1053, 1054, 1056, 1103, 1108, 1132, 1301, 1303, 1310, 1362, 1371, and 1423 of Title 29 and section 106 of 1978 Reorg. Plan No. 4, set out in the Appendix to Title 5, Government Organization and Employees, and as a note under section 1001 of Title 29, repealing sections 1057, 1082 to 1086 of Title 29, and enacting provisions set out as notes under this section and sections 1021, 1082, and 1083 of Title 29] and subtitle B [subtitle B (§§ 111 to 116) of title I of Pub. L. 109–280, enacting sections 430 and 436 of this title, amending this section and sections 409A, 411, 412, 414, 420, 4971, 4972, and 6059 of this title, enacting provisions set out as notes under sections 409A, 412, 430, and 436 of this title, and amending provisions set out as a note under section 412 of this title] shall not apply to plan years beginning before the earliest of—
the first plan year for which the plan ceases to be an eligible government contractor plan,
the effective date of the Cost Accounting Standards Pension Harmonization Rule, or
Interest Rate.—
In applying section 302(b)(5)(B) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1082(b)(5)(B)] and section 412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this subtitle and subtitle B) to an eligible government contractor plan for plan years beginning after
Eligible Government Contractor Plan Defined.—
For purposes of this section, a plan shall be treated as an eligible government contractor plan if it is maintained by a corporation or a member of the same affiliated group (as defined by section 1504(a) of the Internal Revenue Code of 1986), whose primary source of revenue is derived from business performed under contracts with the United States that are subject to the Federal Acquisition Regulations (chapter 1 of title 48, CFR) and that are also subject to the Defense Federal Acquisition Regulation Supplement (chapter 2 of title 48, CFR), and whose revenue derived from such business in the previous fiscal year exceeded $5,000,000,000, and whose pension plan costs that are assignable under those contracts are subject to sections 412 and 413 of the Cost Accounting Standards (48 CFR 9904.412 and 9904.413).
Cost Accounting Standards Pension Harmonization Rule.—
The Cost Accounting Standards Board shall review and revise sections 412 and 413 of the Cost Accounting Standards (48 CFR 9904.412 and 9904.413) to harmonize the minimum required contribution under the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.] of eligible government contractor plans and government reimbursable pension plan costs not later than
Application of Extended Amortization Periods to Plans With Delayed Effective Date
In General.—
If the plan sponsor of a plan to which section 104, 105, or 106 of this Act [see notes above] applies elects to have this section apply for any eligible plan year (in this section referred to as an ‘election year’), section 302 of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1082] and section 412 of the Internal Revenue Code of 1986 (as in effect before the amendments made by this subtitle [subtitle A (§§ 101 to 108) of title I of Pub. L. 109–280, enacting sections 1082 and 1083 of Title 29, Labor, amending sections 1021, 1023, 1053, 1054, 1056, 1103, 1108, 1132, 1301, 1303, 1310, 1362, 1371, and 1423 of Title 29 and section 106 of 1978 Reorg. Plan No. 4, set out in the Appendix to Title 5, Government Organization and Employees, and as a note under section 1001 of Title 29, and repealing sections 1057, 1082 to 1086 of Title 29] and subtitle B [subtitle B (§§ 111 to 116) of title I of Pub. L. 109–280, enacting sections 430 and 436 of this title, amending this section and sections 409A, 411, 412, 414, 420, 4971, 4972, and 6059 of this title, and amending provisions set out as a note under section 412 of this title]) shall apply to such year in the manner described in subsection (b) or (c), whichever is specified in the election. All references in this section to ‘such Act’ or ‘such Code’ shall be to such Act or such Code as in effect before the amendments made by this subtitle and subtitle B.
Application of 2 and 7 Rule.—
In the case of an election year to which this subsection applies—
2-year lookback for determining deficit reduction contributions for certain plans.—
For purposes of applying section 302(d)(9) of such Act [29 U.S.C. 1082(d)(9)] and section 412(l)(9) of such Code, the funded current liability percentage (as defined in subparagraph (C) thereof) for such plan for such plan year shall be such funded current liability percentage of such plan for the second plan year preceding the first election year of such plan.
Calculation of deficit reduction contribution.—
For purposes of applying section 302(d) of such Act [29 U.S.C. 1082(d)] and section 412(l) of such Code to a plan to which such sections apply (after taking into account paragraph (1))—
in the case of the increased unfunded new liability of the plan, the applicable percentage described in section 302(d)(4)(C) of such Act [29 U.S.C. 1082(d)(4)(C)] and section 412(l)(4)(C) of such Code shall be the third segment rate described in sections 104(b), 105(b), and 106(b) of this Act [see notes above], and
in the case of the excess of the unfunded new liability over the increased unfunded new liability, such applicable percentage shall be determined without regard to this section.
Application of 15-year Amortization.—
In the case of an election year to which this subsection applies, for purposes of applying section 302(d) of such Act [29 U.S.C. 1082(d)] and section 412(l) of such Code—
in the case of the increased unfunded new liability of the plan, the applicable percentage described in section 302(d)(4)(C) of such Act [29 U.S.C. 1082(d)(4)(C)] and section 412(l)(4)(C) of such Code for any pre-effective date plan year beginning with or after the first election year shall be the ratio of—
the annual installments payable in each year if the increased unfunded new liability for such plan year were amortized over 15 years, using an interest rate equal to the third segment rate described in sections 104(b), 105(b), and 106(b) of this Act, to
the increased unfunded new liability for such plan year, and
in the case of the excess of the unfunded new liability over the increased unfunded new liability, such applicable percentage shall be determined without regard to this section.
Election.—
In general.—
The plan sponsor of a plan may elect to have this section apply to not more than 2 eligible plan years with respect to the plan, except that in the case of a plan to which section 106 of this Act applies, the plan sponsor may only elect to have this section apply to 1 eligible plan year.
Amortization schedule.—
Such election shall specify whether the rules under subsection (b) or (c) shall apply to an election year, except that if a plan sponsor elects to have this section apply to 2 eligible plan years, the plan sponsor must elect the same rule for both years.
Other rules.—
Such election shall be made at such time, and in such form and manner, as shall be prescribed by the Secretary of the Treasury, and may be revoked only with the consent of the Secretary of the Treasury.
Definitions.—
For purposes of this section—
Eligible plan year.—
For purposes of this subparagraph, the term ‘eligible plan year’ means any plan year beginning in 2008, 2009, 2010, or 2011, except that a plan year beginning in 2008 shall only be treated as an eligible plan year if the due date for the payment of the minimum required contribution for such plan year occurs on or after the date of the enactment of this clause [
Pre-effective date plan year.—
The term ‘pre-effective date plan year’ means, with respect to a plan, any plan year prior to the first year in which the amendments made by this subtitle and subtitle B apply to the plan.
Increased unfunded new liability.—
The term ‘increased unfunded new liability’ means, with respect to a year, the excess (if any) of the unfunded new liability over the amount of unfunded new liability determined as if the value of the plan’s assets determined under subsection 302(c)(2) of such Act [29 U.S.C. 1082(c)(2)] and section 412(c)(2) of such Code equaled the product of the current liability of the plan for the year multiplied by the funded current liability percentage (as defined in section 302(d)(8)(B) of such Act [29 U.S.C. 1082(d)(8)(B)] and 412(l)(8)(B) of such Code) of the plan for the second plan year preceding the first election year of such plan.
Other definitions.—
The terms ‘unfunded new liability’ and ‘current liability’ shall have the meanings set forth in section 302(d) of such Act [29 U.S.C. 1082(d)] and section 412(l) of such Code.”
Grandfather Rule for Church Plans Which Self-Annuitize
In General.—
In the case of any plan year ending after the date of the enactment of this Act [
Qualified Church Plan.—
For purposes of this section, the term ‘qualified church plan’ means any money purchase pension plan described in section 401(a) of such Code which—
is a church plan (as defined in section 414(e) of such Code) with respect to which the election provided by section 410(d) of such Code has not been made, and
was in existence on
New Technologies in Retirement Plans
In General.—
Not later than
interpret the notice, election, consent, disclosure, and time requirements (and related recordkeeping requirements) under the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.] relating to retirement plans as applied to the use of new technologies by plan sponsors and administrators while maintaining the protection of the rights of participants and beneficiaries, and
clarify the extent to which writing requirements under the Internal Revenue Code of 1986 relating to retirement plans shall be interpreted to permit paperless transactions.
Applicability of Final Regulations.—
Final regulations applicable to the guidance regarding new technologies described in subsection (a) shall not be effective until the first plan year beginning at least 6 months after the issuance of such final regulations.”
Treatment of Qualified Football Coaches Plan
In general.—
For purposes of the Internal Revenue Code of 1986, a qualified football coaches plan—
shall be treated as a multiemployer collectively bargained plan, and
notwithstanding section 401(k)(4)(B) of such Code, may include a qualified cash and deferred arrangement under section 401(k) of such Code.
Qualified football coaches plan.—
For purposes of this subsection, the term ‘qualified football coaches plan’ means any defined contribution plan which is established and maintained by an organization—
which is described in section 501(c) of such Code,
the membership of which consists entirely of individuals who primarily coach football as full-time employees of 4-year colleges or universities described in section 170(b)(1)(A)(ii) of such Code, and
which was in existence on
Effective date.—
This subsection shall apply to years beginning after
Applicability of Subsection (a)(26)
Coordination of Internal Revenue Code of 1986 With Employee Retirement Income Security Act of 1974
Plan Amendments Not Required Until January 1, 1998
“If any amendment made by this subtitle [subtitle D (§§ 1401–1465) of title I of Pub. L. 104–188, see Tables for classification] requires an amendment to any plan or annuity contract, such amendment shall not be required to be made before the first day of the first plan year beginning on or after
during the period after such amendment takes effect and before such first plan year, the plan or contract is operated in accordance with the requirements of such amendment, and
such amendment applies retroactively to such period.
In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), this section shall be applied by substituting ‘2000’ for ‘1998’.”
Plan Amendments Not Required Until January 1, 1994
during the period after such amendment takes effect and before such first plan year, the plan is operated in accordance with the requirements of such amendment, and
such plan amendment applies retroactively to such period.”
Plan Amendments Not Required Until January 1, 1989
In General.—
If any amendment made by this subtitle, subtitle C [subtitles A (§§ 1101–1147) and C (§§ 1171–1177) of title XI of Pub. L. 99–514, enacting sections 2057, 4972, 4979, 4980, 4981A, and 6659A of this title, amending this section, sections 38, 56, 72, 106, 108, 117, 120, 127, 129, 132, 133, 219, 274, 402 to 404A, 406 to 411, 414 to 417, 423, 457, 501, 505, 818, 852, 3121, 3306, 3405, 4973 to 4975, 4979A, 6051, 6693, and 7701 of this title, and sections 1052 to 1055 and 1108 of Title 29, Labor, repealing sections 41 and 6699 of this title, and amending provisions set out as a note under section 1001 of Title 29], or title XVIII of this Act [see Tables for classification] requires an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after
during the period after such amendment takes effect and before such first plan year, the plan is operated in accordance with the requirements of such amendment or in accordance with an amendment prescribed by the Secretary and adopted by the plan, and
such plan amendment applies retroactively to the period after such amendment takes effect and such first plan year.
A pension plan shall not be treated as failing to provide definitely determinable benefits or contributions, or to be operated in accordance with the provisions of the plan, merely because it operates in accordance with this provision.
Model Amendment.—
Secretary to prescribe amendment.—
The Secretary of the Treasury or his delegate shall prescribe an amendment or amendments which allow a plan to meet the requirements of any amendment made by this subtitle or subtitle C—
which requires an amendment to such plan, and
is effective before the first plan year beginning after
Adoption by plan.—
If a plan adopts the amendment or amendments prescribed under paragraph (1) and operates in accordance with such amendment or amendments, such plan shall not be treated as failing to provide definitely determinable benefits or contributions or to be operated in accordance with the provisions of the plan.
Special Rule for Collectively Bargained Plans.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before
the earlier of—
the date on which the last of such collective bargaining agreements terminate (without regard to any extension after
For purposes of paragraph (1)(B) [(2)(B)] and any other provision of this title [see Tables for classification], an agreement shall not be treated as terminated merely because the plan is amended pursuant to such agreement to meet the requirements of any amendment made by this title or title XVIII of this Act.”
Secretary To Accept Applications With Respect to Section 401(k) Plans
Treatment of Individuals Having Beginning Date Affected by Pub. L. 99–514
Distribution Requirements for Accounts and Annuities of an Insurer in a Rehabilitation Proceeding
In General.—
For purposes of sections 401(a)(9), 408(a)(6) and (7), and 408(b)(3) and (4) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]—
a trust, custodial account, or annuity or other contract forming part of a pension or profit-sharing plan, or a retirement annuity, or
a grantor of an individual retirement account or an individual retirement annuity,
shall not be treated as failing to meet the requirements of such sections if such account, annuity, or contract was issued by an insurance company which, on
Limitation.—
Subsection (a) shall apply only during the period during which—
the insurance company continues to be a party to the proceeding described in subsection (a), and
distributions under the trust, custodial account, or annuity or other contract may not be made by reason of such proceeding.”
Qualification Requirements Modified if Regulations Not Issued
In general.—
If the Secretary of the Treasury or his delegate does not publish final regulations under section 416 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as in effect on the day before the date of the enactment of this Act [
Effect of incorporation.—
If a plan is amended to incorporate the plan amendment provisions described in paragraph (1), such plan shall be treated as meeting the requirements of section 401(a)(10)(B)(ii) of the Internal Revenue Code of 1986 during the period such amendment is in effect but not later than 6 months after the final regulations described in paragraph (1) are published.
Failure by secretary to publish.—
If the Secretary of the Treasury or his delegate does not publish plan amendment provisions described in paragraph (1), the plan shall be treated as meeting the requirements of section 401(a)(10)(B) of the Internal Revenue Code of 1986 if—
such plan is amended to incorporate such requirements by reference, except that
in the case of any optional requirement under section 416 of such Code, if such amendment does not specify the manner in which such requirement will be met, the employer shall be treated as having elected the requirement with respect to each employee which provides the maximum vested accrued benefit for such employee.”
Transitional Rule
“In the case of cash or deferred arrangements in existence on
the qualification of the plan and the trust under section 401 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954];
the exemption of the trust under section 501(a) of such Code;
the taxable year of inclusion in gross income of the employee of any amount so contributed by the employer to the trust; and
the excludability of the interest of the employee in the trust under sections 2039 and 2517 of such Code,
shall be determined for plan years beginning before
Salary Reduction Regulations
Inclusion of Certain Contributions in Income.—
Except in the case of plans or arrangements in existence on
Administration in the Case of Certain Qualified Pension or Profit-Sharing Plans, Etc., in Existence on June 27, 1974.—
No salary reduction regulations may be issued by the Secretary of the Treasury in final form before
provided for contributions to an employee’s trust described in section 401(a), 403(a), or 405(a) of the Internal Revenue Code of 1986 [subsec. (a) of this section, section 403(a) of this title, or section 405(a) of this title] which is exempt from tax under section 501(a) of such Code [section 501(a) of this title], or
was maintained as part of an arrangement under which an employee was permitted to elect to receive part of his compensation in one or more alternative forms if one of such forms results in the inclusion of amounts in income under the Internal Revenue Code of 1986 [this title].
Administration of Law With Respect to Certain Plans.—
Administration in the case of plans described in subsection (b).—
Until salary reduction regulations have been issued in final form, the law with respect to plans or arrangements described in subsection (b) shall be administered—
without regard to the proposed salary reduction regulations (37 FR 25938) and without regard to any other proposed salary reduction regulations, and
in the manner in which such law was administered before
Administration in the case of qualified profit-sharing plans.—
In the case of plans or arrangements described in subsection (b), in applying this section to the tax treatment of contributions to qualified profit-sharing plans where the contributed amounts are distributable only after a period of deferral, the law shall be administered in a manner consistent with—
Revenue Ruling 56–497 (1956—2 C.B. 284),
Revenue Ruling 63–180 (1963—2 C.B. 189), and
Revenue Ruling 68–89 (1968—1 C.B. 402).
Limitation on Retroactivity of Final Regulations.—
In the case of any salary reduction regulations which become final after
for purposes of chapter 1 of the Internal Revenue Code of 1986 (relating to normal taxes and surtaxes), such regulations shall not apply before
for purposes of chapter 21 of such Code (relating to Federal Insurance Contributions Act) and for purposes of chapter 24 of such Code (relating to collection of income tax at source on wages), such regulations shall not apply before the day on which such regulations are issued in final form.
Salary Reduction Regulations Defined.—
For purpose of this section, the term ‘salary reduction regulations’ means regulations dealing with the includibility in gross income (at the time of contribution) of amounts contributed to a plan which includes a trust that qualifies under section 401(a) [subsec. (a) of this section], or a plan described in section 403(a) or 405(a), including plans or arrangements described in subsection (b)(2), if the contribution is made under an arrangement under which the contribution will be made only if the employee elects to receive a reduction in his compensation or to forego an increase in his compensation, or under an arrangement under which the employee is permitted to elect to receive part of his compensation in one or more alternative forms (if one of such forms results in the inclusion of amounts in income under the Internal Revenue Code of 1986).”