Annuities; certain proceeds of endowment and life insurance contracts
General rules for annuities
Income inclusion
Partial annuitization
If any amount is received as an annuity for a period of 10 years or more or during one or more lives under any portion of an annuity, endowment, or life insurance contract—
such portion shall be treated as a separate contract for purposes of this section,
for purposes of applying subsections (b), (c), and (e), the investment in the contract shall be allocated pro rata between each portion of the contract from which amounts are received as an annuity and the portion of the contract from which amounts are not received as an annuity, and
a separate annuity starting date under subsection (c)(4) shall be determined with respect to each portion of the contract from which amounts are received as an annuity.
Exclusion ratio
In general
Exclusion limited to investment
Deduction where annuity payments cease before entire investment recovered
In general
If—
after the annuity starting date, payments as an annuity under the contract cease by reason of the death of an annuitant, and
as of the date of such cessation, there is unrecovered investment in the contract,
the amount of such unrecovered investment (in excess of any amount specified in subsection (e)(5) which was not included in gross income) shall be allowed as a deduction to the annuitant for his last taxable year.
Payments to other persons
Net operating loss deductions provided
Unrecovered investment
For purposes of this subsection, the unrecovered investment in the contract as of any date is—
the investment in the contract (determined without regard to subsection (c)(2)) as of the annuity starting date, reduced by
the aggregate amount received under the contract on or after such annuity starting date and before the date as of which the determination is being made, to the extent such amount was excludable from gross income under this subtitle.
Definitions
Investment in the contract
For purposes of subsection (b), the investment in the contract as of the annuity starting date is—
the aggregate amount of premiums or other consideration paid for the contract, minus
the aggregate amount received under the contract before such date, to the extent that such amount was excludable from gross income under this subtitle or prior income tax laws.
Adjustment in investment where there is refund feature
If—
the expected return under the contract depends in whole or in part on the life expectancy of one or more individuals;
the contract provides for payments to be made to a beneficiary (or to the estate of an annuitant) on or after the death of the annuitant or annuitants; and
such payments are in the nature of a refund of the consideration paid,
then the value (computed without discount for interest) of such payments on the annuity starting date shall be subtracted from the amount determined under paragraph (1). Such value shall be computed in accordance with actuarial tables prescribed by the Secretary. For purposes of this paragraph and of subsection (e)(2)(A), the term “refund of the consideration paid” includes amounts payable after the death of an annuitant by reason of a provision in the contract for a life annuity with minimum period of payments certain, but (if part of the consideration was contributed by an employer) does not include that part of any payment to a beneficiary (or to the estate of the annuitant) which is not attributable to the consideration paid by the employee for the contract as determined under paragraph (1)(A).
Expected return
For purposes of subsection (b), the expected return under the contract shall be determined as follows:
Life expectancy
Installment payments
Annuity starting date
Special rules for qualified employer retirement plans
Simplified method of taxing annuity payments
In general
In the case of any amount received as an annuity under a qualified employer retirement plan—
subsection (b) shall not apply, and
the investment in the contract shall be recovered as provided in this paragraph.
Method of recovering investment in contract
In general
Gross income shall not include so much of any monthly annuity payment under a qualified employer retirement plan as does not exceed the amount obtained by dividing—
the investment in the contract (as of the annuity starting date), by
the number of anticipated payments determined under the table contained in clause (iii) (or, in the case of a contract to which subsection (c)(3)(B) applies, the number of monthly annuity payments under such contract).
Certain rules made applicable
Number of anticipated payments
If the age of the annuitant on the annuity starting date is: | The number of anticipated payments is: |
|---|---|
Not more than 55 | 360 |
More than 55 but not more than 60 | 310 |
More than 60 but not more than 65 | 260 |
More than 65 but not more than 70 | 210 |
More than 70 | 160. |
Number of anticipated payments where more than one life
If the combined ages of annuitants are: | The number is: |
|---|---|
Not more than 110 | 410 |
More than 110 but not more than 120 | 360 |
More than 120 but not more than 130 | 310 |
More than 130 but not more than 140 | 260 |
More than 140 | 210. |
Adjustment for refund feature not applicable
Special rule where lump sum paid in connection with commencement of annuity payments
If, in connection with the commencement of annuity payments under any qualified employer retirement plan, the taxpayer receives a lump-sum payment—
such payment shall be taxable under subsection (e) as if received before the annuity starting date, and
the investment in the contract for purposes of this paragraph shall be determined as if such payment had been so received.
Exception
Adjustment where annuity payments not on monthly basis
Qualified employer retirement plan
Treatment of employee contributions under defined contribution plans
Treatment of contributions to a pension-linked emergency savings account
Amounts not received as annuities
Application of subsection
In general
This subsection shall apply to any amount which—
is received under an annuity, endowment, or life insurance contract, and
is not received as an annuity,
if no provision of this subtitle (other than this subsection) applies with respect to such amount.
Dividends
General rule
Any amount to which this subsection applies—
if received on or after the annuity starting date, shall be included in gross income, or
if received before the annuity starting date—
shall be included in gross income to the extent allocable to income on the contract, and
shall not be included in gross income to the extent allocable to the investment in the contract.
Allocation of amounts to income and investment
For purposes of paragraph (2)(B)—
Allocation to income
Any amount to which this subsection applies shall be treated as allocable to income on the contract to the extent that such amount does not exceed the excess (if any) of—
the cash value of the contract (determined without regard to any surrender charge) immediately before the amount is received, over
the investment in the contract at such time.
Allocation to investment
Special rules for application of paragraph (2)(B)
For purposes of paragraph (2)(B)—
Loans treated as distributions
If, during any taxable year, an individual—
receives (directly or indirectly) any amount as a loan under any contract to which this subsection applies, or
assigns or pledges (or agrees to assign or pledge) any portion of the value of any such contract,
such amount or portion shall be treated as received under the contract as an amount not received as an annuity. The preceding sentence shall not apply for purposes of determining investment in the contract, except that the investment in the contract shall be increased by any amount included in gross income by reason of the amount treated as received under the preceding sentence.
Treatment of policyholder dividends
Treatment of transfers without adequate consideration
In general
If an individual who holds an annuity contract transfers it without full and adequate consideration, such individual shall be treated as receiving an amount equal to the excess of—
the cash surrender value of such contract at the time of transfer, over
the investment in such contract at such time,
under the contract as an amount not received as an annuity.
Exception for certain transfers between spouses or former spouses
Adjustment to investment in contract of transferee
Retention of existing rules in certain cases
In general
In any case to which this paragraph applies—
paragraphs (2)(B) and (4)(A) shall not apply, and
if paragraph (2)(A) does not apply,
the amount shall be included in gross income, but only to the extent it exceeds the investment in the contract.
Existing contracts
Certain life insurance and endowment contracts
Contracts under qualified plans
Except as provided in paragraph (8), this paragraph shall apply to any amount received—
from a trust described in section 401(a) which is exempt from tax under section 501(a),
from a contract—
purchased by a trust described in clause (i),
purchased as part of a plan described in section 403(a),
described in section 403(b), or
provided for employees of a life insurance company under a plan described in section 818(a)(3), or
from an individual retirement account or an individual retirement annuity.
Any dividend described in section 404(k) which is received by a participant or beneficiary shall, for purposes of this subparagraph, be treated as paid under a separate contract to which clause (ii)(I) applies.
Full refunds, surrenders, redemptions, and maturities
This paragraph shall apply to—
any amount received, whether in a single sum or otherwise, under a contract in full discharge of the obligation under the contract which is in the nature of a refund of the consideration paid for the contract, and
any amount received under a contract on its complete surrender, redemption, or maturity.
In the case of any amount to which the preceding sentence applies, the rule of paragraph (2)(A) shall not apply.
Investment in the contract
For purposes of this subsection, the investment in the contract as of any date is—
the aggregate amount of premiums or other consideration paid for the contract before such date, minus
the aggregate amount received under the contract before such date, to the extent that such amount was excludable from gross income under this subtitle or prior income tax laws.
Repealed. Pub. L. 100–647, title I, § 1011A(b)(9)(A), Nov. 10, 1988, 102 Stat. 3474]
Extension of paragraph (2)(b) 11 So in original. Probably should be paragraph “(2)(B)”. to qualified plans
In general
Allocation of amount received
Treatment of forfeitable rights
Investment in the contract before 1987
Extension of paragraph (2)(B) to qualified tuition programs and Coverdell education savings accounts
Treatment of modified endowment contracts
In general
Notwithstanding paragraph (5)(C), in the case of any modified endowment contract (as defined in section 7702A)—
paragraphs (2)(B) and (4)(A) shall apply, and
in applying paragraph (4)(A), “any person” shall be substituted for “an individual”.
Treatment of certain burial contracts
Special rules for certain combination contracts providing long-term care insurance
Notwithstanding paragraphs (2), (5)(C), and (10), in the case of any charge against the cash value of an annuity contract or the cash surrender value of a life insurance contract made as payment for coverage under a qualified long-term care insurance contract which is part of or a rider on such annuity or life insurance contract—
the investment in the contract shall be reduced (but not below zero) by such charge, and
such charge shall not be includible in gross income.
Anti-abuse rules
In general
For purposes of determining the amount includible in gross income under this subsection—
all modified endowment contracts issued by the same company to the same policyholder during any calendar year shall be treated as 1 modified endowment contract, and
all annuity contracts issued by the same company to the same policyholder during any calendar year shall be treated as 1 annuity contract.
The preceding sentence shall not apply to any contract described in paragraph (5)(D).
Regulatory authority
Special rules for computing employees’ contributions
In computing, for purposes of subsection (c)(1)(A), the aggregate amount of premiums or other consideration paid for the contract, and for purposes of subsection (e)(6), the aggregate premiums or other consideration paid, amounts contributed by the employer shall be included, but only to the extent that—
such amounts were includible in the gross income of the employee under this subtitle or prior income tax laws; or
if such amounts had been paid directly to the employee at the time they were contributed, they would not have been includible in the gross income of the employee under the law applicable at the time of such contribution.
Paragraph (2) shall not apply to amounts which were contributed by the employer after
Rules for transferee where transfer was for value
Where any contract (or any interest therein) is transferred (by assignment or otherwise) for a valuable consideration, to the extent that the contract (or interest therein) does not, in the hands of the transferee, have a basis which is determined by reference to the basis in the hands of the transferor, then—
for purposes of this section, only the actual value of such consideration, plus the amount of the premiums and other consideration paid by the transferee after the transfer, shall be taken into account in computing the aggregate amount of the premiums or other consideration paid for the contract;
for purposes of subsection (c)(1)(B), there shall be taken into account only the aggregate amount received under the contract by the transferee before the annuity starting date, to the extent that such amount was excludable from gross income under this subtitle or prior income tax laws; and
the annuity starting date is the first day of the first period for which the transferee received an amount under the contract as an annuity.
For purposes of this subsection, the term “transferee” includes a beneficiary of, or the estate of, the transferee.
Option to receive annuity in lieu of lump sum
If—
a contract provides for payment of a lump sum in full discharge of an obligation under the contract, subject to an option to receive an annuity in lieu of such lump sum;
the option is exercised within 60 days after the day on which such lump sum first became payable; and
part or all of such lump sum would (but for this subsection) be includible in gross income by reason of subsection (e)(1),
then, for purposes of this subtitle, no part of such lump sum shall be considered as includible in gross income at the time such lump sum first became payable.
Repealed. Pub. L. 94–455, title XIX, § 1951(b)(1)(A), Oct. 4, 1976, 90 Stat. 1836]
Interest
Repealed. Pub. L. 98–369, div. A, title IV, § 421(b)(1), July 18, 1984, 98 Stat. 794]
Face-amount certificates
Special rules applicable to employee annuities and distributions under employee plans
Repealed. Pub. L. 93–406, title II, § 2001(h)(2), Sept. 2, 1974, 88 Stat. 957]
Computation of consideration paid by the employee
In computing—
the aggregate amount of premiums or other consideration paid for the contract for purposes of subsection (c)(1)(A) (relating to the investment in the contract), and
the aggregate premiums or other consideration paid for purposes of subsection (e)(6) (relating to certain amounts not received as an annuity),
any amount allowed as a deduction with respect to the contract under section 404 which was paid while the employee was an employee within the meaning of section 401(c)(1) shall be treated as consideration contributed by the employer, and there shall not be taken into account any portion of the premiums or other consideration for the contract paid while the employee was an owner-employee which is properly allocable (as determined under regulations prescribed by the Secretary) to the cost of life, accident, health, or other insurance.
Life insurance contracts
This paragraph shall apply to any life insurance contract—
purchased as a part of a plan described in section 403(a), or
purchased by a trust described in section 401(a) which is exempt from tax under section 501(a) if the proceeds of such contract are payable directly or indirectly to a participant in such trust or to a beneficiary of such participant.
Any contribution to a plan described in subparagraph (A)(i) or a trust described in subparagraph (A)(ii) which is allowed as a deduction under section 404, and any income of a trust described in subparagraph (A)(ii), which is determined in accordance with regulations prescribed by the Secretary to have been applied to purchase the life insurance protection under a contract described in subparagraph (A), is includible in the gross income of the participant for the taxable year when so applied.
In the case of the death of an individual insured under a contract described in subparagraph (A), an amount equal to the cash surrender value of the contract immediately before the death of the insured shall be treated as a payment under such plan or a distribution by such trust, and the excess of the amount payable by reason of the death of the insured over such cash surrender value shall not be includible in gross income under this section and shall be treated as provided in section 101.
Repealed. Pub. L. 97–248, title II, § 236(b)(1), Sept. 3, 1982, 96 Stat. 510]
Penalties applicable to certain amounts received by 5-percent owners
This paragraph applies to amounts which are received from a qualified trust described in section 401(a) or under a plan described in section 403(a) at any time by an individual who is, or has been, a 5-percent owner, or by a successor of such an individual, but only to the extent such amounts are determined, under regulations prescribed by the Secretary, to exceed the benefits provided for such individual under the plan formula.
If a person receives an amount to which this paragraph applies, his tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of the amount so received which is includible in his gross income for such taxable year.
For purposes of this paragraph, the term “5-percent owner” means any individual who, at any time during the 5 plan years preceding the plan year ending in the taxable year in which the amount is received, is a 5-percent owner (as defined in section 416(i)(1)(B)).
Owner-employee defined
Meaning of disabled
Repealed. Pub. L. 97–248, title II, § 236(b)(1), Sept. 3, 1982, 96 Stat. 510]
Repealed. Pub. L. 98–369, div. A, title VII, § 713(d)(1), July 18, 1984, 98 Stat. 957]
Determination of investment in the contract in the case of qualified domestic relations orders
Annuities under retired serviceman’s family protection plan or survivor benefit plan
Special rules for distributions from qualified plans to which employee made deductible contributions
Treatment of contributions
Repealed. Pub. L. 100–647, title I, § 1011A(c)(8), Nov. 10, 1988, 102 Stat. 3476]
Amounts constructively received
In general
Purchase of life insurance
Special rule for treatment of rollover amounts
Definitions and special rules
For purposes of this subsection—
Deductible employee contributions
Accumulated deductible employee contributions
The term “accumulated deductible employee contributions” means the deductible employee contributions—
increased by the amount of income and gain allocable to such contributions, and
reduced by the sum of the amount of loss and expense allocable to such contributions and the amounts distributed with respect to the employee which are attributable to such contributions (or income or gain allocable to such contributions).
Qualified employer plan
Government plan
Ordering rules
Loans treated as distributions
For purposes of this section—
Treatment as distributions
Loans
Assignments or pledges
Exception for certain loans
General rule
Paragraph (1) shall not apply to any loan to the extent that such loan (when added to the outstanding balance of all other loans from such plan whether made on, before, or after
$50,000, reduced by the excess (if any) of—
the highest outstanding balance of loans from the plan during the 1-year period ending on the day before the date on which such loan was made, over
the outstanding balance of loans from the plan on the date on which such loan was made, or
the greater of (I) one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan, or (II) $10,000.
For purposes of clause (ii), the present value of the nonforfeitable accrued benefit shall be determined without regard to any accumulated deductible employee contributions (as defined in subsection (o)(5)(B)).
Requirement that loan be repayable within 5 years
In general
Exception for home loans
Requirement of level amortization
Prohibition of loans through credit cards and other similar arrangements
Related employers and related plans
For purposes of this paragraph—
the rules of subsections (b), (c), and (m) of section 414 shall apply, and
all plans of an employer (determined after the application of such subsections) shall be treated as 1 plan.
Denial of interest deductions in certain cases
In general
Period to which subparagraph (A) applies
For purposes of subparagraph (A), the period described in this subparagraph is the period—
on or after the 1st day on which the individual to whom the loan is made is a key employee (as defined in section 416(i)), or
such loan is secured by amounts attributable to elective deferrals described in subparagraph (A) or (C) of section 402(g)(3).
Qualified employer plan, etc.
For purposes of this subsection—
Qualified employer plan
In general
The term “qualified employer plan” means—
a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),
an annuity plan described in section 403(a), and
a plan under which amounts are contributed by an individual’s employer for an annuity contract described in section 403(b).
Special rule
Government plan
Special rules for loans, etc., from certain contracts
Increase in limit on loans not treated as distributions
In general
In the case of any loan from a qualified employer plan to a qualified individual made during the applicable period—
clause (i) of paragraph (2)(A) shall be applied by substituting “$100,000” for “$50,000”, and
clause (ii) of such paragraph shall be applied by substituting “the present value of the nonforfeitable accrued benefit of the employee under the plan” for “one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan”.
Delay of repayment
In the case of a qualified individual with respect to any qualified disaster with an outstanding loan from a qualified employer plan on or after the applicable date with respect to the qualified disaster—
if the due date pursuant to subparagraph (B) or (C) of paragraph (2) for any repayment with respect to such loan occurs during the period beginning on the first day of the incident period of such qualified disaster and ending on the date which is 180 days after the last day of such incident period, such due date may be delayed for 1 year,
any subsequent repayments with respect to any such loan may be appropriately adjusted to reflect the delay in the due date under clause (i) and any interest accruing during such delay, and
in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of paragraph (2), the period described in clause (i) may be disregarded.
Definitions
For purposes of this paragraph—
Qualified individual
The term “qualified individual” means any individual—
whose principal place of abode at any time during the incident period of any qualified disaster is located in the qualified disaster area with respect to such qualified disaster, and
who has sustained an economic loss by reason of such qualified disaster.
Applicable period
The applicable period with respect to any disaster is the period—
beginning on the applicable date with respect to such disaster, and
ending on the date that is 180 days after such applicable date.
Other terms
For purposes of this paragraph—
the terms “applicable date”, “qualified disaster”, “qualified disaster area”, and “incident period” have the meaning given such terms under subsection (t)(11), and
the term “applicable period” has the meaning given such term under subsection (t)(8).
10-percent penalty for premature distributions from annuity contracts
Imposition of penalty
Subsection not to apply to certain distributions
Paragraph (1) shall not apply to any distribution—
made on or after the date on which the taxpayer attains age 59½,
made on or after the death of the holder (or, where the holder is not an individual, the death of the primary annuitant (as defined in subsection (s)(6)(B))),
attributable to the taxpayer’s becoming disabled within the meaning of subsection (m)(7),
which is a part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of such taxpayer and his designated beneficiary,
from a plan, contract, account, trust, or annuity described in subsection (e)(5)(D),
allocable to investment in the contract before
under a qualified funding asset (within the meaning of section 130(d), but without regard to whether there is a qualified assignment),
to which subsection (t) applies (without regard to paragraph (2) thereof),
under an immediate annuity contract (within the meaning of section 72(u)(4)), or
which is purchased by an employer upon the termination of a plan described in section 401(a) or 403(a) and which is held by the employer until such time as the employee separates from service.
For purposes of subparagraph (D), periodic payments shall not fail to be treated as substantially equal merely because they are amounts received as an annuity, and such periodic payments shall be deemed to be substantially equal if they are payable over a period described in subparagraph (D) and would satisfy the requirements applicable to annuity payments under section 401(a)(9) if such requirements applied.
Change in substantially equal payments
In general
If—
paragraph (1) does not apply to a distribution by reason of paragraph (2)(D), and
the series of payments under such paragraph are subsequently modified (other than by reason of death or disability)—
before the close of the 5-year period beginning on the date of the first payment and after the taxpayer attains age 59½, or
before the taxpayer attains age 59½,
the taxpayer’s tax for the 1st taxable year in which such modification occurs shall be increased by an amount, determined under regulations, equal to the tax which (but for paragraph (2)(D)) would have been imposed, plus interest for the deferral period (within the meaning of subsection (t)(4)(B)).
Exchanges to subsequent contracts
If—
payments described in paragraph (2)(D) are being made from an annuity contract,
an exchange of all or a portion of such contract for another contract is made under section 1035, and
the aggregate distributions from the contracts involved in the exchange continue to satisfy the requirements of paragraph (2)(D) as if the exchange had not taken place,
such exchange shall not be treated as a modification under subparagraph (A)(ii), and compliance with paragraph (2)(D) shall be determined on the basis of the combined distributions described in clause (iii).
Certain railroad retirement benefits treated as received under employer plans
In general
Tier 2 taxes treated as contributions
In general
For purposes of paragraph (1)—
the tier 2 portion of the tax imposed by section 3201 (relating to tax on employees) shall be treated as an employee contribution,
the tier 2 portion of the tax imposed by section 3211 (relating to tax on employee representatives) shall be treated as an employee contribution, and
the tier 2 portion of the tax imposed by section 3221 (relating to tax on employers) shall be treated as an employer contribution.
Tier 2 portion
For purposes of subparagraph (A)—
After 1984
After September 30, 1981, and before 1985
With respect to compensation paid before 1985 for services rendered after
so much of the tax imposed by section 3201 as is determined at the 2 percent rate, and
so much of the taxes imposed by sections 3211 and 3221 as is determined at the 11.75 percent rate.
With respect to compensation paid for services rendered after
Before October 1, 1981
With respect to compensation paid for services rendered during any period before
the tax imposed for such period by section 3201, 3211, or 3221, as the case may be (other than any tax imposed with respect to man-hours), over
the tax which would have been imposed by such section for such period had the rates of the comparable taxes imposed by chapter 21 for such period applied under such section.
Contributions not allocable to supplemental annuity or windfall benefits
For purposes of paragraph (1), no amount treated as an employee contribution under this paragraph shall be allocated to—
any supplemental annuity paid under section 2(b) of the Railroad Retirement Act of 1974, or
any benefit paid under section 3(h), 4(e), or 4(h) of such Act.
Tier 1 railroad retirement benefit
Required distributions where holder dies before entire interest is distributed
In general
A contract shall not be treated as an annuity contract for purposes of this title unless it provides that—
if any holder of such contract dies on or after the annuity starting date and before the entire interest in such contract has been distributed, the remaining portion of such interest will be distributed at least as rapidly as under the method of distributions being used as of the date of his death, and
if any holder of such contract dies before the annuity starting date, the entire interest in such contract will be distributed within 5 years after the death of such holder.
Exception for certain amounts payable over life of beneficiary
If—
any portion of the holder’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 holder’s death or such later date as the Secretary may by regulations prescribe,
then for purposes of paragraph (1), the portion referred to in subparagraph (A) shall be treated as distributed on the day on which such distributions begin.
Special rule where surviving spouse beneficiary
Designated beneficiary
Exception for certain annuity contracts
This subsection shall not apply to any annuity contract—
which is provided—
under a plan described in section 401(a) which includes a trust exempt from tax under section 501, or
under a plan described in section 403(a),
which is described in section 403(b),
which is an individual retirement annuity or provided under an individual retirement account or annuity, or
which is a qualified funding asset (as defined in section 130(d), but without regard to whether there is a qualified assignment).
Special rule where holder is corporation or other non-individual
In general
Primary annuitant
Treatment of changes in primary annuitant where holder of contract is not an individual
10-percent additional tax on early distributions from qualified retirement plans
Imposition of additional tax
Subsection not to apply to certain distributions
Except as provided in paragraphs (3) and (4), paragraph (1) shall not apply to any of the following distributions:
In general
Distributions which are—
made on or after the date on which the employee attains age 59½,
made to a beneficiary (or to the estate of the employee) on or after the death of the employee,
attributable to the employee’s being disabled within the meaning of subsection (m)(7),
part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary,
made to an employee after separation from service after attainment of age 55,
dividends paid with respect to stock of a corporation which are described in section 404(k),
made on account of a levy under section 6331 on the qualified retirement plan,
payments under a phased retirement annuity under section 8366a(a)(5) 3
attributable to withdrawal of net income attributable to a contribution which is distributed pursuant to section 408(d)(4).
For purposes of clause (iv), periodic payments shall not fail to be treated as substantially equal merely because they are amounts received as an annuity, and such periodic payments shall be deemed to be substantially equal if they are payable over a period described in clause (iv) and satisfy the requirements applicable to annuity payments under section 401(a)(9).
Medical expenses
Payments to alternate payees pursuant to qualified domestic relations orders
Distributions to unemployed individuals for health insurance premiums
In general
Distributions from an individual retirement plan to an individual after separation from employment—
if such individual has received unemployment compensation for 12 consecutive weeks under any Federal or State unemployment compensation law by reason of such separation,
if such distributions are made during any taxable year during which such unemployment compensation is paid or the succeeding taxable year, and
to the extent such distributions do not exceed the amount paid during the taxable year for insurance described in section 213(d)(1)(D) with respect to the individual and the individual’s spouse and dependents (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof).
Distributions after reemployment
Self-employed individuals
Distributions from individual retirement plans for higher education expenses
Distributions from certain plans for first home purchases
Distributions from retirement plans to individuals called to active duty
In general
Amount distributed may be repaid
Qualified reservist distribution
For purposes of this subparagraph, the term “qualified reservist distribution” means any distribution to an individual if—
such distribution is from an individual retirement plan, or from amounts attributable to employer contributions made pursuant to elective deferrals described in subparagraph (A) or (C) of section 402(g)(3) or section 501(c)(18)(D)(iii),
such individual was (by reason of being a member of a reserve component (as defined in section 101 of title 37, United States Code)) ordered or called to active duty for a period in excess of 179 days or for an indefinite period, and
such distribution is made during the period beginning on the date of such order or call and ending at the close of the active duty period.
Application of subparagraph
Distributions from retirement plans in case of birth of child or adoption
In general
Limitation
Qualified birth or adoption distribution
For purposes of this subparagraph—
In general
Eligible adoptee
Treatment of plan distributions
In general
Controlled group
Amount distributed may be repaid
In general
Limitation on contributions to applicable eligible retirement plans other than IRAs
Treatment of repayments of distributions from applicable eligible retirement plans other than IRAs
Treatment of repayments for distributions from IRAs
Definition and special rules
For purposes of this subparagraph—
Applicable eligible retirement plan
Exemption of distributions from trustee to trustee transfer and withholding rules
Taxpayer must include TIN
Distributions treated as meeting plan distribution requirements
Distributions for certain emergency expenses
In general
Annual limitation
Dollar limitation
The amount which may be treated as an emergency personal expense distribution by any individual in any calendar year shall not exceed the lesser of $1,000 or an amount equal to the excess of—
the individual’s total nonforfeitable accrued benefit under the plan (the individual’s total interest in the plan in the case of an individual retirement plan), determined as of the date of each such distribution, over
$1,000.
Emergency personal expense distribution
Treatment of plan distributions
Amount distributed may be repaid
Limitation on subsequent distributions
“If a distribution is treated as an emergency personal expense distribution in any calendar year with respect to a plan of the employee, no amount may be treated as such a distribution during the immediately following 3 calendar years with respect to such plan unless—
such previous distribution is fully repaid to such plan pursuant to clause (vi), or
the aggregate of the elective deferrals and employee contributions to the plan (the total amounts contributed to the plan in the case of an individual retirement plan) subsequent to such previous distribution is at least equal to the amount of such previous distribution which has not been so repaid.
Special rules
Distributions from pension-linked emergency savings account
Distribution from retirement plan in case of domestic abuse
In general
Limitation
The aggregate amount which may be treated as an eligible distribution to a domestic abuse victim by any individual shall not exceed an amount equal to the lesser of—
$10,000, or
50 percent of the present value of the nonforfeitable accrued benefit of the employee under the plan.
Eligible distribution to a domestic abuse victim
For purposes of this subparagraph—
In general
Domestic abuse
Treatment of plan distributions
Amount distributed may be repaid
Definition and special rules
For purposes of this subparagraph:
Applicable eligible retirement plan
Exemption of distributions from trustee to trustee transfer and withholding rules
Distributions treated as meeting plan distribution requirements; self-certification
Inflation adjustment
In the case of a taxable year beginning in a calendar year after 2024, the $10,000 amount in clause (ii)(I) shall be increased by an amount equal to—
such dollar amount, multiplied by
the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2023’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
If any amount after adjustment under the preceding sentence is not a multiple of $100, such amount shall be rounded to the nearest multiple of $100.
Terminal illness
In general
Definition
Documentation
Amount distributed may be repaid
Distributions from retirement plans in connection with federally declared disasters
Limitations
Certain exceptions not to apply to individual retirement plans
Periodic payments under qualified plans must begin after separation
Change in substantially equal payments
In general
If—
paragraph (1) does not apply to a distribution by reason of paragraph (2)(A)(iv), and
the series of payments under such paragraph are subsequently modified (other than by reason of death or disability or a distribution to which paragraph (10) applies)—
before the close of the 5-year period beginning with the date of the first payment and after the employee attains age 59½, or
before the employee attains age 59½,
the taxpayer’s tax for the 1st taxable year in which such modification occurs shall be increased by an amount, determined under regulations, equal to the tax which (but for paragraph (2)(A)(iv)) would have been imposed, plus interest for the deferral period.
Deferral period
Rollovers to subsequent plan
If—
payments described in paragraph (2)(A)(iv) are being made from a qualified retirement plan,
a transfer or a rollover from such qualified retirement plan of all or a portion of the taxpayer’s benefit under the plan is made to another qualified retirement plan, and
distributions from the transferor and transferee plans would in combination continue to satisfy the requirements of paragraph (2)(A)(iv) if they had been made only from the transferor plan,
such transfer or rollover shall not be treated as a modification under subparagraph (A)(ii), and compliance with paragraph (2)(A)(iv) shall be determined on the basis of the combined distributions described in clause (iii).
Employee
Special rules for simple retirement accounts
In general
In the case of any amount received from a simple retirement account (within the meaning of section 408(p)) during the 2-year period beginning on the date such individual first participated in any qualified salary reduction arrangement maintained by the individual’s employer under section 408(p)(2), paragraph (1) shall be applied by substituting “25 percent” for “10 percent”.
Waiver in case of plan conversion to 401(k) or 403(b)
Qualified higher education expenses
For purposes of paragraph (2)(E)—
In general
The term “qualified higher education expenses” means qualified higher education expenses (as defined in section 529(e)(3)) for education furnished to—
the taxpayer,
the taxpayer’s spouse, or
any child (as defined in section 152(f)(1)) or grandchild of the taxpayer or the taxpayer’s spouse,
at an eligible educational institution (as defined in section 529(e)(5)).
Coordination with other benefits
Qualified first-time homebuyer distributions
For purposes of paragraph (2)(F)—
In general
Lifetime dollar limitation
The aggregate amount of payments or distributions received by an individual which may be treated as qualified first-time homebuyer distributions for any taxable year shall not exceed the excess (if any) of—
$10,000, over
the aggregate amounts treated as qualified first-time homebuyer distributions with respect to such individual for all prior taxable years.
Qualified acquisition costs
First-time homebuyer; other definitions
For purposes of this paragraph—
First-time homebuyer
The term “first-time homebuyer” means any individual if—
such individual (and if married, such individual’s spouse) had no present ownership interest in a principal residence during the 2-year period ending on the date of acquisition of the principal residence to which this paragraph applies, and
subsection (h) or (k) of section 1034 5
Principal residence
Date of acquisition
The term “date of acquisition” means the date—
on which a binding contract to acquire the principal residence to which subparagraph (A) applies is entered into, or
on which construction or reconstruction of such a principal residence is commenced.
Special rule where delay in acquisition
If any distribution from any individual retirement plan fails to meet the requirements of subparagraph (A) solely by reason of a delay or cancellation of the purchase or construction of the residence, the amount of the distribution may be contributed to an individual retirement plan as provided in section 408(d)(3)(A)(i) (determined by substituting “120th day” for “60th day” in such section), except that—
section 408(d)(3)(B) shall not be applied to such contribution, and
such amount shall not be taken into account in determining whether section 408(d)(3)(B) applies to any other amount.
Recontributions
General rule
In general
Treatment of repayments
Qualified distribution
For purposes of this subparagraph, the term “qualified distribution” means any distribution—
which is a qualified first-time homebuyer distribution,
which was to be used to purchase or construct a principal residence in a qualified disaster area, but which was not so used on account of the qualified disaster with respect to such area, and
which was received during the period beginning on the date which is 180 days before the first day of the incident period of such qualified disaster and ending on the date which is 30 days after the last day of such incident period.
Applicable period
Special rule for rollovers to section 457 plans
Distributions to qualified public safety employees and private sector firefighters
In general
Qualified public safety employee
For purposes of this paragraph, the term “qualified public safety employee” means—
any employee of a State or political subdivision of a State who provides police protection, firefighting services, emergency medical services, or services as a corrections officer or as a forensic security employee providing for the care, custody, and control of forensic patients for any area within the jurisdiction of such State or political subdivision, or
any Federal law enforcement officer described in section 8331(20) or 8401(17) of title 5, United States Code, any Federal customs and border protection officer described in section 8331(31) or 8401(36) of such title, any Federal firefighter described in section 8331(21) or 8401(14) of such title, any air traffic controller described in 8331(30) or 8401(35) of such title, any nuclear materials courier described in section 8331(27) or 8401(33) of such title, any member of the United States Capitol Police, any member of the Supreme Court Police, or any diplomatic security special agent of the Department of State.
Qualified disaster recovery distribution
For purposes of paragraph (2)(M)—
In general
Except as provided in subparagraph (B), the term “qualified disaster recovery distribution” means any distribution made—
on or after the first day of the incident period of a qualified disaster and before the date that is 180 days after the applicable date with respect to such disaster, and
to an individual whose principal place of abode at any time during the incident period of such qualified disaster is located in the qualified disaster area with respect to such qualified disaster and who has sustained an economic loss by reason of such qualified disaster.
Aggregate dollar limitation
In general
Treatment of plan distributions
Controlled group
Amount distributed may be repaid
In general
Treatment of repayments of distributions from eligible retirement plans other than IRAs
Treatment of repayments for distributions from IRAs
Income inclusion spread over 3-year period
In general
Special rule
Qualified disaster
Other definitions
For purposes of this paragraph and paragraph (8)—
Qualified disaster area
In general
Exceptions
Incident period
Applicable date
The term “applicable date” means the latest of—
the date of the enactment of this paragraph,
the first day of the incident period with respect to the qualified disaster, or
the date of the disaster declaration with respect to the qualified disaster.
Eligible retirement plan
Special rules
Exemption of distributions from trustee to trustee transfer and withholding rules
Qualified disaster recovery distributions treated as meeting plan distribution requirements
For purposes of this title—
a qualified disaster recovery distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A), and
in the case of a money purchase pension plan, a qualified disaster recovery distribution which is an in-service withdrawal shall be treated as meeting the requirements of section 401(a) applicable to distributions.
Treatment of annuity contracts not held by natural persons
In general
If any annuity contract is held by a person who is not a natural person—
such contract shall not be treated as an annuity contract for purposes of this subtitle (other than subchapter L), and
the income on the contract for any taxable year of the policyholder shall be treated as ordinary income received or accrued by the owner during such taxable year.
For purposes of this paragraph, holding by a trust or other entity as an agent for a natural person shall not be taken into account.
Income on the contract
In general
For purposes of paragraph (1), the term “income on the contract” means, with respect to any taxable year of the policyholder, the excess of—
the sum of the net surrender value of the contract as of the close of the taxable year plus all distributions under the contract received during the taxable year or any prior taxable year, reduced by
the sum of the amount of net premiums under the contract for the taxable year and prior taxable years and amounts includible in gross income for prior taxable years with respect to such contract under this subsection.
Where necessary to prevent the avoidance of this subsection, the Secretary may substitute “fair market value of the contract” for “net surrender value of the contract” each place it appears in the preceding sentence.
Net premiums
Exceptions
This subsection shall not apply to any annuity contract which—
is acquired by the estate of a decedent by reason of the death of the decedent,
is held under a plan described in section 401(a) or 403(a), under a program described in section 403(b), or under an individual retirement plan,
is a qualified funding asset (as defined in section 130(d), but without regard to whether there is a qualified assignment),
is purchased by an employer upon the termination of a plan described in section 401(a) or 403(a) and is held by the employer until all amounts under such contract are distributed to the employee for whom such contract was purchased or the employee’s beneficiary, or
is an immediate annuity.
Immediate annuity
For purposes of this subsection, the term “immediate annuity” means an annuity—
which is purchased with a single premium or annuity consideration,
the annuity starting date (as defined in subsection (c)(4)) of which commences no later than 1 year from the date of the purchase of the annuity, and
which provides for a series of substantially equal periodic payments (to be made not less frequently than annually) during the annuity period.
10-percent additional tax for taxable distributions from modified endowment contracts
Imposition of additional tax
Subsection not to apply to certain distributions
Paragraph (1) shall not apply to any distribution—
made on or after the date on which the taxpayer attains age 59½,
which is attributable to the taxpayer’s becoming disabled (within the meaning of subsection (m)(7)), or
which is part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of such taxpayer and his beneficiary.
Application of basis rules to nonresident aliens
In general
Applicable nontaxable contribution
For purposes of this subsection, the term “applicable nontaxable contribution” means any employer or employee contribution—
which was made with respect to compensation—
for labor or personal services performed by an employee who, at the time the labor or services were performed, was a nonresident alien for purposes of the laws of the United States in effect at such time, and
which is treated as from sources without the United States, and
which was not subject to income tax (and would have been subject to income tax if paid as cash compensation when the services were rendered) under the laws of the United States or any foreign country.
Applicable nontaxable earnings
For purposes of this subsection, the term “applicable nontaxable earnings” means earnings—
which are paid or accrued with respect to any employer or employee contribution which was made with respect to compensation for labor or personal services performed by an employee,
with respect to which the employee was at the time the earnings were paid or accrued a nonresident alien for purposes of the laws of the United States, and
which were not subject to income tax under the laws of the United States or any foreign country.
Regulations
Cross reference
Source
(Aug. 16, 1954, ch. 736, 68A Stat. 20; Pub. L. 87–792, § 4(a), (b),Notes
Amendment of Subsection (t)(2)
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 amendment made by this section [amending this section] shall apply to distributions made after the date of the enactment of this Act [
Temporary rule with respect to distributions already made.—
In the case of a qualified birth or adoption distribution (as defined in section 72(t)(2)(H)(iii)(I) of the Internal Revenue Code of 1986) made on or before the date of the enactment of this Act, section 72(t)(2)(H)(v)(I) of such Code (as amended by this Act [div. T of Pub. L. 117–328]) shall apply to such distribution by substituting ‘after such distribution and before
In general.—
The amendments made by subsections (a), (b), and (c) [amending this section and section 6724 of this title] shall apply to transfers, rollovers, and exchanges occurring after
Annuity payments.—
The amendment made by subsection (d) [amending this section] shall apply to distributions commencing on or after the date of the enactment of this Act [
No inference.—
Nothing in the amendments made by this section shall be construed to create an inference with respect to the law in effect prior to the effective date of such amendments.”
Effective Date of 2019 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
Effective Date of 2006 Amendment
Effective date.—
The amendment made by this section [amending this section and sections 401 and 403 of this title] shall apply to distributions after
Waiver of limitations.—
If refund or credit of any overpayment of tax resulting from the amendments made by this section is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this Act [
In general.—
Except as otherwise provided in this subsection, the amendments made by this section [enacting section 6050U of this title and amending this section and sections 848, 1035, 6724, and 7702B of this title] shall apply to contracts issued after
Tax-free exchanges.—
The amendments made by subsection (b) [amending section 1035 of this title] shall apply with respect to exchanges occurring after
Information reporting.—
The amendments made by subsection (d) [enacting section 6050U of this title and amending section 6724 of this title] shall apply to charges made after
Policy acquisition expenses.—
The amendment made by subsection (e) [amending section 848 of this title] shall apply to specified policy acquisition expenses determined for taxable years beginning after
Technical amendment.—
The amendment made by subsection (f) [amending section 7702B of this title] shall take effect as if included in section 321(a) of the Health Insurance Portability and Accountability Act of 1996 [Pub. L. 104–191].”
Effective Date of 2004 Amendment
Effective Date of 2001 Amendment
Effective Date of 1998 Amendment
Effective Date of 1997 Amendment
Effective Date of 1996 Amendment
Effective Date of 1992 Amendment
Effective Date of 1989 Amendment
Effective Date of 1988 Amendment
Effective Date of 1986 Amendment
In general.—
Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 403 and 408 of this title] shall apply to taxable years beginning after
Subsection (c).—
The amendments made by subsection (c) [amending section 403 of this title] shall apply to years beginning after
Exception where distribution commences.—
The amendments made by this section shall not apply to distributions to any employee from a plan maintained by any employer if—
as of
as of
such distribution is made pursuant to such written election.
Transition rule.—
The amendments made by this section 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 an Effective Date of 1982 Amendment note under section 401 of this title].
Special rule for distributions under an annuity contract.—
The amendments made by paragraphs (1), (2), and (3) of subsection (b) [amending this section] shall not apply to any distribution under an annuity contract if—
as of
such distribution is made pursuant to such written election.”
Effective Date of 1984 Amendment
In general.—
The amendments made by this section [amending this section] shall apply to contracts issued after the day which is 6 months after the date of the enactment of this Act [
Transitional rules for contracts issued before effective date.—
In the case of any contract (other than a single premium contract) which is issued on or before the day which is 6 months after the date of the enactment of this Act, for purposes of section 72(q)(1)(A) 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), any investment in such contract which is made during any calendar year shall be treated as having been made on January 1 of such calendar year.”
Effective Date of 1983 Amendment
In general.—
Except as provided in paragraph (2), the amendments made by section 224 [enacting section 6050G of this title, amending this section and section 86 of this title, and enacting provisions set out as a note under section 231n of Title 45, Railroads] shall apply to benefits received after
Treatment of certain lump-sum payments received after december 31, 1983.—
The amendments made by section 224 shall not apply to any portion of a lump-sum payment received after
No fresh start.—
For purposes of determining whether any benefit received after
Effective Date of 1982 Amendment
In general.—
The amendments made by this section [amending this section] shall apply to loans, assignments, and pledges made after
Exception for certain loans used to repay outstanding obligations.—
In general.—
Any qualified refunding loan shall not be treated as a distribution by reason of the amendments made by this section to the extent such loan is repaid before
Qualified refunding loan.—
For purposes of subparagraph (A), the term ‘qualified refunding loan’ means any loan made after
Required principal payment.—
For purposes of subparagraph (B), the term ‘required principal payment’ means any principal repayment on a loan made under the plan which was outstanding on
Special rule for non-key employees.—
In the case of a non-key employee (within the meaning of section 416(i)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]), this paragraph shall be applied by substituting ‘
Treatment of certain renegotiations.—
If—
the taxpayer after
under the applicable State law, such loan requires the renegotiation of all outstanding prior loans made to the taxpayer under such plan, and
the renegotiation described in subparagraph (B) does not change the interest rate on, or extend the duration of, any such outstanding prior loan,
then the renegotiation described in subparagraph (B) shall not be treated as a renegotiation, extension, renewal, or revision for purposes of paragraph (1). If the renegotiation described in subparagraph (B) does not meet the requirements of subparagraph (C) solely because it extends the duration of any such outstanding prior loan, the requirements of subparagraph (C) shall be treated as met with respect to such renegotiation if, before
Subsection (a).—
The amendments made by subsection (a) [amending this section] shall take effect on
Subsection (b).—
The amendments made by subsection (b) [amending this section and sections 46, 50A, 53, 901, 1302, and 1304 of this title] shall apply to distributions after
Effective Date of 1981 Amendment
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 219, 401, 404, 408, 1379, and 4972 of this title] shall apply to taxable years beginning after
Transitional rule.—
The amendments made by subsection (d) [amending this section] shall not apply to any loan from a plan to a self-employed individual who is an employee within the meaning of section 401(c)(1) which is outstanding on
Effective Date of 1976 Amendment
Effective Date of 1974 Amendment
The amendments made by subsection (g) [amending this section and sections 46, 50A, 56, 404, and 901 of this title] apply to distributions made in taxable years beginning after
The amendments made by subsection (h) [amending this section and section 401 of this title] apply to taxable years ending after the date of enactment of this Act [
Effective Date of 1969 Amendment
Effective Date of 1966 Amendment
Effective Date of 1965 Amendment
Effective Date of 1964 Amendment
Effective Date of 1962 Amendment
Savings Provision
Special Rules for Use of Retirement Funds
Tax-favored Withdrawals From Retirement Plans.—
In general.—
Section 72(t) of the Internal Revenue Code of 1986 shall not apply to any coronavirus-related distribution.
Aggregate dollar limitation.—
In general.—
For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as coronavirus-related distributions for any taxable year shall not exceed $100,000.
Treatment of plan distributions.—
If a distribution to an individual would (without regard to subparagraph (A)) be a coronavirus-related distribution, a plan shall not be treated as violating any requirement of the Internal Revenue Code of 1986 merely because the plan treats such distribution as a coronavirus-related distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $100,000.
Controlled group.—
For purposes of subparagraph (B), the term ‘controlled group’ means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986.
Amount distributed may be repaid.—
In general.—
Any individual who receives a coronavirus-related distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make 1 or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), of the Internal Revenue Code of 1986, as the case may be.
Treatment of repayments of distributions from eligible retirement plans other than iras.—
For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a coronavirus-related distribution from an eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the coronavirus-related distribution in an eligible rollover distribution (as defined in section 402(c)(4) of such Code) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
Treatment of repayments of distributions from iras.—
For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a coronavirus-related distribution from an individual retirement plan (as defined by section 7701(a)(37) of such Code), then, to the extent of the amount of the contribution, the coronavirus-related distribution shall be treated as a distribution described in section 408(d)(3) of such Code and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
Definitions.—
For purposes of this subsection—
Coronavirus-related distribution.—
Except as provided in paragraph (2), the term ‘coronavirus-related distribution’ means any distribution from an eligible retirement plan made—
on or after
to an individual—
who is diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention,
whose spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) is diagnosed with such virus or disease by such a test, or
who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate).
Employee certification.—
The administrator of an eligible retirement plan may rely on an employee’s certification that the employee satisfies the conditions of subparagraph (A)(ii) in determining whether any distribution is a coronavirus-related distribution.
Eligible retirement plan.—
The term ‘eligible retirement plan’ has the meaning given such term by section 402(c)(8)(B) of the Internal Revenue Code of 1986.
Income inclusion spread over 3-year period.—
In general.—
In the case of any coronavirus-related distribution, unless the taxpayer elects not to have this paragraph apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable-year period beginning with such taxable year.
Special rule.—
For purposes of subparagraph (A), rules similar to the rules of subparagraph (E) of section 408A(d)(3) of the Internal Revenue Code of 1986 shall apply.
Special rules.—
Exemption of distributions from trustee to trustee transfer and withholding rules.—
For purposes of sections 401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 1986, coronavirus-related distributions shall not be treated as eligible rollover distributions.
Coronavirus-related distributions treated as meeting plan distribution requirements.—
For purposes of the Internal Revenue Code of 1986, a coronavirus-related distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A) of such Code and section 8433(h)(1) of title 5, United States Code, and, in the case of a money purchase pension plan, a coronavirus-related distribution which is an in-service withdrawal shall be treated as meeting the distribution rules of section 401(a) of the Internal Revenue Code of 1986.
Loans From Qualified Plans.—
Increase in limit on loans not treated as distributions.—
In the case of any loan from a qualified employer plan (as defined under section 72(p)(4) of the Internal Revenue Code of 1986) to a qualified individual made during the 180-day period beginning on the date of the enactment of this Act [
clause (i) of section 72(p)(2)(A) of such Code shall be applied by substituting ‘$100,000’ for ‘$50,000’, and
clause (ii) of such section shall be applied by substituting ‘the present value of the nonforfeitable accrued benefit of the employee under the plan’ for ‘one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan’.
Delay of repayment.—
In the case of a qualified individual with an outstanding loan (on or after the date of the enactment of this Act) from a qualified employer plan (as defined in section 72(p)(4) of the Internal Revenue Code of 1986)—
if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) of such Code for any repayment with respect to such loan occurs during the period beginning on the date of the enactment of this Act and ending on
any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under subparagraph (A) and any interest accruing during such delay, and
in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of section 72(p)(2) of such Code, the period described in subparagraph (A) of this paragraph shall be disregarded.
Qualified individual.—
For purposes of this subsection, the term ‘qualified individual’ means any individual who is described in subsection (a)(4)(A)(ii).
Provisions Relating to Plan Amendments.—
In general.—
If this subsection applies to any amendment to any plan or annuity contract—
such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in paragraph (2)(B)(i), 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 subsection applies.—
In general.—
This subsection shall apply to any amendment to any plan or annuity contract which is made—
pursuant to any provision of this section, or pursuant to any regulation issued by the Secretary of the Treasury or the Secretary of Labor (or the delegate of either such Secretary) under any provision of this section, 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), clause (ii) shall be applied by substituting the date which is 2 years after the date otherwise applied under clause (ii).
Conditions.—
This subsection shall not apply to any amendment unless—
during the period—
beginning on the date that this section or the regulation described in subparagraph (A)(i) takes effect (or in the case of a plan or contract amendment not required by this section or such regulation, the effective date specified by the plan), and
ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted),
the plan or contract is operated as if such plan or contract amendment were in effect, and
such plan or contract amendment applies retroactively for such period.”
Applicability of Subsection (t)
Plan Amendments Not Required Until January 1, 1998
Plan Amendments Not Required Until January 1, 1994
Plan Amendments Not Required Until January 1, 1989
Definition of Terms Used in Title I of Pub. L. 110–458
Amendment of 1986 code.—
The term ‘1986 Code’ means the Internal Revenue Code of 1986.
Amendment of erisa.—
The term ‘ERISA’ means the Employee Retirement Income Security Act of 1974 [Pub. L. 93–406; see Short Title note under section 1001 of Title 29, Labor].
2006 act.—
The term ‘2006 Act’ means the Pension Protection Act of 2006 [Pub. L. 109–280; see Short Title of 2006 Amendment note under section 1001 of Title 29, Labor].”