Title 26 — Internal Revenue Code

Part I · Chapter 1 — Normal Taxes and Surtaxes

§ 402. Taxability of beneficiary of employees’ trust

Statutory text

Taxability of beneficiary of exempt trust

Except as otherwise provided in this section, any amount actually distributed to any distributee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities).

Taxability of beneficiary of nonexempt trust

Contributions

Contributions to an employees’ trust made by an employer during a taxable year of the employer which ends with or within a taxable year of the trust for which the trust is not exempt from tax under section 501(a) shall be included in the gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employee’s interest in the trust shall be substituted for the fair market value of the property for purposes of applying such section.

Distributions

The amount actually distributed or made available to any distributee by any trust described in paragraph (1) shall be taxable to the distributee, in the taxable year in which so distributed or made available, under section 72 (relating to annuities), except that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(5) (relating to amounts not received as annuities).

Grantor trusts

A beneficiary of any trust described in paragraph (1) shall not be considered the owner of any portion of such trust under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners).

Failure to meet requirements of section 410(b)

Highly compensated employees

If 1 of the reasons a trust is not exempt from tax under section 501(a) is the failure of the plan of which it is a part to meet the requirements of section 401(a)(26) or 410(b), then a highly compensated employee shall, in lieu of the amount determined under paragraph (1) or (2) include in gross income for the taxable year with or within which the taxable year of the trust ends an amount equal to the vested accrued benefit of such employee (other than the employee’s investment in the contract) as of the close of such taxable year of the trust.

Failure to meet coverage tests

If a trust is not exempt from tax under section 501(a) for any taxable year solely because such trust is part of a plan which fails to meet the requirements of section 401(a)(26) or 410(b), paragraphs (1) and (2) shall not apply by reason of such failure to any employee who was not a highly compensated employee during—

such taxable year, or

any preceding period for which service was creditable to such employee under the plan.

Highly compensated employee

For purposes of this paragraph, the term “highly compensated employee” has the meaning given such term by section 414(q).

Rules applicable to rollovers from exempt trusts

Exclusion from income

If—

any portion of the balance to the credit of an employee in a qualified trust is paid to the employee in an eligible rollover distribution,

the distributee transfers any portion of the property received in such distribution to an eligible retirement plan, and

in the case of a distribution of property other than money, the amount so transferred consists of the property distributed,

then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid.

Maximum amount which may be rolled over

In the case of any eligible rollover distribution, the maximum amount transferred to which paragraph (1) applies shall not exceed the portion of such distribution which is includible in gross income (determined without regard to paragraph (1)). The preceding sentence shall not apply to such distribution to the extent—

such portion is transferred in a direct trustee-to-trustee transfer to a qualified trust or to an annuity contract described in section 403(b) and such trust or contract provides for separate accounting for amounts so transferred (and earnings thereon), 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

such portion is transferred to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B).

In the case of a transfer described in subparagraph (A) or (B), the amount transferred shall be treated as consisting first of the portion of such distribution that is includible in gross income (determined without regard to paragraph (1)).

Time limit on transfers

In general

Except as provided in subparagraphs (B) and (C), paragraph (1) shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed.

Hardship exception

The Secretary may waive the 60-day requirement under subparagraph (A) where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement.

Rollover of certain plan loan offset amounts

In general

In the case of a qualified plan loan offset amount, paragraph (1) shall not apply to any transfer of such amount made after the due date (including extensions) for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan.

Qualified plan loan offset amount

For purposes of this subparagraph, the term “qualified plan loan offset amount” means a plan loan offset amount which is treated as distributed from a qualified employer plan to a participant or beneficiary solely by reason of—

the termination of the qualified employer plan, or

the failure to meet the repayment terms of the loan from such plan because of the severance from employment of the participant.

Plan loan offset amount

For purposes of clause (ii), the term “plan loan offset amount” means the amount by which the participant’s accrued benefit under the plan is reduced in order to repay a loan from the plan.

Limitation

This subparagraph shall not apply to any plan loan offset amount unless such plan loan offset amount relates to a loan to which section 72(p)(1) does not apply by reason of section 72(p)(2).

Qualified employer plan

For purposes of this subsection, the term “qualified employer plan” has the meaning given such term by section 72(p)(4).

Eligible rollover distribution

For purposes of this subsection, the term “eligible rollover distribution” means any distribution to an employee of all or any portion of the balance to the credit of the employee in a qualified trust; except that such term shall not include—

any distribution which is one 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 the employee and the employee’s designated beneficiary, or

for a specified period of 10 years or more,

any distribution to the extent such distribution is required under section 401(a)(9), and

any distribution which is made upon hardship of the employee.

If all or any portion of a distribution during 2020 is treated as an eligible rollover distribution but would not be so treated if the minimum distribution requirements under section 401(a)(9) had applied during 2020, such distribution shall not be treated as an eligible rollover distribution for purposes of section 401(a)(31) or 3405(c) or subsection (f) of this section.

Transfer treated as rollover contribution under section 408

For purposes of this title, a transfer to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B) resulting in any portion of a distribution being excluded from gross income under paragraph (1) shall be treated as a rollover contribution described in section 408(d)(3).

Sales of distributed property

For purposes of this subsection—

Transfer of proceeds from sale of distributed property treated as transfer of distributed property

The transfer of an amount equal to any portion of the proceeds from the sale of property received in the distribution shall be treated as the transfer of property received in the distribution.

Proceeds attributable to increase in value

The excess of fair market value of property on sale over its fair market value on distribution shall be treated as property received in the distribution.

Designation where amount of distribution exceeds rollover contribution

In any case where part or all of the distribution consists of property other than money—

the portion of the money or other property which is to be treated as attributable to amounts not included in gross income, and

the portion of the money or other property which is to be treated as included in the rollover contribution,

shall be determined on a ratable basis unless the taxpayer designates otherwise. Any designation under this subparagraph for a taxable year shall be made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). Any such designation, once made, shall be irrevocable.

Nonrecognition of gain or loss

No gain or loss shall be recognized on any sale described in subparagraph (A) to the extent that an amount equal to the proceeds is transferred pursuant to paragraph (1).

Special rule for frozen deposits

In general

The 60-day period described in paragraph (3) shall not—

include any period during which the amount transferred to the employee is a frozen deposit, or

end earlier than 10 days after such amount ceases to be a frozen deposit.

Frozen deposits

For purposes of this subparagraph, the term “frozen deposit” means any deposit which may not be withdrawn because of—

the bankruptcy or insolvency of any financial institution, or

any requirement imposed by the State in which such institution is located by reason of the bankruptcy or insolvency (or threat thereof) of 1 or more financial institutions in such State.

A deposit shall not be treated as a frozen deposit unless on at least 1 day during the 60-day period described in paragraph (3) (without regard to this paragraph) such deposit is described in the preceding sentence.

Definitions

For purposes of this subsection—

Qualified trust

The term “qualified trust” means an employees’ trust described in section 401(a) which is exempt from tax under section 501(a).

Eligible retirement plan

The term “eligible retirement plan” means—

an individual retirement account described in section 408(a),

an individual retirement annuity described in section 408(b) (other than an endowment contract),

a qualified trust,

an annuity plan described in section 403(a),

an eligible deferred compensation plan described in section 457(b) which is maintained by an eligible employer described in section 457(e)(1)(A), and

an annuity contract described in section 403(b).

If any portion of an eligible rollover distribution is attributable to payments or distributions from a designated Roth account (as defined in section 402A), an eligible retirement plan with respect to such portion shall include only another designated Roth account and a Roth IRA.

Rollover where spouse receives distribution after death of employee

If any distribution attributable to an employee is paid to the spouse of the employee after the employee’s death, the preceding provisions of this subsection shall apply to such distribution in the same manner as if the spouse were the employee.

Separate accounting

Unless a plan described in clause (v) of paragraph (8)(B) agrees to separately account for amounts rolled into such plan from eligible retirement plans not described in such clause, the plan described in such clause may not accept transfers or rollovers from such retirement plans.

Distributions to inherited individual retirement plan of nonspouse beneficiary

In general

If, with respect to any portion of a distribution from an eligible retirement plan described in paragraph (8)(B)(iii) of a deceased employee, a direct trustee-to-trustee transfer is made to an individual retirement plan described in clause (i) or (ii) of paragraph (8)(B) established for the purposes of receiving the distribution on behalf of an individual who is a designated beneficiary (as defined by section 401(a)(9)(E)) of the employee and who is not the surviving spouse of the employee—

the transfer shall be treated as an eligible rollover distribution,

the individual retirement plan shall be treated as an inherited individual retirement account or individual retirement annuity (within the meaning of section 408(d)(3)(C)) for purposes of this title, and

section 401(a)(9)(B) (other than clause (iv) thereof) shall apply to such plan.

Certain trusts treated as beneficiaries

For purposes of this paragraph, to the extent provided in rules prescribed by the Secretary, a trust maintained for the benefit of one or more designated beneficiaries shall be treated in the same manner as a designated beneficiary.

In the case of an inadvertent benefit overpayment from a plan to which section 414(aa)(1) applies that is transferred to an eligible retirement plan by or on behalf of a participant or beneficiary—

the portion of such overpayment with respect to which recoupment is not sought on behalf of the plan shall be treated as having been paid in an eligible rollover distribution if the payment would have been an eligible rollover distribution but for being an overpayment, and

the portion of such overpayment with respect to which recoupment is sought on behalf of the plan shall be permitted to be returned to such plan and in such case shall be treated as an eligible rollover distribution transferred to such plan by the participant or beneficiary who received such overpayment (and the plans making and receiving such transfer shall be treated as permitting such transfer).

Recontributions of withdrawals for home purchases

General rule

In general

Any individual who received a qualified distribution may, during the applicable period, make one or more contributions in an aggregate amount not to exceed the amount of such qualified distribution to an eligible retirement plan (as defined in paragraph (8)(B)) of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under subsection (c) or section 403(a)(4), 403(b)(8), or 408(d)(3), as the case may be.

Treatment of repayments

Rules similar to the rules of clauses (ii) and (iii) of section 72(t)(11)(C) shall apply for purposes of this subsection.

Qualified distribution

For purposes of this paragraph, the term “qualified distribution” means any distribution—

described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(i)(V), or 403(b)(11)(B),

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.

Definitions

For purposes of this paragraph—

the terms “qualified disaster”, “qualified disaster area”, and “incident period” have the meaning given such terms under section 72(t)(11), and

the term “applicable period” has the meaning given such term under section 72(t)(8)(F).

Taxability of beneficiary of certain foreign situs trusts

For purposes of subsections (a), (b), and (c), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as if it were a trust exempt from tax under section 501(a).

Other rules applicable to exempt trusts

Alternate payees

Alternate payee treated as distributee

For purposes of subsection (a) and section 72, an alternate payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distribution or payment made to the alternate payee under a qualified domestic relations order (as defined in section 414(p)).

Rollovers

If any amount is paid or distributed to an alternate payee who is the spouse or former spouse of the participant by reason of any qualified domestic relations order (within the meaning of section 414(p)), subsection (c) shall apply to such distribution in the same manner as if such alternate payee were the employee.

Distributions by United States to nonresident aliens

The amount includible under subsection (a) in the gross income of a nonresident alien with respect to a distribution made by the United States in respect of services performed by an employee of the United States shall not exceed an amount which bears the same ratio to the amount includible in gross income without regard to this paragraph as—

the aggregate basic pay paid by the United States to such employee for such services, reduced by the amount of such basic pay which was not includible in gross income by reason of being from sources without the United States, bears to

the aggregate basic pay paid by the United States to such employee for such services.

In the case of distributions under the civil service retirement laws, the term “basic pay” shall have the meaning provided in section 8331(3) of title 5, United States Code.

Cash or deferred arrangements

For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) or which is part of a salary reduction agreement under section 403(b) shall not be treated as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash.

Net unrealized appreciation

Amounts attributable to employee contributions

For purposes of subsection (a) and section 72, in the case of a distribution other than a lump sum distribution, the amount actually distributed to any distributee from a trust described in subsection (a) shall not include any net unrealized appreciation in securities of the employer corporation attributable to amounts contributed by the employee (other than deductible employee contributions within the meaning of section 72(o)(5)). This subparagraph shall not apply to a distribution to which subsection (c) applies.

Amounts attributable to employer contributions

For purposes of subsection (a) and section 72, in the case of any lump sum distribution which includes securities of the employer corporation, there shall be excluded from gross income the net unrealized appreciation attributable to that part of the distribution which consists of securities of the employer corporation. In accordance with rules prescribed by the Secretary, a taxpayer may elect, on the return of tax on which a lump sum distribution is required to be included, not to have this subparagraph apply to such distribution.

Determination of amounts and adjustments

For purposes of subparagraphs (A) and (B), net unrealized appreciation and the resulting adjustments to basis shall be determined in accordance with regulations prescribed by the Secretary.

Lump-sum distribution

For purposes of this paragraph—

In general

The term “lump-sum distribution” means the distribution or payment within one taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient—

on account of the employee’s death,

after the employee attains age 59½,

on account of the employee’s separation from service, or

after the employee has become disabled (within the meaning of section 72(m)(7)),

from a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Subclause (III) of this clause shall be applied only with respect to an individual who is an employee without regard to section 401(c)(1), and subclause (IV) shall be applied only with respect to an employee within the meaning of section 401(c)(1). For purposes of this clause, a distribution to two or more trusts shall be treated as a distribution to one recipient. For purposes of this paragraph, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)).

Aggregation of certain trusts and plans

For purposes of determining the balance to the credit of an employee under clause (i)—

all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and

trusts which are not qualified trusts under section 401(a) and annuity contracts which do not satisfy the requirements of section 404(a)(2) shall not be taken into account.

Community property laws

The provisions of this paragraph shall be applied without regard to community property laws.

Amounts subject to penalty

This paragraph shall not apply to amounts described in subparagraph (A) of section 72(m)(5) to the extent that section 72(m)(5) applies to such amounts.

Balance to credit of employee not to include amounts payable under qualified domestic relations order

For purposes of this paragraph, the balance to the credit of an employee shall not include any amount payable to an alternate payee under a qualified domestic relations order (within the meaning of section 414(p)).

Transfers to cost-of-living arrangement not treated as distribution

For purposes of this paragraph, the balance to the credit of an employee under a defined contribution plan shall not include any amount transferred from such defined contribution plan to a qualified cost-of-living arrangement (within the meaning of section 415(k)(2)) under a defined benefit plan.

Lump-sum distributions of alternate payees

If any distribution or payment of the balance to the credit of an employee would be treated as a lump-sum distribution, then, for purposes of this paragraph, the payment under a qualified domestic relations order (within the meaning of section 414(p)) of the balance to the credit of an alternate payee who is the spouse or former spouse of the employee shall be treated as a lump-sum distribution. For purposes of this clause, the balance to the credit of the alternate payee shall not include any amount payable to the employee.

Definitions relating to securities

For purposes of this paragraph—

Securities

The term “securities” means only shares of stock and bonds or debentures issued by a corporation with interest coupons or in registered form.

Securities of the employer

The term “securities of the employer corporation” includes securities of a parent or subsidiary corporation (as defined in subsections (e) and (f) of section 424) of the employer corporation.

[(5) Repealed. Pub. L. 104–188, title I, § 1401(b)(13), Aug. 20, 1996, 110 Stat. 1789]

Direct trustee-to-trustee transfers

Any amount transferred in a direct trustee-to-trustee transfer in accordance with section 401(a)(31) shall not be includible in gross income for the taxable year of such transfer.

Written explanation to recipients of distributions eligible for rollover treatment

In general

The plan administrator of any plan shall, within a reasonable period of time before making an eligible rollover distribution, provide a written explanation to the recipient—

of the provisions under which the recipient may have the distribution directly transferred to an eligible retirement plan and that the automatic distribution by direct transfer applies to certain distributions in accordance with section 401(a)(31)(B),

of the provision which requires the withholding of tax on the distribution if it is not directly transferred to an eligible retirement plan,

of the provisions under which the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date on which the recipient received the distribution,

if applicable, of the provisions of subsections (d) and (e) of this section, and

of the provisions under which distributions from the eligible retirement plan receiving the distribution may be subject to restrictions and tax consequences which are different from those applicable to distributions from the plan making such distribution.

Definitions

For purposes of this subsection—

Eligible rollover distribution

The term “eligible rollover distribution” has the same meaning as when used in subsection (c) of this section, paragraph (4) of section 403(a), subparagraph (A) of section 403(b)(8), or subparagraph (A) of section 457(e)(16). Such term shall include any distribution to a designated beneficiary which would be treated as an eligible rollover distribution by reason of subsection (c)(11), or section 403(a)(4)(B), 403(b)(8)(B), or 457(e)(16)(B), if the requirements of subsection (c)(11) were satisfied.

Eligible retirement plan

The term “eligible retirement plan” has the meaning given such term by subsection (c)(8)(B).

Limitation on exclusion for elective deferrals

In general

Limitation

Notwithstanding subsections (e)(3) and (h)(1)(B), the elective deferrals of any individual for any taxable year shall be included in such individual’s gross income to the extent the amount of such deferrals for the taxable year exceeds the applicable dollar amount. The preceding sentence shall not apply to the portion of such excess as does not exceed the designated Roth contributions of the individual for the taxable year.

Applicable dollar amount

For purposes of subparagraph (A), the applicable dollar amount is $15,000.

Distribution of excess deferrals

In general

If any amount (hereinafter in this paragraph referred to as “excess deferrals”) is included in the gross income of an individual under paragraph (1) (or would be included but for the last sentence thereof) for any taxable year—

not later than the 1st March 1 following the close of the taxable year, the individual may allocate the amount of such excess deferrals among the plans under which the deferrals were made and may notify each such plan of the portion allocated to it, and

not later than the 1st April 15 following the close of the taxable year, each such plan may distribute to the individual the amount allocated to it under clause (i) (and any income allocable to such amount through the end of such taxable year).

The distribution described in clause (ii) may be made notwithstanding any other provision of law.

Treatment of distribution under section 401(k)

Except to the extent provided under rules prescribed by the Secretary, notwithstanding the distribution of any portion of an excess deferral from a plan under subparagraph (A)(ii), such portion shall, for purposes of applying section 401(k)(3)(A)(ii), be treated as an employer contribution.

Taxation of distribution

In the case of a distribution to which subparagraph (A) applies—

except as provided in clause (ii), such distribution shall not be included in gross income, and

any income on the excess deferral shall, for purposes of this chapter, be treated as earned and received in the taxable year in which such income is distributed.

No tax shall be imposed under section 72(t) on any distribution described in the preceding sentence.

Partial distributions

If a plan distributes only a portion of any excess deferral and income allocable thereto, such portion shall be treated as having been distributed ratably from the excess deferral and the income.

Elective deferrals

For purposes of this subsection, the term “elective deferrals” means, with respect to any taxable year, the sum of—

any employer contribution under a qualified cash or deferred arrangement (as defined in section 401(k)) to the extent not includible in gross income for the taxable year under subsection (e)(3) (determined without regard to this subsection),

any employer contribution to the extent not includible in gross income for the taxable year under subsection (h)(1)(B) (determined without regard to this subsection),

any employer contribution to purchase an annuity contract under section 403(b) under a salary reduction agreement (within the meaning of section 3121(a)(5)(D)), and

any elective employer contribution under section 408(p)(2)(A)(i).

An employer contribution shall not be treated as an elective deferral described in subparagraph (C) if under the salary reduction agreement such contribution is made pursuant to a one-time irrevocable election made by the employee at the time of initial eligibility to participate in the agreement or is made pursuant to a similar arrangement involving a one-time irrevocable election specified in regulations.

Cost-of-living adjustment

In the case of taxable years beginning after December 31, 2006, the Secretary shall adjust the $15,000 amount under paragraph (1)(B) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2005, and any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500.

Disregard of community property laws

This subsection shall be applied without regard to community property laws.

Coordination with section 72

For purposes of applying section 72, any amount includible in gross income for any taxable year under this subsection but which is not distributed from the plan during such taxable year shall not be treated as investment in the contract.

Special rule for certain organizations

In general

In the case of a qualified employee of a qualified organization, with respect to employer contributions described in paragraph (3)(C) made by such organization, the limitation of paragraph (1) for any taxable year shall be increased by whichever of the following is the least:

$3,000,

$15,000 reduced by the sum of—

the amounts not included in gross income for prior taxable years by reason of this paragraph, plus

the aggregate amount of designated Roth contributions (as defined in section 402A(c)) permitted for prior taxable years by reason of this paragraph, or

the excess of $5,000 multiplied by the number of years of service of the employee with the qualified organization over the employer contributions described in paragraph (3) made by the organization on behalf of such employee for prior taxable years (determined in the manner prescribed by the Secretary).

Qualified organization

For purposes of this paragraph, the term “qualified organization” means any educational organization, hospital, home health service agency, health and welfare service agency, church, or convention or association of churches. Such term includes any organization described in section 414(e)(3)(B)(ii). Terms used in this subparagraph shall have the same meaning as when used in section 415(c)(4) (as in effect before the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001).

Qualified employee

For purposes of this paragraph, the term “qualified employee” means any employee who has completed 15 years of service with the qualified organization.

Years of service

For purposes of this paragraph, the term “years of service” has the meaning given such term by section 403(b).

Matching contributions on behalf of self-employed individuals not treated as elective employer contributions

Except as provided in section 401(k)(3)(D)(ii), any matching contribution described in section 401(m)(4)(A) which is made on behalf of a self-employed individual (as defined in section 401(c)) shall not be treated as an elective employer contribution under a qualified cash or deferred arrangement (as defined in section 401(k)) for purposes of this title.

Special rules for simplified employee pensions

For purposes of this chapter—

In general

Except as provided in paragraph (2), contributions made by an employer on behalf of an employee to an individual retirement plan pursuant to a simplified employee pension (as defined in section 408(k))—

shall not be treated as distributed or made available to the employee or as contributions made by the employee,

if such contributions are made pursuant to an arrangement under section 408(k)(6) under which an employee may elect to have the employer make contributions to the simplified employee pension on behalf of the employee, shall not be treated as distributed or made available or as contributions made by the employee merely because the simplified employee pension includes provisions for such election, and

in the case of any contributions pursuant to a simplified employer pension which are made to an individual retirement plan designated as a Roth IRA, such contribution shall not be excludable from gross income.

Limitations on employer contributions

Contributions made by an employer to a simplified employee pension with respect to an employee for any year shall be treated as distributed or made available to such employee and as contributions made by the employee to the extent such contributions exceed the lesser of—

25 percent of the compensation (within the meaning of section 414(s)) from such employer includible in the employee’s gross income for the year (determined without regard to the employer contributions to the simplified employee pension), or

the limitation in effect under section 415(c)(1)(A), reduced in the case of any highly compensated employee (within the meaning of section 414(q)) by the amount taken into account with respect to such employee under section 408(k)(3)(D).

Distributions

Any amount paid or distributed out of an individual retirement plan pursuant to a simplified employee pension shall be included in gross income by the payee or distributee, as the case may be, in accordance with the provisions of section 408(d) (or section 408A(d) in the case of an individual retirement plan designated as a Roth IRA).

Treatment of self-employed individuals

For purposes of this section, except as otherwise provided in subsection (e)(4)(D)(i), the term “employee” includes a self-employed individual (as defined in section 401(c)(1)(B)) and the employer of such individual shall be the person treated as his employer under section 401(c)(4).

Effect of disposition of stock by plan on net unrealized appreciation

In general

For purposes of subsection (e)(4), in the case of any transaction to which this subsection applies, the determination of net unrealized appreciation shall be made without regard to such transaction.

Transaction to which subsection applies

This subsection shall apply to any transaction in which—

the plan trustee exchanges the plan’s securities of the employer corporation for other such securities, or

the plan trustee disposes of securities of the employer corporation and uses the proceeds of such disposition to acquire securities of the employer corporation within 90 days (or such longer period as the Secretary may prescribe), except that this subparagraph shall not apply to any employee with respect to whom a distribution of money was made during the period after such disposition and before such acquisition.

Treatment of simple retirement accounts

Rules similar to the rules of paragraphs (1) and (3) of subsection (h) shall apply to contributions and distributions with respect to a simple retirement account under section 408(p).

Distributions from governmental plans for health and long-term care insurance

In general

In the case of an employee who is an eligible retired public safety officer who makes the election described in paragraph (6) with respect to any taxable year of such employee, gross income of such employee for such taxable year does not include any distribution from an eligible retirement plan maintained by the employer described in paragraph (4)(B) to the extent that the aggregate amount of such distributions does not exceed the amount paid by such employee for qualified health insurance premiums for such taxable year.

Limitation

The amount which may be excluded from gross income for the taxable year by reason of paragraph (1) shall not exceed $3,000.

Distributions must otherwise be includible

In general

An amount shall be treated as a distribution for purposes of paragraph (1) only to the extent that such amount would be includible in gross income without regard to paragraph (1).

Application of section 72

Notwithstanding section 72, in determining the extent to which an amount is treated as a distribution for purposes of subparagraph (A), the aggregate amounts distributed from an eligible retirement plan in a taxable year (up to the amount excluded under paragraph (1)) shall be treated as includible in gross income (without regard to subparagraph (A)) to the extent that such amount does not exceed the aggregate amount which would have been so includible if all amounts to the credit of the eligible public safety officer in all eligible retirement plans maintained by the employer described in paragraph (4)(B) were distributed during such taxable year and all such plans were treated as 1 contract for purposes of determining under section 72 the aggregate amount which would have been so includible. Proper adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years.

Definitions

For purposes of this subsection—

Eligible retirement plan

For purposes of paragraph (1), the term “eligible retirement plan” means a governmental plan (within the meaning of section 414(d)) which is described in clause (iii), (iv), (v), or (vi) of subsection (c)(8)(B).

Eligible retired public safety officer

The term “eligible retired public safety officer” means an individual who, by reason of disability or attainment of normal retirement age, is separated from service as a public safety officer with the employer who maintains the eligible retirement plan from which distributions subject to paragraph (1) are made.

Public safety officer

The term “public safety officer” shall have the same meaning given such term by section 1204(9)(A) of the Omnibus Crime Control and Safe Streets Act of 1968 (42 U.S.C. 3796b(9)(A)),1 as in effect immediately before the enactment of the National Defense Authorization Act for Fiscal Year 2013.

Qualified health insurance premiums

The term “qualified health insurance premiums” means premiums for coverage for the eligible retired public safety officer, his spouse, and dependents (as defined in section 152), by an accident or health plan or qualified long-term care insurance contract (as defined in section 7702B(b)).

Special rules

For purposes of this subsection—

Direct payment to insurer permitted

In general

Paragraph (1) shall apply to a distribution without regard to whether payment of the premiums is made directly to the provider of the accident or health plan or qualified long-term care insurance contract by deduction from a distribution from the eligible retirement plan, or is made to the employee.

Reporting

In the case of a payment made to the employee as described in clause (i), the employee shall include with the return of tax for the taxable year in which the distribution is made an attestation that the distribution does not exceed the amount paid by the employee for qualified health insurance premiums for such taxable year.

Related plans treated as 1

All eligible retirement plans of an employer shall be treated as a single plan.

Election described

In general

For purposes of paragraph (1), an election is described in this paragraph if the election is made by an employee after separation from service with respect to amounts not distributed from an eligible retirement plan to have amounts from such plan distributed in order to pay for qualified health insurance premiums.

Special rule

A plan shall not be treated as violating the requirements of section 401, or as engaging in a prohibited transaction for purposes of section 503(b), merely because it provides for an election with respect to amounts that are otherwise distributable under the plan or merely because of a distribution made pursuant to an election described in subparagraph (A).

Coordination with medical expense deduction

The amounts excluded from gross income under paragraph (1) shall not be taken into account under section 213.

Coordination with deduction for health insurance costs of self-employed individuals

The amounts excluded from gross income under paragraph (1) shall not be taken into account under section 162(l).

Footnotes

1 See References in Text note below.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1954
Aug. 16, 1954, ch. 736, 68A Stat. 135 · 68A Stat. 135
Enacted · 26 U.S.C. § 402
Aug. 16, 1954, ch. 736, 68A Stat. 135
Source evidence
Code source credit
Aug. 16, 1954, ch. 736, 68A Stat. 135
1960
Pub. L. 86–437 § 2(a) · 74 Stat. 79
Substituted · 26 U.S.C. § 402(a)(1)
Pub. L. 86–437, § 2(a), substituted “paragraphs (2) and (4)” for “paragraph (2)”
Source evidence
Code amendment note
Subsec. (a)(1). Pub. L. 86–437, § 2(a), substituted “paragraphs (2) and (4)” for “paragraph (2)”.
Enacted provision · exact public law section
(a) The first sentence of section 402(a)(1) of the Internal Exempt trusts, taxability. Revenue Code of 1954 (relating to general rule for taxability of beneficiary of exempt trust) is amended by striking out “paragraph (2),” and inserting in lieu thereof “paragraphs (2) and (4),”.
1960
Pub. L. 86–437 § 1 · 74 Stat. 79
Added · 26 U.S.C. § 402(a)(4)
Pub. L. 86–437, § 1, added par. (4)
Source evidence
Code amendment note
Subsec. (a)(4). Pub. L. 86–437, § 1, added par. (4).
1962
Self-Employed Individuals Tax Retirement Act of 1962
Pub. L. 87–792 § 4(c) · 76 Stat. 809
Inserted · 26 U.S.C. § 402(a)(2)
Pub. L. 87–792 inserted sentence providing that this paragraph shall not apply to distributions paid to any distributee to the extent such distributions are attributable to contributions made on behalf of the employee while he was an employee within the meaning of section 401(c)(1)
Source evidence
Code amendment note
Subsec. (a)(2). Pub. L. 87–792 inserted sentence providing that this paragraph shall not apply to distributions paid to any distributee to the extent such distributions are attributable to contributions made on behalf of the employee while he was an employee within the meaning of section 401(c)(1).
Enacted provision · exact public law section
(c) Capital Gains Treatment of Certain Employees’ Trust Distributions.— Section 402(a)(2) of the Internal Revenue Code of 1954 (relating to capital gains treatment for certain distributions) is amended by adding at the end thereof the following new sentence: “This paragraph shall not apply to distributions paid to any distributee to the extent such distributions are attributable to contributions made on behalf of the employee while he was an employee within the meaning of section 401(c)(1).” Ante, p. 811.
1964
Revenue Act of 1964
Pub. L. 88–272 § 232(e)(1) · 78 Stat. 19
Struck · 26 U.S.C. § 402(a)(1)
Pub. L. 88–272, § 232(e)(1), struck out “except that section 72(e)(3) shall not apply” after “(relating to annuities)”
Source evidence
Code amendment note
Subsec. (a)(1). Pub. L. 88–272, § 232(e)(1), struck out “except that section 72(e)(3) shall not apply” after “(relating to annuities)”.
Enacted provision · exact public law section
(1) The first sentence of section 402(a) (1) (relating to general 26 USC 402. rule for taxability of beneficiary of exempt trust).
1964
Revenue Act of 1964
Pub. L. 88–272 § 221(c)(1) · 78 Stat. 19
Substituted · 26 U.S.C. § 402(a)(3)(B)
Pub. L. 88–272, § 221(c)(1), substituted “subsections (e) and (f) of section 425” for “section 421(d)(2) and (3)”
Source evidence
Code amendment note
Subsec. (a)(3)(B). Pub. L. 88–272, § 221(c)(1), substituted “subsections (e) and (f) of section 425” for “section 421(d)(2) and (3)”.
Enacted provision · exact public law section
(1) Section 402(a)(3)(B) (relating to taxability of beneficiary 68A Stat. 135. 26 USC 402. of employees’ trust) is amended by striking out “section 421(d) (2) and (3)” and inserting in lieu thereof “subsections (e) and (f) of section 425”. Ante, p. 71.
1964
Revenue Act of 1964
Pub. L. 88–272 § 232(e)(2) · 78 Stat. 19
Struck · 26 U.S.C. § 402(b); 26 U.S.C. § 402(d)
Pub. L. 88–272, § 232(e)(2), (3), struck out “except that section 72(e)(3) shall not apply” after “(relating to annuities)”
Source evidence
Code amendment note
Subsecs. (b), (d). Pub. L. 88–272, § 232(e)(2), (3), struck out “except that section 72(e)(3) shall not apply” after “(relating to annuities)”.
Enacted provision · exact public law section
(2) The second sentence of section 402(b) (relating to taxability of beneficiary of non-exempt trust).
1969
Tax Reform Act of 1969
Pub. L. 91–172 § 515(a)(1) · 83 Stat. 487
Added · 26 U.S.C. § 402(a)(5)
Pub. L. 91–172, § 515(a)(1), added par. (5)
Source evidence
Code amendment note
Subsec. (a)(5). Pub. L. 91–172, § 515(a)(1), added par. (5).
Enacted provision · exact public law section
(1) Employees’ trust.— Section 402(a) (relating to taxability 68A Stat. 135; 74 Stat. 79. of beneficiary of exempt trust) is amended by adding at the end thereof the following new paragraph: “(5) Limitation on capital gains treatment.— The first sentence of paragraph (2) shall apply to a distribution paid after December 31, 1969, only to the extent that it does not exceed the sum of— “(A) the benefits accrued by the employee on behalf of whom it is paid during plan years beginning before January 1, 1970, and “(B) the portion of the benefits accrued by such employee during plan years beginning after December 31, 1969, which the distributee establishes does not consist of the employee’s allocable share of employer contributions to the trust by which such distribution is paid. The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this paragraph.”
1969
Tax Reform Act of 1969
Pub. L. 91–172 § 321(b)(1) · 83 Stat. 487
Substituted · 26 U.S.C. § 402(b)
Pub. L. 91–172, § 321(b)(1), substituted provision for inclusion of contributions made by an employer to a nonexempt trust in the “gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employee’s interest in the trust shall be substituted for the fair market value of the property for purposes of applying such section” for prior provision for inclusion in the “gross income of an employee for the taxable year in which the contribution is made to the trust in the case of an employee whose beneficial interest in such contribution is nonforfeitable at the time the contribution is made”, and provided that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(1) (relating to amount not received as annuities) and that a beneficiary of any such trust shall not be considered the owner of any portion of such trust under subpart E of part I of subch. J (relating to grantors and others treated as substantial owners)
Source evidence
Code amendment note
Subsec. (b). Pub. L. 91–172, § 321(b)(1), substituted provision for inclusion of contributions made by an employer to a nonexempt trust in the “gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employee’s interest in the trust shall be substituted for the fair market value of the property for purposes of applying such section” for prior provision for inclusion in the “gross income of an employee for the taxable year in which the contribution is made to the trust in the case of an employee whose beneficial interest in such contribution is nonforfeitable at the time the contribution is made”, and provided that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(1) (relating to amount not received as annuities) and that a beneficiary of any such trust shall not be considered the owner of any portion of such trust under subpart E of part I of subch. J (relating to grantors and others treated as substantial owners).
Enacted provision · exact public law section
(1) Beneficiary of nonexempt trust.— Section 402(b) (relating taxability of beneficiary of nonexempt trust) is amended to read as follows: “(b) Taxability of Beneficiary of Nonexempt Trust.— Contributions to an employees’ trust made by an employer during a taxable year of the employer which ends within or with a taxable year of the trust for which the trust is not exempt from tax under section 501(a) 68A Stat. 163. 26 USC 501. shall be included in the gross income of the employee in accordance with section 83 (relating to property transferred in connection with Ante, p. 588. performance of services), except that the value of the employee’s interest in the trust shall be substituted for the fair market value of the property for purposes of applying such section. The amount actually distributed or made available to any distributee by any such trust shall be taxable to him in the year in which so distributed or made available, under section 72 (relating to annuities), except that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(1) (relating to amount not received as annuities). A beneficiary of any such trust shall not be considered the owner of any portion of such trust under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners).”
1976
Pub. L. 94–267 § 1(a)(2) · 90 Stat. 365
Substituted · 26 U.S.C. § 402(a)(5)
Pub. L. 94–267, § 1(a)(2), substituted “a payment” for “the lump-sum distribution”
Source evidence
Code amendment note
Subsec. (a)(5). Pub. L. 94–267, § 1(a)(2), substituted “a payment” for “the lump-sum distribution”.
Enacted provision · exact public law section
(1) by striking out paragraph (5)(A) and inserting in lieu thereof the following: “(A) the balance to the credit of an employee is paid to him— “(i) within one taxable year of the employee 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, or “(ii) in one or more distributions which constitute a lump-sum distribution within the meaning of subsection (e)(4)(A) (determined without reference to subsection (e)(4)(B)),”.
1976
Pub. L. 94–267 § 1(a)(1) · 90 Stat. 365
1. Added · 26 U.S.C. § 402(a)(5)(A)
  Pub. L. 94–267, § 1(a)(1), restructured provision by adding cl. (i)
2. Amended · 26 U.S.C. § 402(a)(5)(A)
  Pub. L. 94–267, § 1(a)(1), restructured provision by designating existing provision as cl. (ii)
Source evidence
Code amendment note
Subsec. (a)(5)(A). Pub. L. 94–267, § 1(a)(1), restructured provision by adding cl. (i) and designating existing provision as cl. (ii).
Enacted provision · exact public law section
(1) by striking out paragraph (5)(A) and inserting in lieu thereof the following: “(A) the balance to the credit of an employee is paid to him— “(i) within one taxable year of the employee 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, or “(ii) in one or more distributions which constitute a lump-sum distribution within the meaning of subsection (e)(4)(A) (determined without reference to subsection (e)(4)(B)),”.
1976
Pub. L. 94–267 § 1(a)(3) · 90 Stat. 365
Added · 26 U.S.C. § 402(a)(6)
Pub. L. 94–267, § 1(a)(3), added par. (6)
Source evidence
Code amendment note
Subsec. (a)(6). Pub. L. 94–267, § 1(a)(3), added par. (6).
Enacted provision · exact public law section
(1) by striking out paragraph (5)(A) and inserting in lieu thereof the following: “(A) the balance to the credit of an employee is paid to him— “(i) within one taxable year of the employee 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, or “(ii) in one or more distributions which constitute a lump-sum distribution within the meaning of subsection (e)(4)(A) (determined without reference to subsection (e)(4)(B)),”.
1974
Employee Retirement Income Security Act of 1974
Pub. L. 93–406 § 2005(b)(1) · 88 Stat. 829
Substituted · 26 U.S.C. § 402(a)(2)
Pub. L. 93–406, § 2005(b)(1), substituted provisions covering capital gains treatment of portions of lump sum distributions determined through the application of a fraction formula susceptible of producing a phaseout of capital gains treatment for provisions covering capital gains treatment of portions of lump sum distributions determined on a fixed formula
Source evidence
Code amendment note
Subsec. (a)(2). Pub. L. 93–406, § 2005(b)(1), substituted provisions covering capital gains treatment of portions of lump sum distributions determined through the application of a fraction formula susceptible of producing a phaseout of capital gains treatment for provisions covering capital gains treatment of portions of lump sum distributions determined on a fixed formula.
Enacted provision · exact public law section
(1) In general.— Section 402(a)(2) (relating to capital gains 26 USC 402. treatment for certain distributions) is amended to read as follows: “(2) Capital gains treatment for portion of lump sum distributions.— In the case of an employee trust described in section 401(a), which is exempt from tax under section 501(a), 26 USC 401, 501. Ante, p. 987. so much of the total taxable amount (as defined in subparagraph (D) of subsection (e)(4)) of a lump sum distribution as is equal to the product of such total taxable amount multiplied by a fraction— “(A) the numerator of which is the number of calendar years of active participation by the employee in such plan before January 1, 1974, and “(B) the denominator of which is the number of calendar years of active participation by the employee in such plan, shall be treated as a gain from the sale or exchange of a capital asset held for more than 6 months. For purposes of computing the Regulations. fraction described in this paragraph and the fraction under subsection (e)(4)(E), the Secretary or his delegate may prescribe Ante, p. 987. regulations under which plan years may be used in lieu of calendar years. For purposes of this paragraph, in the case of an individual who is an employee without regard to section 401(c)(1), 26 USC 401. determination of whether or not any distribution is a lump sum distribution shall be made without regard to the requirement that an election be made under subsection (e)(4)(B), but no distribution to any taxpayer other than an individual, estate, or trust may be treated as a lump sum distribution under this paragraph.”
1974
Employee Retirement Income Security Act of 1974
Pub. L. 93–406 § 2005(c)(1) · 88 Stat. 829
Struck · 26 U.S.C. § 402(a)(3)(C)
Pub. L. 93–406, § 2005(c)(1), struck out subsec. (a)(3)(C) which defined “total distribution payable”
Source evidence
Code amendment note
Subsec. (a)(3)(C). Pub. L. 93–406, § 2005(c)(1), struck out subsec. (a)(3)(C) which defined “total distribution payable”.
Enacted provision · exact public law section
(1) Subparagraph (C) of section 402(a)(3) is repealed. Repeals. 26 USC 402.
1974
Employee Retirement Income Security Act of 1974
Pub. L. 93–406 title II · 88 Stat. 829
Substituted · 26 U.S.C. § 402(a)(5)
Pub. L. 93–406, §§ 2002(g)(5), 2005(c)(2), substituted provisions covering rollover amounts for provisions covering limitation on capital gains treatment
Source evidence
Code amendment note
Subsec. (a)(5). Pub. L. 93–406, §§ 2002(g)(5), 2005(c)(2), substituted provisions covering rollover amounts for provisions covering limitation on capital gains treatment.
Enacted provision · exact public law
TITLE II— AMENDMENTS TO THE INTERNAL REVENUE CODE RELATING TO RETIREMENT PLANS SEC. 1001. AMENDMENT OF INTERNAL REVENUE CODE OF 1954. Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1954. 26 USC 1 et seq. Subtitle A— Participation, Vesting, Funding, Administration, Etc. PART 1— PARTICIPATION, VESTING, AND FUNDING SEC. 1011. MINIMUM PARTICIPATION STANDARDS. Part I of subchapter D of chapter 1 (relating to pension, profit-sharing, stock bonus, plans, etc.) is amended by addmg at the end thereof the following: “Subpart B— Special Rules “Sec. 410. Minimum participation standards. “Sec. 411. Minimum vesting standards. “Sec. 412. Minimum funding standards. “Sec. 413. Collectively bargained plans. “Sec. 414. Definitions and special rules. “Sec. 415. Limitations on benefits and contributions under qualified plans. “SEC. 410. MINIMUM PARTICIPATION STANDARDS. “(a) Participation.— “(1) Minimum age and service conditions.— “(A) General rule.— A trust shall not constitute a qualified trust under section 401(a) if the plan of which it is a part requires, as a condition of participation in the plan, that an employee complete a period of service with the employer or employers maintaining the plan extending beyond the later of the following dates— “(i) the date on which the employee attains the age of 25; or “(ii) the date on which he completes 1 year of service. “(B) Special rules for certain plans.— “(i) In the case of any plan which provides that after not more than 3 years of service each participant has a right to 100 percent of his accrued benefit under the plan which is nonforfeitable (within the meaning of section 411) at the time such benefit accrues, clause (ii) of subparagraph Post, p. 901. (A) shall be applied by substituting ‘3 years of service’ for ‘1 year of service’. “(ii) In the case of any plan maintained exclusively for employees of an educational institution (as defined 26 USC 170. 26 USC 501. in section 170(b)(1)(A)(ii)) by an employer which is exempt from tax under section 501(a) which provides that each participant having at least 1 year of service has a right to 100 percent of his accrued benefit under the plan which is nonforfeitable (within the meaning of section 411) at the time such benefit accrues, clause (i) of Post, p. 901. subparagraph (A) shall be applied by substituting ‘30’ for ‘25’. This clause shall not apply to any plan to which clause (i) applies. “(2) Maximum age conditions.— A trust shall not constitute a qualified trust under section 401(a) if the plan of which it is a 26 USC 401. part excludes from participation (on the basis of age) employees who have attained a specified age, unless— “(A) the plan is a— “(i) defined benefit plan, or “(ii) target benefit plan (as defined under regulations prescribed by the Secretary or his delegate), and “(B) such employees begin employment with the employer after they have attained a specified age which is not more than 5 years before the normal retirement age under the plan. “(3) Definition of year of service.— “(A) General rule.— For purposes of this subsection, the term ‘year of service’ means a 12-month period during which the employee has not less than 1,000 hours of service. For purposes of this paragraph, computation of any 12-month period shall be made with reference to the date on which the employee’s employment commenced, except that, under regulations prescribed by the Secretary of Labor, such computation may be made by reference to the first day of a plan year in the case of an employee who does not complete 1,000 hours of service during the 12-month period beginning on the date his employment commenced. “(B) Seasonal industries.— In the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term ‘year of service’ shall be such period as may be determined under regulations prescribed by the Secretary of Labor. “(C) Hours of service.— For purposes of this subsection, the term ‘hour of service’ means a time of service determined under regulations prescribed by the Secretary of Labor. “(D) Maritime industries.— For purposes of this subsection, in the case of any maritime industry, 125 days of service shall be treated as 1,000 hours of service. The Secretary of Labor may prescribe regulations to carry out this subparagraph. “(4) Time of participation.— A plan shall be treated as not meeting the requirements of paragraph (1) unless it provides that any employee who has satisfied the minimum age and service requirements specified in such paragraph, and who is otherwise entitled to participate in the plan, commences participation in the plan no later than the earlier of— “(A) the first day of the first plan year beginning after the date on which such employee satisfied such requirements, or “(B) the date 6 months after the date on which he satisfied such requirements, unless such employee was separated from the service before the date referred to in subparagraph (A) or (B), whichever is applicable. “(5) Breaks in service.— “(A) General rule.— Except as otherwise provided in subparagraphs (B), (C), and (D), all years of service with the employer or employers maintaining the plan shall be taken into account in computing the period of service for purposes of paragraph (1). “(B) Employees under 3-year 100 percent vesting.— In the case of any employee who has any 1-year break in service (as defined in section 411(a)(6)(A)) under a plan to Post, p. 901. which the service requirements of clause (i) of paragraph (1)(B) apply, if such employee has not satisfied such requirements, service before such break shall not be required to be taken into account. “(C) 1-year break in service.— In computing an employee’s period of service for purposes of subsection (a)(1) in the case of any participant who has any 1-year break in service (as defined in section 411(a)(6)(A)), service before such break shall not be required to be taken into account under the plan until he has completed a year of service (as defined in paragraph (3)) after his return. “(D) Nonvested participants.— In the case of a participant who does not have any nonforfeitable right to an accrued benefit derived from employer contributions, years of service with the employer or employers maintaining the plan before a break in service shall not be required to be taken into account in computing the period of service for purposes of subsection (a)(1) if the number of consecutive 1-year breaks in service equals or exceeds the aggregate number of such years of service before such break. Such aggregate number of years of service before such break shall be deemed not to include any years of service not required to be taken into account under this subparagraph by reason of any prior break in service. “(b) Eligibility.— “(1) In general.— A trust shall not constitute a qualified trust under section 401(a) unless the trust, or two or more trusts, or 26 USC 401. the trust or trusts and annuity plan or plans are designated by the employer as constituting parts of a plan intended to qualify under section 401(a) which benefits either— “(A) 70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all the employees are eligible to benefit under the plan, excluding in each case employees who have not satisfied the minimum age and service requirements, if any, prescribed by the plan as a condition of participation, or “(B) such employees as qualify under a classification set up by the employer and found by the Secretary or his delegate not to be discriminatory in favor of employees who are officers, shareholders, or highly compensated. “(2) Exclusion of certain employees.— For purposes of paragraph (1), there shall be excluded from consideration— “(A) employees not included in the plan who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers, “(B) in the case of a trust established or maintained pursuant to an agreement which the Secretary of Labor finds to be a collective bargaining agreement between air pilots represented in accordance with title II of the Railway Labor Act and one or more employers, all employees not covered 45 USC 181. by such agreement, and “(C) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(b)) 26 USC 911. from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)). Subparagraph (B) shall not apply in the case of a plan which provides contributions or benefits for employees whose principal duties are not customarily performed aboard aircraft in flight. “(c) Application of Participation Standards to Certain Plans.— “(1) The provisions of this section (other than paragraph (2) of this subsection) shall not apply to— “(A) a governmental plan (within the meaning of section 414(d)), Post, p. 925. “(B) a church plan (within the meaning of section 414(e)) with respect to which the election provided by subsection (d) of this section has not been made, “(C) a plan which has not at any time after the date of the enactment of the Employee Retirement Income Security Act of 1974 provided for employer contributions, and “(D) a plan established and maintained by a society, order, or association described in section 501(c)(8) or (9) if no 26 USC 501. part of the contributions to or under such plan are made by employers of participants in such plan. “(2) A plan described in paragraph (1) shall be treated as meeting the requirements of this section, for purposes of section 401(a), if such plan meets the requirements of section 401(a)(3) 26 USC 401. as in effect on the day before the date of the enactment of this section. “(d) Election by Church to Have Paarticipation, Vesting, Funding, Etc., Provisions Apply.— “(1) In general.— If the church or convention or association of churches which maintains any church plan makes an election under this subsection (in such form and manner as the Secretary or his delegate may by regulations prescribe), then the provisions of this title relating to participation, vesting, funding, etc. (as in effect from time to time) shall apply to such church plan as if such provisions did not contain an exclusion for church plans. “(2) Election irrevocable.— An election under this subsection with respect to any church plan shall be binding with respect to such plan, and, once made, shall be irrevocable.” SEC. 1012. MINIMUM VESTING STANDARDS. (a) In General.— Subpart B of part I of subchapter D of chapter 1 is amended by adding after section 410 the following new section: “SEC. 411. MINIMUM VESTING STANDARDS. “(a) General Rule.— A trust shall not constitute a qualified trust under section 401(a) unless the plan of which such trust is a part provides that an employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age (as defined in subsection (a)(8)) and in addition satisfies the requirements of paragraphs (1) and (2) of this subsection and the requirements of paragraph (2) of subsection (b), and in the case of a defined benefit plan, also satisfies the requirements of paragraph (1) of subsection (b). “(1) Employee contributions.— A plan satisfies the requirements of this paragraph if an employee’s rights in his accrued benefit derived from his own contributions are nonforfeitable. “(2) Employer contributions.— A plan satisfies the requirements of this paragraph if it satisfies the requirements of subparagraph (A), (B), or (C). “(A) 10-year vesting.— A plan satisfies the requirements of this subparagraph if an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit derived from employer contributions. “(B) 5- to 15-year vesting.— A plan satisfies the requirements of this subparagraph if an employee who has completed at least 5 years of service has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions which percentage is not less than the percentage determined under the following table: “Years of service: Nonforfeitable percentage 5 25 6 30 7 35 8 40 9 45 10 50 11 60 12 70 13 80 14 90 15 or more 100. “(C) Rule of 45.— “(i) A plan satisfies the requirements of this subparagraph if an employee who is not separated from the service, who has completed at least 5 years of service, and with respect to whom the sum of his age and years of service equals or exceeds 45, has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions determined under the following table: “If years of service equal or exceed— and sum of age and service equals or exceeds— then the nonforfeitable percentage is— 5 45 50 6 47 60 7 49 70 8 51 80 9 53 90 10 55 100. “(ii) Notwithstanding clause (i), a plan shall not be treated as satisfying the requirements of this subparagraph unless any employee who has completed at least 10 years of service has a nonforfeitable right to not less than 50 percent of his accrued benefit derived from employer contributions and to not less than an additional 10 percent for each additional year of service thereafter. “(3) Certain permitted forfeitures, suspensions, etc.— For purposes of this subsection— “(A) Forfeiture on account of death.— A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that it is not payable if the participant dies (except in the case of a survivor annuity which is payable as provided in section 401(a)(11)). Post, p. 935. “(B) Suspension of benefits upon reemployment of retiree.— A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that the payment of benefits is suspended for such period as the employee is employed, subsequent to the commencement of payment of such benefits— “(i) in the case of a plan other than a multiemployer plan, by the employer who maintains the plan under which such benefits were being paid; and “(ii) in the case of a multiemployer plan, in the same industry, the same trade or craft, and the same geographic area covered by the plan as when such benefits commenced. The Secretary of Labor shall prescribe such regulations as Regulations. may be necessary to carry out the purposes of this subparagraph, including regulations with respect to the meaning of the term ‘employed’. “(C) Effect of retroactive plan amendments.— A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because plan amendments may be given retroactive application as provided in section 412(c)(8). Post, p. 914. “(D) Withdrawal of mandatory contribution.— “(i) A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that, in the case of a participant who does not have a nonforfeitable right to at least 50 percent of his accrued benefit derived from employer contributions, such accrued benefit may be forfeited on account of the withdrawal by the participant of any amount attributable to the benefit derived from mandatory contributions (as defined in subsection (c)(2)(C)) made by such participant. “(ii) Clause (i) shall not apply to a plan unless the plan provides that any accrued benefit forfeited under a plan provision described in such clause shall be restored upon repayment by the participant of the full amount of the withdrawal described in such clause plus, in the case of a defined benefit plan, interest. Such interest shall be computed on such amount at the rate determined for purposes of subsection (c)(2)(C) on the date of such repayment (computed annually from the date of such withdrawal). In the case of a defined contribution plan, the plan provision required under this clause may provide that such repayment must be made before the participant has any one-year break in service commencing after the withdrawal. “(iii) In the case of accrued benefits derived from employer contributions which accrued before the date of the enactment of the Employee Retirement Income Security Act of 1974, a right to such accrued benefit Ante, p. 829. derived from employer contributions shall not be treated as forfeitable solely because the plan provides that an amount of such accrued benefit may be forfeited on account of the withdrawal by the participant of an amount attributable to the benefit derived from mandatory contributions (as defined in subsection (c)(2)(C)) made by such participant before the date of the enactment of the Act if such amount forfeited is proportional to such amount withdrawn. This clause shall not apply to any plan to which any mandatory contribution is made after the date of the enactment of such Act. The Secretary or Regulations. his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this clause. “(iv) For purposes of this subparagraph, in the case of any class-year plan, a withdrawal of employee contributions shall be treated as a withdrawal of such contributions on a plan year by plan year basis in succeeding order of time. “(v) For nonforfeitability where the employee has a nonforfeitable right to at least 50 percent of his accrued benefit, see section 401(a)(19). 26 USC 401. “(4) Service included in determination of nonforfeitable percentage.— In computing the period of service under the plan for purposes of determining the nonforfeitable percentage under paragraph (2), all of an employee’s years of service with the employer or employers maintaining the plan shall be taken into account, except that the following may be disregarded: “(A) years of service before age 22, except that in the case of a plan which does not satisfy subparagraph (A) or (B) of paragraph (2), the plan may not disregard any such year of service during which the employee was a participant; “(B) years of service during a period for which the employee declined to contribute to a plan requiring employee contributions; “(C) years of service with an employer during any period for which the employer did not maintain the plan or a predecessor plan (as defined under regulations prescribed by the Secretary or his delegate); “(D) service not required to be taken into account under paragraph (6); “(E) years of service before January 1, 1971, unless the employee has had at least 3 years of service after December 31, 1970; and “(F) years of service before the first plan year to which this section applies, if such service would have been disregarded under the rules of the plan with regard to breaks in service as in effect on the applicable date. “(5) Year of service.— “(A) General rule.— For purposes of this subsection, except as provided in subparagraph (C), the term ‘year of service’ means a calendar year, plan year, or other 12-consecutive month period designated by the plan (and not prohibited under regulations prescribed by the Secretary of Labor) during which the participant has completed 1,000 hours of service. “(B) Hours of service.— For purposes of this subsection, the term ‘hours of service’ has the meaning provided by section 410(a)(3)(C). Ante, p. 898. “(C) Seasonal industries.— In the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term ‘year of service’ shall be such period as may be determined under regulations prescribed by the Secretary of Labor. “(D) Maritime industries.— For purposes of this subsection, in the case of any maritime industry, 125 days of service shall be treated as 1,000 hours of service. The Secretary of Labor may prescribe regulations to carry out the purposes of this subparagraph. “(6) Breaks in service.— “(A) Definition of 1-year break in service.— For purposes of this paragraph, the term ‘1-year break in service’ means a calendar year, plan year, or other 12-consecutive-month period designated by the plan (and not prohibited under regulations prescribed by the Secretary of Labor) during which the participant has not completed more than 500 hours of service. “(B) 1 year of service after 1-year break in service.— For purposes of paragraph (4), in the case of any employee who has any 1-year break in service, years of service before such break shall not be required to be taken into account until he has completed a year of service after his return. “(C) 1-year break in service under defined contribution plan.— For purposes of paragraph (4), in the case of any participant in a defined contribution plan, or an insured defined benefit plan which satisfies the requirements of subsection (b)(1)(F), who has any 1-year break in service, years of service after such break shall not be required to be taken into account for purposes of determining the nonforfeitable percentage of his accrued benefit derived from employer contributions which accrued before such break. “(D) Nonvested participants.— For purposes of paragraph (4), in the case of a participant who, under the plan, does not have any nonforfeitable right to an accrued benefit derived from employer contributions, years of service before any 1-year break in service shall not be required to be taken into account if the number of consecutive 1-year breaks in service equals or exceeds the aggregate number of such years of service prior to such break. Such aggregate number of years of service before such break shall be deemed not to include any years of service not required to be taken into account under this subparagraph by reason of any prior break in service. “(7) Accrued benefit.— “(A) In general.— For purposes of this section, the term ‘accrued benefit’ means— “(i) in the case of a defined benefit plan, the employee’s accrued benefit determined under the plan and, except as provided in subsection (c)(3), expressed in the form of an annual benefit commencing at normal retirement age, or “(ii) in the case of a plan which is not a defined benefit plan, the balance of the employee’s account. “(B) Effect of certain distributions.— Notwithstanding paragraph (4), for purposes of determining the employee’s accrued benefit under the plan, the plan may disregard service performed by the employee with respect to which he has received— “(i) a distribution of the present value of his entire nonforfeitable benefit if such distribution was in an amount (not more than $1,750) permitted under regulations prescribed by the Secretary or his delegate, or “(ii) a distribution of the present value of his nonforfeitable benefit attributable to such service which he elected to receive. Clause (i) of this subparagraph shall apply only if such distribution was made on termination of the employee’s participation in the plan. Clause (ii) of this subparagraph shall apply only if such distribution was made on termination of the employee’s participation in the plan or under such other circumstances as may be provided under regulations prescribed by the Secretary or his delegate. “(C) Repayment of subparagraph (b) distributions.— For purposes of determining the employee’s accrued benefit under a plan, the plan may not disregard service as provided in subparagraph (B) unless the plan provides an opportunity for the participant to repay the full amount of the distribution described in such subparagraph (B) with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C) and provides that upon such repayment the employee’s accrued benefit shall be recomputed by taking into account service so disregarded. This subparagraph shall apply only in the case of a participant who— “(i) received such a distribution in any plan year to which this section applies, which distribution was less than the present value of his accrued benefit, “(ii) resumes employment covered under the plan, and “(iii) repays the full amount of such distribution with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C). In the case of a defined contribution plan, the plan provision required under this subparagraph may provide that such repayment must be made before the participant has any one-year break in service commencing after such withdrawal. “(8) Normal retirement age.— For purposes of this section, the term ‘normal retirement age’ means the earlier of— “(A) the time a plan participant attains normal retirement age under the plan, or “(B) the later of— “(i) the time a plan participant attains age 65, or “(ii) the 10th anniversary of the time a plan participant commenced participation in the plan. “(9) Normal retirement benefit.— For purposes of this section, the term ‘normal retirement benefit’ means the greater of the early retirement benefit under the plan, or the benefit under the plan commencing at normal retirement age. The normal retirement benefit shall be determined without regard to— “(A) medical benefits, and “(B) disability benefits not in excess of the qualified disability benefit. For purposes of this paragraph, a qualified disability benefit is a disability benefit provided by a plan which does not exceed the benefit which would be provided for the participant if he separated from the service at normal retirement age. For purposes of this paragraph, the early retirement benefit under a plan shall be determined without regard to any benefits commencing before benefits payable under title II of the Social Security Act become payable which— 42 USC 401. “(i) do not exceed such social security benefits, and “(ii) terminate when such social security benefits commence. “(10) Changes in vesting schedule.— “(A) General rule.— A plan amendment changing any vesting schedule under the plan shall be treated as not satisfy-ing the requirements of paragraph (2) if the nonforfeitable percentage of the accrued benefit derived from employer contributions (determined as of the later of the date such amendment is adopted, or the date such amendment becomes effective) of any employee who is a participant in the plan is less than such nonforfeitable percentage computed under the plan without regard to such amendment. “(B) Election of former schedule.— A plan amendment changing any vesting schedule under the plan shall be treated as not satisfying the requirements of paragraph (2) unless each participant having not less than 5 years of service is permitted to elect, within a reasonable period after the adoption of such amendment, to have his nonforfeitable percentage computed under the plan without regard to such amendment. “(b) Accrued Benefit Requirements.— “(1) General rules.— “(A) 3-percent method.— A defined benefit plan satisfies the requirements of this paragraph if the accrued benefit to which each participant is entitled upon his separation from the service is not less than— “(i) 3 percent of the normal retirement benefit to which he would be entitled if he commenced participation at the earliest possible entry age under the plan and served continuously until the earlier of age 65 or the normal retirement age specified under the plan, multiplied by “(ii) the number of years (not in excess of 33⅓) of his participation in the plan. In the case of a plan providing retirement benefits based on compensation during any period, the normal retirement benefit to which a participant would be entitled shall be determined as if he continued to earn annually the average rate of compensation which he earned during consecutive years of service, not in excess of 10, for which his compensation was the highest. For purposes of this subparagraph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year. “(B) 133⅓ percent rule.— A defined benefit plan satisfies the requirements of this paragraph for a particular plan year if under the plan the accrued benefit payable at the normal retirement age is equal to the normal retirement benefit and the annual rate at which any individual who is or could be a participant can accrue the retirement benefits payable at normal retirement age under the plan for any later plan year is not more than 133⅓ percent of the annual rate at which he can accrue benefits for any plan year beginning on or after such particular plan year and before such later plan year. For purposes of this subparagraph— “(i) any amendment to the plan which is in effect for the current year shall be treated as in effect for all other plan years; “(ii) any change in an accrual rate which does not apply to any individual who is or could be a participant in the current year shall be disregarded; “(iii) the fact that benefits under the plan may be payable to certain employees before normal retirement age shall be disregarded; and “(iv) social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after the current year. “(C) Fractional rule.— A defined benefit plan satisfies the requirements of this paragraph if the accrued benefit to which any participant is entitled upon his separation from the service is not less than a fraction of the annual benefit commencing at normal retirement age to which he would be entitled under the plan as in effect on the date of his separation if he continued to earn annually until normal retirement age the same rate of compensation upon which his normal retirement benefit would be computed under the plan, determined as if he had attained normal retirement age on the date on which any such determination is made (but taking into account no more than the 10 years of service immediately preceding his separation from service). Such fraction shall be a fraction, not exceeding 1, the numerator of which is the total number of his years of participation in the plan (as of the date of his separation from the service) and the denominator of which is the total number of years he would have participated in the plan if he separated from the service at the normal retirement age. For purposes of this subparagraph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year. “(D) Accrual for service before effective date.— Subparagraphs (A), (B), and (C) shall not apply with respect to years of participation before the first plan year to which this section applies, but a defined benefit plan satisfies the requirements of this subparagraph with respect to such years of participation only if the accrued benefit of any participant with respect to such years of participation is not less than the greater of— “(i) his accrued benefit determined under the plan, as in effect from time to time prior to the date of the enactment of the Employee Retirement Income Security Act of 1974, or “(ii) an accrued benefit which is not less than one-half of the accrued benefit to which such participant would have been entitled if subparagraph (A), (B), or (C) applied with respect to such years of participation. “(E) First two years of service.— Notwithstanding subparagraphs (A), (B), and (C) of this paragraph, a plan shall not be treated as not satisfying the requirements of this paragraph solely because the accrual of benefits under the plan does not become effective until the employee has two continuous years of service. For purposes of this subparagraph, the term ‘years of service’ has the meaning provided by section 410(a)(3)(A). Ante, p. 898. “(F) Certain insured defined benefit plans.— Notwithstanding subparagraphs (A), (B), and (C), a defined benefit plan satisfies the requirements of this paragraph if such plan— “(i) is funded exclusively by the purchase of insurance contracts, and “(ii) satisfishes the requirements of paragraphs (2) and (3) of section 412(i) (relating to certain insurance Post, p. 914. contract plans), but only if an employee’s accrued benefit as of any applicable date is not less than the cash surrender value his insurance contracts would have on such applicable date if the requirements of paragraphs (4), (5), and (6) of section 412(i) were satisfied. “(G) Accrued benefit may not decrease on account of increasing age or service.— Notwithstanding the preceding subparagraphs, a defined benefit plan shall be treated as not satisfying the requirements of this paragraph if the participant’s accrued benefit is reduced on account of any increase in his age or service. The preceding sentence shall not apply to benefits under the plan commencing before entitlement to benefits payable under title II of the Social Security Act 42 USC 401. which benefits under the plan— “(i) do not exceed such social security benefits, and “(ii) terminate when such social security benefits commence. “(2) Separate accounting required in certain cases.— A plan satisfies the requirements of this paragraph if— “(A) in the case of a defined benefit plan, the plan requires separate accounting for the portion of each employee’s accrued benefit derived from any voluntary employee contributions permitted under the plan; and “(B) in the case of any plan which is not a defined benefit plan, the plan requires separate accounting for each employee’s accrued benefit. “(3) Year of participation.— “(A) Definition.— For purposes of determining an employee’s accrued benefit, the term ‘year of participation’ means a period of service (beginning at the earliest date on which the employee is a participant in the plan and which is included in a period of service required to be taken into account under section 410(a)(5)) as determined under regulations Ante, p. 898. prescribed by the Secretary of Labor which provide for the calculation of such period on any reasonable and consistent basis. “(B) Less than full time service.— For purposes of this paragraph, except as provided in subparagraph (C), in the case of any employee whose customary employment is less than full time, the calculation of such employee’s service on any basis which provides less than a ratable portion of the accrued benefit to which he would be entitled under the plan if his customary employment were full time shall not be treated as made on a reasonable and consistent basis. “(C) Less than 1,000 hours of service during year.— For purposes of this paragraph, in the case of any employee whose service is less than 1,000 hours during any calendar year, plan year or other 12-consecutive month period designated by the plan (and not prohibited under regulations prescribed by the Secretary of Labor) the calculation of his period of service shall not be treated as not made on a reasonable and consistent basis solely because such service is not taken into account. “(D) Seasonal industries.— In the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term ‘year of participation’ shall be such period as determined under regulations prescribed by the Secretary of Labor. “(E) Maritime industries.— For purposes of this subsection, in the case of any maritime industry, 125 days of service shall be treated as a year of participation. The Secretary Regulations. of Labor may prescribe regulations to carry out the purposes of this subparagraph. “(c) Allocation of Accrued Benefits Between Employer and Employee Contributions.— “(1) Accrued benefit derived from employer contributions.— For purposes of this section, an employee’s accrued benefit derived from employer contributions as of any applicable date is the excess, if any, of the accrued benefit for such employee as of such applicable date over the accrued benefit derived from contributions made by such employee as of such date. “(2) Accrued benefit derived from employee contributions.— “(A) Plans other than defined benefit plans.— In the case of a plan other than a defined benefit plan, the accrued benefit derived from contributions made by an employee as of any applicable date is— “(i) except as provided in clause (ii), the balance of the employee’s separate account consisting only of his contributions and the income, expenses, gains, and losses attributable thereto, or “(ii) if a separate account is not maintained with respect to an employee’s contributions under such a plan, the amount which bears the same ratio to his total accrued benefit as the total amount of the employee’s contributions (less withdrawals) bears to the sum of such contributions and the contributions made on his behalf by the employer (less withdrawals). “(B) Defined benefit plans.— “(i) In general.— In the case of a defined benefit plan providing an annual benefit in the form of a single life annuity (without ancillary benefits) commencing at normal retirement age, the accrued benefit derived from contributions made by an employee as of any applicable date is the annual benefit equal to the employee’s accumulated contributions multiplied by the appropriate conversion factor. “(ii) Appropriate conversion factor.— For purposes of clause (i), the term ‘appropriate conversion factor’ means the factor necessary to convert an amount equal to the accumulated contributions to a single life annuity (without ancillary benefits) commencing at normal retirement age and shall be 10 percent for a normal retirement age of 65 years. For other normal retirement ages the conversion factor shall be determined in accordance with regulations prescribed by the Secretary or his delegate. “(C) Definition of accumulated contributions.— For purposes of this subsection, the term ‘accumulated contributions’ means the total of— “(i) all mandatory contributions made by the employee, “(ii) interest (if any) under the plan to the end of the last plan year to which subsection (a)(2) does not apply (by reason of the applicable effective date), and “(iii) interest on the sum of the amounts determined under clauses (i) and (ii) compounded annually at the rate of 5 percent per annum from the beginning of the first plan year to which subsection (a)(2) applies (by reason of the applicable effective date) to the date upon which the employee would attain normal retirement age. For purposes of this subparagraph, the term ‘mandatory contributions’ “Mandatory contributions.” means amounts contributed to the plan by the employee which are required as a condition of employment, as a condition of participation in such plan, or as a condition of obtaining benefits under the plan attributable to employer contributions. “(D) Adjustments.— The Secretary or his delegate is authorized to adjust by regulation the conversion factor described in subparagraph (B), the rate of interest described in clause (iii) of subparagraph (C), or both, from time to time as he may deem necessary. The rate of interest shall bear the relationship to 5 percent which the Secretary or his delegate determines to be comparable to the relationship which the long-term money rates and investment yields for the last period of 10 calendar years ending at least 12 months before the beginning of the plan year bear to the long-term money rates and investment yields for the 10-calendar year period 1964 through 1973. No such adjustment shall be effective for a plan year beginning before the expiration of 1 year after such adjustment is determined and published. “(E) Limitation.— The accrued benefit derived from employee contributions shall not exceed the greater of— “(i) the employee’s accrued benefit under the plan, or “(ii) the accrued benefit derived from employee contributions determined as though the amounts calculated under clauses (ii) and (iii) of subparagraph (C) were zero. “(3) Actuarial adjustment.— For purposes of this section, in the case of any defined benefit plan, if an employee’s accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age, or if the accrued benefit derived from contributions made by an employee is to be determined with respect to a benefit other than an annual benefit in the form of a single life annuity (without ancillary benefits) commencing at normal retirement age, the employee’s accrued benefit, or the accrued benefits derived from contributions made by an employee, as the case may be, shall be the actuarial equivalent of such benefit or amount determined under paragraph (1) or (2). “(d) Special Rules.— “(1) Coordination with section 401(a)(4).— A plan which satisfies the requirements of this section shall be treated as satisfying any vesting requirements resulting from the application of section 401(a)(4) unless— Post, p. 938. “(A) there has been a pattern of abuse under the plan (such as a dismissal of employees before their accrued benefits become nonforfeitable) tending to discriminate in favor of employees who are officers, shareholders, or highly compensated, or “(B) there have been, or there is reason to believe there will be, an accrual of benefits or forfeitures tending to discriminate in favor of employees who are officers, shareholders, or highly compensated. “(2) Prohibited discrimination.— Subsection (a) shall not apply to benefits which may not be provided for designated employees in the event of early termination of the plan under provisions of the plan adopted pursuant to regulations prescribed by the Secretary or his delegate to preclude the discrimination prohibited by section 401(a)(4). Post, p. 938. “(3) Termination or partial termination; discontinuance of contributions.— Notwithstanding the provisions of subsection (a), a trust shall not constitute a qualified trust under section 401(a) unless the plan of which such trust is a part provides that— “(A) upon its termination or partial termination, or “(B) in the case of a plan to which section 412 does not Post, p. 914. apply, upon complete discontinuance of contributions under the plan, the rights of all affected employees to benefits accrued to the date of such termination, partial termination, or discontinuance, to the extent funded as of such date, or the amounts credited to the employees’ accounts, are nonforfeitable. This paragraph shall not apply to benefits or contributions which, under provisions of the plan adopted pursuant to regulations prescribed by the Secretary or his delegate to preclude the discrimination prohibited by section 401(a)(4), may not be used for designated employees in the event of early termination of the plan. “(4) Class year plans.— The requirements of subsection (a)(2) shall be deemed to be satisfied in the case of a class year plan if such plan provides that 100 percent of each employee’s right to or derived from the contributions of the employer on his behalf with respect to any plan year are nonforfeitable not later than the end of the 5th plan year following the plan year for which such contributions were made. For purposes of this section, the term ‘class year plan’ means a profit-sharing, stock bonus, or money purchase plan which provides for the separate nonforfeitability of employees’ rights to or derived from the contributions for each plan year. “(5) Treatment of voluntary employee contributions.— In the case of a defined benefit plan which permits voluntary employee contributions, the portion of an employee’s accrued benefit derived from such contributions shall be treated as an accrued benefit derived from employee contributions under a plan other than a defined benefit plan. “(6) Accrued benefit not to be decreased by amendment.— A plan shall be treated as not satisfying the requirements of this section if the accrued benefit of a participant is decreased by an amendment of the plan, other than an amendment described in section 412(c)(8). “(e) Application of Vesting Standards to Certain Plans.— “(1) The provisions of this section (other than paragraph (2)) shall not apply to— “(A) a governmental plan (within the meaning of section 414(d)), Post, p. 925. “(B) a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) Ante, p. 898. has not been made, “(C) a plan which has not, at any time after the date of the enactment of the Employee Retirement Income Security Act of 1974, provided for employer contributions, and “(D) a plan established and maintained by a society, order, or association described in section 501(c) (8) or (9), if no 26 USC 501. part of the contributions to or under such plan are made by employers of participants in such plan. “(2) A plan described in paragraph (1) shall be treated as meeting the requirements of this section, for purposes of section 401(a), if such plan meets the vesting requirements resulting from the application of sections 401(a)(4) and 401(a)(7) as in Post, p. 938. 26 USC 401. effect on the day before the date of the enactment of the Employee Retirement Income Security Act of 1974.” (b) Comparability of Plans.— Section 401(a) (relating to requirements for qualification) is amended by adding at the end of paragraph (5) the following: “For purposes of determining whether two or more plans of an employer satisfy the requirements of paragraph (4) when considered as a single plan, 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 total compensation, or the basic or regular rate of compensation, 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. For the purposes of determining whether two or more plans of an employer satisfy the requirements of paragraph (4) when considered as a single plan, 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 or his delegate to take account of the differences in such rates, the plans shall not be considered discriminatory merely because of the difference in such rates.” (c) Variations From Certain Vesting and Accrued Benefits Requirements.— In the case of any plan maintained on January 1, 1974, if, not later than 2 years after the date of the enactment of this Act, the plan administrator petitions the Secretary of Labor, the Secretary of Labor may prescribe an alternate method which shall be treated as satisfying the requirements of subsection (a)(2) of section 411 of the Internal Revenue Code of 1954, or of subsection (b)(1) Ante, p. 901. (other than subparagraph (D) thereof) of such section 411, or of both such provisions for a period of not more than 4 years. The Secretary may prescribe such alternate method only when he finds that— (1) the application of such requirements would increase the costs of the plan to such an extent that there would result a substantial risk to the voluntary continuation of the plan or a substantial curtailment of benefit levels or the levels of employees’ compensation, (2) the application of such requirements or discontinuance of the plan would be adverse to the interests of plan participants in the aggregate, and (3) a waiver or extension of time granted under section 412(d) Post, p. 914. or (e) would be inadequate. In the case of any plan with respect to which an alternate method has been prescribed under the preceding provisions of this subsection for a period of not more than 4 years, if, not later than 1 year before the expiration of such period, the plan administrator petitions the Secretary of Labor for an extension of such alternate method, and the Secretary makes the findings required by the preceding sentence, such alternate method may be extended for not more than 3 years. SEC. 1013. MINIMUM FUNDING STANDARDS. (a) In General.— Subpart B of part I of subchapter D of chapter 1 is amended by adding after section 411 the following new section: “SEC. 412. MINIMUM FUNDING STANDARDS. “(a) General Rule.— Except as provided in subsection (h), this section applies to a plan if, for any plan year beginning on or after the effective date of this section for such plan— “(1) such plan included a trust which qualified (or was determined by the Secretary or his delegate to have qualified) under section 401(a), or 26 USC 401. “(2) such plan satisfied (or was determined by the Secretary or his delegate to have satisfied) the requirements of section 403(a) or 405(a). Post, pp. 969, 991. A plan to which this section applies shall have satisfied the minimum 26 USC 405. funding standard for such plan for a plan year if as of the end of such plan year, the plan does not have an accumulated funding deficiency. For purposes of this section and section 4971, the term ‘accumulated “Accumulated funding deficiency.” Post, p. 920. funding deficiency’ means for any plan the excess of the total charges to the funding standard account for all plan years (beginning with the first plan year to which this section applies) over the total credits to such account for such years or, if less, the excess of the total charges to the alternative minimum funding standard account for such plan years over the total credits to such account for such years. “(b) Funding Standard Account.— “(1) Account required.— Each plan to which this section applies shall establish and maintain a funding standard account. Such account shall be credited and charged solely as provided in this section. “(2) Charges to account.— For a plan year, the funding standard account shall be charged with the sum of— “(A) the normal cost of the plan for the plan year, “(B) the amounts necessary to amortize in equal annual installments (until fully amortized)— “(i) in the case of a plan in existence on January 1, 1974, the unfunded past service liability under the plan on the first day of the first plan year to which this section applies, over a period of 40 plan years, “(ii) in the case of a plan which comes into existence after January 1, 1974, the unfunded past service liability under the plan on the first day of the first plan year to which this section applies, over a period of 30 plan years (40 plan years in the case of a multiemployer plan), “(iii) separately, with respect to each plan year, the net increase (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 30 plan years (40 plan years in the case of a multiemployer plan), “(iv) separately, with respect to each plan year, the net experience loss (if any) under the plan, over a period of 15 plan years (20 plan years in the case of a multiemployer plan), and “(v) separately, with respect to each plan year, the net loss (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 30 plan years, “(C) the amount necessary to amortize each waived funding deficiency (within the meaning of subsection (d)(3)) for each prior plan year in equal annual installments (until fully amortized) over a period of 15 plan years, and “(D) the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 5 plan years any amount credited to the funding standard account under paragraph (3)(D). “(3) Credits to account.— For a plan year, the funding standard account shall be credited with the sum of— “(A) the amount considered contributed by the employer to or under the plan for the plan year, “(B) the amount necessary to amortize in equal annual installments (until fully amortized)— “(i) separately, with respect to each plan year, the net decrease (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 30 plan years (40 plan years in the case of a multiemployer plan), “(ii) separately, with respect to each plan year, the net experience gain (if any) under the plan, over a period of 15 plan years (20 plan years in the case of a multiemployer plan), and “(iii) separately, with respect to each plan year, the net gain (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 30 plan years, “(C) the amount of the waived funding deficiency (within the meaning of subsection (d)(3)) for the plan year, and “(D) in the case of a plan year for which the accumulated funding deficiency is determined under the funding standard account if such plan year follows a plan year for which such deficiency was determined under the alternative minimum funding standard, the excess (if any) of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit balance in the alternative minimum funding standard account. “(4) Combining and offsetting amounts to be amortized.— Under regulations prescribed by the Secretary or his delegate, amounts required to be amortized under paragraph (2) or paragraph (3), as the case may be— “(A) may be combined into one amount under such paragraph to be amortized over a period determined on the basis of the remaining amortization period for all items entering into such combined amount, and “(B) may be offset against amounts required to be amortized under the other such paragraph, with the resulting amount to be amortized over a period determined on the basis of the remaining amortization periods for all items entering into whichever of the two amounts being offset is the greater. “(5) Interest.— The funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary or his delegate) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine costs. “(c) Special Rules.— “(1) Determinations to be made under funding method.— For purposes of this section, normal costs, accrued liability, past service liabilities, and experience gains and losses shall be determined under the funding method used to determine costs under the plan. “(2) Valuation of assets.— “(A) In general.— For purposes of this section, the value of the plan’s assets shall be determined on the basis of any reasonable actuarial method of valuation which takes into account fair market value and which is permitted under regulations prescribed by the Secretary or his delegate. “(B) Election with respect to bonds.— The value of a bond or other evidence of indebtedness which is not in default as to principal or interest may, at the election of the plan administrator, be determined on an amortized basis running from initial cost at purchase to par value at maturity or earliest call date. Any election under this subparagraph shall be made at such time and in such manner as the Secretary or his delegate shall by regulations provide, shall apply to all such evidences of indebtedness, and may be revoked only with the consent of the Secretary or his delegate. “(3) Actuarial assumptions must be reasonable.— For purposes of this section, all costs, liabilities, rates of interest, and other factors under the plan shall be determined on the basis of actuarial assumptions and methods which, in the aggregate, are reasonable (taking into account the experience of the plan and reasonable expectations) and which, in combination, offer the actuary’s best estimate of anticipated experience under the plan. “(4) Treatment of certain changes as experience gain or loss.— For purposes of this section, if— “(A) a change in benefits under the Social Security Act 42 USC 1305. or in other retirement benefits created under Federal or State law, or “(B) a change in the definition of the term ‘wages’ under section 3121, or a change in the amount of such wages taken 26 USC 3121. 26 USC 401. into account under regulations prescribed for purposes of section 401(a)(5), results in an increase or decrease in accrued liability under a plan, such increase or decrease shall be treated as an experience loss or gain. “(5) Change in funding method or in plan year requires approval.— If the funding method for a plan is changed, the new funding method shall become the funding method used to determine costs and liabilities under the plan only if the change is approved by the Secretary or his delegate. If the plan year for a plan is changed, the new plan year shall become the plan year for the plan only if the change is approved by the Secretary or his delegate. “(6) Full funding.— If, as of the close of a plan year, a plan would (without regard to this paragraph) have an accumulated funding deficiency (determined without regard to the alternative minimum funding standard account permitted under subsection (g)) in excess of the full funding limitation— “(A) the funding standard account shall be credited with the amount of such excess, and “(B) all amounts described in paragraphs (2) (B), (C), and (D) and (3)(B) of subsection (b) which are required to be amortized shall be considered fully amortized for purposes of such paragraphs. “(7) Full funding limitation.— For purposes of paragraph (6), the term ‘full funding limitation’ means the excess (if any) of— “(A) the accrued liability (including normal cost) under the plan (determined under the entry age normal funding method if such accrued liability cannot be directly calculated under the funding method used for the plan), over “(B) the lesser of the fair market value of the plan’s assets or the value of such assets determined under paragraph (2). “(8) Certain retroactive plan amendments.— For purposes of this section, any amendment applying to a plan year which— “(A) is adopted after the close of such plan year but no later than 2 and one-half months after the close of the plan year (or, in the case of a multiemployer plan, no later than 2 years after the close of such plan year), “(B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year to which the amendment applies, and “(C) does not reduce the accrued benefit of any participant determined as of the time of adoption except to the extent required by the circumstances, shall, at the election of the plan administrator, be deemed to have been made on the first day of such plan year. No amendment Notifiction of amendment. described in this paragraph which reduces the accrued benefits of any participant shall take effect unless the plan administrator files a notice with the Secretary of Labor notifying him of such amendment and the Secretary of Labor has approved such amendment, or within 90 days after the date on which such notice was filed, failed to disapprove such amendment. No Approval. amendment described in this subsection shall be approved by the Secretary of Labor unless he determines that such amendment is necessary because of a substantial business hardship (as determined under subsection (d)(2)) and that a waiver under subsection (d)(1) is unavailable or inadequate. “(9) 3-year valuation.— For purposes of this section, a determination of experience gains and losses and a valuation of the plan’s liability shall be made not less frequently than once every 3 years, except that such determination shall be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary or his delegate. “(10) Time when certain contributions deemed made.— For purposes of this section, any contributions for a plan year made by an employer after the last day of such plan year, but not later than two and one-half months after such day, shall be deemed to have been made on such last day. For purposes of this paragraph, such two and one-half month period may be extended for not more than six months under regulations prescribed by the Secretary or his delegate. “(d) Variance From Minimum Funding Standard.— “(1) Waiver in case of substantial business hardship.— If an employer or in the case of a multiemployer plan, 10 percent or more of the number of employers contributing to or under the plan, are unable to satisfy the minimum funding standard for a plan year without substantial business hardship and if application of the standard would be adverse to the interests of plan participants in the aggregate, the Secretary or his delegate may waive the requirements of subsection (a) for such year with respect to all or any portion of the minimum funding standard other than the portion thereof determined under subsection (b)(2)(C). The Secretary or his delegate shall not waive the mini-mum funding standard with respect to a plan for more than 5 of any 15 consecutive plan years. “(2) Determination of substantial business hardship.— For purposes of this section, the factors taken into account in determining substantial business hardship shall include (but shall not be limited to) whether or not— “(A) the employer is operating at an economic loss, “(B) there is substantial unemployment or underemployment in the trade or business and in the industry concerned, “(C) the sales and profits of the industry concerned are depressed or declining, and “(D) it is reasonable to expect that the plan will be continued only if the waiver is granted. “(3) Waived funding deficiency.— For purposes of this section, the term ‘waived funding deficiency’ means the portion of the minimum funding standard (determined without regard to subsection (b)(3)(C)) for a plan year waived by the Secretary or his delegate and not satisfied by employer contributions. “(e) Extension of Amortization Periods.— The period of years required to amortize any unfunded liability (described in any clause of subsection (b)(2)(B)) of any plan may be extended by the Secretary of Labor for a period of time (not in excess of 10 years) if he determines that such extension would carry out the purposes of the Employee Retirement Income Security Act of 1974 and would provide Ante, p. 829. adequate protection for participants under the plan and their beneficiaries and if he determines that the failure to permit such extension would— “(1) result in— “(A) a substantial risk to the voluntary continuation of the plan, or “(B) a substantial curtailment of pension benefit levels or employee compensation, and “(2) be adverse to the interests of plan participants in the aggregate. “(f) Benefits May Not Be Increased During Waiver or Extension Period.— “(1) In general.— No amendment of the plan which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted if a waiver under subsection (d)(1) or an extension of time under subsection (e) is in effect with respect to the plan, or if a plan amendment described in subsection (c)(8) has been made at any time in the preceding 12 months (24 months for multiemployer plans). If a plan is amended in violation of the preceding sentence, any such waiver or extension of time shall not apply to any plan year ending on or after the date on which such amendment is adopted. “(2) Exception.— Paragraph (1) shall not apply to any plan amendment which— “(A) the Secretary of Labor determines to be reasonable and which provides for only de minimis increases in the liabilities of the plan, “(B) only repeals an amendment described in subsection (c)(8), or “(C) is required as a condition of qualification under this part. “(g) Alternative Minimum Funding Standard.— “(1) In general.— A plan which uses a funding method that requires contributions in all years not less than those required under the entry age normal funding method may maintain an alternative minimum funding standard account for any plan year. Such account shall be credited and charged solely as provided in this subsection. “(2) Charges and credits to account.— For a plan year the alternative minimum funding standard account shall be— “(A) charged with the sum of— “(i) the lesser of normal cost under the funding method used under the plan or normal cost determined under the unit credit method, “(ii) the excess, if any, of the present value of accrued benefits under the plan over the fair market value of the assets, and “(iii) an amount equal to the excess (if any) of credits to the alternative minimum standard account for all prior plan years over charges to such account for all such years, and “(B) credited with the amount considered contributed by the employer to or under the plan for the plan year. “(3) Special rules.— The alternative minimum funding standard account (and items therein) shall be charged or credited with interest in the manner provided under subsection (b)(5) with respect to the funding standard account. “(h) Exceptions.— This section shall not apply to— “(1) any profit-sharing or stock bonus plan, “(2) any insurance contract plan described in subsection (i), “(3) any governmental plan (within the meaning of section 414(d)), Post, p. 925. “(4) any church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) Ante, p. 898. has not been made, “(5) any plan which has not, at any time after the date of the enactment of the Employee Retirement Income Security Act of 1974, provided for employer contributions, or Ante, p. 829. “(6) any plan established and maintained by a society, order, or association described in section 501(c) (8) or (9), if no part of 26 USC 501. the contributions to or under such plan are made by employers of participants in such plan. No plan described in paragraph (3), (4), or (6) shall be treated as a qualified plan for purposes of section 401(a) unless such plan meets 26 USC 401. the requirements of section 401(a)(7) as in effect on the day before the date of the enactment of the Employee Retirement Income Security Act of 1974. “(i) Certain Insurance Contract Plans.— A plan is described in this subsection if— “(1) the plan is funded exclusively by the purchase of individual insurance contracts. “(2) such contracts provide for level annual premium payments to be paid extending not later than the retirement age for each individual participating in the plan, and commencing with the date the individual became a participant in the plan (or, in the case of an increase in benefits, commencing at the time such increase becomes effective), “(3) benefits provided by the plan are equal to the benefits provided under each contract at normal retirement age under the plan and are guaranteed by an insurance carrier (licensed under the laws of a State to do business with the plan) to the extent premiums have been paid, “(4) premiums payable for the plan year, and all prior plan years, under such contracts have been paid before lapse or there is reinstatement of the policy, “(5) no rights under such contracts have been subject to a security interest at any time during the plan year, and “(6) no policy loans are outstanding at any time during the plan year. A plan funded exclusively by the purchase of group insurance contracts which is determined under regulations prescribed by the Secretary or his delegate to have the same characteristics as contracts described in the preceding sentence shall be treated as a plan described in this subsection.” (b) Excise Tax on Failure To Meet Minimum Funding Standards.— Subtitle D (relating to miscellaneous excise taxes) is amended by adding at the end thereof the following new chapter: “Chapter 43— Qualified Pension, Etc., Plans “Sec. 4971. Taxes on failure to meet minimum funding standards. “SEC. 4971. TAXES ON FAILURE TO MEET MINIMUM FUNDING STANDARDS. “(a) Initial Tax.— For each taxable year of an employer who maintains a plan to which section 412 applies, there is hereby imposed Ante, p. 914. a tax of 5 percent on the amount of the accumulated funding deficiency under the plan, determined as of the end of the plan year ending with or within such taxable year. The tax imposed by this subsection shall be paid by the employer responsible for contributing to or under the plan the amount described in section 412(b)(3)(A). “(b) Additional Tax.— In any case in which an initial tax is imposed by subsection (a) on an accumulated funding deficiency and such accumulated funding deficiency is not corrected within the correction period, there is hereby imposed a tax equal to 100 percent of such accumulated funding deficiency to the extent not corrected. The tax imposed by this subsection shall be paid by the employer described in subsection (a). “(c) Definitions.— For purposes of this section— “(1) Accumulated funding deficiency.— The term ‘accumulated funding deficiency’ has the meaning given to such term by section 412(a). “(2) Correct.— The term ‘correct’ means, with respect to an accumulated funding deficiency, the contribution, to or under the plan, of the amount necessary to reduce such accumulated funding deficiency as of the end of a plan year to zero. “(3) Correction period.— The term ‘correction period’ means, with respect to an accumulated funding deficiency, the period beginning with the end of a plan year in which there is an accumulated funding deficiency and ending 90 days after the date of mailing of a notice of deficiency under section 6212 with respect to the 26 USC 6212. tax imposed by subsection (b),extended— “(A) by any period in which a deficiency cannot be assessed undersection 6213(a), and 26 USC 6213. “(B) by any other period which the Secretary or his delegate determines is reasonable and necessary to permit a reduction of the accumulated funding deficiency to zero under this section. “(d) Notification of Secretary of Labor.— Before issuing a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary or his delegate shall notify the Secretary of Labor and provide him a reasonable opportunity (but not more than 60 days)— “(1) to require the employer responsible for contributing to or under the plan to eliminate the accumulated funding deficiency, or “(2) to comment on the imposition of such tax, and “(e) Cross References.— “For disallowance of deduction for taxes paid under this section, see section 275. “For liability for tax in case of an employer party to collective bargaining agreement, see section 413(b)(6). “For provisions concerning notification of Secretary of Labor of imposition of tax under this section, waiver of the tax imposed by subsection (b), and other coordination between Secretary of the Treasury and Secretary of Labor with respect to compliance with this section, see section 3002(b) of title III of the Employee Retirement Income Security Act of 1974.”. (c) Amendments to Section 404.— (1) Paragraph (1) of section 404(a) (relating to deduction for 26 USC 404. employer contributions to pension trusts) is amended to read as follows: “(1) Pension trusts. “(A) In general.— In the taxable year when paid, if the contributions are paid into a pension trust, and if such taxable year ends within or with a taxable year of the trust for which the trust is exempt under section 501(a), in an 26 USC 501. amount determined as follows: “(i) the amount necessary to satisfy the minimum funding standard provided by section 412(a) for plan Ante, p. 914. years ending within or with such taxable year (or for any prior plan year), if such amount is greater than the amount determined under clause (ii) or (iii) (whichever is applicable with respect to the plan), “(ii) the amount necessary to provide with respect to all of the employees under the trust the remaining unfunded cost of their past and current service credits distributed as a level amount, or a level percentage of compensation, over the remaining future service of each such employee, as determined under regulations prescribed by the Secretary or his delegate, but if such remaining unfunded cost with respect to any 3 individuals is more than 50 percent of such remaining unfunded cost, the amount of such unfunded cost attributable to such individuals shall be distributed over a period of at least 5 taxable years. “(iii) an amount equal to the normal cost of the plan, as determined under regulations prescribed by the Secretary or his delegate, plus, if past service or other supplementary pension or annuity credits are provided by the plan, an amount necessary to amortize such credits in equal annual payments (until fully amortized) over 10 years, as determined under regulations prescribed by the Secretary or his delegate. In determining the amount deductible in such year under the foregoing limitations the funding method and the actuarial assumptions used shall be those used for such year under section 412, and the maximum amount deductible for such Ante, p. 914. year shall be an amount equal to the full funding limitation for such year determined under section 412. “(B) Special rule in case of certain amendments.— In the case of a plan which the Secretary of Labor finds to be collectively bargained which makes an election under this subparagraph (in such manner and at such time as may be provided under regulations prescribed by the Secretary or his delegate), if the full funding limitation determined under section 412(c)(7) for such year is zero, if as a result of any plan amendment applying to such plan year, the amount determined under section 412(c)(7)(B) exceeds the amount determined under section 412(c)(7)(A), and if the funding method and the actuarial assumptions used are those used for such year under section 412, the maximum amount deductible in such year under the limitations of this paragraph shall be an amount equal to the lesser of— “(i) the full funding limitation for such year determined by applying section 412(c)(7) but increasing the amount referred to in subparagraph (A) thereof by the decrease in the present value of all unamortized liabilities resulting from such amendment, or “(ii) the normal cost under the plan reduced by the amount necessary to amortize in equal annual installments over 10 years (until fully amortized) the decrease described in clause (i). In the case of any election under this subparagraph, the amount deductible under the limitations of this paragraph with respect to any of the plan years following the plan year for which such election was made shall be determined as provided under such regulations as may be prescribed by the Secretary or his delegate to carry out the purposes of this subparagraph. “(C) Certain collectively-bargained plans.— In the case of a plan which the Secretary of Labor finds to be collectively bargained, established or maintained by an employer doing business in not less than 40 States and engaged in the trade or business of furnishing or selling services described in section 167(1)(3)(A)(iii), with respect to which the rates have 26 USC 167. been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof, and in the case of any employer which is a member of a controlled group with such employer, subparagraph (B) shall be applied by substituting for the words ‘plan amendment’ the words ‘plan amendment or increase in benefits payable under title II of the Social Security Act’. For purposes 42 USC 401. “Controlled group.” 26 USC 1563. of this subparagraph, the term ‘controlled group’ has the meaning provided by section 1563(a), determined without regard to section 1563(a)(4) and (e)(3)(C). “(D) Carryover.— Any amount paid in a taxable year in excess of the amount deductible in such year under the foregoing limitations shall be deductible in the succeeding taxable years in order of time to the extent of the difference between the amount paid and deductible in each such succeeding year and the maximum amount deductible for such year under the foregoing limitations.” (2) Paragraph (6) of section 404(a) (relating to taxpayers 26 USC 404. on accrual basis) is amended to read as follows: “(6) Time when contributions deemed made.— For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof).” (3) Paragraph (7) of section 404(a) (relating to limit on deductions) is amended to read as follows: “(7) Limit on deductions.— If amounts are deductible under paragraphs (1) and (3), or (2) and (3), or (1), (2), and (3), in connection with two or more trusts, or one or more trusts and an annuity plan, the total amount deductible in a taxable year under such trusts and plans shall not exceed the greater of 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries of the trusts or plans, or the amount of contributions made to or under the trusts or plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 for the plan year which ends with or Ante, p. 914. within such taxable year (or for any prior plan year). In addition, any amount paid into such trust or under such annuity plans in any taxable year in excess of the amount allowable with respect to such year under the preceding provisions of this paragraph shall be deductible in the succeeding taxable years in order of time, but the amount so deductible under this sentence in any one such succeeding taxable year together with the amount allowable under the first sentence of this paragraph shall not exceed 25 percent of the compensation otherwise paid or accrued during such taxable years to the beneficiaries under the trusts or plans. This paragraph shall not have the effect of reducing the amount otherwise deductible under paragraphs (1), (2), and (3), if no employee is a beneficiary under more than one trust or a trust and an annuity plan.” (d) Alternative Amortization Method for Certain Multiemployer Plans.— (1) General rule.— In the case of any multiemployer plan (as defined in section 414(f) of the Internal Revenue Code of 1954) Post, p. 925. to which section 412 of such Code applies, if— (A) on January 1, 1974, the contributions under the plan were based on a percentage of pay, (B) the actuarial assumptions with respect to pay are reasonably related to past and projected experience, and (C) the rates of interest under the plan are determined on the basis of reasonable actuarial assumptions, the plan may elect (in such manner and at such time as may be provided under regulations prescribed by the Secretary of the Treasury or his delegate) to fund the unfunded past service liability under the plan existing as of the date 12 months following the first date on which such section 412 first applies to the plan by charging the funding standard account with an equal annual percentage of the aggregate pay of all participants in the plan in lieu of the level dollar charges to such account required under clauses (i), (ii), and (iii) of section 412(b)(2)(B) of such Code and section 302(b)(2)(B)(i), (ii), and (iii) of this Act. (2) Limitation.— In the case of a plan which makes an election under paragraph (1), the aggregate of the charges required under such paragraph for a plan year shall not be less than the interest on the unfunded past service liabilities described in clauses (i), (ii), and (iii) of section 412(b)(2)(B) of the Internal Revenue Ante, p. 914. Code of 1954. SEC. 1014. COLLECTIVELY BARGAINED PLANS, ETC. Subpart B of part I of subchapter D of chapter 1 (relating to special rules) is amended by inserting after section 412 the following new section: “SEC. 413. COLLECTIVELY BARGAINED PLANS, ETC. “(a) Application of Subsection (b).— Subsection (b) applies to— “(1) a plan maintained pursuant to an agreement which the Secretary of Labor finds to be a collective-bargaining agreement between employee representatives and one or more employers, and “(2) each trust which is a part of such plan. “(b) General Rule.— If this subsection applies to a plan, notwithstanding any other provision of this title— “(1) Participation.— Section 410 shall be applied as if all Ante, p. 898. employees of each of the employers who are parties to the collective-bargaining agreement and who are subject to the same benefit computation formula under the plan were employed by a single employer. “(2) Discrimination, etc.— Sections 401(a)(4) and 411(d)(3) Post, p. 938; Ante, p. 901. shall be applied as if all participants who are subject to the same benefit computation formula and who are employed by employers who are parties to the collective bargaining agreement were employed by a single employer. “(3) Exclusive benefit.— For purposes of section 401(a), in determining whether the plan of an employer is for the exclusive benefit of his employees and their beneficiaries, all plan participants shall be considered to be his employees. “(4) Vesting.— Section 411 (other than subsection (d)(3)) shall be applied as if all employers who have been parties to the collective-bargaining agreement constituted a single employer, except that the application of any rules with respect to breaks in service shall be made under regulations prescribed by the Secretary of Labor. “(5) Funding.— The minimum funding standard provided by section 412 shall be determined as if all participants in the plan were employed by a single employer. “(6) Liability for funding tax.— For a plan year the liability Ante, p. 920. under section 4971 of each employer who is a party to the collective bargaining agreement shall be determined in a reasonable manner not inconsistent with regulations prescribed by the Secretary or his delegate— “(A) first on the basis of their respective delinquencies in meeting required employer contributions under the plan, and “(B) then on the basis of their respective liabilities for contributions under the plan. “(7) Deduction limitations.— Each applicable limitation provided 26 USC 404. by section 404(a) shall be determined as if all participants in the plan were employed by a single employer. The amounts contributed to or under the plan by each employer who is a party to the agreement, for the portion of his taxable year which is included within such a plan year, shall be considered not to exceed such a limitation if the anticipated employer contributions for such plan year (determined in a manner consistent with the manner in which actual employer contributions for such plan year are determined) do not exceed such limitation. If such anticipated contributions exceed such a limitation, the portion of each such employer’s contributions which is not deductible under section 404 shall be determined in accordance with regulations prescribed by the Secretary or his delegate. “(8) Employees of labor unions.— For purposes of this subsection, employees of employee representatives shall be treated as employees of an employer described in subsection (a)(1) if such representatives meet the requirements of sections 401(a)(4) and 410 with respect to such employees. Post, p. 938; Ante, p. 898. “(c) Plans Maintained by More Than One Employer.— In the case of a plan maintained by more than one employer— “(1) Participation.— Section 410(a) shall be applied as if all employees of each of the employers who maintain the plan were employed by a single employer. “(2) Exclusive benefit.— For purposes of section 401(a), in determining whether the plan of an employer is for the exclusive benefit of his employees and their beneficiaries all plan participants shall be considered to be his employees. “(3) Vesting.— Section 411 shall be applied as if all employers Ante, p. 901. who maintain the plan constituted a single employer, except that the application of any rules with respect to breaks in service shall be made under regulations prescribed by the Secretary of Labor. “(4) Funding.— The minimum funding standard provided by section 412 shall be determined as if all participants in the plan Ante, p. 914. were employed by a single employer. “(5) Liability for funding tax.— For a plan year the liability under section 4971 of each employer who maintains the plan shall Ante, p. 920. be determined in a reasonable manner not inconsistent with regulations prescribed by the Secretary or his delegate— “(A) first on the basis of their respective delinquencies in meeting required employer contributions under the plan, and “(B) then on the basis of their respective liabilities for contributions under the plan. “(6) Deduction limitations.— Each applicable limitation provided by section 404(a) shall be determined as if all participants in the plan were employed by a single employer. The amounts contributed to or under the plan by each employer who maintains the plan, for the portion of this taxable year which is included within such a plan year, shall be considered not to exceed such a limitation if the anticipated employer contributions for such plan year (determined in a reasonable manner not inconsistent with regulations prescribed by the Secretary or his delegate) do not exceed such limitation. If such anticipated contributions exceed such a limitation, the portion of each such employer’s contributions which is not deductible under section 404 shall be determined in accordance with regulations prescribed by the Secretary or his delegate. Allocations of amounts under paragraphs (4), (5), and (6), among the employers maintaining the plan, shall not be inconsistent with regulations prescribed for this purpose by the Secretary or his delegate.” SEC. 1015. DEFINITIONS AND SPECIAL RULES. Subpart B of part I of subchapter D of chapter 1 is amended by inserting after section 413 the following new section: “SEC. 414. DEFINITIONS AND SPECIAL RULES. “(a) Service for Predecessor Employer.— For purposes of this part— “(1) in any case in which the employer maintains a plan of a predecessor employer, service for such predecessor shall be treated as service for the employer, and “(2) in any case in which the employer maintains a plan which is not the plan maintained by a predecessor employer, service for such predecessor shall, to the extent provided in regulations prescribed by the Secretary or his delegate, be treated as service for the employer. “(b) Employees of Controlled Group of Corporations.— For purposes of sections 401, 410, 411, and 415, all employees of all corporations 26 USC 401. Ante, pp. 898, 901; Post, p. 979. which are members of a controlled group of corporations (within the meaning of section 1563(a), determined without regard to section 1563(a)(4) and (e)(3)(C)) shall be treated as employed 26 USC 1563. by a single employer. With respect to a plan adopted by more than one such corporation, the minimum funding standard of section 412, the tax imposed by section 4971, and the applicable limitations provided Ante, p. 920. by section 404(a) shall be determined as if all such employers were a single employer, and allocated to each employer in accordance with regulations prescribed by the Secretary or his delegate. “(c) Employees of Partnerships, Proprietorships, Etc., Which Are Under Common Control.— For purposes of sections 401, 410, 411, and 415, under regulations prescribed by the Secretary or his delegate, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer. The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (b). “(d) Governmental Plan.— For purposes of this part, the term ‘governmental plan’ means a plan established and maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing. The term ‘governmental plan’ also includes any plan to which the Railroad Retirement Act of 1935 or 1937 applies and which is financed by contributions required 45 USC 215–228 notes, 228a. 22 USC 288 note. under that Act and any plan of an international organization which is exempt from taxation by reason of the International Organizations Immunities Act (59 Stat. 669). “(e) Church Plan.— “(1) In general.— For purposes of this part the term ‘church plan’ means— “(A) a plan established and maintained for its employees by a church or by a convention or association of churches which is exempt from tax under section 501, or 26 USC 501. “(B) a plan described in paragraph (3). “(2) Certain unrelated business or multiemployer plans.— The term ‘church plan’ does not include a plan— “(A) which is established and maintained primarily for the benefit of employees (or their beneficiaries) of such church or convention or association of churches who are employed in connection with one or more unrelated trades or businesses (within the meaning of section 513), or “(B) which is a plan maintained by more than one employer, if one or more of the employers in the plan is not a church (or a convention or association of churches) which is exempt from tax under section 501. “(3) Special temporary rule for certain church agencies under church plan.— “(A) Notwithstanding the provisions of paragraph (2)(B), a plan in existence on January 1, 1974, shall be treated as a church plan if it is established and maintained by a church or convention or association of churches and one or more agencies of such church (or convention or association) for the employees of such church (or convention or association) and the employees of one or more agencies of such church (or convention or association), and if such church (or convention or association) and each such agency is exempt from tax under section 501. 26 USC 501. “(B) Subparagraph (A) shall not apply to any plan maintained for employees of an agency with respect to which the plan was not maintained on January 1, 1974. “(C) Subparagraph (A) shall not apply with respect to any plan for any plan year beginning after December 31, 1982. “(f) Multiemployer Plan.— “(1) In general.— For purposes of this part, the term ‘multiemployer plan’ means a plan— “(A) to which more than one employer is required to contribute, “(B) which is maintained pursuant to a collective-bargaining agreement between employee representatives and more than one employer, “(C) under which the amount of contributions made under the plan for a plan year by each employer making such contributions is less than 50 percent of the aggregate amount of contributions made under the plan for that plan year by all employers making such contributions, “(D) under which benefits are payable with respect to each participant without regard to the cessation of contributions by the employer who employed that participant except to the extent that such benefits accrued as a result of service with the employer before such employer was required to contribute to such plan, and “(E) which satisfies such other requirements as the Secretary of Labor may by regulations prescribe. “(2) Special rules.— For purposes of this subsection— “(A) If a plan is a multiemployer plan within the meaning of paragraph (1) for any plan year, subparagraph (C) of paragraph (1) shall be applied by substituting ‘75 percent’ for ‘50 percent’ for each subsequent plan year until the first plan year following a plan year in which the plan had one employer who made contributions of 75 percent or more of the aggregate amount of contributions made under the plan for that plan year by all employers making such contributions. “(B) All corporations which are members of a controlled group of corporations (within the meaning of section 1563 26 USC 1563. (a), determined without regard to section 1563(e)(3)(C)) shall be deemed to be one employer. “(g) Plan Administrator.— For purposes of this part, the term ‘plan administrator’ means— “(1) the person specifically so designated by the terms of the instrument under which the plan is operated; “(2) in the absence of a designation referred to in paragraph (1)— “(A) in the case of a plan maintained by a single employer, such employer, “(B) in the case of a plan maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of the parties who maintained the plan, or “(C) in any case to which subparagraph (A) or (B) does not apply, such other person as the Secretary or his delegate may by regulation, prescribe. “(h) Tax Treatment of Certain Contributions.— “(1) In general.— Effective with respect to taxable years beginning after December 31, 1973, for purposes of this title, any amount contributed— “(A) to an employees’ trust described in section 401(a), or 26 USC 401. “(B) under a plan described in section 403(a) or 405(a), 26 USC 403, 405. shall not be treated as having been made by the employer if it is designated as an employee contribution. “(2) Designation by units of government.— For purposes of paragraph (1), in the case of any plan established by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing, where the contributions of employing units are designated as employee contributions but where any employing unit picks up the contributions, the contributions so picked up shall be treated as employer contributions. “(i) Defined Contribution Plan.— For purposes of this part, the term ‘defined contribution plan’ means a plan which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account. “(j) Defined Benefit Plan.— For purposes of this part, the term ‘defined benefit plan’ means any plan which is not a defined contribution plan. “(k) Certain Plans.— A defined benefit plan which provides a benefit derived from employer contributions which is based partly on the balance of the separate account of a participant shall— “(1) for purposes of section 410 (relating to minimum participation Ante, p. 898. standards), be treated as a defined contribution plan, “(2) for purposes of sections 411(a)(7)(A) (relating to minimum Ante, p. 901. Post, p. 979. vesting standards) and 415 (relating to limitations on benefits and contributions under qualified plans), be treated as consisting of a defined contribution plan to the extent benefits are based on the separate account of a participant and as a defined benefit plan with respect to the remaining portion of benefits under the plan, and “(3) for purposes of section 4975 (relating to tax on prohibited Post, p. 971. transactions), be treated as a defined benefit plan. “(l) Mergers and Consolidations of Plans or Transfers of Plan Assets.— A trust which forms a part of a plan shall not constitute a qualified trust under section 401 and a plan shall be treated as not described in section 403(a) or 405 unless in the case of any merger or consolidation of the plan with, or in the case of any transfer of assets or liabilities of such plan to, any other trust plan after the date of the enactment of the Employee Retirement Income Security Act of 1974, each participant in the plan would (if the plan then terminated) Ante, p. 829. receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the plan had then terminated). This paragraph shall apply in the case of a multiemployer plan only to the extent determined by the Pension Benefit Guaranty Corporation.” SEC. 1016. CONFORMING AND CLERICAL AMENDMENTS. (a) Conforming Amendments.— (1) Section 275(a) (relating to denial of deduction for certain 26 USC 275. taxes) is amended by adding at the end thereof the following new paragraph: “(6) Taxes imposed by chapter 42 and chapter 43.” 26 USC 4940. Ante, p. 920. (2) Section 401(a) (relating to requirements for qualification) 26 USC 401. is amended— (A) by striking out paragraph (3) and inserting in lieu thereof: “(3) if the plan of which such trust is a part satisfies the requirements of section 410 (relating to minimum participation Ante, p. 898. standards); and”, (B) by striking out “paragraph (3)(B) or (4)” in paragraph (5) and inserting in lieu thereof “paragraph (4) or section 410(b) (without regard to paragraph (1)(A) thereof),” and (C) by striking out paragraph (7) and inserting in lieu thereof: “(7) A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part satisfies the requirements of section 411 (relating to minimum vesting Ante, p. 901. standards).” (3) Section 404(a)(2) (relating to deduction for contributions 26 USC 404. of an employer to an employee’s annuity plan) is amended by striking out “and (8),” and inserting in lieu thereof “(8), (11), (12), (13), (14), and (15)”. (4) Section 406(b)(1) (relating to certain employees of foreign 26 USC 406. subsidiaries) is amended by striking out “paragraphs (3)(B) and (4) of section 401(a)” and inserting in lieu thereof “section 401(a)(4) and section 410(b) (without regard to paragraph (1)(A) thereof)”. (5) Section 407(b)(1) (relating to certain employees of 26 USC 407. domestic subsidiaries engaged in business outside the United States) is amended by striking out “paragraph (3)(B) and (4) of section 401(a)” and inserting in lieu thereof “section 401(a)(4) and section 410(b) (without regard to paragraph (1)(A) thereof)”. (6) Section 805(d)(1)(C) (relating to definition of pension 26 USC 805. plan reserves) is amended by striking out “and (8)” and inserting in lieu thereof “(8), (11), (12), (13), (14), and (15)”. (7) Section 6161(b)(1) (relating to extensions of time for paying 26 USC 6161. tax) is amended by striking out “or 42” and inserting in lieu thereof “42 or 43”. The second sentence of section 6161(b) is amended by striking out “or 42” and inserting in lieu thereof “42, or chapter 43”. (8) Section 6201(d) (relating to assessment authority) is 26 USC 6201. amended by striking out “and chapter 42” and inserting in lieu thereof “, chapter 42, and chapter 43”. (9) Section 6211 (defining deficiency) is amended— 26 USC 6211. (A) by striking out so much of subsection (a) as precedes paragraph (1) thereof and inserting in lieu thereof the following: “(a) In General.— For purposes of this title in the case of income, estate, and gift taxes imposed by subtitles A and B and excise taxes 26 USC 1, 2001. imposed by chapters 42 and 43, the term ‘deficiency’ means the amount by which the tax imposed by subtitle A or B, or chapter 42 or 43, exceeds the excess of—”; and (B) by striking out “chapter 42” in subsection (b)(2) and inserting in lieu thereof “chapter 42 or 43”. (10) Section 6212 (relating to notice of deficiency) is amended— 26 USC 6212. (A) by striking out “chapter 42” in subsection (a) and inserting in lieu thereof “chapter 42 or 43”, (B) by striking out “or chapter 42” in subsection (b)(1) and inserting in lieu thereof “chapter 42, or chapter 43”, (C) by striking out “chapter 42, and this chapter” in subsection (b)(1) and inserting in lieu thereof “chapter 42, chapter 43, and this chapter”, and (D) by striking out “of the same decedent,” in subsection (c) and inserting in lieu thereof “of the same decedent, of chapter 43 tax for the same taxable years,”. (11) Section 6213 (relating to restrictions applicable to deficiencies and petition to Tax Court) is amended— (A) by striking out “or chapter 42” in subsection (a) and inserting in lieu thereof “, chapter 42 or 43”, (B) by striking out the heading of subsection (e) and inserting in lieu thereof: “(e) Suspension or Filing Period for Certain Excise Taxes.—”, (C) by striking out “or 4945 (relating to taxes on taxable expenditures)” in subsection (e) and inserting in lieu thereof “4945 (relating to taxes on taxable expenditures), 4971 Ante, p. 920. (relating to excise taxes on failure to meet minimum funding standard), 4975 (relating to excise taxes on prohibited transactions)”; and (D) by striking out “or 4945(h)(2)” in subsection (e) and inserting in lieu thereof “, 4945(i)(2), 4971(c)(3), or 4975(f)(4),”. (12) Section 6214 (relating to determinations by Tax Court) is amended— (A) by amending the heading of subsection (c) to read as follows: “(c) Taxes Imposed by Section 507 or Chapter 42 or 43.—”, (B) by inserting after “chapter 42” each place it appears in subsection (c) “or 43”; and (C) by striking out “chapter 42” in subsection (d) and inserting in lieu thereof “chapter 42 or 43”. (13) Section 6344(a)(1) (relating to cross references) is 26 USC 6344. amended by striking out “chapter 42” and inserting in lieu thereof “chapter 42 or 43”. (14) Section 6501(e)(3) (relating to limitations on assessment 26 USC 6501. and collection) is amended by striking out “chapter 42” and inserting in lieu thereof “chapter 42 or 43”. (15) Section 6503 (relating to suspension of running of period 26 USC 6503. of limitations) is amended— (A) by striking out “chapter 42 taxes)” in subsection (a)(1) and inserting in lieu thereof “certain excise taxes)”, and (B) by inserting after “section 507” in subsection (h) “or section 4971 or section 4975”, and by striking out “or 4945(h)(2)” in subsection (h) and inserting in lieu thereof “4945(i)(2), 4971(c)(3), or 4975(f)(4)”. (16) Section 6512 (relating to limitations in case of petition to 26 USC 6512. Tax Court) is amended by striking out “chapter 42” each place it appears therein and inserting in lieu thereof “chapter 42 or 43”. (17) Section 6601(d) (relating to interest on underpayment, 26 USC 6601. nonpayment, or extensions of time for payment of tax) is amended by— (A) striking out in the heading thereof “Chapter 42” and inserting in lieu thereof “Chapter 42 or 43”, and 26 USC 4940. Ante, p. 920. (B) striking out “chapter 42” and inserting in lieu thereof “certain excise”. (18) Section 6653(c)(1) (relating to income, estate, gift, and 26 USC 6653. chapter 42 taxes) is amended by striking out “chapter 42” each place it appears therein (including the heading) and inserting in lieu thereof “certain excise”. (19) Section 6659(b) (relating to applicable rules) is amended 26 USC 6659. by striking out “chapter 42” and inserting in lieu thereof “certain excise”. (20) Section 6676(b) (relating to failure to supply identifying 26 USC 6676. numbers) is amended by striking out “chapter 42” and inserting in lieu thereof “and certain excise”. (21) Section 6677(b) (relating to failure to file information 26 USC 6677. returns with respect to certain foreign trusts) is amended by striking out “chapter 42” and inserting in lieu thereof “and certain excise”. (22) Section 6679(b) (relating to failure to file returns as to 26 USC 6679. organization or reorganization of foreign corporations and as to acquisitions of their stock) is amended by striking out “chapter 42” and inserting in lieu thereof “and certain excise”. (23) Section 6682(b) (relating to false information with 26 USC 6682. respect to withholding allowances based on itemized deductions) is amended by striking out “chapter 42” and inserting in lieu thereof “and certain excise”. (24) The heading of section 6861 (relating to jeopardy assessments 26 USC 6861. of income, estate, and gift taxes) is amended by striking out “and gift taxes.”, and inserting in lieu thereof “, gift, and certain excise taxes.”. (25) Section 6862 (relating to jeopardy assessment of taxes 26 USC 6862. other than income, estate, and gift taxes) is amended— (A) by striking out “and Gift Taxes.”, in the heading and inserting in lieu thereof “, Gift, and Certain Excise Taxes.”, (B) by striking out “and gift tax)” in subsection (a) and inserting in lieu thereof “gift tax, and certain excise taxes)”. (26) Section 7422 (relating to civil actions for refund) is 26 USC 7422. amended— (A) by striking out “chapter 42” and inserting in lieu thereof “chapter 42 or 43” in subsection (e), (B) by striking out “Chapter 42” in the heading of subsection (g) and inserting in lieu thereof “Chapter 42 or 43”. (C) by striking out “or 4945” in subsection (g)(1) and inserting in lieu thereof “4945, 4971, or 4975”, 26 USC 4945. Ante, p. 920; Post, p. 971. (D) by striking out “section 4945(a) (relating to initial taxes on taxable expenditures)” in subsection (g)(1) and inserting in lieu thereof “section 4945(a) (relating to initial taxes on taxable expenditures), 4971(a) (relating to initial tax on failure to meet minimum funding standard), 4975(a) (relating to initial tax on prohibited transactions)”, (E) by striking out “or section 4945(b) (relating to additional taxes on taxable expenditures)” in subsection (g)(1) and inserting in lieu thereof “section 4945(b) (relating to additional taxes on taxable expenditures), section 4971(b) (relating to additional tax on failure to meet minimum fund-ing standard), or section 4975(b) (relating to additional tax on prohibited transactions)”, and (F) by striking out “or 4945” in paragraphs (2) and (3) of subsection (g) and inserting in lieu thereof “4945, 4971, or 4975”. 26 USC 4945. Ante, p. 920; Post, p. 971. (27) Section 6204(b) (relating to supplemental assessments) is amended by striking out “and gift taxes” and inserting in lieu 26 USC 6204. thereof “gift, and certain excise taxes”. (b) Clerical Amendments.— (1) Part I of subchapter D of chapter 1 is amended by inserting after the heading and before the table of sections the following: “Subpart A. General rule. “Subpart B. Special rules. “Subpart A— General Rule”. (2) The table of chapters for subtitle D is amended by adding at the end thereof the following new item: “Chapter 43. Qualified pension, etc., plans.” (3) The table of sections for subchapter B of chapter 68 is amended by striking out the item relating to the section captioned “Assessable penalties with respect to information required to be furnished under section 7654” and inserting in lieu thereof: “Sec. 6688. Assessable penalties with respect to information required to be furnished under section 7654.” (4) Subchapter B of chapter 68 is amended by striking out the heading of the section immediately preceding section 6689 and inserting in lieu thereof: “SEC. 6688. ASSESSABLE PENALTIES WITH RESPECT TO INFORMATION REQUIRED TO BE FURNISHED UNDER SECTION 7654.” (5) The table of sections for part II of subchapter A of chapter 70 is amended by striking out “and gift taxes” in the items relating to sections 6861 and 6862 and inserting in lieu thereof 26 USC 6861, 6862. “gift, and certain excise taxes”. SEC. 1017. EFFECTIVE DATES AND TRANSITIONAL RULES. (a) General Rule.— Except as otherwise provided in this section, the amendments made by this part shall apply for plan years beginning after the date of the enactment of this Act. (b) Existing Plans.— Except as otherwise provided in subsections (c) through (h), in the case of a plan in existence on January 1, 1974, the amendments made by this part shall apply for plan years beginning after December 31, 1975. (c) Existing Plans Under Collective Bargaining Agreements.— (1) Application of vesting rules to certain plan provisions.— (A) Waiver of application.— In the case of a plan maintained on January 1, 1974, pursuant to one or more agreements which the Secretary of Labor finds to be collective bargaining agreements between employee representatives and one or more employers, during the special temporary waiver period the plan shall not be treated as not meeting the requirements of section 411(b)(1) or (2) of the Internal Revenue Code of 1954 solely by reason of a supplementary or special plan Ante, p. 901. provision (within the meaning of subparagraph (D)). (B) Special temporary waiver period.— For purposes of this paragraph, the term ‘special temporary waiver period’ means plan years beginning after December 31, 1975, and before the earlier of— (i) the date on which the last of the collective bargaining agreements relating to the plan terminates (determined without regard to any extension thereof agreed to after the date of the enactment of this Act), or (ii) January 1, 1981. For purposes of clause (i), any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any requirement contained in this Act shall not be treated as a termination of such collective bargaining agreement. (C) Determination by secretary of labor required.— Subparagraph (A) shall not apply unless the Secretary of Labor determines that the participation and vesting rules in effect on the date of the enactment of this Act are not less favorable to the employees, in the aggregate, than the rules provided under sections 410 and 411 of the Internal Revenue Code of 1954. Ante, pp. 898, 901. (D) Supplementary or special plan provisions.— For purposes of this paragraph, the term “supplementary or special plan provision” means any plan provision which— (i) provides supplementary benefits, not in excess of one-third of the basic benefit, in the form of an annuity for the life of the participant, or (ii) provides that, under a contractual agreement based on medical evidence as to the effects of working in an adverse environment for an extended period of time, a participant having 25 years of service is to be treated as having 30 years of service. (2) Application of funding rules.— (A) In general.— In the case of a plan maintained on January 1, 1974, pursuant to one or more agreements which the Secretary of Labor finds to be collective bargaining agreements between employee representatives and one or more employers, section 412 of the Internal Revenue Code of 1954, Ante, p. 914. and other amendments made by this part to the extent such amendments relate to such section 412, shall not apply during the special temporary waiver period (as defined in paragraph (1)(B)). (B) Waiver of underfunding.— In the case of a plan maintained on January 1, 1974, pursuant to one or more agreements which the Secretary of Labor finds to be collective bargaining agreements between employee representatives and one or more employers, if by reason of subparagraph (A) the requirements of section 401(a)(7) of the Internal Revenue Code of 1954 apply without regard to the amendment of such 26 USC 401. Ante, p. 929. section 401(a)(7) by section 1016(a)(2)(C) of this Act, the plan shall not be treated as not meeting such requirements solely by reason of the application of the amendments made by sections 1011 and 1012 of this Act or related amendments made by this part. (C) Labor organization conventions.— In the case of a plan maintained by a labor organization, which is exempt from tax under section 501(c)(5) of the Internal Revenue Code of 1954, exclusively for the benefit of its employees and 26 USC 501. Ante, p. 914. their beneficiaries, section 412 of such Code and other amendments made by this part to the extent such amendments relate to such section 412, shall be applied by substituting for the term “December 31, 1975” in subsection (b), the earlier of— (i) the date on which the second convention of such labor organization held after the date of the enactment of this Act ends, or (ii) December 31, 1980, but in no event shall a date earlier than the later of December 31, 1975, or the date determined under subparagraph (A) or (B) be substituted. (d) Existing Plans May Elect New Provisions.— In the case of a plan in existence on January 1, 1974, the provisions of the Internal Revenue Code of 1954 relating to participation, vesting, funding, and 26 USC 1 et seq. form of benefit (as in effect from time to time) shall apply in the case of the plan year (which begins after the date of the enactment of this Act but before the applicable effective date determined under subsection (b) or (c)) selected by the plan administrator and to all subsequent plan years, if the plan administrator elects (in such manner and at such time as the Secretary of the Treasury or his delegate shall by regulations prescribe) to have such provisions so apply. Any election made under this subsection, once made, shall be irrevocable. (e) Certain Definitions and Special Rules.— Section 414 of the Internal Revenue Code of 1954 (other than subsections (b) and (c) of Ante, p. 925. such section 414), as added by section 1015(a) of this Act, shall take effect on the date of the enactment of this Act. (f) Transitional Rules With Respect to Breaks in Service.— (1) Participation.— In the case of a plan to which section 410 of the Internal Revenue Code of 1954 applies, if any plan amendment Ante, p. 898. with respect to breaks in service (which amendment is made or becomes effective after January 1, 1974, and before the date on which such section 410 first becomes effective with respect to such plan) provides that any employee’s participation in the plan would commence at any date later than the later of— (A) the date on which his participation would commence under the break in service rules of section 410(a)(5) of such Code, or (B) the date on which his participation would commence under the plan as in effect on January 1, 1974, such plan shall not constitute a plan described in section 403(a) or 405(a) of such Code and a trust forming a part of such plan 26 USC 403, 405. 26 USC 401. shall not constitute a qualified trust under section 401(a) of such Code. (2) Vesting.— In the case of a plan to which section 411 of the Internal Revenue Code of 1954 applies, if any plan amendment Ante, p. 901. with respect to breaks in service (which amendment is made or becomes effective after January 1, 1974, and before the date on which such section 411 first becomes effective with respect to such plan) provides that the nonforfeitable benefit derived from employer contributions to which any employee would be entitled is less than the lesser of the nonforfeitable benefit derived from employer contributions to which he would be entitled under— (A) the break in service rules of section 411(a)(6) of such Code, or (B) the plan as in effect on January 1, 1974, such plan shall not constitute a plan described in section 403(a) or 405(a) of such Code and a trust forming a part of such plan shall not constitute a qualified trust under section 401(a) of such Code. Subparagraph (B) shall not apply if the break in service rules under the plan would have been in violation of any law or rule of law in effect on January 1, 1974. (g) 3-Year Delay for Certain Provisions.— Subparagraphs (B) and (C) of section 404(a)(1) shall apply only in the case of plan years Ante, p. 921. beginning on or after 3 years after the date of the enactment of this Act. (h) (1) Except as provided in paragraph (2), section 413 of the Ante, p. 924. Internal Revenue Code of 1954 shall apply to plan years beginning after December 31, 1953. (2) (A) For plan years beginning before the applicable effective date of section 410 of such Code, the provisions of paragraphs (1) Ante, p. 898. and (8) of subsection (b) of such section 413 shall be applied by substituting “401(a)(3)” for “410”. (B) For plan years beginning before the applicable effective date of section 411 of such Code, the provisions of subsection (b)(2) of Ante, p. 901. such section 413 shall be applied by substituting “401(a)(7)” for “411(d)(3)”. (C) (i) The provisions of subsection (b)(4) of such section 413 shall not apply to plan years beginning before the applicable effective date of section 411 of such Code. (ii) The provisions of subsection (b)(5) (other than the second sentence thereof) of such section 413 shall not apply to plan years beginning before the applicable effective date of section 412 of such Code. Ante, p. 914. PART 2— CERTAIN OTHER PROVISIONS RELATING TO QUALIFIED RETIREMENT PLANS SEC. 1021. ADDITIONAL PLAN REQUIREMENTS. (a) Joint and Survivor Annuity Requirement.— (1) In general.— Effective with respect to plan years beginning 26 USC 401 note. 26 USC 401. after December 31, 1975, section 401(a) (relating to requirements for qualification) is amended by inserting after paragraph (10) the following new paragraph: “(11) (A) A trust shall not constitute a qualified trust under this section if the plan of which such trust is a part provides for the payment of benefits in the form of an annuity unless such plan provides for the payment of annuity benefits in a form having the effect of a qualified joint and survivor annuity. “(B) Notwithstanding the provisions of subparagraph (A), in the case of a plan which provides for the payment of benefits before the normal retirement age (as defined in section 411(a)(8)), the plan is not required to provide for the payment of annuity benefits in a form having the effect of a qualified joint and survivor annuity during the period beginning on the date on which the employee enters into the plan as a participant and ending on the later of— “(i) the date the employee reaches the earliest retirement age under the plan, or “(ii) the first day of the 120th month beginning before the date on which the employee reaches normal retirement age. “(C) A plan described in subparagraph (B) does not meet the requirements of subparagraph (A) unless, under the plan, a participant has a reasonable period during which he may elect the qualified joint and survivor annuity form with respect to the period beginning on the date on which the period described in subparagraph (B) ends and ending on the date on which he reaches normal retirement age (as defined in section 411(a)(8)) if he continues his employment during that period. A plan does not meet the requirements of this subparagraph unless, in the case of such an election, the payments under the survivor annuity are not less than the payments which would have been made under the joint annuity to which the participant would have been entitled if he made an election described in this subparagraph immediately prior to his retirement and if his retirement had occurred on the day before his death and within the period within which an election can be made. “(D) A plan shall not be treated as not satisfying the requirements of this paragraph solely because the spouse of the participant is not entitled to receive a survivor annuity (whether or not an election described in subparagraph (C)) has been made under subparagraph (C)) unless the participant and his spouse have been married throughout the 1-year period ending on the date of such participant’s death. “(E) A plan shall not be treated as satisfying the requirements of this paragraph unless, under the plan, each participant has a reasonable period (as described by the Secretary or his delegate by regulations) before the annuity starting date during which he may elect in writing (after having received a written explanation of the terms and conditions of the joint and survivor annuity and the effect of an election under this subparagraph) not to take such joint and survivor annuity. “(F) A plan shall not be treated as not satisfying the requirements of this paragraph solely because under the plan there is a provision that any election described in subparagraph (C) or (E), and any revocation of any such election, does not become effective (or ceases to be effective) if the participant dies within a period (not in excess of 2 years) beginning on the date of such election or revocation, as the case may be. The preceding sentence does not apply unless the plan provision described in the preceding sentence also provides that such an election or revocation will be given effect in any case in which— “(i) the participant dies from accidental causes, “(ii) a failure to give effect to the election or revocation would deprive the participant’s survivor of a survivor annuity, and “(iii) such election or revocation is made before such accident occurred. “(G) For purposes of this paragraph— Definitions. “(i) the term ‘annuity starting date’ means the first day of the first period for which an amount is received as an annuity (whether by reason of retirement or by reason of disability), “(ii) the term ‘earliest retirement age’ means the earliest date on which, under the plan, the participant could elect to receive retirement benefits, and “(iii) the term ‘qualified joint and survivor annuity’ means an annuity for the life of the participant with a survivor annuity for the life of his spouse which is not less than one-half of, or greater than, the amount of the annuity payable during the joint lives of the participant and his spouse and which is the actuarial equivalent of a single life annuity for the life of the participant. For purposes of this paragraph, a plan may take into account in any equitable manner (as determined by the Secretary or his delegate) any increased costs resulting from providing joint and survivor annuity benefits. “(H) This paragraph shall apply only if— “(i) the annuity starting date did not occur before the effective date of this paragraph, and “(ii) the participant was an active participant in the plan on or after such effective date.” (2) Certain additional requirements apply only to plans to which vesting requirements apply.— Section 401(a) (relating 26 USC 401. to requirements for qualification) is amended by adding at the end thereof the following new sentence: “Paragraphs (11), (12), (13), (14), (15), and (19) shall apply only in the case of a plan to which section 411 (relating to minimum vesting standards) Ante, p. 901. applies without regard to subsection (e)(2) of such section.” (b) Requirements in Case of Mergers and Consolidations of Plans or Transfers of Plan Assets.— Effective with respect to plan years beginning after December 31, 1975, section 401(a) is amended by inserting after paragraph (11) the following new paragraph: “(12) A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that in the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan after the date of the enactment of the Employee Retirement Income Security Act of 1974, each Ante, p. 829. participant in the plan would (if the plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the plan had then terminated). This paragraph shall apply in the case of a multiemployer plan only to the extent determined by the Pension Benefit Guaranty Corporation.” (c) Retirement Benefits May Not Be Assigned or Alienated.— Section 401(a) is amended by inserting after paragraph (12) the following Supra. new paragraph: “(13) 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 Post, p. 971. to tax on prohibited transactions) by reason of section 4975 (d)(1). This paragraph shall take effect on January 1, 1976 and shall not apply to assignments which were irrevocable on the date of the enactment of the Employee Retirement Income Security Act of 1974.” (d) Requirement That Payment of Benefits Begin Not Later Than When the Participant Attains Age 65 or Has Completed 10 Years of Participation.— Section 401(a) is amended by inserting after paragraph (13) the following new paragraph: Supra. “(14) A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that, unless the participant otherwise elects, the payment of benefits under the plan to the participant will begin not later than the 60th day after the latest of the close of the plan year in which— “(A) the date on which the participant attains the earlier of age 65 or the normal retirement age specified under the plan, “(B) occurs the 10th anniversary of the year in which the participant commenced participation in the plan, or “(C) the participant terminates his service with the employer. In the case of a plan which provides for the payment of an early retirement benefit, a trust forming a part of such plan shall not constitute a qualified trust under this section unless a participant who satisfied the service requirements for such early retirement benefit, but separated from the service (with any nonforfeitable right to an accrued benefit) before satisfying the age requirement for such early retirement benefit, is entitled upon satisfaction of such age requirement to receive a benefit not less than the benefit to which he would be entitled at the normal retirement age, actuarially, reduced under regulations prescribed by the Secretary or his delegate.” (e) Requirement That Plan Benefits Are Not Decreased by Certain Social Security Increases.— Section 401(a) is amended by inserting after paragraph (14) the following new paragraph: Ante, p. 937. “(15) a trust shall not constitute a qualified trust under this section unless under the plan of which such trust is a part— “(A) in the case of a participant or beneficiary who is receiving benefits under such plan, or “(B) in the case of a participant who is separated from the service and who has nonforfeitable rights to benefits, such benefits are not decreased by reason of any increase in the benefit levels payable under title II of the Social Security Act or 42 USC 401. any increase in the wage base under such title II, if such increase takes place after the date of the enactment of the Employee Retirement Income Security Act of 1974 or (if later) the earlier of the date of first receipt of such benefits or the date of such separation, as the case may be.” (f) Requirement of Nonforfeitability in Case of Certain Withdrawals.— Section 401(a) is amended by inserting after paragraph (18) the following new paragraph: Post, p. 953. “(19) A trust shall not constitute a qualified trust under this section if under the plan of which such trust is a part any part of a participant’s accrued benefit derived from employer contributions (whether or not otherwise nonforfeitable), is forfeitable solely because of withdrawal by such participant of any amount attributable to the benefit derived from contributions made by such participant. The preceding sentence shall not apply to the accrued benefit of any participant unless, at the time of such withdrawal, such participant has a nonforfeitable right to at least 50 percent of such accrued benefit (as determined under section 411). The first sentence of this paragraph shall not apply to the extent that an accrued benefit is permitted to be forfeited in accordance with section 411(a)(3)(D)(iii) (relating to proportional forfeitures Ante, p. 901. of benefits accrued before enactment of the Employee Retirement Income Security Act of 1974, in the event of withdrawal of certain mandatory contributions).” SEC. 1022. MISCELLANEOUS PROVISIONS. (a) Requirement That Plan Not Be Discriminatory.— Section 401(a)(4) (disqualifying discriminatory plans) is amended to read 26 USC 401. as follows: “(4) If the contributions or the benefits provided under the plan do not discriminate in favor of employees who are— “(A) officers, “(B) shareholders, or “(C) highly compensated. For purposes of this paragraph, there shall be excluded from consideration employees described in section 410(b)(2)(A) and Ante, p. 898. (C).” (b) Amendments Relating to Self-Employed Individuals and Owner-Employees.— (1) Amendment of section (401)(a)(10).— So much of subparagraph (A) of section 401(a)(10) as precedes clause (i) 26 USC 401. thereof is amended to read as follows: “(A) paragraph (3), the first and second sentences of paragraph (5), and section 410 shall not apply, but—”. (2) Amendment of section (401)(d)(3).— Section 401(d)(3) (relating to additional requirements for qualification of trusts and and plans benefiting owner-employees) is amended to read as follows: “(3) (A) The plan benefits each employee having 3 or more years of service (within the meaning of section 410(a)(3)). “(B) For purposes of subparagraph (A), the term ‘employee’ does not include— “(i) any employee included in a unit of employees covered by a collective-bargaining agreement described in section 410(b)(2)(A), and “(ii) any employee who is a nonresident alien individual described in section 410(b)(2)(C).” (c) Persons Other Than Banks May Be Trustees of Trusts Benefitting Owner-Employees.— (1) The first sentence of section 401(d)(1) is amended to read as follows: “In the case of a trust which is created on or after October 10, 1962, or which was created before such date but is not exempt from tax under section 501(a) as an organization 26 USC 501. described in subsection (a) on the day before such date, the assets thereof are held by a bank or other person who demonstrates to the satisfaction of the Secretary or his delegate that the manner in which he will administer the trust will be consistent with the requirements of this section. A trust shall not be disqualified under this paragraph merely because a person (including the employer) other than the trustee or custodian so administering the trust may be granted, under the trust instrument, the power to control the investment of the trust funds either by directing investments (including reinvestments, disposals, and exchanges) or by disapproving proposed investments (including reinvestments, disposals, or exchanges).” (2) The second sentence of section 401(d)(1) is amended by striking out “the date of the enactment of this subsection” and inserting in lieu thereof “October 10, 1962,”. (d) Certain Custodial Accounts.— Effective as of January 1, 26 USC 401 note. 1974, subsection (f) of section 401 (relating to certain custodial accounts) is amended to read as follows: “(f) Certain Custodial Accounts and Annuity Contracts.— For purposes of this title, a custodial account or an annuity contract shall be treated as a qualified trust under this section if— “(1) the custodial account or annuity contract would, except for the fact that it is not a trust, constitute a qualified trust under this section, and “(2) in the case of a custodial account the assets thereof are held by a bank (as defined in subsection (d)(1)) or another person who demonstrates, to the satisfaction of the Secretary or his delegate, 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 annuity 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.” (e) Custodial Accounts for Regulated Investment Company Stock.— Effective as of January 1, 1974, section 408(b) (relating to 26 USC 403 and note. 26 USC 501. taxability of beneficiary under annuity purchased by section 501(c)(3) organization or public school) is amended by adding at the end thereof the following new paragraph: “(7) Custodial accounts for regulated investment company stock.— “(A) Amounts paid treated as contributions.— For purposes of this title, amounts paid by an employer described in paragraph (1)(A) to a custodial account which satisfies the requirements of section 401(f)(2) shall be treated as Ante, p. 939. amounts contributed by him for an annuity contract for his employee if the amounts are paid to provide a retirement benefit for that employee and are to be invested in regulated investment company stock to be held in that custodial account. “(B) Account treated as plan.— For purposes of this title, a custodial account which satisfies the requirements of section 401(f)(2) shall be treated as an organization described in section 401(a) solely for purposes of subchapter F and subtitle F with respect to amounts received by it (and income from investment thereof). “(C) Regulated investment company.— For purposes of this paragraph, the term ‘regulated investment company’ means a domestic corporation which is a regulated investment company within the meaning of section 851(a), and which 26 USC 851. issues only redeemable stock.” (f) Insured Credit Unions.— Effective as of January 1, 1974, the 26 USC 401 and note. last sentence of section 401(d)(1) is amended by striking out “section 581,” and inserting in lieu thereof “section 581, an insured credit union (within the meaning of section 101(6) of the Federal Credit Union Act),”. (g) Public Inspection of Certain Information With Respect to Pension, Profit-Sharing, and Stock Bonus Plans.— (1) Amendment of section 6104(a).— Paragraph (1) of section 6104(a) (relating to public inspection of applications for 26 USC 6104. tax exemption) is amended— (A) by redesignating subparagraph (B) as subparagraph (D) and by inserting after subparagraph (A) the following new subparagraphs: “(B) Pension, etc., plans.— The following shall be open to public inspection at such times and in such places as the Secretary or his delegate may prescribe: “(i) any application filed with respect to the qualification of a pension, profit-sharing, or stock bonus plan under section 401(a), 403(a), or 405(a), an individual 26 USC 401, 403, 405. 26 USC 408. retirement account described in section 408(a), or an individual retirement annuity described in section 408 (b), “(ii) any application filed with respect to the exemption from tax under section 501(a) of an organization 26 USC 501. forming part of a plan or account referred to in clause (i), “(iii) any papers submitted in support of an application referred to in clause (i) or (ii), and “(iv) any letter or other document issued by the Internal Revenue Service and dealing with the qualification referred to in clause (i) or the exemption from tax referred to in clause (ii). Except in the case of a plan participant, this subparagraph shall not apply to any plan referred to in clause (i) having not more than 25 participants. “(C) Certain names and compensation not to be opened to public inspection.— In the case of any application, document, or other papers, referred to in subparagraph (B), information from which the compensation (including deferred compensation) of any individual may be ascertained shall not be open to public inspection under subparagraph (B).” (B) The heading of subparagraph (A) of section 6104(a)(1) 26 USC 6104. is amended to read as follows: “(A) Organizations described in section 501.—”. (C) The heading of subparagraph (D) of section 6104(a) (1) as redesignated by subparagraph (A) of this paragraph is amended to read as follows: “(D) Withholding of certain other information.—”. (D) Subparagraph (D) of section 6104(a)(1) (as so redesignated) is amended by striking out “subparagraph (A)” each place it appears and inserting in lieu thereof “subparagraph (A) or (B)”. (2) Amendment of section 6104(a)(2).— Subparagraph (A) of section 6104(a)(2) is amended by adding at the end thereof “any application referred to in subparagraph (B) of subsection (a)(1) of this section, and”. (3) Amendment of section 6104(b).— Section 6104(b) (relating to inspection of annual information returns) is amended by striking out “and 6056” and inserting in lieu thereof “6056, and 6058”. (4) Effective date.— The amendments made by this subsection 26 USC 6104 note. shall apply to applications filed (or documents issued) after the date of enactment of this Act. (h) Publicity of Returns.— Effective on the date of the enactment 26 USC 6103 and note. of this Act, section 6103 (relating to publicity of returns and disclosure of information as to persons filing income tax returns) is amended by adding at the end thereof a new subsection (g) to read as follows: “(g) Disclosure of Information With Respect to Deferred Compensation Plans.— The Secretary or his delegate is authorized to furnish— “(1) returns with respect to any tax imposed by this title or information with respect to such returns to the proper officers and employees of the Department of Labor and the Pension Benefit Guaranty Corporation for purposes of administration of Titles I and IV of the Employee Retirement Income Security Act of Ante, p. 832. Post, p. 1003. 1974, and “(2) registration statements (as described in section 6057) and 26 USC 6057. information with respect to such statements to the proper officers and employees of the Department of Health, Education, and Welfare for purposes of administration of section 1131 of the Social Security Act.” (i) Certain Puerto Rican Pension, Etc., Plans To Be Exempt From Tax Under Section 501(a).— (1) General rule.— Effective for taxable years beginning after 26 USC 501 and note. 26 USC 501. December 31, 1973, for purposes of section 501(a) of the Internal Revenue Code of 1954 (relating to exemption from tax), any trust forming part of a pension, profit-sharing, or stock bonus plan all of the participants of which are residents of the Commonwealth of Puerto Rico shall be treated as an organization described in section 401(a) of such Code if such trust— (A) forms part of a pension, profit-sharing, or stock bonus plan, and (B) is exempt from income tax under the laws of the Commonwealth of Puerto Rico. (2) Election to have provisions of, and amendments made by, title ii of this act apply.— (A) If the administrator of a pension, profit-sharing, or stock bonus plan which is created or organized in Puerto Rico elects, at such time and in such manner as the Secretary of the Treasury may require, to have the provisions of this paragraph apply, for plan years beginning after the date of election any trust forming a part of such plan shall be treated as a trust created or organized in the United States for purposes of section 401(a) of the Internal Revenue Code of 1954. (B) An election under subparagraph (A), once made, is irrevocable. (C) This paragraph applies to plan years beginning after the date of enactment of this Act. (D) The source of any distributions made under a plan which makes an election under this paragraph to participants and beneficiaries residing outside of the United States shall be determined, for purposes of subchapter N of chapter 1 of the Internal Revenue Code of 1954, by the Secretary of the Treasury in accordance with regulations prescribed by him. For purposes of this subparagraph the United States means the United States as defined in section 7701(a)(9) of the Internal Revenue Code of 1954. 26 USC 7701. (j) Year of Deduction for Certain Employer Contributions for Severance Payments Required by Foreign Law.— Effective for taxable years beginning after December 31, 1973, if— (1) an employer is engaged in a trade or business in a foreign country, (2) such employer is required by the laws of that country to make payments, based on periods of service, to its employees or their beneficiaries after the employees’ retirement, death, or other separation from the service, and (3) such employer establishes a trust (whether organized within or outside the United States) for the purpose of funding the payments required by such law, then, in determining for purposes of paragraph (5) of section 404(a) of the Internal Revenue Code of 1954 the taxable year in which any 26 USC 404. contribution to or under the plan is includible in the gross income of the nonresident alien employees of such employer, such paragraph (5) shall be treated as not requiring that separate accounts be maintained for such nonresident alien employees. (k) Receipts for Employees.— Section 6051 (relating to receipts 26 USC 6051. for employees) is amended by inserting after “exemption,” in subsection (a) the following: “or every employer engaged in a trade or business who pays remuneration for services performed by an employee, including the cash value of such remuneration paid in any medium other than cash,”. SEC. 1023. RETROACTIVE CHANGES IN PLAN. Section 401(b) (relating to certain retroactive changes in plan) is amended to read as follows: “(b) Certain Retroactive Changes in Plan.— A stock bonus, pension, profit-sharing, or annuity plan shall be considered as satisfying the requirements of subsection (a) for the period beginning with the date on which it was put into effect, or for the period beginning with the earlier of the date on which there was adopted or put into effect any amendment which caused the plan to fail to satisfy such requirements, and ending with the time prescribed by law for filing the return of the employer for his taxable year in which such plan or amendment was adopted (including extensions thereof) or such later time as the Secretary or his delegate may designate, if all provisions of the plan which are necessary to satisfy such requirements are in effect by the end of such period and have been made effective for all purposes for the whole of such period.” SEC. 1024. EFFECTIVE DATES. Except as otherwise provided in section 1021, the amendments made by section 1021 shall apply to plan years to which part I applies. Except as otherwise provided in section 1022, the amendments made by section 1022 shall apply to plan years to which part I applies. Section 1023 shall take effect on the date of the enactment of this Act. PART 3— REGISTRATION AND INFORMATION SEC. 1031. REGISTRATION AND INFORMATION. (a) Annual Registration and Information Returns.— Part III of subchapter A of chapter 61 (relating to information returns) is amended by adding at the end thereof the following new subpart: “SUBPART E— REGISTRATION OF AND INFORMATION CONCERNING PENSION, ETC., PLANS “Sec. 6057. Annual registration, etc. “Sec. 6058. Information required in connection with certain plans of deferred compensation. “Sec. 6059. Periodic report by actuary. “SEC. 6057. ANNUAL REGISTRATION, ETC. “(a) Annual Registration.— “(1) General Rule.— Within such period after the end of a plan year as the Secretary or his delegate may by regulations prescribe, the plan administrator (within the meaning of section 414(g)) of each plan to which the vesting standards of section 203 Ante, p. 925. Ante, p. 854. of part 2 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 applies for such plan year shall file a registration statement with the Secretary or his delegate. “(2) Contents.— The registration statement required by paragraph (1) shall set forth— “(A) the name of the plan, “(B) the name and address of the plan administrator, “(C) the name and taxpayer identifying number of each participant in the plan— “(i) who, during such plan year, separated from the service covered by the plan, “(ii) who is entitled to a deferred vested benefit under the plan as of the end of such plan year, and “(iii) with respect to whom retirement benefits were not paid under the plan during such plan year, “(D) the nature, amount, and form of the deferred vested benefit to which such participant is entitled, and “(E) such other information as the Secretary or his delegate may require. At the time he files the registration statement under this subsection, the plan administrator shall furnish evidence satisfactory to the Secretary or his delegate that he has complied with the requirement contained in subsection (e). “(b) Notification of Change in Status.— Any plan administrator required to register under subsection (a) shall also notify the Secretary or his delegate, at such time as may be prescribed by regulations, of— “(1) any change in the name of the plan, “(2) any change in the name or address of the plan administrator, “(3) the termination of the plan, or “(4) the merger or consolidation of the plan with any other plan or its division into two or more plans. “(c) Voluntary Reports.— To the extent provided in regulations prescribed by the Secretary or his delegate, the Secretary or his delegate may receive from— “(1) any plan to which subsection (a) applies, and “(2) any other plan (including any governmental plan or church plan (within the meaning of section 414)), Ante, p. 925. such information (including information relating to plan years beginning before January 1, 1974) as the plan administrator may wish to file with respect to the deferred vested benefit rights of any participant separated from the service covered by the plan during any plan year. “(d) Transmission of Information to Secretary of Health, Education, and Welfare.— The Secretary or his delegate shall transmit copies of any statements, notifications, reports, or other information obtained by him under this section to the Secretary of Health, Education, and Welfare. “(e) Individual Statement to Participant.— Each plan administrator required to file a registration statement under subsection (a) shall, before the expiration of the time prescribed for the filing of such registration statement, also furnish to each participant described in subsection (a)(2)(C) an individual statement setting forth the information with respect to such participant required to be contained in such registration statement. “(f) Regulations.— “(1) In general.— The Secretary, after consultation with the Secretary of Health, Education, and Welfare, may prescribe such regulations as may be necessary to carry out the provisions of this section. “(2) Plans to which more than one employer contributes.— This section shall apply to any plan to which more than one employer is required to contribute only to the extent provided in regulations prescribed under this subsection. “(g) Cross References.— “For provisions relating to penalties for failure to register or furnish statements required by this section, see section 6652(e) and section 6690. “For coordination between Department of the Treasury and the Department of Labor with regard to administration of this section, see section 3004 of the Employee Retirement Income Security Act of 1974. “SEC. 6058. INFORMATION REQUIRED IN CONNECTION WITH CERTAIN PLANS OF DEFERRED COMPENSATION. “(a) In General.— Every employer who maintains a pension, annuity, stock bonus, profit-sharing, or other funded plan of deferred compensation described in part I of subchapter D of chapter 1, or the plan 26 USC 401. Ante, p. 925. administrator (within the meaning of section 414(g)) of the plan, shall file an annual return stating such information as the Secretary or his delegate may by regulations prescribe with respect to the qualification, financial condition, and operations of the plan; except that, in the discretion of the Secretary or his delegate, the employer may be relieved from stating in its return any information which is reported in other returns. “(b) Actuarial Statement in Case of Mergers, Etc.— Not less than 30 days before a merger, consolidation, or transfer of assets or liabilities of a plan described in subsection (a) to another plan, the plan administrator (within the meaning of section 414(g)) shall file an actuarial statement of valuation evidencing compliance with the requirements of section 401(a)(12). Ante, p. 937. “(c) Employer.— For purposes of this section, the term ‘employer’ includes a person described in section 401(c)(4) and an individual who 26 USC 401. 26 USC 408. establishes an individual retirement account or annuity described in section 408. “(d) Cross References.— “For provisions relating to penalties for failure to file a return required by this section, see section 6652(f). “For coordination between the Department of the Treasury and the Department of Labor with respect to the information required under this section, see section 3004 of title III of the Employee Retirement Income Security Act of 1974.”. (b) Sanctions.— (1) Failure to file registration statements or notification of change in status.— (A) Section 6652 (relating to failure to file certain information 26 USC 6652. returns) is amended by redesignating subsection (e) as subsection (g) and by inserting after subsection (d) the following new subsections: “(e) Annual Registration and Other Notification by Pension Plan.— “(1) Registration.— In the case of any failure to file a registration statement required under section 6057(a) (relating to Ante, p. 943. annual registration of certain plans) which includes all participants required to be included in such statement, on the date prescribed therefor (determined without regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause, there shall be paid (on notice and demand by the Secretary or his delegate and in the same manner as tax) by the person failing so to file, an amount equal to $1 for each participant with respect to whom there is a failure to file, multiplied by the number of days during which such failure continues, but the total amount imposed under this paragraph on any person for any failure to file with respect to any plan year shall not exceed $5,000. “(2) Notification of change of status.— In the case of failure to file a notification required under section 6057(b) (relating Ante, p. 943. to notification of change of status) on the date prescribed therefor (determined without regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause, there shall be paid (on notice and demand by the Secretary or his delegate and in the same manner as tax) by the person failing so to file, $1 for each day during which such failure continues, but the total amounts imposed under this paragraph on any person for failure to file any notification shall not exceed $1,000. “(f) Information Required in Connection With Certain Plans of Deferred Compensation.— In the case of failure to file a return or statement required under section 6058 (relating to information Ante, p. 945. required in connection with certain plans of deferred compensation) or 6047 (relating to information relating to certain trusts and annuity Post, p. 970. 26 USC 6047. and bond purchase plans) on the date and in the manner prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause, there shall be paid (on notice and demand by the Secretary or his delegate and in the same manner as tax) by the person failing so to file, $10 for each day during which such failure continues, but the total amount imposed under this subsection on any person for failure to file any return shall not exceed $5,000.” (B) (i) The section heading for section 6652 is amended by 26 USC 6652. adding “, Registration Statements, etc.” before the period at the end thereof. (ii) The item relating to section 6652 in the table of contents for subchapter A of chapter 68 is amended by adding “, registration statements, etc.” before the period of the end thereof. (2) Failure to furnish statement to participant.— (A) Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding at the end thereof the following new section: “SEC. 6690. FRAUDULENT STATEMENT OR FAILURE TO FURNISH STATEMENT TO PLAN PARTICIPANT. “Any person required under section 6057(e) to furnish a statement to a participant who willfully furnishes a false or fraudulent statement, or who willfully fails to furnish a statement in the manner, at the time, and showing the information required under section 6057(e), or regulations prescribed thereunder, shall for each such act, or for each such failure, be subject to a penalty under this subchapter of $50, which shall be assessed and collected in the same manner as the tax on employers imposed by section 3111.” 26 USC 3111. (B) The table of sections for such subchapter B is amended by adding at the end thereof the following new item: “Sec. 6690. Fraudulent statement or failure to furnish statement to plan participant.” (c) Clerical Amendments.— (1) The table of subparts for such part III is amended by adding at the end thereof the following: “Subpart E. Registration of and information concerning pension, etc., plans.” (2) Section 6033(c) (relating to cross references) is amended 26 USC 6033. by adding at the end thereof the following: “For provisions relating to information required in connection with certain plans of deferred compensation, see section 6058.” (3) Subsection (d) of section 6047 (relating to information 26 USC 6047. with respect to certain trusts and annuity and bond purchase plans) is amended to read as follows: “(d) Cross References.— “(1) For provisions relating to penalties for failure to file a return required by this section, see section 6652(f). “(2) For criminal penalty for furnishing fraudulent information, see section 7207.” SEC. 1032. DUTIES OF SECRETARY OF HEALTH, EDUCATION, AND WELFARE. Title XI of the Social Security Act (relating to general provisions) is amended by adding at the end of part A thereof the following new section: “Sec. 1131. “notification of social security claimant with respect to deferred vested benefits “(a) Whenever— “(1) the Secretary makes a finding of fact and a decision as to— “(A) the entitlement of any individual to monthly benefits under section 202, 223, or 228, 42 USC 402, 423, 428. “(B) the entitlement of any individual to a lump-sum death payment payable under section 202(i) on account of the death of any person to whom such individual is related by blood, marriage, or adoption, or “(C) the entitlement under section 226 of any individual 42 USC 426. 42 USC 1395c. to hospital insurance benefits under part A of title XVIII, or “(2) the Secretary is requested to do so— “(A) by any individual with respect to whom the Secretary holds information obtained under section 6057 of the Internal Revenue Code of 1954, or Ante, p. 943. “(B) in the case of the death of the individual referred to in subparagraph (A), by the individual who would be entitled to payment under section 204(d) of this Act. 42 USC 404. he shall transmit to the individual referred to in paragraph (1) or the individual making the request under paragraph (2) any information, as reported by the employer, regarding any deferred vested benefit transmitted to the Secretary pursuant to such section 6057 with respect to the individual referred to in paragraph (1) or (2)(A) or the person on whose wages and self-employment income entitlement (or claim of entitlement) is based. “(b) “(1) For purposes of section 201(g)(1), expenses incurred in 42 USC 401. the administration of subsection (a) shall be deemed to be expenses incurred for the administration of title II. “(2) There are hereby authorized to be appropriated to the Federal Appropriation. Old-Age and Survivors Insurance Trust Fund for each fiscal year (commencing with the fiscal year ending June 30, 1974) such sums as the Secretary deems necessary on account of additional administrative expenses resulting from the enactment of the provisions of subsection (a).” SEC. 1033. REPORTS BY ACTUARIES. (a) Reports by Actuaries.— Subpart E of part III of subchapter A of chapter 61 (relating to registration of and information concerning pension, etc., plans) as added by section 1031(a) of this Act, is Ante, p. 943. amended by adding at the end thereof the following new section: “SEC. 6059. PERIODIC REPORT OF ACTUARY. “(a) General Rule.— The actuarial report described in subsection (b) shall be filed by the plan administrator (as defined in section 414(g) of eacli defined benefit plan to which section 412 applies, for Ante, pp. 925, 914. the first plan year for which section 412 applies to the plan and for each third plan year thereafter (or more frequently if the Secretary or his delegate determines that more frequent reports are necessary). “(b) Actuarial Report.— The actuarial report of a plan required by subsection (a) shall be prepared and signed by an enrolled actuary (within the meaning of section 7701(a)(35)) and shall contain— 26 USC 7701. “(1) a description of the funding method and actuarial assumptions used to determine costs under the plan, “(2) a certification of the contribution necessary to reduce the accumulated funding deficiency (as defined in section 412(a)) to zero, “(3) a statement— “(A) that to the best of his knowledge the report is complete and accurate, and “(B) the requirements of section 412(c) (relating to reasonable actuarial assumptions) have been complied with, “(4) such other information as may be necessary to fully and fairly disclose the actuarial position of the plan, and “(5) such other information regarding the plan as the Secretary or his delegate may by regulations require. “(c) Time and Manner of Filing.— The actuarial report and statement required by this section shall be filed at the time and in the manner provided by regulations prescribed by the Secretary or his delegate. “(d) Cross Reference.— “For coordination between the Department of the Treasury and the Department of Labor with respect to the report required to be filed under this section, see section 3004 of title III of the Employee Retirement Income Security Act of 1974.”. (b) Assessable Penalties.— Subchapter B of chapter 68 (relating Ante, p. 946. to assessable penalties) is amended by adding at the end thereof the following new section: “SEC. 6692. FAILURE TO FILE ACTUARIAL REPORT. “The plan administrator (as defined in section 414(g)) of each Ante, p. 925. Ante, p. 914. Ante, p. 947. defined benefit plan to which section 412 applies who fails to file the report required by section 6059 at the time and in the manner required by section 6059, shall pay a penalty of $1,000 for each such failure unless it is shown that such failure is due to reasonable cause.” (c) Consolidation of Actuarial Reports.— The Secretary of the 26 USC 6059 note. Treasury and the Secretary of Labor shall take such steps as may be necessary to assure coordination to the maximum extent feasible between the actuarial reports required by section 6059 of the Internal Revenue Code of 1954 and by section 103(d) of title I of the Employee Retirement Income Security Act of 1974. (d) Clerical Amendment.— The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following new item: “Sec. 6692. Failure to file actuarial report.”. SEC. 1034. EFFECTIVE DATES. This part shall take effect upon the date of the enactment of this Act; except that— (1) the requirements of section 6059 of the Internal Revenue Code of 1954 shall apply only with respect to plan years to which part I of this title applies, (2) the requirements of section 6057 of such Code shall apply Ante, p. 943. only with respect to plan years beginning after December 31, 1975, (3) the requirements of section 6058(a) of such Code shall Ante, p. 945. apply only with respect to plan years beginning after the date of the enactment of this Act, and (4) the amendments made by section 1032 shall take effect on January 1, 1978. PART 4— DECLARATORY JUDGMENTS RELATING TO QUALIFICATION OF CERTAIN RETIREMENT PLANS SEC. 1041. TAX COURT PROCEDURE. (a) In General.— Subchapter O of chapter 76 (relating to the Tax Court, is amended by adding at the end thereof the following new part: “PART IV— DECLARATORY JUDGMENTS RELATING TO QUALIFICATION OF CERTAIN RETIREMENT PLANS “Sec. 7476. Declaratory judgments. “SEC. 7476. DECLARATORY JUDGMENTS. “(a) Creation of Remedy.— In a case of actual controversy involving— “(1) a determination by the Secretary or his delegate with respect to the initial qualification or continuing qualification of a retirement plan under subchapter D of chapter I, or “(2) a failure by the Secretary or his delegate to make a determination with respect to— “(A) such initial qualification, or “(B) such continuing qualification if the controversy arises from a plan amendment or plan termination, upon the filing of an appropriate pleading, the United States Tax Court may make a declaration with respect to such initial qualification or continuing qualification. Any such declaration shall have the force and effect of a decision of the Tax Court and shall be reviewable as such. “(b) Limitations.— “(1) Petitioner.— A pleading may be filed under this section only by a petitioner who is the employer, the plan administrator, an employee who has qualified under regulations prescribed by the Secretary or his delegate as an interested party for purposes of pursuing administrative remedies within the Internal Revenue Service, or the Pension Benefit Guaranty Corporation. “(2) Notice.— For purposes of this section, the filing of a pleading by any petitioner may be held by the Tax Court to be premature, unless the petitioner establishes to the satisfaction of the court that he has complied with the requirements prescribed by regulations of the Secretary or his delegate with respect to notice to other interested parties of the filing of the request for a determination referred to in subsection (a). “(3) Exhaustion of administrative remedies.— The Tax Court shall not issue a declaratory judgment or decree under this section in any proceeding unless it determines that the petitioner has exhausted administrative remedies available to him within the Internal Revenue Service. A petitioner shall not be deemed to have exhausted his administrative remedies with respect to a failure by the Secretary or his delegate to make a determination with respect to initial qualification or continuing qualification of a retirement plan before the expiration of 270 days after the request for such determination was made. “(4) Plan put into effect.— No proceeding may be maintained under this section unless the plan (and, in the case of a controversy involving the continuing qualification of the plan because of an amendment to the plan, the amendment) with respect to which a decision of the Tax Court is sought has been put into effect before the filing of the pleading. A plan or amendment shall not be treated as not being in effect merely because under the plan the funds contributed to the plan may be refunded if the plan (or the plan as so amended) is found to be not qualified. “(5) Time for bringing action.— If the Secretary or his delegate sends by certified or registered mail notice of his determination with respect to the qualification of the plan to the persons referred to in paragraph (1) (or, in the case of employees referred to in paragraph (1), to any individual designated under regulations prescribed by the Secretary or his delegate as a representative of such employee), no proceeding may be initiated under this section by any person unless the pleading is filed before the ninety-first day after the day after such notice is mailed to such person (or to his designated representative, in the case of an employee). “(c) Commissioners.— The chief judge of the Tax Court may assign proceedings under this section to be heard by the commissioners of the court, and the court may authorize a commissioner to make the decision of the court with respect to such proceeding, subject to such conditions and review as the court may by rule provide. “(d) Retirement Plan.— For purposes of this section, the term ‘retirement plan’ means— “(1) a pension, profit-sharing, or stock bonus plan described in section 401(a) or a trust which is part of such a plan, 26 USC 401. “(2) an annuity plan described in section 403(a), or 26 USC 403. “(3) a bond purchase plan described in section 405(a). 26 USC 405. “(e) Cross Reference.— “For provisions concerning intervention by Pension Benefit Guaranty Corporation and Secretary of Labor in actions brought under this section and right of Pension Benefit Guaranty Corporation to bring action, see section 301(c) of subtitle A of title III of the Employee Retirement Income Security Act of 1974.” (b) Technical and Conforming Amendments.— (1) Fee for filing petition.— Section 7451 (relating to fee 26 USC 7451. for filing petition) is amended by striking out “deficiency” and inserting in lieu thereof “deficiency or for a declaratory judgment under part IV of this subchapter”. (2) Date of decision.— Section 7459(c) (relating to date of 26 USC 7459. decision) is amended by inserting before the period at the end of the first sentence the following: “or, in the case of a declaratory judgment proceeding under part IV of this subchapter, the date of the court’s order entering the decision”. (3) Venue for appeal of decision.— (A) Section 7482(b)(1) (relating to venue) is amended by 26 USC 7482. striking out the period at the end of subparagraph (B) and inserting in lieu thereof “, or” and by inserting after subparagraph (B) the following new subparagraph: “(C) in the case of a person seeking a declaratory decision Ante, p. 949. under section 7476, the principal place of business, or principal office or agency of the employer.” (B) Section 7482(b)(1) is further amended— (i) by striking out “neither subparagraph (A) nor (B) applies” and inserting in lieu thereof “subparagraph (A), (B), and (C) do not apply”; and (ii) by inserting before the period at the end of the last sentence thereof the following: “or as of the time the petition seeking a declaratory decision under section 7476 was filed with the Tax Court”. Ante, p. 949. (c) Clerical Amendment.— The table of parts for subchapter C of chapter 76 (relating to the Tax Court) is amended by adding at the end thereof the following new item: “Part IV. Declaratory judgments relating to qualification of certain retirement plans.”. (d) Effective Date.— The amendments made by this section shall 26 USC 7476 note. apply to pleadings filed more than 1 year after the date of the enactment of this Act. PART 5— INTERNAL REVENUE SERVICE SEC. 1051. ESTABLISHMENT OF OFFICE. (a) In General.— Section 7802 (relating to Commissioner of Internal 26 USC 7802. Revenue) is amended to read as follows: “SEC. 7802. COMMISSIONER OF INTERNAL REVENUE; ASSISTANT COMMISSIONER (EMPLOYEE PLANS AND EXEMPT ORGANIZATIONS). “(a) Commissioner of Internal Revenue.— There shall be in the Department of the Treasury a Commissioner of Internal Revenue, who shall be appointed by the President, by and with the advice and consent of the Senate. The Commissioner of Internal Revenue shall have such duties and powers as may be prescribed by the Secretary. “(b) Assistant Commissioner for Employee Plans and Exempt Organizations.— There is established within the Internal Revenue Office of Employee Plans and Exempt Organizations. Establishment. Service an office to be known as the ‘Office of Employee Plans and Exempt Organizations’ to be under the supervision and direction of an Assistant Commissioner of Internal Revenue. As head of the Office, the Assistant Commissioner shall be responsible for carrying out such functions as the Secretary or his delegate may prescribe with respect to organizations exempt from tax under section 501(a) and with respect 26 USC 501. to plans to which part I of subchapter D of chapter 1 applies (and with respect to organizations designed to be exempt under such section and plans designed to be plans to which such part applies).” (b) Salaries.— (1) Assistant commissioner.— Section 5109 of title 5, United States Code, is amended by adding at the end thereof the following new subsection: “(c) The position held by the employee appointed under section 7802(b) of the Internal Revenue Code of 1954 is classified at GS–18, Supra. and is in addition to the number of positions authorized by section 5108(a) of this title.” 5 USC 5108. (2) Classification of positions at gs–16 and 17.— Section 5108 of title 5, United States Code, is amended by adding at the end thereof the following new subsection: “(e) In addition to the number of positions authorized by subsection (a), the Commissioner of Internal Revenue is authorized, without regard to any other provision of this section, to place a total of 20 positions in the Internal Revenue Service in GS–16 and 17.”. (c) Clerical Amendments.— The item relating to section 7802 in the table of sections for subchapter A of chapter 80 is amended to read as follows: “Sec. 7802. Commissioner of Internal Revenue; Assistant Commissioner (Employee Plans and Exempt Organizations).” (d) Effective Date.— The amendments made by this section shall 26 USC 7802 note. take effect on the 90th day after the date of the enactment of this Act. SEC. 1052. AUTHORIZATION OF APPROPRIATIONS. There is authorized to be appropriated to the Department of the Treasury for the purpose of carrying out all functions of the Office of Employee Plans and Exempt Organizations for each fiscal year beginning after June 30, 1974, an amount equal to the sum of— (1) so much of the collections from the taxes imposed under section 4940 of such Code (relating to excise tax based on investment 26 USC 4940. income) as would have been collected if the rate of tax under such section was 2 percent during the second preceding fiscal year, and (2) the greater of— (A) an amount equal to the amount described in paragraph (1), or (B) $30,000,000. Subtitle B— Other Amendments to the Internal Revenue Code Relating to Retirement Plans SEC. 2001. CONTRIBUTIONS ON BEHALF OF SELF-EMPLOYED INDIVIDUALS AND SHAREHOLDER-EMPLOYEES. (a) Increase in Maximum Amount Deductible for Self-Employed Individuals— (1) Paragraph (1) of section 404(e) (relating to special limitations 26 USC 404. for self-employed individuals) is amended— (A) by striking out “$2,500, or 10 percent” and inserting in lieu thereof “$7,500, or 15 percent”, and (B) by striking out “subject to the provisions of paragraph (2)” and inserting in lieu thereof “subject to paragraphs (2) and (4)”. (2) Paragraph (2)(A) of section 404(e) is amended by striking out “shall not exceed $2,500, or 10 percent” and inserting in lieu thereof “shall (subject to paragraph (4)) not exceed $7,500, or 15 percent”. (3) Section 404(e) is amended by adding at the end thereof the following new paragraph: “(4) Limitations cannot be lower than $750 or 100 percent of earned income.— The limitations under paragraphs (1) and (2)(A) for any employee shall not be less than the lesser of— “(A) $750, or “(B) 100 percent of the earned income derived by such employee from the trades or businesses taken into account for purposes of paragraph (1) or (2)(A) as the case may be.”. (b) Increase in Maximum Amount Deductible for Shareholder-Employees.— Paragraph (1) of section 1379(b) (relating to 26 USC 1379. taxability of shareholder-employees) is amended— (1) by striking out “10 percent” in subparagraph (A) and inserting in lieu thereof “15 percent”, and (2) by striking out “$2,500” in subparagraph (B) and inserting in lieu thereof “$7,500”. (c) Only First $100,000 of Annual Compensation To Be Taken Into Account.— Subsection (a) of section 401 (relating to requirements 26 USC 401. for qualification) is amended by inserting after paragraph (16) the following new paragraph: “(17) In the case of a plan which provides contributions or benefits for employees some or all of whom are employees within the meaning of subsection (c)(1), or are shareholder-employees within the meaning of section 1379(d), only if the annual compen-sation of each employee taken into account under the plan does not exceed the first $100,000 of such compensation.” (d) Defined Benefit Plans for Self-Employed Individuals.— (1) Subsection (a) of section 401 is amended by inserting after paragraph (17) the following new paragraph: Ante, p. 952. “(18) In the case of a trust which is part of a plan providing a defined benefit for employees some or all of whom are employees within the meaning of subsection (c)(1), or are shareholder-employees within the meaning of section 1379(d), only if such 26 USC 1379. plan satisfies the requirements of subsection (j).” (2) Section 401 (relating to qualified pension, profit-sharing, 26 USC 401. and stock bonus plans) is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: “(j) Defined Benefit Plans Providing Benefits for Self-Employed Individuals and Shareholder-Employees.— “(1) In general.— A defined benefit plan satisfies the requirements of this subsection only if the basic benefit accruing under the plan for each plan year of participation by an employee within the meaning of subsection (c)(1) (or a shareholder-employee) is permissible under regulations prescribed by the Secretary or his delegate under this subsection to insure that there will be reasonable comparability (assuming level funding) between the maximum retirement benefits which may be provided with favorable tax treatment under this title for such employees under— “(A) defined contribution plans, “(B) defined benefit plans, and “(C) a combination of defined contribution plans and defined benefit plans. “(2) Guidelines for regulations.— The regulations prescribed under this subsection shall provide that a plan does not satisfy the requirements of this subsection if, under the plan, the basic benefit of any employee within the meaning of subsection (c)(1) (or a shareholder-employee) may exceed the sum of the products for each plan year of participation of— “(A) his annual compensation (not in excess of $50,000) for such year, and “(B) the applicable percentage determined under paragraph (3). “(3) Applicable percentage.— “(A) Table.— For purposes of paragraph (2), the applicable percentage for any individual for any plan year shall be based on the percentage shown on the following table opposite his age when his current period of participation in the plan began. “Age when participation began: Applicable percentage 30 or less 6.5 35 5.4 40 4.4 45 3.6 50 3.0 55 2.5 60 or over 2.0 “(B) Additional requirements.— The regulations prescribed under this subsection shall include provisions— “(i) for applicable percentages for ages between any two ages shown on the table, “(ii) for adjusting the applicable percentages in the case of plans providing benefits other than a basic benefit, “(iii) that any increase in the rate of accrual, and any increase in the compensation base which may be taken into account, shall, with respect only to such increase, begin a new period of participation in the plan, and “(iv) when appropriate, in the case of periods beginning after December 31, 1977, for adjustments in the applicable percentages based on changes in prevailing interest and mortality rates occurring after 1973. “(4) Certain contributions and benefits may not be taken into account.— A defined benefit plan which provides contributions or benefits for owner-employees does not satisfy the requirements of this subsection unless such plan meets the requirements of subsection (a)(4) without taking into account contributions or benefits under chapter 2 (relating to tax on self-employment 26 USC 1401. 26 USC 3101. 26 USC 401. income), chapter 21 (relating to Federal Insurance Contributions Act), title II of the Social Security Act, or any other Federal or State law. “(5) Definitions.— For purposes of this subsection— “(A) Basic benefit.— The term ‘basic benefit’ means a benefit in the form of a straight life annuity commencing at the later of— “(i) age 65, or “(ii) the day 5 years after the day the participant’s current period of participation began under a plan which provides no ancillary benefits and to which employees do not contribute. “(B) Shareholder-employee.— The term ‘shareholder-employee’ has the same meaning as when used in section 1379(d). 26 USC 1379. “(C) Compensation.— The term ‘compensation’ means— “(i) in the case of an employee within the meaning of subsection (c)(1), the earned income of such individual, or “(ii) in the case of a shareholder-employee, the compensation received or accrued by the individual from the electing small business corporation. “(6) Special rules.— Section 404(e) (relating to special limitations Ante, p. 952. for self-employed individuals) and section 1379(b) (relating to taxability of shareholder-employee beneficiaries) do not apply to a trust to which this subsection applies.” (e) Repeal of Existing Tax Treatment of Excess Contributions.— (1) The last sentence of section 401(d)(5) is amended to read 26 USC 401. as follows: “Subparagraphs (A) and (B) do not apply to contributions described in subsection (e).” (2) Paragraph (8) of section 401(d) is repealed. Repeal. (3) Subsection (e) of section 401 is amended to read as follows: “(e) Contributions for Premiums on Annuity, Etc., Contracts.— A contribution by the employer on behalf of an owner-employee is described in this subsection if— “(1) under the plan such contribution is required to be applied (directly or through a trustee) to pay premiums or other consideration for one or more annuity, endowment, or life insurance contracts on the life of such owner-employee issued under the plan, “(2) the amount of such contribution exceeds the amount deductible under section 404 with respect to contributions made by the employer on behalf of such owner-employee under the plan, and “(3) the amount of such contribution does not exceed the average of the amounts which were deductible under section 404 with respect to contributions made by the employer on behalf of such owner-employee under the plan (or which would have been deductible if such section had been in effect) for the first three taxable years (A) preceding the year in which the last such annuity, endowment, or life insurance contract was issued under the plan, and (B) in which such owner-employee derived earned income from the trade or business with respect to which the plan is established, or for so many of such taxable years as such owner-employee was engaged in such trade or business and derived earned income therefrom. In the case of any individual on whose behalf contributions described in paragraph (1) are made under more than one plan as an owner-employee during any taxable year, the preceding sentence does not apply if the amount of such contributions under all such plans for all such years exceeds $7,500. Any contribution which is described in this subsection shall, for purposes of section 4972(b), be taken into Infra. 26 USC 404. account as a contribution made by such owner-employee as an employee to the extent that the amount of such contribution is not deductible under section 404 for the taxable year, but only for the purpose of applying section 4972(b) to other contributions made by such owner-employee as an employee.” (4) Clause (ii) of section 401(a)(10)(A) is amended by striking 26 USC 401. out “subsection (e)(3)(A)” and inserting in lieu thereof “subsection (e)”. (5) Subparagraph (A) of section 72(m)(5)(A) is amended— 26 USC 72. (A) by inserting “and” at the end of clause (i), (B) by striking out the comma at the end of clause (ii) and the word “and” following that comma, and inserting in lieu thereof a period, and (C) by striking out clause (iii). (f) Tax on Excess Contributions.— (1) Chapter 43 (relating to qualified pension, etc., plans) is amended by inserting after section 4971 the following new section: “SEC. 4972. TAX ON EXCESS CONTRIBUTIONS FOR SELF-EMPLOYED INDIVIDUALS. “(a) Tax Imposed.— In the case of a plan which provides contributions or benefits for employees some or all of whom are employees within the meaning of section 401(c)(1), there is imposed, for each taxable year of the employer who maintains such plan, a tax in an amount equal to 6 percent of the amount of the excess contributions under the plan (determined as of the close of the taxable year). The tax imposed by this subsection shall be paid by the employer who maintains the plan. This section applies only to plans which include a trust described in section 401(a), which are described in section 403(a), or which are described in section 405(a). 26 USC 401,403, 405. “(b) Excess Contributions.— “(1) In general.— For purposes of this section, the term ‘excess “Excess contributions.” contributions’ means the sum of the amounts (if any) determined under paragraphs (2), (3), and (4), reduced by the sum of the correcting distributions (as defined in paragraph (5)) made in all prior taxable years beginning after December 31, 1975. For purposes of this subsection the amount of any contribution which is allocable (determined under regulations prescribed by the Secretary or his delegate) to the purchase of life, accident, health, or other insurance shall not be taken into account. “(2) Contributions by owner-employees.— The amount determined under this paragraph, in the case of a plan which provides contributions or benefits for employees some or all of whom are owner-employees (within the meaning of section 401(c)(3)), is 26 USC 401. the sum of— “(A) the excess (if any) of— “(i) the amount contributed under the plan by each owner-employee (as an employee) for the taxable year, over “(ii) the amount permitted to be contributed by each owner-employee (as an employee) for such year, and “(B) the amount determined under this paragraph for the preceding taxable year of the employer, reduced by the excess (if any) of the amount described in subparagraph (A)(ii) over the amount described in subparagraph (A)(i). “(3) Defined benefit plans.— The amount determined under this paragraph, in the case of a defined benefit plan, is the amount contributed under the plan by the employer during the taxable year or any prior taxable year beginning after December 31, 1975, if— “(A) as of the close of the taxable year, the full funding limitation of the plan (determined under section 412(c)(7)) is zero, and “(B) such amount has not been deductible for the taxable year or any prior taxable year. “(4) Defined contribution plans.— The amount determined under this paragraph, in the case of a plan other than a defined benefit plan, is the portion of the amounts contributed under the plan by the employer during the taxable year and each prior taxable year beginning after December 31, 1975, which has not been deductible for the taxable year or any prior taxable year. “(5) Correcting distribution.— For purposes of this subsection the term ‘correcting distribution’ means— “(A) in the case of a contribution made by an owner-employee as an employee, regardless of the type of plan, the amount determined under paragraph (2) distributed to the owner-employee who contributed such amount, “(B) in the case of a defined benefit plan, the amount determined under paragraph (3) which is distributed from the plan to the employer, and “(C) in the case of a defined contribution plan, the amount determined under paragraph (4) which is distributed from the plan to the employer or to the employee to the account of whom the amount described was contributed. “(c) Amount Permitted To Be Contributed by Owner-Employee.— For purposes of subsection (b)(2), the amount permitted to be contributed under a plan by an owner-employee (as an employee) for any taxable year is the smallest of the following: “(1) $2,500, “(2) 10 percent of the earned income (as defined in section 401(c)(2)) for such taxable year derived by such owner-employee from the trade or business with respect to which the plan is established, or “(3) the amount of the contribution which would be contributed by the owner-employee (as an employee) if such contribution were made at the rate of contributions permitted to be made by employees other than owner-employees. In any case in which there are no employees other than owner-employees, the amount determined under the preceding sentence shall be zero. “(d) Cross Reference.— “For disallowance of deduction for taxes paid under this section, see section 275.”. (2) Clerical amendment.— The table of sections for chapter 43 is amended by inserting after the item relating to section 4971 the following new item: “Sec. 4972. Tax on excess contributions for self-employed individuals.”. (g) Premature Distributions to Owner-Employees.— (1) In general.— Subparagraph (B) of section 72(m)(5) 26 USC 72. (relating to penalties applicable to certain amounts received by owner-employees) is amended to read as follows: “(B) 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.” (2) Conforming amendments.— (A) Subparagraphs (C), (D), and (E) of section 72(m)(5) Repeals. are repealed. (B) The second sentence of section 46(a)(3) and the second 26 USC 46. 26 USC 50A. Post, p. 987. sentence of section 50A(a)(3), as each is amended by section 2005(c)(4) of this Act, are each amended by inserting after “tax preferences,” the following: “section 72(m)(5) (B) (relating to 10 percent tax on premature distributions to owner-employees),”. (C) The third sentence of section 901(a), as amended by 26 USC 901. section 2005(c)(5) of this Act, is amended by striking out “tax preferences,” and inserting in lieu thereof “tax preferences), against the tax imposed for the taxable year under section 72(m)(5)(B) (relating to 10 percent tax on premature distributions to owner-employees),”. (D) Subparagraph (A) of section 56(a)(2) and paragraph 26 USC 56. (1) of section 56(c), as each is amended by section 2005(c)(7) of this Act, are each amended by striking out “402(e)” and inserting in lieu thereof “72(m)(5)(B), 402(e)”. (E) Section 404(a)(2) is amended by striking out “(16)” 26 USC 404. and inserting in lieu thereof “(16),(17),(18)”. (F) Clause (ii) of section 404(a)(9)(B) is amended to read as follows: “(ii) without regard to the second sentence of paragraph (3); and”. (h) Withdrawal of Employee Contributions of Owner-Employees.— (1) Section 401(d)(4)(B) (relating to additional requirements 26 USC 401. for qualification of trusts and plans benefiting owner-employees) is amended by inserting “in excess of contributions made by an owner-employee as an employee” after “benefits”. (2) Paragraph (1) of section 72(m) (relating to certain Repeal. amounts received before annuity starting date) is repealed. (3) Section 72(m)(5)(A)(i) is amended by striking out “(whether or not paid by him)” and inserting in lieu thereof the following: “(other than contributions made by him as an owner-employee)”. (i) Effective Dates.— (1) The amendments made by subsections (a) and (b) apply to taxable years beginning after December 31, 1973. (2) The amendments made by subsection (c) apply to— 26 USC 401 note. (A) taxable years beginning after December 31, 1975, and (B) any other taxable years beginning after December 31, 1973, for which contributions were made under the plan in excess of the amounts permitted to be made under sections 404(e) and 1379(b) as in effect on the day before the date of Ante, p. 952. 26 USC 1379. the enactment of this Act. (3) The amendments made by subsection (d) apply to taxable 26 USC 401 note. years beginning after December 31, 1975. (4) The amendments made by subsections (e) and (f) apply 26 USC 401 note. to contributions made in taxable years beginning after December 31, 1975. (5) The amendments made by subsection (g) apply to distributions 26 USC 72 note. made in taxable years beginning after December 31, 1975. (6) The amendments made by subsection (h) apply to taxable 26 USC 72 note. years ending after the date of enactment of this Act. SEC. 2002. DEDUCTION FOR RETIREMENT SAVINGS. (a) Allowance of Deduction.— (1) In General.— Part VII of subchapter B of chapter 1 (relating 26 USC 211. to additional itemized deductions for individuals) is amended by redesignating section 219 as 220 and by inserting after section 218 the following new section: 26 USC 220. “SEC. 219. RETIREMENT SAVINGS. “(a) Deduction Allowed.— In the case of an individual, there is allowed as a deduction amounts paid in cash during the taxable year by or on behalf of such individual for his benefit— “(1) to an individual retirement account described in section 26 USC 408. 408(a), “(2) for an individual retirement annuity described in section 408(b), or “(3) for a retirement bond described in section 409 (but only 26 USC 409. if the bond is not redeemed within 12 months of the date of its issuance). For purposes of this title, any amount paid by an employer to such a retirement account or for such a retirement annuity or retirement bond constitutes payment of compensation to the employee (other than a self-employed individual who is an employee within the meaning of section 401(c)(1) includible in his gross income, whether 26 USC 401. or not a deduction for such payment is allowable under this section to the employee after the application of subsection (b). “(b) Limitations and Restrictions.— “(1) Maximum deduction.— The amount allowable as a deduction under subsection (a) to an individual for any taxable year may not exceed an amount equal to 15 percent of the compensation includible in his gross income for such taxable year, or $1,500, whichever is less. “(2) Covered by certain other plans.— No deduction is allowed under subsection (a) for an individual for the taxable year if for any part of such year— “(A) he was an active participant in— “(i) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a), 26 USC 501. “(ii) an annuity plan described in section 403(a), 26 USC 403. “(iii) a qualified bond purchase plan described in section 405(a), or 26 USC 405. “(iv) a plan established for its employees by the United States, by a State or political division thereof, or by an agency or instrumentality of any of the foregoing, or “(B) amounts were contributed by his employer for an annuity contract described in section 403(b) (whether or not 26 USC 403. his rights in such contract are nonforfeitable).” “(3) Contributions after age 70½— No deduction is allowed under subsection (a) with respect to any payment described in subsection (a) which is made during the taxable year of an individual who has attained age 70½ before the close of such taxable year. “(4) Recontributed amounts.— No deduction is allowed under this section with respect to a rollover contribution described in section 402(a)(5), 403(a)(4), 408(d)(3), or 409(b)(3)(C). Post, pp. 991, 969, 964. “(5) Amounts contributed under endowment contract.— In the case of an endowment contract described in section 408(b), Infra. no deduction is allowed under subsection (a) for that portion of the amounts paid under the contract for the taxable year properly allocable, under regulations prescribed by the Secretary or his delegate, to the cost of life insurance. “(c) Definitions and Special Rules.— “(1) Compensation.— For purposes of this section, the term ‘compensation’ includes earned income as defined in section 401(c)(2). 26 USC 401. “(2) Married individuals.— The maximum deduction under subsection (b)(1) shall be computed separately for each individual, and this section shall be applied without regard to any community property laws.”. (2) Deduction allowed in arriving at adjusted gross income.— Section 62 (defining adjusted gross income) is amended by inserting after paragraph (9) the following new paragraph: “(10) Retirement savings.— The deduction allowed by section 219 (relating to deduction of certain retirement savings).”. Ante, p. 958. (b) Individual Retirement Accounts.— Subpart A of part I of subchapter D of chapter 1 (relating to retirement plans) is amended 26 USC 401. by adding at the end thereof the following new section: “SEC. 408. INDIVIDUAL RETIREMENT ACCOUNTS. “(a) Individual Retirement Account.— For purposes of this section, the term ‘individual retirement account’ means a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries, but only if the written governing instrument creating the trust meets the following requirements: “(1) Except in the case of a rollover contribution described in subsection (d)(3) in section 402(a)(5), 403(a)(4), or 409(b)(3)(C), no contribution will be accepted unless it is in cash, and contributions will not be accepted for the taxable year in excess of $1,500 on behalf of any individual. “(2) The trustee is a bank (as defined in section 401(d)(1)) or such other person who demonstrates to the satisfaction of the Secretary or his delegate that the manner in which such other person will administer the trust will be consistent with the requirements of this section. “(3) No part of the trust funds will be invested in life insurance contracts. “(4) The interest of an individual in the balance in his account is nonforfeitable. “(5) The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund. “(6) The entire interest of an individual for whose benefit the trust is maintained will be distributed to him not later than the close of his taxable year in which he attains age 70½, or will be distributed, commencing before the close of such taxable year, in accordance with regulations prescribed by the Secretary or his delegate, over— “(A) the life of such individual or the lives of such individual and his spouse, or “(B) a period not extending beyond the life expectancy of such individual or the life expectancy of such individual and his spouse. “(7) If an individual for whose benefit the trust is maintained dies before his entire interest has been distributed to him, or if distribution has been commenced as provided in paragraph (6) to his surviving spouse and such surviving spouse dies before the entire interest has been distributed to such spouse, the entire interest (or the remaining part of such interest if distribution thereof has commenced) will, within 5 years after his death (or the death of the surviving spouse), be distributed, or applied to the purchase of an immediate annuity for his beneficiary or beneficiaries (or the beneficiary or beneficiaries of his surviving spouse) which will be payable for the life of such beneficiary or beneficiaries (or for a term certain not extending beyond the life expectancy of such beneficiary or beneficiaries) and which annuity will be immediately distributed to such beneficiary or beneficiaries. The preceding sentence does not apply if distributions over a term certain commenced before the death of the individual for whose benefit the trust was maintained and the term certain is for a period permitted under paragraph (6). “(b) Individual Retirement Annuity.— For purposes of this section, the term ‘individual retirement annuity’ means an annuity contract, or an endowment contract (as determined under regulations prescribed by the Secretary or his delegate), issued by an insurance company which meets the following requirements: “(1) The contract is not transferable by the owner. “(2) The annual premium under the contract will not exceed $1,500 and any refund of premiums will be applied before the close of the calendar year following the year of the refund toward the payment of future premiums or the purchase of additional benefits. “(3) The entire interest of the owner will be distributed to him not later than the close of his taxable year in which he attains age 70½, or will be distributed, in accordance with regulations prescribed by the Secretary or his delegate, over— “(A) the life of such owner or the lives of such owner and his spouse, or “(B) a period not extending beyond the life expectancy of such owner or the life expectancy of such owner and his spouse. “(4) If the owner dies before his entire interest has been distributed to him, or if distribution has been commenced as provided in paragraph (3) to his surviving spouse and such surviving spouse dies before the entire interest has been distributed to such spouse, the entire interest (or the remaining part of such interest if distribution thereof has commenced) will, within 5 years after his death (or the death of the surviving spouse), be distributed, or applied to the purchase of an immediate annuity for his beneficiary or beneficiaries (or the beneficiary or beneficiaries of his surviving spouse) which will be payable for the life of such bene-ficiary or beneficiaries (or for a term certain not extending beyond the life expectancy of such beneficiary or beneficiaries) and which annuity will be immediately distributed to such beneficiary or beneficiaries. The preceding sentence shall have no application if distributions over a term certain commenced before the death of the owner and the term certain is for a period permitted under paragraph (3). “(5) The entire interest of the owner is nonforfeitable. Such term does not include such an annuity contract for any taxable year of the owner in which it is disqualified on the application of subsection (e) or for any subsequent taxable year. For purposes of this subsection, no contract shall be treated as an endowment contract if it matures later than the taxable year in which the individual in whose name such contract is purchased attains age 70½; if it is not for the exclusive benefit of the individual in whose name it is purchased or his beneficiaries; or if the aggregate annual premiums under all such contracts purchased in the name of such individual for any taxable year exceed $1,500. “(c) Accounts Established by Employers and Certain Associations of Employees.— A trust created or organized in the United States by an employer for the exclusive benefit of his employees or their beneficiaries, or by an association of employees (which may include employees within the meaning of section 401(c)(1)) for the 26 USC 401. exclusive benefit of its members or their beneficiaries, shall be treated as an individual retirement account (described in subsection (a)), but only if the written governing instrument creating the trust meets the following requirements: “(1) The trust satisfies the requirements of paragraphs (1) through (7) of subsection (a). “(2) There is a separate accounting for the interest of each employee or member. The assets of the trust may be held in a common fund for the account of all individuals who have an interest in the trust. “(d) Tax Treatment of Distributions.— “(1) In general.— Except as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement account or under an individual retirement annuity shall be included in gross income by the payee or distributee, as the case may be, for the taxable year in which the payment or distribution is received. The basis of any person in such an account or annuity is zero. “(2) Distributions of annuity contracts.— Paragraph (1) does not apply to any annuity contract which meets the requirements of paragraphs (1), (3), (4), and (5) of subsection (b) and which is distributed from an individual retirement account. Section 72 applies to any such annuity contract, and for purposes 26 USC 72. of section 72 the investment in such contract is zero. “(3) Rollover contribution.— An amount is described in this paragraph as a rollover contribution if it meets the requirements of subparagraphs (A) and (B). “(A) In general.— Paragraph (1) does not apply to any amount paid or distributed out of an individual retirement account or individual retirement annuity to the individual for whose benefit the account or annuity is maintained if— “(i) the entire amount received (including money and any other property) is paid into an individual retirement account or individual retirement annuity (other than an endowment contract) or retirement bond for the benefit of such individual not later than the 60th day after the day on which he receives the payment or distribution; or “(ii) the entire amount received (including money and any other property) represents the entire amount in the account or the entire value of the annuity and no amount in the account and no part of the value of the annuity is attributable to any source other than a rollover contribution from an employees’ trust described in section 401(a) which is exempt from tax under section 501(a) 26 USC 401, 501. (other than a trust forming part of a plan under which the individual was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan), or an annuity plan described in section 403(a) (other than a plan under which the 26 USC 403. individual was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan) and any earnings on such sums and the entire amount thereof is paid into another such trust (for the benefit of such individual) or annuity plan not later than the 60th day on which he receives the payment or distribution. “(B) Limitation.— This paragraph does not apply to any amount described in subparagraph (A)(i) received by an individual from an individual retirement account or individual retirement annuity if at any time during the 3-year period ending on the day of such receipt such individual received any other amount described in that subparagraph from an individual retirement account, individual retirement annuity, or a retirement bond which was not includible in his gross income because of the application of this paragraph. “(4) Excess contributions returned before due date of return.— Paragraph (1) does not apply to the distribution of any contribution paid during a taxable year to an individual retirement account or for an individual retirement annuity to the extent that such contribution exceeds the amount allowable as a deduction under section 219 if— Ante, p. 958. “(A) such distribution is received on or before the day prescribed by law (including extensions of time) for filing such individual’s return for such taxable year, “(B) no deduction is allowed under section 219 with respect to such excess contribution, and “(C) such distribution is accompanied by the amount of net income attributable to such excess contribution. Any net income described in subparagraph (C) shall be included in the gross income of the individual for the taxable year in which received. “(5) Transfer of account incident to divorce.— The transfer of an individual’s interest in an individual retirement account, individual retirement annuity, or retirement bond to his former spouse under a divorce decree or under a written instrument incident to such divorce is not to be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest at the time of the transfer is to be treated as an individual retirement account of such spouse, and not of such individual. Thereafter such account, annuity, or bond for purposes of this subtitle is to be treated as maintained for the benefit of such spouse. “(e) Tax Treatment of Accounts and Annuities.— “(1) Exemption from tax.— Any individual retirement account is exempt from taxation under this subtitle unless such account has ceased to be an individual retirement account by reason of paragraph (2) or (3). Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business 26 USC 511. income of charitable, etc. organizations). “(2) Loss of exemption of account where employee engages in prohibited transaction.— “(A) In general.— If, during any taxable year of the individual for whose benefit any individual retirement account is established, that individual or his beneficiary engages in any transaction prohibited by section 4975 with respect to Post, p. 971. such account, such account ceases to be an individual retirement account as of the first day of such taxable year. For purposes of this paragraph— “(i) the individual for whose benefit any account was established is treated as the creator of such account, and “(ii) the separate account for any individual within an individual retirement account maintained by an employer or association of employees is treated as a separate individual retirement account. “(B) Account treated as distributing all its assets.— In any case in which any account ceases to be an individual retirement account by reason of subparagraph (A) as of the first day of any taxable year, paragraph (1) of subsection (d) applies as if there were a distribution on such first day in an amount equal to the fair market value (on such first day) of all assets in the account (on such first day). “(3) Effect of borrowing on annuity contract.— If during any taxable year the owner of an individual retirement annuity borrows any money under or by use of such contract, the contract ceases to be an individual retirement annuity as of the first day of such taxable year. Such owner shall include in gross income for such year an amount equal to the fair market value of such contract as of such first day. “(4) Effect of pledging account as security.— If, during any taxable year of the individual for whose benefit an individual retirement account is established, that individual uses the account or any portion thereof as security for a loan, the portion so used is treated as distributed to that individual. “(5) Purchase of endowment contract by individual retirement account.— If the assets of an individual retirement account or any part of such assets are used to purchase an endowment contract for the benefit of the individual for whose benefit the account is established— “(A) to the extent that the amount of the assets involved in the purchase are not attributable to the purchase of life insurance, the purchase is treated as a rollover contribution described in subsection (d)(3), and “(B) to the extent that the amount of the assets involved in the purchase are attributable to the purchase of life, health, accident, or other insurance, such amounts are treated as distributed to that individual (but the provisions of subsection (f) do not apply). “(6) Commingling individual retirement account amounts in certain common trust funds and common investment funds.— Any common trust fund or common investment fund of individual retirement account assets which is exempt from taxation under this subtitle does not cease to be exempt on account of the participation or inclusion of assets of a trust exempt from taxation under section 501(a) which is described in section 401(a). 26 USC 501, 401. “(f) Additional Tax on Certain Amounts Included in Gross Income Before Age 59½.— “(1) Early distributions from an individual retirement account, etc.— If a distribution from an individual retirement account or under an individual retirement annuity to the individual for whose benefit such account or annuity was established is made before such individual attains age 59½, his tax under this chapter for the taxable year in which such distribution is received shall be increased by an amount equal to 10 percent of the amount of the distribution which is includible in his gross income for such taxable year. “(2) Disqualification cases.— If an amount is includible in gross income for a taxable year under subsection (e) and the taxpayer has not attained age 59½ before the beginning of such taxable year, his tax under this chapter for such taxable year shall be increased by an amount equal to 10 percent of such amount so required to be included in his gross income. “(3) Disability cases.— Paragraphs (1) and (2) do not apply if the amount paid or distributed, or the disqualification of the account or annuity under subsection (e), is attributable to the taxpayer becoming disabled within the meaning of section 72(m)(7). “(g) Community Property Laws.— This section shall be applied without regard to any community property laws. “(h) Custodial Accounts.— For purposes of this section, a custodial account shall be treated as a trust if the assets of such account are held by a bank (as defined in section 401(d)(1)) or another person who demonstrates, to the satisfaction of the Secretary or his delegate, that the manner in which he will administer the account will be consistent with the requirements of this section, and if the custodial account would, except for the fact that it is not a trust, constitute an individual retirement account described in subsection (a). For purposes of this title, in the case of a custodial account treated as a trust by reason of the preceding sentence, the custodian of such account shall be treated as the trustee thereof. “(i) Reports.— The trustee of an individual retirement account and the issuer of an endowment contract described in subsection (b) or an individual retirement annuity shall make such reports regarding such account, contract, or annuity to the Secretary or his delegate and to the individuals for whom the account, contract, or annuity is, or is to be, maintained with respect to contributions, distributions, and such other matters as the Secretary or his delegate may require under regulations. The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required by those regulations. “(j) Cross References.— “(1) For tax on excess contributions in individual retirement accounts or annuities, see section 4973. “(2) For tax on certain accumulations in individual retirement accounts or annuities, see section 4974.” (c) Retirement Bonds.— Subpart A of part I of subchapter D of chapter I (relating to retirement plans) is amended by inserting after section 408 the following new section: Ante, p. 959. “SEC. 409. RETIREMENT BONDS. “(a) Retirement Bond.— For purposes of this section and section 219(a), the term ‘retirement bond’ means a bond issued under the Ante, p. 958. Second Liberty Bond Act, as amended, which by its terms, or by 31 USC 774. regulations prescribed by the Secretary or his delegate under such Act— “(1) provides for payment of interest, or investment yield, only on redemption; “(2) provides that no interest, or investment yield, is payable if the bond is redeemed within 12 months after the date of its issuance; “(3) provides that it ceases to bear interest, or provide investment yield on the earlier of— “(A) the date on which the individual in whose name it is purchased (hereinafter in this section referred to as the ‘registered owner’) attains age 70½; or “(B) 5 years after the date on which the registered owner dies, but not later than the date on which he would have attained the age 70½ had he lived; “(4) provides that, except in the case of a rollover contribution described in subsection (b)(3)(C) or in section 402(a)(5), Post, p. 991, Post, p. 969, Ante, p. 959. 403(a)(4), or 408(d)(3) the registered owner may not contribute for the purchase of such bonds in excess of $1,500 in any taxable year; and “(5) is not transferable. “(b) Income Tax Treatment of Bonds.— “(1) In general.— Except as otherwise provided in this subsection, on the redemption of a retirement bond the entire proceeds shall be included in the gross income of the taxpayer entitled to the proceeds on redemption. If the registered owner has not tendered it for redemption before the close of the taxable year in which he attains age 70½, such individual shall include in his gross income for such taxable year the amount of proceeds he would have received if the bond had been redeemed at age 70½. The provisions of section 72 (relating to annuities) and section 26 USC 72. 1232 (relating to bonds and other evidences of indebtedness) shall not apply to a retirement bond. “(2) Basis.— The basis of a retirement bond is zero. “(3) Exceptions.— “(A) Redemption within 12 months.— If a retirement bond is redeemed within 12 months after the date of its issuance, the proceeds are excluded from gross income if no deduction is allowed under section 219 on account of the Ante, p. 958. purchase of such bond. “(B) Redemption after age 70½.— If a retirement bond is redeemed after the close of the taxable year in which the registered owner attains age 70½, the proceeds from the redemption of the bond are excluded from the gross income of the registered owner to the extent that such proceeds were includible in his gross income for such taxable year. “(C) Rollover into an individual retirement account or annuity or a qualified plan.— If a retirement bond is redeemed at any time before the close of the taxable year in which the registered owner attains age 70½, and the registered owner transfers the entire amount of the proceeds from the redemption of the bond to an individual retirement account described in section 408(a) or to an individual retirement Ante, p. 959. annuity described in section 408(b) (other than an endowment contract) which is maintained for the benefit of the registered owner of the bond, or to an employees’ trust described in section 401(a) which is exempt from tax under 26 USC 401. 26 USC 501, 403. asection 501(a), or an annuity plan described in section 403(a) for the benefit of the registered owner, on or before the 60th day after the day on which he received the proceeds of such redemption, then the proceeds shall be excluded from gross income and the transfer shall be treated as a rollover contribution described in section 403(d)(3). This subparagraph does 26 USC 403. not apply in the case of a transfer to such an employees’ trust or such an annuity plan unless no part of the value of such proceeds is attributable to any source other than a rollover contribution from such an employees’ trust or annuity plan (other than an annuity plan or a trust forming part of a plan under which the individual was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan). “(c) Additional Tax on Certain Redemptions Before Age 59½.— “(1) Early redemption of bond.— If a retirement bond is redeemed by the registered owner before he attains age 59½, his tax under this chapter for the taxable year in which the bond is redeemed shall be increased by an amount equal to 10 percent of the amount of the proceeds of the redemption includible in his gross income for the taxable year. “(2) Disability cases.— Paragraph (1) does not apply for any taxable year during which the retirement bond is redeemed if, for that taxable year, the registered owner is disabled within the meaning of section 72(m)(7). 26 USC 72. “(3) Redemption within one year.— Paragraph (1) does not apply if the registered owner tenders the bond for redemption within 12 months after the date of its issuance.”. (d) Excise Tax on Excess Contributions.— Chapter 43 (relating to qualified pension, etc., plans) is amended by inserting after section 4972 the following new section: “SEC. 4973. TAX ON EXCESS CONTRIBUTIONS TO INDIVIDUAL RETIREMENT ACCOUNTS, CERTAIN SECTION 493(b) CONTRACTS, CERTAIN INDIVIDUAL RETIREMENT ANNUITIES, AND CERTAIN RETIREMENT BONDS. “(a) Tax Imposed.— In the case of— “(1) an individual retirement account (within the meaning of section 408(a)), Ante, p. 959. “(2) an individual retirement annuity (within the meaning of section 408(b)), a custodial account treated as an annuity contract under section 403(b)(7)(A) (relating to custodial accounts Ante, p. 940. for regulated investment company stock), or “(3) a retirement bond (within the meaning of section 409), Ante, p. 964. established for the benefit of any individual, there is imposed for each taxable year a tax in an amount equal to 6 percent of the amount of the excess contributions to such individual’s accounts, annuities, or bonds (determined as of the close of the taxable year). The amount of such tax for any taxable year shall not exceed 6 percent of the value of the account, annuity, or bond (determined as of the close of the taxable year). In the case of an endowment contract described in section 408(b), the tax imposed by this section does not apply to any amount allocable to life, health, accident, or other insurance under such contract. The tax imposed by this subsection shall be paid by such individual. “(b) Excess Contributions.— For purposes of this section, in the case of individual retirement accounts, individual retirement annuities, or bonds, the term ‘excess contributions’ means the sum of— “(1) the excess (if any) of— “(A) the amount contributed for the taxable year to the accounts or for the annuities or bonds (other than a rollover contribution described in section 402(a)(5), 403(a)(4), 408(d)(3)), Post, pp. 991, 969; Ante, pp. 959, 964. or 409(b)(3)(C), over “(B) the amount allowable as a deduction under section 219 for such contributions, and “(2) the amount determined under this subsection for the preceding taxable year, reduced by the excess (if any) of the maximum amount allowable as a deduction under section 219 for the Ante, p. 958. taxable year over the amount contributed to the accounts or for the annuities or bonds for the taxable year and reduced by the sum of the distributions out of the account (for all prior taxable years) which were included in the gross income of the payee under section 408(d)(1). for purposes of this paragraph, any contribution which is distributed out of the individual retirement account, individual retirement annuity, or bond in a distribution to which section 408(d)(4) applies shall be treated as an amount not contributed.” “(c) Section 403(b) Contracts.— For purposes of this section, in “Excess contributions.” the case of a custodial account referred to in subsection (a)(3), the term ‘excess contributions’ means the sum of— “(1) the excess (if any) of the amount contributed for the taxable year to such account, over the lesser of the amount excludable from gross income under section 403(b) or the amount permitted 26 USC 403. Post, p. 979. to be contributed under the limitations contained in section 415 (or under whichever such section is applicable, if only one is applicable), and “(2) the amount determined under this subsection for the preceding taxable year, reduced by— “(A) the excess (if any) of the lesser of (i) the amount excludable from gross income under section 403(b) or (ii) the amount permitted to be contributed under the limitations contained in section 415 over the amount contributed to the account for the taxable year (or under whichever such section is applicable, if only one is applicable), and “(B) the sum of the distributions out of the account (for all prior taxable years) which are included in gross income under section 72(e).” 26 USC 72. (e) Excise Tax on Excessive Accumulations.— Chapter 43 is amended by inserting after section 4973 the following new section: “SEC. 4974. EXCISE TAX ON CERTAIN ACCUMULATIONS IN INDIVIDUAL RETIREMENT ACCOUNTS OR ANNUITIES. “(a) Imposition of Tax.— If, in the case of an individual retirement account or individual retirement annuity, the amount distributed during the taxable year of the payee is less than the minimum amount required to be distributed under section 408(a)(6) or (7), or 408(b)(3) Ante, p. 959. or (4) during such year, there is imposed a tax equal to 50 percent of the amount by which the minimum amount required to be distributed during such year exceeds the amount actually distributed during the year. The tax imposed by this section shall be paid by such payee. “(b) Regulations.— For purposes of this section, the minimum amount required to be distributed during a taxable year under section 408(a)(6) or (7) or 408(b)(3) or (4) shall be determined under regulations prescribed by the Secretary or his delegate.”. (f) Penalty for Failure To Provide Reports on Individual Retirement Accounts.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding at the end thereof the following new section: “SEC. 6693. FAILURE TO PROVIDE REPORTS ON INDIVIDUAL RETIREMENT ACCOUNTS OR ANNUITIES. “(a) The person required by section 408(i) to file a report regarding Penalty. Ante, p. 959. an individual retirement account or individual retirement annuity at the time and in the manner required by section 408(i) shall pay a penalty of $10 for each failure unless it is shown that such failure is due to reasonable cause. “(b) Deficiency Procedures Not To Apply.— Subchapter B of chapter 63 (relating to deficiency procedures for income, estate, gift, 26 USC 6211. and certain excise taxes) does not apply to the assessment or collection of any penalty imposed by subsection (a).”. (g) Conforming Amendments.— (1) Section 37(c)(1) (defining retirement income) is amended— 26 USC 37. (A) by striking out “and” at the end of subparagraph (D), (B) by adding at the end of subparagraph (E) the following: “retirement bonds described in section 409, and”, and (C) by adding at the end thereof the following new paragraph: “(F) an individual retirement account described in section 408(a) or an individual retirement annuity described in section 408(b), or”. (2) The second sentence of section 46(a)(3) and the second sentence of section 50A(a)(3), as each is amended by sections 2001(g)(2)(B) 26 USC 46, 50A. Ante, p. 952, Post, p. 987. and 2005(c)(4) of this Act, are each amended by inserting after “owner-employees,” the following: “section 408(e) (relating to additional tax on income from certain retirement accounts),”. (3) The third sentence of section 901(a), as amended by section 26 USC 901. 2005(c)(5) of this Act, is amended by inserting “against the tax imposed for the taxable year by section 408(f) (relating to additional tax on income from certain retirement accounts),” before “against the tax imposed by section 531”. (4) Subparagraph (A) of section 56(a)(2) and paragraph (1) 26 USC 56. of section 56(c) are each amended by striking out “531” and inserting in lieu thereof “408(f), 531,”. (5) Section 402(a) (relating to taxability of beneficiary of 26 USC 402. exempt trust), as amended by section 2005(c)(2) of this Act, is amended by inserting after paragraph (5) the following new paragraph: “(5) Rollover amounts.— In the case of an employees’ trust described in section 401(a) which is exempt from tax under section 501(a), 26 USC 401. 26 USC 501. if— “(A) the balance to the credit of an employee is paid to him on one or more distributions which constitute a lump sum distribution within the meaning of subsection (e)(4)(A) (determined without reference to subsection (e)(4)(B)), “(B) (i) the employee transfers all the property he receives in such distribution to an individual retirement account described in section 408(a), an individual retirement annuity described in section 408(b) (other than an endowment contract), or a retirement bond described in section 409, on or before the 60th day after the day on which he received such property, to the extent the fair market value of such property exceeds the amount referred to in subsection (e)(4)(D)(i), or “(ii) the employee transfers all the property he receives in such distribution to an employees’ trust described in section 401(a) which is exempt from tax under section 501(a), or to an annuity plan described in section 403(a) on or before 26 USC 403. the 60th day after the day on which he received such property, to the extent the fair market value of such property exceeds the amount referred to in subsection (e)(4)(D)(i), and “(C) the amount so transferred consists of the property (other than money) distributed, to the extent that the fair market value of such property does not exceed the amount required to be transferred pursuant to subparagraph (B), then such distributions are not includible in gross income for the year in which paid. For purposes of this title, a transfer described in subparagraph (B)(i) shall be treated as a rollover contribution as described in section 408(d)(3). Subparagraph (B)(ii) Ante, p. 959. does not apply in the case of a transfer to an employees’ trust, or annuity plan if any part of the lump sum distribution described in subparagraph (A) is attributable to a trust forming part of a plan under which the employee was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan.” (6) Section 403(a) (relating to taxation of employee annuities) is amended by adding after paragraph (3) the following new paragraph: “(4) Rollover amounts.— In the case of an employee annuity described in 403(a), if— “(A) the balance to the credit of an employee is paid to him in one or more distributions which constitute a lump sum distribution within the meaning of section 402(e)(4)(A) 26 USC 402. determined without reference to section 402(e)(4)(B), “(B) (i) the employee transfers all the property he receives in such distribution to an individual account described in section 408(a), an individual retirement annuity described in section 408(b) (other than an endowment contract), or a retirement bond described in section 409, on Ante, p. 964. or before the 60th day after the day on which he received such property to the extent the fair market value of such property exceeds the amount referred to in section 402(e)(4)(D)(i), or “(ii) the employee transfers all the property he receives in such distribution to an employees’ trust described in section 401(a) which is exempt from tax under section 501(a), or to an annuity plan described in subsection (a) on or before the 60th day after the day on which he received such property to the extent the fair market value of such property exceeds the amount referred to in section 402(e)(4)(D)(i), and “(C) the amount so transferred consists of the property distributed to the extent that the fair market value of such property does not exceed the amount required to be transferred pursuant to subparagraph (B), then such distribution is not includible in gross income for the year in which paid. For purposes of this title, a transfer described in subparagraph (B)(i) shall be treated as a rollover contribution described in section 408(d)(3). Subparagraph (B)(ii) does not apply in the case of a transfer to an employees’ trust, or annuity plan if any part of the lump sum distribution described in subparagraph (A) is attributable to an annuity plan under which the employee was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan.”. (7) Section 3401(a)(12) (relating to exemption from collection 26 USC 3401. of income tax at source on certain wages) is amended by adding at the end thereof the following new subparagraph: “(D) for a payment described in section 219(a) if, at the Ante, p. 958. time of such payment, it is reasonable to believe that the employee will be entitled to a deduction under such section for payment; or”. (8) Section 6047 (relating to information relating to certain 26 USC 6047. trusts and annuity and bond purchase plans) is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection: “(d) Other Programs.— To the extent provided by regulations prescribed by the Secretary or his delegate, the provisions of this section apply with respect to any payment described in section 219(a) and to transactions of any trust described in section 408(a) or under Ante, p. 959. an individual retirement annuity described in section 408(b).”. (9) Section 805(d)(1) (relating to definition of pension plan Pension plan reserves. 26 USC 805. reserves) is amended by striking out “or” at the end of subparagraph (C), by striking out “foregoing.” at the end of subparagraph (D) and inserting in lieu thereof “foregoing; or”, and by adding at the end thereof the following new subparagraph: “(E) purchased under contracts entered into with trusts which (at the time the contracts were entered into) were individual retirement accounts described in section 408(a) or under contracts entered into with individual retirement annuities described in section 408(b).” (10) Section 72 (relating to annuities) is amended— 26 USC 72. (A) by inserting after “501(a)” in subsection (m)(4)(A) “, an individual retirement amount described in section 408(a), an individual retirement annuity described in section 408(b)”. (B) by striking out at the end of subsection (m)(6) “401(c)(3)” and inserting in lieu thereof “401(c)(3) and includes an individual for whose benefit an individual retirement account or annuity described in section 408 (a) or (b) is maintained”. (11) Section 801(g)(7) (relating to basis of assets held for 26 USC 801. qualified pension plan contracts) is amended by striking out “or (D)” and inserting in lieu thereof “(D), or (E)”. (h) Clerical Amendments.— (1) The table of sections for part VII of subchapter B of chapter 1 is amended by striking out the item relating to section 219 and inserting in lieu thereof the following: “Sec. 219. Retirement savings. “Sec. 220. Cross references.”. (2) The table of sections for subpart A of part I of subchapter D of chapter 1 is amended by adding at the end thereof the following: “Sec. 408. Individual retirement accounts. “Sec. 409. Retirement bonds.”. (3) The table of sections for chapter 43 is amended by inserting after the item relating to section 4972 the following new items: “Sec. 4973. Tax on excess contributions to individual retirement accounts, certain 403(b) contracts, certain individual retirement annuities, and certain retirement bonds. “Sec. 4974. Tax on certain accumulations in individual retirement accounts. “Sec. 4975. Tax on prohibited transactions.”, (4) The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following new item: “Sec. 6693. Failure to provide reports on individual retirement accounts or annuities.”. (i) Effective Dates.— (1) The amendments made by subsections (a), (b), and (c) 26 USC 219 note. apply to taxable years beginning after December 31, 1974. (2) The amendments made by subsections (d) through (h) 26 USC 4973 note. except subsection (g)(5) and (6) shall take effect on January 1, 1975. (3) The amendments made by subsection (g)(5) and (6) 26 USC 402 note. shall apply on and after the date of enactment of this Act with respect to contributions to an employees’ trust described in section 401(a) of the Internal Revenue Code of 1954 which is exempt from tax under section 501(a) of such Code or an annuity plan described in section 403(a) of such Code. SEC. 2003. PROHIBITED TRANSACTIONS. (a) Excise Tax on Prohibited Transactions.— Chapter 43 (relating to qualified pension, etc., plans) is amended by adding after section 4974 the following new section: “SEC. 4975. TAX ON PROHIBITED TRANSACTIONS. “(a) Initial Taxes on Disqualified Person.— There is hereby imposed a tax on each prohibited transaction. The rate of tax shall be equal to 5 percent of the amount involved with respect to the prohibited transaction for each year (or part thereof) in the taxable period. The tax imposed by this subsection shall be paid by any disqualified person who participates in the prohibited transaction (other than a fiduciary acting only as such). “(b) Additional Taxes on Disqualified Person.— In any case in which an initial tax is imposed by subsection (a) on a prohibited transaction and the transaction is not corrected within the correction period, there is hereby imposed a tax equal to 100 percent of the amount involved. The tax imposed by this subsection shall be paid by any disqualified person who participated in the prohibited transaction (other than a fiduciary acting only as such). “(c) Prohibited Transaction.— “(1) General rule.— For purposes of this section, the term ‘prohibited transaction’ means any direct or indirect— “(A) sale or exchange, or leasing, of any property between a plan and a disqualified person; “(B) lending of money or other extension of credit between a plan and a disqualified person; “(C) furnishing of goods, services, or facilities between a plan and a disqualified person; “(D) transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan; “(E) act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account; or “(F) receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan. “(2) Special exemption.— The Secretary or his delegate shall establish an exemption procedure for purposes of this subsection. Pursuant to such procedure, he may grant a conditional or unconditional exemption of any disqualified person or transaction, orders of disqualified persons or transactions, from all or part of the restrictions imposed by paragraph (1) of this subsection. Action under this subparagraph may be taken only after consultation and coordination with the Secretary of Labor. The Secretary Exemption. or his delegate may not grant an exemption under this paragraph unless he finds that such exemption is— “(A) administratively feasible, “(B) in the interests of the plan and of its participants and beneficiaries, and “(C) protective of the rights of participants and beneficiaries of the plan. Before granting an exemption under this paragraph, the Secretary Notice, publication in Federal Register. or his delegate shall require adequate notice to be given to interested persons and shall publish notice in the Federal Register of the pendency of such exemption and shall afford interested persons an opportunity to present views. No exemption may be granted under this paragraph with respect to a transaction described in subparagraph (E) or (F) of paragraph (1) unless the Secretary or his delegate affords an opportunity for a hearing and makes a determination on the record with respect to the findings required under subparagraphs (A), (B), and (C) of this paragraph, except that in lieu of such hearing the Secretary or his delegate may accept any record made by the Secretary of Labor with respect to an application for exemption under section 408(a) of title I of the Employee Retirement Income Security Act of 1974. “(3) Special rule for individual retirement accounts.— An individual for whose benefit an individual retirement account is established and his beneficiaries shall be exempt for the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be an individual retirement account by reason of the application of section 408(e)(2)(A) or if section 408(e)(4) applies to such account. “(d) Exemptions.— The prohibitions provided in subsection (c) shall not apply to— “(1) any loan made by the plan to a disqualified person who is a participant or beneficiary of the plan if such loan— “(A) is available to all such participants or beneficiaries on a reasonably equivalent basis, “(B) is not made available to highly compensated employees, officers, or shareholders in an amount greater than the amount made available to other employees, “(C) is made in accordance with specific provisions regarding such loans set forth in the plan, “(D) bears a reasonable rate of interest, and “(E) is adequately secured; “(2) any contract, or reasonable arrangement, made with a disqualified person for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor; “(3) any loan to an employee stock ownership plan (as defined in subsection (e)(7)), if— “(A) such loan is primarily for the benefit of participants and beneficiaries of the plan, and “(B) such loan is at a reasonable rate of interest, and any collateral which is given to a disqualified person by the plan consists only of qualifying employer securities (as defined in subsection (e)(8)); “(4) the investment of all or part of a plan’s assets in deposits which bear a reasonable interest rate in a bank or similar financial institution supervised by the United States or a State, if such bank or other institution is a fiduciary of such plan and if— “(A) the plan covers only employees of such bank or other institution and employees of affiliates of such bank or other institution, or “(B) such investment is expressly authorized by a provision of the plan or by a fiduciary (other than such bank or institution or affiliates thereof) who is expressly empowered by the plan to so instruct the trustee with respect to such investment; “(5) any contract for life insurance, health insurance, or annuities with one or more insurers which are qualified to do business in a State if the plan pays no more than adequate consideration, and if each such insurer or insurers is— “(A) the employer maintaining the plan, or “(B) a disqualified person which is wholly owned (directly or indirectly) by the employer establishing the plan, or by any person which is a disqualified person with respect to the plan, but only if the total premiums and annuity considerations written by such insurers for life insurance, health insurance, or annuities for all plans (and their employers) with respect to which such insurers are disqualified persons (not including premiums or annuity considerations written by the employer maintaining the plan) do not exceed 5 percent of the total premiums and annuity considerations written for all lines of insurance in that year by such insurers (not including premiums or annuity considerations written by the employer maintaining the plan); “(6) the provision of any ancillary service by a bank or similar financial institution supervised by the United States or a State, if such service is provided at not more than reasonable compensation, if such bank or other institution is a fiduciary of such plan, and if— “(A) such bank or similar financial institution has adopted adequate internal safeguards which assure that the provision of such ancillary service is consistent with sound banking and financial practice, as determined by Federal or State supervisory authority, and “(B) the extent to which such ancillary service is provided is subject to specific guidelines issued by such bank or similar financial institution (as determined by the Secretary or his delegate after consultation with Federal and State supervisory authority), and under such guidelines the bank or similar financial institution does not provide such ancillary service— “(i) in an excessive or unreasonable manner, and “(ii) in a manner that would be inconsistent with the best interests of participants and beneficiaries of employee benefit plans; “(7) the exercise of a privilege to convert securities, to the extent provided in regulations of the Secretary or his delegate, but only if the plan receives no less than adequate consideration pursuant to such conversion; “(8) any transaction between a plan and a common or collective trust fund or pooled investment fund maintained by a disqualified person which is a bank or trust company supervised by a State or Federal agency or between a plan and a pooled investment fund of an insurance company qualified to do business in a State if— “(A) the transaction is a sale or purchase of an interest in the fund, “(B) the bank, trust company, or insurance company receives not more than reasonable compensation, and “(C) such transaction is expressly permitted by the instrument under which the plan is maintained, or by a fiduciary (other than the bank, trust company, or insurance company, or an affiliate thereof) who has authority to manage and control the assets of the plan; “(9) receipt by a disqualified person of any benefit to which he may be entitled as a participant or beneficiary in the plan, so long as the benefit is computed and paid on a basis which is consistent with the terms of the plan as applied to all other participants and beneficiaries; “(10) receipt by a disqualified person of any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred, in the performance of his duties with the plan, but no person so serving who already receives full-time pay from an employer or an association of employers, whose employees are participants in the plan, or from an employee organization whose members are participants in the plan shall receive compensation from such plan, except for reimbursement of expenses properly and actually incurred; “(11) service by a disqualified person as a fiduciary in addition to being an officer, employee, agent, or other representative of a disqualified person; “(12) the making by a fiduciary of a distribution of the assets of the trust in accordance with the terms of the plan if such assets are distributed in the same manner as provided under section 4044 of title IV of the Employee Retirement Income Security Act of 1974 (relating to allocation of assets); or Post, p. 1025. “(13) any transaction which is exempt from section 406 of such 26 USC 406. Ante, p. 959. Act by reason of section 408(e) of such Act (or which would be so exempt if such section 406 applied to such transaction). The exemptions provided by this subsection (other than paragraphs (9) and (12) shall not apply to any transaction with respect to a trust described in section 401(a) which is part of a plan providing contributions or benefits for employees some or all of whom are owner-employees (as defined in section 401(c) (3)) in which a plan directly or indirectly lends any part of the corpus or income of the plan to, pays any compensation for personal services rendered to the plan to, or acquires for the plan any property from or sells any property to, any such owner-employee, a member of the family (as defined in section 267(c) (4)) of any such owner-employee, or a corporation controlled 26 USC 267. by any such owner-employee through the ownership, directly or indirectly, of 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation. For purposes of the preceding sentence, a shareholder-employee (as defined in section 1379), a participant or beneficiary of an individual retirement 26 USC 1379. account, individual retirement annuity, on an individual retirement bond (as defined in section 408 or 409), and an employer or association of employees which establishes such an account or annuity under section 408(c) shall be deemed to be an owner-employee. “(e) Definitions.— “(1) Plan.— For purposes of this section, the term ‘plan’ means a trust described in section 401(a) which forms a part of a plan, or a plan described in section 403(a), or 405(a), which trust or Ante, p. 969. 26 USC 405. Ante, p. 959. plan is exempt from tax under section 501(a), an individual retirement account described in section 408(a), or an individual retirement annuity described in section 408(b) or a retirement bond described in section 409 (or a trust, plan, account, annuity, or bond which, at any time, has been determined by the Secretary or his delegate to be such a trust, plan, account, or bond). “(2) Disqualified person.— For purposes of this section, the term ‘disqualified person’ means a person who is— “(A) a fiduciary; “(B) a person providing services to the plan; “(C) an employer any of whose employees are covered by the plan; “(D) an employee organization any of whose members are covered by the plan; “(E) an owner, direct or indirect, of 50 percent or more of— “(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation, “(ii) the capital interest or the profits interest of a partnership, or “(iii) the beneficial interest of a trust or unincorporated enterprise, which is an employer or an employee organization described in subparagraph (C) or (D); “(F) a member of the family (as defined in paragraph (6)) of any individual described in subparagraph (A), (B), (C), or (E); “(G) a corporation, partnership, or trust or estate of which (or in which) 50 percent or more of— “(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of such corporation, “(ii) the capital interest or profits interest of such partnership, or “(iii) the beneficial interest of such trust or estate, is owned directly or indirectly, or held by persons described in subparagraph (A), (B), (C), (D), or (E); “(H) an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G); or “(I) a 10 percent or more (in capital or profits) partner or joint venturer of a person described in subparagraph (C), (D), (E), or (G). The Secretary, after consultation and coordination with the Secretary of Labor or his delegate, may by regulation prescribe a percentage lower than 50 percent for subparagraphs (E) and (G) and lower than 10 percent for subparagraphs (H) and (I). “(3) Fiduciary.— For purposes of this section, the term ‘fiduciary’ means any person who— “(A) exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, “(B) renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or “(C) has any discretionary authority or discretionary responsibility in the administration of such plan. Such term includes any person designated under section 405(c)(1)(B) of the Employee Retirement Income Security Act of 1974. Ante, p. 878. “(4) Stockholdings.— For purposes of paragraphs (2)(E)(i) and (G)(i) there shall be taken into account indirect stockholdings which would be taken into account under section 267(c), 26 USC 267. except that, for purposes of this paragraph, section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of paragraph (6). “(5) Partnerships; trusts.— For purposes of paragraphs (2)(E)(ii) and (iii), (G)(ii) and (iii), and (I) the ownership of profits or beneficial interest shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of paragraph (6). “(6) Member of family.— For purposes of paragraph (2)(F), the family of any individual shall include his spouse, ancestor, lineal descendant, and any spouse of a lineal descendant. “(7) Employee stock ownership plan.— The term ‘employee stock ownership plan’ means a defined contribution plan— “(A) which is a stock bonus plan which is qualified, or a stock bonus plan and money purchase plan both of which are qualified under section 401(a), and which are designed to Ante, p. 953. invest primarily in qualifying employer securities; and “(B) which is otherwise defined in regulations prescribed by the Secretary or his delegate. “(8) Qualifying employer security.— The term ‘qualifying employer security’ means an employer security which is— “(A) stock or otherwise an equity security, or “(B) a bond, debenture, note, or certificate or other evidence of indebtedness which is described in paragraphs (1), 26 USC 503. (2), and (3) of section 503(e). If any moneys or other property of a plan are invested in shares of an investment company registered under the Investment Company Act of 1940, the investment shall not cause that investment 15 USC 80a–51. company or that investment company’s investment adviser or principal underwriter to be treated as a fiduciary or a disqualified person for purposes of this section, except when an investment company or its investment adviser or principal underwriter acts in connection with a plan covering employees of the investment company, its investment adviser, or its principal underwriter. “(f) Other Definitions and Special Rules.— For purposes of this section— “(1) Joint and several liability.— If more than one person is liable under subsection (a) or (b) with respect to any one prohibited transaction, all such persons shall be jointly and severally liable under such subsection with respect to such transaction. “(2) Taxable Period.— The term ‘taxable period’ means, with respect to any prohibited transaction, the period beginning with the date on which the prohibited transaction occurs and ending on the earlier of— “(A) the date of mailing of a notice of deficiency pursuant to section 6212, with respect to the tax imposed by subsection 26 USC 6212. (a), or “(B) the date on which correction of the prohibited transaction is completed. “(3) Sale or exchange; encumbered property.— A transfer of real or personal property by a disqualified person to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan assumes or if it is subject to a mortgage or similar lien which a disqualified person placed on the property within the 10-year period ending on the date of the transfer. “(4) Amount Involved.— The term ‘amount involved’ means, with respect to a prohibited transaction, the greater of the amount of money and the fair market value of the other property given or the amount of money and the fair market value of the other property received; except that, in the case of services described in paragraphs (2) and (10) of subsection (d) the amount involved shall be only the excess compensation. For purposes of the preceding sentence, the fair market value— Fair market value. “(A) in the case of the tax imposed by subsection (a), shall be determined as of the date on which the prohibited transaction occurs; and “(B) in the case of the tax imposed by subsection (b), shall be the highest fair market value during the correction period. “(5) Correction.— The terms ‘correction’ and ‘correct’ mean, with respect to a prohibited transaction, undoing the transaction to the extent possible, but in any case placing the plan in a financial position not worse than that in which it would be if the disqualified person were acting under the highest fiduciary standards. “(6) Correction period.— The term ‘correction period’ means, with respect to a prohibited transaction, the period beginning with the date on which the prohibited transaction occurs and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (b) under section 6212, extended by— “(A) any period in which a deficiency cannot be assessed under section 6213(a), and “(B) any other period which the Secretary or his delegate determines is reasonable and necessary to bring about the correction of the prohibited transaction. “(g) Application of Section.— This section shall not apply— “(1) in the case of a plan to which a guaranteed benefit policy (as defined in section 401(b)(2)(B) of the Employee Retirement Income Security Act of 1974) is issued, to any assets of the insurance Ante, p. 874. company, insurance service, or insurance organization merely because of its issuance of such policy; “(2) to a governmental plan (within the meaning of section 414(d)); or Ante, p. 925. “(3) to a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has Ante, p. 898. not been made. In the case of a plan which invests in any security issued by an investment company registered under the Investment Company Act of 1940, 15 USC 80a–51. the assets of such plan shall be deemed to include such security but shall not, by reason of such investment, be deemed to include any assets of such company. “(h) Notification of Secretary of Labor.— Before sending a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary or his delegate shall notify the Secretary of Labor and provide him a reasonable opportunity to obtain a correction of the prohibited transaction or to comment on the imposition of such tax. “(i) Cross Reference.— “For provisions concerning coordination procedures between Secretary of Labor and Secretary of Treasury with respect to application of tax imposed by this section and for authority to waive imposition of the tax imposed by subsection (b), see section 3003 of the Employee Retirement Income Security Act of 1974.” (b) Amendment of Section 503.— Section 503 (relating to requirements 26 USC 503. for exemption) is amended— (1) by striking out “or (18)” in subsection (a)(1)(A), (2) by amending subsection (a)(1)(B) by inserting “which is referred to in section 4975(g) (2) or (3)” after “described in section 401(a)”, (3) by striking out “or section 401” in subsection (a)(2) and inserting in lieu thereof “or paragraph (1)(B)”, (4) by striking out “or section 401” in subsection (c) and inserting in lieu thereof “or subsection (a)(1)(B)”, and (5) by striking out subsection (g). (c) Effective Date and Savings Provisions.— (1) (A) The amendments made by this section shall take effect on January 1, 1975. (B) If, before the amendments made by this section take effect, an organization described in section 401(a) of the Internal Revenue Code of 1954 is denied exemption under section 501(a) Ante, p. 935. 26 USC 501. of such Code by reason of section 503 of such Code, the denial of such exemption shall not apply if the disqualified person elects (in such manner and at such time as the Secretary or his delegate shall by regulations prescribe) to pay, with respect to the prohibited transaction (within the meaning of section 503 (b) or (g)) which resulted in such denial of exemption, a tax in the amount and in the manner provided with respect to the tax imposed under section 4975 of such Code. An election made under Ante, p. 971. Regulations. this subparagraph, once made, shall be irrevocable. The Secretary of the Treasury or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph. (2) Section 4975 of the Internal Revenue Code of 1954 (relating to tax on prohibited transactions) shall not apply to— (A) a loan of money or other extension of credit between a plan and a disqualified person under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984, if such loan or other extension of credit remains at least as favorable to the plan as an arm’s-length transaction with an unrelated party would be, and if the execution of the contract, the making of the loan, or the extension of credit was not, at the time of such execution, making, or extension, a prohibited transaction (within the meaning of section 503(b) of such Code or the corresponding provisions of prior law); (B) a lease or joint use of property involving the plan and a disqualified person pursuant to a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984, if such lease or joint use remains at least as favorable to the plan as an arm’s-length transaction with an unrelated party would be and if the execution of the contract was not, at the time of such execution, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law; 26 USC 503. (C) the sale, exchange, or other disposition of property described in subparagraph (B) between a plan and a disqualified person before June 30, 1984, if— (i) in the case of a sale, exchange, or other disposition of the property by the plan to the disqualified person, the plan receives an amount which is not less than the fair market value of the property at the time of such disposition; and (ii) in the case of the acquisition of the property by the plan, the plan pays an amount which is not in excess of the fair market value of the property at the time of such acquisition; (D) Until June 30, 1977, the provision of services to which subparagraphs (A), (B), and (C) do not apply between a plan and a disqualified person (i) under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such contract), or (ii) if the disqualified person ordinarily and customarily furnished such services on June 30, 1974, if such provision of services remains at least as favorable to the plan as an arm’s-length transaction with an unrelated party would be and if the provision of services was not, at the time of such provision, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law; or (E) the sale, exchange, or other disposition of property which is owned by a plan on June 30, 1974, and all times thereafter, to a disqualified person, if such plan is required to dispose of such property in order to comply with the provisions of section 407(a)(2)(A) (relating to the prohibition against holding excess employer securities and employer real property) of the Employee Retirement Income Security Act of 1974, and if the plan receives not less than adequate Ante, p. 880. consideration. For the purposes of this paragraph, the term “disqualified person” has the meaning provided by section 4975(e)(2) of the Internal Revenue Code of 1954. Ante, p. 971. SEC. 2004. LIMITATIONS ON BENEFITS AND CONTRIBUTIONS. (a) Plan Requirements.— (1) Section 401(a) (relating to requirements for qualification) is amended by inserting after paragraph (15) the following new Ante, p. 938. paragraph: “(16) A trust shall not constitute a qualified trust under this section if the plan of which such trust is a part provides for benefits or contributions which exceed the limitations of section 415.” Infra. (2) Subpart B of part I of subchapter D of chapter 1 is amended by inserting after section 414 the following new section: “SEC. 415. LIMITATIONS ON BENEFITS AND CONTRIBUTION UNDER QUALIFIED PLANS. “(a) General Rule.— “(1) Trusts.— A trust which is a part of a pension, profit-sharing, or stock bonus plan shall not constitute a qualified trust under section 401(a) if— Ante, p. 935. “(A) in the case of a defined benefit plan, the plan provides for the payment of benefits with respect to a participant which exceed the limitation of subsection (b), “(B) in the case of a defined contribution plan, contributions and other additions under the plan with respect to any participant for any taxable year exceed the limitation of subsection (c), or “(C) in any case in which an individual is a participant in both a defined benefit plan and a defined contribution plan maintained by the employer, the trust has been disqualified under subsection (g). “(2) Section applies to certain annuities and accounts.— in the case of— “(A) an employee annuity plan described in section 403(a), Ante, p. 969. “(B) an annuity contract described in section 403(b), 26 USC 403. “(C) an individual retirement account described in section 408(a), Ante, p. 959. “(D) an individual retirement annuity described in section 408(b), “(E) a plan described in section 405(a), or 26 USC 405. “(F) a retirement bond described in section 409, Ante, p. 964. such contract, annuity plan, account, annuity, plan, or bond shall not be considered to be described in section 403(a), 403(b), 405(a), 408(a), 408(b), or 409, as the case may be, unless it satisfies the Ante, p. 959. requirements of subparagraph (A) or subparagraph (B) of paragraph (1), whichever is appropriate, and has not been disqualified under subsection (g). In the case of an annuity contract described in section 403(b), the preceding sentence shall apply only to the portion of the annuity contract which exceeds the limitation of subsection (b) or the limitation of subsection (c), whichever is appropriate, and the amount of the contribution for such portion shall reduce the exclusion allowance as provided in section 403(b)(2). “(b) Limitation for Defined Benefit Plans.— “(1) In general.— Benefits with respect to a participant exceed the limitation of this subsection if, when expressed as an annual benefit (within the meaning of paragraph (2)), such annual benefit is greater than the lesser of— “(A) $75,000, or “(B) 100 percent of the participant’s average compensation for his high 3 years. “(2) Annual benefit.— “(A) In general.— For purposes of paragraph (1), the term ‘annual benefit’ means a benefit payable annually in the form of a straight life annuity (with no ancillary benefits) under a plan to which employees do not contribute and under which no rollover contributions (as defined in sections 402(a)(5), 403(a)(4), 408(d)(3), and 409(b)(3)(C)) are made. Ante, pp. 968, 969. “(B) Adjustment for certain other forms of benefit.— If the benefit under the plan is payable in any form other than the form described in subparagraph (A), or if the employees contribute to the plan or make rollover contributions (as defined in sections 402(a)(5), 403(a)(4), 408(d)(3) and 409(b)(3)(C)), the determinations as to whether the limitation described in paragraph (1) has been satisfied shall be made, in accordance with regulations prescribed by the Secretary or his delegate, by adjusting such benefit so that it is equivalent to the benefit described in subparagraph (A). For purposes of this subparagraph, any ancillary benefit which is not directly related to retirement income benefits shall not be taken into account; and that portion of any joint and survivor annuity which constitutes a qualified joint and survivor annuity (as defined in section 401(a)(11)(H)(iii)) Ante, p. 935. shall not be taken into account. “(C) Adjustment to $75,000 limit where benefit begins before age 55.— If the retirement income benefit under the plan begins before age 55, the determination as to whether the $75,000 limitation set forth in paragraph (1)(A) has been satisfied shall be made, in accordance with regulations prescribed by the Secretary or his delegate, by adjusting such benefit so that it is equivalent to such a benefit beginning at age 55. “(3) Average compensation for high 3 years.— For purposes of paragraph (1), a participant’s high 3 years shall be the period of consecutive calendar years (not more than 3) during which the participant both was an active participant in the plan and had the greatest aggregate compensation from the employer. In the case of an employee within the meaning of section 401(c)(1), the preceding sentence shall be applied by substituting 26 USC 401. for ‘compensation from the employer’ the following: ‘the participant’s earned income (within the meaning of section 401(c)(2) but determined without regard to any exclusion under section 911). “(4) Total annual benefits not in excess of $10,000.— Notwithstanding the preceding provisions of this subsection, the benefits payable with respect to a participant under any defined benefit plan shall be deemed not to exceed the limitation of this subsection if— “(A) the retirement benefits payable with respect to such participant under such plan and under all other defined benefit plans of the employer do not exceed $10,000 for the plan year, or for any prior plan year, and “(B) the employer has not at any time maintained a defined contribution plan in which the participant participated. “(5) Reduction for service less than 10 years.— In the case of an employee who has less than 10 years of service with the employer, the limitation referred to in paragraph (1), and the limitation referred to in paragraph (4), shall be the limitation determined under such paragraph (without regard to this paragraph), multiplied by a fraction, the numerator of which is the number of years (or part thereof) of service with the employer and the denominator of which is 10. “(6) Computation of benefits and contributions.— The computation of— “(A) benefits under a defined contribution plan, for purposes of section 401(a)(4), Ante, p. 938. “(B) contributions made on behalf of a participant in a defined benefit plan, for purposes of section 401(a)(4), and “(C) contributions and benefits provided for a participant in a plan described in section 414(k), for purposes of this Ante, p. 925. section shall not be made on a basis inconsistent with regulations prescribed by the Secretary or his delegate. “(c) Limitation for Defined Contribution Plans.— “(1) In general.— Contributions and other additions with respect to a participant exceed the limitation of this subsection if when expressed as an annual addition (within the meaning of paragraph (2)) to the participant’s account, such annual addition is greater than the lesser of— “(A) $25,000, or “(B) 25 percent of the participant’s compensation. “(2) Annual addition.— For purposes of paragraph (1), the term ‘annual addition’ means the sum for any year of— “(A) employer contributions, “(B) the lesser of— “(i) the amount of the employee contributions in excess of 6 percent of his compensation, or “(ii) one-half of the employee contributions, and “(C) forfeitures. For the purposes of this paragraph, employee contributions under subparagraph (B) are determined without regard to any rollover contributions (as defined in sections 402(a)(5), 403(a)(4), Ante, pp. 968, 969, 959, 964. 408(d)(3), and 409(b)(3)(C)). “(3) Participant’s compensation.— For purposes of paragraph (1), the term ‘participant’s compensation’ means the compensation of the participant from the employer for the year. In the case of an employee within the meaning of section 401(c)(1), 26 USC 401. the preceding sentence shall be applied by substituting for ‘compensation of the participant from the employer’ the following: ‘the participant’s earned income (within the meaning of section 401(c)(2) but determined without regard to any exclusion under section 911)’. “(4) Special election for section 403(b) contracts purchased by educational institutions, hospitals, and home health service agencies.— “(A) In the case of amounts contributed for an annuity contract described in section 403(b) for the year in which 26 USC 403. occurs a participant’s separation from the service with an educational institution, a hospital, or a home health service agency, at the election of the participant there is substituted for the amount specified in paragraph (1)(B) the amount of the exclusion allowance which would be determined under section 403(b)(2) (without regard to this section) for the Post, p. 986. participant’s taxable year in which such separation occurs if the participant’s years of service were computed only by taking into account his service for the employer during the period of years (not exceeding ten) ending on the date of such separation. “(B) In the case of amounts contributed for an annuity contract described in section 403(b) for any year in the case of a participant who is an employee of an educational institution, a hospital, or a home health service agency, at the election of the participant there is substituted for the amount specified in paragraph (1)(B) the least of— “(i) 25 percent of the participant’s includible compensation (as defined in section 403(b)(3)) plus $4,000, “(ii) the amount of the exclusion allowance determined for the year under section 403(b)(2), or “(iii) $15,000. “(C) In the case of amounts contributed for an annuity contract described in section 403(b) for any year for a participant who is an employee of an educational institution, a hospital, or a home health service agency, at the election of the participant the provisions of section 403(b)(2)(A) shall not apply. “(D) (i) The provisions of this paragraph apply only if the participant elects its application at the time and in the manner provided under regulations prescribed by the Secretary or his delegate. Not more than one election may be made under subparagraph (A) by any participant. A participant who elects to have the provisions of subparagraph (A), (B), or (C) of this paragraph apply to him may not elect to have any other subparagraph of this paragraph apply to him. Any election made under this paragraph is irrevocable. “(ii) For purposes of this paragraph the term ‘educational “Educational institution.” 26 USC 151. institution’ means an educational institution as defined in section 151(e)(4). “(iii) For purposes of this paragraph the term ‘home “Home health service agency.” 26 USC 501. health service agency’ means an organization described in subsection 501(c)(3) which is exempt from tax under section 501(a) and which has been determined by the Secretary of Health, Education, and Welfare to be a home health agency (as defined in section 1861(o) of the Social Security Act). “(d) Cost-of-Living Adjustments.— “(1) In general.— The Secretary or his delegate shall adjust annually— “(A) the $75,000 amount in subsection (b)(1)(A), “(B) the $25,000 amount in subsection (c)(1)(A), and “(C) in the case of a participant who is separated from service, the amount taken into account under subsection (b)(1)(B), for increases in the cost of living in accordance with regulations prescribed by the Secretary or his delegate. Such regulations shall provide for adjustment procedures which are similar to the procedures used to adjust primary insurance amounts under section 215(i)(2)(A) of the Social Security Act. 42 USC 415. “(2) Base periods.— The base period taken into account— “(A) for purposes of subparagraphs (A) and (B) of paragraph (1) is the calendar quarter beginning October 1, 1974, and “(B) for purposes of subparagraph (C) of paragraph (1) is the last calendar quarter of the calendar year before the calendar year in which the participant is separated from service. “(e) Limitation in Case of Defined Benefit Plan and Defined Contribution Plan for Same Employee.— “(1) In general.— In any case in which an individual is a participant in both a defined benefit plan and a defined contribution plan maintained by the same employer, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any year may not exceed 1.4. “(2) Defined benefit plan fraction.— For purposes of this subsection, the defined benefit plan fraction for any year is a fraction— “(A) the numerator of which is the projected annual benefit of the participant under the plan (determined as of the close of the year), and “(B) the denominator of which is the projected annual benefit of the participant under the plan (determined as of the close of the year) if the plan provided the maximum benefit allowable under subsection (b). “(3) Defined contribution plan fraction.— For purposes of this subsection, the defined contribution plan fraction for any year is a fraction— “(A) the numerator of which is the sum of the annual additions to the participant’s account as of the close of the year, and “(B) the denominator of which is the sum of the maximum amount of annual additions to such account which could have been made under subsection (c) for such year and for each prior year of service with the employer. “(4) Special transition rules for defined contribution fraction.— In applying paragraph (3) with respect to years beginning before January 1, 1976— “(A) the aggregate amount taken into account under paragraph (3)(A) may not exceed the aggregate amount taken into account under paragraph (3)(B), and “(B) the amount taken into account under subsection (c)(2)(B)(i) for any year concerned is an amount equal to— “(i) the excess of the aggregate amount of employee contributions for all years beginning before January 1, 1976, during which the employee was an active participant of the plan, over 10 percent of the employee’s aggregate compensation for all such years, multiplied by “(ii) a fraction the numerator of which is 1 and the denominator of which is the number of years beginning before January 1, 1976, during which the employee was an active participant in the plan. Employee contributions made on or after October 2, 1973, shall be taken into account under subparagraph (B) of the preceding sentence only to the extent that the amount of such contributions does not exceed the maximum amount of contributions permissible under the plan as in effect on October 2, 1973. “(5) Special rules for sections 403(b) and 408.— For purposes 26 USC 403. Ante, p. 959. of this subsection, any annuity contract described in section 403(b) (except in the case of a participant who has elected under subsection (c)(4)(D) to have the provisions of subsection (c)(4)(C) apply), any individual retirement account described in section 408(a), any individual retirement annuity described in section 408(b), and any retirement bond described in section 409, for the benefit of a participant shall be treated as a defined contribution plan maintained by each employer with respect to which the participant has the control required under subsection (b) or (c) of section 414 (as modified by subsection (h)). In the case of Ante, p. 925. any annuity contract described in section 403(b), the amount of the contribution disqualified by reason of subsection (g) shall reduce the exclusion allowance as provided in section 403(b)(2). “(f) Combining of Plans.— “(1) In general.— For purposes of applying the limitations of subsections (b), (c), and (e)— “(A) all defined benefit plans (whether or not terminated) of an employer are to be treated as one defined benefit plan, and “(B) all defined contribution plans (whether or not terminated) of an employer are to be treated as one defined contribution plan. “(2) Annual compensation taken into account for defined benefit plans.— If the employer has more than one defined benefit plan— “(A) subsection (b)(1)(B) shall be applied separately with respect to each such plan, but “(B) in applying subsection (b)(1)(B) to the aggregate of such defined benefit plans for purposes of this subsection, the high 3 years of compensation taken into account shall be the period of consecutive calendar years (not more than 3) during which the individual had the greatest aggregate compensation from the employer. “(g) Aggregation of Plans.— The Secretary or his delegate, in applying the provisions of this section to benefits or contributions under more than one plan maintained by the same employer, and to any trusts, contracts, accounts, or bonds referred to in subsection (a)(2), with respect to which the participant has the control required under section 414(b) or (c), as modified by subsection (h), shall, under Ante, p. 925. regulations prescribed by the Secretary or his delegate, disqualify one or more trusts, plans, contracts, accounts, or bonds, or any combination thereof until such benefits or contributions do not exceed the limitations contained in this section. In addition to taking into account such other factors as may be necessary to carry out the purposes of subsections (e) and (f), the regulations prescribed under this paragraph shall provide that no plan which has been terminated shall be disqualified until all other trusts, plans, contracts, accounts, or bonds have been disqualified. “(h) 50 Percent Control.— For purposes of applying subsections (b) and (c) of section 414 to this section, the phrase ‘more than 50 percent’ shall be substituted for the phrase ‘at least 80 percent’ each place it appears in section 1563(a)(1). 26 USC 1563. “(i) Records Not Available for Past Periods.— Where for the period before January 1, 1976, or (if later) the first day of the first plan year of the plan, the records necessary for the application of this section are not available, the Secretary or his delegate may by regulations prescribe alternative methods for determining the amounts to be taken into account for such period. “(j) Regulations; Definition of Year.— The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section, including, but not limited to, regulations defining the term ‘year’ for purposes of any provision of this section. “(k) Special Rules.— “(1) Defined benefit plan and defined contribution plan.— For purposes of this title, the term ‘defined contribution plan’ or ‘defined benefit plan’ means a defined contribution plan (within the meaning of section 414(i)) or a defined benefit plan (within the meaning of section 414(j)), whichever applies, which is— “(A) a plan described in section 401(a) which includes a 26 USC 401. 26 USC 501. trust which is exempt from tax under section 501(a), “(B) an annuity plan described in section 403(a), 26 USC 403. “(C) a qualified bond purchase plan described in section 405(a), 26 USC 405. “(D) an annuity contract described in section 403(b), “(E) an individual retirement account described in section 408(a), Ante, p. 959. “(F) an individual retirement annuity described in section 408(b), or “(G) an individual retirement bond described in section 409.”. Ante, p. 964. (3) Special rule for certain plans in effect on date of enactment.— In any case in which, on the date of enactment of this Act, an individual is a participant in both a defined benefit plan and a defined contribution plan maintained by the same employer, and the sum of the defined benefit plan fraction and the defined contribution plan fraction for the year during which such date occurs exceeds 1.4, the sum of such fractions may continue to exceed 1.4 if— (A) the defined benefit plan fraction is not increased, by amendment of the plan or otherwise, after the date of enactment of this Act, and (B) no contributions are made under the defined contribution plan after such date. A trust which is part of a pension, profit-sharing, or stock bonus plan described in the preceding sentence shall not be treated as not constituting a qualified trust under section 401(a) of the Internal Revenue Code of 1954 on account of the provisions of section 26 USC 401. Ante, p. 979. 415(e) of such Code, as long as it is described in the preceding sentence of this subsection. (b) Limit on Employer Deductions.— The second sentence of section 404(a)(3)(A) (relating to limits on deductible contributions) 26 USC 404. is amended by striking out “beneficiaries under the plan.” and inserting in lieu thereof “beneficiaries under the plan, but the amount so deductible under this sentence in any one succeeding taxable year together with the amount so deductible under the first sentence of this subparagraph shall not exceed 25 percent of the compensation otherwise paid or accrued during such taxable year to the beneficiaries under the plan.”. (c) Certain Annuity and Bond Purchase Plans.— (1) Section 404(a)(2) (relating to the general rule for deduction for employee annuities) is amended by striking out “(15)” and inserting in lieu thereof “(15), (16), and (19)” and by striking out “(a)(9) and (10)” and inserting in lieu thereof “(a)(9), (10), (17), and (18)”. (2) Section 405(a)(1) (relating to requirements for qualified bond purchase plans) is amended by striking out “and (8),” and inserting in lieu thereof “(8), (16), and (19)”. (3) Section 805(d)(1)(C) (relating to pension plan reserves) 26 USC 805. is amended by striking out “and (15)” and inserting in lieu thereof “(15), (16), and (19)”. (4) Section 403(b)(2) (relating to exclusion allowance) is 26 USC 403. amended to read as follows: “(2) Exclusion allowance.— “(A) In general.— For purposes of this subsection, the exclusion allowance for any employee for the taxable year is an amount equal to the excess, if any, of— “(i) the amount determined by multiplying 20 percent of his includible compensation by the number of years of service, over “(ii) the aggregate of the amounts contributed by the employer for annuity contracts and excludible from the gross income of the employee for any prior taxable year. “(B) Election to have allowance determined under section 415 rules.— In the case of an employee who makes an election under section 415(c)(4)(D) to have the provisions of section 415(c)(4)(C) (relating to special rule for section 408(b) contracts purchased by educational institutions, hospitals, and home health service agencies) apply, the exclusion allowance for any such employee for the taxable year is the amount which could be contributed (under section 415) by his employer under a plan described in section 408(a) if the annuity contract for the benefit of such employee were treated as a defined contribution plan maintained by the employer.” (d) Effective date.— (1) General rule.— The amendments made by this section shall apply to years beginning after December 31, 1975. The Secretary of the Treasury shall prescribe such regulations as may be necessary to carry out the provisions of this paragraph. (2) Transition rule for defined benefit plans.— In the case of an individual who was an active participant in a defined benefit plan before October 3, 1973, if— (A) the annual benefit (within the meaning of section 415(b)(2) of the Internal Revenue Code of 1954) payable Ante, p. 979. to such participant on retirement does not exceed 100 percent of his annual rate of compensation on the earlier of (i) October 2, 1973, or (ii) the date on which he separated from the service of the employer, (B) such annual benefit is no greater than the annual benefit which would have been payable to such participant on retirement if (i) all the terms and conditions of such plan in existence on such date had remained in existence until such retirement, and (ii) his compensation taken into account for any period after October 2, 1973, had not exceeded his annual rate of compensation on such date, and (C) in the case of a participant who separated from the service of the employer prior to October 2, 1973, such annual benefit is no greater than his vested accrued benefit as of the date he separated from the service, then such annual benefit shall be treated as not exceeding the limitation of subsection (b) of section 415 of the Internal Revenue Code of 1954. SEC. 2005. TAXATION OF CERTAIN LUMP SUM DISTRIBUTIONS. (a) Treatment of total distributions.— Section 402(e) (relating 26 USC 402. to certain plan terminations) is amended to read as follows: “(e) Tax on Lump Sum Distributions.— (1) Imposition of separate tax on lump sum distributions.— “(A) Separate tax.— There is hereby imposed a tax (in the amount determined under subparagraph (B)) on the ordinary income portion of a lump sum distribution. “(B) Amount of tax.— The amount of tax imposed by subparagraph (A) for any taxable year shall be an amount equal to the amount of the initial separate tax for such taxable year multiplied by a fraction, the numerator of which is the ordinary income portion of the lump sum distribution for the taxable year and the denominator of which is the total taxable amount of such distribution for such year. “(C) Initial separate tax.— The initial separate tax for any taxable year is an amount equal to 10 times the tax which would be imposed by subsection (c) of section 1 if the recipient were an individual referred to in such subsection and the taxable income were an amount equal to one-tenth of the excess of— “(i) the total taxable amount of the lump sum distribution for the taxable year, over “(ii) the minimum distribution allowance. “(D) Minimum distribution allowance.— For purposes of this paragraph, the minimum distribution allowance for the taxable year is an amount equal to— “(i) the lesser of $10,000 or one-half of the total taxable amount of the lump sum distribution for the taxable year, reduced (but not below zero) by “(ii) 20 percent of the amount (if any) by which such total taxable amount exceeds $20,000. “(E) Liability for tax.— The recipient shall be liable for the tax imposed by this paragraph. “(2) Multiple distributions and distributions of annuity contracts.— In the case of any recipient of a lump sum distribution for the taxable year with respect to whom during the 6-taxable-year period ending on the last day of the taxable year there has been one or more other lump sum distributions after December 31, 1973, or if the distribution (or any part thereof) is an annuity contract, in computing the tax imposed by paragraph (1) (A), the total taxable amounts of all such distributions during such 6-taxable-year period shall be aggregated, but the amount of tax so computed shall be reduced (but not below zero) by the sum of— “(A) the amount of the tax imposed by paragraph (1)(A) paid with respect to such other distributions, plus “(B) that portion of the tax on the aggregated total taxable amounts which is attributable to annuity contracts. For purposes of this paragraph, a beneficiary of a trust to which a lump sum distribution is made shall be treated as the recipient of such distribution if the beneficiary is an employee (including an employee within the meaning of section 401(c)(1)) with respect 26 USC 401. to the plan under which the distribution is made or if the beneficiary is treated as the owner of such trust for purposes of subpart E of part I of subchapter J. In the case of the distribution 26 USC 671. of an annuity contract, the taxable amount of such distribution shall be deemed to be the current actuarial value of the contract, determined on the date of such distribution. In the case of a lump sum distribution with respect to any individual which is made only to two or more trusts, the tax imposed by paragraph (1)(A) shall be computed as if such distribution was made to a single trust, but the liability for such tax shall be apportioned among such trusts according to the relative amounts received by each. The Secretary or his delegate shall prescribe such regulations Regulations. as may be necessary to carry out the purposes of this paragraph. “(3) Allowance of deduction.— The ordinary income portion of a lump sum distribution for the taxable year shall be allowed as a deduction from gross income for such taxable year, but only to the extent included in the taxpayer’s gross income for such taxable year. “(4) Definitions and special rules.— “(A) Lump sum distribution.— For purposes of this section and section 403, the term ‘lump sum distribution’ 26 USC 403. means the distribution or payment within one taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient— “(i) on account of the employee’s death, “(ii) after the employee attains age 59½, “(iii) on account of the employee’s separation from the service, or “(iv) after the employee has become disabled (within the meaning of section 72 (m) (7)) 26 USC 72. from a trust which forms a part of a plan described in section 26 USC 401, 501. 26 USC 403. 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Clause (iii) of this subparagraph shall be applied only with respect to an individual who is an employee without regard to section 401 (c) (1), and clause (iv) shall be applied only with respect to an employee within the meaning of section 401(c)(1). For purposes of this subparagraph, a distribution of an annuity contract from a trust or annuity plan referred to in the first sentence of this subparagraph shall be treated as a lump sum distribution. For purposes of this subparagraph, a distribution to two or more trusts shall be treated as a distribution to one recipient. “(B) Election of lump sum treatment.— For purposes of this section and section 403, no amount which is not an annuity contract may be treated as a lump sum distribution under subparagraph (A) unless the taxpayer elects for the taxable year to have all such amounts received during such year so treated at the time and in the manner provided under regulations prescribed by the Secretary or his delegate. Not more than one election may be made under this subparagraph with respect to any individual after such individual has attained age 59½. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to two or more trusts, the election under this subparagraph shall be made by the personal representative of the employee. “(C) Aggregation of certain trusts and plans.— For purposes of determining the balance to the credit of an employee under subparagraph (A)— “(i) all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and “(ii) trusts which are not qualified trusts under section 401(a) and annuity contracts which do not satisfy the requirements of section 404(a)(2) shall not be taken 26 USC 404. into account. “(D) Total taxable amount.— For purposes of this section and section 403, the term ‘total taxable amount’ means, with respect to a lump sum distribution, the amount of such distribution which exceeds the sum of— “(i) the amounts considered contributed by the employee (determined by applying section 72(f)), which employee contributions shall be reduced by any amounts theretofore distributed to him which were not includible in gross income, and “(ii) the net unrealized appreciation attributable to that part of the distribution which consists of the securities of the employer corporation so distributed. “(E) Ordinary income portion.— For purposes of this section, the term ‘ordinary income portion’ means, with respect to a lump sum distribution, so much of the total taxable amount of such distribution as is equal to the product of such total taxable amount multiplied by a fraction— “(i) the numerator of which is the number of calendar years of active participation by the employee in such plan after December 31, 1973, and “(ii) the denominator of which is the number of calendar years of active participation by the employee in such plan. “(F) Employee.— For purposes of this subsection and subsection (a)(2), except as otherwise provided in subparagraph (A), the term ‘employee’ includes an individual who is an employee within the meaning of section 401(c)(1) and 26 USC 401. the employer of such individual is the person treated as his employer under section 401(c)(4). “(G) Community property laws.— The provisions of this subsection, other than paragraph (3), shall be applied without regard to community property laws. “(H) Minimum period of service.— For purposes of this subsection (but not for purposes of subsection (a)(2) or section 403(a)(2)(A)), no amount distributed to an employee 26 USC 403. from or under a plan may be treated as a lump sum distribution under subparagraph (A) unless he has been a participant in the plan for 5 or more taxable years before the taxable year in which such amounts are distributed. “(I) Amounts subject to penalty.— This subsection shall not apply to amounts described in clause (ii) of subparagraph (A) of section 72(m)(5) to the extent that section 72(m)(5) applies to such amounts. “(J) Unrealized appreciation of employer securities.— In the case of any distribution including securities of the employer corporation which, without regard to the requirement of subparagraph (H), would be treated as a lump sum distribution under subparagraph (A), there shall be excluded from gross income the net unrealized appreciation attributable to that part of the distribution which consists of securities of the employer corporation so distributed. In the case of any such distribution or any lump sum distribution including securities of the employer corporation, the amount of net unrealized appreciation of such securities and the resulting adjustments to the basis of such securities shall be determined under regulations prescribed by the Secretary or his delegate. “(K) Securities.— For purposes of this subsection, the terms ‘securities’ and ‘securities of the employer corporation’ have the respective meanings provided by subsection (a)(3).” (b) Phaseout of Capital Gains Treatment.— (1) In general.— Section 402(a)(2) (relating to capital gains 26 USC 402. treatment for certain distributions) is amended to read as follows: “(2) Capital gains treatment for portion of lump sum distributions.— In the case of an employee trust described in section 401(a), which is exempt from tax under section 501(a), 26 USC 401, 501. Ante, p. 987. so much of the total taxable amount (as defined in subparagraph (D) of subsection (e)(4)) of a lump sum distribution as is equal to the product of such total taxable amount multiplied by a fraction— “(A) the numerator of which is the number of calendar years of active participation by the employee in such plan before January 1, 1974, and “(B) the denominator of which is the number of calendar years of active participation by the employee in such plan, shall be treated as a gain from the sale or exchange of a capital asset held for more than 6 months. For purposes of computing the Regulations. fraction described in this paragraph and the fraction under subsection (e)(4)(E), the Secretary or his delegate may prescribe Ante, p. 987. regulations under which plan years may be used in lieu of calendar years. For purposes of this paragraph, in the case of an individual who is an employee without regard to section 401(c)(1), 26 USC 401. determination of whether or not any distribution is a lump sum distribution shall be made without regard to the requirement that an election be made under subsection (e)(4)(B), but no distribution to any taxpayer other than an individual, estate, or trust may be treated as a lump sum distribution under this paragraph.” (2) Amendment of section 403.— That part of paragraph (2) of section 403(a) which follows clause (ii) of subparagraph (A) 26 USC 403. thereof is amended to read as follows: “(iii) a lump sum distribution (as defined in section 402(e)(4)(A)) is paid to the recipient, Ante, p. 987. so much of the total taxable amount (as defined in section 402(e)(4)(D)) of such distribution as is equal to the product of such total taxable amount multiplied by the fraction described in section 402(a)(2) shall be treated as a gain from Ante, p. 990. the sale or exchange of a capital asset held for more than 6 months. For purposes of this paragraph, in the case of an individual who is an employee without regard to section 401(c)(1), determination of whether or not any distribution is a lump sum distribution shall be made without regard to the requirement that an election be made under subsection (e)(4)(B) of section 402, but no distribution to any taxpayer other than an individual, estate, or trust may be treated as a lump sum distribution under this paragraph. “(B) Cross reference.— “For imposition of separate tax on ordinary income portion of lump sum distribution, see section 402(e).” (c) Conforming Amendments.— (1) Subparagraph (C) of section 402(a)(3) is repealed. Repeals. 26 USC 402. (2) Paragraph (5) (as in effect on December 31, 1973) of section 402(a) is repealed. (3) Section 72 is amended by striking out subsection (n) thereof 26 USC 72. and by redesignating subsections (o) and (p) as (n) and (o), respectively. (4) The second sentence of section 46(a)(3) and the second 26 USC 46. 26 USC 50. sentence of section 50A(a)(3) are each amended by inserting after “tax preferences),” the following: “section 402(e) (relating to tax on lump sum distributions),”. (5) The third sentence of section 901(a) is amended by inserting 26 USC 901. “against the tax imposed by section 402(e) (relating to tax on lump sum distributions),” before “against the tax imposed by section 531”. (6) Subsection 1304(b)(2) (relating to special rules) is 26 USC 1304. amended by striking out paragraph (2) and by redesignating paragraphs (3), (4), (5), and (6) as paragraphs (2), (3), (4), and (5), respectively. (7) Subparagraph (A) of section 56(a)(2) and paragraph (1) 26 USC 56. of section 56(c) are each amended by inserting before “531” the following: “402(e),”. (8) Sections 871(b)(1) and 877(b) are each amended by inserting 26 USC 871, 877. Ante, p. 987. “, 402(e)(1),” after “section 1”. (9) Section 62 (defining adjusted gross income), is amended by Ante, p. 959. inserting after paragraph (10) the following new paragraph: “(11) Certain portion of lump-sum distributions from pension plans taxed under section 402(e).— The deduction allowed by section 402(e)(3).” (10) Section 122(b)(2) (relating to consideration for the contract) 26 USC 122. is amended by striking out “72(o)” and inserting “72(n)”. (11) Section 405(e) (relating to capital gains treatment and 26 USC 405. limitation of tax not to apply to bonds distributed by trusts) is amended by striking out “Section 72(n) and section 402(a)(2)” and inserting “Subsections (a)(2) and (e) of section 402”. (12) Section 406(c) (relating to termination of status as 26 USC 406. deemed employee, etc.) is amended by striking out “section 72(n), section 402(a)(2)” and inserting “subsections (a)(2) and (e) of section 402”. (13) Section 407(c) (relating to termination of status as 26 USC 407. deemed employee, etc.) is amended by striking out “section 72(n), section 402(a)(2)” and inserting “subsections (a)(2) and (e) of section 402”. (14) Section 1348(b)(1) (relating to earned income) is 26 USC 1348. amended by striking out “72(n), 402(a)(2)” and inserting “402(a)(2), 402(e)”. (15) Section 101(b)(2)(B) is amended by striking out “total 26 USC 101. distributions payable (as defined in section 402(a)(3)) which are paid to a distribute within one taxable year of the distribute by reason of the employee’s death” and inserting in lieu thereof “a lump sum distribution (as defined in section 402(e)(4))”. (d) Effective Date.— The amendments made by this section shall 26 USC 402 note. apply only with respect to distributions or payments made after December 31, 1973, in taxable years beginning after such date. SEC. 2006. SALARY REDUCTION REGULATIONS. (a) Inclusion of Certain Contributions in Income.— Except in the case of plans or arrangements in existence on June 27, 1974, a contribution made before January 1, 1977, to an employees’ trust described in section 401(a), 403(a), or 405(a) of the Internal Revenue Code of 1954 which is exempt from tax under section 501(a) of such 26 USC 401, 403, 405. 26 USC 501. Code, or under an arrangement which, but for the fact that it was not in existence on June 27, 1974, would be an arrangement described in subsection (b)(2) of this section, shall be treated as a contribution made by an employee if the contribution is made under an arrangement under which the contribution will be made only if the employee elects to receive a reduction in his compensation or to forego an increase in his compensation. (b) Administration in the Case of Certain Qualified Pension or Profit-Sharing Plans, Etc., in Existence on June 27, 1974.— No salary reduction regulations may be issued by the Secretary of the Treasury in final form before January 1, 1977, with respect to an arrangement which was in existence on June 27, 1974, and which, on that date— (1) provided for contributions to an employees’ trust described in section 401(a), 403(a), or 405(a) of the Internal Revenue Code of 1954 which is exempt from tax under section 501(a) of such Code, or (2) was maintained as part of an arrangement under which an employee was permitted to elect to receive part of his compensation in one or more alternative forms if one of such forms results in the inclusion of amounts in income under the Internal Revenue Code of 1954. 26 USC 1 et seq. (c) Administration of Law With Respect to Certain Plans.— (1) Administration in the case of plans described in subsection (b).— Until salary reduction regulations have been issued in final form, the law with respect to plans or arrangements described in subsection (b) shall be administered— (A) without regard to the proposed salary reduction regulations (37 FR 25938) and without regard to any other proposed salary reduction regulations, and (B) in the manner in which such law was administered before January 1, 1972. (2) Administration in the case of qualified profit-sharing plans.— In the case of plans or arrangements described in subsection (b), in applying this section to the tax treatment of contributions to qualified profit-sharing plans where the contributed amounts are distributable only after a period of deferral, the law shall be administered in a manner consistent with— (A) Revenue Ruling 56–497 (1956—2 C.B. 284), (B) Revenue Ruling 63–180 (1963—2 C.B. 189), and (C) Revenue Ruling 68–89 (1968—1 C.B. 402). (d) Limitation on Retroactivity of Final Regulations.— In the case of any salary reduction regulations which become final after December 31, 1976— (1) for purposes of chapter 1 of the Internal Revenue Code of 1954 (relating to normal taxes and surtaxes), such regulations 26 USC 1. shall not apply before January 1, 1977; and (2) for purposes of chapter 21 of such Code (relating to Federal Insurance Contributions Act) and for purposes of chapter 24 26 USC 3101. 26 USC 3401. of such Code (relating to collection of income tax at source on wages), such regulations shall not apply before the day on which such regulations are issued in final form. (e) Salary Reduction Regulations Defined.— For purposes of this section, the term “salary reduction regulations” means regulations dealing with the ineludibility in gross income (at the time of contribution) of amounts contributed to a plan which includes a trust that qualifies under section 401(a), or a plan described in section 403(a) 26 USC 401, 403. 26 USC 405. 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 1954). SEC. 2008. CERTAIN ARMED FORCES SURVIVOR ANNUITIES. (a) Treatment of Certain Participants in the Plan.— Section 404(c) (relating to certain negotiated plans) is amended by inserting 26 USC 404. after the first sentence the following new sentences: “For purposes of this chapter and subtitle B, in the case of any individual who before July 1, 1974, was a participant in a plan described in the preceding sentence— “(A) such individual, if he is or was an employee within the meaning of section 401(c)(1), shall be treated (with respect to 26 USC 401. service covered by the plan) as being an employee other than an employee within the meaning of section 401(c)(1) and as being an employee of a participating employer under the plan, “(B) earnings derived from service covered by the plan shall be treated as not being earned income within the meaning of section 401(c)(2), and “(C) such individual shall be treated as an employee of a participating employer under the plan with respect to service before July 1, 1975, covered by the plan. Section 277 (relating to deductions incurred by certain membership 26 USC 277. organizations in transactions with members) does not apply to any trust described in this subsection.”. (b) Other Amendments to Section 404(c)(1).— (1) Paragraph (1) of the first sentence of section 404(c) is amended by striking out “and pensions” and inserting in lieu thereof “or pensions”. (2) The last sentence of section 404(c) is amended by striking out “This subsection” and inserting in lieu thereof “The first and third sentences of this subsection”. (c) Effective Date.— The amendments made by this section shall 26 USC 404 note. apply to taxable years ending on or after June 30, 1972. SEC. 2007. RULES FOR CERTAIN NEGOTIATED PLANS. (a) In General.— Section 122(a) (relating to certain reduced uniformed 26 USC 122. services retired pay) is amended to read as follows: “(a) General Rule.— In the case of a member or former member of the uniformed services of the United States, gross income does not include the amount of any reduction in his retired or retainer pay pursuant to the provisions of chapter 73 of title 10, United States Code.”. 10 USC 1431. (b) Technical Amendments.— (1) Section 122(b)(2) is amended by striking out “section 1438” in subparagraph (B) and inserting in lieu thereof “section 1438 or 1452(d)”. (2) Section 72(o) is amended by inserting after “Plan” in the Ante, p. 991. heading of such section “or Survivor Benefit Plan”. (3) Section 101(b)(2)(D) is amended by striking out “if the 26 USC 101. individual who made the election under such chapter” and inserting in lieu thereof “if the member or former member of the uniformed services by reason of whose death such annuity is payable”. (4) Section 2039(c) is amended by striking out “section 1438” 26 USC 2039. in the last sentence and inserting in lieu thereof “section 1438 or 1452(d)”. (c) Effective Dates.— The amendments made by this section apply 26 USC 122 note. to taxable years ending on or after September 21, 1972. The amendments made by paragraphs (3) and (4) of subsection (b) apply with respect to individuals dying on or after such date.
1974
Employee Retirement Income Security Act of 1974
Pub. L. 93–406 § 2005(a) · 88 Stat. 829
Substituted · 26 U.S.C. § 402(e)
Pub. L. 93–406, § 2005(a), substituted provisions covering tax on lump sum distributions for provisions covering plan termination distributions made after Dec. 31, 1953, and before Jan. 1, 1955
Source evidence
Code amendment note
Subsec. (e). Pub. L. 93–406, § 2005(a), substituted provisions covering tax on lump sum distributions for provisions covering plan termination distributions made after Dec. 31, 1953, and before Jan. 1, 1955.
Enacted provision · exact public law section
(a) Treatment of total distributions.— Section 402(e) (relating 26 USC 402. to certain plan terminations) is amended to read as follows: “(e) Tax on Lump Sum Distributions.— (1) Imposition of separate tax on lump sum distributions.— “(A) Separate tax.— There is hereby imposed a tax (in the amount determined under subparagraph (B)) on the ordinary income portion of a lump sum distribution. “(B) Amount of tax.— The amount of tax imposed by subparagraph (A) for any taxable year shall be an amount equal to the amount of the initial separate tax for such taxable year multiplied by a fraction, the numerator of which is the ordinary income portion of the lump sum distribution for the taxable year and the denominator of which is the total taxable amount of such distribution for such year. “(C) Initial separate tax.— The initial separate tax for any taxable year is an amount equal to 10 times the tax which would be imposed by subsection (c) of section 1 if the recipient were an individual referred to in such subsection and the taxable income were an amount equal to one-tenth of the excess of— “(i) the total taxable amount of the lump sum distribution for the taxable year, over “(ii) the minimum distribution allowance. “(D) Minimum distribution allowance.— For purposes of this paragraph, the minimum distribution allowance for the taxable year is an amount equal to— “(i) the lesser of $10,000 or one-half of the total taxable amount of the lump sum distribution for the taxable year, reduced (but not below zero) by “(ii) 20 percent of the amount (if any) by which such total taxable amount exceeds $20,000. “(E) Liability for tax.— The recipient shall be liable for the tax imposed by this paragraph. “(2) Multiple distributions and distributions of annuity contracts.— In the case of any recipient of a lump sum distribution for the taxable year with respect to whom during the 6-taxable-year period ending on the last day of the taxable year there has been one or more other lump sum distributions after December 31, 1973, or if the distribution (or any part thereof) is an annuity contract, in computing the tax imposed by paragraph (1) (A), the total taxable amounts of all such distributions during such 6-taxable-year period shall be aggregated, but the amount of tax so computed shall be reduced (but not below zero) by the sum of— “(A) the amount of the tax imposed by paragraph (1)(A) paid with respect to such other distributions, plus “(B) that portion of the tax on the aggregated total taxable amounts which is attributable to annuity contracts. For purposes of this paragraph, a beneficiary of a trust to which a lump sum distribution is made shall be treated as the recipient of such distribution if the beneficiary is an employee (including an employee within the meaning of section 401(c)(1)) with respect 26 USC 401. to the plan under which the distribution is made or if the beneficiary is treated as the owner of such trust for purposes of subpart E of part I of subchapter J. In the case of the distribution 26 USC 671. of an annuity contract, the taxable amount of such distribution shall be deemed to be the current actuarial value of the contract, determined on the date of such distribution. In the case of a lump sum distribution with respect to any individual which is made only to two or more trusts, the tax imposed by paragraph (1)(A) shall be computed as if such distribution was made to a single trust, but the liability for such tax shall be apportioned among such trusts according to the relative amounts received by each. The Secretary or his delegate shall prescribe such regulations Regulations. as may be necessary to carry out the purposes of this paragraph. “(3) Allowance of deduction.— The ordinary income portion of a lump sum distribution for the taxable year shall be allowed as a deduction from gross income for such taxable year, but only to the extent included in the taxpayer’s gross income for such taxable year. “(4) Definitions and special rules.— “(A) Lump sum distribution.— For purposes of this section and section 403, the term ‘lump sum distribution’ 26 USC 403. means the distribution or payment within one taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient— “(i) on account of the employee’s death, “(ii) after the employee attains age 59½, “(iii) on account of the employee’s separation from the service, or “(iv) after the employee has become disabled (within the meaning of section 72 (m) (7)) 26 USC 72. from a trust which forms a part of a plan described in section 26 USC 401, 501. 26 USC 403. 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Clause (iii) of this subparagraph shall be applied only with respect to an individual who is an employee without regard to section 401 (c) (1), and clause (iv) shall be applied only with respect to an employee within the meaning of section 401(c)(1). For purposes of this subparagraph, a distribution of an annuity contract from a trust or annuity plan referred to in the first sentence of this subparagraph shall be treated as a lump sum distribution. For purposes of this subparagraph, a distribution to two or more trusts shall be treated as a distribution to one recipient. “(B) Election of lump sum treatment.— For purposes of this section and section 403, no amount which is not an annuity contract may be treated as a lump sum distribution under subparagraph (A) unless the taxpayer elects for the taxable year to have all such amounts received during such year so treated at the time and in the manner provided under regulations prescribed by the Secretary or his delegate. Not more than one election may be made under this subparagraph with respect to any individual after such individual has attained age 59½. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to two or more trusts, the election under this subparagraph shall be made by the personal representative of the employee. “(C) Aggregation of certain trusts and plans.— For purposes of determining the balance to the credit of an employee under subparagraph (A)— “(i) all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and “(ii) trusts which are not qualified trusts under section 401(a) and annuity contracts which do not satisfy the requirements of section 404(a)(2) shall not be taken 26 USC 404. into account. “(D) Total taxable amount.— For purposes of this section and section 403, the term ‘total taxable amount’ means, with respect to a lump sum distribution, the amount of such distribution which exceeds the sum of— “(i) the amounts considered contributed by the employee (determined by applying section 72(f)), which employee contributions shall be reduced by any amounts theretofore distributed to him which were not includible in gross income, and “(ii) the net unrealized appreciation attributable to that part of the distribution which consists of the securities of the employer corporation so distributed. “(E) Ordinary income portion.— For purposes of this section, the term ‘ordinary income portion’ means, with respect to a lump sum distribution, so much of the total taxable amount of such distribution as is equal to the product of such total taxable amount multiplied by a fraction— “(i) the numerator of which is the number of calendar years of active participation by the employee in such plan after December 31, 1973, and “(ii) the denominator of which is the number of calendar years of active participation by the employee in such plan. “(F) Employee.— For purposes of this subsection and subsection (a)(2), except as otherwise provided in subparagraph (A), the term ‘employee’ includes an individual who is an employee within the meaning of section 401(c)(1) and 26 USC 401. the employer of such individual is the person treated as his employer under section 401(c)(4). “(G) Community property laws.— The provisions of this subsection, other than paragraph (3), shall be applied without regard to community property laws. “(H) Minimum period of service.— For purposes of this subsection (but not for purposes of subsection (a)(2) or section 403(a)(2)(A)), no amount distributed to an employee 26 USC 403. from or under a plan may be treated as a lump sum distribution under subparagraph (A) unless he has been a participant in the plan for 5 or more taxable years before the taxable year in which such amounts are distributed. “(I) Amounts subject to penalty.— This subsection shall not apply to amounts described in clause (ii) of subparagraph (A) of section 72(m)(5) to the extent that section 72(m)(5) applies to such amounts. “(J) Unrealized appreciation of employer securities.— In the case of any distribution including securities of the employer corporation which, without regard to the requirement of subparagraph (H), would be treated as a lump sum distribution under subparagraph (A), there shall be excluded from gross income the net unrealized appreciation attributable to that part of the distribution which consists of securities of the employer corporation so distributed. In the case of any such distribution or any lump sum distribution including securities of the employer corporation, the amount of net unrealized appreciation of such securities and the resulting adjustments to the basis of such securities shall be determined under regulations prescribed by the Secretary or his delegate. “(K) Securities.— For purposes of this subsection, the terms ‘securities’ and ‘securities of the employer corporation’ have the respective meanings provided by subsection (a)(3).”
1976
Pub. L. 94–455 § 1906(b)(13)(A) · 90 Stat. 1520
Struck · 26 U.S.C. § 402(a)(1)
Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”
Source evidence
Code amendment note
Subsec. (a)(1). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Enacted provision · exact public law section
(A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.
1976
Pub. L. 94–455 § 1402(b)(2) · 90 Stat. 1520
Changed · 26 U.S.C. § 402(a)(2)
Pub. L. 94–455, § 1402(b)(2), provided that “9 months” would be changed to “1 year”
Source evidence
Code amendment note
Subsec. (a)(2). Pub. L. 94–455, § 1402(b)(2), provided that “9 months” would be changed to “1 year”.
Enacted provision · exact public law section
(2) Taxable years beginning after 1977.— Effective with respect to taxable years beginning after December 31, 1977, each provision referred to in paragraph (1) is amended by striking out Ante, p. 1731. “9 months” each place it appears and inserting in lieu thereof “1 year”.
1976
Pub. L. 94–455 title XIV § 1402(b)(1)(C) · 90 Stat. 1520
Struck · 26 U.S.C. § 402(a)(2)
Pub. L. 94–455, §§ 1402(b)(1)(C), 1906(b)(13)(A), provided that “6 months” would be changed to “9 months” for taxable years beginning in 1977 and struck out “or his delegate” after “Secretary”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 94–455, §§ 1402(b)(1)(C), 1906(b)(13)(A), provided that “6 months” would be changed to “9 months” for taxable years beginning in 1977 and struck out “or his delegate” after “Secretary”.
Enacted provision · exact public law section
(C) Paragraph (2) of subsection (a) of section 402 (relating 26 USC 402. to capital gains treatment for certain distributions in the case of a beneficiary of an exempt employees’ trust) and subparagraph (L) of paragraph (4) of section 402(e) (relating to election to treat pre–1974 participation as post–1973 participation) .
1976
Pub. L. 94–455 § 1901(a)(57)(A) · 90 Stat. 1520
1. Substituted · 26 U.S.C. § 402(a)(4)
  Pub. L. 94–455, § 1901(a)(57)(A), substituted “basic pay” for “basic salary”
2. Substituted · 26 U.S.C. § 402(a)(4)
  Pub. L. 94–455, § 1901(a)(57)(A), substituted “civil service retirement laws” for “Civil Service Retirement Act (5 U.S.C. 2251)”
3. Substituted · 26 U.S.C. § 402(a)(4)
  Pub. L. 94–455, § 1901(a)(57)(A), substituted “section 8331(3) of title 5, United States Code” for “section 1(d) of such Act”
Source evidence
Code amendment note
Subsec. (a)(4). Pub. L. 94–455, § 1901(a)(57)(A), substituted “basic pay” for “basic salary”, “civil service retirement laws” for “Civil Service Retirement Act (5 U.S.C. 2251)”, and “section 8331(3) of title 5, United States Code” for “section 1(d) of such Act”.
Enacted provision · exact public law section
(A) Section 402(a)(4) (relating to distributions made to 26 USC 402. nonresident alien individuals) is amended by striking out “basic salary” each place it appears therein and inserting in lieu thereof “basic pay”, and by amending the last sentence in such paragraph to read as follows: “In the case of distributions under the civil service retirement laws, the term ‘basic pay’ shall have the meaning provided in section 8331(3) of title 5, United States Code.”
1976
Pub. L. 94–455 § 1906(b)(13)(A) · 90 Stat. 1520
Struck · 26 U.S.C. § 402(a)(6)(A)
Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”
Source evidence
Code amendment note
Subsec. (a)(6)(A). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Enacted provision · exact public law section
(A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.
1976
Pub. L. 94–455 § 1901(a)(57)(B) · 90 Stat. 1520
Struck · 26 U.S.C. § 402(d)
Pub. L. 94–455, § 1901(a)(57)(B), struck out subsec. (d) which related to certain trust agreements made before Oct. 21, 1942
Source evidence
Code amendment note
Subsec. (d). Pub. L. 94–455, § 1901(a)(57)(B), struck out subsec. (d) which related to certain trust agreements made before Oct. 21, 1942.
Enacted provision · exact public law section
(B) Section 402 (relating to taxability of beneficiary of employees’ trusts) is amended by striking out subsection (d) (relating to certain trust agreements made before October 21, 1942),
1976
Pub. L. 94–455 § 1906(b)(13)(A) · 90 Stat. 1520
Struck · 26 U.S.C. § 402(e)(2)
Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”
Source evidence
Code amendment note
Subsec. (e)(2). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Enacted provision · exact public law section
(A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.
1976
Pub. L. 94–455 § 1901(a)(57)(C)(i) · 90 Stat. 1520
Substituted · 26 U.S.C. § 402(e)(4)(A)
Pub. L. 94–455, § 1901(a)(57)(C)(i), substituted “Except for purposes of subsection (a)(2) and section 403(a)(2)” for “For purposes of this subparagraph”
Source evidence
Code amendment note
Subsec. (e)(4)(A). Pub. L. 94–455, § 1901(a)(57)(C)(i), substituted “Except for purposes of subsection (a)(2) and section 403(a)(2)” for “For purposes of this subparagraph”.
Enacted provision · exact public law section
(i) So much of the third sentence of section 402(e)(4) 26 USC 402. (A) (relating to definition of lump sum distributions) as precedes “a distribution of an annuity contract” is amended to read as follows: “Except for purposes of subsection (a)(2) and section 403(a)(2),”.
1976
Pub. L. 94–455 § 1906(b)(13)(A) · 90 Stat. 1520
Struck · 26 U.S.C. § 402(e)(4)(B); 26 U.S.C. § 402(e)(4)(J)
Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”
Source evidence
Code amendment note
Subsec. (e)(4)(B), (J). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Enacted provision · exact public law section
(A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.
1976
Pub. L. 94–455 § 1402(b)(2) · 90 Stat. 1520
Substituted · 26 U.S.C. § 402(e)(4)(L)
Pub. L. 94–455, § 1402(b)(2), substituted “1 year” for “9 months”
Source evidence
Code amendment note
Subsec. (e)(4)(L). Pub. L. 94–455, § 1402(b)(2), substituted “1 year” for “9 months”.
Enacted provision · exact public law section
(2) Taxable years beginning after 1977.— Effective with respect to taxable years beginning after December 31, 1977, each provision referred to in paragraph (1) is amended by striking out Ante, p. 1731. “9 months” each place it appears and inserting in lieu thereof “1 year”.
1976
Pub. L. 94–455 title XIV § 1402(b)(1)(C) · 90 Stat. 1520
Added · 26 U.S.C. § 402(e)(4)(L)
Pub. L. 94–455, §§ 1402(b)(1)(C), 1512(a), added subsec. (e)(4)(L) to be applicable to distributions and payments after Dec. 31, 1975, in taxable years beginning after Dec. 31, 1975, and provided that “6 months” would be changed to “9 months” for taxable years beginning in 1977
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 94–455, §§ 1402(b)(1)(C), 1512(a), added subsec. (e)(4)(L) to be applicable to distributions and payments after Dec. 31, 1975, in taxable years beginning after Dec. 31, 1975, and provided that “6 months” would be changed to “9 months” for taxable years beginning in 1977.
Enacted provision · exact public law section
(C) Paragraph (2) of subsection (a) of section 402 (relating 26 USC 402. to capital gains treatment for certain distributions in the case of a beneficiary of an exempt employees’ trust) and subparagraph (L) of paragraph (4) of section 402(e) (relating to election to treat pre–1974 participation as post–1973 participation) .
1977
Tax Reduction and Simplification Act of 1977
Pub. L. 95–30 title I § 102(b)(4) · 91 Stat. 126
Substituted · 26 U.S.C. § 402(e)(1)(C)
Pub. L. 95–30 substituted “amount equal to $2,200 plus one-tenth of the excess of” for “amount equal to one-tenth of the excess of” in provisions preceding cl. (i)
Source evidence
Code amendment note
Subsec. (e)(1)(C). Pub. L. 95–30 substituted “amount equal to $2,200 plus one-tenth of the excess of” for “amount equal to one-tenth of the excess of” in provisions preceding cl. (i).
Enacted provision · exact public law section
(4) Subparagraph (C) of section 402(e) (1) (relating to imposition 26 USC 402. of separate tax on lump sum distributions) is amended by striking out “amount equal to one-tenth of the excess of” and inserting in lieu thereof “amount equal to $2,200 plus one-tenth of the excess of”.
1978
Pub. L. 95–458 § 4(a) · 92 Stat. 1255
Substituted · 26 U.S.C. § 402(a)(5)
Pub. L. 95–458, § 4(a), among other changes, substituted provision permitting tax-free treatment for any portion of a lump sum distribution from a qualified retirement plan which is deposited in an individual retirement account or another qualifying plan for provision which required transfer of all such property received
Source evidence
Code amendment note
Subsec. (a)(5). Pub. L. 95–458, § 4(a), among other changes, substituted provision permitting tax-free treatment for any portion of a lump sum distribution from a qualified retirement plan which is deposited in an individual retirement account or another qualifying plan for provision which required transfer of all such property received.
Enacted provision · exact public law section
(a) Partial Rollover From Employees’ Trusts Permitted.— Paragraph (5) of section 402(a) of the Internal Revenue Code of 1954 (relating to rollover amounts) is amended to read as follows: 26 USC 402. “(5) Rollover amounts.— “(A) General rule.— If— “(i) the balance to the credit of an employee in a qualified trust is paid to him in a qualifying rollover distribution, “(ii) the employee transfers any portion of the property he receives in such distribution to an eligible retirement plan, and “(iii) in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid. “(B) Maximum amount which mat be rolled over.— In the case of any qualifying rollover distribution, the maximum amount transferred to which subparagraph (A) applies shall not exceed the fair market value of all the property the employee receives in the distribution, reduced by the employee contributions. “(C) Transfer must be made within 60 days of receipt.— Subparagraph (A) shall not apply to any transfer of a distribution made after the 60th day following the day on which the employee received the property distributed. “(D) Definitions.— For purposes of this paragraph— “(i) Qualifying rollover distribution.— The term ‘qualifying rollover distribution’ means 1 or more distributions— “(I) within 1 taxable year of the employee 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, or “(II) which constitute a lump sum distribution within the meaning of subsection (e)(4)(A) (determined without reference to subsection (e)(4)(B)). “(ii) Employee contributions.— The term ‘employee contributions’ means— “(I) the excess of the amounts considered contributed by the employee (determined by applying section 72(f)), over 26 USC 72. “(II) any amounts theretofore distributed to the employee which were not includible in gross income. “(iii) Qualified trust.— The term ‘qualified trust’ means an employees’ trust described in section 401(a) 26 USC 401. 26 USC 501. which is exempt from tax under section 501(a). “(iv) Eligible retirement plan.— The term ‘eligible retirement plan’ means— “(I) an individual retirement account described in section 408(a), 26 USC 408. “(II) an individual retirement annuity described in section 408(b) (other than an endowment contract), “(III) a retirement bond described in section 409, 26 USC 409. “(IV) a qualified trust, and “(V) an annuity plan described in section 403(a). 26 USC 403. “(E) Special rules.— “(i) Transfer treated as rollover contribution under section 408.— For purposes of this title, a transfer 26 USC 408. described in subparagraph (A) to an eligible retirement plan described in subclause (I), (II), or (III) of subparagraph (D)(iv) shall be treated as a rollover contribution described in section 408 (d)(3). “(ii) Self-employed individuals and owner-employees.— An eligible retirement plan described in subclause (IV) or (V) of subparagraph (D)(iv) shall not be treated as an eligible retirement plan for the transfer of a distribution if any part of the distribution is attributable to a trust forming part of a plan under which the employee was an employee within the meaning of section 401(c)(1) at the time contributions were 26 USC 401. made on his behalf under the plan.”
1978
Pub. L. 95–458 § 4(c) · 92 Stat. 1255
1. Substituted · 26 U.S.C. § 402(a)(6)
  Pub. L. 95–458, § 4(c), in provision preceding subpar. (A) struck out “For purposes of paragraph (5)(A)(i)”, in subpar. (A) substituted “For purposes of paragraph (5)(D)(i), a complete” for “A complete”, in subpar. (B) inserted “For purposes of paragraph (5)(D)(i)—” after “assets.—” in provision preceding cl. (i)
2. Added · 26 U.S.C. § 402(a)(6)
  Pub. L. 95–458, § 4(c), in provision preceding subpar. (A) added subpar. (C)
Source evidence
Code amendment note
Subsec. (a)(6). Pub. L. 95–458, § 4(c), in provision preceding subpar. (A) struck out “For purposes of paragraph (5)(A)(i)”, in subpar. (A) substituted “For purposes of paragraph (5)(D)(i), a complete” for “A complete”, in subpar. (B) inserted “For purposes of paragraph (5)(D)(i)—” after “assets.—” in provision preceding cl. (i), and added subpar. (C).
Enacted provision · exact public law section
(c) Taxation of Portion Not Rolled Over.— (1) In general.— Paragraph (6) of section 402(a) of such Code (relating to special rollover rules) is amended by adding at the end thereof the following new subparagraph: “(C) Treatment of portion not rolled over.— If any portion of a lump sum distribution is transferred in a transfer to which paragraph (5) (A) applies, paragraph (2) of subsection Ante, p. 1258. (a), and paragraphs (1) and (3) of subsection (e) shall not apply with respect to such lump sum distribution.” (2) Conforming amendments.— Paragraph (6) of section 402 (a) of such Code is amended— (A) by striking out “For purposes of paragraph (5) (A) (i)” (B) by striking out “A complete” in subparagraph (A) and inserting in lieu thereof “For purposes of paragraph 5(D)(i), complete”, and Ante, p. 1258. (C) by inserting “For purposes of paragraph (5)(D)(i)—” after “Assets.—” in subparagraph (B).
1978
Pub. L. 95–600 § 157(h)(1) · 92 Stat. 2763
Substituted · 26 U.S.C. § 402(a)(5)(D)(i)(II)
Pub. L. 95–600, § 157(h)(1), substituted “subparagraphs (B) and (H) of subsection (e)(4)” for “subsection (e)(4)(B)”
Source evidence
Code amendment note
Subsec. (a)(5)(D)(i)(II). Pub. L. 95–600, § 157(h)(1), substituted “subparagraphs (B) and (H) of subsection (e)(4)” for “subsection (e)(4)(B)”.
Enacted provision · exact public law section
(1) Disregard of 5-year minimum participation rule for purposes of rollovers.— Subclause (II) of section 402(a)(5)(D)(i) is amended by striking out “subsection (e)(4)(B)” and inserting in lieu thereof “subparagraphs (B) and (H) of subsection (e)(4)”.
1978
Pub. L. 95–600 § 157(f)(1) · 92 Stat. 2763
Added · 26 U.S.C. § 402(a)(6)(D)
Pub. L. 95–600, § 157(f)(1), added subpar. (D)
Source evidence
Code amendment note
Subsec. (a)(6)(D). Pub. L. 95–600, § 157(f)(1), added subpar. (D).
Enacted provision · exact public law section
(1) Rollovers from qualified employees’ trusts and annuities.— Paragraph (6) of section 402(a) (relating to special rollover rules) is amended by adding at the end thereof the following new subparagraph: “(D) Sales of distributed property.— For purposes of subparagraphs (5) and (7)— “(i) Transfer of proceeds from sale of distributed property treated as transfer of distributed property.— The transfer of an amount equal to any portion of the proceeds from the sale of property received in the distribution shall be treated as the transfer of property received in the distribution. “(ii) Proceeds attributable to increase in value.— The excess of fair market value of property on sale over its fair market value on distribution shall be treated as property received in the distribution. “(iii) Designation where amount of distribution exceeds rollover contribution.— In any case where part or all of the distribution consists of property other than money, the taxpayer many designate— “(I) the portion of the money or other property which is to be treated as attributable to employee contributions, and “(II) the portion of the money or other property which is to be treated as included in the rollover contribution. Any designation under this clause for a taxable year shall be made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). Any such designation, once made, shall be irrevocable. “(iv) Treatment where no designation.— In any case where part or all of the distribution consists of property other than money and the taxpayer fails to make a designation under clause (iii) within the time provided therein, then— “(I) the portion of the money or other property which is to be treated as attributable to employee contributions, and “(II) the portion of the money or other property which is to be treated as included in the rollover contribution shall be determined on a ratable basis. “(v) Nonrecognition of gain or loss.— In the case of any sale described in clause (i), to the extent that an amount equal to the proceeds is transferred pursuant to paragraph (5)(B) or (7)(B) (as the case by be), neither gain nor loss on such sale shall be recognized.”
1978
Pub. L. 95–600 § 157(g)(1) · 92 Stat. 2763
Added · 26 U.S.C. § 402(a)(7)
Pub. L. 95–600, § 157(g)(1), added par. (7)
Source evidence
Code amendment note
Subsec. (a)(7). Pub. L. 95–600, § 157(g)(1), added par. (7).
Enacted provision · exact public law section
(1) Rollovers from qualified employees’ trust.— Subsection 26 USC 402. (a) of section 402 (relating to taxability of beneficiary of exempt trust) is amended by adding at the end thereof the following new paragraph: “(7) Rollover where spouse receives lump-sum distribution at death of employee.— “(A) General rule.— If— “(i) any portion of a lump-sum distribution from a qualified trust is paid to the spouse of the employee on account of the employee’s death, “(ii) the spouse transfers any portion of the property which the spouse receives in such distribution to an individual retirement plan, and “(iii) in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid. “(B) Certain rules made applicable.— Rules similar to the rules of subparagraphs (B) through (E) of paragraph (5) and of paragraph (6) shall apply for purposes of this paragraph.”
1978
Pub. L. 95–600 § 135(b) · 92 Stat. 2763
Added · 26 U.S.C. § 402(a)(8)
Pub. L. 95–600, § 135(b), added par. (8)
Source evidence
Code amendment note
Subsec. (a)(8). Pub. L. 95–600, § 135(b), added par. (8).
Enacted provision · exact public law section
(b) Taxability of Beneficiaries.— Subsection (a) of section 402 is 26 USC 402. amended by adding at the end thereof the following new paragraph: “(8) Cash or deferred arrangements.— For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) shall not be treated 26 USC 401. as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash.”
1978
Pub. L. 95–600 § 101(d)(1) · 92 Stat. 2763
Substituted · 26 U.S.C. § 402(e)(1)(C)
Pub. L. 95–600, § 101(d)(1), substituted “$2,300” for “$2,200”
Source evidence
Code amendment note
Subsec. (e)(1)(C). Pub. L. 95–600, § 101(d)(1), substituted “$2,300” for “$2,200”.
Enacted provision · exact public law section
(1) 26 USC 402. Subparagraph (C) of section 402(e)(1) (relating to tax on lump sum distributions) is amended by striking out “$2,200” and inserting in lieu thereof “$2,300”.
1980
Technical Corrections Act of 1979
Pub. L. 96–222 § 101(a)(14)(E)(i) · 94 Stat. 194
Substituted · 26 U.S.C. § 402(a)(6)(D)(iii)
Pub. L. 96–222, § 101(a)(14)(E)(i), substituted “may designate” for “many designate”
Source evidence
Code amendment note
Subsec. (a)(6)(D)(iii). Pub. L. 96–222, § 101(a)(14)(E)(i), substituted “may designate” for “many designate”.
Enacted provision · exact public law section
(i) Clause (iii) of section 402(a)(6)(D) (relating to sales of 26 USC 402. distributed property) is amended by striking out “many designate” and inserting in lieu thereof “may designate”.
1980
Technical Corrections Act of 1979
Pub. L. 96–222 § 101(a)(14)(C) · 94 Stat. 194
Substituted · 26 U.S.C. § 402(a)(7)(A)(i)
Pub. L. 96–222, § 101(a)(14)(C), substituted “qualifying rollover distribution attributable to an employee is paid to the spouse of the employee after” for “lump-sum distribution from a qualified trust is paid to the spouse of the employee on account of”
Source evidence
Code amendment note
Subsec. (a)(7)(A)(i). Pub. L. 96–222, § 101(a)(14)(C), substituted “qualifying rollover distribution attributable to an employee is paid to the spouse of the employee after” for “lump-sum distribution from a qualified trust is paid to the spouse of the employee on account of”.
Enacted provision · exact public law section
(C) Spousal rollovers.— Clause (i) of section 402(a)(7)(A) is amended to read as follows: “(i) any portion of a qualifying rollover distribution attributable to an employee is paid to the spouse of the employee after the employee’s death,”.
1980
Pub. L. 96–608 § 2(a) · 94 Stat. 3550
Added · 26 U.S.C. § 402(a)(6)(E)
Pub. L. 96–608 added subpar. (E)
Source evidence
Code amendment note
Subsec. (a)(6)(E). Pub. L. 96–608 added subpar. (E).
Enacted provision · exact public law section
(a) General Rule.— Paragraph (6) of section 402(a) of the Internal Revenue Code of 1954 (relating to special rollover rules) is amended 26 USC 402. by adding at the end thereof the following new subparagraph: “(E) Special rule where employer maintains money purchase pension plan and other pension plan.— “(i) In general.— In the case of any distribution from a money purchase pension plan which is maintained by an employer, for purposes of paragraph (5)(D)(i)(II), subsection (e)(4)(C) shall be applied by not taking into account any pension plan maintained by such employer which is not a money purchase pension plan. The preceding sentence shall not apply to any distribution which is a qualifying rollover distribution without regard to this subparagraph. “(ii) Treatment of subsequent distributions.— If— “(I) any distribution of the balance to the credit of an employee from a money purchase pension plan maintained by an employer is treated as a qualifying rollover distribution by reason of clause (i), and “(II) any portion of such distribution is transferred in a transfer to which paragraph (5)(A) applies, then paragraph (2) of subsection (a), and paragraphs (1) and (3) of subsection (e), shall not apply to any distribution (after the taxable year in which the distribution described in subparagraph (A) of paragraph (5) is made) of the balance to the credit of such employee from any other pension plan maintained by such employer.”
1981
Economic Recovery Tax Act of 1981
Pub. L. 97–34 § 311(c)(1) · 95 Stat. 175
Inserted · 26 U.S.C. § 402(a)(1)
Pub. L. 97–34, § 311(c)(1), inserted “(other than deductible employee contributions within the meaning of section 72(o)(5))”
Source evidence
Code amendment note
Subsec. (a)(1). Pub. L. 97–34, § 311(c)(1), inserted “(other than deductible employee contributions within the meaning of section 72(o)(5))”.
Enacted provision · exact public law section
(1) Paragraph (1) of section 402(a) (relating to taxability of beneficiary of exempt trust) is amended by striking out in the second sentence thereof “by the employee” and inserting in lieu thereof “by the employee (other than deductible employee contributions within the meaning of section 72(o)(5)).”
1981
Economic Recovery Tax Act of 1981
Pub. L. 97–34 § 314(c)(1) · 95 Stat. 175
Struck · 26 U.S.C. § 402(a)(1)
Pub. L. 97–34, § 314(c)(1), struck out “or made available” after “distributed” in three places
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 97–34, § 314(c)(1), struck out “or made available” after “distributed” in three places.
Enacted provision · exact public law section
(1) Contributions made available.— Paragraph (1) of section 26 USC 402. 402(a) (relating to taxability of beneficiary of exempt trust) is amended by striking out each place it appears “or made available”.
1981
Economic Recovery Tax Act of 1981
Pub. L. 97–34 § 311(b)(3)(A) · 95 Stat. 175
1. Inserted · 26 U.S.C. § 402(a)(5)
  Pub. L. 97–34, § 311(b)(3)(A), inserted “(other than accumulated deductible employee contributions within the meaning of section 72(o)(5))” after “contributions” in subpar. (B)
2. Added · 26 U.S.C. § 402(a)(5)
  Pub. L. 97–34, § 311(b)(3)(A), added subcl. (III) in subpar. (D)
Source evidence
Code amendment note
Subsec. (a)(5). Pub. L. 97–34, § 311(b)(3)(A), inserted “(other than accumulated deductible employee contributions within the meaning of section 72(o)(5))” after “contributions” in subpar. (B) and added subcl. (III) in subpar. (D).
Enacted provision · exact public law section
(A) Paragraph (5) of section 402(a) (relating to rollover amounts) is amended— (i) by inserting “(other than accumulated deductible employee contributions within the meaning of section 72(o)(5))” after “contributions” in subparagraph (B), (ii) by striking out “or” at the end of subparagraph (D)(i)(I), (iii) by striking out the period at the end of subparagraph (D)(i)(II) and inserting in lieu thereof “, or”, and (iv) by inserting at the end of subparagraph (D) the following new subclause: “(III) which constitute a distribution of accumulated deductible employee contributions (within the meaning of section 72(o)(5)).”
1981
Economic Recovery Tax Act of 1981
Pub. L. 97–34 § 311(b)(2) · 95 Stat. 175
1. Added · 26 U.S.C. § 402(e)(4)
  Pub. L. 97–34, § 311(b)(2), (c)(2), added to subpar. (A) provision that for purposes of sections 402 and 403, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5))
2. Added · 26 U.S.C. § 402(e)(4)
  Pub. L. 97–34, § 311(b)(2), (c)(2), added subpar. (J) provision making subpar. (J) inapplicable to distributions of accumulated deductible employee contributions (within the meaning of section 77(o)(5)). See 1983 Amendment note above
Source evidence
Code amendment note
Subsec. (e)(4). Pub. L. 97–34, § 311(b)(2), (c)(2), added to subpar. (A) provision that for purposes of sections 402 and 403, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)), and added subpar. (J) provision making subpar. (J) inapplicable to distributions of accumulated deductible employee contributions (within the meaning of section 77(o)(5)). See 1983 Amendment note above.
Enacted provision · exact public law section
(2) 10-year averaging and capital gains not to apply.— 26 USC 402. Subparagraph (A) of section 402(e)(4) (defining lump sum distribution) is amended by adding at the end thereof the following new sentence: “For purposes of this section and section 403, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan Ante, p. 278. (within the meaning of section 72(o)(5)).”
1983
Pub. L. 97–448 § 103(c)(8)(A) · 96 Stat. 2365
Added · 26 U.S.C. § 402(a)(5)(D)(v)
Pub. L. 97–448, § 103(c)(8)(A), added cl. (v)
Source evidence
Code amendment note
Subsec. (a)(5)(D)(v). Pub. L. 97–448, § 103(c)(8)(A), added cl. (v).
Enacted provision · exact public law section
(A) Subparagraph (D) of section 402(a)(5) (relating to roll-over amounts) is amended by adding at the end thereof the following new clause: “(v) Rollover of partial distributions of deductible employee contributions permitted.—In the case of any qualifying rollover distribution described in subclause GH) of clause (i), clause (i) of subparagraph (A) shall be applied by substituting ‘any portion of the balance’ for ‘the balance’.”
1983
Pub. L. 97–448 § 101(b) · 96 Stat. 2365
Substituted · 26 U.S.C. § 402(e)(1)(C)
Pub. L. 97–448, § 101(b), substituted “the zero bracket amount applicable to such an individual for the taxable year” for “$2,300”
Source evidence
Code amendment note
Subsec. (e)(1)(C). Pub. L. 97–448, § 101(b), substituted “the zero bracket amount applicable to such an individual for the taxable year” for “$2,300”.
Enacted provision · exact public law section
(b) 95 Stat. 188.26 USC 402. Amendment Related to Section 104.— Subparagraph (C) of section 402(e)(1) (relating to imposition of separate tax on lump sum distributions) is amended by striking out “$2,300” and inserting in lieu thereof “the zero bracket amount applicable to such an individual for the taxable year”.
1983
Pub. L. 97–448 § 103(c)(7) · 96 Stat. 2365
Substituted · 26 U.S.C. § 402(e)(4)(A)
Pub. L. 97–448, § 103(c)(7), substituted “this subsection, subsection (a)(2) of this section, and subsection (a)(2) of section 403” for “this section and section 403” in last sentence
Source evidence
Code amendment note
Subsec. (e)(4)(A). Pub. L. 97–448, § 103(c)(7), substituted “this subsection, subsection (a)(2) of this section, and subsection (a)(2) of section 403” for “this section and section 403” in last sentence.
Enacted provision · exact public law section
(7) 26 USC 402. 10-year averaging and capital gains provisions.— The last sentence of subparagraph (A) of section 402(e)(4) (defining lump sum distribution) is amended by striking out “this section and section 403” and inserting in lieu thereof “this subsection, subsection (a)(2) of this section, and subsection (a)(2) of section 403”.
1983
Pub. L. 97–448 § 103(c)(12)(D) · 96 Stat. 2365
Substituted · 26 U.S.C. § 402(e)(4)(J)
Pub. L. 97–448, § 103(c)(12)(D), amended Pub. L. 97–34, § 311(c)(2) [see 1981 Amendment note below], by substituting “section 72(o)(5)” for “section 77(o)(5)” in last sentence of subpar. (j)
Source evidence
Code amendment note
Subsec. (e)(4)(J). Pub. L. 97–448, § 103(c)(12)(D), amended Pub. L. 97–34, § 311(c)(2) [see 1981 Amendment note below], by substituting “section 72(o)(5)” for “section 77(o)(5)” in last sentence of subpar. (j).
Enacted provision · exact public law section
(D) Paragraph (2) of section 311(c) of the Economic Recovery Tax Act of 1981 is amended to read as follows: 26 USC 402. “(2) Subparagraph (J) of section 402(e)(4) (relating to tax on lump sum distribution) is amended by adding at the end thereof the following new sentence: ‘This subparagraph shall not apply to distributions of accumulated deductible employee contributions (within the meaning of section 72(o)(5)).’ ”
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 1001(b)(3) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(2)
Pub. L. 98–369, § 1001(b)(3), substituted “6 months” for “1 year”
Source evidence
Code amendment note
Subsec. (a)(2). Pub. L. 98–369, § 1001(b)(3), substituted “6 months” for “1 year”.
Enacted provision · exact public law section
(3) Paragraph (2) of subsection (a) and subparagraph (L) of subsection (e)(4) of section 402 (relating to capital gains treatment 26 USC 402. for certain distributions in the case of a beneficiary of an exempt employees’ trust).
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(a)(1) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(5)(A)(i)
Pub. L. 98–369, § 522(a)(1), substituted “any portion of the balance to the credit of an employee in a qualified trust is paid to him” for “the balance to the credit of an employee in a qualified trust is paid to him in a qualifying rollover distribution”
Source evidence
Code amendment note
Subsec. (a)(5)(A)(i). Pub. L. 98–369, § 522(a)(1), substituted “any portion of the balance to the credit of an employee in a qualified trust is paid to him” for “the balance to the credit of an employee in a qualified trust is paid to him in a qualifying rollover distribution”.
Enacted provision · exact public law section
(1) Qualified trusts.— Clause (i) of section 402(a)(5)(A) (relating to rollover amounts) is amended to read as follows— “(i) any portion of the balance to the credit of an employee in a qualified trust is paid to him,”.
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(d)(1)(A) · 98 Stat. 494
1. Substituted · 26 U.S.C. § 402(a)(5)(B)
  Pub. L. 98–369, § 522(d)(1)(A), (2), substituted “qualified total distribution” for “qualifying rollover distribution”
2. Inserted · 26 U.S.C. § 402(a)(5)(B)
  Pub. L. 98–369, § 522(d)(1)(A), (2), inserted “In the case of any partial distribution, the maximum amount transferred to which subparagraph (A) applies shall not exceed the portion of such distribution which is includible in gross income (determined without regard to subparagraph (A)).”
Source evidence
Code amendment note
Subsec. (a)(5)(B). Pub. L. 98–369, § 522(d)(1)(A), (2), substituted “qualified total distribution” for “qualifying rollover distribution”, and inserted “In the case of any partial distribution, the maximum amount transferred to which subparagraph (A) applies shall not exceed the portion of such distribution which is includible in gross income (determined without regard to subparagraph (A)).”
Enacted provision · exact public law section
(A) section 402(a)(5)(B),
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(b) · 98 Stat. 494
Redesignated · 26 U.S.C. § 402(a)(5)(D)
Pub. L. 98–369, § 522(b), added subpar. (D). Former subpar. (D) redesignated (E)
Source evidence
Code amendment note
Subsec. (a)(5)(D). Pub. L. 98–369, § 522(b), added subpar. (D). Former subpar. (D) redesignated (E).
Enacted provision · exact public law section
(b) Special Rules for Rollovers of Partial Distributions.— Paragraph (5) of section 402(a) is amended by redesignating subparagraphs 26 USC 402. (D) and (E) as subparagraphs (E) and (F), respectively, and by inserting after subparagraph (C) the following new subparagraph: “(D) Special rules for partial distributions.— “(i) Requirements.— Subparagraph (A) shall apply to a partial distribution only if— “(I) such distribution is of an amount equal to at least 50 percent of the balance to the credit of the employee in a qualified trust (determined immediately before such distribution and without regard to subsection (e)(4)(C)), “(II) such distribution is not one of a series of periodic payments, and “(III) the employee elects (at such time and in such manner as the Secretary shall by regulations prescribe) to have subparagraph (A) apply to such partial distribution. “(ii) Partial distributions may be transferred only to individual retirement plans.— In the Case of a partial distribution, a plan described in subclause (IV) or (V) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan. “(iii) Denial of 10 year averaging and capital gains treatment for subsequent distributions.— If an election under clause (i) is made with respect to any partial distribution paid to any employee— “(I) paragraph (2) of this subsection, “(II) paragraphs (1) and (3) of subsection (e), and “(III) paragraph (2) of section 403(a), shall not apply to any distribution (paid after such partial distribution) of the balance to the credit of such employee under the plan under which such partial distribution was made (or under any other plan which, under subsection (e)(4)(C), would be aggregated with such plan). “(iv) Special rule for unrealized appreciation.— If an election under clause (i) is made with respect to any partial distribution, the second and third sentences of paragraph (1) shall not apply to such distribution.”
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 491(d)(9) · 98 Stat. 494
1. Struck · 26 U.S.C. § 402(a)(5)(D)(iv)(III)(V)
  Pub. L. 98–369, § 491(d)(9), struck out subcl. (III), which included a retirement bond described in section 409 within term “eligible retirement plan”
2. Redesignated · 26 U.S.C. § 402(a)(5)(D)(iv)(III)(V)
  Pub. L. 98–369, § 491(d)(9), redesignated former subcls. (IV) and (V) and (III) and (IV), respectively
Source evidence
Code amendment note
Subsec. (a)(5)(D)(iv)(III)–(V). Pub. L. 98–369, § 491(d)(9), struck out subcl. (III), which included a retirement bond described in section 409 within term “eligible retirement plan” and redesignated former subcls. (IV) and (V) and (III) and (IV), respectively.
Enacted provision · exact public law section
(9) Clause (iv) of section 402(a)(5)(D) is amended by striking Post, p. 869. out subclause (III) and by redesignating subclauses (IV) and (V) as subclauses (III) and (IV), respectively.
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(b) · 98 Stat. 494
Redesignated · 26 U.S.C. § 402(a)(5)(E)
Pub. L. 98–369, § 522(b), redesignated subpar. (D) as (E). Former subpar. (E) redesignated (F)
Source evidence
Code amendment note
Subsec. (a)(5)(E). Pub. L. 98–369, § 522(b), redesignated subpar. (D) as (E). Former subpar. (E) redesignated (F).
Enacted provision · exact public law section
(b) Special Rules for Rollovers of Partial Distributions.— Paragraph (5) of section 402(a) is amended by redesignating subparagraphs 26 USC 402. (D) and (E) as subparagraphs (E) and (F), respectively, and by inserting after subparagraph (C) the following new subparagraph: “(D) Special rules for partial distributions.— “(i) Requirements.— Subparagraph (A) shall apply to a partial distribution only if— “(I) such distribution is of an amount equal to at least 50 percent of the balance to the credit of the employee in a qualified trust (determined immediately before such distribution and without regard to subsection (e)(4)(C)), “(II) such distribution is not one of a series of periodic payments, and “(III) the employee elects (at such time and in such manner as the Secretary shall by regulations prescribe) to have subparagraph (A) apply to such partial distribution. “(ii) Partial distributions may be transferred only to individual retirement plans.— In the Case of a partial distribution, a plan described in subclause (IV) or (V) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan. “(iii) Denial of 10 year averaging and capital gains treatment for subsequent distributions.— If an election under clause (i) is made with respect to any partial distribution paid to any employee— “(I) paragraph (2) of this subsection, “(II) paragraphs (1) and (3) of subsection (e), and “(III) paragraph (2) of section 403(a), shall not apply to any distribution (paid after such partial distribution) of the balance to the credit of such employee under the plan under which such partial distribution was made (or under any other plan which, under subsection (e)(4)(C), would be aggregated with such plan). “(iv) Special rule for unrealized appreciation.— If an election under clause (i) is made with respect to any partial distribution, the second and third sentences of paragraph (1) shall not apply to such distribution.”
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(d)(1)(B) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(5)(E)(i)
Pub. L. 98–369, § 522(d)(1)(B), substituted “qualified total distribution” for “qualifying rollover distribution” in heading and text
Source evidence
Code amendment note
Subsec. (a)(5)(E)(i). Pub. L. 98–369, § 522(d)(1)(B), substituted “qualified total distribution” for “qualifying rollover distribution” in heading and text.
Enacted provision · exact public law section
(B) section 402(a)(5)(E)(i) (as redesignated by subsection (b)), and
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(d)(3) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(5)(E)(ii)(II)
Pub. L. 98–369, § 522(d)(3), substituted “gross income (determined without regard to this paragraph)” for “gross income”
Source evidence
Code amendment note
Subsec. (a)(5)(E)(ii)(II). Pub. L. 98–369, § 522(d)(3), substituted “gross income (determined without regard to this paragraph)” for “gross income”.
Enacted provision · exact public law section
(3) Clause (ii) of section 402(a)(5)(E) (as redesignated by subsection (b)) is amended by striking out “gross income” and inserting in lieu thereof “gross income (determined without regard to this paragraph)”.
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(d)(4) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(5)(E)(v)
Pub. L. 98–369, § 522(d)(4), substituted provision dealing with partial distribution for provision dealing with rollover of partial distributions of deductible employee contributions permitted
Source evidence
Code amendment note
Subsec. (a)(5)(E)(v). Pub. L. 98–369, § 522(d)(4), substituted provision dealing with partial distribution for provision dealing with rollover of partial distributions of deductible employee contributions permitted.
Enacted provision · exact public law section
(4) Clause (v) of subparagraph (E) of section 402(a)(5) (as redesignated by subsection (b)) is amended to read as follows: “(v) Partial distribution.— The term ‘partial distribution’ means any distribution to an employee of any portion of the balance to the credit of such employee in a qualified trust; except that such term shall not include any distribution which is a qualified total distribution.”
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(b) · 98 Stat. 494
Redesignated · 26 U.S.C. § 402(a)(5)(F)
Pub. L. 98–369, § 522(b), redesignated subpar. (E) as (F)
Source evidence
Code amendment note
Subsec. (a)(5)(F). Pub. L. 98–369, § 522(b), redesignated subpar. (E) as (F).
Enacted provision · exact public law section
(b) Special Rules for Rollovers of Partial Distributions.— Paragraph (5) of section 402(a) is amended by redesignating subparagraphs 26 USC 402. (D) and (E) as subparagraphs (E) and (F), respectively, and by inserting after subparagraph (C) the following new subparagraph: “(D) Special rules for partial distributions.— “(i) Requirements.— Subparagraph (A) shall apply to a partial distribution only if— “(I) such distribution is of an amount equal to at least 50 percent of the balance to the credit of the employee in a qualified trust (determined immediately before such distribution and without regard to subsection (e)(4)(C)), “(II) such distribution is not one of a series of periodic payments, and “(III) the employee elects (at such time and in such manner as the Secretary shall by regulations prescribe) to have subparagraph (A) apply to such partial distribution. “(ii) Partial distributions may be transferred only to individual retirement plans.— In the Case of a partial distribution, a plan described in subclause (IV) or (V) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan. “(iii) Denial of 10 year averaging and capital gains treatment for subsequent distributions.— If an election under clause (i) is made with respect to any partial distribution paid to any employee— “(I) paragraph (2) of this subsection, “(II) paragraphs (1) and (3) of subsection (e), and “(III) paragraph (2) of section 403(a), shall not apply to any distribution (paid after such partial distribution) of the balance to the credit of such employee under the plan under which such partial distribution was made (or under any other plan which, under subsection (e)(4)(C), would be aggregated with such plan). “(iv) Special rule for unrealized appreciation.— If an election under clause (i) is made with respect to any partial distribution, the second and third sentences of paragraph (1) shall not apply to such distribution.”
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(d)(5) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(5)(F)(i)
Pub. L. 98–369, § 522(d)(5), substituted “subparagraph (E)(iv)” for “subparagraph (D)(iv)”
Source evidence
Code amendment note
Subsec. (a)(5)(F)(i). Pub. L. 98–369, § 522(d)(5), substituted “subparagraph (E)(iv)” for “subparagraph (D)(iv)”.
Enacted provision · exact public law section
(5) Subparagraph (F) of section 402(a)(5) (as redesignated by subsection (b)) is amended by striking out “subparagraph (D)(iv)” each place it appears and inserting in lieu thereof “subparagraph (E)(iv)”.
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 491(d)(10) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(5)(F)(i)
Pub. L. 98–369, § 491(d)(10), substituted “or (II)” for “, (II), or (III)”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 98–369, § 491(d)(10), substituted “or (II)” for “, (II), or (III)”.
Enacted provision · exact public law section
(10) Clause (i) of section 402(a)(5)(F), as amended by this Act, is amended by striking out “, (II), or (III)” and inserting in lieu thereof “or (II)”.
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(d)(5) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(5)(F)(ii)
Pub. L. 98–369, § 522(d)(5), substituted “subparagraph (E)(iv)” for “subparagraph (D)(iv)”
Source evidence
Code amendment note
Subsec. (a)(5)(F)(ii). Pub. L. 98–369, § 522(d)(5), substituted “subparagraph (E)(iv)” for “subparagraph (D)(iv)”.
Enacted provision · exact public law section
(5) Subparagraph (F) of section 402(a)(5) (as redesignated by subsection (b)) is amended by striking out “subparagraph (D)(iv)” each place it appears and inserting in lieu thereof “subparagraph (E)(iv)”.
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 491(d)(11) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(5)(F)(ii)
Pub. L. 98–369, § 491(d)(11), substituted “(III) or (IV)” for “(IV) and (V)”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 98–369, § 491(d)(11), substituted “(III) or (IV)” for “(IV) and (V)”.
Enacted provision · exact public law section
(11) Clause (ii) of section 402(a)(5)(F), as amended by this Act, is amended by striking out “(IV) or (V)” and inserting in lieu thereof “(III) or (IV)”.
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 713(c)(3) · 98 Stat. 494
1. Substituted · 26 U.S.C. § 402(a)(5)(F)(ii)
  Pub. L. 98–369, § 713(c)(3), substituted “Key employees” for “Self-employed individuals and owner-employees” in text
2. Substituted · 26 U.S.C. § 402(a)(5)(F)(ii)
  Pub. L. 98–369, § 713(c)(3), substituted “attributable to contributions made on behalf of the employee while he was a key employee in a top-heavy plan” for “attributable to a trust forming part of a plan under which the employee was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan” in text
3. Inserted · 26 U.S.C. § 402(a)(5)(F)(ii)
  Pub. L. 98–369, § 713(c)(3), inserted sentence adopting the meaning of “key employee” and “top-heavy plan” used in section 416
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 98–369, § 713(c)(3), substituted “Key employees” for “Self-employed individuals and owner-employees” in heading and “attributable to contributions made on behalf of the employee while he was a key employee in a top-heavy plan” for “attributable to a trust forming part of a plan under which the employee was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan” in text, and inserted sentence adopting the meaning of “key employee” and “top-heavy plan” used in section 416.
Enacted provision · exact public law section
(3) Limitation on rollovers to apply only to key employees.— Clause (ii) of section 402(a)(5)(E) (relating to self-employed Ante, p. 869. individuals and owner-employees) is amended to read as follows: “(ii) Key employees.— An eligible retirement plan described in subclause (IV) or (V) of subparagraph (D)(iv) shall not be treated as an eligible retirement plan for the transfer of a distribution if any part of the distribution is attributable to contributions made on behalf of the employee while he was a key employee in a top-heavy plan. For purposes of the preceding sentence, the terms ‘key employee’ and ‘top-heavy plan’ have the same respective meanings as when used in section 416.”
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(d)(6) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(6)(A); 26 U.S.C. § 402(a)(6)(B)
Pub. L. 98–369, § 522(d)(6), substituted “paragraph (5)(E)(i)” for “paragraph (5)(D)(i)”
Source evidence
Code amendment note
Subsec. (a)(6)(A), (B). Pub. L. 98–369, § 522(d)(6), substituted “paragraph (5)(E)(i)” for “paragraph (5)(D)(i)”.
Enacted provision · exact public law section
(6) Paragraph (6) of section 402(a) is amended by striking out “paragraph (5)(d)(1)” each place it appears and inserting in lieu thereof “paragraph (5)(E)(i) -
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(d)(7) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(6)(D)(iii); 26 U.S.C. § 402(a)(6)(D)(iv)
Pub. L. 98–369, § 522(d)(7), substituted “employee contributions (or, in the case of a partial distribution, the amount not includible in gross income)” for “employee contributions”
Source evidence
Code amendment note
Subsec. (a)(6)(D)(iii), (iv). Pub. L. 98–369, § 522(d)(7), substituted “employee contributions (or, in the case of a partial distribution, the amount not includible in gross income)” for “employee contributions”.
Enacted provision · exact public law section
(7) Clauses (iii) and (iv) of section 402(a)(6)(D) are each amended by striking out “employee contributions” and inserting in lieu thereof “ employee contributions (or, in the case of a partial distribution, the amount not includible in gross income)”.
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(d)(1)(C) · 98 Stat. 494
1. Substituted · 26 U.S.C. § 402(a)(6)(E)(i)
  Pub. L. 98–369, § 522(d)(1)(C), (8), substituted “qualified total distribution” for “qualifying rollover distribution”
2. Substituted · 26 U.S.C. § 402(a)(6)(E)(i)
  Pub. L. 98–369, § 522(d)(1)(C), (8), substituted “paragraph (5)(D) or (5)(E)(i)(II)” for “paragraph (5)(D)(i)(II)”
Source evidence
Code amendment note
Subsec. (a)(6)(E)(i). Pub. L. 98–369, § 522(d)(1)(C), (8), substituted “qualified total distribution” for “qualifying rollover distribution”, and “paragraph (5)(D) or (5)(E)(i)(II)” for “paragraph (5)(D)(i)(II)”.
Enacted provision · exact public law section
(C) section 402(a)(6)(E)(i).
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 522(c) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(a)(7)
Pub. L. 98–369, § 522(c), substituted provisions relating to rollover where spouse receives distributions after death of employee for provisions dealing with rollover where spouse receives lump-sum distribution at death of employee
Source evidence
Code amendment note
Subsec. (a)(7). Pub. L. 98–369, § 522(c), substituted provisions relating to rollover where spouse receives distributions after death of employee for provisions dealing with rollover where spouse receives lump-sum distribution at death of employee.
Enacted provision · exact public law section
(c) Partial Distributions Paid to Spouse of Employee After Employee’s Death Eligible for Rollover.— Paragraph (7) of section 402(a) (relating to rollover where spouse receives lump-sum distribution at death of employee) is amended to read as follows: “(7) Rollover where spouse receives distributions after death of employee.— If any distribution attributable to an employee is paid to the spouse of the employee after the employee’s death, paragraph (5) shall apply to such distribution in the same manner as if the spouse were the employee.”.
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 1001(b)(3) · 98 Stat. 494
Substituted · 26 U.S.C. § 402(e)(4)(L)
Pub. L. 98–369, § 1001(b)(3), substituted “6 months” for “1 year”, applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See Effective Date of 1984 Amendment note below
Source evidence
Code amendment note
Subsec. (e)(4)(L). Pub. L. 98–369, § 1001(b)(3), substituted “6 months” for “1 year”, applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See Effective Date of 1984 Amendment note below.
Enacted provision · exact public law section
(3) Paragraph (2) of subsection (a) and subparagraph (L) of subsection (e)(4) of section 402 (relating to capital gains treatment 26 USC 402. for certain distributions in the case of a beneficiary of an exempt employees’ trust).
1984
Tax Reform Act of 1984
Pub. L. 98–369 § 491(c)(2) · 98 Stat. 494
Added · 26 U.S.C. § 402(e)(5)
Pub. L. 98–369, § 491(c)(2), added par. (5)
Source evidence
Code amendment note
Subsec. (e)(5). Pub. L. 98–369, § 491(c)(2), added par. (5).
Enacted provision · exact public law section
(2) Subsection (e) of section 402 (relating to tax on lump-sum distributions) is amended by adding at the end thereof the following new paragraph: “(5) Special rule where portion of lump-sum distribution attributable to rollover of bond purchased under qualified bond purchase plan.— If any portion of a lump-sum distribution is attributable to a transfer described in section 405(d)(3)(A)(ii) (as in effect before its repeal Ante, p. 494. by the Tax Reform Act of 1984), paragraphs (1) and (3) of this subsection and paragraph (2) of subsection (a) shall not apply to such portion.”
1984
Retirement Equity Act of 1984
Pub. L. 98–397 § 204(c)(3) · 98 Stat. 1426
Added · 26 U.S.C. § 402(a)(6)(F)
Pub. L. 98–397, § 204(c)(3), added subpar. (F)
Source evidence
Code amendment note
Subsec. (a)(6)(F). Pub. L. 98–397, § 204(c)(3), added subpar. (F).
Enacted provision · exact public law section
(3) Rollover of distributions under qualified domestic relations orders.— Paragraph (6) of section 402(a) (relating to special rules for rollovers) is amended by adding at the end thereof the following new subparagraph: “(F) Qualified domestic relations orders.— If— “(i) within 1 taxable year of the recipient, the balance to the credit of the recipient by reason of any qualified domestic relations order (within the meaning of section 414(p)) is distributed or paid to the recipient, “(ii) the recipient transfers any portion of the property the recipient receives in such distributions to an eligible retirement plan described in subclause (I) or (II) of paragraph (5)(E)(iv), and “(iii) in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, then the portion of the distribution so transferred shall be treated as a distribution described in paragraph (5)(A).”.
1984
Retirement Equity Act of 1984
Pub. L. 98–397 § 204(c)(1) · 98 Stat. 1426
Added · 26 U.S.C. § 402(a)(9)
Pub. L. 98–397, § 204(c)(1), added par. (9)
Source evidence
Code amendment note
Subsec. (a)(9). Pub. L. 98–397, § 204(c)(1), added par. (9).
Enacted provision · exact public law section
(1) Alternate payee must include benefits in gross income.— Section 402(a) (relating to taxability of beneficiary of trust) is amended by adding at the end thereof the following new paragraph: “(9) Alternate payee under qualified domestic relations order treated as distributee.— For purposes of subsection 26 USC 72. (a)(1) and section 72, the alternate payee shall be treated as the distributee of any distribution or payment made to the alternate payee under a qualified domestic relations order (as defined Ante, p. 1445. 26 USC 72. in section 414(p)).”.
1984
Retirement Equity Act of 1984
Pub. L. 98–397 § 204(c)(4) · 98 Stat. 1426
Added · 26 U.S.C. § 402(e)(4)(M)
Pub. L. 98–397, § 204(c)(4), added subpar. (M)
Source evidence
Code amendment note
Subsec. (e)(4)(M). Pub. L. 98–397, § 204(c)(4), added subpar. (M).
Enacted provision · exact public law section
(4) Clarification of eligibility of participant for lump sum treatment.— Paragraph (4) of section 402(e) (relating to tax 26 USC 402. on lump sum distributions) is amended by adding at the end thereof the following new subparagraph: “(M) Balance to credit of employee not to include amounts payable under qualified domestic relations order.— For purposes of this subsection, subsection (a)(2) of this section, and section 403(a)(2), the balance to the credit 26 USC 403. of an employee shall not include any amount payable to an alternate payee under a qualified domestic relations order (within the meaning of section 414(p)).”. Ante, p. 1445.
1984
Retirement Equity Act of 1984
Pub. L. 98–397 § 207(a) · 98 Stat. 1426
Added · 26 U.S.C. § 402(f)
Pub. L. 98–397, § 207(a), added subsec. (f)
Source evidence
Code amendment note
Subsec. (f). Pub. L. 98–397, § 207(a), added subsec. (f).
Enacted provision · exact public law section
(a) General Rule.— Section 402 (relating to taxability of beneficiary 26 USC 402. of employees trusts) is amended by adding at the end thereof the following new subsection: “(f) Written Explanation to Recipients of Distributions Eligible for Rollover Treatment.— “(1) In general.— The plan administrator of any plan shall, when making a qualifying rollover distribution, provide a written explanation to the recipient— “(A) of the provisions under which such distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date on which the recipient received the distribution, and “(B) if applicable, the provisions of subsections (a)(2) and (e) of this section. “(2) Definitions.— For purposes of this subsection, the terms ‘qualifying rollover distribution’ and ‘eligible retirement plan’ have the respective meanings given such terms by subsection (a)(5)(E).”.
1986
Single-Employer Pension Plan Amendments Act of 1986
Pub. L. 99–272 title XI § 11012(c) · 100 Stat. 82
Added · 26 U.S.C. § 402(a)(6)(G)
Pub. L. 99–272 added subpar. (G) relating to payments from certain pension plan termination trusts
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 99–272 added subpar. (G) relating to payments from certain pension plan termination trusts.
Enacted provision · exact public law section
(c) Rollovers of Payments From Trust Allowed.— Paragraph 26 USC 402. (6) of section 402(a) of such Code (relating to special rollover rules) is amended by adding at the end thereof the following new subparagraph: “(G) Payments from certain pension plan termination trusts.— If— “(i) any amount is paid or distributed to a recipient from a trust described in section 501(c)(24), “(ii) the recipient transfers any portion of the property received in such distribution to an eligible retirement plan described in subclause (I) or (II) of paragraph (5)(E)(iv), and “(iii) in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, then the portion of the distribution so transferred shall be treated as a distribution described in paragraph (5)(A).”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(b)(1)(A) · 100 Stat. 2085
Struck · 26 U.S.C. § 402(a)(2)
Pub. L. 99–514, § 1122(b)(1)(A), struck out par. (2) relating to capital gains treatment for portion of lump sum distribution
Source evidence
Code amendment note
Subsec. (a)(2). Pub. L. 99–514, § 1122(b)(1)(A), struck out par. (2) relating to capital gains treatment for portion of lump sum distribution.
Enacted provision · exact public law section
(A) Paragraph (2) of section 402(a) (relating to capital gains treatment for portion of lump sum distribution).
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(e)(1) · 100 Stat. 2085
Amended · 26 U.S.C. § 402(a)(5)(D)(i)
Pub. L. 99–514, § 1122(e)(1), amended cl. (i) generally, to read as follows: “Subparagraph (A) shall apply to a partial distribution only if the employee elects to have subparagraph (A) apply to such distribution and such distribution would be a lump sum distribution if subsection (e)(4)(A) were applied—
Source evidence
Code amendment note
Subsec. (a)(5)(D)(i). Pub. L. 99–514, § 1122(e)(1), amended cl. (i) generally, to read as follows: “Subparagraph (A) shall apply to a partial distribution only if the employee elects to have subparagraph (A) apply to such distribution and such distribution would be a lump sum distribution if subsection (e)(4)(A) were applied—
“(I) by substituting ‘50 percent of the balance to the credit of an employee’ for ‘the balance to the credit of an employee’, “(II) without regard to clause (ii) thereof, the second sentence thereof, and subparagraph (B) of subsection (e)(4).
Enacted provision · exact public law section
(1) Partial rollovers.— Clause (i) of section 402(a)(5)(D) (relating to requirements for partial distributions) is amended to read as follows: “(i) Requirements.— Subparagraph (A) shall apply to a partial distribution only if the employee elects to have subparagraph (A) apply to such distribution and such distribution would be a lump sum distribution if subsection (e)(4)(A) were applied— “(I) by substituting ‘50 percent of the balance to the credit of an employee’ for ‘the balance to the credit of an employee’, “(II) without regard to clause (ii) thereof, the second sentence thereof, and subparagraph (B) of subsection (e)(4). Any distribution described in section 401(a)(28)(B)(ii) shall be treated as meeting the requirements of this clause.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(b)(2) · 100 Stat. 2085
Inserted · 26 U.S.C. § 402(a)(5)(D)(i)
Pub. L. 99–514, § 1852(b)(2), inserted at end “For purposes of subclause (I), the balance to the credit of the employee shall not include any accumulated deductible employee contributions (within the meaning of section 72(o)(5)).”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 99–514, § 1852(b)(2), inserted at end “For purposes of subclause (I), the balance to the credit of the employee shall not include any accumulated deductible employee contributions (within the meaning of section 72(o)(5)).”
Enacted provision · exact public law section
(2) Clause (i) of section 402(a)(5)(1) (relating to special rules for partial distributions) is amended by adding at the end thereof the following new sentence: “For purposes of subclause (I), the balance to the credit of the employee shall not include any accumulated deductible employee contributions (within the meaning of section 72(o)(5)).”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(b)(5) · 100 Stat. 2085
Substituted · 26 U.S.C. § 402(a)(5)(D)(ii)
Pub. L. 99–514, § 1852(b)(5), substituted “a trust or plan described in subclause (III) or (IV)” for “a plan described in subclause (IV) or (V)”
Source evidence
Code amendment note
Subsec. (a)(5)(D)(ii). Pub. L. 99–514, § 1852(b)(5), substituted “a trust or plan described in subclause (III) or (IV)” for “a plan described in subclause (IV) or (V)”.
Enacted provision · exact public law section
(5) Clause (ii) of section 402(a)(5)(D) is amended by striking out “a plan described in subclause (IV) or (V)” and inserting in lieu thereof “a trust or plan described in subclause (III) or (IV)”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(b)(2)(A) · 100 Stat. 2085
1. Struck · 26 U.S.C. § 402(a)(5)(D)(iii)
  Pub. L. 99–514, § 1122(b)(2)(A), struck out “and capital gains treatment” in heading
2. Amended · 26 U.S.C. § 402(a)(5)(D)(iii)
  Pub. L. 99–514, § 1122(b)(2)(A), amended text generally. Prior to amendment, cl. (iii) read as follows: “If an election under clause (i) is made with respect to any partial distribution paid to any employee—
Source evidence
Code amendment note
Subsec. (a)(5)(D)(iii). Pub. L. 99–514, § 1122(b)(2)(A), struck out “and capital gains treatment” in heading and amended text generally. Prior to amendment, cl. (iii) read as follows: “If an election under clause (i) is made with respect to any partial distribution paid to any employee—
“(I) paragraph (2) of this subsection, “(II) paragraphs (1) and (3) of subsection (e), and “(III) paragraph (2) of section 403(a), shall not apply to any distribution (paid after such partial distribution) of the balance to the credit of such employee under the plan under which such partial distribution was made (or under any other plan which, under subsection (e)(4)(C), would be aggregated with such plan).”
Enacted provision · exact public law section
(A) Clause (iii) of section 402(a)(5)(D) is amended to read as follows: “(iii) Denial of ioyear averaging for subsequent distributions.— If an election under clause (i) is made with respect to any partial distribution paid to any employee, paragraphs (1) and (3) of subsection (e) shall not apply to any distribution (paid after such partial distribution) of the balance to the credit of such employee under the plan under which such partial distribution was made (or under any other plan which, under subsection (e)(4)(C), would be aggregated with such plan).”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(b)(1) · 100 Stat. 2085
Substituted · 26 U.S.C. § 402(a)(5)(E)(v)
Pub. L. 99–514, § 1852(b)(1), substituted “of all or any portion of” for “of any portion of”
Source evidence
Code amendment note
Subsec. (a)(5)(E)(v). Pub. L. 99–514, § 1852(b)(1), substituted “of all or any portion of” for “of any portion of”.
Enacted provision · exact public law section
(1) Clause (v) of section 402(a)(5)(E) (defining partial distribution) is amended by striking out “of any portion of” and inserting in lieu thereof “of all or any portion of”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1121(c)(1) · 100 Stat. 2085
Amended · 26 U.S.C. § 402(a)(5)(F)
Pub. L. 99–514, § 1121(c)(1), amended subpar. (F) generally. Prior to amendment, subpar. (F) heading read “Special rules” and text read as follows:
Source evidence
Code amendment note
Subsec. (a)(5)(F). Pub. L. 99–514, § 1121(c)(1), amended subpar. (F) generally. Prior to amendment, subpar. (F) heading read “Special rules” and text read as follows:
“(i) Transfer treated as rollover contribution under section 408 “For purposes of this title, a transfer resulting in any portion of a distribution being excluded from gross income under subparagraph (A) to an eligible retirement plan described in subclause (I) or (II) of subparagraph (E)(iv) shall be treated as a rollover contribution described in section 408(d)(3). “(ii) 5-percent owners “An eligible retirement plan described in subclause (III) or (IV) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan for the transfer of a distribution if the employee is a 5-percent owner at the time such distribution is made. For purposes of the preceding sentence, the term ‘5-percent owner’ means any individual who is a 5-percent owner (as defined in section 416(i)(1)(B)) at any time during the 5 plan years preceding the plan year in which the distribution is made.”
Enacted provision · exact public law section
(1) Subparagraph (F) of section 402(a)(5) is amended to read as follows: “(F) Transfer treated as rollover contribution under section 408.— For purposes of this title, a transfer described in subparagraph (A) to an eligible retirement plan described in subclause (I) or (II) of subparagraph (E)(iv) shall be treated as a rollover contribution described in section 408(d)(3).”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(b)(6) · 100 Stat. 2085
Substituted · 26 U.S.C. § 402(a)(5)(F)
Pub. L. 99–514, § 1852(b)(6), in cl. (i) substituted “a transfer resulting in any portion of a distribution being excluded from gross income under subparagraph (A)” for “a transfer described in subparagraph (A)”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 99–514, § 1852(b)(6), in cl. (i) substituted “a transfer resulting in any portion of a distribution being excluded from gross income under subparagraph (A)” for “a transfer described in subparagraph (A)”.
Enacted provision · exact public law section
(6) Clause (i) of section 402(a)(5)(F) is amended by striking out “a transfer described in subparagraph (A)” and inserting in lieu thereof “a transfer resulting in any portion of a distribution being excluded from gross income under subparagraph (A)”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1875(c)(1)(A) · 100 Stat. 2085
Amended · 26 U.S.C. § 402(a)(5)(F)
Pub. L. 99–514, § 1875(c)(1)(A), amended cl. (ii) generally. Prior to amendment, cl. (ii), key employees, read as follows: “An eligible retirement plan described in subclause (III) or (IV) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan for the transfer of a distribution if any part of the distribution is attributable to contributions made on behalf of the employee while he was a key employee in a top-heavy plan. For purposes of the preceding sentence, the terms ‘key employee’ and ‘top-heavy plan’ have the same respective meanings as when used in section 416.”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 99–514, § 1875(c)(1)(A), amended cl. (ii) generally. Prior to amendment, cl. (ii), key employees, read as follows: “An eligible retirement plan described in subclause (III) or (IV) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan for the transfer of a distribution if any part of the distribution is attributable to contributions made on behalf of the employee while he was a key employee in a top-heavy plan. For purposes of the preceding sentence, the terms ‘key employee’ and ‘top-heavy plan’ have the same respective meanings as when used in section 416.”
Enacted provision · exact public law section
(A) Section 402(a)(5)(F)(ii) (relating to special rules for key employees) is amended to read as follows: “(ii) 5-percent owners.— An eligible retirement plan described in subclause (III) or (IV) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan for the transfer of a distribution if the employee is a 5-percent owner at the time such distribution is made. For purposes of the preceding sentence, the term ‘5-percent owner’ means any individual who is a 5-percent owner (as defined in section 416(i)(1)(B)) at any time during the 5 plan years preceding the plan year in which the distribution is made.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(a)(5)(A) · 100 Stat. 2085
Added · 26 U.S.C. § 402(a)(5)(G)
Pub. L. 99–514, § 1852(a)(5)(A), added subpar. (G)
Source evidence
Code amendment note
Subsec. (a)(5)(G). Pub. L. 99–514, § 1852(a)(5)(A), added subpar. (G).
Enacted provision · exact public law section
(A) Paragraph (5) of section 402(a) (relating to rollover amounts) is amended by adding at the end thereof the following new subparagraph: “(G) Required distributions not eligible for rollover treatment.— Subparagraph (A) shall not apply to any distribution to the extent such distribution is required under section 401(a)(9).”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(b)(7) · 100 Stat. 2085
Substituted · 26 U.S.C. § 402(a)(6)(D)(v)
Pub. L. 99–514, § 1852(b)(7), substituted “(7)” for “(7)(B)”
Source evidence
Code amendment note
Subsec. (a)(6)(D)(v). Pub. L. 99–514, § 1852(b)(7), substituted “(7)” for “(7)(B)”.
Enacted provision · exact public law section
(7) Clause (v) of section 402(a)(6)(D) is amended by striking out “(7)(B)” and inserting in lieu thereof “(7)”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1898(c)(7)(A)(i) · 100 Stat. 2085
Substituted · 26 U.S.C. § 402(a)(6)(F)
Pub. L. 99–514, § 1898(c)(7)(A)(i), substituted “paragraph (5)” for “paragraph (5)(A)”
Source evidence
Code amendment note
Subsec. (a)(6)(F). Pub. L. 99–514, § 1898(c)(7)(A)(i), substituted “paragraph (5)” for “paragraph (5)(A)”.
Enacted provision · exact public law section
(i) Subparagraph (F) of section 402(a)(6) is amended by striking out “paragraph (5)(A)” and inserting in lieu thereof “paragraph (5)”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1898(a)(3) · 100 Stat. 2085
Added · 26 U.S.C. § 402(a)(6)(G)
Pub. L. 99–514, § 1898(a)(3), added subpar. (G) relating to treatment of potential future vesting
Source evidence
Code amendment note
Subsec. (a)(6)(G). Pub. L. 99–514, § 1898(a)(3), added subpar. (G) relating to treatment of potential future vesting.
Enacted provision · exact public law section
(3) Rules relating to rollovers.— Paragraph (6) of section 402(a) (relating to special rollover rules) is amended by adding at the end thereof the following new subparagraph: “(G) Treatment of potential future vesting.— “(i) In general.— For purposes of paragraph (5), in determining whether any portion of a distribution on account of the employee’s separation from service may be transferred in a transfer to which paragraph (5)(A) applies, the balance to the credit of the employee shall be determined without regard to any increase in vesting which may occur if the employee is re-employed by the employer. “(ii) Treatment of subsequent distributions.— If— “(I) any portion of a distribution is transferred in a transfer to which paragraph (5)(A) applies by reason of clause (i), “(II) the employee is subsequently re-employed by the employer, and “(III) as a result of service performed after being so re-employed, there is an increase in the employee’s vesting for benefits accrued before the separation referred to in clause (i), then the provisions of paragraph (5)(D)(iii) shall apply to any distribution from the plan after the distribution referred to in clause (i). The preceding sentence shall not apply if the distribution referred to in subclause (I) is made without the consent of the participant.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(e)(2)(A) · 100 Stat. 2085
Added · 26 U.S.C. § 402(a)(6)(H)
Pub. L. 99–514, § 1122(e)(2)(A), added subpar. (H)
Source evidence
Code amendment note
Subsec. (a)(6)(H). Pub. L. 99–514, § 1122(e)(2)(A), added subpar. (H).
Enacted provision · exact public law section
(A) In general.— Section 402(a)(6) (relating to special rollover rules) is amended by adding at the end thereof the following new subparagraph: “(H) Special rule for frozen deposits.— “(i) In general.— The 60-day period described in paragraph (5)(C) shall not— “(I) include any period during which the amount transferred to the employee is a frozen deposit, or “(II) end earlier than 10 days after such amount ceases to be a frozen deposit. “(ii) Frozen deposit.— For purposes of this subparagraph, the term ‘frozen deposit’ means any deposit which may not be withdrawn because of— “(I) the bankruptcy or insolvency of any financial institution, or “(II) any requirement imposed by the State in which such institution is located by reason of the bankruptcy or insolvency (or threat thereof) of 1 or more financial institutions in such State.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(b)(4) · 100 Stat. 2085
Inserted · 26 U.S.C. § 402(a)(7)
Pub. L. 99–514, § 1852(b)(4), inserted “; except that a trust or plan described in subclause (III) or (IV) of paragraph (5)(E)(iv) shall not be treated as an eligible retirement plan with respect to such distribution” after “the spouse were the employee”
Source evidence
Code amendment note
Subsec. (a)(7). Pub. L. 99–514, § 1852(b)(4), inserted “; except that a trust or plan described in subclause (III) or (IV) of paragraph (5)(E)(iv) shall not be treated as an eligible retirement plan with respect to such distribution” after “the spouse were the employee”.
Enacted provision · exact public law section
(4) Paragraph (7) of section 402(a) (relating to rollover where spouse received distributions after death of employee) is amended by striking out “the spouse were the employee” and inserting in lieu thereof “the spouse were the employee; except that a trust or plan described in subclause (III) or (IV) of paragraph (5)(E)(iv) shall not be treated as an eligible retirement plan with respect to such distribution”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1898(c)(1)(A) · 100 Stat. 2085
Substituted · 26 U.S.C. § 402(a)(9)
Pub. L. 99–514, § 1898(c)(1)(A), substituted “any alternate payee who is the spouse or former spouse of the participant shall be treated” for “the alternate payee shall be treated”
Source evidence
Code amendment note
Subsec. (a)(9). Pub. L. 99–514, § 1898(c)(1)(A), substituted “any alternate payee who is the spouse or former spouse of the participant shall be treated” for “the alternate payee shall be treated”.
Enacted provision · exact public law section
(A) In general.— Paragraph (9) of section 402(a) (relating to alternate payee under qualified domestic relations order treated as distributee) is amended by striking out “the alternate payee shall be treated” and inserting in lieu thereof “any alternate payee who is the spouse or former spouse of the participant shall be treated”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1112(c) · 100 Stat. 2085
1. Amended · 26 U.S.C. § 402(b)
  Pub. L. 99–514, § 1112(c), designated existing provisions as par. (1)
2. Inserted · 26 U.S.C. § 402(b)
  Pub. L. 99–514, § 1112(c), inserted par. (1) heading
3. Added · 26 U.S.C. § 402(b)
  Pub. L. 99–514, § 1112(c), added par. (2)
Source evidence
Code amendment note
Subsec. (b). Pub. L. 99–514, § 1112(c), designated existing provisions as par. (1), inserted par. (1) heading, and added par. (2).
Enacted provision · exact public law section
(c) Plans Failing To Meet Requirements of Section 410(b).— (1) In general.— Subsection (b) of section 402 (relating to taxability of beneficiary of nonexempt trust) is amended by adding at the end thereof the following new paragraph: “(2) Failure to meet requirements of section 410(b).— “(A) In general.— In the case of a trust which is not exempt from tax under section 501(a) solely because such trust is part of a plan which fails to meet the requirements of section 410(b)— “(i) such trust shall be treated as exempt from tax under section 501(a) for purposes of applying paragraph (1) to employees who are not highly compensated employees, and “(ii) paragraph (1) shall be applied to the vested accrued benefit (other than employee contributions) of any highly compensated employee as of the close of the employers taxable year described in paragraph (1) (rather than contributions made during such year). “(B) Failure in more than i year.— If a plan fails to meet the requirements of section 410(b) for more than 1 taxable year, any portion of the vested accrued benefit to which subparagraph (A) applies shall be included in gross income only once. “(C) Highly compensated employee.— For purposes of this paragraph, the term ‘highly compensated employee’ has the meaning given such term by section 414(q).” (2) Conforming amendment.— The heading for section 402(b) is amended to read as follows: “(b) Taxability of Beneficiary of Nonexempt Trust.— “(1) In general.—
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(c)(5) · 100 Stat. 2085
Substituted · 26 U.S.C. § 402(b)
Pub. L. 99–514, § 1852(c)(5), substituted “section 72(e)(5)” for “section 72(e)(1)”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 99–514, § 1852(c)(5), substituted “section 72(e)(5)” for “section 72(e)(1)”.
Enacted provision · exact public law section
(5) Subsection (b) of section 402 is amended by striking out “section 72(e)(1)” and inserting in lieu thereof “section 72(e )(5)”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(b)(2)(B) · 100 Stat. 2085
1. Redesignated · 26 U.S.C. § 402(e)(1)(B)
  Pub. L. 99–514, § 1122(b)(2)(B), and Pub. L. 100–647, § 1018(u)(6), redesignated subpar. (C) as (B)
2. Substituted · 26 U.S.C. § 402(e)(1)(B)
  Pub. L. 99–514, § 1122(b)(2)(B), and Pub. L. 100–647, § 1018(u)(6), substituted “Amount of tax” for “Initial separate tax”
3. Substituted · 26 U.S.C. § 402(e)(1)(B)
  Pub. L. 99–514, § 1122(b)(2)(B), and Pub. L. 100–647, § 1018(u)(6), substituted “The amount of tax imposed by subparagraph (A)” for “The initial separate tax”
4. Struck · 26 U.S.C. § 402(e)(1)(B)
  Pub. L. 99–514, § 1122(b)(2)(B), and Pub. L. 100–647, § 1018(u)(6), struck out former subpar. (B) which related to computation of tax on lump sum distributions
Source evidence
Code amendment note
Subsec. (e)(1)(B). Pub. L. 99–514, § 1122(b)(2)(B), and Pub. L. 100–647, § 1018(u)(6), redesignated subpar. (C) as (B), substituted “Amount of tax” for “Initial separate tax” in heading and “The amount of tax imposed by subparagraph (A)” for “The initial separate tax”, and struck out former subpar. (B) which related to computation of tax on lump sum distributions.
Enacted provision · exact public law section
(B) Paragraph (1) of section 402(e) is amended— (i) by striking out subparagraph (B) and by redesignating subparagraphs (C), (D), and (E) as subparagraphs (B), (C), and (D), respectively, and (ii) by striking out “The initial separate tax” in subparagraph (B) (as so redesignated) and inserting in lieu thereof “The amount of tax imposed by subparagraph (A)”, and (iii) by striking out “Initial separate” in the heading of subparagraph (B) (as so redesignated) and inserting in lieu thereof “Amount of tax”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 104(b)(5) · 100 Stat. 2085
1. Amended · 26 U.S.C. § 402(e)(1)(B)
  Pub. L. 99–514, § 104(b)(5), as amended by Pub. L. 100–647, § 1018(u)(1)
2. Struck · 26 U.S.C. § 402(e)(1)(B)
  Pub. L. 99–514, § 104(b)(5), as struck out “the zero bracket amount applicable to such individual for the taxable year plus” after “amount equal to”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 99–514, § 104(b)(5), as amended by Pub. L. 100–647, § 1018(u)(1), struck out “the zero bracket amount applicable to such individual for the taxable year plus” after “amount equal to”.
Enacted provision · exact public law section
(5) Section 402.— Subparagraph (B) of section 402(e)(D, as amended by section 1222(b), is amended by striking out “the zero bracket amount applicable to such individual for the taxable year plus”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(a)(2)(A) · 100 Stat. 2085
1. Substituted · 26 U.S.C. § 402(e)(1)(B)
  Pub. L. 99–514, § 1122(a)(2)(A), (B), substituted “5” for “10”
2. Substituted · 26 U.S.C. § 402(e)(1)(B)
  Pub. L. 99–514, § 1122(a)(2)(A), (B), substituted “⅕” for “one-tenth”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 99–514, § 1122(a)(2)(A), (B), substituted “5” for “10” and “⅕” for “one-tenth”.
Enacted provision · exact public law section
(A) by striking out “10 times” and inserting in lieu thereof “5 times”, and
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(b)(2)(B)(i) · 100 Stat. 2085
Redesignated · 26 U.S.C. § 402(e)(1)(C)(E)
Pub. L. 99–514, § 1122(b)(2)(B)(i), redesignated subpars. (C) to (E) as (B) to (D), respectively
Source evidence
Code amendment note
Subsec. (e)(1)(C) to (E). Pub. L. 99–514, § 1122(b)(2)(B)(i), redesignated subpars. (C) to (E) as (B) to (D), respectively.
Enacted provision · exact public law section
(i) by striking out subparagraph (B) and by redesignating subparagraphs (C), (D), and (E) as subparagraphs (B), (C), and (D), respectively, and
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(b)(2)(C) · 100 Stat. 2085
Substituted · 26 U.S.C. § 402(e)(3)
Pub. L. 99–514, § 1122(b)(2)(C), and Pub. L. 100-647, § 1018(u)(7), substituted “total taxable amount” for “ordinary income portion”
Source evidence
Code amendment note
Subsec. (e)(3). Pub. L. 99–514, § 1122(b)(2)(C), and Pub. L. 100-647, § 1018(u)(7), substituted “total taxable amount” for “ordinary income portion”.
Enacted provision · exact public law section
(C) Paragraph (3) of section 402(e) is amended by striking out “the ordinary income portion” and inserting in lieu thereof “total taxable amount”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(a)(1) · 100 Stat. 2085
Amended · 26 U.S.C. § 402(e)(4)(B)
Pub. L. 99–514, § 1122(a)(1), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “For purposes of this section and section 403, no amount which is not an annuity contract may be treated as a lump sum distribution under subparagraph (A) unless the taxpayer elects for the taxable year to have all such amounts received during such year so treated at the time and in the manner provided under regulations prescribed by the Secretary. Not more than one election may be made under this subparagraph with respect to any individual after such individual has attained age 59½. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to two or more trusts, the election under this subparagraph shall be made by the personal representative of the employee.”
Source evidence
Code amendment note
Subsec. (e)(4)(B). Pub. L. 99–514, § 1122(a)(1), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “For purposes of this section and section 403, no amount which is not an annuity contract may be treated as a lump sum distribution under subparagraph (A) unless the taxpayer elects for the taxable year to have all such amounts received during such year so treated at the time and in the manner provided under regulations prescribed by the Secretary. Not more than one election may be made under this subparagraph with respect to any individual after such individual has attained age 59½. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to two or more trusts, the election under this subparagraph shall be made by the personal representative of the employee.”
Enacted provision · exact public law section
(1) Averaging provisions limited to i lump sum distribution after age 5972.— Subparagraph (B) of section 402(e)(4) (relating to election of lump sum treatment) is amended to read as follows: “(B) Averaging to apply to 1 lump sum distribution after age 5914.— Paragraph (1) shall apply to a lump sum distribution with respect to an employee under subparagraph (A) only if— “(i) such amount is received on or after the taxpayer has attained age 5972, and “(ii) the taxpayer elects for the taxable year to have all such amounts received during such taxable year so treated. Not more than 1 election may be made under this subparagraph by any taxpayer with respect to any employee. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to 2 or more trusts, the election under this subparagraph shall be made by the personal representative of the taxpayer.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(b)(2)(D) · 100 Stat. 2085
Struck · 26 U.S.C. § 402(e)(4)(E)
Pub. L. 99–514, § 1122(b)(2)(D), struck out subpar. (E) defining “ordinary income portion” with respect to a lump sum distribution
Source evidence
Code amendment note
Subsec. (e)(4)(E). Pub. L. 99–514, § 1122(b)(2)(D), struck out subpar. (E) defining “ordinary income portion” with respect to a lump sum distribution.
Enacted provision · exact public law section
(D) Paragraph (4) of section 402(e) is amended by striking out subparagraph (E).
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(b)(3)(B) · 100 Stat. 2085
Struck · 26 U.S.C. § 402(e)(4)(F)
Pub. L. 99–514, § 1852(b)(3)(B), struck out subpar. (F) defining “employee”. See subsec. (g) of this section relating to treatment of self-employed individuals
Source evidence
Code amendment note
Subsec. (e)(4)(F). Pub. L. 99–514, § 1852(b)(3)(B), struck out subpar. (F) defining “employee”. See subsec. (g) of this section relating to treatment of self-employed individuals.
Enacted provision · exact public law section
(B) Paragraph (4) of section 402(e) is amended by striking out subparagraph (F).
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(b)(2)(E) · 100 Stat. 2085
Struck · 26 U.S.C. § 402(e)(4)(H)
Pub. L. 99–514, § 1122(b)(2)(E), struck out “(but not for purposes of subsection (a)(2) or section 403(a)(2)(A))” after “For purposes of this subsection”
Source evidence
Code amendment note
Subsec. (e)(4)(H). Pub. L. 99–514, § 1122(b)(2)(E), struck out “(but not for purposes of subsection (a)(2) or section 403(a)(2)(A))” after “For purposes of this subsection”.
Enacted provision · exact public law section
(E) Subparagraph (H) of section 402(e)(4) is amended by striking out “(but not for purposes of subsection (a)(2) or section 403(a)(2)(A))”.
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1122(g) · 100 Stat. 2085
Inserted · 26 U.S.C. § 402(e)(4)(J)
Pub. L. 99–514, § 1122(g), inserted at end “To the extent provided by the Secretary, a taxpayer may elect before any distribution not to have this paragraph apply with respect to such distribution.”
Source evidence
Code amendment note
Subsec. (e)(4)(J). Pub. L. 99–514, § 1122(g), inserted at end “To the extent provided by the Secretary, a taxpayer may elect before any distribution not to have this paragraph apply with respect to such distribution.”
Enacted provision · exact public law section
(g) Net Unrealized Appreciation.— Section 402(e)(4)(J) (relating to unrealized appreciation of employer securities) is amended by adding at the end thereof the following new sentence: “To the extent provided by the Secretary, a taxpayer may elect before any distribution not to have this paragraph apply with respect to such distribution.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1106(c)(2) · 100 Stat. 2085
Added · 26 U.S.C. § 402(e)(4)(N)
Pub. L. 99–514, § 1106(c)(2), added subpar. (N)
Source evidence
Code amendment note
Subsec. (e)(4)(N). Pub. L. 99–514, § 1106(c)(2), added subpar. (N).
Enacted provision · exact public law section
(2) Certain transfers to defined benefit plans not taken into account for purposes of lump sum distribution.— Section 402(e)(4) (relating to special rules for lump sum distributions) is amended by adding at the end thereof the following new subparagraph: “(N) Transfers to cost-of-living arrangement not treated as distribution.— For purposes of this subsection, the balance to the credit of an employee under a defined contribution plan shall not include any amount transferred from such defined contribution plan to a qualified cost-of-living arrangement (within the meaning of section 415(kX2)) under a defined benefit plan.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1898(a)(2) · 100 Stat. 2085
Added · 26 U.S.C. § 402(e)(6)
Pub. L. 99–514, § 1898(a)(2), added par. (6)
Source evidence
Code amendment note
Subsec. (e)(6). Pub. L. 99–514, § 1898(a)(2), added par. (6).
Enacted provision · exact public law section
(2) Rules relating to lump sum treatment.— Subsection (e) of section 402 (relating to tax on lump sum distributions) is amended by adding at the end thereof the following new paragraph: “(6) Treatment of potential future vesting.— “(A) In general.— For purposes of determining whether any distribution which becomes payable to the recipient on account of the employee’s separation from service is a lump sum distribution, the balance to the credit of the employee shall be determined without regard to any increase in vesting which may occur if the employee is re-employed by the employer. “(B) Recapture in certain cases.— If— “(i) an amount is treated as a lump sum distribution by reason of subparagraph (A), “(ii) special lump sum treatment applies to such distribution, “(iii) the employee is subsequently re-employed by the employer; and “(iv) as a result of services performed after being so re-employed, there is an increase in the employee’s vesting for benefits accrued before the separation referred to in subparagraph (A), under regulations prescribed by the Secretary, the tax imposed by this chapter for the taxable year (in which the increase in vesting first occurs) shall be increased by the reduction in tax which resulted from the special lump sum treatment (and any election under paragraph (4)(B) shall not be taken into account for purposes of determining whether the employee may make another election under paragraph (4)(B)), “(C) Special lump sum treatment.— For purposes of this paragraph, special lump sum treatment applies to any distribution if any portion of such distribution— “(i) is taxed under this subsection by reason of an election under paragraph (4)(B), or “(ii) is treated as long-term capital gain under subsection (a)(2) of this section or section 403(a)(2). “(D) Vesting.— For purposes of this paragraph the term ‘vesting’ means the portion of the accrued benefits derived from employer contributions to which the participant has a nonforfeitable right.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1898(e)(1) · 100 Stat. 2085
Substituted · 26 U.S.C. § 402(f)(1)
Pub. L. 99–514, § 1898(e)(1), substituted “eligible rollover distribution” for “qualifying rollover distribution”
Source evidence
Code amendment note
Subsec. (f)(1). Pub. L. 99–514, § 1898(e)(1), substituted “eligible rollover distribution” for “qualifying rollover distribution”.
Enacted provision · exact public law section
(1) Paragraph (1) of section 402(f) (relating to written explanation to recipients of distributions eligible for rollover treatment) is amended by striking out “qualifying rollover distribution” and inserting in lieu thereof “eligible rollover distribution”,
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1898(e)(2) · 100 Stat. 2085
Amended · 26 U.S.C. § 402(f)(2)
Pub. L. 99–514, § 1898(e)(2), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “For purposes of this subsection, the terms ‘qualifying rollover distribution’ and ‘eligible retirement plan’ have the respective meanings given such terms by subsection (a)(5)(E).”
Source evidence
Code amendment note
Subsec. (f)(2). Pub. L. 99–514, § 1898(e)(2), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “For purposes of this subsection, the terms ‘qualifying rollover distribution’ and ‘eligible retirement plan’ have the respective meanings given such terms by subsection (a)(5)(E).”
Enacted provision · exact public law section
(2) Paragraph (2) of section 402(0 is amended to read as follows: “(2) Definitions.— For purposes of this subsection— “(A) Eligible rollover distribution.— The term ‘eligible rollover distribution’ means any distribution any portion of which may be excluded from gross income under subsection (a)(5) of this section or subsection (a)(4) of section 403 if transferred to an eligible retirement plan in accordance with the requirements of such subsection. “(B) Eligible retirement plan.— The term ‘eligible retirement plan’ has the meaning given such term by subsection (a)(5)(E)(iv).”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1854(f)(2) · 100 Stat. 2085
Added · 26 U.S.C. § 402(g)
Pub. L. 99–514, § 1854(f)(2), added subsec. (g) relating to effect of disposition of stock by plan on net unrealized appreciation
Source evidence
Code amendment note
Subsec. (g). Pub. L. 99–514, § 1854(f)(2), added subsec. (g) relating to effect of disposition of stock by plan on net unrealized appreciation.
Enacted provision · exact public law section
(2) Section 402 is amended by adding at the end thereof the following new section: “(g) Effect of Disposition of Stock by Plan on Net Unrealized Appreciation.— (1) In general.— For purposes of subsection (a)(1) or (e)(4)(J) in the case of any transaction to which this subsection applies, the determination of net unrealized appreciation shall be made without regard to such transaction. “(2) Transaction to which subsection applies.— This subsection shall apply to any transaction in which— “(A) the plan trustee exchanges the plan’s securities of the employer corporation for other such securities, or “(B) the plan trustee disposes of securities of the employer corporation and uses the proceeds of such disposition to acquire securities of the employer corporation within 90 days (or such longer period as the Secretary may prescribe), except that this subparagraph shall not apply to any employee with respect to whom a distribution of money was made during the period after such disposition and before such acquisition.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1852(b)(3)(A) · 100 Stat. 2085
Added · 26 U.S.C. § 402(g)
Pub. L. 99–514, § 1852(b)(3)(A), added subsec. (g) relating to treatment of self-employed individuals
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 99–514, § 1852(b)(3)(A), added subsec. (g) relating to treatment of self-employed individuals.
Enacted provision · exact public law section
(A) Section 402 is amended by adding at the end thereof the following new subsection: “(g) Treatment of Self-Employed Individuals.— For purposes of this section, except as otherwise provided in subparagraph (A) of subsection (e)(4), the term ‘employee’ includes a self-employed individual (as defined in section 401(c)(1)(B)) and the employer of such individual shall be the person treated as his employer under section 401(c)(4).”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1105(a) · 100 Stat. 2085
Added · 26 U.S.C. § 402(g)
Pub. L. 99–514, § 1105(a), added subsec. (g) relating to limitation on exclusion for elective deferrals
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 99–514, § 1105(a), added subsec. (g) relating to limitation on exclusion for elective deferrals.
Enacted provision · exact public law section
(a) General Rule.— Section 402 (relating to taxability of beneficiary of employees’ trust) is amended by adding at the end thereof the following new subsection: “(g) Limitation on Exclusion for Elective Deferrals.— “(1) In general.— Notwithstanding subsections (a)(8) and (h)(1)(B), the elective deferrals of any individual for any taxable year shall be included in such individual’s gross income to the extent the amount of such deferrals for the taxable year exceeds $7,000. “(2) Required distribution of excess deferrals — “(A) Ln general.— If any amount (hereinafter in this paragraph referred to as ‘excess deferrals’) is included in the gross income of an individual under paragraph (1) for any taxable year— “(i) not later than the 1st March 1 following the close of the taxable year, the individual may allocate the amount of such excess deferrals among the plans under which the deferrals were made and may notify each such plan of the portion allocated to it, and “(ii) not later than the 1st April 15 following the close of the taxable year, each such plan may distribute to the individual the amount allocated to it under clause (i) (and any income allocable to such amount). The distribution described in clause (ii) may be made notwithstanding any other provision of law. “(B) Treatment of distribution under section 401 (k).— Except to the extent provided under rules prescribed by the Secretary, notwithstanding the distribution of any portion of an excess deferral from a plan under subparagraph (A)(ii), such portion shall, for purposes of applying section 401(k)(3)(A)(ii), be treated as an employer contribution. “(C) Taxation of distribution.— In the case of a distribution to which subparagraph (A) applies— “(i) except as provided in clause (ii), such distribution shall not be included in gross income (and no tax shall be imposed under section 72(t)), and “(ii) any income on the excess deferral shall, for purposes of this chapter, be treated as earned and received in the taxable year in which such excess deferral is made. “(3) Elective deferrals.— For purposes of this paragraph, the term ‘elective deferrals’ means, with respect to any taxable year, the sum of— “(A) any employer contribution under a qualified cash or deferred arrangement (as defined in section 401(k)) to the extent not includible in gross income for the taxable year under subsection (a)(8) (determined without regard to this subsection), “(B) any employer contribution to the extent not includible in gross income for the taxable year under subsection (h)(1)(B) (determined without regard to this subsection), and “(C) any employer contribution to purchase an annuity contract under section 403(b) under a salary reduction agreement (within the meaning of section 3121(a)(5)(D)). “(4) Increase in limit for amounts contributed under section 403 (b) contracts.— The limitation under paragraph (1) shall be increased (but not to an amount in excess of $9,500) by the amount of any employer contributions for the taxable year described in paragraph (3)(C). “(5) Cost-of-living adjustment.— The Secretary shall adjust the $7,000 amount under paragraph (1) at the same time and in the same manner as under section 415(d). “(6) Disregard of community property laws.— This subsection shall be applied without regard to community property laws. “(7) Coordination with section 72.— For purposes of applying section 72, any amount includible in gross income for any taxable year under this subsection but which is not distributed from the plan during such taxable year shall not be treated as investment in the contract. “(8) Special rule for certain organizations.— “(A) In general.— In the case of a qualified employee of a qualified organization, with respect to employer contributions described in paragraph (3)(C) made by such organiza-tion, the limitation of paragraph (1) for any taxable year shall be increased by whichever of the following is the least: “(i) $3,000, “(ii) $15,000 reduced by amounts not included in gross income for prior taxable years by reason of this paragraph, or “(iii) the excess of $5,000 multiplied by the number of years of service of the employee with the qualified organization over the employer contributions described in paragraph (3) made by the organization on behalf of such employee for prior taxable years. “(B) Qualified organization.— For purposes of this paragraph, the term ‘qualified organization’ means any educational organization, hospital, home health service agency, health and welfare service agency, church, or convention or association of churches. Such term includes any organization described in section 414(e)(3)(B)(ii). Terms used in this subparagraph shall have the same meaning as when used in section 415(c)(4). “(C) Qualified employee.— For purposes of this paragraph, the term ‘qualified employee’ means any employee who has completed 15 years of service with the qualified organization.”
1986
Tax Reform Act of 1986
Pub. L. 99–514 § 1108(b) · 100 Stat. 2085
Added · 26 U.S.C. § 402(h)
Pub. L. 99–514, § 1108(b), added subsec. (h)
Source evidence
Code amendment note
Subsec. (h). Pub. L. 99–514, § 1108(b), added subsec. (h).
Enacted provision · exact public law section
(b) Exclusion From Gross Income.— Section 402 (relating to taxability of beneficiary of employees’ trust), as amended by section 1105(a), is amended by inserting at the end thereof the following new subsection: “(h) Special Rules for Simplified Employee Pensions.— For purposes of this chapter— “(1) In general.— Except as provided in paragraph (2), contributions made by an employer on behalf of an employee to an individual retirement plan pursuant to a simplified employee pension (as defined in section 408(k))— “(A) shall not be treated as distributed or made available to the employee or as contributions made by the employee, and “(B) if such contributions are made pursuant to an arrangement under section 408(k)(6) under which an employee may elect to have the employer make contributions to the simplified employee pension on behalf of the employee, shall not be treated as distributed or made available or as contributions made by the employee merely because the simplified employee pension includes provisions for such election. “(2) Limitations on employer contributions.— Contributions made by an employer to a simplified employee pension with respect to an employee for any year shall be treated as distributed or made available to such employee and as contributions made by the employee to the extent such contributions exceed the lesser of— “(A) 15 percent of the compensation (within the meaning of section 414(s)) from such employer includible in the employee’s gross income for the year (determined without regard to the employer contributions to the simplified employee pension), or “(B) the limitation in effect under section 415(c)(1)(A), reduced in the case of any highly compensated employee (within the meaning of section 414(q)) by the amount taken into account with respect to such employee under section 408(k)(3)(D). “(3) Distributions.— Any amount paid or distributed out of an individual retirement plan pursuant to a simplified employee pension shall be included in gross income by the payee or distributee, as the case may be, in accordance with the provisions of section 408(d).”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(A) · 102 Stat. 3342
Substituted · 26 U.S.C. § 402(a)(1)
Pub. L. 100–647, § 1011A(b)(8)(A), substituted “paragraph (4)” for “paragraphs (2) and (4)”
Source evidence
Code amendment note
Subsec. (a)(1). Pub. L. 100–647, § 1011A(b)(8)(A), substituted “paragraph (4)” for “paragraphs (2) and (4)”.
Enacted provision · exact public law section
(A) Subsection (a)(1) is amended by striking out “paragraphs (2) and (4)” and inserting in lieu thereof “paragraph (4)”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(B) · 102 Stat. 3342
Struck · 26 U.S.C. § 402(a)(4)
Pub. L. 100–647, § 1011A(b)(8)(B), struck out “or (2)” after “under paragraph (1)”
Source evidence
Code amendment note
Subsec. (a)(4). Pub. L. 100–647, § 1011A(b)(8)(B), struck out “or (2)” after “under paragraph (1)”.
Enacted provision · exact public law section
(B) Subsection (a)(4) is amended by striking out “or (2)”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(4)(C) · 102 Stat. 3342
Inserted · 26 U.S.C. § 402(a)(5)(D)(i)
Pub. L. 100–647, § 1011A(b)(4)(C), inserted at end “Any distribution described in section 401(a)(28)(B)(ii) shall be treated as meeting the requirements of subclauses (I) and (II).”
Source evidence
Code amendment note
Subsec. (a)(5)(D)(i). Pub. L. 100–647, § 1011A(b)(4)(C), inserted at end “Any distribution described in section 401(a)(28)(B)(ii) shall be treated as meeting the requirements of subclauses (I) and (II).”
Enacted provision · exact public law section
(C) Section 402(a)(5)(D)(i) of the 1986 Code is amended by adding at the end thereof the following new sentence: “Any distribution described in section 401(a)(28)(B)(ii) shall be treated as meeting the requirements of subclauses (I) and (II).”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(4)(A) · 102 Stat. 3342
Repealed · 26 U.S.C. § 402(a)(5)(D)(i)
Pub. L. 100–647, § 1011A(b)(4)(A), repealed amendment by Pub. L. 99–514, § 1122(e)(1), which had amended cl. (i) generally, and provided that the Internal Revenue Code of 1986 shall be applied and administered as if such amendment had not been enacted. See 1986 Amendment note and Effective Date of 1988 Amendment note below
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 100–647, § 1011A(b)(4)(A), repealed amendment by Pub. L. 99–514, § 1122(e)(1), which had amended cl. (i) generally, and provided that the Internal Revenue Code of 1986 shall be applied and administered as if such amendment had not been enacted. See 1986 Amendment note and Effective Date of 1988 Amendment note below.
Enacted provision · exact public law section
(A) The amendment made by section 1122(e)(1) of the Reform Act is repealed and the Internal Revenue Code of 1986 26 USC 402 and note. shall be applied and administered as if such amendment had not been enacted.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(4)(B) · 102 Stat. 3342
Inserted · 26 U.S.C. § 402(a)(5)(D)(i)(I)
Pub. L. 100–647, § 1011A(b)(4)(B), inserted “is payable as provided in clause (i), (iii), or (iv) of subsection (e)(4)(A) (without regard to the second sentence thereof) and” after “(I) such distribution”
Source evidence
Code amendment note
Subsec. (a)(5)(D)(i)(I). Pub. L. 100–647, § 1011A(b)(4)(B), inserted “is payable as provided in clause (i), (iii), or (iv) of subsection (e)(4)(A) (without regard to the second sentence thereof) and” after “(I) such distribution”.
Enacted provision · exact public law section
(B) Subclause (D of section 402(a)(5)(D)(i) of the 1986 Code is amended by inserting “is payable as provided in clause (i), (iii), or (iv) of subsection (e)(4)(A) (without regard to the second sentence thereof) and” after “such distribution” the first place it appears.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(4)(D) · 102 Stat. 3342
Struck · 26 U.S.C. § 402(a)(5)(D)(iii)
Pub. L. 100–647, § 1011A(b)(4)(D), struck out “10-year” after “Denial of” in heading
Source evidence
Code amendment note
Subsec. (a)(5)(D)(iii). Pub. L. 100–647, § 1011A(b)(4)(D), struck out “10-year” after “Denial of” in heading.
Enacted provision · exact public law section
(D) Section 402(a)(5)(D)(iii) is amended by striking out “10-year” in the heading.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(a)(1) · 102 Stat. 3342
Substituted · 26 U.S.C. § 402(a)(5)(F)
Pub. L. 100–647, § 1011A(a)(1), substituted “resulting in any portion of a distribution being excluded from gross income under subparagraph (A)” for “described in subparagraph (A)”
Source evidence
Code amendment note
Subsec. (a)(5)(F). Pub. L. 100–647, § 1011A(a)(1), substituted “resulting in any portion of a distribution being excluded from gross income under subparagraph (A)” for “described in subparagraph (A)”.
Enacted provision · exact public law section
(1) Subparagraph (F) of section 402(a)(5) of the 1986 Code (relating to transfer treated as rollover contribution under section 408) is amended by striking out “described in subparagraph (A)” and inserting in lieu thereof “resulting in any portion of a distribution being excluded from gross income under subparagraph (A)”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(C) · 102 Stat. 3342
Struck · 26 U.S.C. § 402(a)(6)(C)
Pub. L. 100–647, § 1011A(b)(8)(C), struck out “paragraph (2) of subsection (a), and” after “paragraph (5)(A) applies,”
Source evidence
Code amendment note
Subsec. (a)(6)(C). Pub. L. 100–647, § 1011A(b)(8)(C), struck out “paragraph (2) of subsection (a), and” after “paragraph (5)(A) applies,”.
Enacted provision · exact public law section
(C) Subsection (a)(6)(C) is amended by striking out “paragraph (2) of subsection (a), and”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(D) · 102 Stat. 3342
Substituted · 26 U.S.C. § 402(a)(6)(E)(ii)
Pub. L. 100–647, § 1011A(b)(8)(D), substituted “then paragraphs (1) and (3) of subsection (e) shall” for “then paragraph (2) of subsection (a), and paragraphs (1) and (3) of subsection (e), shall”
Source evidence
Code amendment note
Subsec. (a)(6)(E)(ii). Pub. L. 100–647, § 1011A(b)(8)(D), substituted “then paragraphs (1) and (3) of subsection (e) shall” for “then paragraph (2) of subsection (a), and paragraphs (1) and (3) of subsection (e), shall”.
Enacted provision · exact public law section
(D) Subsection (a)(6)(E)(ii) is amended by striking out “paragraph (2) of subsection (a), and” and by striking out the comma after “subsection (e)”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1018(t)(8)(A) · 102 Stat. 3342
Redesignated · 26 U.S.C. § 402(a)(6)(G)
Pub. L. 100–647, § 1018(t)(8)(A), redesignated subpar. (G), relating to treatment of potential future vesting, as (I)
Source evidence
Code amendment note
Subsec. (a)(6)(G). Pub. L. 100–647, § 1018(t)(8)(A), redesignated subpar. (G), relating to treatment of potential future vesting, as (I).
Enacted provision · exact public law section
(A) Subparagraph (G) of section 402(a)(6) of the 1986 Code (relating to treatment of potential future vesting), as added by section 1898(a)(3) of the Reform Act, is redesignated as subparagraph (I).
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(5) · 102 Stat. 3342
Inserted · 26 U.S.C. § 402(a)(6)(H)(ii)
Pub. L. 100–647, § 1011A(b)(5), inserted at end “A deposit shall not be treated as a frozen deposit unless on at least 1 day during the 60-day period described in paragraph (5)(C) (without regard to this subparagraph) such deposit is described in the preceding sentence.”
Source evidence
Code amendment note
Subsec. (a)(6)(H)(ii). Pub. L. 100–647, § 1011A(b)(5), inserted at end “A deposit shall not be treated as a frozen deposit unless on at least 1 day during the 60-day period described in paragraph (5)(C) (without regard to this subparagraph) such deposit is described in the preceding sentence.”
Enacted provision · exact public law section
(5) Clause (ii) of section 402(a)(6)(H) of the 1986 Code (relating to special rule for frozen deposits) is amended by adding at the end thereof the following new flush sentence: “A deposit shall not be treated as a frozen deposit unless on at least 1 day during the 60-day period described in paragraph (5)(C) (without regard to this subparagraph) such deposit is described in the preceding sentence.”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1018(t)(8)(A) · 102 Stat. 3342
Redesignated · 26 U.S.C. § 402(a)(6)(I)
Pub. L. 100–647, § 1018(t)(8)(A), redesignated subpar. (G), relating to treatment of potential future vesting, as (I)
Source evidence
Code amendment note
Subsec. (a)(6)(I). Pub. L. 100–647, § 1018(t)(8)(A), redesignated subpar. (G), relating to treatment of potential future vesting, as (I).
Enacted provision · exact public law section
(A) Subparagraph (G) of section 402(a)(6) of the 1986 Code (relating to treatment of potential future vesting), as added by section 1898(a)(3) of the Reform Act, is redesignated as subparagraph (I).
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(h)(4) · 102 Stat. 3342
1. Added · 26 U.S.C. § 402(b)(2)(A)
  Pub. L. 100–647, § 1011(h)(4), added subpar. (A)
2. Struck · 26 U.S.C. § 402(b)(2)(A)
  Pub. L. 100–647, § 1011(h)(4), struck out former subpar. (A) which related to trust which is not exempt from tax under section 501(a) because plan fails to meet requirements of section 410(b)
Source evidence
Code amendment note
Subsec. (b)(2)(A). Pub. L. 100–647, § 1011(h)(4), added subpar. (A) and struck out former subpar. (A) which related to trust which is not exempt from tax under section 501(a) because plan fails to meet requirements of section 410(b).
Enacted provision · exact public law section
(4) Section 402(b)(2) of the 1986 Code (relating to failure to meet requirements of section 410(b)) is amended by striking out subparagraphs (A) and (B) and inserting in lieu thereof the following: “(A) Highly compensated employees.— If 1 of the reasons a trust is not exempt from tax under section 501(a) is the failure of the plan of which it is a part to meet the requirements of section 401(a)(26) or 410(b), then a highly compensated employee shall, in lieu of the amount determined under paragraph (1), include in gross income for the taxable year with or within which the taxable year of the trust ends an amount equal to the vested accrued benefit of such employee (other than the employee’s investment in the contract) as of the close of such taxable year of the trust. “(B) Failure to meet coverage tests.— If a trust is not exempt from tax under section 501(a) for any taxable year solely because such trust is part of a plan which fails to meet the requirements of section 401(a)(26) or 410(b), paragraph (1) shall not apply by reason of such failure to any employee who was not a highly compensated employee during— “(i) such taxable year, or “(ii) any preceding period for which service was creditable to such employee under the plan.”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(h)(4) · 102 Stat. 3342
1. Added · 26 U.S.C. § 402(b)(2)(B)
  Pub. L. 100–647, § 1011(h)(4), added subpar. (B)
2. Struck · 26 U.S.C. § 402(b)(2)(B)
  Pub. L. 100–647, § 1011(h)(4), struck out former subpar. (B) which related to failure of plan to meet requirements of section 410(b) for more than 1 taxable year
Source evidence
Code amendment note
Subsec. (b)(2)(B). Pub. L. 100–647, § 1011(h)(4), added subpar. (B) and struck out former subpar. (B) which related to failure of plan to meet requirements of section 410(b) for more than 1 taxable year.
Enacted provision · exact public law section
(4) Section 402(b)(2) of the 1986 Code (relating to failure to meet requirements of section 410(b)) is amended by striking out subparagraphs (A) and (B) and inserting in lieu thereof the following: “(A) Highly compensated employees.— If 1 of the reasons a trust is not exempt from tax under section 501(a) is the failure of the plan of which it is a part to meet the requirements of section 401(a)(26) or 410(b), then a highly compensated employee shall, in lieu of the amount determined under paragraph (1), include in gross income for the taxable year with or within which the taxable year of the trust ends an amount equal to the vested accrued benefit of such employee (other than the employee’s investment in the contract) as of the close of such taxable year of the trust. “(B) Failure to meet coverage tests.— If a trust is not exempt from tax under section 501(a) for any taxable year solely because such trust is part of a plan which fails to meet the requirements of section 401(a)(26) or 410(b), paragraph (1) shall not apply by reason of such failure to any employee who was not a highly compensated employee during— “(i) such taxable year, or “(ii) any preceding period for which service was creditable to such employee under the plan.”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(E) · 102 Stat. 3342
Struck · 26 U.S.C. § 402(e)(1)(A)
Pub. L. 100–647, § 1011A(b)(8)(E), struck out “ordinary income portion of a” after “subparagraph (B)) on the”
Source evidence
Code amendment note
Subsec. (e)(1)(A). Pub. L. 100–647, § 1011A(b)(8)(E), struck out “ordinary income portion of a” after “subparagraph (B)) on the”.
Enacted provision · exact public law section
(E) Subsection (e)(1)(A) is amended by striking out “ordinary income portion of a”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(10) · 102 Stat. 3342
Inserted · 26 U.S.C. § 402(e)(1)(B)
Pub. L. 100–647, § 1011A(b)(10), inserted at end “For purposes of the preceding sentence, in determining the amount of tax under section 1(c), section 1(g) shall be applied without regard to paragraph (2)(B) thereof.”
Source evidence
Code amendment note
Subsec. (e)(1)(B). Pub. L. 100–647, § 1011A(b)(10), inserted at end “For purposes of the preceding sentence, in determining the amount of tax under section 1(c), section 1(g) shall be applied without regard to paragraph (2)(B) thereof.”
Enacted provision · exact public law section
(10) Section 402(e)(1)(B) of the 1986 Code (relating to amount of tax on lump-sum distributions) is amended by adding at the end thereof the following new flush sentence: “For purposes of the preceding sentence, in determining the amount of tax under section 1(c), section 1(g) shall be applied without regard to paragraph (2)(B) thereof.”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1018(u)(1) · 102 Stat. 3342
Changed · 26 U.S.C. § 402(e)(1)(B)
Pub. L. 100–647, § 1018(u)(1), made technical correction to directory language of Pub. L. 99–514, § 104(b)(5). See 1986 Amendment note below
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 100–647, § 1018(u)(1), made technical correction to directory language of Pub. L. 99–514, § 104(b)(5). See 1986 Amendment note below.
Enacted provision · exact public law section
(1) Paragraph (5) of section 104(b) of the Reform Act is amended by striking out “1222(b)” and inserting in lieu thereof “1122(b)”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1018(u)(6) · 102 Stat. 3342
Changed · 26 U.S.C. § 402(e)(1)(B)
Pub. L. 100–647, § 1018(u)(6), related to execution of amendment by Pub. L. 99–514, § 1122(b)(2)(B), see 1986 Amendment note below
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 100–647, § 1018(u)(6), related to execution of amendment by Pub. L. 99–514, § 1122(b)(2)(B), see 1986 Amendment note below.
Enacted provision · exact public law section
(6) The amendment made by section 1122(b)(2)(BXiii) of the Reform Act shall be applied as if it struck out “Initial separate tax”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1018(u)(7) · 102 Stat. 3342
Changed · 26 U.S.C. § 402(e)(3)
Pub. L. 100–647, § 1018(u)(7), related to execution of amendment by Pub. L. 99–514, § 1122(b)(2)(C), see 1986 Amendment note below
Source evidence
Code amendment note
Subsec. (e)(3). Pub. L. 100–647, § 1018(u)(7), related to execution of amendment by Pub. L. 99–514, § 1122(b)(2)(C), see 1986 Amendment note below.
Enacted provision · exact public law section
(7) The amendment made by section 1122(b)(2)(C) of the Reform Act shall be applied as if it did not strike out “the”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(F) · 102 Stat. 3342
1. Substituted · 26 U.S.C. § 402(e)(4)(A)
  Pub. L. 100–647, § 1011A(b)(8)(F), in concluding provisions, substituted “A” for “Except for purposes of subsection (a)(2) and section 403(a)(2), a”
2. Struck · 26 U.S.C. § 402(e)(4)(A)
  Pub. L. 100–647, § 1011A(b)(8)(F), in concluding provisions, struck out “subsection (a)(2) of this section, and subsection (a)(2) of section 403,” before “the balance to”
Source evidence
Code amendment note
Subsec. (e)(4)(A). Pub. L. 100–647, § 1011A(b)(8)(F), in concluding provisions, substituted “A” for “Except for purposes of subsection (a)(2) and section 403(a)(2), a”, and struck out “subsection (a)(2) of this section, and subsection (a)(2) of section 403,” before “the balance to”.
Enacted provision · exact public law section
(F) Subsection (e)(4)(A) is amended— (i) by striking out “Except for purposes of subsection (a)(2) and section 403(a)(2), a” and inserting in lieu thereof “A”, and (ii) by striking out “subsection (a)(2) of this section, and subsection (a)(2) of section 403,”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(6) · 102 Stat. 3342
Substituted · 26 U.S.C. § 402(e)(4)(B)(i)
Pub. L. 100–647, § 1011A(b)(6), substituted “employee” for “taxpayer”
Source evidence
Code amendment note
Subsec. (e)(4)(B)(i). Pub. L. 100–647, § 1011A(b)(6), substituted “employee” for “taxpayer”.
Enacted provision · exact public law section
(6) Clause (i) of section 402(e)(4)(B) of the 1986 Code is amended by striking out “taxpayer” and inserting in lieu thereof “employee”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(c)(9) · 102 Stat. 3342
Struck · 26 U.S.C. § 402(e)(4)(I)
Pub. L. 100–647, § 1011A(c)(9), struck out “clause (ii) of” after “amounts described in”
Source evidence
Code amendment note
Subsec. (e)(4)(I). Pub. L. 100–647, § 1011A(c)(9), struck out “clause (ii) of” after “amounts described in”.
Enacted provision · exact public law section
(9) Subparagraph (I) of section 402(e)(4) of the 1986 Code is amended by striking out “clause (ii) of”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(7) · 102 Stat. 3342
Amended · 26 U.S.C. § 402(e)(4)(J)
Pub. L. 100–647, § 1011A(b)(7), amended last sentence generally. Prior to amendment, last sentence read as follows: “To the extent provided by the Secretary, a taxpayer may elect before any distribution not to have this paragraph apply with respect to such distribution.”
Source evidence
Code amendment note
Subsec. (e)(4)(J). Pub. L. 100–647, § 1011A(b)(7), amended last sentence generally. Prior to amendment, last sentence read as follows: “To the extent provided by the Secretary, a taxpayer may elect before any distribution not to have this paragraph apply with respect to such distribution.”
Enacted provision · exact public law section
(7) The last sentence of section 402(e)(4)(J) of the 1986 Code (relating to unrealized appreciation on employer securities) is amended to read as follows: “In accordance with rules prescribed by the Secretary, a taxpayer may elect, on the return of tax on which a distribution is required to be included, not to have this subparagraph apply with respect to such distribution.”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(G) · 102 Stat. 3342
Struck · 26 U.S.C. § 402(e)(4)(L)
Pub. L. 100–647, § 1011A(b)(8)(G), struck out subpar. (L) which related to election to treat pre-1974 participation as post-1973 participation
Source evidence
Code amendment note
Subsec. (e)(4)(L). Pub. L. 100–647, § 1011A(b)(8)(G), struck out subpar. (L) which related to election to treat pre-1974 participation as post-1973 participation.
Enacted provision · exact public law section
(G) Subparagraph (L) of subsection (e)(4) is hereby re-pealed.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(H) · 102 Stat. 3342
Struck · 26 U.S.C. § 402(e)(4)(M)
Pub. L. 100–647, § 1011A(b)(8)(H), struck out “, subsection (a)(2) of this section, and section 403(a)(2)” after “of this subsection”
Source evidence
Code amendment note
Subsec. (e)(4)(M). Pub. L. 100–647, § 1011A(b)(8)(H), struck out “, subsection (a)(2) of this section, and section 403(a)(2)” after “of this subsection”.
Enacted provision · exact public law section
(H) Subsection (e)(4)(M) is amended by striking out “, subsection (a)(2) of this section, and section 403(a)(2)”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 6068(a) · 102 Stat. 3342
Added · 26 U.S.C. § 402(e)(4)(O)
Pub. L. 100–647, § 6068(a), added subpar. (O)
Source evidence
Code amendment note
Subsec. (e)(4)(O). Pub. L. 100–647, § 6068(a), added subpar. (O).
Enacted provision · exact public law section
(a) In General.— Section 402(e)(4) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: “(O) Lump-sum distributions of alternate payees.— If any distribution or payment of the balance to the credit of an employee would be treated as a lump-sum distribution, then, for purposes of this subsection, the payment under a qualified domestic relations order (within the meaning of section 414(p)) of the balance to the credit of an alternate payee who is the spouse or former spouse of the employee shall be treated as a lump-sum distribution. For purposes of this subparagraph, the balance to the credit of the alternate payee shall not include any amount payable to the employee.”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(I) · 102 Stat. 3342
Struck · 26 U.S.C. § 402(e)(5)
Pub. L. 100–647, § 1011A(b)(8)(I), struck out “and paragraph (2) of subsection (a)” after “of this subsection”
Source evidence
Code amendment note
Subsec. (e)(5). Pub. L. 100–647, § 1011A(b)(8)(I), struck out “and paragraph (2) of subsection (a)” after “of this subsection”.
Enacted provision · exact public law section
(I) Subsection (e)(5) is amended by striking out “and paragraph (2) of subsection (a)”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(8)(J) · 102 Stat. 3342
Amended · 26 U.S.C. § 402(e)(6)(C)
Pub. L. 100–647, § 1011A(b)(8)(J), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “For purposes of this paragraph, special lump sum treatment applies to any distribution if any portion of such distribution—
Source evidence
Code amendment note
Subsec. (e)(6)(C). Pub. L. 100–647, § 1011A(b)(8)(J), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “For purposes of this paragraph, special lump sum treatment applies to any distribution if any portion of such distribution—
“(i) is taxed under this subsection by reason of an election under paragraph (4)(B), or “(ii) is treated as long-term capital gain under subsection (a)(2) of this section or section 403(a)(2).”
Enacted provision · exact public law section
(J) Subsection (e)(6)(C) is amended to read as follows: “(C) Special lump-sum treatment.— For purposes of this paragraph, special lump sum treatment applies to any distribution if any portion of such distribution is taxed under this subsection by reason of an election under paragraph (4)(B).”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1018(t)(8)(C) · 102 Stat. 3342
Substituted · 26 U.S.C. § 402(f)(1)
Pub. L. 100–647, § 1018(t)(8)(C), substituted “an eligible” for “a eligible”
Source evidence
Code amendment note
Subsec. (f)(1). Pub. L. 100–647, § 1018(t)(8)(C), substituted “an eligible” for “a eligible”.
Enacted provision · exact public law section
(C) Section 402(f)(1) of the 1986 Code is amended by striking out “a eligible” and inserting in lieu thereof “an eligible”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(6)(B) · 102 Stat. 3342
Redesignated · 26 U.S.C. § 402(g)
Pub. L. 100–647, § 1011(c)(6)(B), redesignated subsec. (g), relating to effect of disposition of stock by plan on net unrealized appreciation, as (j)
Source evidence
Code amendment note
Subsec. (g). Pub. L. 100–647, § 1011(c)(6)(B), redesignated subsec. (g), relating to effect of disposition of stock by plan on net unrealized appreciation, as (j).
Enacted provision · exact public law section
(B) Section 402(g) of the 1986 Code, as added by section 1854(f)(2) of the Reform Act, is redesignated as subsection (j).
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(6)(A) · 102 Stat. 3342
Redesignated · 26 U.S.C. § 402(g)
Pub. L. 100–647, § 1011(c)(6)(A), redesignated subsec. (g), relating to treatment of self-employed individuals, as (i)
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 100–647, § 1011(c)(6)(A), redesignated subsec. (g), relating to treatment of self-employed individuals, as (i).
Enacted provision · exact public law section
(A) Section 402(g) of the 1986 Code, as added by section 1852(b)(3)(A) of the Reform Act, is redesignated as subsection (i).
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(2) · 102 Stat. 3342
Substituted · 26 U.S.C. § 402(g)(2)
Pub. L. 100–647, § 1011(c)(2), substituted “Distribution” for “Required distribution” in heading
Source evidence
Code amendment note
Subsec. (g)(2). Pub. L. 100–647, § 1011(c)(2), substituted “Distribution” for “Required distribution” in heading.
Enacted provision · exact public law section
(2) Section 402(g)(2) is amended by striking out “Required distrirution” in the heading thereof and inserting in lieu thereof “Distribution”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(1) · 102 Stat. 3342
1. Struck · 26 U.S.C. § 402(g)(2)(C)
  Pub. L. 100–647, § 1011(c)(1), struck out “(and no tax shall be imposed under section 72(t))” after “in gross income”, in cl. (i)
2. Substituted · 26 U.S.C. § 402(g)(2)(C)
  Pub. L. 100–647, § 1011(c)(1), substituted “such income is distributed” for “such excess deferral is made” in cl. (ii)
3. Inserted · 26 U.S.C. § 402(g)(2)(C)
  Pub. L. 100–647, § 1011(c)(1), inserted at end “No tax shall be imposed under section 72(t) on any distribution described in the preceding sentence.”
Source evidence
Code amendment note
Subsec. (g)(2)(C). Pub. L. 100–647, § 1011(c)(1), struck out “(and no tax shall be imposed under section 72(t))” after “in gross income”, in cl. (i), substituted “such income is distributed” for “such excess deferral is made” in cl. (ii), and inserted at end “No tax shall be imposed under section 72(t) on any distribution described in the preceding sentence.”
Enacted provision · exact public law section
(1) Section 402(g)(2)(C) of the 1986 Code (relating to taxation of distribution) is amended— (A) by striking out “(and no tax shall be imposed under section 72(t))” in clause (i), (B) by striking out “such excess deferral is made” in clause (ii) and inserting in lieu thereof “such income is distributed”, and (C) by inserting at the end thereof the following new flush sentence: “No tax shall be imposed under section 72(t) on any distribution described in the preceding sentence.”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(3) · 102 Stat. 3342
Added · 26 U.S.C. § 402(g)(2)(D)
Pub. L. 100–647, § 1011(c)(3), added subpar. (D)
Source evidence
Code amendment note
Subsec. (g)(2)(D). Pub. L. 100–647, § 1011(c)(3), added subpar. (D).
Enacted provision · exact public law section
(3) Section 402(g)(2) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: “(D) Partial distributions.— If a plan distributes only a portion of any excess deferral and income allocable thereto, such portion shall be treated as having been distributed ratably from the excess deferral and the income.”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(4) · 102 Stat. 3342
Substituted · 26 U.S.C. § 402(g)(3)
Pub. L. 100–647, § 1011(c)(4), substituted “this subsection” for “this paragraph”
Source evidence
Code amendment note
Subsec. (g)(3). Pub. L. 100–647, § 1011(c)(4), substituted “this subsection” for “this paragraph”.
Enacted provision · exact public law section
(4) Section 402(g)(3) of the 1986 Code (defining elective deferral) is amended by striking out “paragraph” and inserting in
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(11) · 102 Stat. 3342
Inserted · 26 U.S.C. § 402(g)(3)
Pub. L. 100–647, § 1011(c)(11), inserted at end “An employer contribution shall not be treated as an elective deferral described in subparagraph (C) if under the salary reduction agreement such contribution is made pursuant to a one-time irrevocable election made by the employee at the time of initial eligibility to participate in the agreement or is made pursuant to a similar arrangement specified in regulations.”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 100–647, § 1011(c)(11), inserted at end “An employer contribution shall not be treated as an elective deferral described in subparagraph (C) if under the salary reduction agreement such contribution is made pursuant to a one-time irrevocable election made by the employee at the time of initial eligibility to participate in the agreement or is made pursuant to a similar arrangement specified in regulations.”
Enacted provision · exact public law section
(11) Section 402(g)(3) of the 1986 Code is amended by inserting Wages. at the end thereof the following new sentence: “An employer contribution shall not be treated as an elective deferral described in subparagraph (C) if under the salary reduction agreement such contribution is made pursuant to a one-time irrevocable election made by the employee at the time of initial eligibility to participate in the agreement or is made pursuant to a similar arrangement specified in regulations.”
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(5)(A) · 102 Stat. 3342
Inserted · 26 U.S.C. § 402(g)(8)(A)(iii)
Pub. L. 100–647, § 1011(c)(5)(A), inserted “(determined in the manner prescribed by the Secretary)” after “prior taxable years”
Source evidence
Code amendment note
Subsec. (g)(8)(A)(iii). Pub. L. 100–647, § 1011(c)(5)(A), inserted “(determined in the manner prescribed by the Secretary)” after “prior taxable years”.
Enacted provision · exact public law section
(A) Clause (iii) of section 402(g)(8)(A) of the 1986 Code (relating to special rule for certain organizations) is amended by inserting “(determined in the manner prescribed by the Secretary)” after “taxable years”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(5)(B) · 102 Stat. 3342
Added · 26 U.S.C. § 402(g)(8)(D)
Pub. L. 100–647, § 1011(c)(5)(B), added subpar. (D)
Source evidence
Code amendment note
Subsec. (g)(8)(D). Pub. L. 100–647, § 1011(c)(5)(B), added subpar. (D).
Enacted provision · exact public law section
(B) Section 402(g)(8) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: “(D) Years of service.— For purposes of this paragraph, the term ‘years of service’ has the meaning given such term by section 403(b).”.
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(6)(A) · 102 Stat. 3342
Redesignated · 26 U.S.C. § 402(i)
Pub. L. 100–647, § 1011(c)(6)(A), redesignated subsec. (g), relating to treatment of self-employed individuals, as (i)
Source evidence
Code amendment note
Subsec. (i). Pub. L. 100–647, § 1011(c)(6)(A), redesignated subsec. (g), relating to treatment of self-employed individuals, as (i).
Enacted provision · exact public law section
(A) Section 402(g) of the 1986 Code, as added by section 1852(b)(3)(A) of the Reform Act, is redesignated as subsection (i).
1988
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011(c)(6)(B) · 102 Stat. 3342
Redesignated · 26 U.S.C. § 402(j)
Pub. L. 100–647, § 1011(c)(6)(B), redesignated subsec. (g), relating to effect of disposition of stock by plan on net unrealized appreciation, as (j)
Source evidence
Code amendment note
Subsec. (j). Pub. L. 100–647, § 1011(c)(6)(B), redesignated subsec. (g), relating to effect of disposition of stock by plan on net unrealized appreciation, as (j).
Enacted provision · exact public law section
(B) Section 402(g) of the 1986 Code, as added by section 1854(f)(2) of the Reform Act, is redesignated as subsection (j).
1986
Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1011A(b)(4)(A) · 102 Stat. 3342
Changed · 26 U.S.C. § 402(a)(5)(D)(i)
Pub. L. 100–647, § 1011A(b)(4)(A). See 1988 Amendment note above
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Any distribution described in section 401(a)(28)(B)(ii) shall be treated as meeting the requirements of this clause.” This amendment was repealed by Pub. L. 100–647, § 1011A(b)(4)(A). See 1988 Amendment note above.
Enacted provision · exact public law section
(A) The amendment made by section 1122(e)(1) of the Reform Act is repealed and the Internal Revenue Code of 1986 26 USC 402 and note. shall be applied and administered as if such amendment had not been enacted.
1989
Revenue Reconciliation Act of 1989
Pub. L. 101–239 § 7811(i)(13) · 103 Stat. 2106
Added · 26 U.S.C. § 402(e)(7)
Pub. L. 101–239, § 7811(i)(13), added par. (7)
Source evidence
Code amendment note
Subsec. (e)(7). Pub. L. 101–239, § 7811(i)(13), added par. (7).
Enacted provision · exact public law section
(13) Effective with respect to taxable years ending after the Effective date. date of the enactment of this Act (or, at the election of the taxpayer, beginning after December 31, 1986), subsection (e) of section 402 is amended by adding at the end the following new paragraph: “(7) Coordination with foreign tax credit limitations.— Subsections (a), (b), and (c) of section 904 shall be applied separately with respect to any lump sum distribution on which tax is imposed under paragraph (1), and the amount of such distribution shall be treated as the taxable income for purposes of such separate application.”
1989
Revenue Reconciliation Act of 1989
Pub. L. 101–239 § 7811(g)(2) · 103 Stat. 2106
Inserted · 26 U.S.C. § 402(g)(3)
Pub. L. 101–239, § 7811(g)(2), inserted “involving a one-time irrevocable election” after “similar arrangement” in last sentence
Source evidence
Code amendment note
Subsec. (g)(3). Pub. L. 101–239, § 7811(g)(2), inserted “involving a one-time irrevocable election” after “similar arrangement” in last sentence.
Enacted provision · exact public law section
(2) The last sentence of section 402(g)(3) is amended by inserting “involving a one-time irrevocable election” after “similar arrangement”.
1990
Revenue Reconciliation Act of 1990
Pub. L. 101–508 § 11801(c)(9)(I)(i) · 104 Stat. 1388
Substituted · 26 U.S.C. § 402(a)(3)(B)
Pub. L. 101–508, § 11801(c)(9)(I)(i), substituted “section 424” for “section 425”
Source evidence
Code amendment note
Subsec. (a)(3)(B). Pub. L. 101–508, § 11801(c)(9)(I)(i), substituted “section 424” for “section 425”.
Enacted provision · exact public law section
(i) Subparagraph (B) of section 402(a)(3) is amended by striking “section 425” and inserting “section 424”.
1990
Revenue Reconciliation Act of 1990
Pub. L. 101–508 § 11801(c)(9)(I)(ii) · 104 Stat. 1388
Substituted · 26 U.S.C. § 402(a)(6)(B)(i)
Pub. L. 101–508, § 11801(c)(9)(I)(ii), substituted “section 424(f)” for “section 425(f)”
Source evidence
Code amendment note
Subsec. (a)(6)(B)(i). Pub. L. 101–508, § 11801(c)(9)(I)(ii), substituted “section 424(f)” for “section 425(f)”.
Enacted provision · exact public law section
(ii) Clause (i) of section 402(a)(6)(B) is amended by striking “section 425(f)” and inserting “section 424(f)”.
1992
Unemployment Compensation Amendments of 1992
Pub. L. 102–318 § 521(a) · 106 Stat. 290
1. Amended · 26 U.S.C. § 402(a)(d)
  Pub. L. 102–318, § 521(a), amended subsecs. (a) to (d) generally
2. Repealed · 26 U.S.C. § 402(a)(d)
  Pub. L. 102–318, § 521(a), substituting present provisions for former provisions which in subsec. (a) related to taxability of beneficiaries of exempt trusts, in subsec. (b) related to taxability of beneficiaries of nonexempt trusts, in subsec. (c) related to taxability of beneficiaries of certain foreign situs trusts, and subsec. (d) which had been previously repealed
Source evidence
Code amendment note
Subsecs. (a) to (d). Pub. L. 102–318, § 521(a), amended subsecs. (a) to (d) generally, substituting present provisions for former provisions which in subsec. (a) related to taxability of beneficiaries of exempt trusts, in subsec. (b) related to taxability of beneficiaries of nonexempt trusts, in subsec. (c) related to taxability of beneficiaries of certain foreign situs trusts, and subsec. (d) which had been previously repealed.
Enacted provision · exact public law section
(a) In General.— So much of section 402 (relating to taxability of beneficiary of employees’ trust) as precedes subsection (g) thereof is amended to read as follows: “SEC. 402. TAXABILITY OF BENEFICIARY OF EMPLOYEES’ TRUST. “(a) Taxability of Beneficiary of Exempt Trust.— Except as otherwise provided in this section, any amount actually distributed to any distributee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities). “(b) Taxability of Beneficiary of Nonexempt Trust.— “(1) Contributions.— Contributions to an employees’ trust made by an employer during a taxable year of the employer which ends with or within a taxable year of the trust for which the trust is not exempt from tax under section 501(a) shall be included in the gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employee’s interest in the trust shall be substituted for the fair market value of the property for purposes of applying such section. “(2) Distributions.— The amount actually distributed or made available to any distributee by any trust described in paragraph (1) shall be taxable to the distributee, in the taxable year in which so distributed or made available, under section 72 (relating to annuities), except that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(5) (relating to amounts not received as annuities). “(3) Grantor trusts.— A beneficiary of any trust described in paragraph (1) shall not be considered the owner of any portion of such trust under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners). “(4) Failure to meet requirements of section 410(b).— “(A) Highly compensated employees.— If 1 of the reasons a trust is not exempt from tax under section 501(a) is the failure of the plan of which it is a part to meet the requirements of section 401(a)(26) or 410(b), then a highly compensated employee shall, in lieu of the amount determined under paragraph (1) or (2) include in gross income for the taxable year with or within which the taxable year of the trust ends an amount equal to the vested accrued benefit of such employee (other than the employee’s investment in the contract) as of the close of such taxable year of the trust. “(B) Failure to meet coverage tests.— If a trust is not exempt from tax under section 501(a) for any taxable year solely because such trust is part of a plan which fails to meet the requirements of section 401(a)(26) or 410(b), paragraphs (1) and (2) shall not apply by reason of such failure to any employee who was not a highly compensated employee during— “(i) such taxable year, or “(ii) any preceding period for which service was creditable to such employee under the plan. “(C) Highly compensated employee.— For purposes of this paragraph, the term ‘highly compensated employee’ has the meaning given such term by section 414(q). “(c) Rules Applicable to Rollovers From Exempt Trusts.— “(1) Exclusion from income.— If— “(A) any portion of the balance to the credit of an employee in a qualified trust is paid to the employee in an eligible rollover distribution, “(B) the distributee transfers any portion of the property received in such distribution to an eligible retirement plan, and “(C) in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid. “(2) Maximum amount which may be rolled over.— In the case of any eligible rollover distribution, the maximum amount transferred to which paragraph (1) applies shall not exceed the portion of such distribution which is includible in gross income (determined without regard to paragraph (1)). “(3) Transfer must be made within 60 days of receipt.— Paragraph (1) shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed. “(4) Eligible rollover distribution.— For purposes of this subsection, the term ‘eligible rollover distribution’ means any distribution to an employee of all or any portion of the balance to the credit of the employee in a qualified trust; except that such term shall not include— “(A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made— “(i) for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of the employee and the employee’s designated beneficiary, or “(ii) for a specified period of 10 years or more, and “(B) any distribution to the extent such distribution is required under section 401(a)(9). “(5) Transfer treated as rollover contribution under section 408.— For purposes of this title, a transfer to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B) resulting in any portion of a distribution being excluded from gross income under paragraph (1) shall be treated as a rollover contribution described in section 408(d)(3). “(6) Sales of distributed property.— For purposes of this subsection— “(A) Transfer of proceeds from sale of distributed property treated as transfer of distributed property.— The transfer of an amount equal to any portion of the proceeds from the sale of property received in the distribution shall be treated as the transfer of property received in the distribution. “(B) Proceeds attributable to increase in value.— The excess of fair market value of property on sale over its fair market value on distribution shall be treated as property received in the distribution. “(C) Designation where amount of distribution exceeds rollover contribution.— In any case where part or all of the distribution consists of property other than money— “(i) the portion of the money or other property which is to be treated as attributable to amounts not included in gross income, and “(ii) the portion of the money or other property which is to be treated as included in the rollover contribution, shall be determined on a ratable basis unless the taxpayer designates otherwise. Any designation under this subparagraph for a taxable year shall be made not later them the time prescribed by law for filing the return for such taxable year (including extensions thereof). Any such designation, once made, shall be irrevocable. “(D) Nonrecognition of gain or loss.— No gain or loss shall be recognized on any sale described in subparagraph (A) to the extent that an amount equal to the proceeds is transferred pursuant to paragraph (1). “(7) Special rule for frozen deposits.— “(A) In general.— The 60-day period described in paragraph (3) shall not— “(i) include any period during which the amount transferred to the employee is a frozen deposit, or “(ii) end earlier than 10 days after such amount ceases to be a frozen deposit. “(B) Frozen deposits.— For purposes of this subparagraph, the term ‘frozen deposit’ means any deposit which may not be withdrawn because of— “(i) the bankruptcy or insolvency of any financial institution, or “(ii) any requirement imposed by the State in which such institution is located by reason of the bankruptcy or insolvency (or threat thereof) of 1 or more financial institutions in such State. A deposit shall not be treated as a frozen deposit unless on at least 1 day during the 60-day period described in paragraph (3) (without regard to this paragraph) such deposit is described in the preceding sentence. “(8) Definitions.— For purposes of this subsection— “(A) Qualified trust.— The term ‘qualified trust’ means an employees’ trust described in section 401(a) which is exempt from tax under section 501(a). “(B) Eligible retirement plan.— The term ‘eligible retirement plan’ means— “(i) an individual retirement account described in section 408(a), “(ii) an individual retirement annuity described in section 408(b) (other than an endowment contract), “(iii) a qualified trust, and “(iv) an annuity plan described in section 403(a). “(9) Rollover where spouse receives distribution after death of employee.— If any distribution attributable to an employee is paid to the spouse of the employee after the employee’s death, the preceding provisions of this subsection shall apply to such distribution in the same manner as if the spouse were the employee; except that a trust or plan described in clause (iii) or (iv) of paragraph (8)(B) shall not be treated as an eligible retirement plan with respect to such distribution. “(10) Denial of averaging for subsequent distributions.— If paragraph (1) applies to any distribution paid to any employee, paragraphs (1) and (3) of subsection (d) shall not apply to any distribution (paid after such distribution) of the balance to the credit of the employee under the plan under which the preceding distribution was made (or under any other plan which, under subsection (d)(4)(C), would be aggregated with such plan). “(d) Tax on Lump Sum Distributions.— “(1) Imposition of separate tax on lump sum distributions.— “(A) Separate tax.— There is hereby imposed a tax (in the amount determined under subparagraph (B)) on a lump sum distribution. “(B) Amount of tax.— The amount of tax imposed by subparagraph (A) for any taxable year is an amount equal to 5 times the tax which would be imposed by subsection (c) of section 1 if the recipient were an individual referred to in such subsection and the taxable income were an amount equal to ⅕ of the excess of— “(i) the total taxable amount of the lump sum distribution for the taxable year, over “(ii) the minimum distribution allowance. “(C) Minimum distribution allowance.— For purposes of this paragraph, the minimum distribution allowance for any taxable year is an amount equal to— “(i) the lesser of $10,000 or one-half of the total taxable amount of the lump sum distribution for the taxable year, reduced (but not below zero) by “(ii) 20 percent of the amount (if any) by which such total taxable amount exceeds $20,000. “(D) Liability for tax.— The recipient shall be liable for the tax imposed by this paragraph. “(2) Distributions of annuity contracts.— “(A) In general.— In the case of any recipient of a lump sum distribution for any taxable year, if the distribution (or any part thereof) is an annuity contract, the total taxable amount of the distribution shall be aggregated for purposes of computing the tax imposed by paragraph (1)(A), except that the amount of tax so computed shall be reduced (but not below zero) by that portion of the tax on the aggregate total taxable amount which is attributable to annuity contracts. “(B) Beneficiaries.— For purposes of this paragraph, a beneficiary of a trust to which a lump sum distribution is made shall be treated as the recipient of such distribution if the beneficiary is an employee (including an employee within the meaning of section 401(c)(1)) with respect to the plan under which the distribution is made or if the beneficiary is treated as the owner of such trust for purposes of subpart E of part I of subchapter J. “(C) Annuity contracts.— For purposes of this paragraph, in the case of the distribution of an annuity contract, the taxable amount of such distribution shall be deemed to be the current actuarial value of the contract, determined on the date of such distribution. “(D) Trusts.— In the case of a lump sum distribution with respect to any individual which is made only to 2 or more trusts, the tax imposed by paragraph (1)(A) shall be computed as if such distribution was made to a single trust, but the liability for such tax shall be apportioned among such trusts according to the relative amounts received by each. “(E) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this paragraph. “(3) Allowance of deduction.— The total taxable amount of a lump sum distribution for any taxable year shall be allowed as a deduction from gross income for such taxable year, but only to the extent included in the taxpayer’s gross income for such taxable year. “(4) Definitions and special rules.— “(A) Lump sum distribution.— For purposes of this section and section 403, the term ‘lump sum distribution’ means the distribution or payment within 1 taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient— “(i) on account of the employee’s death, “(ii) after the employee attains age 59½, “(iii) on account of the employee’s separation from the service, or “(iv) after the employee has become disabled (within the meaning of section 72(m)(7)), from a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Clause (iii) of this subparagraph shall be applied only with respect to an individual who is an employee without regard to section 401(c)(1), and clause (iv) shall be applied only with respect to an employee within the meaning of section 401(c)(1). A distribution of an annuity contract from a trust or annuity plan referred to in the first sentence of this subparagraph shall be treated as a lump sum distribution. For purposes of this subparagraph, a distribution to 2 or more trusts shall be treated as a distribution to 1 recipient. For purposes of this subsection, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)). “(B) Averaging to apply to 1 lump sum distribution after age 59½.— Paragraph (1) shall apply to a lump sum distribution with respect to an employee under subparagraph (A) only if— “(i) such amount is received on or after the date on which the employee has attained age 5914, and “(ii) the taxpayer elects for the taxable year to have all such amounts received during such taxable year so treated. Not more than 1 election may be made under this subparagraph by any taxpayer with respect to any employee. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to 2 or more trusts, the election under this subparagraph shall be made by the personal representative of the taxpayer. “(C) Aggregation of certain trusts and plans.— For purposes of determining the balance to the credit of an employee under subparagraph (A)— “(i) all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and “(ii) trusts which are not qualified trusts under section 401(a) and annuity contracts which do not satisfy the requirements of section 404(a)(2) shall not be taken into account. “(D) Total taxable amount.— For purposes of this section and section 403, the term ‘total taxable amount’ means, with respect to a lump sum distribution, the amount of such distribution which exceeds the sum of— “(i) the amounts considered contributed by the employee (determined by applying section 72(f)), reduced by any amounts previously distributed which were not includible in gross income, and “(ii) the net unrealized appreciation attributable to that part of the distribution which consists of the securities of the employer corporation so distributed. “(E) Community property laws.— The provisions of this subsection, other than paragraph (3), shall be applied without regard to community property laws. “(F) Minimum period of service.— For purposes of this subsection, no amount distributed to an employee from or under a plan may be treated as a lump sum distribution under subparagraph (A) unless the employee has been a participant in the plan for 5 or more taxable years before the taxable year in which such amounts are distributed. “(G) Amounts subject to penalty.— This subsection shall not apply to amounts described in subparagraph (A) of section 72(m)(5) to the extent that section 72(m)(5) applies to such amounts. “(H) Balance to credit of employee not to include amounts payable under qualified domestic relations order.— For purposes of this subsection, the balance to the credit of an employee shall not include any amount payable to an alternate payee under a qualified domestic relations order (within the meaning of section 414(p)). “(I) Transfers to cost-of-living arrangement not treated as distribution.— For purposes of this subsection, the balance to the credit of an employee under a defined contribution plan shall not include any amount transferred from such defined contribution plan to a qualified cost-of-living arrangement (within the meaning of section 415(k)(2)) under a defined benefit plan. “(J) Lump sum distributions of alternate payees.— If any distribution or payment of the balance to the credit of an employee would be treated as a lump sum distribution, then, for purposes of this subsection, the payment under a qualified domestic relations order (within the meaning of section 414(p)) of the balance to the credit of an alternate payee who is the spouse or former spouse of the employee shall be treated as a lump sum distribution. For purposes of this subparagraph, the balance to the credit of the alternate payee shall not include any amount payable to the employee. “(K) Treatment of portion not rolled over.— If any portion of a lump sum distribution is transferred in a transfer to which subsection (c) applies, paragraphs (1) and (3) shall not apply with respect to the distribution. “(L) Securities.— For purposes of this subsection, the terms ‘securities’ and ‘securities of the employer corporation’ have the respective meanings provided by subsection (e)(4)(E). “(5) Special rule where portions of lump sum distribution attributable to rollover of bond purchased under qualified bond purchase plan.— If any portion of a lump sum distribution is attributable to a transfer described in section 405(d)(3)(A)(ii) (as in effect before its repeal by the Tax Reform Act of 1984), paragraphs (1) and (3) of this subsection shall not apply to such portion. “(6) Treatment of potential future vesting.— “(A) In general.— For purposes of determining whether any distribution which becomes payable to the recipient on account of the employee’s separation from service is a lump sum distribution, the balance to the credit of the employee shall be determined without regard to any increase in vesting which may occur if the employee is reemployed by the employer. “(B) Recapture in certain cases.— If— “(i) an amount is treated as a lump sum distribution by reason of subparagraph (A), “(ii) special lump sum treatment applies to such distribution, “(iii) the employee is subsequently reemployed by the employer, and “(iv) as a result of services performed after being so reemployed, there is an increase in the employee’s vesting for benefits accrued before the separation referred to in subparagraph (A), under regulations prescribed by the Secretary, the tax imposed by this chapter for the taxable year (in which the increase in vesting first occurs) shall be increased by the reduction in tax which resulted from the special lump sum treatment (and any election under paragraph (4)(B) shall not be taken into account for purposes of determining whether the employee may make another election under paragraph (4)(B)). “(C) Special lump sum treatment.— For purposes of this paragraph, special lump sum treatment applies to any distribution if any portion of such distribution is taxed under the subsection by reason of an election under paragraph (4)(B). “(D) Vesting.— For purposes of this paragraph, the term ‘vesting’ means the portion of the accrued benefits derived from employer contributions to which the participant has a nonforfeitable right. “(7) Coordination with foreign tax credit limitations.— Subsections (a), (b), and (c) of section 904 shall be applied separately with respect to any lump sum distribution on which tax is imposed under paragraph (1), and the amount of such distribution shall be treated as the taxable income for purposes of such separate application. “(e) Other Rules Applicable to Exempt Trusts.— “(1) Alternate payees.— “(A) Alternate payee treated as distributee.— For purposes of subsection (a) and section 72, an alternate payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distribution or payment made to the alternate payee under a qualified domestic relations order (as defined in section 414(p)). “(B) Rollovers.— If any amount is paid or distributed to an alternate payee who is the spouse or former spouse of the participant by reason of any qualified domestic relations order (within the meaning of section 414(p)), sub-section (c) shall apply to such distribution in the same manner as if such alternate payee were the employee. “(2) Distributions by united states to nonresident aliens.— The amount includible under subsection (a) in the gross income of a nonresident alien with respect to a distribution made by the United States in respect of services performed by an employee of the United States shall not exceed an amount which bears the same ratio to the amount includible in gross income without regard to this paragraph as— “(A) the aggregate basic pay paid by the United States to such employee for such services, reduced by the amount of such basic pay which was not includible in gross income by reason of being from sources without the United States, bears to “(B) the aggregate basic pay paid by the United States to such employee for such services. In the case of distributions under the civil service retirement laws, the term ‘basic pay’ shall have the meaning provided in section 8331(3) of title 5, United States Code. “(3) Cash or deferred arrangements.— For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) shall not be treated as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash. “(4) Net unrealized appreciation.— “(A) Amounts attributable to employee contributions.— For purposes of subsection (a) and section 72, in the case of a distribution other than a lump sum distribution, the amount actually distributed to any distributee from a trust described in subsection (a) shall not include any net unrealized appreciation in securities of the employer corporation attributable to amounts contributed by the employee (other than deductible employee contributions within the meaning of section 72(o)(5)). This subparagraph shall not apply to a distribution to which subsection (c) applies. “(B) Amounts attributable to employer contributions.— For purposes of subsection (a) and section 72, in the case of any lump sum distribution which includes securities of the employer corporation, there shall be excluded from gross income the net unrealized appreciation attributable to that part of the distribution which consists of securities of the employer corporation. In accordance with rules prescribed by the Secretary, a taxpayer may elect, on the return of tax on which a lump sum distribution is required to be included, not to have this subparagraph apply to such distribution. “(C) Determination of amounts and adjustments.— For purposes of subparagraphs (A) and (B), net unrealized appreciation and the resulting adjustments to basis shall be determined in accordance with regulations prescribed by the Secretary. “(D) Lump sum distribution.— For purposes of this paragraph, the term ‘lump sum distribution’ has the meaning given such term by subsection (d)(4)(A) (without regard to subsection (d)(4)(F)). “(E) Definitions relating to securities.— For purposes of this paragraph— “(i) Securities.— The term ‘securities’ means only shares of stock and bonds or debentures issued by a corporation with interest coupons or in registered form. “(ii) Securities of the employer.— The term ‘securities of the employer corporation’ includes securities of a parent or subsidiary corporation (as defined in subsections (e) and (f) of section 424) of the employer corporation. “(5) Taxability of beneficiary of certain foreign situs trusts.— For purposes of subsections (a), (b), and (c), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as if it were a trust exempt from tax under section 501(a). “(f) Written Explanation to Recipients of Distributions Eligible for Rollover Treatment.— “(1) In general.— The plan administrator of any plan shall, within a reasonable period of time before making an eligible rollover distribution from an eligible retirement plan, provide a written explanation to the recipient— “(A) of the provisions under which the recipient may have the distribution directly transferred to another eligible retirement plan, “(B) of the provision which requires the withholding of tax on the distribution if it is not directly transferred to another eligible retirement plan, “(C) of the provisions under which the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date on which the recipient received the distribution, and “(D) if applicable, of the provisions of subsections (d) and (e) of this section. “(2) Definitions.— For purposes of this subsection— “(A) Eligible rollover distribution.— The term ‘eligible rollover distribution’ has the same meaning as when used in subsection (c) of this section or paragraph (4) of section 403(a). “(B) Eligible retirement plan.— The term ‘eligible retirement plan’ has the meaning given such term by subsection (c)(8)(B).”
1992
Unemployment Compensation Amendments of 1992
Pub. L. 102–318 § 521 · 106 Stat. 290
1. Amended · 26 U.S.C. § 402(e)
  Pub. L. 102–318, § 521, amended subsec. (e) generally
2. Substituted · 26 U.S.C. § 402(e)
  Pub. L. 102–318, § 521, substituting provisions relating to other rules applicable to exempt trusts for provisions relating to tax on lump sum distributions
Source evidence
Code amendment note
Subsec. (e). Pub. L. 102–318, § 521, amended subsec. (e) generally, substituting provisions relating to other rules applicable to exempt trusts for provisions relating to tax on lump sum distributions.
Enacted provision · exact public law section
SEC. 521. TAXABILITY OF BENEFICIARY OF QUALIFIED PLAN. (a) In General.— So much of section 402 (relating to taxability of beneficiary of employees’ trust) as precedes subsection (g) thereof is amended to read as follows: “SEC. 402. TAXABILITY OF BENEFICIARY OF EMPLOYEES’ TRUST. “(a) Taxability of Beneficiary of Exempt Trust.— Except as otherwise provided in this section, any amount actually distributed to any distributee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities). “(b) Taxability of Beneficiary of Nonexempt Trust.— “(1) Contributions.— Contributions to an employees’ trust made by an employer during a taxable year of the employer which ends with or within a taxable year of the trust for which the trust is not exempt from tax under section 501(a) shall be included in the gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employee’s interest in the trust shall be substituted for the fair market value of the property for purposes of applying such section. “(2) Distributions.— The amount actually distributed or made available to any distributee by any trust described in paragraph (1) shall be taxable to the distributee, in the taxable year in which so distributed or made available, under section 72 (relating to annuities), except that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(5) (relating to amounts not received as annuities). “(3) Grantor trusts.— A beneficiary of any trust described in paragraph (1) shall not be considered the owner of any portion of such trust under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners). “(4) Failure to meet requirements of section 410(b).— “(A) Highly compensated employees.— If 1 of the reasons a trust is not exempt from tax under section 501(a) is the failure of the plan of which it is a part to meet the requirements of section 401(a)(26) or 410(b), then a highly compensated employee shall, in lieu of the amount determined under paragraph (1) or (2) include in gross income for the taxable year with or within which the taxable year of the trust ends an amount equal to the vested accrued benefit of such employee (other than the employee’s investment in the contract) as of the close of such taxable year of the trust. “(B) Failure to meet coverage tests.— If a trust is not exempt from tax under section 501(a) for any taxable year solely because such trust is part of a plan which fails to meet the requirements of section 401(a)(26) or 410(b), paragraphs (1) and (2) shall not apply by reason of such failure to any employee who was not a highly compensated employee during— “(i) such taxable year, or “(ii) any preceding period for which service was creditable to such employee under the plan. “(C) Highly compensated employee.— For purposes of this paragraph, the term ‘highly compensated employee’ has the meaning given such term by section 414(q). “(c) Rules Applicable to Rollovers From Exempt Trusts.— “(1) Exclusion from income.— If— “(A) any portion of the balance to the credit of an employee in a qualified trust is paid to the employee in an eligible rollover distribution, “(B) the distributee transfers any portion of the property received in such distribution to an eligible retirement plan, and “(C) in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid. “(2) Maximum amount which may be rolled over.— In the case of any eligible rollover distribution, the maximum amount transferred to which paragraph (1) applies shall not exceed the portion of such distribution which is includible in gross income (determined without regard to paragraph (1)). “(3) Transfer must be made within 60 days of receipt.— Paragraph (1) shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed. “(4) Eligible rollover distribution.— For purposes of this subsection, the term ‘eligible rollover distribution’ means any distribution to an employee of all or any portion of the balance to the credit of the employee in a qualified trust; except that such term shall not include— “(A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made— “(i) for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of the employee and the employee’s designated beneficiary, or “(ii) for a specified period of 10 years or more, and “(B) any distribution to the extent such distribution is required under section 401(a)(9). “(5) Transfer treated as rollover contribution under section 408.— For purposes of this title, a transfer to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B) resulting in any portion of a distribution being excluded from gross income under paragraph (1) shall be treated as a rollover contribution described in section 408(d)(3). “(6) Sales of distributed property.— For purposes of this subsection— “(A) Transfer of proceeds from sale of distributed property treated as transfer of distributed property.— The transfer of an amount equal to any portion of the proceeds from the sale of property received in the distribution shall be treated as the transfer of property received in the distribution. “(B) Proceeds attributable to increase in value.— The excess of fair market value of property on sale over its fair market value on distribution shall be treated as property received in the distribution. “(C) Designation where amount of distribution exceeds rollover contribution.— In any case where part or all of the distribution consists of property other than money— “(i) the portion of the money or other property which is to be treated as attributable to amounts not included in gross income, and “(ii) the portion of the money or other property which is to be treated as included in the rollover contribution, shall be determined on a ratable basis unless the taxpayer designates otherwise. Any designation under this subparagraph for a taxable year shall be made not later them the time prescribed by law for filing the return for such taxable year (including extensions thereof). Any such designation, once made, shall be irrevocable. “(D) Nonrecognition of gain or loss.— No gain or loss shall be recognized on any sale described in subparagraph (A) to the extent that an amount equal to the proceeds is transferred pursuant to paragraph (1). “(7) Special rule for frozen deposits.— “(A) In general.— The 60-day period described in paragraph (3) shall not— “(i) include any period during which the amount transferred to the employee is a frozen deposit, or “(ii) end earlier than 10 days after such amount ceases to be a frozen deposit. “(B) Frozen deposits.— For purposes of this subparagraph, the term ‘frozen deposit’ means any deposit which may not be withdrawn because of— “(i) the bankruptcy or insolvency of any financial institution, or “(ii) any requirement imposed by the State in which such institution is located by reason of the bankruptcy or insolvency (or threat thereof) of 1 or more financial institutions in such State. A deposit shall not be treated as a frozen deposit unless on at least 1 day during the 60-day period described in paragraph (3) (without regard to this paragraph) such deposit is described in the preceding sentence. “(8) Definitions.— For purposes of this subsection— “(A) Qualified trust.— The term ‘qualified trust’ means an employees’ trust described in section 401(a) which is exempt from tax under section 501(a). “(B) Eligible retirement plan.— The term ‘eligible retirement plan’ means— “(i) an individual retirement account described in section 408(a), “(ii) an individual retirement annuity described in section 408(b) (other than an endowment contract), “(iii) a qualified trust, and “(iv) an annuity plan described in section 403(a). “(9) Rollover where spouse receives distribution after death of employee.— If any distribution attributable to an employee is paid to the spouse of the employee after the employee’s death, the preceding provisions of this subsection shall apply to such distribution in the same manner as if the spouse were the employee; except that a trust or plan described in clause (iii) or (iv) of paragraph (8)(B) shall not be treated as an eligible retirement plan with respect to such distribution. “(10) Denial of averaging for subsequent distributions.— If paragraph (1) applies to any distribution paid to any employee, paragraphs (1) and (3) of subsection (d) shall not apply to any distribution (paid after such distribution) of the balance to the credit of the employee under the plan under which the preceding distribution was made (or under any other plan which, under subsection (d)(4)(C), would be aggregated with such plan). “(d) Tax on Lump Sum Distributions.— “(1) Imposition of separate tax on lump sum distributions.— “(A) Separate tax.— There is hereby imposed a tax (in the amount determined under subparagraph (B)) on a lump sum distribution. “(B) Amount of tax.— The amount of tax imposed by subparagraph (A) for any taxable year is an amount equal to 5 times the tax which would be imposed by subsection (c) of section 1 if the recipient were an individual referred to in such subsection and the taxable income were an amount equal to ⅕ of the excess of— “(i) the total taxable amount of the lump sum distribution for the taxable year, over “(ii) the minimum distribution allowance. “(C) Minimum distribution allowance.— For purposes of this paragraph, the minimum distribution allowance for any taxable year is an amount equal to— “(i) the lesser of $10,000 or one-half of the total taxable amount of the lump sum distribution for the taxable year, reduced (but not below zero) by “(ii) 20 percent of the amount (if any) by which such total taxable amount exceeds $20,000. “(D) Liability for tax.— The recipient shall be liable for the tax imposed by this paragraph. “(2) Distributions of annuity contracts.— “(A) In general.— In the case of any recipient of a lump sum distribution for any taxable year, if the distribution (or any part thereof) is an annuity contract, the total taxable amount of the distribution shall be aggregated for purposes of computing the tax imposed by paragraph (1)(A), except that the amount of tax so computed shall be reduced (but not below zero) by that portion of the tax on the aggregate total taxable amount which is attributable to annuity contracts. “(B) Beneficiaries.— For purposes of this paragraph, a beneficiary of a trust to which a lump sum distribution is made shall be treated as the recipient of such distribution if the beneficiary is an employee (including an employee within the meaning of section 401(c)(1)) with respect to the plan under which the distribution is made or if the beneficiary is treated as the owner of such trust for purposes of subpart E of part I of subchapter J. “(C) Annuity contracts.— For purposes of this paragraph, in the case of the distribution of an annuity contract, the taxable amount of such distribution shall be deemed to be the current actuarial value of the contract, determined on the date of such distribution. “(D) Trusts.— In the case of a lump sum distribution with respect to any individual which is made only to 2 or more trusts, the tax imposed by paragraph (1)(A) shall be computed as if such distribution was made to a single trust, but the liability for such tax shall be apportioned among such trusts according to the relative amounts received by each. “(E) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this paragraph. “(3) Allowance of deduction.— The total taxable amount of a lump sum distribution for any taxable year shall be allowed as a deduction from gross income for such taxable year, but only to the extent included in the taxpayer’s gross income for such taxable year. “(4) Definitions and special rules.— “(A) Lump sum distribution.— For purposes of this section and section 403, the term ‘lump sum distribution’ means the distribution or payment within 1 taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient— “(i) on account of the employee’s death, “(ii) after the employee attains age 59½, “(iii) on account of the employee’s separation from the service, or “(iv) after the employee has become disabled (within the meaning of section 72(m)(7)), from a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Clause (iii) of this subparagraph shall be applied only with respect to an individual who is an employee without regard to section 401(c)(1), and clause (iv) shall be applied only with respect to an employee within the meaning of section 401(c)(1). A distribution of an annuity contract from a trust or annuity plan referred to in the first sentence of this subparagraph shall be treated as a lump sum distribution. For purposes of this subparagraph, a distribution to 2 or more trusts shall be treated as a distribution to 1 recipient. For purposes of this subsection, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)). “(B) Averaging to apply to 1 lump sum distribution after age 59½.— Paragraph (1) shall apply to a lump sum distribution with respect to an employee under subparagraph (A) only if— “(i) such amount is received on or after the date on which the employee has attained age 5914, and “(ii) the taxpayer elects for the taxable year to have all such amounts received during such taxable year so treated. Not more than 1 election may be made under this subparagraph by any taxpayer with respect to any employee. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to 2 or more trusts, the election under this subparagraph shall be made by the personal representative of the taxpayer. “(C) Aggregation of certain trusts and plans.— For purposes of determining the balance to the credit of an employee under subparagraph (A)— “(i) all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and “(ii) trusts which are not qualified trusts under section 401(a) and annuity contracts which do not satisfy the requirements of section 404(a)(2) shall not be taken into account. “(D) Total taxable amount.— For purposes of this section and section 403, the term ‘total taxable amount’ means, with respect to a lump sum distribution, the amount of such distribution which exceeds the sum of— “(i) the amounts considered contributed by the employee (determined by applying section 72(f)), reduced by any amounts previously distributed which were not includible in gross income, and “(ii) the net unrealized appreciation attributable to that part of the distribution which consists of the securities of the employer corporation so distributed. “(E) Community property laws.— The provisions of this subsection, other than paragraph (3), shall be applied without regard to community property laws. “(F) Minimum period of service.— For purposes of this subsection, no amount distributed to an employee from or under a plan may be treated as a lump sum distribution under subparagraph (A) unless the employee has been a participant in the plan for 5 or more taxable years before the taxable year in which such amounts are distributed. “(G) Amounts subject to penalty.— This subsection shall not apply to amounts described in subparagraph (A) of section 72(m)(5) to the extent that section 72(m)(5) applies to such amounts. “(H) Balance to credit of employee not to include amounts payable under qualified domestic relations order.— For purposes of this subsection, the balance to the credit of an employee shall not include any amount payable to an alternate payee under a qualified domestic relations order (within the meaning of section 414(p)). “(I) Transfers to cost-of-living arrangement not treated as distribution.— For purposes of this subsection, the balance to the credit of an employee under a defined contribution plan shall not include any amount transferred from such defined contribution plan to a qualified cost-of-living arrangement (within the meaning of section 415(k)(2)) under a defined benefit plan. “(J) Lump sum distributions of alternate payees.— If any distribution or payment of the balance to the credit of an employee would be treated as a lump sum distribution, then, for purposes of this subsection, the payment under a qualified domestic relations order (within the meaning of section 414(p)) of the balance to the credit of an alternate payee who is the spouse or former spouse of the employee shall be treated as a lump sum distribution. For purposes of this subparagraph, the balance to the credit of the alternate payee shall not include any amount payable to the employee. “(K) Treatment of portion not rolled over.— If any portion of a lump sum distribution is transferred in a transfer to which subsection (c) applies, paragraphs (1) and (3) shall not apply with respect to the distribution. “(L) Securities.— For purposes of this subsection, the terms ‘securities’ and ‘securities of the employer corporation’ have the respective meanings provided by subsection (e)(4)(E). “(5) Special rule where portions of lump sum distribution attributable to rollover of bond purchased under qualified bond purchase plan.— If any portion of a lump sum distribution is attributable to a transfer described in section 405(d)(3)(A)(ii) (as in effect before its repeal by the Tax Reform Act of 1984), paragraphs (1) and (3) of this subsection shall not apply to such portion. “(6) Treatment of potential future vesting.— “(A) In general.— For purposes of determining whether any distribution which becomes payable to the recipient on account of the employee’s separation from service is a lump sum distribution, the balance to the credit of the employee shall be determined without regard to any increase in vesting which may occur if the employee is reemployed by the employer. “(B) Recapture in certain cases.— If— “(i) an amount is treated as a lump sum distribution by reason of subparagraph (A), “(ii) special lump sum treatment applies to such distribution, “(iii) the employee is subsequently reemployed by the employer, and “(iv) as a result of services performed after being so reemployed, there is an increase in the employee’s vesting for benefits accrued before the separation referred to in subparagraph (A), under regulations prescribed by the Secretary, the tax imposed by this chapter for the taxable year (in which the increase in vesting first occurs) shall be increased by the reduction in tax which resulted from the special lump sum treatment (and any election under paragraph (4)(B) shall not be taken into account for purposes of determining whether the employee may make another election under paragraph (4)(B)). “(C) Special lump sum treatment.— For purposes of this paragraph, special lump sum treatment applies to any distribution if any portion of such distribution is taxed under the subsection by reason of an election under paragraph (4)(B). “(D) Vesting.— For purposes of this paragraph, the term ‘vesting’ means the portion of the accrued benefits derived from employer contributions to which the participant has a nonforfeitable right. “(7) Coordination with foreign tax credit limitations.— Subsections (a), (b), and (c) of section 904 shall be applied separately with respect to any lump sum distribution on which tax is imposed under paragraph (1), and the amount of such distribution shall be treated as the taxable income for purposes of such separate application. “(e) Other Rules Applicable to Exempt Trusts.— “(1) Alternate payees.— “(A) Alternate payee treated as distributee.— For purposes of subsection (a) and section 72, an alternate payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distribution or payment made to the alternate payee under a qualified domestic relations order (as defined in section 414(p)). “(B) Rollovers.— If any amount is paid or distributed to an alternate payee who is the spouse or former spouse of the participant by reason of any qualified domestic relations order (within the meaning of section 414(p)), sub-section (c) shall apply to such distribution in the same manner as if such alternate payee were the employee. “(2) Distributions by united states to nonresident aliens.— The amount includible under subsection (a) in the gross income of a nonresident alien with respect to a distribution made by the United States in respect of services performed by an employee of the United States shall not exceed an amount which bears the same ratio to the amount includible in gross income without regard to this paragraph as— “(A) the aggregate basic pay paid by the United States to such employee for such services, reduced by the amount of such basic pay which was not includible in gross income by reason of being from sources without the United States, bears to “(B) the aggregate basic pay paid by the United States to such employee for such services. In the case of distributions under the civil service retirement laws, the term ‘basic pay’ shall have the meaning provided in section 8331(3) of title 5, United States Code. “(3) Cash or deferred arrangements.— For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) shall not be treated as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash. “(4) Net unrealized appreciation.— “(A) Amounts attributable to employee contributions.— For purposes of subsection (a) and section 72, in the case of a distribution other than a lump sum distribution, the amount actually distributed to any distributee from a trust described in subsection (a) shall not include any net unrealized appreciation in securities of the employer corporation attributable to amounts contributed by the employee (other than deductible employee contributions within the meaning of section 72(o)(5)). This subparagraph shall not apply to a distribution to which subsection (c) applies. “(B) Amounts attributable to employer contributions.— For purposes of subsection (a) and section 72, in the case of any lump sum distribution which includes securities of the employer corporation, there shall be excluded from gross income the net unrealized appreciation attributable to that part of the distribution which consists of securities of the employer corporation. In accordance with rules prescribed by the Secretary, a taxpayer may elect, on the return of tax on which a lump sum distribution is required to be included, not to have this subparagraph apply to such distribution. “(C) Determination of amounts and adjustments.— For purposes of subparagraphs (A) and (B), net unrealized appreciation and the resulting adjustments to basis shall be determined in accordance with regulations prescribed by the Secretary. “(D) Lump sum distribution.— For purposes of this paragraph, the term ‘lump sum distribution’ has the meaning given such term by subsection (d)(4)(A) (without regard to subsection (d)(4)(F)). “(E) Definitions relating to securities.— For purposes of this paragraph— “(i) Securities.— The term ‘securities’ means only shares of stock and bonds or debentures issued by a corporation with interest coupons or in registered form. “(ii) Securities of the employer.— The term ‘securities of the employer corporation’ includes securities of a parent or subsidiary corporation (as defined in subsections (e) and (f) of section 424) of the employer corporation. “(5) Taxability of beneficiary of certain foreign situs trusts.— For purposes of subsections (a), (b), and (c), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as if it were a trust exempt from tax under section 501(a). “(f) Written Explanation to Recipients of Distributions Eligible for Rollover Treatment.— “(1) In general.— The plan administrator of any plan shall, within a reasonable period of time before making an eligible rollover distribution from an eligible retirement plan, provide a written explanation to the recipient— “(A) of the provisions under which the recipient may have the distribution directly transferred to another eligible retirement plan, “(B) of the provision which requires the withholding of tax on the distribution if it is not directly transferred to another eligible retirement plan, “(C) of the provisions under which the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date on which the recipient received the distribution, and “(D) if applicable, of the provisions of subsections (d) and (e) of this section. “(2) Definitions.— For purposes of this subsection— “(A) Eligible rollover distribution.— The term ‘eligible rollover distribution’ has the same meaning as when used in subsection (c) of this section or paragraph (4) of section 403(a). “(B) Eligible retirement plan.— The term ‘eligible retirement plan’ has the meaning given such term by subsection (c)(8)(B).” (b) Conforming Amendments.— (1) Paragraph (1) of section 55(c) is amended by striking “section 402(e)” and inserting “section 402(d)”. (2) Paragraph (8) of section 62(a) (relating to certain portion of lump-sum distributions from pension plans taxed under section 402(e)) is amended by striking “402(e)” in the text and heading and inserting “402(d)”. (3) Paragraph (4) of section 72(o) (relating to special rule for treatment of rollover amount) is amended by striking “sections 402(a)(5), 402(a)(7)” and inserting “sections 402(c)”. (4) Paragraph (2) of section 219(d) (relating to recontributed amount) is amended by striking “section 402(a)(5), 402(a)(7)” and inserting “section 402(c)”. (5) Paragraph (20) of section 401(a) is amended— (A) by striking “a qualified total distribution described in section 402(a)(5)(E)(i)(I)” and inserting “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”, and (B) by adding at the end the following new sentence: “For purposes of this paragraph, rules similar to the rules of section 402(a)(6)(B) (as in effect before its repeal by section 211 of the Unemployment Compensation Amendments of 1992) shall apply.” (6) Clause (v) of section 401(a)(28)(B) (relating to coordination with distribution rules) is amended to read as follows: “(v) Coordination with distribution rules.— Any distribution required by this subparagraph shall not be taken into account in determining whether a subsequent distribution is a lump sum distribution under section 402(d)(4)(A) or in determining whether section 402(c)(10) applies.” (7) Subclause (IV) of section 401(k)(2)(B)(i) is amended by striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (8) Subparagraph (B)(ii) of section 401(k)(10) (relating to distributions that must be lump-sum distributions) is amended— (A) by striking “section 402(e)(4)” and inserting “section 402(d)(4)”, and (B) by striking “subparagraph (H)” and inserting “subparagraph (F)”. (9) Section 402(g)(1) is amended by striking “subsections (a)(8)” and inserting “subsections (e)( (3)”. (10) Section 402(i) is amended by striking “subsection (e)(4)” and inserting “subsection (d)(4)”. (11) Subsection (j) of section 402 is amended by striking 26 USC 402. “(a)(1) or (e)(4)(J)” and inserting “(e)(4)”. (12) (A) Clause (i) of section 403(a)(4)(A) is amended by inserting 26 USC 403. “in an eligible rollover distribution (within the meaning of section 402(c)(4))” before the comma at the end thereof (B) Subparagraph (B) of section 403(a)(4) is amended to read as follows: “(B) Certain rules made applicable.— Rules similar to the rules of paragraphs (2) through (7) of section 402(c) shall apply for purposes of subparagraph (A).” (13) (A) Clause (i) of section 403(b)(8)(A) is amended by inserting “in an eligible rollover distribution (within the meaning of section 402(c)(4))” before the comma at the end thereof (B) Paragraph (8) of section 403(b) is amended by striking subparagraphs (B), (C), and (D) and inserting the following: “(B) Certain rules made applicable.— Rules similar to the rules of paragraphs (2) through (7) of section 402(c) shall apply for purposes of subparagraph (A).” (14) Section 406(c) (relating to termination of status as 26 USC 406. deemed employee not to be treated as separation from service for purposes of limitation of tax) is amended by striking “section 402(e)” and inserting “section 402(d)”. (15) Section 407(c) (relating to termination of status as 26 USC 407. deemed employee not to be treated as separation from service for purposes of limitation of tax) is amended by striking “section 402(e)” and inserting “section 402(d)”. (16) Paragraph (1) of section 408(a) is amended by striking 26 USC 408. “section 402(a)(5), 402(a)(7)” and inserting “section 402(c)”. (17) Clause (ii) of section 408(d)(3)(A) is amended to read as follows: “(ii) no amount in the account and no part of the value of the annuity is attributable to any source other than a rollover contribution (as defined in section 402) from an employee’s trust described in section 401(a) which is exempt from tax under section 501(a) or from an annuity plan described in section 403(a) (and any earnings on such contribution), and the entire amount received (including property and other money) is paid (for the benefit of such individual) into another such trust or annuity plan not later than the 60th day on which the individual receives the payment or the distribution; or”. (18) Subparagraph (B) of section 408(d)(3) (relating to limitations) is amended by striking the second sentence thereof. (19) Subparagraph (F) of section 408(d)(3) (relating to frozen deposits) is amended by striking “section 402(a)(6)(H)” and inserting “section 402(c)(7)”. (20) Subclause (I) of section 414(n)(5)(C)(iii) is amended by 26 USC 414. striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (21) Clause (i) of section 414(q)(7)(B) is amended by striking “402(a)(8)” and inserting “402(e)(3)”. (22) Paragraph (2) of section 414(s) (relating to employer may elect to treat certain deferrals as compensation) is amended by striking “402(a)(8)” and inserting “402(e)(3)”. (23) Subparagraph (A) of section 415(b)(2) (relating to annual 26 USC 415. benefit in general) is amended by striking “sections 402(a)(5)” and inserting “sections 402(c)”. (24) Subparagraph (B) of section 415(b)(2) (relating to adjustment for certain other forms of benefit) is amended by striking “sections 402(a)(5)” and inserting “sections 402(c)”. (25) Paragraph (2) of section 415(c) (relating to annual addition) is amended by striking “sections 402(a)(5)” and inserting “sections 402(c)”. (26) Subparagraph (B) of section 457(c)(2) is amended by striking “section 402(a)(8)” in clause (i) thereof and inserting “section 402(e)(3)”. (27) Section 691(c) (relating to coordination with section 402(e)) is amended by striking “402(e)” in the text and heading and inserting “402(d)”. (28) Subparagraph (B) of section 871(a)(1) (relating to income other than capital gains) is amended by striking “402(a)(2), 403(a)(2), or”. (29) Paragraph (1) of section 871(b) (relating to imposition of tax) is amended by striking “402(e)(1)” and inserting “402(d)(1)”. (30) Paragraph (1) of section 871(k) is amended by striking “section 402(a)(4)” and inserting “section 402(e)(2)”. (31) Subsection (b) of section 877 (relating to alternative tax) is amended by striking “402(e)(1)” and inserting “402(d)(1)”. (32) Subsection (b) of section 1441 (relating to income items) is amended by striking “402(a)(2), 403(a)(2), or”. (33) Paragraph (5) of section 1441(c) (relating to special items) is amended by striking “402(a)(2), 403(a)(2), or”. (34) Subparagraph (A) of section 3121(v)(1) is amended by striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (35) Subparagraph (A) of section 3306(r)(1) is amended by striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (36) Subsection (a) of section 3405 is amended by striking “Pensions, Annuities, Etc.—”from the heading thereof and inserting “Periodic Payments.—”. (37) Subsection (b) of section 3405 (relating to nonperiodic distribution) is amended— (A) by striking “the amount determined under paragraph (2)” from paragraph (1) thereof and inserting “an amount equal to 10 percent of such distribution”; and (B) by striking paragraph (2) (relating to amount of withholding) and redesignating paragraph (3) as paragraph (2). (38) Paragraph (4) of section 3405(d) (relating to qualified total distributions) is hereby repealed. (39) Paragraph (8) of section 3405(d) (relating to maximum amounts withheld) is amended to read as follows: “(8) Maximum amount withheld.— The maximum amount to be withheld under this section on any designated distribution shall not exceed the sum of the amount of money and the fair market value of other property (other than securities of the employer corporation) received in the distribution. No amount shall be required to be withheld under this section in the case of any designated distribution which consists only of securities of the employer corporation and cash (not in excess of $200) in lieu of financial shares. For purposes of this paragraph, the term ‘securities of the employer corporation’ has the meaning given such term by section 402(e)(4)(E).” (40) Subparagraph (A) of section 3405(d)(13) is amended by 26 USC 3405. striking “(b)(3)” and inserting “(b)(2)”. (41) Subparagraph (A) of section 4973(b)(1) is amended by 26 USC 4973. striking “sections 402(a)(5), 402(a)(7)” and inserting “sections 402(c)”. (42) Paragraph (4) of section 4980A(c) (relating to special 26 USC 4980A. rule where taxpayer elects income averaging) is amended by striking “section 402(e)(4)(B)” and inserting “section 402(d)(4)(B)”. (43) Subparagraph (C) of section 7701(j)(1) is amended by 26 USC 7701. striking “section 402(a)(8)” and inserting “section 402(e)(3)”. (44) Section 411(d)(3) is amended by adding at the end the 26 USC 411. following new sentence: “For purposes of this paragraph, in the case of the complete discontinuance of contributions under a profit-sharing or stock bonus plan, such plan shall be treated as having terminated on the day on which the plan administrator notifies the Secretary (in accordance with regulations) of the discontinuance.” (d) Model Explanation.— The Secretary of the Treasury or his 26 USC 402 note. delegate shall develop a model explanation which a plan administrator may provide to a recipient in order to meet the requirements of section 402(f) of the Internal Revenue Code of 1986. (e) Effective Dates.— (1) In general.— The amendments made by this section shall apply to distributions after December 31, 1992. (2) Special rule for partial distributions.— For purposes of section 402(a)(5)(D)(i)(II) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section), a distribution before January 1, 1993, which is made before or at the same time as a series of periodic payments shall not be treated as one of such series if it is not substantially equal in amount to other payments in such series.
1992
Unemployment Compensation Amendments of 1992
Pub. L. 102–318 § 522(c)(1) · 106 Stat. 290
Added · 26 U.S.C. § 402(e)(6)
Pub. L. 102–318, § 522(c)(1), added par. (6)
Source evidence
Code amendment note
Subsec. (e)(6). Pub. L. 102–318, § 522(c)(1), added par. (6).
Enacted provision · exact public law section
(1) Qualified trusts.— Subsection (e) of section 402 (relating 26 USC 402. to taxability of beneficiary of employees’ trust), as amended by section 521, is amended by adding at the end the following new paragraph: “(6) Direct trustee-to-trustee transfers.— Any amount transferred in a direct trustee-to-trustee transfer in accordance with section 401(a)(31) shall not be includible in gross income for the taxable year of such transfer.”
1992
Unemployment Compensation Amendments of 1992
Pub. L. 102–318 § 521(a) · 106 Stat. 290
1. Amended · 26 U.S.C. § 402(f)
  Pub. L. 102–318, § 521(a), amended subsec. (f) generally
2. Substituted · 26 U.S.C. § 402(f)
  Pub. L. 102–318, § 521(a), substituting present provisions for provisions requiring a different time when explanation was to be provided and a different content of explanation to be given and using different definitions for “eligible rollover distribution” and “eligible retirement plan”
Source evidence
Code amendment note
Subsec. (f). Pub. L. 102–318, § 521(a), amended subsec. (f) generally, substituting present provisions for provisions requiring a different time when explanation was to be provided and a different content of explanation to be given and using different definitions for “eligible rollover distribution” and “eligible retirement plan”.
Enacted provision · exact public law section
(a) In General.— So much of section 402 (relating to taxability of beneficiary of employees’ trust) as precedes subsection (g) thereof is amended to read as follows: “SEC. 402. TAXABILITY OF BENEFICIARY OF EMPLOYEES’ TRUST. “(a) Taxability of Beneficiary of Exempt Trust.— Except as otherwise provided in this section, any amount actually distributed to any distributee by any employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, under section 72 (relating to annuities). “(b) Taxability of Beneficiary of Nonexempt Trust.— “(1) Contributions.— Contributions to an employees’ trust made by an employer during a taxable year of the employer which ends with or within a taxable year of the trust for which the trust is not exempt from tax under section 501(a) shall be included in the gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employee’s interest in the trust shall be substituted for the fair market value of the property for purposes of applying such section. “(2) Distributions.— The amount actually distributed or made available to any distributee by any trust described in paragraph (1) shall be taxable to the distributee, in the taxable year in which so distributed or made available, under section 72 (relating to annuities), except that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(5) (relating to amounts not received as annuities). “(3) Grantor trusts.— A beneficiary of any trust described in paragraph (1) shall not be considered the owner of any portion of such trust under subpart E of part I of subchapter J (relating to grantors and others treated as substantial owners). “(4) Failure to meet requirements of section 410(b).— “(A) Highly compensated employees.— If 1 of the reasons a trust is not exempt from tax under section 501(a) is the failure of the plan of which it is a part to meet the requirements of section 401(a)(26) or 410(b), then a highly compensated employee shall, in lieu of the amount determined under paragraph (1) or (2) include in gross income for the taxable year with or within which the taxable year of the trust ends an amount equal to the vested accrued benefit of such employee (other than the employee’s investment in the contract) as of the close of such taxable year of the trust. “(B) Failure to meet coverage tests.— If a trust is not exempt from tax under section 501(a) for any taxable year solely because such trust is part of a plan which fails to meet the requirements of section 401(a)(26) or 410(b), paragraphs (1) and (2) shall not apply by reason of such failure to any employee who was not a highly compensated employee during— “(i) such taxable year, or “(ii) any preceding period for which service was creditable to such employee under the plan. “(C) Highly compensated employee.— For purposes of this paragraph, the term ‘highly compensated employee’ has the meaning given such term by section 414(q). “(c) Rules Applicable to Rollovers From Exempt Trusts.— “(1) Exclusion from income.— If— “(A) any portion of the balance to the credit of an employee in a qualified trust is paid to the employee in an eligible rollover distribution, “(B) the distributee transfers any portion of the property received in such distribution to an eligible retirement plan, and “(C) in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid. “(2) Maximum amount which may be rolled over.— In the case of any eligible rollover distribution, the maximum amount transferred to which paragraph (1) applies shall not exceed the portion of such distribution which is includible in gross income (determined without regard to paragraph (1)). “(3) Transfer must be made within 60 days of receipt.— Paragraph (1) shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed. “(4) Eligible rollover distribution.— For purposes of this subsection, the term ‘eligible rollover distribution’ means any distribution to an employee of all or any portion of the balance to the credit of the employee in a qualified trust; except that such term shall not include— “(A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made— “(i) for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of the employee and the employee’s designated beneficiary, or “(ii) for a specified period of 10 years or more, and “(B) any distribution to the extent such distribution is required under section 401(a)(9). “(5) Transfer treated as rollover contribution under section 408.— For purposes of this title, a transfer to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B) resulting in any portion of a distribution being excluded from gross income under paragraph (1) shall be treated as a rollover contribution described in section 408(d)(3). “(6) Sales of distributed property.— For purposes of this subsection— “(A) Transfer of proceeds from sale of distributed property treated as transfer of distributed property.— The transfer of an amount equal to any portion of the proceeds from the sale of property received in the distribution shall be treated as the transfer of property received in the distribution. “(B) Proceeds attributable to increase in value.— The excess of fair market value of property on sale over its fair market value on distribution shall be treated as property received in the distribution. “(C) Designation where amount of distribution exceeds rollover contribution.— In any case where part or all of the distribution consists of property other than money— “(i) the portion of the money or other property which is to be treated as attributable to amounts not included in gross income, and “(ii) the portion of the money or other property which is to be treated as included in the rollover contribution, shall be determined on a ratable basis unless the taxpayer designates otherwise. Any designation under this subparagraph for a taxable year shall be made not later them the time prescribed by law for filing the return for such taxable year (including extensions thereof). Any such designation, once made, shall be irrevocable. “(D) Nonrecognition of gain or loss.— No gain or loss shall be recognized on any sale described in subparagraph (A) to the extent that an amount equal to the proceeds is transferred pursuant to paragraph (1). “(7) Special rule for frozen deposits.— “(A) In general.— The 60-day period described in paragraph (3) shall not— “(i) include any period during which the amount transferred to the employee is a frozen deposit, or “(ii) end earlier than 10 days after such amount ceases to be a frozen deposit. “(B) Frozen deposits.— For purposes of this subparagraph, the term ‘frozen deposit’ means any deposit which may not be withdrawn because of— “(i) the bankruptcy or insolvency of any financial institution, or “(ii) any requirement imposed by the State in which such institution is located by reason of the bankruptcy or insolvency (or threat thereof) of 1 or more financial institutions in such State. A deposit shall not be treated as a frozen deposit unless on at least 1 day during the 60-day period described in paragraph (3) (without regard to this paragraph) such deposit is described in the preceding sentence. “(8) Definitions.— For purposes of this subsection— “(A) Qualified trust.— The term ‘qualified trust’ means an employees’ trust described in section 401(a) which is exempt from tax under section 501(a). “(B) Eligible retirement plan.— The term ‘eligible retirement plan’ means— “(i) an individual retirement account described in section 408(a), “(ii) an individual retirement annuity described in section 408(b) (other than an endowment contract), “(iii) a qualified trust, and “(iv) an annuity plan described in section 403(a). “(9) Rollover where spouse receives distribution after death of employee.— If any distribution attributable to an employee is paid to the spouse of the employee after the employee’s death, the preceding provisions of this subsection shall apply to such distribution in the same manner as if the spouse were the employee; except that a trust or plan described in clause (iii) or (iv) of paragraph (8)(B) shall not be treated as an eligible retirement plan with respect to such distribution. “(10) Denial of averaging for subsequent distributions.— If paragraph (1) applies to any distribution paid to any employee, paragraphs (1) and (3) of subsection (d) shall not apply to any distribution (paid after such distribution) of the balance to the credit of the employee under the plan under which the preceding distribution was made (or under any other plan which, under subsection (d)(4)(C), would be aggregated with such plan). “(d) Tax on Lump Sum Distributions.— “(1) Imposition of separate tax on lump sum distributions.— “(A) Separate tax.— There is hereby imposed a tax (in the amount determined under subparagraph (B)) on a lump sum distribution. “(B) Amount of tax.— The amount of tax imposed by subparagraph (A) for any taxable year is an amount equal to 5 times the tax which would be imposed by subsection (c) of section 1 if the recipient were an individual referred to in such subsection and the taxable income were an amount equal to ⅕ of the excess of— “(i) the total taxable amount of the lump sum distribution for the taxable year, over “(ii) the minimum distribution allowance. “(C) Minimum distribution allowance.— For purposes of this paragraph, the minimum distribution allowance for any taxable year is an amount equal to— “(i) the lesser of $10,000 or one-half of the total taxable amount of the lump sum distribution for the taxable year, reduced (but not below zero) by “(ii) 20 percent of the amount (if any) by which such total taxable amount exceeds $20,000. “(D) Liability for tax.— The recipient shall be liable for the tax imposed by this paragraph. “(2) Distributions of annuity contracts.— “(A) In general.— In the case of any recipient of a lump sum distribution for any taxable year, if the distribution (or any part thereof) is an annuity contract, the total taxable amount of the distribution shall be aggregated for purposes of computing the tax imposed by paragraph (1)(A), except that the amount of tax so computed shall be reduced (but not below zero) by that portion of the tax on the aggregate total taxable amount which is attributable to annuity contracts. “(B) Beneficiaries.— For purposes of this paragraph, a beneficiary of a trust to which a lump sum distribution is made shall be treated as the recipient of such distribution if the beneficiary is an employee (including an employee within the meaning of section 401(c)(1)) with respect to the plan under which the distribution is made or if the beneficiary is treated as the owner of such trust for purposes of subpart E of part I of subchapter J. “(C) Annuity contracts.— For purposes of this paragraph, in the case of the distribution of an annuity contract, the taxable amount of such distribution shall be deemed to be the current actuarial value of the contract, determined on the date of such distribution. “(D) Trusts.— In the case of a lump sum distribution with respect to any individual which is made only to 2 or more trusts, the tax imposed by paragraph (1)(A) shall be computed as if such distribution was made to a single trust, but the liability for such tax shall be apportioned among such trusts according to the relative amounts received by each. “(E) Regulations.— The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this paragraph. “(3) Allowance of deduction.— The total taxable amount of a lump sum distribution for any taxable year shall be allowed as a deduction from gross income for such taxable year, but only to the extent included in the taxpayer’s gross income for such taxable year. “(4) Definitions and special rules.— “(A) Lump sum distribution.— For purposes of this section and section 403, the term ‘lump sum distribution’ means the distribution or payment within 1 taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient— “(i) on account of the employee’s death, “(ii) after the employee attains age 59½, “(iii) on account of the employee’s separation from the service, or “(iv) after the employee has become disabled (within the meaning of section 72(m)(7)), from a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Clause (iii) of this subparagraph shall be applied only with respect to an individual who is an employee without regard to section 401(c)(1), and clause (iv) shall be applied only with respect to an employee within the meaning of section 401(c)(1). A distribution of an annuity contract from a trust or annuity plan referred to in the first sentence of this subparagraph shall be treated as a lump sum distribution. For purposes of this subparagraph, a distribution to 2 or more trusts shall be treated as a distribution to 1 recipient. For purposes of this subsection, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)). “(B) Averaging to apply to 1 lump sum distribution after age 59½.— Paragraph (1) shall apply to a lump sum distribution with respect to an employee under subparagraph (A) only if— “(i) such amount is received on or after the date on which the employee has attained age 5914, and “(ii) the taxpayer elects for the taxable year to have all such amounts received during such taxable year so treated. Not more than 1 election may be made under this subparagraph by any taxpayer with respect to any employee. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to 2 or more trusts, the election under this subparagraph shall be made by the personal representative of the taxpayer. “(C) Aggregation of certain trusts and plans.— For purposes of determining the balance to the credit of an employee under subparagraph (A)— “(i) all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and “(ii) trusts which are not qualified trusts under section 401(a) and annuity contracts which do not satisfy the requirements of section 404(a)(2) shall not be taken into account. “(D) Total taxable amount.— For purposes of this section and section 403, the term ‘total taxable amount’ means, with respect to a lump sum distribution, the amount of such distribution which exceeds the sum of— “(i) the amounts considered contributed by the employee (determined by applying section 72(f)), reduced by any amounts previously distributed which were not includible in gross income, and “(ii) the net unrealized appreciation attributable to that part of the distribution which consists of the securities of the employer corporation so distributed. “(E) Community property laws.— The provisions of this subsection, other than paragraph (3), shall be applied without regard to community property laws. “(F) Minimum period of service.— For purposes of this subsection, no amount distributed to an employee from or under a plan may be treated as a lump sum distribution under subparagraph (A) unless the employee has been a participant in the plan for 5 or more taxable years before the taxable year in which such amounts are distributed. “(G) Amounts subject to penalty.— This subsection shall not apply to amounts described in subparagraph (A) of section 72(m)(5) to the extent that section 72(m)(5) applies to such amounts. “(H) Balance to credit of employee not to include amounts payable under qualified domestic relations order.— For purposes of this subsection, the balance to the credit of an employee shall not include any amount payable to an alternate payee under a qualified domestic relations order (within the meaning of section 414(p)). “(I) Transfers to cost-of-living arrangement not treated as distribution.— For purposes of this subsection, the balance to the credit of an employee under a defined contribution plan shall not include any amount transferred from such defined contribution plan to a qualified cost-of-living arrangement (within the meaning of section 415(k)(2)) under a defined benefit plan. “(J) Lump sum distributions of alternate payees.— If any distribution or payment of the balance to the credit of an employee would be treated as a lump sum distribution, then, for purposes of this subsection, the payment under a qualified domestic relations order (within the meaning of section 414(p)) of the balance to the credit of an alternate payee who is the spouse or former spouse of the employee shall be treated as a lump sum distribution. For purposes of this subparagraph, the balance to the credit of the alternate payee shall not include any amount payable to the employee. “(K) Treatment of portion not rolled over.— If any portion of a lump sum distribution is transferred in a transfer to which subsection (c) applies, paragraphs (1) and (3) shall not apply with respect to the distribution. “(L) Securities.— For purposes of this subsection, the terms ‘securities’ and ‘securities of the employer corporation’ have the respective meanings provided by subsection (e)(4)(E). “(5) Special rule where portions of lump sum distribution attributable to rollover of bond purchased under qualified bond purchase plan.— If any portion of a lump sum distribution is attributable to a transfer described in section 405(d)(3)(A)(ii) (as in effect before its repeal by the Tax Reform Act of 1984), paragraphs (1) and (3) of this subsection shall not apply to such portion. “(6) Treatment of potential future vesting.— “(A) In general.— For purposes of determining whether any distribution which becomes payable to the recipient on account of the employee’s separation from service is a lump sum distribution, the balance to the credit of the employee shall be determined without regard to any increase in vesting which may occur if the employee is reemployed by the employer. “(B) Recapture in certain cases.— If— “(i) an amount is treated as a lump sum distribution by reason of subparagraph (A), “(ii) special lump sum treatment applies to such distribution, “(iii) the employee is subsequently reemployed by the employer, and “(iv) as a result of services performed after being so reemployed, there is an increase in the employee’s vesting for benefits accrued before the separation referred to in subparagraph (A), under regulations prescribed by the Secretary, the tax imposed by this chapter for the taxable year (in which the increase in vesting first occurs) shall be increased by the reduction in tax which resulted from the special lump sum treatment (and any election under paragraph (4)(B) shall not be taken into account for purposes of determining whether the employee may make another election under paragraph (4)(B)). “(C) Special lump sum treatment.— For purposes of this paragraph, special lump sum treatment applies to any distribution if any portion of such distribution is taxed under the subsection by reason of an election under paragraph (4)(B). “(D) Vesting.— For purposes of this paragraph, the term ‘vesting’ means the portion of the accrued benefits derived from employer contributions to which the participant has a nonforfeitable right. “(7) Coordination with foreign tax credit limitations.— Subsections (a), (b), and (c) of section 904 shall be applied separately with respect to any lump sum distribution on which tax is imposed under paragraph (1), and the amount of such distribution shall be treated as the taxable income for purposes of such separate application. “(e) Other Rules Applicable to Exempt Trusts.— “(1) Alternate payees.— “(A) Alternate payee treated as distributee.— For purposes of subsection (a) and section 72, an alternate payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distribution or payment made to the alternate payee under a qualified domestic relations order (as defined in section 414(p)). “(B) Rollovers.— If any amount is paid or distributed to an alternate payee who is the spouse or former spouse of the participant by reason of any qualified domestic relations order (within the meaning of section 414(p)), sub-section (c) shall apply to such distribution in the same manner as if such alternate payee were the employee. “(2) Distributions by united states to nonresident aliens.— The amount includible under subsection (a) in the gross income of a nonresident alien with respect to a distribution made by the United States in respect of services performed by an employee of the United States shall not exceed an amount which bears the same ratio to the amount includible in gross income without regard to this paragraph as— “(A) the aggregate basic pay paid by the United States to such employee for such services, reduced by the amount of such basic pay which was not includible in gross income by reason of being from sources without the United States, bears to “(B) the aggregate basic pay paid by the United States to such employee for such services. In the case of distributions under the civil service retirement laws, the term ‘basic pay’ shall have the meaning provided in section 8331(3) of title 5, United States Code. “(3) Cash or deferred arrangements.— For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) shall not be treated as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash. “(4) Net unrealized appreciation.— “(A) Amounts attributable to employee contributions.— For purposes of subsection (a) and section 72, in the case of a distribution other than a lump sum distribution, the amount actually distributed to any distributee from a trust described in subsection (a) shall not include any net unrealized appreciation in securities of the employer corporation attributable to amounts contributed by the employee (other than deductible employee contributions within the meaning of section 72(o)(5)). This subparagraph shall not apply to a distribution to which subsection (c) applies. “(B) Amounts attributable to employer contributions.— For purposes of subsection (a) and section 72, in the case of any lump sum distribution which includes securities of the employer corporation, there shall be excluded from gross income the net unrealized appreciation attributable to that part of the distribution which consists of securities of the employer corporation. In accordance with rules prescribed by the Secretary, a taxpayer may elect, on the return of tax on which a lump sum distribution is required to be included, not to have this subparagraph apply to such distribution. “(C) Determination of amounts and adjustments.— For purposes of subparagraphs (A) and (B), net unrealized appreciation and the resulting adjustments to basis shall be determined in accordance with regulations prescribed by the Secretary. “(D) Lump sum distribution.— For purposes of this paragraph, the term ‘lump sum distribution’ has the meaning given such term by subsection (d)(4)(A) (without regard to subsection (d)(4)(F)). “(E) Definitions relating to securities.— For purposes of this paragraph— “(i) Securities.— The term ‘securities’ means only shares of stock and bonds or debentures issued by a corporation with interest coupons or in registered form. “(ii) Securities of the employer.— The term ‘securities of the employer corporation’ includes securities of a parent or subsidiary corporation (as defined in subsections (e) and (f) of section 424) of the employer corporation. “(5) Taxability of beneficiary of certain foreign situs trusts.— For purposes of subsections (a), (b), and (c), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as if it were a trust exempt from tax under section 501(a). “(f) Written Explanation to Recipients of Distributions Eligible for Rollover Treatment.— “(1) In general.— The plan administrator of any plan shall, within a reasonable period of time before making an eligible rollover distribution from an eligible retirement plan, provide a written explanation to the recipient— “(A) of the provisions under which the recipient may have the distribution directly transferred to another eligible retirement plan, “(B) of the provision which requires the withholding of tax on the distribution if it is not directly transferred to another eligible retirement plan, “(C) of the provisions under which the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date on which the recipient received the distribution, and “(D) if applicable, of the provisions of subsections (d) and (e) of this section. “(2) Definitions.— For purposes of this subsection— “(A) Eligible rollover distribution.— The term ‘eligible rollover distribution’ has the same meaning as when used in subsection (c) of this section or paragraph (4) of section 403(a). “(B) Eligible retirement plan.— The term ‘eligible retirement plan’ has the meaning given such term by subsection (c)(8)(B).”
1992
Unemployment Compensation Amendments of 1992
Pub. L. 102–318 § 521(b)(9) · 106 Stat. 290
Substituted · 26 U.S.C. § 402(g)(1)
Pub. L. 102–318, § 521(b)(9), substituted “subsections (e)(3)” for “subsections (a)(8)”
Source evidence
Code amendment note
Subsec. (g)(1). Pub. L. 102–318, § 521(b)(9), substituted “subsections (e)(3)” for “subsections (a)(8)”.
Enacted provision · exact public law section
(9) Section 402(g)(1) is amended by striking “subsections (a)(8)” and inserting “subsections (e)( (3)”.
1992
Unemployment Compensation Amendments of 1992
Pub. L. 102–318 § 521(b)(10) · 106 Stat. 290
Substituted · 26 U.S.C. § 402(i)
Pub. L. 102–318, § 521(b)(10), substituted “subsection (d)(4)” for “subsection (e)(4)”
Source evidence
Code amendment note
Subsec. (i). Pub. L. 102–318, § 521(b)(10), substituted “subsection (d)(4)” for “subsection (e)(4)”.
Enacted provision · exact public law section
(10) Section 402(i) is amended by striking “subsection (e)(4)” and inserting “subsection (d)(4)”.
1992
Unemployment Compensation Amendments of 1992
Pub. L. 102–318 § 521(b)(11) · 106 Stat. 290
Substituted · 26 U.S.C. § 402(j)(1)
Pub. L. 102–318, § 521(b)(11), substituted “(e)(4)” for “(a)(1) or (e)(4)(J)”
Source evidence
Code amendment note
Subsec. (j)(1). Pub. L. 102–318, § 521(b)(11), substituted “(e)(4)” for “(a)(1) or (e)(4)(J)”.
Enacted provision · exact public law section
(11) Subsection (j) of section 402 is amended by striking 26 USC 402. “(a)(1) or (e)(4)(J)” and inserting “(e)(4)”.
1994
Pub. L. 103–465 title VII § 732(c) · 108 Stat. 4809
Inserted · 26 U.S.C. § 402(g)(5)
Pub. L. 103–465 inserted before period at end “; except that any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500”
Source evidence
Code amendment note
Subsec. (g)(5). Pub. L. 103–465 inserted before period at end “; except that any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500”.
Enacted provision · exact public law section
(c) Cost-of-Living Adjustment for Maximum Salary Deferral.— Section 402(g)(5) is amended by inserting before the period “; except that any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500”.
1996
Small Business Job Protection Act of 1996
Pub. L. 104–188 § 1401(b)(2) · 110 Stat. 1755
Struck · 26 U.S.C. § 402(c)(10)
Pub. L. 104–188, § 1401(b)(2), struck out par. (10) which read as follows:
Source evidence
Code amendment note
Subsec. (c)(10). Pub. L. 104–188, § 1401(b)(2), struck out par. (10) which read as follows:
“(10) Denial of averaging for subsequent distributions.—If paragraph (1) applies to any distribution paid to any employee, paragraphs (1) and (3) of subsection (d) shall not apply to any distribution (paid after such distribution) of the balance to the credit of the employee under the plan under which the preceding distribution was made (or under any other plan which, under subsection (d)(4)(C), would be aggregated with such plan).”
Enacted provision · exact public law section
(2) Section 402(c) (relating to rules applicable to rollovers from exempt trusts) is amended by striking paragraph (10).
1996
Small Business Job Protection Act of 1996
Pub. L. 104–188 § 1401(a) · 110 Stat. 1755
1. Amended · 26 U.S.C. § 402(d)
  Pub. L. 104–188, § 1401(a), amended subsec. (d) generally
2. Substituted · 26 U.S.C. § 402(d)
  Pub. L. 104–188, § 1401(a), substituting provisions relating to taxability of beneficiary of certain foreign situs trusts for former provisions relating to tax on lump sum distributions
Source evidence
Code amendment note
Subsec. (d). Pub. L. 104–188, § 1401(a), amended subsec. (d) generally, substituting provisions relating to taxability of beneficiary of certain foreign situs trusts for former provisions relating to tax on lump sum distributions.
Enacted provision · exact public law section
(a) In General.— Subsection (d) of section 402 (relating to taxability of beneficiary of employees’ trust) is amended to read as follows: “(d) Taxability of Beneficiary of Certain Foreign Situs Trusts.— For purposes of subsections (a), (b), and (c), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as ifit were a trust exempt from tax under section 501(a).”.
1996
Small Business Job Protection Act of 1996
Pub. L. 104–188 § 1450(a)(2) · 110 Stat. 1755
Inserted · 26 U.S.C. § 402(e)(3)
Pub. L. 104–188, § 1450(a)(2), inserted “or which is part of a salary reduction agreement under section 403(b)” after “section 401(k)(2))”
Source evidence
Code amendment note
Subsec. (e)(3). Pub. L. 104–188, § 1450(a)(2), inserted “or which is part of a salary reduction agreement under section 403(b)” after “section 401(k)(2))”.
Enacted provision · exact public law section
(2) Constructive receipt.— Section 402(e)(3) is amended by inserting “or which is part of a salary reduction agreement under section 403(b)” after “section 401(k)(2))”.
1996
Small Business Job Protection Act of 1996
Pub. L. 104–188 § 1401(b)(1) · 110 Stat. 1755
Amended · 26 U.S.C. § 402(e)(4)(D)
Pub. L. 104–188, § 1401(b)(1), amended subpar. (D) generally. Prior to amendment, subpar. (D) read as follows:
Source evidence
Code amendment note
Subsec. (e)(4)(D). Pub. L. 104–188, § 1401(b)(1), amended subpar. (D) generally. Prior to amendment, subpar. (D) read as follows:
“(D) Lump sum distribution.—For purposes of this paragraph, the term ‘lump sum distribution’ has the meaning given such term by subsection (d)(4)(A) (without regard to subsection (d)(4)(F)).”
Enacted provision · exact public law section
(1) Subparagraph (D) of section 402(e)(4) (relating to other rules applicable to exempt trusts) is amended to read as follows: “(D) Lump-sum distribution.— For purposes of this paragraph— “(i) In general.— The term ‘lump-sum distribution’ means the distribution or payment within one taxable year of the recipient of the balance to the credit of an employee which becomes payable to the recipient— “(I) on account of the employee’s death, “(II) after the employee attains age 59½, “(III) on account of the employee’s separation from service, or “(IV) after the employee has become disabled (within the meaning of section 72(m)(7)), from a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under section 501 or from a plan described in section 403(a). Subclause (III) of this clause shall be applied only with respect to an individual who is an employee without regard to section 401(c)(1), and subclause (IV) shall be applied only with respect to an employee within the meaning of section 401(c)(1). For purposes of this clause, a distribution to two or more trusts shall be treated as a distribution to one recipient. For purposes of this paragraph, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)). “(ii) Aggregation of certain trusts and plans.— For purposes of determining the balance to the credit of an employee under clause (i)— “(I) all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and “(II) trusts which are not qualified trusts under section 401(a) and annuity contracts which do not satisfy the requirements of section 404(a)(2) shall not be taken into account. “(iii) Community property laws.— The provisions of this paragraph shall be applied without regard to community property laws. “(iv) Amounts subject to penalty.— This paragraph shall not apply to amounts described in subparagraph (A) of section 72(m)(5) to the extent that section 72(rn)(5) applies to such amounts. “(v) Balance to credit of employee not to include amounts payable under qualified domestic relations order.— For purposes of this paragraph, the balance to the credit of an employee shall not include any amount payable to an alternate payee under a qualified domestic relations order (within the meaning of section 414(p)). “(vi) Transfers to cost-of-living arrangement not treated as distribution.— For purposes of this paragraph, the balance to the credit of an employee under a defined contribution plan shall not include any amount transferred from such defined contribution plan to a qualified cost-of-living arrangement (within the meaning of section 415(k)(2)) under a defined benefit plan. “(vii) Lump-sum distributions of alternate payees.— If any distribution or payment of the balance to the credit of an employee would be treated as a lump-sum distribution, then, for purposes of this paragraph, the payment under a qualified domestic relations order (within the meaning of section 414(p)) of the balance to the credit of an alternate payee who is the spouse or former spouse of the employee shall be treated as a lump-sum distribution. For purposes of this clause, the balance to the credit of the alternate payee shall not include any amount payable to the employee.”.
1996
Small Business Job Protection Act of 1996
Pub. L. 104–188 § 1401(b)(13) · 110 Stat. 1755
Struck · 26 U.S.C. § 402(e)(5)
Pub. L. 104–188, § 1401(b)(13), struck out par. (5) which read as follows:
Source evidence
Code amendment note
Subsec. (e)(5). Pub. L. 104–188, § 1401(b)(13), struck out par. (5) which read as follows:
“(5) Taxability of beneficiary of certain foreign situs trusts.—For purposes of subsections (a), (b), and (c), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as if it were a trust exempt from tax under section 501(a).”
Enacted provision · exact public law section
(13) Section 402(e) is amended by striking paragraph (5).
1996
Small Business Job Protection Act of 1996
Pub. L. 104–188 § 1704(t)(68) · 110 Stat. 1755
Substituted · 26 U.S.C. § 402(g)(3)(A)
Pub. L. 104–188, § 1704(t)(68), substituted “subsection (e)(3)” for “subsection (a)(8)”
Source evidence
Code amendment note
Subsec. (g)(3)(A). Pub. L. 104–188, § 1704(t)(68), substituted “subsection (e)(3)” for “subsection (a)(8)”.
Enacted provision · exact public law section
(68) Subparagraph (A) of section 402(g)(3) is amended by striking “subsection (a)(8)” and inserting “subsection (e)(3)”.
1996
Small Business Job Protection Act of 1996
Pub. L. 104–188 § 1421(b)(9)(B) · 110 Stat. 1755
Added · 26 U.S.C. § 402(g)(3)(D)
Pub. L. 104–188, § 1421(b)(9)(B), added subpar. (D)
Source evidence
Code amendment note
Subsec. (g)(3)(D). Pub. L. 104–188, § 1421(b)(9)(B), added subpar. (D).
Enacted provision · exact public law section
(B) Section 402(g)(3) is amended by striking “and” at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting “, and”, and by adding after subparagraph (C) the following new subparagraph: “(D) any elective employer contribution under section 408(p)(2)(A)(i).”.
1996
Small Business Job Protection Act of 1996
Pub. L. 104–188 § 1421(b)(3)(A) · 110 Stat. 1755
Added · 26 U.S.C. § 402(k)
Pub. L. 104–188, § 1421(b)(3)(A), added subsec. (k)
Source evidence
Code amendment note
Subsec. (k). Pub. L. 104–188, § 1421(b)(3)(A), added subsec. (k).
Enacted provision · exact public law section
(A) Section 402 (relating to taxability of beneficiary of employees’ trust) is amended by adding at the end the following new subsection: “(k) Treatment of Simple Retirement Accounts.— Rules similar to the rules of paragraphs (1) and (3) of subsection (h) shall apply to contributions and distributions with respect to a simple retirement account under section 408(p).”.
1997
Pub. L. 105–34 title XV § 1501(a) · 111 Stat. 788
Added · 26 U.S.C. § 402(g)(9)
Pub. L. 105–34 added par. (9)
Source evidence
Code amendment note
Subsec. (g)(9). Pub. L. 105–34 added par. (9).
Enacted provision · exact public law section
(a) In General.— Section 402(g) (relating to limitation on exclusion for elective deferrals) is amended by adding at the end the following: “(9) Matching contributions on behalf of selfemployed individuals not treated as elective employer contributions.— Except as provided in section 401(k)(3)(D)(ii), any matching contribution described in section 401(m)(4)(A) which is made on behalf of a self-employed individual (as defined in section 401(c)) shall not be treated as an elective employer contribution under a qualified cash or deferred arrangement (as defined in section 401(k)) for purposes of this title.”.
1998
Internal Revenue Service Restructuring and Reform Act of 1998
Pub. L. 105–206 title VI § 6005(c)(2)(A) · 112 Stat. 685
Added · 26 U.S.C. § 402(c)(4)(C)
Pub. L. 105–206 added subpar. (C)
Source evidence
Code amendment note
Subsec. (c)(4)(C). Pub. L. 105–206 added subpar. (C).
Enacted provision · exact public law section
(A) Section 402(c)(4) of the 1986 Code is amended by striking “and” at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting “, and”, by inserting at the end the following new subparagraph: “(C) any hardship distribution described in section 401(k)(2)(B)(i)(IV).”.
2001
Pub. L. 107–16 § 643(a) · 115 Stat. 38
Inserted · 26 U.S.C. § 402(c)(2)
Pub. L. 107–16, § 643(a), inserted at end “The preceding sentence shall not apply to such distribution to the extent—
Source evidence
Code amendment note
Subsec. (c)(2). Pub. L. 107–16, § 643(a), inserted at end “The preceding sentence shall not apply to such distribution to the extent—
“(A) such portion is transferred in a direct trustee-to-trustee transfer to a qualified trust which is part of a plan which is a defined contribution plan and which agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible, or “(B) such portion is transferred to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B).”
Enacted provision · exact public law section
(a) Rollovers From Exempt Trusts.— Paragraph (2) of section 402(c) (relating to maximum amount which may be rolled over) is amended by adding at the end the following: “The preceding sentence shall not apply to such distribution to the extent— “(A) such portion is transferred in a direct trustee-to-trustee transfer to a qualified trust which is part of a plan which is a defined contribution plan and which agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible, or “(B) such portion is transferred to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B).”.
2001
Pub. L. 107–16 § 644(a) · 115 Stat. 38
Amended · 26 U.S.C. § 402(c)(3)
Pub. L. 107–16, § 644(a), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Paragraph (1) shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed.”
Source evidence
Code amendment note
Subsec. (c)(3). Pub. L. 107–16, § 644(a), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Paragraph (1) shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed.”
Enacted provision · exact public law section
(a) Exempt Trusts.— Paragraph (3) of section 402(c) (relating to transfer must be made within 60 days of receipt) is amended to read as follows: “(3) Transfer must be made within 60 days of receipt.— “(A) In general.— Except as provided in subparagraph (B), paragraph (1) shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed. “(B) Hardship exception.— The Secretary may waive the 60-day requirement under subparagraph (A) where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement.”.
2001
Pub. L. 107–16 § 636(b)(1) · 115 Stat. 38
Amended · 26 U.S.C. § 402(c)(4)(C)
Pub. L. 107–16, § 636(b)(1), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “any hardship distribution described in section 401(k)(2)(B)(i)(IV).”
Source evidence
Code amendment note
Subsec. (c)(4)(C). Pub. L. 107–16, § 636(b)(1), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “any hardship distribution described in section 401(k)(2)(B)(i)(IV).”
Enacted provision · exact public law section
(1) Modification of definition of eligible rollover.— Subparagraph (C) of section 402(c)(4) (relating to eligible rollover distribution) is amended to read as follows: “(C) any distribution which is made upon hardship of the employee.”.
2001
Pub. L. 107–16 § 617(c) · 115 Stat. 38
Inserted · 26 U.S.C. § 402(c)(8)(B)
Pub. L. 107–16, § 617(c), inserted concluding provisions
Source evidence
Code amendment note
Subsec. (c)(8)(B). Pub. L. 107–16, § 617(c), inserted concluding provisions.
Enacted provision · exact public law section
(c) Rollovers.— Subparagraph (B) of section 402(c)(8) is amended by adding at the end the following: “If any portion of an eligible rollover distribution is attributable to payments or distributions from a designated Roth account (as defined in section 402A), an eligible retirement plan with respect to such portion shall include only another designated Roth account and a Roth IRA.”.
2001
Pub. L. 107–16 § 641(a)(2)(A) · 115 Stat. 38
Added · 26 U.S.C. § 402(c)(8)(B)(v)
Pub. L. 107–16, § 641(a)(2)(A), added cl. (v)
Source evidence
Code amendment note
Subsec. (c)(8)(B)(v). Pub. L. 107–16, § 641(a)(2)(A), added cl. (v).
Enacted provision · exact public law section
(A) In general.— Section 402(c)(8)(B) (defining eligible retirement plan) is amended by striking “and” at the end of clause (iii), by striking the period at the end of clause (iv) and inserting “, and”, and by inserting after clause (iv) the following new clause: “(v) an eligible deferred compensation plan described in section 457(b) which is maintained by an eligible employer described in section 457(e)(1)(A).”.
2001
Pub. L. 107–16 § 641(b)(2) · 115 Stat. 38
Added · 26 U.S.C. § 402(c)(8)(B)(vi)
Pub. L. 107–16, § 641(b)(2), added cl. (vi)
Source evidence
Code amendment note
Subsec. (c)(8)(B)(vi). Pub. L. 107–16, § 641(b)(2), added cl. (vi).
Enacted provision · exact public law section
(2) Rollovers to section 403(b) plans.— Section 402(c)(8)(B) (defining eligible retirement plan), as amended by subsection (a), is amended by striking “and” at the end of clause (iv), by striking the period at the end of clause (v) and inserting and", and by inserting after clause (v) the following new clause: “(vi) an annuity contract described in section 403(b).”.
2001
Pub. L. 107–16 § 641(d) · 115 Stat. 38
Struck · 26 U.S.C. § 402(c)(9)
Pub. L. 107–16, § 641(d), struck out before period at end “; except that a trust or plan described in clause (iii) or (iv) of paragraph (8)(B) shall not be treated as an eligible retirement plan with respect to such distribution”
Source evidence
Code amendment note
Subsec. (c)(9). Pub. L. 107–16, § 641(d), struck out before period at end “; except that a trust or plan described in clause (iii) or (iv) of paragraph (8)(B) shall not be treated as an eligible retirement plan with respect to such distribution”.
Enacted provision · exact public law section
(d) Spousal Rollovers.— Section 402(c)(9) (relating to rollover where spouse receives distribution after death of employee) is amended by striking “; except that” and all that follows up to the end period.
2001
Pub. L. 107–16 § 641(a)(2)(B) · 115 Stat. 38
Added · 26 U.S.C. § 402(c)(10)
Pub. L. 107–16, § 641(a)(2)(B), added par. (10)
Source evidence
Code amendment note
Subsec. (c)(10). Pub. L. 107–16, § 641(a)(2)(B), added par. (10).
Enacted provision · exact public law section
(B) Separate accounting.— Section 402(c) is amended by adding at the end the following new paragraph: “(10) Separate accounting.— Unless a plan described in clause (v) of paragraph (8)(B) agrees to separately account for amounts rolled into such plan from eligible retirement plans not described in such clause, the plan described in such clause may not accept transfers or rollovers from such retirement plans.”
2001
Pub. L. 107–16 § 641(e)(5) · 115 Stat. 38
Struck · 26 U.S.C. § 402(f)(1)
Pub. L. 107–16, § 641(e)(5), struck out “from an eligible retirement plan” after “rollover distribution” in introductory provisions
Source evidence
Code amendment note
Subsec. (f)(1). Pub. L. 107–16, § 641(e)(5), struck out “from an eligible retirement plan” after “rollover distribution” in introductory provisions.
Enacted provision · exact public law section
(5) Paragraph (1) of section 402(f) is amended by striking “from an eligible retirement plan”.
2001
Pub. L. 107–16 § 657(b) · 115 Stat. 38
Inserted · 26 U.S.C. § 402(f)(1)(A)
Pub. L. 107–16, § 657(b), inserted before comma at end “and that the automatic distribution by direct transfer applies to certain distributions in accordance with section 401(a)(31)(B)”
Source evidence
Code amendment note
Subsec. (f)(1)(A). Pub. L. 107–16, § 657(b), inserted before comma at end “and that the automatic distribution by direct transfer applies to certain distributions in accordance with section 401(a)(31)(B)”.
Enacted provision · exact public law section
(b) Notice Requirement.— Subparagraph (A) of section 402(f)(1) is amended by inserting before the comma at the end the following: “and that the automatic distribution by direct, transfer applies to certain distributions in accordance with section 401(a)(31)(B)”.
2001
Pub. L. 107–16 § 641(e)(6) · 115 Stat. 38
Substituted · 26 U.S.C. § 402(f)(1)(A)
Pub. L. 107–16, § 641(e)(6), substituted “an eligible retirement plan” for “another eligible retirement plan”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 107–16, § 641(e)(6), substituted “an eligible retirement plan” for “another eligible retirement plan”.
Enacted provision · exact public law section
(6) Subparagraphs (A) and (B) of section 402(f)(1) are 26 USC 402. amended by striking “another eligible retirement plan” and inserting “an eligible retirement plan”.
2001
Pub. L. 107–16 § 641(e)(6) · 115 Stat. 38
Substituted · 26 U.S.C. § 402(f)(1)(B)
Pub. L. 107–16, § 641(e)(6), substituted “an eligible retirement plan” for “another eligible retirement plan”
Source evidence
Code amendment note
Subsec. (f)(1)(B). Pub. L. 107–16, § 641(e)(6), substituted “an eligible retirement plan” for “another eligible retirement plan”.
Enacted provision · exact public law section
(6) Subparagraphs (A) and (B) of section 402(f)(1) are 26 USC 402. amended by striking “another eligible retirement plan” and inserting “an eligible retirement plan”.
2001
Pub. L. 107–16 § 641(c) · 115 Stat. 38
Added · 26 U.S.C. § 402(f)(1)(E)
Pub. L. 107–16, § 641(c), added subpar. (E)
Source evidence
Code amendment note
Subsec. (f)(1)(E). Pub. L. 107–16, § 641(c), added subpar. (E).
Enacted provision · exact public law section
(c) Expanded Explanation to Recipients of Rollover Distributions.— Paragraph (1) of section 402(f) (relating to written explanation to recipients of distributions eligible for rollover treatment) is amended by striking “and” at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting and", and by adding at the end the following new subparagraph; “(E) of the provisions under which distributions from the eligible retirement plan receiving the distribution may be subject to restrictions and tax consequences which are different from those applicable to distributions from the plan making such distribution.”.
2001
Pub. L. 107–16 § 641(e)(4) · 115 Stat. 38
Substituted · 26 U.S.C. § 402(f)(2)(A)
Pub. L. 107–16, § 641(e)(4), substituted “, paragraph (4) of section 403(a), subparagraph (A) of section 403(b)(8), or subparagraph (A) of section 457(e)(16)” for “or paragraph (4) of section 403(a)”
Source evidence
Code amendment note
Subsec. (f)(2)(A). Pub. L. 107–16, § 641(e)(4), substituted “, paragraph (4) of section 403(a), subparagraph (A) of section 403(b)(8), or subparagraph (A) of section 457(e)(16)” for “or paragraph (4) of section 403(a)”.
Enacted provision · exact public law section
(4) Subparagraph (A) of section 402(f)(2) is amended by striking “or paragraph (4) of section 403(a)” and inserting “, paragraph (4) of section 403(a), subparagraph (A) of section 403(b)(8), or subparagraph (A) of section 457(e)(16)”.
2001
Pub. L. 107–16 § 611(d)(1) · 115 Stat. 38
Amended · 26 U.S.C. § 402(g)(1)
Pub. L. 107–16, § 611(d)(1), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Notwithstanding subsections (e)(3) and (h)(1)(B), the elective deferrals of any individual for any taxable year shall be included in such individual’s gross income to the extent the amount of such deferrals for the taxable year exceeds $7,000.”
Source evidence
Code amendment note
Subsec. (g)(1). Pub. L. 107–16, § 611(d)(1), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Notwithstanding subsections (e)(3) and (h)(1)(B), the elective deferrals of any individual for any taxable year shall be included in such individual’s gross income to the extent the amount of such deferrals for the taxable year exceeds $7,000.”
Enacted provision · exact public law section
(1) In general.— Paragraph (1) of section 402(g) (relating to limitation on exclusion for elective deferrals) is amended to read as follows; “(1) In general.— “(A) Limitation.— Notwithstanding subsections (e)(3) and (h)(1)(B), the elective deferrals of any individual for any taxable year shall be included in such individual’s gross income to the extent the amount of such deferrals for the taxable year exceeds the applicable dollar amount. “(B) Applicable dollar amount.— For purposes of subparagraph (A), the applicable dollar amount shall be the amount determined in accordance with the following table: “For taxable years beginning in calendar year: The applicable dollar amount: 2002 $11,000 2003 $12,000 2004 $13,000 2005 $14,000 2006 or thereafter $15,000.”.
2001
Pub. L. 107–16 title VI § 617(b)(1) · 115 Stat. 38
Inserted · 26 U.S.C. § 402(g)(1)(A)
Pub. L. 107–16, title VI, § 617(b)(1), inserted at end “The preceding sentence shall not apply the portion of such excess as does not exceed the designated Roth contributions of the individual for the taxable year.”
Source evidence
Code amendment note
Subsec. (g)(1)(A). Pub. L. 107–16, title VI, § 617(b)(1), inserted at end “The preceding sentence shall not apply the portion of such excess as does not exceed the designated Roth contributions of the individual for the taxable year.”
Enacted provision · exact public law section
(1) by adding at the end of paragraph (1)(A) (as added by section 201(c)(1)) the following new sentence: “The preceding sentence shall not apply the portion of such excess as does not exceed the designated Roth contributions of the individual for the taxable year.”; and
2001
Pub. L. 107–16 title VI § 617(b)(2) · 115 Stat. 38
Inserted · 26 U.S.C. § 402(g)(2)(A)
Pub. L. 107–16, title VI, § 617(b)(2), inserted “(or would be included but for the last sentence thereof)” after “paragraph (1)”
Source evidence
Code amendment note
Subsec. (g)(2)(A). Pub. L. 107–16, title VI, § 617(b)(2), inserted “(or would be included but for the last sentence thereof)” after “paragraph (1)”.
Enacted provision · exact public law section
(2) by inserting “(or would be included but for the last sentence thereof)” after “paragraph (1)” in paragraph (2)(A).
2001
Pub. L. 107–16 § 611(d)(3)(A) · 115 Stat. 38
1. Redesignated · 26 U.S.C. § 402(g)(4)
  Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (5) as (4)
2. Struck · 26 U.S.C. § 402(g)(4)
  Pub. L. 107–16, § 611(d)(3)(A), struck out heading and text of former par. (4). Text read as follows: “The limitation under paragraph (1) shall be increased (but not to an amount in excess of $9,500) by the amount of any employer contributions for the taxable year described in paragraph (3)(C).”
Source evidence
Code amendment note
Subsec. (g)(4). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (5) as (4) and struck out heading and text of former par. (4). Text read as follows: “The limitation under paragraph (1) shall be increased (but not to an amount in excess of $9,500) by the amount of any employer contributions for the taxable year described in paragraph (3)(C).”
Enacted provision · exact public law section
(A) Section 402(g) (relating to limitation on exclusion for elective deferrals), as amended by paragraphs (1) and (2), is further amended by striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.
2001
Pub. L. 107–16 § 611(d)(3)(A) · 115 Stat. 38
Redesignated · 26 U.S.C. § 402(g)(5)
Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (6) as (5). Former par. (5) redesignated (4)
Source evidence
Code amendment note
Subsec. (g)(5). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (6) as (5). Former par. (5) redesignated (4).
Enacted provision · exact public law section
(A) Section 402(g) (relating to limitation on exclusion for elective deferrals), as amended by paragraphs (1) and (2), is further amended by striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.
2001
Pub. L. 107–16 § 611(d)(2) · 115 Stat. 38
Amended · 26 U.S.C. § 402(g)(5)
Pub. L. 107–16, § 611(d)(2), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “The Secretary shall adjust the $7,000 amount under paragraph (1) at the same time and in the same manner as under section 415(d); except that any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500.”
Target inherited from the preceding amendment note.
Source evidence
Code amendment note
Pub. L. 107–16, § 611(d)(2), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “The Secretary shall adjust the $7,000 amount under paragraph (1) at the same time and in the same manner as under section 415(d); except that any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500.”
Enacted provision · exact public law section
(2) Cost-of-living adjustment.— Paragraph (5) of section 402(g) is amended to read as follows: “(5) Cost-of-living adjustment.— In the case of taxable years beginning after December 31, 2006, the Secretary shall adjust the $15,000 amount under paragraph (1)(B) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2005, and any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500.”.
2001
Pub. L. 107–16 § 611(d)(3)(A) · 115 Stat. 38
Redesignated · 26 U.S.C. § 402(g)(6)
Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (7) as (6). Former par. (6) redesignated (5)
Source evidence
Code amendment note
Subsec. (g)(6). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (7) as (6). Former par. (6) redesignated (5).
Enacted provision · exact public law section
(A) Section 402(g) (relating to limitation on exclusion for elective deferrals), as amended by paragraphs (1) and (2), is further amended by striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.
2001
Pub. L. 107–16 § 611(d)(3)(A) · 115 Stat. 38
Redesignated · 26 U.S.C. § 402(g)(7)
Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (8) as (7)
Source evidence
Code amendment note
Subsec. (g)(7). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (8) as (7).
Enacted provision · exact public law section
(A) Section 402(g) (relating to limitation on exclusion for elective deferrals), as amended by paragraphs (1) and (2), is further amended by striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.
2001
Pub. L. 107–16 § 632(a)(3)(G) · 115 Stat. 38
Inserted · 26 U.S.C. § 402(g)(7)(B)
Pub. L. 107–16, § 632(a)(3)(G), inserted “(as in effect before the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001” before period at end
Source evidence
Code amendment note
Subsec. (g)(7)(B). Pub. L. 107–16, § 632(a)(3)(G), inserted “(as in effect before the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001” before period at end.
Enacted provision · exact public law section
(G) Subparagraph (B) of section 402(g)(7) (as redesignated by section 611(c)(3)) is amended by inserting before the period at the end the following: “(as in effect before the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001”.
2001
Pub. L. 107–16 § 611(d)(3)(A) · 115 Stat. 38
Redesignated · 26 U.S.C. § 402(g)(8); 26 U.S.C. § 402(g)(9)
Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (9) as (8). Former par. (8) redesignated (7)
Source evidence
Code amendment note
Subsec. (g)(8), (9). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (9) as (8). Former par. (8) redesignated (7).
Enacted provision · exact public law section
(A) Section 402(g) (relating to limitation on exclusion for elective deferrals), as amended by paragraphs (1) and (2), is further amended by striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.
2002
Job Creation and Worker Assistance Act of 2002
Pub. L. 107–147 § 411(q)(2) · 116 Stat. 21
Inserted · 26 U.S.C. § 402(c)(2)
Pub. L. 107–147, § 411(q)(2), inserted at end: “In the case of a transfer described in subparagraph (A) or (B), the amount transferred shall be treated as consisting first of the portion of such distribution that is includible in gross income (determined without regard to paragraph (1)).”
Source evidence
Code amendment note
Subsec. (c)(2). Pub. L. 107–147, § 411(q)(2), inserted at end: “In the case of a transfer described in subparagraph (A) or (B), the amount transferred shall be treated as consisting first of the portion of such distribution that is includible in gross income (determined without regard to paragraph (1)).”
Enacted provision · exact public law section
(2) Section 402(c)(2) is amended by adding at the end the following flush sentence: “In the case of a transfer described in subparagraph (A) or (B), the amount transferred shall be treated as consisting first of the portion of such distribution that is includible in gross income (determined without regard to paragraph (1)).”.
2002
Job Creation and Worker Assistance Act of 2002
Pub. L. 107–147 § 411 · 116 Stat. 21
Added · 26 U.S.C. § 402(g)(1)(C)
Pub. L. 107–147, § 411(o)(1), added subpar. (C)
Source evidence
Code amendment note
Subsec. (g)(1)(C). Pub. L. 107–147, § 411(o)(1), added subpar. (C).
Enacted provision · exact public law section
SEC. 411. AMENDMENTS RELATED TO ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001. (a) Amendments Related to Section 101 of the Act.— (1) In general.— Subsection (b) of section 6428 is amended to read as follows: “(b) Credit Treated as Nonrefundable Personal Credit.— For purposes of this title, the credit allowed under this section shall be treated as a credit allowable under subpart A of part IV of subchapter A of chapter 1.”. (2) Conforming amendments.— “(A) Subsection (d) of section 6428 is amended to read as follows: “(d) Coordination with Advance Refunds of Credit.— “(1) In general.— The amount of credit which would (but for this paragraph) be allowable under this section shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer under subsection (e). Any failure to so reduce the credit shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1). “(2) Joint returns.— In the case of a refund or credit made or allowed under subsection (e) with respect to a joint return, half of such refund or credit shall be treated as having been made or allowed to each individual filing such return.”. (B) Paragraph (2) of section 6428(e) is amended to read as follows: “(2) Advance refund amount.— For purposes of paragraph (1), the advance refund amount is the amount that would have been allowed as a credit under this section for such first taxable year if— “(A) this section (other than subsections (b) and (d) and this subsection) had applied to such taxable year, and “(B) the credit for such taxable year were not allowed to exceed the excess (if any) of— “(i) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over “(ii) the sum of the credits allowable under part IV of subchapter A of chapter 1 (other than the credits allowable under subpart C thereof, relating to refundable credits).”. (b) Amendment Related to Section 201 of the Act..— Subparagraph (B) of section 24(d)(1) is amended by striking 26 USC 24. “amount of credit allowed by this section” and inserting “aggregate amount of credits allowed by this subpart”. (c) Amendments Related to Section 202 of the Act.— (1) Corrections to credit for adoption expenses.— (A) Paragraph (1) of section 23(a) is amended to read as follows: “(1) In general.— In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter the amount of the qualified adoption expenses paid or incurred by the taxpayer.”. (B) Subsection (a) of section 23 is amended by adding at the end the following new paragraph: “(3) $10,000 credit for adoption of child with special needs regardless of expenses.— In the case of an adoption of a child with special needs which becomes final during a taxable year, the taxpayer shall be treated as having paid during such year qualified adoption expenses with respect to such adoption in an amount equal to the excess (if any) of $10,000 over the aggregate qualified adoption expenses actually paid or incurred by the taxpayer with respect to such adoption during such taxable year and all prior taxable years.”. (C) Paragraph (2) of section 23(a) is amended by striking the last sentence. (D) Paragraph (1) of section 23(b) is amended by striking “subsection (a)(1)(A)” and inserting “subsection (a)”. (E) Subsection (i) of section 23 is amended by striking “the dollar limitation in subsection (b)(1)” and inserting “the dollar amounts in subsections (a)(3) and (b)(1)”. (F) Expenses paid or incurred during any taxable year 26 USC 23 note. , beginning before January 1, 2002, may be taken into account in determining the credit under section 23 of the Internal Revenue Code of 1986 only to the extent the aggregate of such expenses does not exceed the applicable limitation under section 23(b)(1) of such Code as in effect on the day before the date of the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001. (2) Corrections to exclusion for employer-provided adoption assistance.— (A) Subsection (a) of section 137 is amended to read as follows: “(a) Exclusion.— “(1) In general.— Gross income of an employee does not include amounts paid or expenses incurred by the employer for qualified adoption expenses in connection with the adoption of a child by an employee if such amounts are furnished pursuant to an adoption assistance program. “(2) $10,000 exclusion for adoption of child with special needs regardless of expenses.— In the case of an adoption of a child with special needs which becomes final during a taxable year, the qualified adoption expenses with respect to such adoption for such year shall be increased by an amount equal to the excess (if any) of $10,000 over the actual aggregate qualified adoption expenses with respect to such adoption during such taxable year and all prior taxable years.”. (B) Paragraph (2) of section 137(b) is amended by striking “subsection (a)(1)” and inserting “subsection (a)”. (3) Effective date.— The amendments made by this subsection 26 USC 23 note. shall apply to taxable years beginning after December 31, 2002; except that the amendments made by paragraphs (1)(C), (1)(D), and (2)(B) shall apply to taxable years beginning after December 31, 2001. (d) Amendments Related to Section 205 of the Act.— (1) Section 45F(d)(4)(B) is amended by striking “subpart A, B, or D of this part” and inserting “this chapter or for purposes of section 55”. (2) Section 38(b)(15) is amended by striking “45F” and inserting “45F(a)”. (e) Amendments Related to Section 301 of the Act.— (1) Section 63(c)(2) is amended— (A) in subparagraph (A), by striking “subparagraph (C)” and inserting “subparagraph (D)”, (B) by striking “or” at the end of subparagraph (B), (C) by redesignating subparagraph (C) as subparagraph (D), (D) by inserting after subparagraph (B) the following new subparagraph: “(C) one-half of the amount in effect under subparagraph (A) in the case of a married individual filing a separate return, or”, and (E) by inserting the following flush sentence at the end: “If any amount determined under subparagraph (A) is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.”. (2) (A) Section 63(c)(4) is amended by striking “paragraph (2) or (5)” and inserting “paragraph (2)(B), (2)(1)), or (5)”. (B) Section 63(c)(4)(B)(i) is amended by striking “paragraph (2)” and inserting “paragraph (2)(B), (2)(D),”. (C) Section 63(c)(4) is amended by striking the flush sentence at the end (as added by section 301(c)(2) of Public Law 107-17). (f) Amendment Related to Section 401 of the Act.— Section 530(d)(4)(B)(iv) is amended by striking “because the taxpayer elected under paragraph (2)(C) to waive the application of paragraph (2)” and inserting “by application of paragraph (2)(C)(i)(II)”. (g) Amendments Related to Section 511 of the Act.— (1) Section 2511(c) is amended by striking “taxable gift under section 2503,” and inserting “transfer of property by gift,”. (2) Section 2101(b) is amended by striking the last sentence, (h) Amendment Related to Section 532 of the Act.— Section 2016 is amended by striking “any State, any possession of the United States, or the District of Columbia,”. (i) Amendments Relating to Section 602 of the Act.— (1) Subparagraph (A) of section 408(q)(3) is amended to read as follows: “(A) Qualified employer plan.— The term ‘qualified employer plan’ has the meaning given such term by section 72(p)(4)(A)(i); except that such term shall also include an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A).”. (2) Section 4(c) of Employee Retirement Income Security Act of 1974 is amended— 29 USC 1003. (A) by inserting “and part 5 (relating to administration and enforcement)” before the period at the end, and (B) by adding at the end the following new sentence: “Such provisions shall apply to such accounts and annuities Applicability. in a manner similar to their application to a simplified employee pension under section 408(k) of the Internal Revenue Code of 1986.”. (j) Amendments Relating to Section 611 of the Act.— (1) Section 408(k) is amended— 26 USC 408. (A) in paragraph (2)(C) by striking “$300” and inserting “$450”, and (B) in paragraph (8) by striking “$300” both places it appears and inserting “$450”. (2) Section 409(o)(1)(C)(ii) is amended— (A) by striking “$500,000” both places it appears and inserting “$800,000”, and (B) by striking “$100,000” and inserting “$160,000”. (3) Section 611(i) of the Economic Growth and Tax Relief Reconciliation Act of 2001 is amended by adding at the end 26 USC 415 note. the following new paragraph: “(3) Special rule.— In the case of plan that, on June 7, 2001, incorporated by reference the limitation of section 415(b)(1)(A) of the Internal Revenue Code of 1986, section 411(d)(6) of such Code and section 204(g)(1) of the Employee Retirement Income Security Act of 1974 do not apply to a plan amendment that— “(A) is adopted on or before June 30, 2002, “(B) reduces benefits to the level that would have applied without regard to the amendments made by subsection (a) of this section, and “(C) is effective no earlier than the years described in paragraph (2).”. (k) Amendments Relating to Section 613 of the Act.— (1) Section 416(c)(1)(C)(iii) is amended by striking “Exception for frozen plan” and inserting “exception for plan under which no key employee (or former key employee) benefits for plan year”. (2) Section 416(g)(3)(B) is amended by striking “separation from service” and inserting “severance from employment”. (l) Amendments Relating to Sections 614 and 616 of the Act.— (1) Section 404(a)(12) is amended by striking “(9),” and inserting “(9) and subsection (h)(1)(C),”. (2) Section 404(n) is amended by striking “subsection (a),” and inserting “subsection (a) or paragraph (1)(C) of subsection (h)”. (3) Section 402(h)(2)(A) is amended by striking “15 percent” and inserting “25 percent”. (4) Section 404(a)(7)(C) is amended to read as follows: “(C) Paragraph not to apply in certain cases.— “(i) Beneficiary test.— This paragraph shall not have the effect of reducing the amount otherwise deductible under paragraphs (1), (2), and (3), if no employee is a beneficiary under more than 1 trust or under a trust and an annuity plan. “(ii) Elective deferrals.— If, in connection with 1 or more defined contribution plans and 1 or more defined benefit plans, no amounts (other than elective deferrals (as defined in section 402(g)(3))) are contributed to any of the defined contribution plans for the taxable year, then subparagraph (A) shall not apply with respect to any of such defined contribution plans and defined benefit plans.”. (m) Amendment Relating to Section 618 of the Act.— 26 USC 25B. Section 25B(d)(2)(A) is amended to read as follows: “(A) In general.— The qualified retirement savings contributions determined under paragraph (1) shall be reduced (but not below zero) by the aggregate distributions received by the individual during the testing period from any entity of a type to which contributions under paragraph (1) may be made. The preceding sentence shall not apply to the portion of any distribution which is not includible in gross income by reason of a trustee-to-trustee transfer or a rollover distribution.”. (n) Amendments Relating to Section 619 of the Act.— (1) Section 45E(e)(1) is amended by striking “(n)” and inserting “(m)”. (2) Section 619(d) of the Economic Growth and Tax Relief 26 USC 38 note. Reconciliation Act of 2001 is amended by striking “established” and inserting “first effective”. (o) Amendments Relating to Section 631 of the Act.— (1) Section 402(g)(1) is amended by adding at the end the following: “(C) Catch-up contributions.— In addition to subparagraph (A), in the case of an eligible participant (as defined in section 414(v)), gross income shall not include elective deferrals in excess of the applicable dollar amount under subparagraph (B) to the extent that the amount of such elective deferrals does not exceed the applicable dollar amount under section 414(v)(2)(B)(i) for the taxable year (without regard to the treatment of the elective deferrals by an applicable employer plan under section 414(v)).”. (2) Section 401(a)(30) is amended by striking “402(g)(1)” and inserting “402(g)(1)(A)”. (3) Section 414(v)(2) is amended by adding at the end the following: “(D) Aggregation of plans.— For purposes of this paragraph, plans described in clauses (i), (ii), and (iv) of paragraph (6)(A) that are maintained by the same employer (as determined under subsection (b), (c), (m) or (o)) shall be treated as a single plan, and plans described in clause (iii) of paragraph (6)(A) that are maintained by the same employer shall be treated as a single plan.”. (4) Section 414(v)(3)(A)(i) is amended by striking “section 402(g), 402(h), 403(b), 404(a), 404(h), 408(k), 408(p), 415, or 457” and inserting “sections 401(a)(30), 402(h), 403(b), 408, 415(c), and 457(b)(2) (determined without regard to section 457(b)(3))”. (5) Section 414(v)(3)(B) is amended by striking “section 401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12), 403(b)(12), 408(k), 408(p), 408B, 410(b), or 416” and inserting “section 401(a)(4), 401(k)(3), 401(k)(11), 403(b)(12), 408(k), 410(b), or 416”. (6) Section 414(v)(4)(B) is amended by inserting before 26 USC 414. the period at the end the following: “, except that a plan described in clause (i) of section 410(b)(6)(C) shall not be treated as a plan of the employer until the expiration of the transition period with respect to such plan (as determined under clause (ii) of such section)”. (7) Section 414(v)(5) is amended— (A) by striking “, with respect to any plan year,” in the matter preceding subparagraph (A), (B) by amending subparagraph (A) to read as follows: “(A) who would attain age 50 by the end of the taxable year,”, and (C) in subparagraph (B) by striking “plan year” and inserting “plan (or other applicable) year”. (8) Section 414(v)(6)(C) is amended to read as follows: “(C) Exception for section 457 plans.—This subsection shall not apply to a participant for any year for which a higher limitation applies to the participant under section 457(b)(3).”. (9) Section 457(e) is amended by adding at the end the following new paragraph: “(18) Coordination with catch-up contributions for individuals age 50 or older.— In the case of an individual who is an eligible participant (as defined by section 414(v)) and who is a participant in an eligible deferred compensation plan of an employer described in paragraph (I)(A), subsections (b)(3) and (c) shall be applied by substituting for the amount otherwise determined under the applicable subsection the greater of— “(A) the sum of— “(i) the plan ceiling established for purposes of subsection (b)(2) (without regard to subsection (b)(3)), plus “(ii) the applicable dollar amount for the taxable year determined under section 414(v)(2)(B)(i), or “(B) the amount determined under the applicable subsection (without regard to this paragraph).”. (p) Amendments Relating to Section 632 of the Act.— (1) Section 403(b)(1) is amended in the matter following subparagraph (E) by striking “then amounts contributed” and all that follows and inserting the following: “then contributions and other additions by such employer for such annuity contract shall be excluded from the gross income of the employee for the taxable year to the extent that the aggregate of such contributions and additions (when expressed as an annual addition (within the meaning of section 415(c)(2))) does not exceed the applicable limit under section 415. The amount actually distributed to any distributee under such contract shall be taxable to the distributee (in the year in which so distributed) under section 72 (relating to annuities). For purposes of applying the rules of this subsection to contributions and other additions by an employer for a taxable year, amounts transferred to a contract described in this paragraph by reason of a rollover contribution described in paragraph (8) of this subsection or section 408(d)(3)(A)(ii) shall not be considered contributed by such employer.”. (2) Section 403(b) is amended by striking paragraph (6). (3) Section 403(b)(3) is amended— (A) in the first sentence by inserting the following before the period at the end: and which precedes the taxable year by no more than five years”, and (B) in the second sentence by striking “or any amount received by a former employee after the fifth taxable year following the taxable year in which such employee was terminated”. (4) Section 415(c)(7) is amended to read as follows: “(7) Special rules relating to church plans.— “(A) Alternative contribution limitation.— “(i) In general.— Notwithstanding any other provision of this subsection, at the election of a participant who is an employee of a church or a convention or association of churches, including an organization described in section 414(e)(3)(B)(ii), contributions and other additions for an annuity contract or retirement income account described in section 403(b) with respect to such participant, when expressed as an annual addition to such participant's account, shall be treated as not exceeding the limitation of paragraph (1) if such annual addition is not in excess of $10,000. “(ii) $40,000 aggregate limitation.— The total amount of additions with respect to any participant which may be taken into account for purposes of this subparagraph for all years may not exceed $40,000. “(B) Number of years of service for duly ordained, commissioned, or licensed ministers or lay employees.— For purposes of this paragraph— “(i) all years of service by— “(I) a duly ordained, commissioned, or licensed minister of a church, or “(II) a lay person, as an employee of a church, a convention or association of churches, including an organization described in section 414(e)(3)(B)(ii), shall be considered as years of service for 1 employer, and “(ii) all amounts contributed for annuity contracts by each such church (or convention or association of churches) or such organization during such years for such minister or lay person shall be considered to have been contributed by 1 employer. “(C) Foreign missionaries.— In the case of any individual described in subparagraph (D) performing services outside the United States, contributions and other additions for an annuity contract or retirement income account described in section 403(b) with respect to such employee, when expressed as an annual addition to such employee's account, shall not be treated as exceeding the limitation of paragraph (1) if such annual addition is not in excess of the greater of $3,000 or the employee's includible compensation determined under section 403(b)(3). “(D) Annual addition.— For purposes of this paragraph, the term ‘annual addition’ has the meaning given such term by paragraph (2). “(E) Church, convention or association of churches.— For purposes of this paragraph, the terms ‘church’ and ‘convention or association of churches’ have the same meaning as when used in section 414(e).”. (5) Section 457(e)(5) is amended to read as follows: 26 USC 457. “(5) Includible compensation.— The term ‘includible compensation’ has the meaning given to the term ‘participant's compensation’ by section 415(c)(3).”. (6) Section 402(g)(7)(B) is amended by striking “2001.” and inserting “2001).”. (q) Amendments Relating to Section 643 of the Act.— (1) Section 401(a)(31)(C)(i) is amended by inserting “is a qualified trust which is part of a plan which is a defined contribution plan and” before “agrees”. (2) Section 402(c)(2) is amended by adding at the end the following flush sentence: “In the case of a transfer described in subparagraph (A) or (B), the amount transferred shall be treated as consisting first of the portion of such distribution that is includible in gross income (determined without regard to paragraph (1)).”. (r) Amendments Relating to Section 648 of the Act.— (1) Section 417(e) is amended— (A) in paragraph (1) by striking “exceed the dollar limit under section 411(a)(11)(A)” and inserting “exceed the amount that can be distributed without the participant's consent under section 411(a)(11)”, and (B) in paragraph (2)(A) by striking “exceeds the dollar limit under section 411(a)(11)(A)” and inserting “exceeds the amount that can be distributed without the participant's consent under section 411(a)(11)”. (2) Section 205(g) of the Employee Retirement Income Security Act of 1974 is amended— 26 USC 1055. (A) in paragraph (1) by striking “exceed the dollar limit under section 203(e)(1)” and inserting “exceed the amount that can be distributed without the participant's consent under section 203(e)”, and (B) in paragraph (2)(A) by striking “exceeds the dollar limit under section 203(e)(1)” and inserting “exceeds the amount that can be distributed without the participant's consent under section 203(e)”. (s) Amendment Relating to Section 652 of the Act.— Section 404(a)(1)(D)(iv) is amended by striking “Plans maintained by professional service employers” and inserting “Special rule for terminating plans”. (t) Amendments Relating to Section 657 of the Act.— Section 404(c)(3) of the Employee Retirement Income Security Act of 1974 is amended— 26 USC 1104. (1) by striking “the earlier of” in subparagraph (A) the second place it appears, and (2) by striking “if the transfer” and inserting “a transfer that”. (u) Amendments Relating to Section 659 of the Act.— (1) Section 4980F is amended— (A) in subsection (e)(1) by striking “written notice” and inserting “the notice described in paragraph (2)”, (B) by amending subsection (f)(2)(A) to read as follows: “(A) any defined benefit plan described in section 401(a) which includes a trust exempt from tax under section 501(a), or”, and (C) in subsection (f)(3) by striking “significantly” both places it appears. (2) Section 204(h)(9) of the Employee Retirement Income Security Act of 1974 is amended by striking “significantly” both places it appears. (3) Section 659(c)(3)(B) of the Economic Growth and Tax 26 USC 4980F note. Relief Reconciliation Act of 2001 is amended by striking “(or” and inserting “(and”. (v) Amendments Relating to Section 661 of the Act.— (1) Section 412(c)(9)(B) is amended— (A) in clause (ii) by striking “125 percent” and inserting “100 percent”, and (B) by adding at the end the following new clause: “(i) Limitation.— A change in funding method to use a prior year valuation, as provided in clause (ii), may not be made unless as of the valuation date within the prior plan year, the value of the assets of the plan are not less than 125 percent of the plan's current liability (as defined in paragraph (7)(B)).”. (2) Section 302(c)(9)(B) of the Employee Retirement Income 29 USC 1082. Security Act of 1974 is amended— (A) in clause (ii) by striking “125 percent” and inserting “100 percent”, and (B) by adding at the end the following new clause: “(iv) A change in funding method to use a prior year valuation, as provided in clause (ii), may not be made unless as of the valuation date within the prior plan year, the value of the assets of the plan are not less than 125 percent of the plan's current liability (as defined in paragraph (7)(B)).”. (w) Amendments Relating to Section 662 of the Act.— (1) Section 404(k) is amended— (A) in paragraph (1) by striking “during the taxable year”, (B) in paragraph (2)(B) by striking “(A)(iii)” and inserting “(A)(iv)”, (C) in paragraph (4)(B) by striking “(iii)” and inserting “(iv)”, and (D) by redesignating subparagraph (B) of paragraph (4) (as amended by subparagraph (C)) as subparagraph (C) of paragraph (4) and by inserting after subparagraph (A) the following new subparagraph: “(B) Reinvestment dividends.— For purposes of subparagraph (A), an applicable dividend reinvested pursuant to clause (iii)(II) of paragraph (2)(A) shall be treated as paid in the taxable year of the corporation in which such dividend is reinvested in qualifying employer securities or in which the election under clause (iii) of paragraph (2)(A) is made, whichever is later.”. (2) Section 404(k) is amended by adding at the end the following new paragraph: “(7) Full vesting.— In accordance with section 411, an applicable dividend described in clause (iii)(II) of paragraph (2)(A) shall be subject to the requirements of section 411(a)(1).”. (x) Effective Date.— Except as provided in subsection (c), 26 USC 25B note. the amendments made by this section shall take effect as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 to which they relate.
2002
Job Creation and Worker Assistance Act of 2002
Pub. L. 107–147 § 411(p)(6) · 116 Stat. 21
Substituted · 26 U.S.C. § 402(g)(7)(B)
Pub. L. 107–147, § 411(p)(6), substituted “2001).” for “2001.”
Source evidence
Code amendment note
Subsec. (g)(7)(B). Pub. L. 107–147, § 411(p)(6), substituted “2001).” for “2001.”
Enacted provision · exact public law section
(6) Section 402(g)(7)(B) is amended by striking “2001.” and inserting “2001).”.
2002
Job Creation and Worker Assistance Act of 2002
Pub. L. 107–147 § 411 · 116 Stat. 21
Substituted · 26 U.S.C. § 402(h)(2)(A)
Pub. L. 107–147, § 411(l)(3), substituted “25 percent” for “15 percent”
Source evidence
Code amendment note
Subsec. (h)(2)(A). Pub. L. 107–147, § 411(l)(3), substituted “25 percent” for “15 percent”.
Enacted provision · exact public law section
SEC. 411. AMENDMENTS RELATED TO ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001. (a) Amendments Related to Section 101 of the Act.— (1) In general.— Subsection (b) of section 6428 is amended to read as follows: “(b) Credit Treated as Nonrefundable Personal Credit.— For purposes of this title, the credit allowed under this section shall be treated as a credit allowable under subpart A of part IV of subchapter A of chapter 1.”. (2) Conforming amendments.— “(A) Subsection (d) of section 6428 is amended to read as follows: “(d) Coordination with Advance Refunds of Credit.— “(1) In general.— The amount of credit which would (but for this paragraph) be allowable under this section shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer under subsection (e). Any failure to so reduce the credit shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1). “(2) Joint returns.— In the case of a refund or credit made or allowed under subsection (e) with respect to a joint return, half of such refund or credit shall be treated as having been made or allowed to each individual filing such return.”. (B) Paragraph (2) of section 6428(e) is amended to read as follows: “(2) Advance refund amount.— For purposes of paragraph (1), the advance refund amount is the amount that would have been allowed as a credit under this section for such first taxable year if— “(A) this section (other than subsections (b) and (d) and this subsection) had applied to such taxable year, and “(B) the credit for such taxable year were not allowed to exceed the excess (if any) of— “(i) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over “(ii) the sum of the credits allowable under part IV of subchapter A of chapter 1 (other than the credits allowable under subpart C thereof, relating to refundable credits).”. (b) Amendment Related to Section 201 of the Act..— Subparagraph (B) of section 24(d)(1) is amended by striking 26 USC 24. “amount of credit allowed by this section” and inserting “aggregate amount of credits allowed by this subpart”. (c) Amendments Related to Section 202 of the Act.— (1) Corrections to credit for adoption expenses.— (A) Paragraph (1) of section 23(a) is amended to read as follows: “(1) In general.— In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter the amount of the qualified adoption expenses paid or incurred by the taxpayer.”. (B) Subsection (a) of section 23 is amended by adding at the end the following new paragraph: “(3) $10,000 credit for adoption of child with special needs regardless of expenses.— In the case of an adoption of a child with special needs which becomes final during a taxable year, the taxpayer shall be treated as having paid during such year qualified adoption expenses with respect to such adoption in an amount equal to the excess (if any) of $10,000 over the aggregate qualified adoption expenses actually paid or incurred by the taxpayer with respect to such adoption during such taxable year and all prior taxable years.”. (C) Paragraph (2) of section 23(a) is amended by striking the last sentence. (D) Paragraph (1) of section 23(b) is amended by striking “subsection (a)(1)(A)” and inserting “subsection (a)”. (E) Subsection (i) of section 23 is amended by striking “the dollar limitation in subsection (b)(1)” and inserting “the dollar amounts in subsections (a)(3) and (b)(1)”. (F) Expenses paid or incurred during any taxable year 26 USC 23 note. , beginning before January 1, 2002, may be taken into account in determining the credit under section 23 of the Internal Revenue Code of 1986 only to the extent the aggregate of such expenses does not exceed the applicable limitation under section 23(b)(1) of such Code as in effect on the day before the date of the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001. (2) Corrections to exclusion for employer-provided adoption assistance.— (A) Subsection (a) of section 137 is amended to read as follows: “(a) Exclusion.— “(1) In general.— Gross income of an employee does not include amounts paid or expenses incurred by the employer for qualified adoption expenses in connection with the adoption of a child by an employee if such amounts are furnished pursuant to an adoption assistance program. “(2) $10,000 exclusion for adoption of child with special needs regardless of expenses.— In the case of an adoption of a child with special needs which becomes final during a taxable year, the qualified adoption expenses with respect to such adoption for such year shall be increased by an amount equal to the excess (if any) of $10,000 over the actual aggregate qualified adoption expenses with respect to such adoption during such taxable year and all prior taxable years.”. (B) Paragraph (2) of section 137(b) is amended by striking “subsection (a)(1)” and inserting “subsection (a)”. (3) Effective date.— The amendments made by this subsection 26 USC 23 note. shall apply to taxable years beginning after December 31, 2002; except that the amendments made by paragraphs (1)(C), (1)(D), and (2)(B) shall apply to taxable years beginning after December 31, 2001. (d) Amendments Related to Section 205 of the Act.— (1) Section 45F(d)(4)(B) is amended by striking “subpart A, B, or D of this part” and inserting “this chapter or for purposes of section 55”. (2) Section 38(b)(15) is amended by striking “45F” and inserting “45F(a)”. (e) Amendments Related to Section 301 of the Act.— (1) Section 63(c)(2) is amended— (A) in subparagraph (A), by striking “subparagraph (C)” and inserting “subparagraph (D)”, (B) by striking “or” at the end of subparagraph (B), (C) by redesignating subparagraph (C) as subparagraph (D), (D) by inserting after subparagraph (B) the following new subparagraph: “(C) one-half of the amount in effect under subparagraph (A) in the case of a married individual filing a separate return, or”, and (E) by inserting the following flush sentence at the end: “If any amount determined under subparagraph (A) is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.”. (2) (A) Section 63(c)(4) is amended by striking “paragraph (2) or (5)” and inserting “paragraph (2)(B), (2)(1)), or (5)”. (B) Section 63(c)(4)(B)(i) is amended by striking “paragraph (2)” and inserting “paragraph (2)(B), (2)(D),”. (C) Section 63(c)(4) is amended by striking the flush sentence at the end (as added by section 301(c)(2) of Public Law 107-17). (f) Amendment Related to Section 401 of the Act.— Section 530(d)(4)(B)(iv) is amended by striking “because the taxpayer elected under paragraph (2)(C) to waive the application of paragraph (2)” and inserting “by application of paragraph (2)(C)(i)(II)”. (g) Amendments Related to Section 511 of the Act.— (1) Section 2511(c) is amended by striking “taxable gift under section 2503,” and inserting “transfer of property by gift,”. (2) Section 2101(b) is amended by striking the last sentence, (h) Amendment Related to Section 532 of the Act.— Section 2016 is amended by striking “any State, any possession of the United States, or the District of Columbia,”. (i) Amendments Relating to Section 602 of the Act.— (1) Subparagraph (A) of section 408(q)(3) is amended to read as follows: “(A) Qualified employer plan.— The term ‘qualified employer plan’ has the meaning given such term by section 72(p)(4)(A)(i); except that such term shall also include an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A).”. (2) Section 4(c) of Employee Retirement Income Security Act of 1974 is amended— 29 USC 1003. (A) by inserting “and part 5 (relating to administration and enforcement)” before the period at the end, and (B) by adding at the end the following new sentence: “Such provisions shall apply to such accounts and annuities Applicability. in a manner similar to their application to a simplified employee pension under section 408(k) of the Internal Revenue Code of 1986.”. (j) Amendments Relating to Section 611 of the Act.— (1) Section 408(k) is amended— 26 USC 408. (A) in paragraph (2)(C) by striking “$300” and inserting “$450”, and (B) in paragraph (8) by striking “$300” both places it appears and inserting “$450”. (2) Section 409(o)(1)(C)(ii) is amended— (A) by striking “$500,000” both places it appears and inserting “$800,000”, and (B) by striking “$100,000” and inserting “$160,000”. (3) Section 611(i) of the Economic Growth and Tax Relief Reconciliation Act of 2001 is amended by adding at the end 26 USC 415 note. the following new paragraph: “(3) Special rule.— In the case of plan that, on June 7, 2001, incorporated by reference the limitation of section 415(b)(1)(A) of the Internal Revenue Code of 1986, section 411(d)(6) of such Code and section 204(g)(1) of the Employee Retirement Income Security Act of 1974 do not apply to a plan amendment that— “(A) is adopted on or before June 30, 2002, “(B) reduces benefits to the level that would have applied without regard to the amendments made by subsection (a) of this section, and “(C) is effective no earlier than the years described in paragraph (2).”. (k) Amendments Relating to Section 613 of the Act.— (1) Section 416(c)(1)(C)(iii) is amended by striking “Exception for frozen plan” and inserting “exception for plan under which no key employee (or former key employee) benefits for plan year”. (2) Section 416(g)(3)(B) is amended by striking “separation from service” and inserting “severance from employment”. (l) Amendments Relating to Sections 614 and 616 of the Act.— (1) Section 404(a)(12) is amended by striking “(9),” and inserting “(9) and subsection (h)(1)(C),”. (2) Section 404(n) is amended by striking “subsection (a),” and inserting “subsection (a) or paragraph (1)(C) of subsection (h)”. (3) Section 402(h)(2)(A) is amended by striking “15 percent” and inserting “25 percent”. (4) Section 404(a)(7)(C) is amended to read as follows: “(C) Paragraph not to apply in certain cases.— “(i) Beneficiary test.— This paragraph shall not have the effect of reducing the amount otherwise deductible under paragraphs (1), (2), and (3), if no employee is a beneficiary under more than 1 trust or under a trust and an annuity plan. “(ii) Elective deferrals.— If, in connection with 1 or more defined contribution plans and 1 or more defined benefit plans, no amounts (other than elective deferrals (as defined in section 402(g)(3))) are contributed to any of the defined contribution plans for the taxable year, then subparagraph (A) shall not apply with respect to any of such defined contribution plans and defined benefit plans.”. (m) Amendment Relating to Section 618 of the Act.— 26 USC 25B. Section 25B(d)(2)(A) is amended to read as follows: “(A) In general.— The qualified retirement savings contributions determined under paragraph (1) shall be reduced (but not below zero) by the aggregate distributions received by the individual during the testing period from any entity of a type to which contributions under paragraph (1) may be made. The preceding sentence shall not apply to the portion of any distribution which is not includible in gross income by reason of a trustee-to-trustee transfer or a rollover distribution.”. (n) Amendments Relating to Section 619 of the Act.— (1) Section 45E(e)(1) is amended by striking “(n)” and inserting “(m)”. (2) Section 619(d) of the Economic Growth and Tax Relief 26 USC 38 note. Reconciliation Act of 2001 is amended by striking “established” and inserting “first effective”. (o) Amendments Relating to Section 631 of the Act.— (1) Section 402(g)(1) is amended by adding at the end the following: “(C) Catch-up contributions.— In addition to subparagraph (A), in the case of an eligible participant (as defined in section 414(v)), gross income shall not include elective deferrals in excess of the applicable dollar amount under subparagraph (B) to the extent that the amount of such elective deferrals does not exceed the applicable dollar amount under section 414(v)(2)(B)(i) for the taxable year (without regard to the treatment of the elective deferrals by an applicable employer plan under section 414(v)).”. (2) Section 401(a)(30) is amended by striking “402(g)(1)” and inserting “402(g)(1)(A)”. (3) Section 414(v)(2) is amended by adding at the end the following: “(D) Aggregation of plans.— For purposes of this paragraph, plans described in clauses (i), (ii), and (iv) of paragraph (6)(A) that are maintained by the same employer (as determined under subsection (b), (c), (m) or (o)) shall be treated as a single plan, and plans described in clause (iii) of paragraph (6)(A) that are maintained by the same employer shall be treated as a single plan.”. (4) Section 414(v)(3)(A)(i) is amended by striking “section 402(g), 402(h), 403(b), 404(a), 404(h), 408(k), 408(p), 415, or 457” and inserting “sections 401(a)(30), 402(h), 403(b), 408, 415(c), and 457(b)(2) (determined without regard to section 457(b)(3))”. (5) Section 414(v)(3)(B) is amended by striking “section 401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12), 403(b)(12), 408(k), 408(p), 408B, 410(b), or 416” and inserting “section 401(a)(4), 401(k)(3), 401(k)(11), 403(b)(12), 408(k), 410(b), or 416”. (6) Section 414(v)(4)(B) is amended by inserting before 26 USC 414. the period at the end the following: “, except that a plan described in clause (i) of section 410(b)(6)(C) shall not be treated as a plan of the employer until the expiration of the transition period with respect to such plan (as determined under clause (ii) of such section)”. (7) Section 414(v)(5) is amended— (A) by striking “, with respect to any plan year,” in the matter preceding subparagraph (A), (B) by amending subparagraph (A) to read as follows: “(A) who would attain age 50 by the end of the taxable year,”, and (C) in subparagraph (B) by striking “plan year” and inserting “plan (or other applicable) year”. (8) Section 414(v)(6)(C) is amended to read as follows: “(C) Exception for section 457 plans.—This subsection shall not apply to a participant for any year for which a higher limitation applies to the participant under section 457(b)(3).”. (9) Section 457(e) is amended by adding at the end the following new paragraph: “(18) Coordination with catch-up contributions for individuals age 50 or older.— In the case of an individual who is an eligible participant (as defined by section 414(v)) and who is a participant in an eligible deferred compensation plan of an employer described in paragraph (I)(A), subsections (b)(3) and (c) shall be applied by substituting for the amount otherwise determined under the applicable subsection the greater of— “(A) the sum of— “(i) the plan ceiling established for purposes of subsection (b)(2) (without regard to subsection (b)(3)), plus “(ii) the applicable dollar amount for the taxable year determined under section 414(v)(2)(B)(i), or “(B) the amount determined under the applicable subsection (without regard to this paragraph).”. (p) Amendments Relating to Section 632 of the Act.— (1) Section 403(b)(1) is amended in the matter following subparagraph (E) by striking “then amounts contributed” and all that follows and inserting the following: “then contributions and other additions by such employer for such annuity contract shall be excluded from the gross income of the employee for the taxable year to the extent that the aggregate of such contributions and additions (when expressed as an annual addition (within the meaning of section 415(c)(2))) does not exceed the applicable limit under section 415. The amount actually distributed to any distributee under such contract shall be taxable to the distributee (in the year in which so distributed) under section 72 (relating to annuities). For purposes of applying the rules of this subsection to contributions and other additions by an employer for a taxable year, amounts transferred to a contract described in this paragraph by reason of a rollover contribution described in paragraph (8) of this subsection or section 408(d)(3)(A)(ii) shall not be considered contributed by such employer.”. (2) Section 403(b) is amended by striking paragraph (6). (3) Section 403(b)(3) is amended— (A) in the first sentence by inserting the following before the period at the end: and which precedes the taxable year by no more than five years”, and (B) in the second sentence by striking “or any amount received by a former employee after the fifth taxable year following the taxable year in which such employee was terminated”. (4) Section 415(c)(7) is amended to read as follows: “(7) Special rules relating to church plans.— “(A) Alternative contribution limitation.— “(i) In general.— Notwithstanding any other provision of this subsection, at the election of a participant who is an employee of a church or a convention or association of churches, including an organization described in section 414(e)(3)(B)(ii), contributions and other additions for an annuity contract or retirement income account described in section 403(b) with respect to such participant, when expressed as an annual addition to such participant's account, shall be treated as not exceeding the limitation of paragraph (1) if such annual addition is not in excess of $10,000. “(ii) $40,000 aggregate limitation.— The total amount of additions with respect to any participant which may be taken into account for purposes of this subparagraph for all years may not exceed $40,000. “(B) Number of years of service for duly ordained, commissioned, or licensed ministers or lay employees.— For purposes of this paragraph— “(i) all years of service by— “(I) a duly ordained, commissioned, or licensed minister of a church, or “(II) a lay person, as an employee of a church, a convention or association of churches, including an organization described in section 414(e)(3)(B)(ii), shall be considered as years of service for 1 employer, and “(ii) all amounts contributed for annuity contracts by each such church (or convention or association of churches) or such organization during such years for such minister or lay person shall be considered to have been contributed by 1 employer. “(C) Foreign missionaries.— In the case of any individual described in subparagraph (D) performing services outside the United States, contributions and other additions for an annuity contract or retirement income account described in section 403(b) with respect to such employee, when expressed as an annual addition to such employee's account, shall not be treated as exceeding the limitation of paragraph (1) if such annual addition is not in excess of the greater of $3,000 or the employee's includible compensation determined under section 403(b)(3). “(D) Annual addition.— For purposes of this paragraph, the term ‘annual addition’ has the meaning given such term by paragraph (2). “(E) Church, convention or association of churches.— For purposes of this paragraph, the terms ‘church’ and ‘convention or association of churches’ have the same meaning as when used in section 414(e).”. (5) Section 457(e)(5) is amended to read as follows: 26 USC 457. “(5) Includible compensation.— The term ‘includible compensation’ has the meaning given to the term ‘participant's compensation’ by section 415(c)(3).”. (6) Section 402(g)(7)(B) is amended by striking “2001.” and inserting “2001).”. (q) Amendments Relating to Section 643 of the Act.— (1) Section 401(a)(31)(C)(i) is amended by inserting “is a qualified trust which is part of a plan which is a defined contribution plan and” before “agrees”. (2) Section 402(c)(2) is amended by adding at the end the following flush sentence: “In the case of a transfer described in subparagraph (A) or (B), the amount transferred shall be treated as consisting first of the portion of such distribution that is includible in gross income (determined without regard to paragraph (1)).”. (r) Amendments Relating to Section 648 of the Act.— (1) Section 417(e) is amended— (A) in paragraph (1) by striking “exceed the dollar limit under section 411(a)(11)(A)” and inserting “exceed the amount that can be distributed without the participant's consent under section 411(a)(11)”, and (B) in paragraph (2)(A) by striking “exceeds the dollar limit under section 411(a)(11)(A)” and inserting “exceeds the amount that can be distributed without the participant's consent under section 411(a)(11)”. (2) Section 205(g) of the Employee Retirement Income Security Act of 1974 is amended— 26 USC 1055. (A) in paragraph (1) by striking “exceed the dollar limit under section 203(e)(1)” and inserting “exceed the amount that can be distributed without the participant's consent under section 203(e)”, and (B) in paragraph (2)(A) by striking “exceeds the dollar limit under section 203(e)(1)” and inserting “exceeds the amount that can be distributed without the participant's consent under section 203(e)”. (s) Amendment Relating to Section 652 of the Act.— Section 404(a)(1)(D)(iv) is amended by striking “Plans maintained by professional service employers” and inserting “Special rule for terminating plans”. (t) Amendments Relating to Section 657 of the Act.— Section 404(c)(3) of the Employee Retirement Income Security Act of 1974 is amended— 26 USC 1104. (1) by striking “the earlier of” in subparagraph (A) the second place it appears, and (2) by striking “if the transfer” and inserting “a transfer that”. (u) Amendments Relating to Section 659 of the Act.— (1) Section 4980F is amended— (A) in subsection (e)(1) by striking “written notice” and inserting “the notice described in paragraph (2)”, (B) by amending subsection (f)(2)(A) to read as follows: “(A) any defined benefit plan described in section 401(a) which includes a trust exempt from tax under section 501(a), or”, and (C) in subsection (f)(3) by striking “significantly” both places it appears. (2) Section 204(h)(9) of the Employee Retirement Income Security Act of 1974 is amended by striking “significantly” both places it appears. (3) Section 659(c)(3)(B) of the Economic Growth and Tax 26 USC 4980F note. Relief Reconciliation Act of 2001 is amended by striking “(or” and inserting “(and”. (v) Amendments Relating to Section 661 of the Act.— (1) Section 412(c)(9)(B) is amended— (A) in clause (ii) by striking “125 percent” and inserting “100 percent”, and (B) by adding at the end the following new clause: “(i) Limitation.— A change in funding method to use a prior year valuation, as provided in clause (ii), may not be made unless as of the valuation date within the prior plan year, the value of the assets of the plan are not less than 125 percent of the plan's current liability (as defined in paragraph (7)(B)).”. (2) Section 302(c)(9)(B) of the Employee Retirement Income 29 USC 1082. Security Act of 1974 is amended— (A) in clause (ii) by striking “125 percent” and inserting “100 percent”, and (B) by adding at the end the following new clause: “(iv) A change in funding method to use a prior year valuation, as provided in clause (ii), may not be made unless as of the valuation date within the prior plan year, the value of the assets of the plan are not less than 125 percent of the plan's current liability (as defined in paragraph (7)(B)).”. (w) Amendments Relating to Section 662 of the Act.— (1) Section 404(k) is amended— (A) in paragraph (1) by striking “during the taxable year”, (B) in paragraph (2)(B) by striking “(A)(iii)” and inserting “(A)(iv)”, (C) in paragraph (4)(B) by striking “(iii)” and inserting “(iv)”, and (D) by redesignating subparagraph (B) of paragraph (4) (as amended by subparagraph (C)) as subparagraph (C) of paragraph (4) and by inserting after subparagraph (A) the following new subparagraph: “(B) Reinvestment dividends.— For purposes of subparagraph (A), an applicable dividend reinvested pursuant to clause (iii)(II) of paragraph (2)(A) shall be treated as paid in the taxable year of the corporation in which such dividend is reinvested in qualifying employer securities or in which the election under clause (iii) of paragraph (2)(A) is made, whichever is later.”. (2) Section 404(k) is amended by adding at the end the following new paragraph: “(7) Full vesting.— In accordance with section 411, an applicable dividend described in clause (iii)(II) of paragraph (2)(A) shall be subject to the requirements of section 411(a)(1).”. (x) Effective Date.— Except as provided in subsection (c), 26 USC 25B note. the amendments made by this section shall take effect as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 to which they relate.
2005
Tax Technical Corrections Act of 2005
Pub. L. 109–135 § 407(a)(2) · 119 Stat. 2577
Inserted · 26 U.S.C. § 402(g)(1)(A)
Pub. L. 109–135, § 407(a)(2), inserted “to” after “shall not apply”
Source evidence
Code amendment note
Subsec. (g)(1)(A). Pub. L. 109–135, § 407(a)(2), inserted “to” after “shall not apply”.
Enacted provision · exact public law section
(2) Subparagraph (A) of section 402(g)(1) is amended by inserting “to” after “shall not apply”.
2005
Tax Technical Corrections Act of 2005
Pub. L. 109–135 § 407(a)(1) · 119 Stat. 2577
Amended · 26 U.S.C. § 402(g)(7)(A)(ii)
Pub. L. 109–135, § 407(a)(1), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “$15,000 reduced by amounts not included in gross income for prior taxable years by reason of this paragraph, or”
Source evidence
Code amendment note
Subsec. (g)(7)(A)(ii). Pub. L. 109–135, § 407(a)(1), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “$15,000 reduced by amounts not included in gross income for prior taxable years by reason of this paragraph, or”.
Enacted provision · exact public law section
(1) Clause (ii) of section 402(g)(7)(A) is 26 USC 402. amended to read as follows: “(ii) $15,000 reduced by the sum of— “(I) the amounts not included in gross income for prior taxable years by reason of this paragraph, plus “(II) the aggregate amount of designated Roth contributions (as defined in section 402A(c)) for prior taxable years, or” .
2006
Pub. L. 109–280 § 822(a) · 120 Stat. 780
1. Substituted · 26 U.S.C. § 402(c)(2)(A)
  Pub. L. 109–280, § 822(a), which directed the amendment of section 402(c)(2)(A) by substituting “or to an annuity contract described in section 403(b) and such trust or contract provides for separate accounting” for “which is part of a plan which is a defined contribution plan and which agrees to separately account”
2. Inserted · 26 U.S.C. § 402(c)(2)(A)
  Pub. L. 109–280, § 822(a), which directed the amendment of section 402(c)(2)(A) by inserting “(and earnings thereon)” after “so transferred”, without specifying the act to be amended, was executed to this section, which is section 402(c)(2)(A) of the Internal Revenue Code of 1986, to reflect the probable intent of Congress
Source evidence
Code amendment note
Subsec. (c)(2)(A). Pub. L. 109–280, § 822(a), which directed the amendment of section 402(c)(2)(A) by substituting “or to an annuity contract described in section 403(b) and such trust or contract provides for separate accounting” for “which is part of a plan which is a defined contribution plan and which agrees to separately account” and inserting “(and earnings thereon)” after “so transferred”, without specifying the act to be amended, was executed to this section, which is section 402(c)(2)(A) of the Internal Revenue Code of 1986, to reflect the probable intent of Congress.
Enacted provision · exact public law section
(a) In General.— Subparagraph (A) of section 26 USC 402. 402(c)(2) (relating to the maximum amount which may be rolled over) is amended— (1) by striking “which is part of a plan which is a defined contribution plan and which agrees to separately account” and inserting “or to an annuity contract described in section 403(b) and such trust or contract provides for separate accounting”; and (2) by inserting “(and earnings thereon)” after “so transferred”.
2006
Pub. L. 109–280 § 829(a)(1) · 120 Stat. 780
Added · 26 U.S.C. § 402(c)(11)
Pub. L. 109–280, § 829(a)(1), added par. (11)
Source evidence
Code amendment note
Subsec. (c)(11). Pub. L. 109–280, § 829(a)(1), added par. (11).
Enacted provision · exact public law section
(1) Qualified plans.— Section 402(c) of the Internal Revenue Code of 1986 (relating to rollovers from exempt trusts) is amended by adding at the end the following new paragraph: “(11) Distributions to inherited individual retirement plan of nonspouse beneficiary.— “(A) In general.— If, with respect to any portion of a distribution from an eligible retirement plan of a deceased employee, a direct trustee-to-trustee transfer is made to an individual retirement plan described in clause (i) or (ii) of paragraph (8)(B) established for the purposes of receiving the distribution on behalf of an individual who is a designated beneficiary (as defined by section 401(a)(9)(E)) of the employee and who is not the surviving spouse of the employee— “(i) the transfer shall be treated as an eligible rollover distribution for purposes of this subsection, “(ii) the individual retirement plan shall be treated as an inherited individual retirement account or individual retirement annuity (within the meaning of section 408(d)(3)(C)) for purposes of this title, and “(iii) Applicability. section 401(a)(9)(B) (other than clause (iv) thereof) shall apply to such plan. “(B) Certain trusts treated as beneficiaries.— For purposes of this paragraph, to the extent provided in rules prescribed by the Secretary, a trust maintained for the benefit of one or more designated beneficiaries shall be treated in the same manner as a trust designated beneficiary.” .
2006
Pub. L. 109–280 § 845(a) · 120 Stat. 780
Added · 26 U.S.C. § 402(l)
Pub. L. 109–280, § 845(a), added subsec. (l)
Source evidence
Code amendment note
Subsec. (l). Pub. L. 109–280, § 845(a), added subsec. (l).
Enacted provision · exact public law section
(a) In General.— Section 402 of the Internal Revenue Code of 1986 (relating to taxability of beneficiary of employees’ trust) is amended by adding at the end the following new subsection: “(l) Distributions From Governmental Plans for Health and Long-Term Care Insurance.— “(1) In general.— In the case of an employee who is an eligible retired public safety officer who makes the election described in paragraph (6) with respect to any taxable year of such employee, gross income of such employee for such taxable year does not include any distribution from an eligible retirement plan to the extent that the aggregate amount of such distributions does not exceed the amount paid by such employee for qualified health insurance premiums of the employee, his spouse, or dependents (as defined in section 152) for such taxable year. “(2) Limitation.— The amount which may be excluded from gross income for the taxable year by reason of paragraph (1) shall not exceed $3,000. “(3) Distributions must otherwise be includible.— “(A) In general.— An amount shall be treated as a distribution for purposes of paragraph (1) only to the extent that such amount would be includible in gross income without regard to paragraph (1). “(B) Application of section 72.— Notwithstanding section 72, in determining the extent to which an amount is treated as a distribution for purposes of subparagraph (A), the aggregate amounts distributed from an eligible retirement plan in a taxable year (up to the amount excluded under paragraph (1)) shall be treated as includible in gross income (without regard to subparagraph (A)) to the extent that such amount does not exceed the aggregate amount which would have been so includible if all amounts distributed from all eligible retirement plans were treated as 1 contract for purposes of determining the inclusion of such distribution under section 72. Proper adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years. “(4) Definitions.— For purposes of this subsection— “(A) Eligible retirement plan.— For purposes of paragraph (1), the term ‘eligible retirement plan’ means a governmental plan (within the meaning of section 414(d)) which is described in clause (iii), (iv), (v), or (vi) of subsection (c)(8)(B). “(B) Eligible retired public safety officer.— The term ‘eligible retired public safety officer’ means an individual who, by reason of disability or attainment of normal retirement age, is separated from service as a public safety officer with the employer who maintains the eligible retirement plan from which distributions subject to paragraph (1) are made. “(C) Public safety officer.— The term ‘public safety officer’ shall have the same meaning given such term by section 1204(9)(A) of the Omnibus Crime Control and Safe Streets Act of 1968 (42 U.S.C. 3796b(9)(A)). “(D) Qualified health insurance premiums.— The term ‘qualified health insurance premiums’ means premiums for coverage for the eligible retired public safety officer, his spouse, and dependents, by an accident or health insurance plan or qualified long-term care insurance contract (as defined in section 7702B(b)). “(5) Special rules.— For purposes of this subsection— “(A) Direct payment to insurer required.— Paragraph (1) shall only apply to a distribution if payment of the premiums is made directly to the provider of the accident or health insurance plan or qualified long-term care insurance contract by deduction from a distribution from the eligible retirement plan. “(B) Related plans treated as 1.— All eligible retirement plans of an employer shall be treated as a single plan. “(6) Election described.— “(A) In general.— For purposes of paragraph (1), an election is described in this paragraph if the election is made by an employee after separation from service with respect to amounts not distributed from an eligible retirement plan to have amounts from such plan distributed in order to pay for qualified health insurance premiums. “(B) Special rule.— A plan shall not be treated as violating the requirements of section 401, or as engaging in a prohibited transaction for purposes of section 503(b), merely because it provides for an election with respect to amounts that are otherwise distributable under the plan or merely because of a distribution made pursuant to an election described in subparagraph (A). “(7) Coordination with medical expense deduction.— The amounts excluded from gross income under paragraph (1) shall not be taken into account under section 213. “(8) Coordination with deduction for health insurance costs of self-employed individuals.— The amounts excluded from gross income under paragraph (1) shall not be taken into account under section 162(l).” .
2007
Tax Technical Corrections Act of 2007
Pub. L. 110–172 § 8(a)(1) · 121 Stat. 2473
Substituted · 26 U.S.C. § 402(g)(7)(A)(ii)(II)
Pub. L. 110–172 substituted “permitted for prior taxable years by reason of this paragraph” for “for prior taxable years”. Amendment was executed to subsec. (g)(7)(A)(ii) as amended by Pub. L. 109–135, § 407(a)(1), as the probable intent of Congress, notwithstanding Pub. L. 110–172, § 8(b), which provided that the amendment take effect as if included in the provisions of Pub. L. 107–16 to which it relates. See 2006 Amendment note and Effective Date of 2007 Amendment note below
Source evidence
Code amendment note
Subsec. (g)(7)(A)(ii)(II). Pub. L. 110–172 substituted “permitted for prior taxable years by reason of this paragraph” for “for prior taxable years”. Amendment was executed to subsec. (g)(7)(A)(ii) as amended by Pub. L. 109–135, § 407(a)(1), as the probable intent of Congress, notwithstanding Pub. L. 110–172, § 8(b), which provided that the amendment take effect as if included in the provisions of Pub. L. 107–16 to which it relates. See 2006 Amendment note and Effective Date of 2007 Amendment note below.
Enacted provision · exact public law section
(1) Subclause (II) of section 402(g)(7)(A)(ii) is amended by striking “for prior taxable years” and inserting “permitted for prior taxable years by reason of this paragraph”.
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 201(b) · 122 Stat. 5092
Inserted · 26 U.S.C. § 402(c)(4)
Pub. L. 110–458, § 201(b), inserted concluding provisions
Source evidence
Code amendment note
Subsec. (c)(4). Pub. L. 110–458, § 201(b), inserted concluding provisions.
Enacted provision · exact public law section
(b) Eligible Rollover Distributions.— Section 402(c)(4) of the Internal Revenue Code of 1986 26 USC 402. (defining eligible rollover distribution) is amended by adding at the end the following new flush sentence: “If all or any portion of a distribution during 2009 is treated as an eligible rollover distribution but would not be so treated if the minimum distribution requirements under section 401(a)(9) had applied during 2009, such distribution shall not be treated as an eligible rollover distribution for purposes of section 401(a)(31) or 3405(c) or subsection (f) of this section.” .
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 108(f)(1)(A) · 122 Stat. 5092
Inserted · 26 U.S.C. § 402(c)(11)(A)
Pub. L. 110–458, § 108(f)(1)(A), inserted “described in paragraph (8)(B)(iii)” after “eligible retirement plan” in introductory provisions
Source evidence
Code amendment note
Subsec. (c)(11)(A). Pub. L. 110–458, § 108(f)(1)(A), inserted “described in paragraph (8)(B)(iii)” after “eligible retirement plan” in introductory provisions.
Enacted provision · exact public law section
(A) by inserting “described in paragraph (8)(B)(iii)” after “eligible retirement plan” in subparagraph (A), and
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 108(f)(2)(B) · 122 Stat. 5092
Struck · 26 U.S.C. § 402(c)(11)(A)(i)
Pub. L. 110–458, § 108(f)(2)(B), struck out “for purposes of this subsection” after “eligible rollover distribution”
Source evidence
Code amendment note
Subsec. (c)(11)(A)(i). Pub. L. 110–458, § 108(f)(2)(B), struck out “for purposes of this subsection” after “eligible rollover distribution”.
Enacted provision · exact public law section
(B) Clause (i) of section 402(c)(11)(A) of the 1986 Code is amended by striking “for purposes of this subsection”.
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 108(f)(1)(B) · 122 Stat. 5092
Struck · 26 U.S.C. § 402(c)(11)(B)
Pub. L. 110–458, § 108(f)(1)(B), struck out “trust” before “designated beneficiary”
Source evidence
Code amendment note
Subsec. (c)(11)(B). Pub. L. 110–458, § 108(f)(1)(B), struck out “trust” before “designated beneficiary”.
Enacted provision · exact public law section
(B) by striking “trust” before “designated beneficiary” in subparagraph (B).
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 108(f)(2)(A) · 122 Stat. 5092
Inserted · 26 U.S.C. § 402(f)(2)(A)
Pub. L. 110–458, § 108(f)(2)(A), inserted at end “Such term shall include any distribution to a designated beneficiary which would be treated as an eligible rollover distribution by reason of subsection (c)(11), or section 403(a)(4)(B), 403(b)(8)(B), or 457(e)(16)(B), if the requirements of subsection (c)(11) were satisfied.”
Source evidence
Code amendment note
Subsec. (f)(2)(A). Pub. L. 110–458, § 108(f)(2)(A), inserted at end “Such term shall include any distribution to a designated beneficiary which would be treated as an eligible rollover distribution by reason of subsection (c)(11), or section 403(a)(4)(B), 403(b)(8)(B), or 457(e)(16)(B), if the requirements of subsection (c)(11) were satisfied.”
Enacted provision · exact public law section
(A) Section 402(f)(2)(A) of the 1986 Code is amended by adding at the end the following new sentence: “Such term shall include any distribution to a designated beneficiary which would be treated as an eligible rollover distribution by reason of subsection (c)(11), or section 403(a)(4)(B), 403(b)(8)(B), or 457(e)(16)(B), if the requirements of subsection (c)(11) were satisfied.”
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 109(b)(3) · 122 Stat. 5092
Inserted · 26 U.S.C. § 402(g)(2)(A)(ii)
Pub. L. 110–458, § 109(b)(3), inserted “through the end of such taxable year” after “such amount”
Source evidence
Code amendment note
Subsec. (g)(2)(A)(ii). Pub. L. 110–458, § 109(b)(3), inserted “through the end of such taxable year” after “such amount”.
Enacted provision · exact public law section
(3) Section 402(g)(2)(A)(ii) of the 1986 Code 26 USC 402. is amended by inserting “through the end of such taxable year” after “such amount”.
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 108(j)(1)(A) · 122 Stat. 5092
1. Inserted · 26 U.S.C. § 402(l)(1)
  Pub. L. 110–458, § 108(j)(1)(A), inserted “maintained by the employer described in paragraph (4)(B)” after “an eligible retirement plan”
2. Struck · 26 U.S.C. § 402(l)(1)
  Pub. L. 110–458, § 108(j)(1)(A), struck out “of the employee, his spouse, or dependents (as defined in section 152)” after “qualified health insurance premiums”
Source evidence
Code amendment note
Subsec. (l)(1). Pub. L. 110–458, § 108(j)(1)(A), inserted “maintained by the employer described in paragraph (4)(B)” after “an eligible retirement plan” and struck out “of the employee, his spouse, or dependents (as defined in section 152)” after “qualified health insurance premiums”.
Enacted provision · exact public law section
(A) in paragraph (1)— (i) by inserting “maintained by the employer described in paragraph (4)(B)” after “an eligible retirement plan”, and (ii) by striking “of the employee, his spouse, or dependents (as defined in section 152)” ,
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 108(j)(2) · 122 Stat. 5092
Substituted · 26 U.S.C. § 402(l)(3)(B)
Pub. L. 110–458, § 108(j)(2), substituted “all amounts to the credit of the eligible public safety officer in all eligible retirement plans maintained by the employer described in paragraph (4)(B) were distributed during such taxable year and all such plans were treated as 1 contract for purposes of determining under section 72 the aggregate amount which would have been so includible” for “all amounts distributed from all eligible retirement plans were treated as 1 contract for purposes of determining the inclusion of such distribution under section 72”
Source evidence
Code amendment note
Subsec. (l)(3)(B). Pub. L. 110–458, § 108(j)(2), substituted “all amounts to the credit of the eligible public safety officer in all eligible retirement plans maintained by the employer described in paragraph (4)(B) were distributed during such taxable year and all such plans were treated as 1 contract for purposes of determining under section 72 the aggregate amount which would have been so includible” for “all amounts distributed from all eligible retirement plans were treated as 1 contract for purposes of determining the inclusion of such distribution under section 72”.
Enacted provision · exact public law section
(2) Subparagraph (B) of section 402(l)(3) of the 1986 Code is amended by striking “all amounts distributed from all eligible retirement plans were treated as 1 contract for purposes of determining the inclusion of such distribution under section 72” and inserting “all amounts to the credit of the eligible public safety officer in all eligible retirement plans maintained by the employer described in paragraph (4)(B) were distributed during such taxable year and all such plans were treated as 1 contract for purposes of determining under section 72 the aggregate amount which would have been so includible”.
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 108(j)(1)(B) · 122 Stat. 5092
1. Inserted · 26 U.S.C. § 402(l)(4)(D)
  Pub. L. 110–458, § 108(j)(1)(B), inserted “(as defined in section 152)” after “dependents”
2. Substituted · 26 U.S.C. § 402(l)(4)(D)
  Pub. L. 110–458, § 108(j)(1)(B), substituted “health plan” for “health insurance plan”
Source evidence
Code amendment note
Subsec. (l)(4)(D). Pub. L. 110–458, § 108(j)(1)(B), inserted “(as defined in section 152)” after “dependents” and substituted “health plan” for “health insurance plan”.
Enacted provision · exact public law section
(B) in paragraph (4)(D), by— (i) inserting “(as defined in section 152)” after “dependents”, and (ii) striking “health insurance plan” and inserting “health plan”, and
2008
Worker, Retiree, and Employer Recovery Act of 2008
Pub. L. 110–458 § 108(j)(1)(C) · 122 Stat. 5092
Substituted · 26 U.S.C. § 402(l)(5)(A)
Pub. L. 110–458, § 108(j)(1)(C), substituted “health plan” for “health insurance plan”
Source evidence
Code amendment note
Subsec. (l)(5)(A). Pub. L. 110–458, § 108(j)(1)(C), substituted “health plan” for “health insurance plan”.
Enacted provision · exact public law section
(C) in paragraph (5)(A), by striking “health insurance plan” and inserting “health plan”.
2013
Dale Long Public Safety Officers’ Benefits Improvements Act of 2012
Pub. L. 112–239 div. A title X § 1086(b)(3)(A) · 126 Stat. 1632
Inserted · 26 U.S.C. § 402(l)(4)(C)
Pub. L. 112–239 inserted “, as in effect immediately before the enactment of the National Defense Authorization Act for Fiscal Year 2013” before period at end
Source evidence
Code amendment note
Subsec. (l)(4)(C). Pub. L. 112–239 inserted “, as in effect immediately before the enactment of the National Defense Authorization Act for Fiscal Year 2013” before period at end.
Enacted provision · exact public law section
(A) in section 402(l)(4)(C), by inserting before the period at the end the following: “, as in effect immediately before the enactment of the National Defense Authorization Act for Fiscal Year 2013”; and
2014
Tax Technical Corrections Act of 2014
Pub. L. 113–295 div. A title II § 221(a)(57)(A) · 128 Stat. 4010
1. Substituted · 26 U.S.C. § 402(g)(1)(B)
  Pub. L. 113–295 substituted “is $15,000.” for “shall be the amount determined in accordance with the following table:”
2. Struck · 26 U.S.C. § 402(g)(1)(B)
  Pub. L. 113–295 struck out table at end listing applicable dollar amounts for fiscal years 2002 to 2006 and thereafter
Source evidence
Code amendment note
Subsec. (g)(1)(B). Pub. L. 113–295 substituted “is $15,000.” for “shall be the amount determined in accordance with the following table:” and struck out table at end listing applicable dollar amounts for fiscal years 2002 to 2006 and thereafter.
Enacted provision · exact public law section
(A) Section 402(g)(1)(B) is amended by striking “shall be” and all that follows and inserting “is $15,000.”.
2017
Pub. L. 115–97 § 13613(b)(1) · 131 Stat. 2054
Substituted · 26 U.S.C. § 402(c)(3)
Pub. L. 115–97, § 13613(b)(1), substituted “Time limit on transfers” for “Transfer must be made within 60 days of receipt” in heading
Source evidence
Code amendment note
Subsec. (c)(3). Pub. L. 115–97, § 13613(b)(1), substituted “Time limit on transfers” for “Transfer must be made within 60 days of receipt” in heading.
Enacted provision · exact public law section
(1) by striking “Transfer must be made within 60 days of receipt” in the heading and inserting “Time limit on transfers”, and
2017
Pub. L. 115–97 § 13613(b)(2) · 131 Stat. 2054
Substituted · 26 U.S.C. § 402(c)(3)(A)
Pub. L. 115–97, § 13613(b)(2), substituted “subparagraphs (B) and (C)” for “subparagraph (B)”
Source evidence
Code amendment note
Subsec. (c)(3)(A). Pub. L. 115–97, § 13613(b)(2), substituted “subparagraphs (B) and (C)” for “subparagraph (B)”.
Enacted provision · exact public law section
(2) by striking “subparagraph (B)” in subparagraph (A) and inserting “subparagraphs (B) and (C)”.
2017
Pub. L. 115–97 § 13613(a) · 131 Stat. 2054
Added · 26 U.S.C. § 402(c)(3)(C)
Pub. L. 115–97, § 13613(a), added subpar. (C)
Source evidence
Code amendment note
Subsec. (c)(3)(C). Pub. L. 115–97, § 13613(a), added subpar. (C).
Enacted provision · exact public law section
(a) In General.— Paragraph (3) of section 402(c) 26 USC 402. is amended by adding at the end the following new subparagraph: “(C) Rollover of certain plan loan offset amounts.— “(i) In general.— In the case of a qualified plan loan offset amount, paragraph (1) shall not apply to any transfer of such amount made after the due date (including extensions) for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan. “(ii) Qualified plan loan offset amount.— For purposes of this subparagraph, the term ‘qualified plan loan offset amount’ means a plan loan offset amount which is treated as distributed from a qualified employer plan to a participant or beneficiary solely by reason of— “(I) the termination of the qualified employer plan, or “(II) the failure to meet the repayment terms of the loan from such plan because of the severance from employment of the participant. “(iii) Plan loan offset amount.— For purposes of clause (ii), the term ‘plan loan offset amount’ means the amount by which the participant’s accrued benefit under the plan is reduced in order to repay a loan from the plan. “(iv) Limitation.— This subparagraph shall not apply to any plan loan offset amount unless such plan loan offset amount relates to a loan to which section 72(p)(1) does not apply by reason of section 72(p)(2). “(v) Qualified employer plan.— For purposes of this subsection, the term ‘qualified employer plan’ has the meaning given such term by section 72(p)(4).” .
2018
Energy and Water Development and Related Agencies Appropriations Act, 2018
Pub. L. 115–141 div. U title IV § 401(a)(73) · 132 Stat. 348
Substituted · 26 U.S.C. § 402(i)
Pub. L. 115–141 substituted “subsection (e)(4)(D)(i)” for “subparagraph (A) of subsection (d)(4)”
Source evidence
Code amendment note
Subsec. (i). Pub. L. 115–141 substituted “subsection (e)(4)(D)(i)” for “subparagraph (A) of subsection (d)(4)”.
Enacted provision · exact public law section
Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.
2020
Coronavirus Aid, Relief, and Economic Security Act
Pub. L. 116–136 div. A title II § 2203(b) · 134 Stat. 281
Substituted · 26 U.S.C. § 402(c)(4)
Pub. L. 116–136 substituted “2020” for “2009” in two places in concluding provisions
Source evidence
Code amendment note
Subsec. (c)(4). Pub. L. 116–136 substituted “2020” for “2009” in two places in concluding provisions.
Enacted provision · exact public law section
(b) Eligible Rollover Distributions.— Section 402(c)(4) of the Internal Revenue Code of 1986 26 USC 402. is amended by striking “2009” each place it appears in the last sentence and inserting “2020”.
2022
Energy and Water Development and Related Agencies Appropriations Act, 2023
Pub. L. 117–328 § 301(b)(2) · 136 Stat. 4459
Added · 26 U.S.C. § 402(c)(12)
Pub. L. 117–328, § 301(b)(2), added par. (12)
Source evidence
Code amendment note
Subsec. (c)(12). Pub. L. 117–328, § 301(b)(2), added par. (12).
Enacted provision · exact public law section
(2) The Secretary of Energy shall submit to the Committees on Appropriations of both Houses of Congress within 15 days of the conclusion of each quarter a report detailing each grant allocation or discretionary grant award totaling less than $1,000,000 provided during the previous quarter.
Effective date note
Pub. L. 117–328, div. T, title III, § 301(c), Dec. 29, 2022, 136 Stat. 5338, provided that: “The amendments made by this section [amending this section, section 414 of this title, and section 1056 of Title 29, Labor] shall apply as of the date of the enactment of this Act [Dec. 29, 2022].” Pub. L. 117–328, div. T, title III, § 328(b), Dec. 29, 2022, 136 Stat. 5360, provided that: “The amendment made by this section [amending this section] shall apply to distributions made after the date of the enactment of this Act [Dec. 29, 2022].” Amendment by section 331(b)(2) of Pub. L. 117–328 applicable to recontributions of withdrawals for home purchases with respect to disasters the incident period (as defined in section 72(t)(11)(F)(ii) of this title) for which begins on or after the date which is 30 days after Dec. 27, 2020, see section 331(b)(3) of Pub. L. 117–328, set out as a note under section 72 of this title. Pub. L. 117–328, div. T, title VI, § 601(e), Dec. 29, 2022, 136 Stat. 5390, provided that: “The amendments made by this section [amending this section and sections 408 and 408A of this title] shall apply to taxable years beginning after December 31, 2022.” Pub. L. 117–328, div. T, title VI, § 603(c), Dec. 29, 2022, 136 Stat. 5392, provided that: “The amendments made by this section [amending this section and sections 414 and 457 of this title] shall apply to taxable years beginning after December 31, 2023.”
2022
SECURE 2.0 Act of 2022
Pub. L. 117–328 § 331(b)(2) · 136 Stat. 4459
Added · 26 U.S.C. § 402(c)(13)
Pub. L. 117–328, § 331(b)(2), added par. (13)
Source evidence
Code amendment note
Subsec. (c)(13). Pub. L. 117–328, § 331(b)(2), added par. (13).
Enacted provision · exact public law section
(2) Qualified plans.— Subsection (c) of section 402, as amended by this Act, is further amended by adding at the end the following new paragraph: “(13) Recontributions of withdrawals for home purchases.— “(A) General rule.— “(i) In general.— Any individual who received a qualified distribution may, during the applicable period, make one or more contributions in an aggregate amount not to exceed the amount of such qualified distribution to an eligible retirement plan (as defined in paragraph (8)(B)) of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under subsection (c) or section 403(a)(4), 403(b)(8), or 408(d)(3), as the case may be. “(ii) Treatment of repayments.— Rules similar to the rules of clauses (ii) and (iii) of section 72(t)(11)(C) shall apply for purposes of this subsection. “(B) Qualified distribution.— For purposes of this paragraph, the term ‘qualified distribution’ means any distribution— “(i) described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(i)(V), or 403(b)(11)(B), “(ii) 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 “(iii) 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. “(C) Definitions.— For purposes of this paragraph— “(i) the terms ‘qualified disaster’, ‘qualified disaster area’, and ‘incident period’ have the meaning given such terms under section 72(t)(11), and “(ii) the term ‘applicable period’ has the meaning given such term under section 72(t)(8)(F).” .
Effective date note
Pub. L. 117–328, div. T, title III, § 301(c), Dec. 29, 2022, 136 Stat. 5338, provided that: “The amendments made by this section [amending this section, section 414 of this title, and section 1056 of Title 29, Labor] shall apply as of the date of the enactment of this Act [Dec. 29, 2022].” Pub. L. 117–328, div. T, title III, § 328(b), Dec. 29, 2022, 136 Stat. 5360, provided that: “The amendment made by this section [amending this section] shall apply to distributions made after the date of the enactment of this Act [Dec. 29, 2022].” Amendment by section 331(b)(2) of Pub. L. 117–328 applicable to recontributions of withdrawals for home purchases with respect to disasters the incident period (as defined in section 72(t)(11)(F)(ii) of this title) for which begins on or after the date which is 30 days after Dec. 27, 2020, see section 331(b)(3) of Pub. L. 117–328, set out as a note under section 72 of this title. Pub. L. 117–328, div. T, title VI, § 601(e), Dec. 29, 2022, 136 Stat. 5390, provided that: “The amendments made by this section [amending this section and sections 408 and 408A of this title] shall apply to taxable years beginning after December 31, 2022.” Pub. L. 117–328, div. T, title VI, § 603(c), Dec. 29, 2022, 136 Stat. 5392, provided that: “The amendments made by this section [amending this section and sections 414 and 457 of this title] shall apply to taxable years beginning after December 31, 2023.”
2022
Financial Services and General Government Appropriations Act, 2023
Pub. L. 117–328 § 603(b)(1) · 136 Stat. 4459
Struck · 26 U.S.C. § 402(g)(1)(C)
Pub. L. 117–328, § 603(b)(1), struck out subpar. (C). Text read as follows: “In addition to subparagraph (A), in the case of an eligible participant (as defined in section 414(v)), gross income shall not include elective deferrals in excess of the applicable dollar amount under subparagraph (B) to the extent that the amount of such elective deferrals does not exceed the applicable dollar amount under section 414(v)(2)(B)(i) for the taxable year (without regard to the treatment of the elective deferrals by an applicable employer plan under section 414(v)).”
Source evidence
Code amendment note
Subsec. (g)(1)(C). Pub. L. 117–328, § 603(b)(1), struck out subpar. (C). Text read as follows: “In addition to subparagraph (A), in the case of an eligible participant (as defined in section 414(v)), gross income shall not include elective deferrals in excess of the applicable dollar amount under subparagraph (B) to the extent that the amount of such elective deferrals does not exceed the applicable dollar amount under section 414(v)(2)(B)(i) for the taxable year (without regard to the treatment of the elective deferrals by an applicable employer plan under section 414(v)).”
Enacted provision · exact public law section
Sec. 603. The expenditure of any appropriation under this Act for any consulting service through procurement contract pursuant to 5 U.S.C. 3109, shall be limited to those contracts where such expenditures are a matter of public record and available for public inspection, except where otherwise provided under existing law, or under existing Executive order issued pursuant to existing law.
Effective date note
Pub. L. 117–328, div. T, title III, § 301(c), Dec. 29, 2022, 136 Stat. 5338, provided that: “The amendments made by this section [amending this section, section 414 of this title, and section 1056 of Title 29, Labor] shall apply as of the date of the enactment of this Act [Dec. 29, 2022].” Pub. L. 117–328, div. T, title III, § 328(b), Dec. 29, 2022, 136 Stat. 5360, provided that: “The amendment made by this section [amending this section] shall apply to distributions made after the date of the enactment of this Act [Dec. 29, 2022].” Amendment by section 331(b)(2) of Pub. L. 117–328 applicable to recontributions of withdrawals for home purchases with respect to disasters the incident period (as defined in section 72(t)(11)(F)(ii) of this title) for which begins on or after the date which is 30 days after Dec. 27, 2020, see section 331(b)(3) of Pub. L. 117–328, set out as a note under section 72 of this title. Pub. L. 117–328, div. T, title VI, § 601(e), Dec. 29, 2022, 136 Stat. 5390, provided that: “The amendments made by this section [amending this section and sections 408 and 408A of this title] shall apply to taxable years beginning after December 31, 2022.” Pub. L. 117–328, div. T, title VI, § 603(c), Dec. 29, 2022, 136 Stat. 5392, provided that: “The amendments made by this section [amending this section and sections 414 and 457 of this title] shall apply to taxable years beginning after December 31, 2023.”
2022
Financial Services and General Government Appropriations Act, 2023
Pub. L. 117–328 § 601(b)(1) · 136 Stat. 4459
Added · 26 U.S.C. § 402(h)(1)(C)
Pub. L. 117–328, § 601(b)(1), added subpar. (C)
Source evidence
Code amendment note
Subsec. (h)(1)(C). Pub. L. 117–328, § 601(b)(1), added subpar. (C).
Enacted provision · exact public law section
Sec. 601. (including rescission of funds) None of the funds in this Act shall be used for the planning or execution of any program to pay the expenses of, or otherwise compensate, non-Federal parties intervening in regulatory or adjudicatory proceedings funded in this Act.
Effective date note
Pub. L. 117–328, div. T, title III, § 301(c), Dec. 29, 2022, 136 Stat. 5338, provided that: “The amendments made by this section [amending this section, section 414 of this title, and section 1056 of Title 29, Labor] shall apply as of the date of the enactment of this Act [Dec. 29, 2022].” Pub. L. 117–328, div. T, title III, § 328(b), Dec. 29, 2022, 136 Stat. 5360, provided that: “The amendment made by this section [amending this section] shall apply to distributions made after the date of the enactment of this Act [Dec. 29, 2022].” Amendment by section 331(b)(2) of Pub. L. 117–328 applicable to recontributions of withdrawals for home purchases with respect to disasters the incident period (as defined in section 72(t)(11)(F)(ii) of this title) for which begins on or after the date which is 30 days after Dec. 27, 2020, see section 331(b)(3) of Pub. L. 117–328, set out as a note under section 72 of this title. Pub. L. 117–328, div. T, title VI, § 601(e), Dec. 29, 2022, 136 Stat. 5390, provided that: “The amendments made by this section [amending this section and sections 408 and 408A of this title] shall apply to taxable years beginning after December 31, 2022.” Pub. L. 117–328, div. T, title VI, § 603(c), Dec. 29, 2022, 136 Stat. 5392, provided that: “The amendments made by this section [amending this section and sections 414 and 457 of this title] shall apply to taxable years beginning after December 31, 2023.”
2022
Financial Services and General Government Appropriations Act, 2023
Pub. L. 117–328 § 601(b)(2) · 136 Stat. 4459
Inserted · 26 U.S.C. § 402(h)(3)
Pub. L. 117–328, § 601(b)(2), inserted “(or section 408A(d) in the case of an individual retirement plan designated as a Roth IRA)” before period at end
Source evidence
Code amendment note
Subsec. (h)(3). Pub. L. 117–328, § 601(b)(2), inserted “(or section 408A(d) in the case of an individual retirement plan designated as a Roth IRA)” before period at end.
Enacted provision · exact public law section
Sec. 601. (including rescission of funds) None of the funds in this Act shall be used for the planning or execution of any program to pay the expenses of, or otherwise compensate, non-Federal parties intervening in regulatory or adjudicatory proceedings funded in this Act.
Effective date note
Pub. L. 117–328, div. T, title III, § 301(c), Dec. 29, 2022, 136 Stat. 5338, provided that: “The amendments made by this section [amending this section, section 414 of this title, and section 1056 of Title 29, Labor] shall apply as of the date of the enactment of this Act [Dec. 29, 2022].” Pub. L. 117–328, div. T, title III, § 328(b), Dec. 29, 2022, 136 Stat. 5360, provided that: “The amendment made by this section [amending this section] shall apply to distributions made after the date of the enactment of this Act [Dec. 29, 2022].” Amendment by section 331(b)(2) of Pub. L. 117–328 applicable to recontributions of withdrawals for home purchases with respect to disasters the incident period (as defined in section 72(t)(11)(F)(ii) of this title) for which begins on or after the date which is 30 days after Dec. 27, 2020, see section 331(b)(3) of Pub. L. 117–328, set out as a note under section 72 of this title. Pub. L. 117–328, div. T, title VI, § 601(e), Dec. 29, 2022, 136 Stat. 5390, provided that: “The amendments made by this section [amending this section and sections 408 and 408A of this title] shall apply to taxable years beginning after December 31, 2022.” Pub. L. 117–328, div. T, title VI, § 603(c), Dec. 29, 2022, 136 Stat. 5392, provided that: “The amendments made by this section [amending this section and sections 414 and 457 of this title] shall apply to taxable years beginning after December 31, 2023.”
2022
SECURE 2.0 Act of 2022
Pub. L. 117–328 § 328(a) · 136 Stat. 4459
Amended · 26 U.S.C. § 402(l)(5)(A)
Pub. L. 117–328, § 328(a), amended subpar. (A) generally. Prior to amendment, text read as follows: “Paragraph (1) shall only apply to a distribution if payment of the premiums is made directly to the provider of the accident or health plan or qualified long-term care insurance contract by deduction from a distribution from the eligible retirement plan.”
Source evidence
Code amendment note
Subsec. (l)(5)(A). Pub. L. 117–328, § 328(a), amended subpar. (A) generally. Prior to amendment, text read as follows: “Paragraph (1) shall only apply to a distribution if payment of the premiums is made directly to the provider of the accident or health plan or qualified long-term care insurance contract by deduction from a distribution from the eligible retirement plan.”
Enacted provision · exact public law section
(a) In General.— Section 402(l)(5)(A) 26 USC 402. is amended to read as follows: “(A) Direct payment to insurer permitted.— “(i) In general.— Paragraph (1) shall apply to a distribution without regard to whether payment of the premiums is made directly to the provider of the accident or health plan or qualified long-term care insurance contract by deduction from a distribution from the eligible retirement plan, or is made to the employee. “(ii) Reporting.— In the case of a payment made to the employee as described in clause (i), the employee shall include with the return of tax for the taxable year in which the distribution is made an attestation that the distribution does not exceed the amount paid by the employee for qualified health insurance premiums for such taxable year.” .
Effective date note
Pub. L. 117–328, div. T, title III, § 301(c), Dec. 29, 2022, 136 Stat. 5338, provided that: “The amendments made by this section [amending this section, section 414 of this title, and section 1056 of Title 29, Labor] shall apply as of the date of the enactment of this Act [Dec. 29, 2022].” Pub. L. 117–328, div. T, title III, § 328(b), Dec. 29, 2022, 136 Stat. 5360, provided that: “The amendment made by this section [amending this section] shall apply to distributions made after the date of the enactment of this Act [Dec. 29, 2022].” Amendment by section 331(b)(2) of Pub. L. 117–328 applicable to recontributions of withdrawals for home purchases with respect to disasters the incident period (as defined in section 72(t)(11)(F)(ii) of this title) for which begins on or after the date which is 30 days after Dec. 27, 2020, see section 331(b)(3) of Pub. L. 117–328, set out as a note under section 72 of this title. Pub. L. 117–328, div. T, title VI, § 601(e), Dec. 29, 2022, 136 Stat. 5390, provided that: “The amendments made by this section [amending this section and sections 408 and 408A of this title] shall apply to taxable years beginning after December 31, 2022.” Pub. L. 117–328, div. T, title VI, § 603(c), Dec. 29, 2022, 136 Stat. 5392, provided that: “The amendments made by this section [amending this section and sections 414 and 457 of this title] shall apply to taxable years beginning after December 31, 2023.”

258 of 261 references resolved to an enrolled provision · 3 partial

Notes

Inflation Adjusted Items for Certain Years

For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under section 401 of this title.

Editorial Notes

References in Text

Section 415(c)(4) (as in effect before the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001), referred to in subsec. (g)(7)(B), means section 415(c)(4) of this title prior to its repeal by Pub. L. 107–16, title VI, § 632(a)(3)(E), June 7, 2001, 115 Stat. 114.

Section 1204(9)(A) of the Omnibus Crime Control and Safe Streets Act of 1968 (42 U.S.C. 3796b(9)(A)), as in effect immediately before the enactment of the National Defense Authorization Act for Fiscal Year 2013, referred to in subsec. (l)(4)(C), means section 1204(9)(A) of Pub. L. 90–351 prior to its amendment by Pub. L. 112–239, div. A, title X, § 1086(b)(1)(E)(v)(I), Jan. 2, 2013, 126 Stat. 1967. Section 1204(9)(A) of Pub. L. 90–351 was classified to section 3796b(9)(A) of Title 42, The Public Health and Welfare, prior to editorial reclassification and renumbering as section 10284(9)(A) of Title 34, Crime Control and Law Enforcement. Section 10284(9)(A) of Title 34 was redesignated as section 10284(14)(A) and amended by Pub. L. 117–61, § 3(1), (7)(A), Nov. 18, 2021, 135 Stat. 1475, 1476.

Amendments1960–2022 · 33 rounds

2022

Subsec. (c)(12). Pub. L. 117–328, § 301(b)(2), added par. (12).

Subsec. (c)(13). Pub. L. 117–328, § 331(b)(2), added par. (13).

Subsec. (g)(1)(C). Pub. L. 117–328, § 603(b)(1), struck out subpar. (C). Text read as follows: “In addition to subparagraph (A), in the case of an eligible participant (as defined in section 414(v)), gross income shall not include elective deferrals in excess of the applicable dollar amount under subparagraph (B) to the extent that the amount of such elective deferrals does not exceed the applicable dollar amount under section 414(v)(2)(B)(i) for the taxable year (without regard to the treatment of the elective deferrals by an applicable employer plan under section 414(v)).”

Subsec. (h)(1)(C). Pub. L. 117–328, § 601(b)(1), added subpar. (C).

Subsec. (h)(3). Pub. L. 117–328, § 601(b)(2), inserted “(or section 408A(d) in the case of an individual retirement plan designated as a Roth IRA)” before period at end.

Subsec. (l)(5)(A). Pub. L. 117–328, § 328(a), amended subpar. (A) generally. Prior to amendment, text read as follows: “Paragraph (1) shall only apply to a distribution if payment of the premiums is made directly to the provider of the accident or health plan or qualified long-term care insurance contract by deduction from a distribution from the eligible retirement plan.”

2020

Subsec. (c)(4). Pub. L. 116–136 substituted “2020” for “2009” in two places in concluding provisions.

2018

Subsec. (i). Pub. L. 115–141 substituted “subsection (e)(4)(D)(i)” for “subparagraph (A) of subsection (d)(4)”.

2017

Subsec. (c)(3). Pub. L. 115–97, § 13613(b)(1), substituted “Time limit on transfers” for “Transfer must be made within 60 days of receipt” in heading.

Subsec. (c)(3)(A). Pub. L. 115–97, § 13613(b)(2), substituted “subparagraphs (B) and (C)” for “subparagraph (B)”.

Subsec. (c)(3)(C). Pub. L. 115–97, § 13613(a), added subpar. (C).

2014

Subsec. (g)(1)(B). Pub. L. 113–295 substituted “is $15,000.” for “shall be the amount determined in accordance with the following table:” and struck out table at end listing applicable dollar amounts for fiscal years 2002 to 2006 and thereafter.

2013

Subsec. (l)(4)(C). Pub. L. 112–239 inserted “, as in effect immediately before the enactment of the National Defense Authorization Act for Fiscal Year 2013” before period at end.

2008

Subsec. (c)(4). Pub. L. 110–458, § 201(b), inserted concluding provisions.

Subsec. (c)(11)(A). Pub. L. 110–458, § 108(f)(1)(A), inserted “described in paragraph (8)(B)(iii)” after “eligible retirement plan” in introductory provisions.

Subsec. (c)(11)(A)(i). Pub. L. 110–458, § 108(f)(2)(B), struck out “for purposes of this subsection” after “eligible rollover distribution”.

Subsec. (c)(11)(B). Pub. L. 110–458, § 108(f)(1)(B), struck out “trust” before “designated beneficiary”.

Subsec. (f)(2)(A). Pub. L. 110–458, § 108(f)(2)(A), inserted at end “Such term shall include any distribution to a designated beneficiary which would be treated as an eligible rollover distribution by reason of subsection (c)(11), or section 403(a)(4)(B), 403(b)(8)(B), or 457(e)(16)(B), if the requirements of subsection (c)(11) were satisfied.”

Subsec. (g)(2)(A)(ii). Pub. L. 110–458, § 109(b)(3), inserted “through the end of such taxable year” after “such amount”.

Subsec. (l)(1). Pub. L. 110–458, § 108(j)(1)(A), inserted “maintained by the employer described in paragraph (4)(B)” after “an eligible retirement plan” and struck out “of the employee, his spouse, or dependents (as defined in section 152)” after “qualified health insurance premiums”.

Subsec. (l)(3)(B). Pub. L. 110–458, § 108(j)(2), substituted “all amounts to the credit of the eligible public safety officer in all eligible retirement plans maintained by the employer described in paragraph (4)(B) were distributed during such taxable year and all such plans were treated as 1 contract for purposes of determining under section 72 the aggregate amount which would have been so includible” for “all amounts distributed from all eligible retirement plans were treated as 1 contract for purposes of determining the inclusion of such distribution under section 72”.

Subsec. (l)(4)(D). Pub. L. 110–458, § 108(j)(1)(B), inserted “(as defined in section 152)” after “dependents” and substituted “health plan” for “health insurance plan”.

Subsec. (l)(5)(A). Pub. L. 110–458, § 108(j)(1)(C), substituted “health plan” for “health insurance plan”.

2007

Subsec. (g)(7)(A)(ii)(II). Pub. L. 110–172 substituted “permitted for prior taxable years by reason of this paragraph” for “for prior taxable years”. Amendment was executed to subsec. (g)(7)(A)(ii) as amended by Pub. L. 109–135, § 407(a)(1), as the probable intent of Congress, notwithstanding Pub. L. 110–172, § 8(b), which provided that the amendment take effect as if included in the provisions of Pub. L. 107–16 to which it relates. See 2006 Amendment note and Effective Date of 2007 Amendment note below.

2006

Subsec. (c)(2)(A). Pub. L. 109–280, § 822(a), which directed the amendment of section 402(c)(2)(A) by substituting “or to an annuity contract described in section 403(b) and such trust or contract provides for separate accounting” for “which is part of a plan which is a defined contribution plan and which agrees to separately account” and inserting “(and earnings thereon)” after “so transferred”, without specifying the act to be amended, was executed to this section, which is section 402(c)(2)(A) of the Internal Revenue Code of 1986, to reflect the probable intent of Congress.

Subsec. (c)(11). Pub. L. 109–280, § 829(a)(1), added par. (11).

Subsec. (l). Pub. L. 109–280, § 845(a), added subsec. (l).

2005

Subsec. (g)(1)(A). Pub. L. 109–135, § 407(a)(2), inserted “to” after “shall not apply”.

Subsec. (g)(7)(A)(ii). Pub. L. 109–135, § 407(a)(1), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “$15,000 reduced by amounts not included in gross income for prior taxable years by reason of this paragraph, or”.

2002

Subsec. (c)(2). Pub. L. 107–147, § 411(q)(2), inserted at end: “In the case of a transfer described in subparagraph (A) or (B), the amount transferred shall be treated as consisting first of the portion of such distribution that is includible in gross income (determined without regard to paragraph (1)).”

Subsec. (g)(1)(C). Pub. L. 107–147, § 411(o)(1), added subpar. (C).

Subsec. (g)(7)(B). Pub. L. 107–147, § 411(p)(6), substituted “2001).” for “2001.”

Subsec. (h)(2)(A). Pub. L. 107–147, § 411(l)(3), substituted “25 percent” for “15 percent”.

2001

Subsec. (c)(2). Pub. L. 107–16, § 643(a), inserted at end “The preceding sentence shall not apply to such distribution to the extent—

“(A) such portion is transferred in a direct trustee-to-trustee transfer to a qualified trust which is part of a plan which is a defined contribution plan and which agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible, or

“(B) such portion is transferred to an eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B).”

Subsec. (c)(3). Pub. L. 107–16, § 644(a), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Paragraph (1) shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed.”

Subsec. (c)(4)(C). Pub. L. 107–16, § 636(b)(1), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “any hardship distribution described in section 401(k)(2)(B)(i)(IV).”

Subsec. (c)(8)(B). Pub. L. 107–16, § 617(c), inserted concluding provisions.

Subsec. (c)(8)(B)(v). Pub. L. 107–16, § 641(a)(2)(A), added cl. (v).

Subsec. (c)(8)(B)(vi). Pub. L. 107–16, § 641(b)(2), added cl. (vi).

Subsec. (c)(9). Pub. L. 107–16, § 641(d), struck out before period at end “; except that a trust or plan described in clause (iii) or (iv) of paragraph (8)(B) shall not be treated as an eligible retirement plan with respect to such distribution”.

Subsec. (c)(10). Pub. L. 107–16, § 641(a)(2)(B), added par. (10).

Subsec. (f)(1). Pub. L. 107–16, § 641(e)(5), struck out “from an eligible retirement plan” after “rollover distribution” in introductory provisions.

Subsec. (f)(1)(A). Pub. L. 107–16, § 657(b), inserted before comma at end “and that the automatic distribution by direct transfer applies to certain distributions in accordance with section 401(a)(31)(B)”.

Pub. L. 107–16, § 641(e)(6), substituted “an eligible retirement plan” for “another eligible retirement plan”.

Subsec. (f)(1)(B). Pub. L. 107–16, § 641(e)(6), substituted “an eligible retirement plan” for “another eligible retirement plan”.

Subsec. (f)(1)(E). Pub. L. 107–16, § 641(c), added subpar. (E).

Subsec. (f)(2)(A). Pub. L. 107–16, § 641(e)(4), substituted “, paragraph (4) of section 403(a), subparagraph (A) of section 403(b)(8), or subparagraph (A) of section 457(e)(16)” for “or paragraph (4) of section 403(a)”.

Subsec. (g)(1). Pub. L. 107–16, § 611(d)(1), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Notwithstanding subsections (e)(3) and (h)(1)(B), the elective deferrals of any individual for any taxable year shall be included in such individual’s gross income to the extent the amount of such deferrals for the taxable year exceeds $7,000.”

Subsec. (g)(1)(A). Pub. L. 107–16, title VI, § 617(b)(1), inserted at end “The preceding sentence shall not apply the portion of such excess as does not exceed the designated Roth contributions of the individual for the taxable year.”

Subsec. (g)(2)(A). Pub. L. 107–16, title VI, § 617(b)(2), inserted “(or would be included but for the last sentence thereof)” after “paragraph (1)”.

Subsec. (g)(4). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (5) as (4) and struck out heading and text of former par. (4). Text read as follows: “The limitation under paragraph (1) shall be increased (but not to an amount in excess of $9,500) by the amount of any employer contributions for the taxable year described in paragraph (3)(C).”

Subsec. (g)(5). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (6) as (5). Former par. (5) redesignated (4).

Pub. L. 107–16, § 611(d)(2), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “The Secretary shall adjust the $7,000 amount under paragraph (1) at the same time and in the same manner as under section 415(d); except that any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500.”

Subsec. (g)(6). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (7) as (6). Former par. (6) redesignated (5).

Subsec. (g)(7). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (8) as (7).

Subsec. (g)(7)(B). Pub. L. 107–16, § 632(a)(3)(G), inserted “(as in effect before the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001” before period at end.

Subsec. (g)(8), (9). Pub. L. 107–16, § 611(d)(3)(A), redesignated par. (9) as (8). Former par. (8) redesignated (7).

1998

Subsec. (c)(4)(C). Pub. L. 105–206 added subpar. (C).

1997

Subsec. (g)(9). Pub. L. 105–34 added par. (9).

1996

Subsec. (c)(10). Pub. L. 104–188, § 1401(b)(2), struck out par. (10) which read as follows:

“(10) Denial of averaging for subsequent distributions.—If paragraph (1) applies to any distribution paid to any employee, paragraphs (1) and (3) of subsection (d) shall not apply to any distribution (paid after such distribution) of the balance to the credit of the employee under the plan under which the preceding distribution was made (or under any other plan which, under subsection (d)(4)(C), would be aggregated with such plan).”

Subsec. (d). Pub. L. 104–188, § 1401(a), amended subsec. (d) generally, substituting provisions relating to taxability of beneficiary of certain foreign situs trusts for former provisions relating to tax on lump sum distributions.

Subsec. (e)(3). Pub. L. 104–188, § 1450(a)(2), inserted “or which is part of a salary reduction agreement under section 403(b)” after “section 401(k)(2))”.

Subsec. (e)(4)(D). Pub. L. 104–188, § 1401(b)(1), amended subpar. (D) generally. Prior to amendment, subpar. (D) read as follows:

“(D) Lump sum distribution.—For purposes of this paragraph, the term ‘lump sum distribution’ has the meaning given such term by subsection (d)(4)(A) (without regard to subsection (d)(4)(F)).”

Subsec. (e)(5). Pub. L. 104–188, § 1401(b)(13), struck out par. (5) which read as follows:

“(5) Taxability of beneficiary of certain foreign situs trusts.—For purposes of subsections (a), (b), and (c), a stock bonus, pension, or profit-sharing trust which would qualify for exemption from tax under section 501(a) except for the fact that it is a trust created or organized outside the United States shall be treated as if it were a trust exempt from tax under section 501(a).”

Subsec. (g)(3)(A). Pub. L. 104–188, § 1704(t)(68), substituted “subsection (e)(3)” for “subsection (a)(8)”.

Subsec. (g)(3)(D). Pub. L. 104–188, § 1421(b)(9)(B), added subpar. (D).

Subsec. (k). Pub. L. 104–188, § 1421(b)(3)(A), added subsec. (k).

1994

Subsec. (g)(5). Pub. L. 103–465 inserted before period at end “; except that any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500”.

1992

Subsecs. (a) to (d). Pub. L. 102–318, § 521(a), amended subsecs. (a) to (d) generally, substituting present provisions for former provisions which in subsec. (a) related to taxability of beneficiaries of exempt trusts, in subsec. (b) related to taxability of beneficiaries of nonexempt trusts, in subsec. (c) related to taxability of beneficiaries of certain foreign situs trusts, and subsec. (d) which had been previously repealed.

Subsec. (e). Pub. L. 102–318, § 521, amended subsec. (e) generally, substituting provisions relating to other rules applicable to exempt trusts for provisions relating to tax on lump sum distributions.

Subsec. (e)(6). Pub. L. 102–318, § 522(c)(1), added par. (6).

Subsec. (f). Pub. L. 102–318, § 521(a), amended subsec. (f) generally, substituting present provisions for provisions requiring a different time when explanation was to be provided and a different content of explanation to be given and using different definitions for “eligible rollover distribution” and “eligible retirement plan”.

Subsec. (g)(1). Pub. L. 102–318, § 521(b)(9), substituted “subsections (e)(3)” for “subsections (a)(8)”.

Subsec. (i). Pub. L. 102–318, § 521(b)(10), substituted “subsection (d)(4)” for “subsection (e)(4)”.

Subsec. (j)(1). Pub. L. 102–318, § 521(b)(11), substituted “(e)(4)” for “(a)(1) or (e)(4)(J)”.

1990

Subsec. (a)(3)(B). Pub. L. 101–508, § 11801(c)(9)(I)(i), substituted “section 424” for “section 425”.

Subsec. (a)(6)(B)(i). Pub. L. 101–508, § 11801(c)(9)(I)(ii), substituted “section 424(f)” for “section 425(f)”.

1989

Subsec. (e)(7). Pub. L. 101–239, § 7811(i)(13), added par. (7).

Subsec. (g)(3). Pub. L. 101–239, § 7811(g)(2), inserted “involving a one-time irrevocable election” after “similar arrangement” in last sentence.

1988

Subsec. (a)(1). Pub. L. 100–647, § 1011A(b)(8)(A), substituted “paragraph (4)” for “paragraphs (2) and (4)”.

Subsec. (a)(4). Pub. L. 100–647, § 1011A(b)(8)(B), struck out “or (2)” after “under paragraph (1)”.

Subsec. (a)(5)(D)(i). Pub. L. 100–647, § 1011A(b)(4)(C), inserted at end “Any distribution described in section 401(a)(28)(B)(ii) shall be treated as meeting the requirements of subclauses (I) and (II).”

Pub. L. 100–647, § 1011A(b)(4)(A), repealed amendment by Pub. L. 99–514, § 1122(e)(1), which had amended cl. (i) generally, and provided that the Internal Revenue Code of 1986 shall be applied and administered as if such amendment had not been enacted. See 1986 Amendment note and Effective Date of 1988 Amendment note below.

Subsec. (a)(5)(D)(i)(I). Pub. L. 100–647, § 1011A(b)(4)(B), inserted “is payable as provided in clause (i), (iii), or (iv) of subsection (e)(4)(A) (without regard to the second sentence thereof) and” after “(I) such distribution”.

Subsec. (a)(5)(D)(iii). Pub. L. 100–647, § 1011A(b)(4)(D), struck out “10-year” after “Denial of” in heading.

Subsec. (a)(5)(F). Pub. L. 100–647, § 1011A(a)(1), substituted “resulting in any portion of a distribution being excluded from gross income under subparagraph (A)” for “described in subparagraph (A)”.

Subsec. (a)(6)(C). Pub. L. 100–647, § 1011A(b)(8)(C), struck out “paragraph (2) of subsection (a), and” after “paragraph (5)(A) applies,”.

Subsec. (a)(6)(E)(ii). Pub. L. 100–647, § 1011A(b)(8)(D), substituted “then paragraphs (1) and (3) of subsection (e) shall” for “then paragraph (2) of subsection (a), and paragraphs (1) and (3) of subsection (e), shall”.

Subsec. (a)(6)(G). Pub. L. 100–647, § 1018(t)(8)(A), redesignated subpar. (G), relating to treatment of potential future vesting, as (I).

Subsec. (a)(6)(H)(ii). Pub. L. 100–647, § 1011A(b)(5), inserted at end “A deposit shall not be treated as a frozen deposit unless on at least 1 day during the 60-day period described in paragraph (5)(C) (without regard to this subparagraph) such deposit is described in the preceding sentence.”

Subsec. (a)(6)(I). Pub. L. 100–647, § 1018(t)(8)(A), redesignated subpar. (G), relating to treatment of potential future vesting, as (I).

Subsec. (b)(2)(A). Pub. L. 100–647, § 1011(h)(4), added subpar. (A) and struck out former subpar. (A) which related to trust which is not exempt from tax under section 501(a) because plan fails to meet requirements of section 410(b).

Subsec. (b)(2)(B). Pub. L. 100–647, § 1011(h)(4), added subpar. (B) and struck out former subpar. (B) which related to failure of plan to meet requirements of section 410(b) for more than 1 taxable year.

Subsec. (e)(1)(A). Pub. L. 100–647, § 1011A(b)(8)(E), struck out “ordinary income portion of a” after “subparagraph (B)) on the”.

Subsec. (e)(1)(B). Pub. L. 100–647, § 1011A(b)(10), inserted at end “For purposes of the preceding sentence, in determining the amount of tax under section 1(c), section 1(g) shall be applied without regard to paragraph (2)(B) thereof.”

Pub. L. 100–647, § 1018(u)(1), made technical correction to directory language of Pub. L. 99–514, § 104(b)(5). See 1986 Amendment note below.

Pub. L. 100–647, § 1018(u)(6), related to execution of amendment by Pub. L. 99–514, § 1122(b)(2)(B), see 1986 Amendment note below.

Subsec. (e)(3). Pub. L. 100–647, § 1018(u)(7), related to execution of amendment by Pub. L. 99–514, § 1122(b)(2)(C), see 1986 Amendment note below.

Subsec. (e)(4)(A). Pub. L. 100–647, § 1011A(b)(8)(F), in concluding provisions, substituted “A” for “Except for purposes of subsection (a)(2) and section 403(a)(2), a”, and struck out “subsection (a)(2) of this section, and subsection (a)(2) of section 403,” before “the balance to”.

Subsec. (e)(4)(B)(i). Pub. L. 100–647, § 1011A(b)(6), substituted “employee” for “taxpayer”.

Subsec. (e)(4)(I). Pub. L. 100–647, § 1011A(c)(9), struck out “clause (ii) of” after “amounts described in”.

Subsec. (e)(4)(J). Pub. L. 100–647, § 1011A(b)(7), amended last sentence generally. Prior to amendment, last sentence read as follows: “To the extent provided by the Secretary, a taxpayer may elect before any distribution not to have this paragraph apply with respect to such distribution.”

Subsec. (e)(4)(L). Pub. L. 100–647, § 1011A(b)(8)(G), struck out subpar. (L) which related to election to treat pre-1974 participation as post-1973 participation.

Subsec. (e)(4)(M). Pub. L. 100–647, § 1011A(b)(8)(H), struck out “, subsection (a)(2) of this section, and section 403(a)(2)” after “of this subsection”.

Subsec. (e)(4)(O). Pub. L. 100–647, § 6068(a), added subpar. (O).

Subsec. (e)(5). Pub. L. 100–647, § 1011A(b)(8)(I), struck out “and paragraph (2) of subsection (a)” after “of this subsection”.

Subsec. (e)(6)(C). Pub. L. 100–647, § 1011A(b)(8)(J), amended subpar. (C) generally. Prior to amendment, subpar. (C) read as follows: “For purposes of this paragraph, special lump sum treatment applies to any distribution if any portion of such distribution—

“(i) is taxed under this subsection by reason of an election under paragraph (4)(B), or

“(ii) is treated as long-term capital gain under subsection (a)(2) of this section or section 403(a)(2).”

Subsec. (f)(1). Pub. L. 100–647, § 1018(t)(8)(C), substituted “an eligible” for “a eligible”.

Subsec. (g). Pub. L. 100–647, § 1011(c)(6)(B), redesignated subsec. (g), relating to effect of disposition of stock by plan on net unrealized appreciation, as (j).

Pub. L. 100–647, § 1011(c)(6)(A), redesignated subsec. (g), relating to treatment of self-employed individuals, as (i).

Subsec. (g)(2). Pub. L. 100–647, § 1011(c)(2), substituted “Distribution” for “Required distribution” in heading.

Subsec. (g)(2)(C). Pub. L. 100–647, § 1011(c)(1), struck out “(and no tax shall be imposed under section 72(t))” after “in gross income”, in cl. (i), substituted “such income is distributed” for “such excess deferral is made” in cl. (ii), and inserted at end “No tax shall be imposed under section 72(t) on any distribution described in the preceding sentence.”

Subsec. (g)(2)(D). Pub. L. 100–647, § 1011(c)(3), added subpar. (D).

Subsec. (g)(3). Pub. L. 100–647, § 1011(c)(4), substituted “this subsection” for “this paragraph”.

Pub. L. 100–647, § 1011(c)(11), inserted at end “An employer contribution shall not be treated as an elective deferral described in subparagraph (C) if under the salary reduction agreement such contribution is made pursuant to a one-time irrevocable election made by the employee at the time of initial eligibility to participate in the agreement or is made pursuant to a similar arrangement specified in regulations.”

Subsec. (g)(8)(A)(iii). Pub. L. 100–647, § 1011(c)(5)(A), inserted “(determined in the manner prescribed by the Secretary)” after “prior taxable years”.

Subsec. (g)(8)(D). Pub. L. 100–647, § 1011(c)(5)(B), added subpar. (D).

Subsec. (i). Pub. L. 100–647, § 1011(c)(6)(A), redesignated subsec. (g), relating to treatment of self-employed individuals, as (i).

Subsec. (j). Pub. L. 100–647, § 1011(c)(6)(B), redesignated subsec. (g), relating to effect of disposition of stock by plan on net unrealized appreciation, as (j).

1986

Subsec. (a)(2). Pub. L. 99–514, § 1122(b)(1)(A), struck out par. (2) relating to capital gains treatment for portion of lump sum distribution.

Subsec. (a)(5)(D)(i). Pub. L. 99–514, § 1122(e)(1), amended cl. (i) generally, to read as follows: “Subparagraph (A) shall apply to a partial distribution only if the employee elects to have subparagraph (A) apply to such distribution and such distribution would be a lump sum distribution if subsection (e)(4)(A) were applied—

“(I) by substituting ‘50 percent of the balance to the credit of an employee’ for ‘the balance to the credit of an employee’,

“(II) without regard to clause (ii) thereof, the second sentence thereof, and subparagraph (B) of subsection (e)(4).

Any distribution described in section 401(a)(28)(B)(ii) shall be treated as meeting the requirements of this clause.” This amendment was repealed by Pub. L. 100–647, § 1011A(b)(4)(A). See 1988 Amendment note above.

Pub. L. 99–514, § 1852(b)(2), inserted at end “For purposes of subclause (I), the balance to the credit of the employee shall not include any accumulated deductible employee contributions (within the meaning of section 72(o)(5)).”

Subsec. (a)(5)(D)(ii). Pub. L. 99–514, § 1852(b)(5), substituted “a trust or plan described in subclause (III) or (IV)” for “a plan described in subclause (IV) or (V)”.

Subsec. (a)(5)(D)(iii). Pub. L. 99–514, § 1122(b)(2)(A), struck out “and capital gains treatment” in heading and amended text generally. Prior to amendment, cl. (iii) read as follows: “If an election under clause (i) is made with respect to any partial distribution paid to any employee—

“(I) paragraph (2) of this subsection,

“(II) paragraphs (1) and (3) of subsection (e), and

“(III) paragraph (2) of section 403(a),

shall not apply to any distribution (paid after such partial distribution) of the balance to the credit of such employee under the plan under which such partial distribution was made (or under any other plan which, under subsection (e)(4)(C), would be aggregated with such plan).”

Subsec. (a)(5)(E)(v). Pub. L. 99–514, § 1852(b)(1), substituted “of all or any portion of” for “of any portion of”.

Subsec. (a)(5)(F). Pub. L. 99–514, § 1121(c)(1), amended subpar. (F) generally. Prior to amendment, subpar. (F) heading read “Special rules” and text read as follows:

“(i) Transfer treated as rollover contribution under section 408

“For purposes of this title, a transfer resulting in any portion of a distribution being excluded from gross income under subparagraph (A) to an eligible retirement plan described in subclause (I) or (II) of subparagraph (E)(iv) shall be treated as a rollover contribution described in section 408(d)(3).

“(ii) 5-percent owners

“An eligible retirement plan described in subclause (III) or (IV) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan for the transfer of a distribution if the employee is a 5-percent owner at the time such distribution is made. For purposes of the preceding sentence, the term ‘5-percent owner’ means any individual who is a 5-percent owner (as defined in section 416(i)(1)(B)) at any time during the 5 plan years preceding the plan year in which the distribution is made.”

Pub. L. 99–514, § 1852(b)(6), in cl. (i) substituted “a transfer resulting in any portion of a distribution being excluded from gross income under subparagraph (A)” for “a transfer described in subparagraph (A)”.

Pub. L. 99–514, § 1875(c)(1)(A), amended cl. (ii) generally. Prior to amendment, cl. (ii), key employees, read as follows: “An eligible retirement plan described in subclause (III) or (IV) of subparagraph (E)(iv) shall not be treated as an eligible retirement plan for the transfer of a distribution if any part of the distribution is attributable to contributions made on behalf of the employee while he was a key employee in a top-heavy plan. For purposes of the preceding sentence, the terms ‘key employee’ and ‘top-heavy plan’ have the same respective meanings as when used in section 416.”

Subsec. (a)(5)(G). Pub. L. 99–514, § 1852(a)(5)(A), added subpar. (G).

Subsec. (a)(6)(D)(v). Pub. L. 99–514, § 1852(b)(7), substituted “(7)” for “(7)(B)”.

Subsec. (a)(6)(F). Pub. L. 99–514, § 1898(c)(7)(A)(i), substituted “paragraph (5)” for “paragraph (5)(A)”.

Subsec. (a)(6)(G). Pub. L. 99–514, § 1898(a)(3), added subpar. (G) relating to treatment of potential future vesting.

Pub. L. 99–272 added subpar. (G) relating to payments from certain pension plan termination trusts.

Subsec. (a)(6)(H). Pub. L. 99–514, § 1122(e)(2)(A), added subpar. (H).

Subsec. (a)(7). Pub. L. 99–514, § 1852(b)(4), inserted “; except that a trust or plan described in subclause (III) or (IV) of paragraph (5)(E)(iv) shall not be treated as an eligible retirement plan with respect to such distribution” after “the spouse were the employee”.

Subsec. (a)(9). Pub. L. 99–514, § 1898(c)(1)(A), substituted “any alternate payee who is the spouse or former spouse of the participant shall be treated” for “the alternate payee shall be treated”.

Subsec. (b). Pub. L. 99–514, § 1112(c), designated existing provisions as par. (1), inserted par. (1) heading, and added par. (2).

Pub. L. 99–514, § 1852(c)(5), substituted “section 72(e)(5)” for “section 72(e)(1)”.

Subsec. (e)(1)(B). Pub. L. 99–514, § 1122(b)(2)(B), and Pub. L. 100–647, § 1018(u)(6), redesignated subpar. (C) as (B), substituted “Amount of tax” for “Initial separate tax” in heading and “The amount of tax imposed by subparagraph (A)” for “The initial separate tax”, and struck out former subpar. (B) which related to computation of tax on lump sum distributions.

Pub. L. 99–514, § 104(b)(5), as amended by Pub. L. 100–647, § 1018(u)(1), struck out “the zero bracket amount applicable to such individual for the taxable year plus” after “amount equal to”.

Pub. L. 99–514, § 1122(a)(2)(A), (B), substituted “5” for “10” and “⅕” for “one-tenth”.

Subsec. (e)(1)(C) to (E). Pub. L. 99–514, § 1122(b)(2)(B)(i), redesignated subpars. (C) to (E) as (B) to (D), respectively.

Subsec. (e)(3). Pub. L. 99–514, § 1122(b)(2)(C), and Pub. L. 100-647, § 1018(u)(7), substituted “total taxable amount” for “ordinary income portion”.

Subsec. (e)(4)(B). Pub. L. 99–514, § 1122(a)(1), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “For purposes of this section and section 403, no amount which is not an annuity contract may be treated as a lump sum distribution under subparagraph (A) unless the taxpayer elects for the taxable year to have all such amounts received during such year so treated at the time and in the manner provided under regulations prescribed by the Secretary. Not more than one election may be made under this subparagraph with respect to any individual after such individual has attained age 59½. No election may be made under this subparagraph by any taxpayer other than an individual, an estate, or a trust. In the case of a lump sum distribution made with respect to an employee to two or more trusts, the election under this subparagraph shall be made by the personal representative of the employee.”

Subsec. (e)(4)(E). Pub. L. 99–514, § 1122(b)(2)(D), struck out subpar. (E) defining “ordinary income portion” with respect to a lump sum distribution.

Subsec. (e)(4)(F). Pub. L. 99–514, § 1852(b)(3)(B), struck out subpar. (F) defining “employee”. See subsec. (g) of this section relating to treatment of self-employed individuals.

Subsec. (e)(4)(H). Pub. L. 99–514, § 1122(b)(2)(E), struck out “(but not for purposes of subsection (a)(2) or section 403(a)(2)(A))” after “For purposes of this subsection”.

Subsec. (e)(4)(J). Pub. L. 99–514, § 1122(g), inserted at end “To the extent provided by the Secretary, a taxpayer may elect before any distribution not to have this paragraph apply with respect to such distribution.”

Subsec. (e)(4)(N). Pub. L. 99–514, § 1106(c)(2), added subpar. (N).

Subsec. (e)(6). Pub. L. 99–514, § 1898(a)(2), added par. (6).

Subsec. (f)(1). Pub. L. 99–514, § 1898(e)(1), substituted “eligible rollover distribution” for “qualifying rollover distribution”.

Subsec. (f)(2). Pub. L. 99–514, § 1898(e)(2), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “For purposes of this subsection, the terms ‘qualifying rollover distribution’ and ‘eligible retirement plan’ have the respective meanings given such terms by subsection (a)(5)(E).”

Subsec. (g). Pub. L. 99–514, § 1854(f)(2), added subsec. (g) relating to effect of disposition of stock by plan on net unrealized appreciation.

Pub. L. 99–514, § 1852(b)(3)(A), added subsec. (g) relating to treatment of self-employed individuals.

Pub. L. 99–514, § 1105(a), added subsec. (g) relating to limitation on exclusion for elective deferrals.

Subsec. (h). Pub. L. 99–514, § 1108(b), added subsec. (h).

1984

Subsec. (a)(2). Pub. L. 98–369, § 1001(b)(3), substituted “6 months” for “1 year”.

Subsec. (a)(5)(A)(i). Pub. L. 98–369, § 522(a)(1), substituted “any portion of the balance to the credit of an employee in a qualified trust is paid to him” for “the balance to the credit of an employee in a qualified trust is paid to him in a qualifying rollover distribution”.

Subsec. (a)(5)(B). Pub. L. 98–369, § 522(d)(1)(A), (2), substituted “qualified total distribution” for “qualifying rollover distribution”, and inserted “In the case of any partial distribution, the maximum amount transferred to which subparagraph (A) applies shall not exceed the portion of such distribution which is includible in gross income (determined without regard to subparagraph (A)).”

Subsec. (a)(5)(D). Pub. L. 98–369, § 522(b), added subpar. (D). Former subpar. (D) redesignated (E).

Subsec. (a)(5)(D)(iv)(III)–(V). Pub. L. 98–369, § 491(d)(9), struck out subcl. (III), which included a retirement bond described in section 409 within term “eligible retirement plan” and redesignated former subcls. (IV) and (V) and (III) and (IV), respectively.

Subsec. (a)(5)(E). Pub. L. 98–369, § 522(b), redesignated subpar. (D) as (E). Former subpar. (E) redesignated (F).

Subsec. (a)(5)(E)(i). Pub. L. 98–369, § 522(d)(1)(B), substituted “qualified total distribution” for “qualifying rollover distribution” in heading and text.

Subsec. (a)(5)(E)(ii)(II). Pub. L. 98–369, § 522(d)(3), substituted “gross income (determined without regard to this paragraph)” for “gross income”.

Subsec. (a)(5)(E)(v). Pub. L. 98–369, § 522(d)(4), substituted provision dealing with partial distribution for provision dealing with rollover of partial distributions of deductible employee contributions permitted.

Subsec. (a)(5)(F). Pub. L. 98–369, § 522(b), redesignated subpar. (E) as (F).

Subsec. (a)(5)(F)(i). Pub. L. 98–369, § 522(d)(5), substituted “subparagraph (E)(iv)” for “subparagraph (D)(iv)”.

Pub. L. 98–369, § 491(d)(10), substituted “or (II)” for “, (II), or (III)”.

Subsec. (a)(5)(F)(ii). Pub. L. 98–369, § 522(d)(5), substituted “subparagraph (E)(iv)” for “subparagraph (D)(iv)”.

Pub. L. 98–369, § 491(d)(11), substituted “(III) or (IV)” for “(IV) and (V)”.

Pub. L. 98–369, § 713(c)(3), substituted “Key employees” for “Self-employed individuals and owner-employees” in heading and “attributable to contributions made on behalf of the employee while he was a key employee in a top-heavy plan” for “attributable to a trust forming part of a plan under which the employee was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan” in text, and inserted sentence adopting the meaning of “key employee” and “top-heavy plan” used in section 416.

Subsec. (a)(6)(A), (B). Pub. L. 98–369, § 522(d)(6), substituted “paragraph (5)(E)(i)” for “paragraph (5)(D)(i)”.

Subsec. (a)(6)(D)(iii), (iv). Pub. L. 98–369, § 522(d)(7), substituted “employee contributions (or, in the case of a partial distribution, the amount not includible in gross income)” for “employee contributions”.

Subsec. (a)(6)(E)(i). Pub. L. 98–369, § 522(d)(1)(C), (8), substituted “qualified total distribution” for “qualifying rollover distribution”, and “paragraph (5)(D) or (5)(E)(i)(II)” for “paragraph (5)(D)(i)(II)”.

Subsec. (a)(6)(F). Pub. L. 98–397, § 204(c)(3), added subpar. (F).

Subsec. (a)(7). Pub. L. 98–369, § 522(c), substituted provisions relating to rollover where spouse receives distributions after death of employee for provisions dealing with rollover where spouse receives lump-sum distribution at death of employee.

Subsec. (a)(9). Pub. L. 98–397, § 204(c)(1), added par. (9).

Subsec. (e)(4)(L). Pub. L. 98–369, § 1001(b)(3), substituted “6 months” for “1 year”, applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See Effective Date of 1984 Amendment note below.

Subsec. (e)(4)(M). Pub. L. 98–397, § 204(c)(4), added subpar. (M).

Subsec. (e)(5). Pub. L. 98–369, § 491(c)(2), added par. (5).

Subsec. (f). Pub. L. 98–397, § 207(a), added subsec. (f).

1983

Subsec. (a)(5)(D)(v). Pub. L. 97–448, § 103(c)(8)(A), added cl. (v).

Subsec. (e)(1)(C). Pub. L. 97–448, § 101(b), substituted “the zero bracket amount applicable to such an individual for the taxable year” for “$2,300”.

Subsec. (e)(4)(A). Pub. L. 97–448, § 103(c)(7), substituted “this subsection, subsection (a)(2) of this section, and subsection (a)(2) of section 403” for “this section and section 403” in last sentence.

Subsec. (e)(4)(J). Pub. L. 97–448, § 103(c)(12)(D), amended Pub. L. 97–34, § 311(c)(2) [see 1981 Amendment note below], by substituting “section 72(o)(5)” for “section 77(o)(5)” in last sentence of subpar. (j).

1981

Subsec. (a)(1). Pub. L. 97–34, § 311(c)(1), inserted “(other than deductible employee contributions within the meaning of section 72(o)(5))”.

Pub. L. 97–34, § 314(c)(1), struck out “or made available” after “distributed” in three places.

Subsec. (a)(5). Pub. L. 97–34, § 311(b)(3)(A), inserted “(other than accumulated deductible employee contributions within the meaning of section 72(o)(5))” after “contributions” in subpar. (B) and added subcl. (III) in subpar. (D).

Subsec. (e)(4). Pub. L. 97–34, § 311(b)(2), (c)(2), added to subpar. (A) provision that for purposes of sections 402 and 403, the balance to the credit of the employee does not include the accumulated deductible employee contributions under the plan (within the meaning of section 72(o)(5)), and added subpar. (J) provision making subpar. (J) inapplicable to distributions of accumulated deductible employee contributions (within the meaning of section 77(o)(5)). See 1983 Amendment note above.

1980

Subsec. (a)(6)(D)(iii). Pub. L. 96–222, § 101(a)(14)(E)(i), substituted “may designate” for “many designate”.

Subsec. (a)(6)(E). Pub. L. 96–608 added subpar. (E).

Subsec. (a)(7)(A)(i). Pub. L. 96–222, § 101(a)(14)(C), substituted “qualifying rollover distribution attributable to an employee is paid to the spouse of the employee after” for “lump-sum distribution from a qualified trust is paid to the spouse of the employee on account of”.

1978

Subsec. (a)(5). Pub. L. 95–458, § 4(a), among other changes, substituted provision permitting tax-free treatment for any portion of a lump sum distribution from a qualified retirement plan which is deposited in an individual retirement account or another qualifying plan for provision which required transfer of all such property received.

Subsec. (a)(5)(D)(i)(II). Pub. L. 95–600, § 157(h)(1), substituted “subparagraphs (B) and (H) of subsection (e)(4)” for “subsection (e)(4)(B)”.

Subsec. (a)(6). Pub. L. 95–458, § 4(c), in provision preceding subpar. (A) struck out “For purposes of paragraph (5)(A)(i)”, in subpar. (A) substituted “For purposes of paragraph (5)(D)(i), a complete” for “A complete”, in subpar. (B) inserted “For purposes of paragraph (5)(D)(i)—” after “assets.—” in provision preceding cl. (i), and added subpar. (C).

Subsec. (a)(6)(D). Pub. L. 95–600, § 157(f)(1), added subpar. (D).

Subsec. (a)(7). Pub. L. 95–600, § 157(g)(1), added par. (7).

Subsec. (a)(8). Pub. L. 95–600, § 135(b), added par. (8).

Subsec. (e)(1)(C). Pub. L. 95–600, § 101(d)(1), substituted “$2,300” for “$2,200”.

1977

Subsec. (e)(1)(C). Pub. L. 95–30 substituted “amount equal to $2,200 plus one-tenth of the excess of” for “amount equal to one-tenth of the excess of” in provisions preceding cl. (i).

1976

Subsec. (a)(1). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (a)(2). Pub. L. 94–455, § 1402(b)(2), provided that “9 months” would be changed to “1 year”.

Pub. L. 94–455, §§ 1402(b)(1)(C), 1906(b)(13)(A), provided that “6 months” would be changed to “9 months” for taxable years beginning in 1977 and struck out “or his delegate” after “Secretary”.

Subsec. (a)(4). Pub. L. 94–455, § 1901(a)(57)(A), substituted “basic pay” for “basic salary”, “civil service retirement laws” for “Civil Service Retirement Act (5 U.S.C. 2251)”, and “section 8331(3) of title 5, United States Code” for “section 1(d) of such Act”.

Subsec. (a)(5). Pub. L. 94–267, § 1(a)(2), substituted “a payment” for “the lump-sum distribution”.

Subsec. (a)(5)(A). Pub. L. 94–267, § 1(a)(1), restructured provision by adding cl. (i) and designating existing provision as cl. (ii).

Subsec. (a)(6). Pub. L. 94–267, § 1(a)(3), added par. (6).

Subsec. (a)(6)(A). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (d). Pub. L. 94–455, § 1901(a)(57)(B), struck out subsec. (d) which related to certain trust agreements made before Oct. 21, 1942.

Subsec. (e)(2). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (e)(4)(A). Pub. L. 94–455, § 1901(a)(57)(C)(i), substituted “Except for purposes of subsection (a)(2) and section 403(a)(2)” for “For purposes of this subparagraph”.

Subsec. (e)(4)(B), (J). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

Subsec. (e)(4)(L). Pub. L. 94–455, § 1402(b)(2), substituted “1 year” for “9 months”.

Pub. L. 94–455, §§ 1402(b)(1)(C), 1512(a), added subsec. (e)(4)(L) to be applicable to distributions and payments after Dec. 31, 1975, in taxable years beginning after Dec. 31, 1975, and provided that “6 months” would be changed to “9 months” for taxable years beginning in 1977.

1974

Subsec. (a)(2). Pub. L. 93–406, § 2005(b)(1), substituted provisions covering capital gains treatment of portions of lump sum distributions determined through the application of a fraction formula susceptible of producing a phaseout of capital gains treatment for provisions covering capital gains treatment of portions of lump sum distributions determined on a fixed formula.

Subsec. (a)(3)(C). Pub. L. 93–406, § 2005(c)(1), struck out subsec. (a)(3)(C) which defined “total distribution payable”.

Subsec. (a)(5). Pub. L. 93–406, §§ 2002(g)(5), 2005(c)(2), substituted provisions covering rollover amounts for provisions covering limitation on capital gains treatment.

Subsec. (e). Pub. L. 93–406, § 2005(a), substituted provisions covering tax on lump sum distributions for provisions covering plan termination distributions made after Dec. 31, 1953, and before Jan. 1, 1955.

1969

Subsec. (a)(5). Pub. L. 91–172, § 515(a)(1), added par. (5).

Subsec. (b). Pub. L. 91–172, § 321(b)(1), substituted provision for inclusion of contributions made by an employer to a nonexempt trust in the “gross income of the employee in accordance with section 83 (relating to property transferred in connection with performance of services), except that the value of the employee’s interest in the trust shall be substituted for the fair market value of the property for purposes of applying such section” for prior provision for inclusion in the “gross income of an employee for the taxable year in which the contribution is made to the trust in the case of an employee whose beneficial interest in such contribution is nonforfeitable at the time the contribution is made”, and provided that distributions of income of such trust before the annuity starting date (as defined in section 72(c)(4)) shall be included in the gross income of the employee without regard to section 72(e)(1) (relating to amount not received as annuities) and that a beneficiary of any such trust shall not be considered the owner of any portion of such trust under subpart E of part I of subch. J (relating to grantors and others treated as substantial owners).

1964

Subsec. (a)(1). Pub. L. 88–272, § 232(e)(1), struck out “except that section 72(e)(3) shall not apply” after “(relating to annuities)”.

Subsec. (a)(3)(B). Pub. L. 88–272, § 221(c)(1), substituted “subsections (e) and (f) of section 425” for “section 421(d)(2) and (3)”.

Subsecs. (b), (d). Pub. L. 88–272, § 232(e)(2), (3), struck out “except that section 72(e)(3) shall not apply” after “(relating to annuities)”.

1962

Subsec. (a)(2). Pub. L. 87–792 inserted sentence providing that this paragraph shall not apply to distributions paid to any distributee to the extent such distributions are attributable to contributions made on behalf of the employee while he was an employee within the meaning of section 401(c)(1).

1960

Subsec. (a)(1). Pub. L. 86–437, § 2(a), substituted “paragraphs (2) and (4)” for “paragraph (2)”.

Subsec. (a)(4). Pub. L. 86–437, § 1, added par. (4).

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Pub. L. 117–328, div. T, title III, § 301(c), Dec. 29, 2022, 136 Stat. 5338, provided that: “The amendments made by this section [amending this section, section 414 of this title, and section 1056 of Title 29, Labor] shall apply as of the date of the enactment of this Act [Dec. 29, 2022].”

Pub. L. 117–328, div. T, title III, § 328(b), Dec. 29, 2022, 136 Stat. 5360, provided that: “The amendment made by this section [amending this section] shall apply to distributions made after the date of the enactment of this Act [Dec. 29, 2022].”

Amendment by section 331(b)(2) of Pub. L. 117–328 applicable to recontributions of withdrawals for home purchases with respect to disasters the incident period (as defined in section 72(t)(11)(F)(ii) of this title) for which begins on or after the date which is 30 days after Dec. 27, 2020, see section 331(b)(3) of Pub. L. 117–328, set out as a note under section 72 of this title.

Pub. L. 117–328, div. T, title VI, § 601(e), Dec. 29, 2022, 136 Stat. 5390, provided that: “The amendments made by this section [amending this section and sections 408 and 408A of this title] shall apply to taxable years beginning after December 31, 2022.”

Pub. L. 117–328, div. T, title VI, § 603(c), Dec. 29, 2022, 136 Stat. 5392, provided that: “The amendments made by this section [amending this section and sections 414 and 457 of this title] shall apply to taxable years beginning after December 31, 2023.”

Effective Date of 2020 Amendment

Amendment by Pub. L. 116–136 applicable for calendar years beginning after Dec. 31, 2019, with additional provisions relating to plan or contract amendments, see section 2203(c) of Pub. L. 116–136, set out as a note under section 401 of this title.

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, § 13613(c), Dec. 22, 2017, 131 Stat. 2166, provided that: “The amendments made by this section [amending this section] shall apply to plan loan offset amounts which are treated as distributed in taxable years beginning after December 31, 2017.”

Effective Date of 2014 Amendment

Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2013 Amendment

Amendment by Pub. L. 112–239 effective Jan. 2, 2013, and applicable to matters pending on Jan. 2, 2013, or filed or accruing after that date, with certain exceptions, see section 1086(d) of Pub. L. 112–239, set out as a note under section 10251 of Title 34, Crime Control and Law Enforcement.

Effective Date of 2008 Amendment

Pub. L. 110–458, title I, § 108(f)(2)(C), Dec. 23, 2008, 122 Stat. 5109, provided that: “The amendments made by this paragraph [amending this section] shall apply with respect to plan years beginning after December 31, 2009.”

Amendment by sections 108(f)(1)–(2)(B), (j) and 109(b)(3) of Pub. L. 110–458 effective as if included in the provisions of Pub. L. 109–280 to which the amendment relates, except as otherwise provided, see section 112 of Pub. L. 110–458, set out as a note under section 72 of this title.

Amendment by section 201(b) of Pub. L. 110–458 applicable to calendar years beginning after December 31, 2008, with provisions relating to pension plan or contract amendments, see section 201(c) of Pub. L. 110–458, set out as a note under section 401 of this title.

Effective Date of 2007 Amendment

Pub. L. 110–172, § 8(b), Dec. 29, 2007, 121 Stat. 2484, provided that: “The amendments made by this section [amending this section and section 3121 of this title] shall take effect as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 [Pub. L. 107–16] to which they relate.”

Effective Date of 2006 Amendment

Pub. L. 109–280, title VIII, § 822(b), Aug. 17, 2006, 120 Stat. 998, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 2006.”

Pub. L. 109–280, title VIII, § 829(b), Aug. 17, 2006, 120 Stat. 1002, provided that: “The amendments made by this section [amending this section and sections 403 and 457 of this title] shall apply to distributions after December 31, 2006.”

Pub. L. 109–280, title VIII, § 845(c), Aug. 17, 2006, 120 Stat. 1015, provided that: “The amendments made by this section [amending this section and sections 403 and 457 of this title] shall apply to distributions in taxable years beginning after December 31, 2006.”

Effective Date of 2005 Amendment

Pub. L. 109–135, title IV, § 407(c), Dec. 21, 2005, 119 Stat. 2635, provided that: “The amendments made by this section [amending this section and section 415 of this title] shall take effect as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 [Pub. L. 107–16] to which they relate.”

Effective Date of 2002 Amendment

Amendment by Pub. L. 107–147 effective as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16, to which such amendment relates, see section 411(x) of Pub. L. 107–147, set out as a note under section 25B of this title.

Effective Date of 2001 Amendment

Amendment by section 611(d)(1)–(3)(A) of Pub. L. 107–16 applicable to years beginning after Dec. 31, 2001, see section 611(i)(1) of Pub. L. 107–16, set out as a note under section 415 of this title.

Pub. L. 107–16, title VI, § 617(f), June 7, 2001, 115 Stat. 106, provided that: “The amendments made by this section [enacting section 402A of this title and amending this section and sections 408A, 6047, and 6051 of this title] shall apply to taxable years beginning after December 31, 2005.”

Amendment by section 632(a)(3)(G) of Pub. L. 107–16 applicable to years beginning after Dec. 31, 2001, see section 632(a)(4) of Pub. L. 107–16, set out as a note under section 72 of this title.

Pub. L. 107–16, title VI, § 636(b)(2), June 7, 2001, 115 Stat. 117, provided that: “The amendment made by this subsection [amending this section] shall apply to distributions made after December 31, 2001.”

Pub. L. 107–16, title VI, § 641(f), June 7, 2001, 115 Stat. 121, provided that:

“(1)
Effective date.—
The amendments made by this section [amending this section and sections 72, 219, 401, 403, 408, 415, 457, 3401, 3405, and 4973 of this title] shall apply to distributions after December 31, 2001.
#
“(2)
Reasonable notice.—
No penalty shall be imposed on a plan for the failure to provide the information required by the amendment made by subsection (c) [amending this section] with respect to any distribution made before the date that is 90 days after the date on which the Secretary of the Treasury issues a safe harbor rollover notice after the date of the enactment of this Act [June 7, 2001], if the administrator of such plan makes a reasonable attempt to comply with such requirement.
#
“(3)
Special rule.—
Notwithstanding any other provision of law, subsections (h)(3) and (h)(5) of section 1122 of the Tax Reform Act of 1986 [Pub. L. 99–514, set out as a note below] shall not apply to any distribution from an eligible retirement plan (as defined in clause (iii) or (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 1986) on behalf of an individual if there was a rollover to such plan on behalf of such individual which is permitted solely by reason of any amendment made by this section.”
#

Amendment by section 643(a) of Pub. L. 107–16 applicable to distributions made after Dec. 31, 2001, see section 643(d) of Pub. L. 107–16, set out as a note under section 401 of this title.

Pub. L. 107–16, title VI, § 644(c), June 7, 2001, 115 Stat. 123, provided that: “The amendments made by this section [amending this section and section 408 of this title] shall apply to distributions after December 31, 2001.”

Amendment by section 657(b) of Pub. L. 107–16 applicable to distributions made after Mar. 28, 2005, see section 657(d) of Pub. L. 107–16, set out as a note under section 401 of this title.

Effective Date of 1998 Amendment

Pub. L. 105–206, title VI, § 6005(c)(2)(C), July 22, 1998, 112 Stat. 800, provided that: “The amendments made by this paragraph [amending this section and section 403 of this title] shall apply to distributions after December 31, 1998.”

Effective Date of 1997 Amendment

Pub. L. 105–34, title XV, § 1501(c)(1), Aug. 5, 1997, 111 Stat. 1058, provided that: “The amendment made by subsection (a) [amending this section] shall apply to years beginning after December 31, 1997.”

Effective Date of 1996 Amendment

Pub. L. 104–188, title I, § 1401(c), Aug. 20, 1996, 110 Stat. 1789, provided that:

“(1)
In general.—
The amendments made by this section [amending this section and sections 55, 62, 401, 406, 407, 691, 871, 877, and 4980A of this title] shall apply to taxable years beginning after December 31, 1999.
#
“(2)
Retention of certain transition rules.—
The amendments made by this section shall not apply to any distribution for which the taxpayer is eligible to elect the benefits of section 1122(h)(3) or (5) of the Tax Reform Act of 1986 [Pub. L. 99–514, set out below]. Notwithstanding the preceding sentence, individuals who elect such benefits after December 31, 1999, shall not be eligible for 5-year averaging under section 402(d) of the Internal Revenue Code of 1986 (as in effect immediately before such amendments).”
#

Amendment by section 1421(b)(3)(A), (9)(B) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1996, see section 1421(e) of Pub. L. 104–188, set out as a note under section 72 of this title.

Amendment by section 1450(a)(2) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1995, see section 1450(a)(3) of Pub. L. 104–188, set out in a Modifications of Subsection (b) of This Section note under section 403 of this title.

Effective Date of 1994 Amendment

Amendment by Pub. L. 103–465 applicable to years beginning after Dec. 31, 1994, and, to the extent of providing for the rounding of indexed amounts, not applicable to any year to the extent the rounding would require the indexed amount to be reduced below the amount in effect for years beginning in 1994, see section 732(e) of Pub. L. 103–465, set out as a note under section 401 of this title.

Effective Date of 1992 Amendment

Pub. L. 102–318, title V, § 521(e), July 3, 1992, 106 Stat. 313, provided that:

“(1)
In general.—
The amendments made by this section [amending this section and sections 55, 62, 72, 219, 401, 403, 406 to 408, 411, 414, 415, 457, 691, 871, 877, 1441, 3121, 3306, 3405, 4973, 4980A, and 7701 of this title] shall apply to distributions after December 31, 1992.
#
“(2)
Special rule for partial distributions.—
For purposes of section 402(a)(5)(D)(i)(II) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section), a distribution before January 1, 1993, which is made before or at the same time as a series of periodic payments shall not be treated as one of such series if it is not substantially equal in amount to other payments in such series.”
#

Amendment by section 522(c)(1) of Pub. L. 102–318 applicable, except as otherwise provided, to distributions after Dec. 31, 1992, see section 522(d) of Pub. L. 102–318, set out as a note under section 401 of this title.

Effective Date of 1989 Amendment

Pub. L. 101–239, title VII, § 7811(i)(13), Dec. 19, 1989, 103 Stat. 2411, provided that the amendment made by that section is effective with respect to taxable years ending after Dec. 19, 1989 (or, at the election of the taxpayer, beginning after Dec. 31, 1986).

Amendment by section 7811(g)(2) of Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

Effective Date of 1988 Amendment

Amendment by sections 1011(c)(1)–(6)(B), (11), (h)(4), 1011A(a)(1), (b)(4)(A)–(D), (5)–(8), (10), (c)(9), and 1018(t)(8)(A), (C), (u)(1), (6), (7) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Pub. L. 100–647, title VI, § 6068(b), Nov. 10, 1988, 102 Stat. 3704, provided that: “The amendment made by this section [amending this section] shall apply to taxable years ending after December 31, 1984.”

Effective Date of 1986 Amendment

Amendment by section 104(b)(5) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. L. 99–514, set out as a note under section 1 of this title.

Pub. L. 99–514, title XI, § 1105(c), Oct. 22, 1986, 100 Stat. 2419, as amended by Pub. L. 100–647, title I, § 1011(c)(8), (9), Nov. 10, 1988, 102 Stat. 3458, provided that:

“(1)
In general.—
Except as provided in this subsection, the amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1986.
#
“(2)
Deferrals under collective bargaining agreements.—
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before March 1, 1986, the amendment made by subsection (a) shall not apply to contributions made pursuant to such an agreement for taxable years beginning before the earlier of—
“(A)
the date on which such agreement terminates (determined without regard to any extension thereof after February 28, 1986), or
#
“(B)
January 1, 1989.
#
Such contributions shall be taken into account for purposes of applying the amendment made by this section to other plans.
#
“(3)
Distributions made before plan amendment.—
“(A)
In general.—
If a plan amendment is required to allow the plan to make any distribution described in section 402(g)(2)(A)(ii) of the Internal Revenue Code of 1986, any such distribution which is made before the close of the 1st plan year for which such amendment is required to be in effect under section 1140 [set out as a note under section 401 of this title] shall be treated as made in accordance with the provisions of such plan.
#
“(B)
Distributions pursuant to model amendment.—
“(i)
Secretary to prescribe amendment.—
The Secretary of the Treasury or his delegate shall prescribe an amendment which allows a plan to make any distribution described in section 402(g)(2)(A)(ii) of such Code.
#
“(ii)
Adoption by plan.—
If a plan adopts the amendment prescribed under clause (i) and makes a distribution in accordance with such amendment, such distribution shall be treated as made in accordance with the provisions of the plan.
#
#
#
“(4)
Special rule for taxable years of partnerships which include january 1, 1987.—
In the case of the taxable year of any partnership which begins before January 1, 1987, and ends after January 1, 1987, elective deferrals (within the meaning of section 402(g)(3) of the Internal Revenue Code of 1986) made on behalf of a partner for such taxable year shall, for purposes of section 402(g)(3) of such Code, be treated as having been made ratably during such taxable year.
#
“(5)
Cash or deferred arrangements.—
The amendments made by this section [amending this section and section 6051 of this title] shall not apply to employer contributions made during 1987 and attributable to services performed during 1986 under a qualified cash or deferred arrangement (as defined in section 401(k) of the Internal Revenue Code of 1986) if, under the terms of such arrangement as in effect on August 16, 1986—
“(A)
the employee makes an election with respect to such contribution before January 1, 1987, and
#
“(B)
the employer identifies the amount of such contribution before January 1, 1987.
#
#
“(6)
Reporting requirements.—
The amendments made by subsection (b) [amending section 6051 of this title] shall apply to calendar years beginning after December 31, 1986.”
#

Amendment by section 1106(c)(2) of Pub. L. 99–514 applicable to years beginning after Dec. 31, 1986, see section 1106(i) of Pub. L. 99–514, set out as a note under section 415 of this title.

Amendment by section 1108(b) of Pub. L. 99–514 applicable to years beginning after Dec. 31, 1986, see section 1108(h) of Pub. L. 99–514, set out as a note under section 219 of this title.

Amendment by section 1112(c) of Pub. L. 99–514 applicable to plan years beginning after Dec. 31, 1988, with special rule regarding collective bargaining agreements ratified before Mar. 1, 1986, and with provision for waiver of excise tax on reversions, see section 1112(e) of Pub. L. 99–514, set out as a note under section 401 of this title.

Amendment by section 1121(c)(1) of Pub. L. 99–514 applicable to years beginning after Dec. 31, 1986, with special provisions for plans maintained pursuant to collective bargaining agreements ratified before Mar. 1, 1986, and transition rules, see section 1121(d) of Pub. L. 99–514, set out as a note under section 401 of this title.

Pub. L. 99–514, title XI, § 1122(h), Oct. 22, 1986, 100 Stat. 2470, as amended by Pub. L. 100–647, title I, § 1011A(b)(11)–(15), Nov. 10, 1988, 102 Stat. 3474, 3475, provided that:

“(1)
In general.—
Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 72, 403, and 408 of this title] shall apply to amounts distributed after December 31, 1986, in taxable years ending after such date.
#
“(2)
Subsection (c).—
“(A)
Subsection (c)(1).—
The amendment made by subsection (c)(1) [amending section 72 of this title] shall apply to individuals whose annuity starting date is after July 1, 1986.
#
“(B)
Subsection (c)(2).—
The amendment made by subsection (c)(2) [amending section 72 of this title] shall apply to individuals whose annuity starting date is after December 31, 1986, except that section 72(b)(3) of the Internal Revenue Code of 1986 (as added by such subsection) shall apply to individuals whose annuity starting date is after July 1, 1986.
#
“(C)
Special rule for amounts not received as annuities.—
In the case of any plan not described in section 72(e)(8)(D) of the Internal Revenue Code of 1986 (as added by subsection (c)(3)), the amendments made by subsection (c)(3) [amending section 72 of this title] shall apply to amounts received after July 1, 1986.
#
#
“(3)
Special rule for individuals who attained age 50 before january 1, 1986.—
“(A)
In general.—
In the case of a lump sum distribution to which this paragraph applies—
“(i)
the existing capital gains provisions shall continue to apply, and
#
“(ii)
the requirement of subparagraph (B) of section 402(e)(4) of the Internal Revenue Code of 1986 (as amended by subsection (a)) that the distribution be received after attaining age 59½ shall not apply.
#
#
“(B)
Computation of tax.—
If subparagraph (A) applies to any lump sum distribution of any taxpayer for any taxable year, the tax imposed by section 1 of the Internal Revenue Code of 1986 on such taxpayer for such taxable year shall be equal to the sum of—
“(i)
the tax imposed by such section 1 on the taxable income of the taxpayer (reduced by the portion of such lump sum distribution to which clause (ii) applies), plus
#
“(ii)
20 percent of the portion of such lump sum distribution to which the existing capital gains provisions continue to apply by reason of this paragraph.
#
#
“(C)
Lump sum distributions to which paragraph applies.—
This paragraph shall apply to any lump sum distribution if—
“(i)
such lump sum distribution is received by an employee who has attained age 50 before January 1, 1986 or by an individual, estate, or trust with respect to such an employee, and
#
“(ii)
the taxpayer makes an election under this paragraph.
#
Not more than 1 election may be made under this paragraph with respect to an employee. An election under this subparagraph shall be treated as an election under section 402(e)(4)(B) of such Code for purposes of such Code.
#
#
“(4)
5-year phase-out of capital gains treatment.—
“(A)
Notwithstanding the amendment made by subsection (b) [amending this section and section 403 of this title], if the taxpayer elects the application of this paragraph with respect to any distribution after December 31, 1986, and before January 1, 1992, the phase-out percentage of the amount which would have been treated, without regard to this subparagraph, as long-term capital gain under the existing capital gains provisions shall be treated as long-term capital gain.
#
“(B)
For purposes of this paragraph—
“In the case of distributions during calendar year: The phase-outpercentage is:
1987 100  
1988 95  
1989 75  
1990 50  
1991 25.
#
“(C)
No more than 1 election may be made under this paragraph with respect to an employee. An election under this paragraph shall be treated as an election under section 402(e)(4)(B) of the Internal Revenue Code of 1986 for purposes of such Code.
#
#
“(5)
Election of 10-year averaging.—
An employee who has attained age 50 before January 1, 1986, and elects the application of paragraph (3) or section 402(e)(1) of the Internal Revenue Code of 1986 (as amended by this Act) may elect to have such section applied by substituting ‘10 times’ for ‘5 times’ and ‘⅒’ for ‘⅕’ in subparagraph (B) thereof. For purposes of the preceding sentence, section 402(e)(1) of such Code shall be applied by using the rate of tax in effect under section 1 of the Internal Revenue Code of 1954 for taxable years beginning during 1986 and by including in gross income the zero bracket amount in effect under section 63(d) of such Code for such years. This paragraph shall also apply to an individual, estate, or trust which receives a distribution with respect to an employee described in this paragraph.
#
“(6)
Existing capital gain provisions.—
For purposes of paragraphs (3) and (4), the term ‘existing capital gains provisions’ means the provisions of paragraph (2) of section 402(a) of the Internal Revenue Code of 1954 (as in effect on the day before the date of the enactment of this Act [Oct. 22, 1986]) and paragraph (2) of section 403(a) of such Code (as so in effect).
#
“(7)
Subsection (d).—
The amendments made by subsection (d) [amending section 403 of this title] shall apply to taxable years beginning after December 31, 1985.
#
“(8)
Frozen deposits.—
The amendments made by subsection (e)(2) [amending this section and section 408 of this title] shall apply to amounts transferred to an employee before, on, or after the date of the enactment of this Act [Oct. 22, 1986], except that in the case of an amount transferred on or before such date, the 60-day period referred to in section 402(a)(5)(C) of the Internal Revenue Code of 1986 shall not expire before the 60th day after the date of the enactment of this Act.
#
“(9)
Special rule for state plans.—
In the case of a plan maintained by a State which on May 5, 1986, permitted withdrawal by the employee of employee contributions (other than as an annuity), section 72(e) of the Internal Revenue Code of 1986 shall be applied—
“(A)
without regard to the phrase ‘before separation from service’ in paragraph (8)(D), and
#
“(B)
by treating any amount received (other than as an annuity) before or with the 1st annuity payment as having been received before the annuity starting date.”
#
#

“In the case of distributions during calendar year:	The phase-outpercentage is:
1987	100
1988	95
1989	75
1990	50
1991	25.

Amendment by section 1852(a)(5)(A), (b)(1)–(7), (c)(5) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Pub. L. 99–514, title XVIII, § 1854(f)(4)(C), Oct. 22, 1986, 100 Stat. 2882, as amended by Pub. L. 100–647, title I, § 1011(c)(6)(C), Nov. 10, 1988, 102 Stat. 3458, provided that: “The amendments made by paragraph (2) [amending this section] shall apply to any transaction occurring after December 31, 1984, except that in the case of any transaction occurring before the date of the enactment of this Act [Oct. 22, 1986], the period under which proceeds are required to be invested under section 402(j) of the Internal Revenue Code of 1954 [now 1986] (as added by paragraph (2)) shall not end before the earlier of 1 year after the date of such transaction or 180 days after the date of the enactment of this Act.”

Pub. L. 99–514, title XVIII, § 1875(c)(1)(B), Oct. 22, 1986, 100 Stat. 2894, provided that: “The amendments made by subparagraph (A) [amending this section] shall apply to distributions after the date of the enactment of this Act [Oct. 22, 1986]. Such amendments shall apply also to distributions after 1983 and on or before the date of the enactment of this Act to individuals who are not 5-percent owners (as defined in section 402(a)(5)(F)(ii) of the Internal Revenue Code of 1954 [now 1986] (as amended by this paragraph)).”

Amendment by section 1898(a)(2), (3), (c)(7)(A)(i), (e) of Pub. L. 99–514 effective as if included in the provision of the Retirement Equity Act of 1984, Pub. L. 98–397, to which such amendment relates, except as otherwise provided, see section 1898(j) of Pub. L. 99–514, set out as a note under section 401 of this title.

Amendment by section 1898(c)(1)(A) of Pub. L. 99–514 applicable to payments made after Oct. 22, 1986, see section 1898(c)(1)(C) of Pub. L. 99–514, set out as a note under section 72 of this title.

Amendment by Pub. L. 99–272 effective Jan. 1, 1986, with certain exceptions, see section 11019 of Pub. L. 99–272, set out as a note under section 1341 of Title 29, Labor.

Effective Date of 1984 Amendment

Amendment by section 204 of Pub. L. 98–397 effective Jan. 1, 1985, and amendment by section 207 of Pub. L. 98–397 applicable to plan years beginning after Dec. 31, 1984, except as otherwise provided, see sections 302 and 303 of Pub. L. 98–397, set out as a note under section 1001 of Title 29, Labor.

Amendment by section 491(d)(9)–(11) of Pub. L. 98–369 applicable to obligations issued after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 98–369, set out as a note under section 62 of this title.

Pub. L. 98–369, div. A, title IV, § 491(f)(2), July 18, 1984, 98 Stat. 853, provided that: “The amendment made by subsection (c) [amending this section and section 405 of this title] shall apply to redemptions after the date of the enactment of this Act [July 18, 1984] in taxable years ending after such date.”

Pub. L. 98–369, div. A, title V, § 522(e), July 18, 1984, 98 Stat. 871, as amended by Pub. L. 99–514, title XVIII, § 1852(b)(9), Oct. 22, 1986, 100 Stat. 2867, provided that: “The amendments made by this section [amending this section and sections 403, 408, and 409 of this title] shall apply to distributions made after the date of the enactment of this Act [July 18, 1984], in taxable years ending after such date.”

Pub. L. 98–369, div. A, title VII, § 713(c)(4), as added by Pub. L. 99–514, title XVIII, § 1875(c)(2), Oct. 22, 1986, 100 Stat. 2894, provided that: “The amendment made by paragraph (3) [amending this section] shall apply to distributions after July 18, 1984.”

Amendment by section 1001(b)(3) of Pub. L. 98–369 applicable to property acquired after June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub. L. 98–369, set out as a note under section 166 of this title.

Effective Date of 1983 Amendment

Amendment by Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under section 1 of this title.

Effective Date of 1981 Amendment

Amendment by section 311(b)(2), (3)(A), (c) of Pub. L. 97–34, applicable to taxable years beginning after Dec. 31, 1981, see section 311(i)(1) of Pub. L. 97–34, set out as a note under section 219 of this title.

Pub. L. 97–34, title III, § 314(c)(2), Aug. 13, 1981, 95 Stat. 286, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1981.”

Effective Date of 1980 Amendments

Pub. L. 96–608, § 2(b), Dec. 28, 1980, 94 Stat. 3551, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(1)
In general.—
The amendment made by subsection (a) [amending this section] shall apply to payments made in taxable years beginning after December 31, 1978.
#
“(2)
Transitional rule.—
In the case of any payment made before January 1, 1982, in a taxable year beginning after December 31, 1978, which is treated as a qualifying rollover distribution (as defined in section 402(a)(5)(D)(i) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) by reason of the amendment made by subsection (a), the applicable period specified in section 402(a)(5)(C) of such Code shall not expire before the close of December 31, 1981.”
#

Amendment by Pub. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title.

Effective Date of 1978 Amendment

Amendment by section 101(d) of Pub. L. 95–600 effective with respect to taxable years beginning after Dec. 31, 1978, see section 101(f)(1) of Pub. L. 95–600, set out as a note under section 1 of this title.

Amendment by section 135(b) of Pub. L. 95–600 applicable to plan years beginning after December 31, 1979, see section 135(c)(1) of Pub. L. 95–600, set out as a note under section 401 of this title.

Pub. L. 95–600, title I, § 157(f)(2), Nov. 6, 1978, 92 Stat. 2807, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to qualifying rollover distributions (as defined in section 402(a)(5)(D)(i) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) completed after December 31, 1978, in taxable years ending after such date.”

Pub. L. 95–600, title I, § 157(g)(4), Nov. 6, 1978, 92 Stat. 2808, provided that: “The amendments made by this subsection [amending this section and sections 403 and 408 of this title] shall apply to lump-sum distributions completed after December 31, 1978, in taxable years ending after such date.”

Pub. L. 95–600, title I, § 157(h)(3)(A), Nov. 6, 1978, 92 Stat. 2808, as amended by Pub. L. 96–222, title I, § 101(a)(14)(A), Apr. 1, 1980, 94 Stat. 204, provided that: “The amendments made by this subsection [amending this section and section 408 of this title] shall apply to payments made in taxable years beginning after December 31, 1977.”

Effective Date of 1978 Amendment; Certain Rollovers Validated

Pub. L. 95–458, § 4(d), Oct. 14, 1978, 92 Stat. 1260, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(1)
In general.—
The amendments made by subsections (a), (b), and (c) [amending this section and section 403 of this title] shall apply with respect to taxable years beginning after December 31, 1974.
#
“(2)
Validation of certain attempted rollovers.—
If the taxpayer—
“(A)
attempted to comply with the requirements of section 402(a)(5) or 403(a)(4) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] for a taxable year beginning before the date of the enactment of this Act, [Oct. 14, 1978], and
#
“(B)
failed to meet the requirements of such section that all property received in the distribution be transferred,
#
such section (as amended by this section) shall be applied by treating any transfer of property made on or before December 31, 1978, as if it were made on or before the 60th day after the day on which the taxpayer received such property. For purposes of the preceding sentence, a transfer of money shall be treated as a transfer of property received in a distribution to the extent that the amount of the money transferred does not exceed the highest fair market value of the property distributed during the 60-day period beginning on the date on which the taxpayer received such property.”
#

Effective Date of 1977 Amendment

Amendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title.

Effective Date of 1976 Amendment

Pub. L. 94–455, title XIV, § 1402(b)(1), Oct. 4, 1976, 90 Stat. 1731, provided that the amendment made by that section is effective with respect to taxable years beginning in 1977.

Pub. L. 94–455, title XIV, § 1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, provided that the amendment made by that section is effective with respect to taxable years beginning after Dec. 31, 1977.

Pub. L. 94–455, title XV, § 1512(b), Oct. 4, 1976, 90 Stat. 1742, provided that: “The amendment made by this section [amending this section] shall apply to distributions and payments made after December 31, 1975, in taxable years beginning after such date.”

Pub. L. 94–455, title XIX, § 1901(a)(57)(C)(ii), Oct. 4, 1976, 90 Stat. 1774, provided that: “The amendment made by clause (i) [amending this section] shall apply with respect to distributions or payments made after December 31, 1973, in taxable years beginning after such date.”

Amendment by Pub. L. 94–267 applicable with respect to payments made to an employee on or after July 4, 1974, see section 1(e) of Pub. L. 94–267, set out as a note under section 401 of this title.

Effective Date of 1974 Amendment

Pub. L. 93–406, title II, § 2002(i)(3), Sept. 2, 1974, 88 Stat. 971, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendments made by subsection (g)(5) and (6) [amending this section and section 403 of this title] shall apply on and after the date of enactment of this Act [Sept. 2, 1974] with respect to contributions to an employees’ trust described in section 401(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] which is exempt from tax under section 501(a) of such Code or an annuity plan described in section 403(a) of such Code.”

Pub. L. 93–406, title II, § 2005(d), Sept. 2, 1974, 88 Stat. 992, provided that: “The amendments made by this section [amending this section and sections 46, 50A, 56, 62, 72, 101, 122, 403, 405, 406, 407, 871, 877, 901, 1304, and 1348 of this title] shall apply only with respect to distributions or payments made after December 31, 1973, in taxable years beginning after such date.”

Effective Date of 1969 Amendment

Amendment by section 321(b)(1) of Pub. L. 91–172 applicable with respect to contributions made and premiums paid after Aug. 1, 1969, see section 321(d) of Pub. L. 91–172, set out as an Effective Date note under section 83 of this title.

Pub. L. 91–172, title V, § 515(d), Dec. 30, 1969, 83 Stat. 646, provided that: “The amendments made by this section [amending this section and sections 72, 403, 405, 406, 407 and 1304 of this title] shall apply to taxable years ending after December 31, 1969.”

Effective Date of 1964 Amendment

Amendment by section 221(c)(1) of Pub. L. 88–272 applicable to taxable years ending after Dec. 31, 1963, see section 221(e) of Pub. L. 88–272, set out as a note under section 421 of this title.

Amendment by section 232(e)(1)–(3) of Pub. L. 88–272 applicable to taxable years beginning after Dec. 31, 1963, see section 232(g) of Pub. L. 88–272, set out as a note under section 5 of this title.

Effective Date of 1962 Amendment

Amendment by Pub. L. 87–792 applicable to taxable years beginning after Dec. 31, 1962, see section 8 of Pub. L. 87–792, set out as a note under section 22 of this title.

Effective Date of 1960 Amendment

Pub. L. 86–437, § 3, Apr. 22, 1960, 74 Stat. 79, provided that: “The amendments made by this Act [amending this section and section 871 of this title] shall apply only with respect to taxable years beginning after December 31, 1959.”

Regulations

Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1112 of Pub. L. 99–514, see section 1141 of Pub. L. 99–514, set out as a note under section 401 of this title.

Savings Provision

For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.

Certain Actions Before Date of Enactment of Pub. L. 117–328

Pub. L. 117–328, div. T, title III, § 301(d), Dec. 29, 2022, 136 Stat. 5338, provided that:

“Plans, fiduciaries, employers, and plan sponsors are entitled to rely on—
“(1)
a reasonable good faith interpretation of then existing administrative guidance for inadvertent benefit overpayment recoupments and recoveries that commenced before the date of enactment of this Act [Dec. 29, 2022], and
#
“(2)
determinations made before the date of enactment of this Act by the responsible plan fiduciary, in the exercise of its fiduciary discretion, not to seek recoupment or recovery of all or part of an inadvertent benefit overpayment.
#
In the case of a benefit overpayment that occurred prior to the date of enactment of this Act, any installment payments by the participant or beneficiary to the plan or any reduction in periodic benefit payments to the participant or beneficiary, which were made in recoupment of such overpayment and which commenced prior to such date, may continue after such date. Nothing in this subsection shall relieve a fiduciary from responsibility for an overpayment that resulted from a breach of its fiduciary duties.”

Clarification of Disqualification Rules Relating to Acceptance of Rollover Contributions

Pub. L. 105–34, title XV, § 1509, Aug. 5, 1997, 111 Stat. 1068, provided that: “The Secretary of the Treasury or his delegate shall clarify that, under the Internal Revenue Service regulations protecting pension plans from disqualification by reason of the receipt of invalid rollover contributions under section 402(c) of the Internal Revenue Code of 1986, in order for the administrator of the plan receiving any such contribution to reasonably conclude that the contribution is a valid rollover contribution it is not necessary for the distributing plan to have a determination letter with respect to its status as a qualified plan under section 401 of such Code.”

Model Explanation

Pub. L. 102–318, title V, § 521(d), July 3, 1992, 106 Stat. 313, provided that: “The Secretary of the Treasury or his delegate shall develop a model explanation which a plan administrator may provide to a recipient in order to meet the requirements of section 402(f) of the Internal Revenue Code of 1986.”

Incorporation by Reference of Subsection (g) Limitations

Pub. L. 100–647, title I, § 1011(c)(10), Nov. 10, 1988, 102 Stat. 3459, provided that: “Notwithstanding any other provision of law, a plan may incorporate by reference the dollar limitations under section 402(g) of the Internal Revenue Code of 1986.”

Applicability of Subsection (a)(5)(F)(ii)

Pub. L. 100–647, title I, § 1011A(a)(5), Nov. 10, 1988, 102 Stat. 3472, provided that: “Section 402(a)(5)(F)(ii) of the Internal Revenue Code of 1954 shall not apply to distributions after October 22, 1986, and before the 1st taxable year beginning after 1986 which are attributable to benefits which accrued before January 1, 1985.”

Applicability of Subsection (a)(5)(D)(i)(II)

Pub. L. 100–647, title I, § 1011A(b)(4)(E), Nov. 10, 1988, 102 Stat. 3473, provided that: “Section 402(a)(5)(D)(i)(II) of the 1986 Code (as in effect after the amendment made by subparagraph (A)) shall not apply to distributions after December 31, 1986, and before March 31, 1988.”

Election To Treat Certain Lump Sum Distributions Received During 1987 as Received During 1986

Pub. L. 99–514, title XI, § 1124, Oct. 22, 1986, 100 Stat. 2475, as amended by Pub. L. 100–647, title I, § 1011A(d), Nov. 10, 1988, 102 Stat. 3476, provided that:

“(a)
In General.—
If an employee dies, separates from service, or becomes disabled before 1987 and an individual, trust, or estate receives a lump-sum distribution with respect to such employee after December 31, 1986, and before March 16, 1987, on account of such death, separation from service, or disability, then, for purposes of the Internal Revenue Code of 1986, such individual, estate, or trust may treat such distribution as if it were received in 1986.
#
“(b)
Special Rule for Terminated Plan.—
In the case of an individual, estate, or trust who receives with respect to an employee a distribution from a terminated plan which was maintained by a corporation organized under the laws of the State of Nevada, the principal place of business of which is Denver, Colorado, and which filed for relief from creditors under the United States Bankruptcy Code on August 28, 1986, the individual, estate, or trust may treat a lump sum distribution received from such plan before June 30, 1987, as if it were received in 1986.
#
“(c)
Lump Sum Distribution.—
For purposes of this section, the term ‘lump sum distribution’ has the meaning given such term by section 402(e)(4)(A) of the Internal Revenue Code of 1986, without regard to subparagraph (B) or (H) of section 402(e)(4) of such Code.”
#

Plan Amendments Not Required Until January 1, 1998

For provisions directing that if any amendments made by subtitle D [§§ 1401–1465] of title I of Pub. L. 104–188 require an amendment to any plan or annuity contract, such amendment shall not be required to be made before the first day of the first plan year beginning on or after Jan. 1, 1998, see section 1465 of Pub. L. 104–188, set out as a note under section 401 of this title.

Plan Amendments Not Required Until January 1, 1994

For provisions directing that if any amendments made by subtitle B [§§ 521–523] of title V of Pub. L. 102–318 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1994, see section 523 of Pub. L. 102–318, set out as a note under section 401 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

Treatment of Certain Distributions From Qualified Terminated Plan

Pub. L. 98–369, div. A, title V, § 551, July 18, 1984, 98 Stat. 896, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(a)
In General.—
For purposes of the Internal Revenue Code [of] 1986 [formerly I.R.C. 1954], if—
“(1)
a distribution was made from a qualified terminated plan to an employee on December 16, 1976, and on January 6, 1977, such employee transferred all of the property received in such distribution to an individual retirement account (within the meaning of section 408(a) of such Code) established for the benefit of such employee, and
#
“(2)
the remaining balance to the credit of such employee in such qualified terminated plan was distributed to such employee on January 21, 1977, and all the property received by such employee in such distribution was transferred by such employee to such individual retirement account on January 21, 1977,
#
then such distributions shall be treated as qualifying rollover distributions (within the meaning of section 402(a)(5) of such Code) and shall not be includible in the gross income of such employee for the taxable year in which paid.
#
“(b)
Qualified Terminated Plan.—
For purposes of this section, the term ‘qualified terminated plan’ means a pension plan—
“(1)
with respect to which a notice of sufficiency was issued by the Pension Benefit Guaranty Corporation on December 2, 1976, and
#
“(2)
which was terminated by corporate action on February 20, 1976.
#
#
“(c)
Refund or Credit of Overpayment Barred by Statute of Limitations.—
Notwithstanding section 6511(a) of the Internal Revenue Code of 1986 or any other period of limitation or lapse of time, a claim for credit or refund of overpayment of the tax imposed by such Code which arises by reason of this section may be filed by any person at any time within the 1-year period beginning on the date of enactment of this Act [July 18, 1984]. Sections 6511(b) and 6514 of such Code shall not apply to any claim for credit or refund filed under this subsection within such 1-year period.”
#

Transitional Rule in Case of Rollover Contributions to Employee Trusts or Annuities

Pub. L. 95–600, title I, § 157(h)(3)(B), Nov. 6, 1978, 92 Stat. 2808, as amended by Pub. L. 96–222, title I, § 101(a)(14)(A), (D), Apr. 1, 1980, 94 Stat. 204, 205; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “In the case of any payment made during 1978 which is described in section 402(a)(5)(A) or 403(a)(4)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] by reason of the amendments made by this subsection [amending sections 402 and 408 of this title], the applicable period specified in section 402(a)(5)(C) of such Code (or in the case of an individual retirement annuity, such section as made applicable by section 403(a)(4)(B) of such code) shall not expire before the close of December 31, 1980.”

Transitional Rules Relating to Period for Rollover Contribution

Pub. L. 94–267, § 1(d), Apr. 15, 1976, 90 Stat. 367, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(1)
In general.—
“(A)
Period for rollover contribution.—
In the case of a payment described in section 402(a)(5)(A) (other than a payment described in section 402(a)(5)(A) as in effect on the day before the date of the enactment of this Act) [Apr. 15, 1976] or section 403(a)(4)(A) (other than a payment described in section 403(a)(4)(A) as in effect on the day before the date of the enactment of this Act [Apr. 15, 1976] of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to distributions of the balance to the credit of the employee) which is contributed by an employee after the date of the enactment of this Act [Apr. 15, 1976] to a trust, plan, account, annuity, or bond described in section 402(a)(5)(B) or 403(a)(4)(B) of such Code, the applicable period specified in section 402(a)(5)(B) or 403(a)(4)(B) of such Code (relating to rollover distributions to another plan or retirement account) shall not expire before December 31, 1976.
#
“(B)
Time of contribution.—
#
#

(i) General rule.—If the initial portion of a payment the applicable period for which is determined under subparagraph (A) is contributed before December 31, 1976, by an individual to a trust, plan, account, annuity, or bond described in subparagraph (A) and the remaining portion of such payment is contributed by such individual to such a trust, plan, account, annuity, or bond not later than 30 days after the date a credit or refund is allowed by the Secretary of the Treasury or his delegate under section 6402 of the Internal Revenue Code of 1986 with respect to the contribution, then, for purposes of subparagraph (A) and sections 402(a)(5) and 403(a)(4) of such Code, at the election of the individual (made in accordance with regulations prescribed by the Secretary or his delegate), such remaining portion shall be considered to have been contributed on the date the initial portion of the payment was contributed. For purposes of this subparagraph, the initial portion of a payment is the amount by which such payment exceeds the amount of the tax imposed on such payment by chapter 1 of such Code (determined without regard to this subparagraph). [chapter 1 of this title]

“(ii) Regulations.—For purposes of this subparagraph, the tax imposed on a payment by chapter 1 of the Internal Revenue Code of 1986, and the date a credit or refund is allowed by the Secretary of the Treasury or his delegate under section 6402 with respect to a contribution, shall be determined under regulations prescribed by the Secretary of the Treasury or his delegate.

“(C) Period of limitations.—If an individual has made the election provided by subparagraph (B), then—

“(i) the period provided by the Internal Revenue Code of 1986 for the assessment of any deficiency for the taxable year in which the payment described in subparagraph (A) was made and each subsequent taxable year for which tax is determined by reference to the treatment of such payment under such Code or the status under such Code of any trust, plan, account, annuity, or bond described in subparagraph (A) shall, to the extent attributable to such treatment, not expire before the expiration of 3 years from the date the Secretary of the Treasury or his delegate is notified by the individual (in such manner as the Secretary of the Treasury or his delegate may prescribe) that such individual has made (or failed to make) the contribution of the remaining portion of the payment within the period specified in subparagraph (B)(i), and

“(ii) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of section 6212(c) of such Code or the provisions of any other law or rule of law which would otherwise prevent such assessment.

“(2) Rollover contribution for certain property sold.—Sections 402(a)(5)(C) and 403(a)(4)(C) of the Internal Revenue Code of 1986 (relating to the requirement that rollover amount must consist of property received in a distribution) shall not apply with respect to that portion of the property received in a payment described in section 402(a)(5)(A) (other than a payment described in section 402(a)(5)(A) as in effect on the day before the date of the enactment of this Act [Apr. 15, 1976] or 403(a)(4)(A) (other than a payment described in section 403(a)(4)(A) as in effect on the day before the date of the enactment of this Act) [Apr. 15, 1976] of such Code which is sold or exchanged by the employee on or before the date of the enactment of this Act, [Apr. 15, 1976], if the employee transfers an amount of cash equal to the proceeds received from the sale or exchange of such property in excess of the amount considered contributed by the employee (within the meaning of section 402(a)(4)(D)(i) of such Code).

“(3) Nonrecognition of gain or loss.—For purposes of the Internal Revenue Code of 1986 [this title] no gain or loss shall be recognized with respect to the sale or exchange of property described in paragraph (2) if the proceeds of such sale or exchange are transferred by an employee in accordance with this subsection and the applicable provisions of section 402(a)(5) or 403(a)(4) of such Code.”

Credits

1954–2022 · 38 acts

1954Aug. 16, 1954, ch. 736, 68A Stat. 135
1960Pub. L. 86–437, §§ 1, 2(a), Apr. 22, 1960, 74 Stat. 79
1962Pub. L. 87–792, § 4(c), Oct. 10, 1962, 76 Stat. 825
1964Pub. L. 88–272, title II, §§ 221(c)(1), 232(e)(1)–(3), Feb. 26, 1964, 78 Stat. 75, 111
1969Pub. L. 91–172, title III, § 321(b)(1), title V, § 515(a)(1), Dec. 30, 1969, 83 Stat. 590, 643
1974Pub. L. 93–406, title II, §§ 2002(g)(5), 2005(a), (b)(1), (c)(1), (2), Sept. 2, 1974, 88 Stat. 968, 987, 990, 991: Pub. L. 94–267, § 1(a), Apr. 15, 1976, 90 Stat. 365
1976Pub. L. 94–455, title XIV, § 1402(b)(1)(C), (2), title XV, § 1512(a), title XIX, §§ 1901(a)(57)(A)–(C)(i), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1731, 1732, 1742, 1773, 1774, 1834
1977Pub. L. 95–30, title I, § 102(b)(4), May 23, 1977, 91 Stat. 137
1978Pub. L. 95–458, § 4(a), (c), Oct. 14, 1978, 92 Stat. 1257, 1259
1978Pub. L. 95–600, title I, §§ 101(d)(1), 135(b), 157(f)(1), (g)(1), (h)(1), Nov. 6, 1978, 92 Stat. 2770, 2787, 2806–2808
1980Pub. L. 96–222, title I, § 101(a)(14)(C), (E)(i), Apr. 1, 1980, 94 Stat. 204, 205
1980Pub. L. 96–608, § 2(a), Dec. 28, 1980, 94 Stat. 3551
1981Pub. L. 97–34, title III, §§ 311(b)(2), (3)(A), (c), 314(c)(1), Aug. 13, 1981, 95 Stat. 280, 286
1983Pub. L. 97–448, title I, §§ 101(b), 103(c)(7), (8)(A), (12)(D), Jan. 12, 1983, 96 Stat. 2366, 2376, 2377
1984Pub. L. 98–369, div. A, title IV, § 491(c)(2), (d)(9)–(11), title V, § 522(a)(1), (b)–(d)(8), title VII, § 713(c)(3), title X, § 1001(b)(3), (e), July 18, 1984, 98 Stat. 848, 849, 868–870, 957, 1011, 1012
1984Pub. L. 98–397, title II, §§ 204(c)(1), (3), (4), 207(a), Aug. 23, 1984, 98 Stat. 1448, 1449
1986Pub. L. 99–272, title XI, § 11012(c), Apr. 7, 1986, 100 Stat. 260
1986Pub. L. 99–514, title I, § 104(b)(5), title XI, §§ 1105(a), 1106(c)(2), 1108(b), 1112(c), 1121(c)(1), 1122(a), (b)(1)(A), (2), (e)(1), (2)(A), (g), title XVIII, §§ 1852(a)(5)(A), (b)(1)–(7), (c)(5), 1854(f)(2), 1875(c)(1)(A), 1898(a)(2), (3), (c)(1)(A), (7)(A)(i), (e), Oct. 22, 1986, 100 Stat. 2105, 2417, 2423, 2432, 2444, 2465, 2466, 2469, 2470, 2865–2867, 2881, 2894, 2942, 2943, 2951, 2954, 2955
1988Pub. L. 100–647, title I, §§ 1011(c)(1)–(6)(B), (11), (h)(4), 1011A(a)(1), (b)(4)(A)–(D), (5)–(8), (10), (c)(9), 1018(t)(8)(A), (C), (u)(1), (6), (7), title VI, § 6068(a), Nov. 10, 1988, 102 Stat. 3457–3459, 3464, 3472–3474, 3476, 3589, 3590, 3703
1989Pub. L. 101–239, title VII, § 7811(g)(2), (i)(13), Dec. 19, 1989, 103 Stat. 2409, 2411
1990Pub. L. 101–508, title XI, § 11801(c)(9)(I), Nov. 5, 1990, 104 Stat. 1388–526
1992Pub. L. 102–318, title V, §§ 521(a), (b)(9)–(11), 522(c)(1), July 3, 1992, 106 Stat. 300, 310, 311, 315
1994Pub. L. 103–465, title VII, § 732(c), Dec. 8, 1994, 108 Stat. 5005
1996Pub. L. 104–188, title I, §§ 1401(a)–(b)(2), (13), 1421(b)(3)(A), (9)(B), 1450(a)(2), 1704(t)(68), Aug. 20, 1996, 110 Stat. 1787–1789, 1796, 1798, 1814, 1891
1997Pub. L. 105–34, title XV, § 1501(a), Aug. 5, 1997, 111 Stat. 1058
1998Pub. L. 105–206, title VI, § 6005(c)(2)(A), July 22, 1998, 112 Stat. 800
2001Pub. L. 107–16, title VI, §§ 611(d)(1)–(3)(A), 617(b), (c), 632(a)(3)(G), 636(b)(1), 641(a)(2)(A), (B), (b)(2)–(d), (e)(4)–(6), 643(a), 644(a), 657(b), June 7, 2001, 115 Stat. 97, 98, 105, 114, 117, 119–123, 136
2002Pub. L. 107–147, title IV, § 411(l)(3), (o)(1), (p)(6), (q)(2), Mar. 9, 2002, 116 Stat. 47, 48, 51
2005Pub. L. 109–135, title IV, § 407(a), Dec. 21, 2005, 119 Stat. 2635
2006Pub. L. 109–280, title VIII, §§ 822(a), 829(a)(1), 845(a), Aug. 17, 2006, 120 Stat. 998, 1001, 1013
2007Pub. L. 110–172, § 8(a)(1), Dec. 29, 2007, 121 Stat. 2483
2008Pub. L. 110–458, title I, §§ 108(f)(1)–(2)(B), (j), 109(b)(3), title II, § 201(b), Dec. 23, 2008, 122 Stat. 5109–5111, 5117
2013Pub. L. 112–239, div. A, title X, § 1086(b)(3)(A), Jan. 2, 2013, 126 Stat. 1968
2014Pub. L. 113–295, div. A, title II, § 221(a)(57)(A), Dec. 19, 2014, 128 Stat. 4046
2017Pub. L. 115–97, title I, § 13613(a), (b), Dec. 22, 2017, 131 Stat. 2166
2018Pub. L. 115–141, div. U, title IV, § 401(a)(73), Mar. 23, 2018, 132 Stat. 1187
2020Pub. L. 116–136, div. A, title II, § 2203(b), Mar. 27, 2020, 134 Stat. 344
2022Pub. L. 117–328, div. T, title III, §§ 301(b)(2), 328(a), 331(b)(2), title VI, §§ 601(b)(1), (2), 603(b)(1), Dec. 29, 2022, 136 Stat. 5338, 5360, 5364, 5390, 5392.

Show as published

(Aug. 16, 1954, ch. 736, 68A Stat. 135; Pub. L. 86–437, §§ 1, 2(a), Apr. 22, 1960, 74 Stat. 79; Pub. L. 87–792, § 4(c), Oct. 10, 1962, 76 Stat. 825; Pub. L. 88–272, title II, §§ 221(c)(1), 232(e)(1)–(3), Feb. 26, 1964, 78 Stat. 75, 111; Pub. L. 91–172, title III, § 321(b)(1), title V, § 515(a)(1), Dec. 30, 1969, 83 Stat. 590, 643; Pub. L. 93–406, title II, §§ 2002(g)(5), 2005(a), (b)(1), (c)(1), (2), Sept. 2, 1974, 88 Stat. 968, 987, 990, 991: Pub. L. 94–267, § 1(a), Apr. 15, 1976, 90 Stat. 365; Pub. L. 94–455, title XIV, § 1402(b)(1)(C), (2), title XV, § 1512(a), title XIX, §§ 1901(a)(57)(A)–(C)(i), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1731, 1732, 1742, 1773, 1774, 1834; Pub. L. 95–30, title I, § 102(b)(4), May 23, 1977, 91 Stat. 137; Pub. L. 95–458, § 4(a), (c), Oct. 14, 1978, 92 Stat. 1257, 1259; Pub. L. 95–600, title I, §§ 101(d)(1), 135(b), 157(f)(1), (g)(1), (h)(1), Nov. 6, 1978, 92 Stat. 2770, 2787, 2806–2808; Pub. L. 96–222, title I, § 101(a)(14)(C), (E)(i), Apr. 1, 1980, 94 Stat. 204, 205; Pub. L. 96–608, § 2(a), Dec. 28, 1980, 94 Stat. 3551; Pub. L. 97–34, title III, §§ 311(b)(2), (3)(A), (c), 314(c)(1), Aug. 13, 1981, 95 Stat. 280, 286; Pub. L. 97–448, title I, §§ 101(b), 103(c)(7), (8)(A), (12)(D), Jan. 12, 1983, 96 Stat. 2366, 2376, 2377; Pub. L. 98–369, div. A, title IV, § 491(c)(2), (d)(9)–(11), title V, § 522(a)(1), (b)–(d)(8), title VII, § 713(c)(3), title X, § 1001(b)(3), (e), July 18, 1984, 98 Stat. 848, 849, 868–870, 957, 1011, 1012; Pub. L. 98–397, title II, §§ 204(c)(1), (3), (4), 207(a), Aug. 23, 1984, 98 Stat. 1448, 1449; Pub. L. 99–272, title XI, § 11012(c), Apr. 7, 1986, 100 Stat. 260; Pub. L. 99–514, title I, § 104(b)(5), title XI, §§ 1105(a), 1106(c)(2), 1108(b), 1112(c), 1121(c)(1), 1122(a), (b)(1)(A), (2), (e)(1), (2)(A), (g), title XVIII, §§ 1852(a)(5)(A), (b)(1)–(7), (c)(5), 1854(f)(2), 1875(c)(1)(A), 1898(a)(2), (3), (c)(1)(A), (7)(A)(i), (e), Oct. 22, 1986, 100 Stat. 2105, 2417, 2423, 2432, 2444, 2465, 2466, 2469, 2470, 2865–2867, 2881, 2894, 2942, 2943, 2951, 2954, 2955; Pub. L. 100–647, title I, §§ 1011(c)(1)–(6)(B), (11), (h)(4), 1011A(a)(1), (b)(4)(A)–(D), (5)–(8), (10), (c)(9), 1018(t)(8)(A), (C), (u)(1), (6), (7), title VI, § 6068(a), Nov. 10, 1988, 102 Stat. 3457–3459, 3464, 3472–3474, 3476, 3589, 3590, 3703; Pub. L. 101–239, title VII, § 7811(g)(2), (i)(13), Dec. 19, 1989, 103 Stat. 2409, 2411; Pub. L. 101–508, title XI, § 11801(c)(9)(I), Nov. 5, 1990, 104 Stat. 1388–526; Pub. L. 102–318, title V, §§ 521(a), (b)(9)–(11), 522(c)(1), July 3, 1992, 106 Stat. 300, 310, 311, 315; Pub. L. 103–465, title VII, § 732(c), Dec. 8, 1994, 108 Stat. 5005; Pub. L. 104–188, title I, §§ 1401(a)–(b)(2), (13), 1421(b)(3)(A), (9)(B), 1450(a)(2), 1704(t)(68), Aug. 20, 1996, 110 Stat. 1787–1789, 1796, 1798, 1814, 1891; Pub. L. 105–34, title XV, § 1501(a), Aug. 5, 1997, 111 Stat. 1058; Pub. L. 105–206, title VI, § 6005(c)(2)(A), July 22, 1998, 112 Stat. 800; Pub. L. 107–16, title VI, §§ 611(d)(1)–(3)(A), 617(b), (c), 632(a)(3)(G), 636(b)(1), 641(a)(2)(A), (B), (b)(2)–(d), (e)(4)–(6), 643(a), 644(a), 657(b), June 7, 2001, 115 Stat. 97, 98, 105, 114, 117, 119–123, 136; Pub. L. 107–147, title IV, § 411(l)(3), (o)(1), (p)(6), (q)(2), Mar. 9, 2002, 116 Stat. 47, 48, 51; Pub. L. 109–135, title IV, § 407(a), Dec. 21, 2005, 119 Stat. 2635; Pub. L. 109–280, title VIII, §§ 822(a), 829(a)(1), 845(a), Aug. 17, 2006, 120 Stat. 998, 1001, 1013; Pub. L. 110–172, § 8(a)(1), Dec. 29, 2007, 121 Stat. 2483; Pub. L. 110–458, title I, §§ 108(f)(1)–(2)(B), (j), 109(b)(3), title II, § 201(b), Dec. 23, 2008, 122 Stat. 5109–5111, 5117; Pub. L. 112–239, div. A, title X, § 1086(b)(3)(A), Jan. 2, 2013, 126 Stat. 1968; Pub. L. 113–295, div. A, title II, § 221(a)(57)(A), Dec. 19, 2014, 128 Stat. 4046; Pub. L. 115–97, title I, § 13613(a), (b), Dec. 22, 2017, 131 Stat. 2166; Pub. L. 115–141, div. U, title IV, § 401(a)(73), Mar. 23, 2018, 132 Stat. 1187; Pub. L. 116–136, div. A, title II, § 2203(b), Mar. 27, 2020, 134 Stat. 344; Pub. L. 117–328, div. T, title III, §§ 301(b)(2), 328(a), 331(b)(2), title VI, §§ 601(b)(1), (2), 603(b)(1), Dec. 29, 2022, 136 Stat. 5338, 5360, 5364, 5390, 5392.)

Statutory text

Taxability of beneficiary of exempt trust

Taxability of beneficiary of nonexempt trust

Contributions

Distributions

Grantor trusts

Failure to meet requirements of section 410(b)

Highly compensated employees

Failure to meet coverage tests

Highly compensated employee

Rules applicable to rollovers from exempt trusts

Exclusion from income

Maximum amount which may be rolled over

Time limit on transfers

In general

Hardship exception

Rollover of certain plan loan offset amounts

In general

Qualified plan loan offset amount

Plan loan offset amount

Limitation

Qualified employer plan

Eligible rollover distribution

Transfer treated as rollover contribution under section 408

Sales of distributed property

Transfer of proceeds from sale of distributed property treated as transfer of distributed property

Proceeds attributable to increase in value

Designation where amount of distribution exceeds rollover contribution

Nonrecognition of gain or loss

Special rule for frozen deposits

In general

Frozen deposits

Definitions

Qualified trust

Eligible retirement plan

Rollover where spouse receives distribution after death of employee

Separate accounting

Distributions to inherited individual retirement plan of nonspouse beneficiary

In general

Certain trusts treated as beneficiaries

Recontributions of withdrawals for home purchases

General rule

In general

Treatment of repayments

Qualified distribution

Definitions

Taxability of beneficiary of certain foreign situs trusts

Other rules applicable to exempt trusts

Alternate payees

Alternate payee treated as distributee

Rollovers

Distributions by United States to nonresident aliens

Cash or deferred arrangements

Net unrealized appreciation

Amounts attributable to employee contributions

Amounts attributable to employer contributions

Determination of amounts and adjustments

Lump-sum distribution

In general

Aggregation of certain trusts and plans

Community property laws

Amounts subject to penalty

Balance to credit of employee not to include amounts payable under qualified domestic relations order

Transfers to cost-of-living arrangement not treated as distribution

Lump-sum distributions of alternate payees

Definitions relating to securities

Securities

Securities of the employer

[(5) Repealed. Pub. L. 104–188, title I, § 1401(b)(13), Aug. 20, 1996, 110 Stat. 1789]

Direct trustee-to-trustee transfers

Written explanation to recipients of distributions eligible for rollover treatment

In general

Definitions

Eligible rollover distribution

Eligible retirement plan

Limitation on exclusion for elective deferrals

In general

Limitation

Applicable dollar amount

Distribution of excess deferrals

[(5) Repealed. Pub. L. 104–188, title I, § 1401(b)(13), Aug. 20, 1996, 110 Stat. 1789]