Source: http://www.law.cornell.edu/uscode/text/26/401?quicktabs_8=1
Timestamp: 2013-12-09 00:29:18
Document Index: 373217947

Matched Legal Cases: ['§ 401', '§ 401', '§ 401', 'art 4', 'art 4', 'art 4', '§ 237', '§ 1171']

26 USC § 401 - Qualified pension, profit-sharing, and stock bonus plans | Title 26 - Internal Revenue Code | U.S. Code | LII / Legal Information Institute
USC › Title 26 › Subtitle A › Chapter 1 › Subchapter D › Part I › Subpart A › § 401 › prevnext
26 USC § 401 - Qualified pension, profit-sharing, and stock bonus plans
if contributions are made to the trust by such employer, or employees, or both, or by another employer who is entitled to deduct his contributions under section 404
(a)(3)(B) (relating to deduction for contributions to profit-sharing and stock bonus plans), or by a charitable remainder trust pursuant to a qualified gratuitous transfer (as defined in section 664
(g)(1)), for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with such plan;
if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries (but this paragraph shall not be construed, in the case of a multiemployer plan, to prohibit the return of a contribution within 6 months after the plan administrator determines that the contribution was made by a mistake of fact or law (other than a mistake relating to whether the plan is described in section 401
(a) or the trust which is part of such plan is exempt from taxation under section 501
(a), or the return of any withdrawal liability payment determined to be an overpayment within 6 months of such determination).; [1]
if the plan of which such trust is a part satisfies the requirements of section 410 (relating to minimum participation standards); and
if the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees (within the meaning of section 414
(q)). For purposes of this paragraph, there shall be excluded from consideration employees described in section 410
(b)(3)(A) and (C).
Special rules relating to nondiscrimination requirements.— (A)
Salaried or clerical employees.— A classification shall not be considered discriminatory within the meaning of paragraph (4) or section 410
(b)(2)(A)(i) merely because it is limited to salaried or clerical employees.
Contributions and benefits may bear uniform relationship to compensation.— A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the contributions or benefits of, or on behalf of, the employees under the plan bear a uniform relationship to the compensation (within the meaning of section 414(s)) of such employees.
Certain disparity permitted.— A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the contributions or benefits of, or on behalf of, the employees under the plan favor highly compensated employees (as defined in section 414
(q)) in the manner permitted under subsection (l).
Integrated defined benefit plan.— (i)
In general.— A defined benefit plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the plan provides that the employer-derived accrued retirement benefit for any participant under the plan may not exceed the excess (if any) of—
the participant’s final pay with the employer, over
the employer-derived retirement benefit created under Federal law attributable to service by the participant with the employer.
Final pay.— For purposes of this subparagraph, the participant’s final pay is the compensation (as defined in section 414
(q)(4)) paid to the participant by the employer for any year—
which ends during the 5-year period ending with the year in which the participant separated from service for the employer, and
for which the participant’s total compensation from the employer was highest.
2 or more plans treated as single plan.— For purposes of determining whether 2 or more plans of an employer satisfy the requirements of paragraph (4) when considered as a single plan—
Contributions.— If the amount of contributions on behalf of the employees allowed as a deduction under section 404 for the taxable year with respect to such plans, taken together, bears a uniform relationship to the compensation (within the meaning of section 414(s)) of such employees, the plans shall not be considered discriminatory merely because the rights of employees to, or derived from, the employer contributions under the separate plans do not become nonforfeitable at the same rate.
Benefits.— If the employees’ rights to benefits under the separate plans do not become nonforfeitable at the same rate, but the levels of benefits provided by the separate plans satisfy the requirements of regulations prescribed by the Secretary to take account of the differences in such rates, the plans shall not be considered discriminatory merely because of the difference in such rates.
Social security retirement age.— For purposes of testing for discrimination under paragraph (4)—
the social security retirement age (as defined in section 415
(b)(8)) shall be treated as a uniform retirement age, and
subsidized early retirement benefits and joint and survivor annuities shall not be treated as being unavailable to employees on the same terms merely because such benefits or annuities are based in whole or in part on an employee’s social security retirement age (as so defined).
Governmental plans.— Paragraphs (3) and (4) shall not apply to a governmental plan (within the meaning of section 414
A plan shall be considered as meeting the requirements of paragraph (3) during the whole of any taxable year of the plan if on one day in each quarter it satisfied such requirements.
A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part satisfies the requirements of section 411 (relating to minimum vesting standards).
A trust forming part of a defined benefit plan shall not constitute a qualified trust under this section unless the plan provides that forfeitures must not be applied to increase the benefits any employee would otherwise receive under the plan.
Required distributions.— (A)
In general.— A trust shall not constitute a qualified trust under this subsection unless the plan provides that the entire interest of each employee—
will be distributed to such employee not later than the required beginning date, or
will be distributed, beginning not later than the required beginning date, in accordance with regulations, over the life of such employee or over the lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary).
Required distribution where employee dies before entire interest is distributed.— (i)
Where distributions have begun under subparagraph (A)(ii).—A trust shall not constitute a qualified trust under this section unless the plan provides that if—
the distribution of the employee’s interest has begun in accordance with subparagraph (A)(ii), and
the employee dies before his entire interest has been distributed to him,
5-year rule for other cases.— A trust shall not constitute a qualified trust under this section unless the plan provides that, if an employee dies before the distribution of the employee’s interest has begun in accordance with subparagraph (A)(ii), the entire interest of the employee will be distributed within 5 years after the death of such employee.
Exception to 5-year rule for certain amounts payable over life of beneficiary.— If—
any portion of the employee’s interest is payable to (or for the benefit of) a designated beneficiary,
such distributions begin not later than 1 year after the date of the employee’s death or such later date as the Secretary may by regulations prescribe,
Special rule for surviving spouse of employee.— If the designated beneficiary referred to in clause (iii)(I) is the surviving spouse of the employee—
the date on which the distributions are required to begin under clause (iii)(III) shall not be earlier than the date on which the employee would have attained age 701/2, and
Required beginning date.— For purposes of this paragraph—
In general.— The term “required beginning date” means April 1 of the calendar year following the later of—
the calendar year in which the employee attains age 701/2, or
Exception.— Subclause (II) of clause (i) shall not apply—
except as provided in section 409
(d), in the case of an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains age 701/2, or
(a)(6) or (b)(3).
Actuarial adjustment.— In the case of an employee to whom clause (i)(II) applies who retires in a calendar year after the calendar year in which the employee attains age 701/2, the employee’s accrued benefit shall be actuarially increased to take into account the period after age 701/2 in which the employee was not receiving any benefits under the plan.
Exception for governmental and church plans.— Clauses (ii) and (iii) shall not apply in the case of a governmental plan or church plan. For purposes of this clause, the term “church plan” means a plan maintained by a church for church employees, and the term “church” means any church (as defined in section 3121
Life expectancy.— For purposes of this paragraph, the life expectancy of an employee and the employee’s spouse (other than in the case of a life annuity) may be redetermined but not more frequently than annually.
Designated beneficiary.— For purposes of this paragraph, the term “designated beneficiary” means any individual designated as a beneficiary by the employee.
Treatment of payments to children.— Under regulations prescribed by the Secretary, for purposes of this paragraph, any amount paid to a child shall be treated as if it had been paid to the surviving spouse if such amount will become payable to the surviving spouse upon such child reaching majority (or other designated event permitted under regulations).
Treatment of incidental death benefit distributions.— For purposes of this title, any distribution required under the incidental death benefit requirements of this subsection shall be treated as a distribution required under this paragraph.
Temporary waiver of minimum required distribution.— (i)
In general.— The requirements of this paragraph shall not apply for calendar year 2009 to—
a defined contribution plan which is described in this subsection or in section 403
a defined contribution plan which is an eligible deferred compensation plan described in section 457
(b) but only if such plan is maintained by an employer described in section 457
Special rules regarding waiver period.— For purposes of this paragraph—
the required beginning date with respect to any individual shall be determined without regard to this subparagraph for purposes of applying this paragraph for calendar years after 2009, and
if clause (ii) of subparagraph (B) applies, the 5-year period described in such clause shall be determined without regard to calendar year 2009.
Other requirements.— (A)
Plans benefiting owner-employees.— In the case of any plan which provides contributions or benefits for employees some or all of whom are owner-employees (as defined in subsection (c)(3)), a trust forming part of such plan shall constitute a qualified trust under this section only if the requirements of subsection (d) are also met.
Top-heavy plans.— (i)
In general.— In the case of any top-heavy plan, a trust forming part of such plan shall constitute a qualified trust under this section only if the requirements of section 416 are met.
Plans which may become top-heavy.— Except to the extent provided in regulations, a trust forming part of a plan (whether or not a top-heavy plan) shall constitute a qualified trust under this section only if such plan contains provisions—
which will take effect if such plan becomes a top-heavy plan, and
which meet the requirements of section 416.
Exemption for governmental plans.— This subparagraph shall not apply to any governmental plan.
Requirement of joint and survivor annuity and preretirement survivor annuity.— (A)
In general.— In the case of any plan to which this paragraph applies, except as provided in section 417, a trust forming part of such plan shall not constitute a qualified trust under this section unless—
in the case of a vested participant who does not die before the annuity starting date, the accrued benefit payable to such participant is provided in the form of a qualified joint and survivor annuity, and
in the case of a vested participant who dies before the annuity starting date and who has a surviving spouse, a qualified preretirement survivor annuity is provided to the surviving spouse of such participant.
Plans to which paragraph applies.— This paragraph shall apply to—
any defined contribution plan which is subject to the funding standards of section 412, and
any participant under any other defined contribution plan unless—
such plan provides that the participant’s nonforfeitable accrued benefit (reduced by any security interest held by the plan by reason of a loan outstanding to such participant) is payable in full, on the death of the participant, to the participant’s surviving spouse (or, if there is no surviving spouse or the surviving spouse consents in the manner required under section 417
(a)(2), to a designated beneficiary),
such participant does not elect a payment of benefits in the form of a life annuity, and
with respect to such participant, such plan is not a direct or indirect transferee (in a transfer after December 31, 1984) of a plan which is described in clause (i) or (ii) or to which this clause applied with respect to the participant.
Exception for certain ESOP benefits.— (i)
In general.— In the case of—
subparagraph (A) shall not apply to that portion of the employee’s accrued benefit to which the requirements of section 409
(h) apply.
Nonforfeitable benefit must be paid in full, etc.— In the case of any participant, clause (i) shall apply only if the requirements of subclauses (I), (II), and (III) of subparagraph (B)(iii) are met with respect to such participant.
Special rule where participant and spouse married less than 1 year.— A plan shall not be treated as failing to meet the requirements of subparagraphs (B)(iii) or (C) merely because the plan provides that benefits will not be payable to the surviving spouse of the participant unless the participant and such spouse had been married throughout the 1-year period ending on the earlier of the participant’s annuity starting date or the date of the participant’s death.
Exception for plans described in section 404
(c).—This paragraph shall not apply to a plan which the Secretary has determined is a plan described in section 404
(c) (or a continuation thereof) in which participation is substantially limited to individuals who, before January 1, 1976, ceased employment covered by the plan.
Cross reference.— For—
provisions under which participants may elect to waive the requirements of this paragraph, and
other definitions and special rules for purposes of this paragraph,
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 September 2, 1974, each 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). The preceding sentence does not apply to any multiemployer plan with respect to any transaction to the extent that participants either before or after the transaction are covered under a multiemployer plan to which title IV of the Employee Retirement Income Security Act of 1974 applies.
Assignment and alienation.— (A)
In general.— A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated. For purposes of the preceding sentence, there shall not be taken into account any voluntary and revocable assignment of not to exceed 10 percent of any benefit payment made by any participant who is receiving benefits under the plan unless the assignment or alienation is made for purposes of defraying plan administration costs. For purposes of this paragraph a loan made to a participant or beneficiary shall not be treated as an assignment or alienation if such loan is secured by the participant’s accrued nonforfeitable benefit and is exempt from the tax imposed by section 4975 (relating to tax on prohibited transactions) by reason of section 4975
(d)(1). This paragraph shall take effect on January 1, 1976 and shall not apply to assignments which were irrevocable on September 2, 1974.
Special rules for domestic relations orders.— Subparagraph (A) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, except that subparagraph (A) shall not apply if the order is determined to be a qualified domestic relations order.
Special rule for certain judgments and settlements.— Subparagraph (A) shall not apply to any offset of a participant’s benefits provided under a plan against an amount that the participant is ordered or required to pay to the plan if—
under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or
pursuant to a settlement agreement between the Secretary of Labor and the participant, or a settlement agreement between the Pension Benefit Guaranty Corporation and the participant, in connection with a violation (or alleged violation) of part 4 of such subtitle by a fiduciary or any other person,
in a case in which the survivor annuity requirements of section 401
(a)(11) apply with respect to distributions from the plan to the participant, if the participant has a spouse at the time at which the offset is to be made—
either such spouse has consented in writing to such offset and such consent is witnessed by a notary public or representative of the plan (or it is established to the satisfaction of a plan representative that such consent may not be obtained by reason of circumstances described in section 417
(a)(2)(B)), or an election to waive the right of the spouse to either a qualified joint and survivor annuity or a qualified preretirement survivor annuity is in effect in accordance with the requirements of section 417
such spouse is ordered or required in such judgment, order, decree, or settlement to pay an amount to the plan in connection with a violation of part 4 of such subtitle, or
in such judgment, order, decree, or settlement, such spouse retains the right to receive the survivor annuity under a qualified joint and survivor annuity provided pursuant to section 401
(a)(11)(A)(i) and under a qualified preretirement survivor annuity provided pursuant to section 401
(a)(11)(A)(ii), determined in accordance with subparagraph (D).
A plan shall not be treated as failing to meet the requirements of this subsection, subsection (k),section 403(b), or section 409
(d) solely by reason of an offset described in this subparagraph.
Survivor annuity.— (i)
In general.— The survivor annuity described in subparagraph (C)(iii)(III) shall be determined as if—
Definition.— For purposes of this subparagraph, the term “minimum-required qualified joint and survivor annuity” means the qualified joint and survivor annuity which is the actuarial equivalent of the participant’s accrued benefit (within the meaning of section 411
(a)(7)) and under which the survivor annuity is 50 percent of the amount of the annuity which is payable during the joint lives of the participant and the spouse.
A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that, unless the participant otherwise elects, the payment of benefits under the plan to the participant will begin not later than the 60th day after the latest of the close of the plan year in which—
the date on which the participant attains the earlier of age 65 or the normal retirement age specified under the plan,
trust shall not constitute a qualified trust under this section unless under the plan of which such trust is a part—
in the case of a participant or beneficiary who is receiving benefits under such plan, or
in the case of a participant who is separated from the service and who has nonforfeitable rights to benefits,
A trust shall not constitute a qualified trust under this section if the plan of which such trust is a part provides for benefits or contributions which exceed the limitations of section 415.
Compensation limit.— (A)
In general.— A trust shall not constitute a qualified trust under this section unless, under the plan of which such trust is a part, the annual compensation of each employee taken into account under the plan for any year does not exceed $200,000.
Cost-of-living adjustment.— The Secretary shall adjust annually the $200,000 amount in subparagraph (A) for increases in the cost-of-living at the same time and in the same manner as adjustments under section 415
(d); except that the base period shall be the calendar quarter beginning July 1, 2001, and any increase which is not a multiple of $5,000 shall be rounded to the next lowest multiple of $5,000.
[(18)
Repealed. Pub. L. 97–248, title II, § 237(b),Sept. 3, 1982, 96 Stat. 511.]
A trust shall not constitute a qualified trust under this section if under the plan of which such trust is a part any part of a participant’s accrued benefit derived from employer contributions (whether or not otherwise nonforfeitable), is forfeitable solely because of withdrawal by such participant of any amount attributable to the benefit derived from contributions made by such participant. The preceding sentence shall not apply to the accrued benefit of any participant unless, at the time of such withdrawal, such participant has a nonforfeitable right to at least 50 percent of such accrued benefit (as determined under section 411). The first sentence of this paragraph shall not apply to the extent that an accrued benefit is permitted to be forfeited in accordance with section 411
(a)(3)(D)(iii) (relating to proportional forfeitures of benefits accrued before September 2, 1974, in the event of withdrawal of certain mandatory contributions).
A trust forming part of a pension plan shall not be treated as failing to constitute a qualified trust under this section merely because the pension plan of which such trust is a part makes 1 or more distributions within 1 taxable year to a distributee on account of a termination of the plan of which the trust is a part, or in the case of a profit-sharing or stock bonus plan, a complete discontinuance of contributions under such plan. This paragraph shall not apply to a defined benefit plan unless the employer maintaining such plan files a notice with the Pension Benefit Guaranty Corporation (at the time and in the manner prescribed by the Pension Benefit Guaranty Corporation) notifying the Corporation of such payment or distribution and the Corporation has approved such payment or distribution or, within 90 days after the date on which such notice was filed, has failed to disapprove such payment or distribution. For purposes of this paragraph, rules similar to the rules of section 402
(a)(6)(B) (as in effect before its repeal by section 521 of the Unemployment Compensation Amendments of 1992) shall apply.
[(21)
Repealed. Pub. L. 99–514, title XI, § 1171(b)(5),Oct. 22, 1986, 100 Stat. 2513.]
If a defined contribution plan (other than a profit-sharing plan)—
is established by an employer whose stock is not readily tradable on an established market, and
after acquiring securities of the employer, more than 10 percent of the total assets of the plan are securities of the employer,
any trust forming part of such plan shall not constitute a qualified trust under this section unless the plan meets the requirements of subsection (e) ofsection 409. The requirements of subsection (e) ofsection 409 shall not apply to any employees of an employer who are participants in any defined contribution plan established and maintained by such employer if the stock of such employer is not readily tradable on an established market and the trade or business of such employer consists of publishing on a regular basis a newspaper for general circulation. For purposes of the preceding sentence, subsections (b), (c), (m), and (o) ofsection 414 shall not apply except for determining whether stock of the employer is not readily tradable on an established market.
A stock bonus plan shall not be treated as meeting the requirements of this section unless such plan meets the requirements of subsections (h) and (o) ofsection 409, except that in applying section 409
(h) for purposes of this paragraph, the term “employer securities” shall include any securities of the employer held by the plan.
Any group trust which otherwise meets the requirements of this section shall not be treated as not meeting such requirements on account of the participation or inclusion in such trust of the moneys of any plan or governmental unit described in section 818
Requirement that actuarial assumptions be specified.— A defined benefit plan shall not be treated as providing definitely determinable benefits unless, whenever the amount of any benefit is to be determined on the basis of actuarial assumptions, such assumptions are specified in the plan in a way which precludes employer discretion.
Additional participation requirements.— (A)
In general.— In the case of a trust which is a part of a defined benefit plan, such trust shall not constitute a qualified trust under this subsection unless on each day of the plan year such trust benefits at least the lesser of—
Treatment of excludable employees.— (i)
In general.— A plan may exclude from consideration under this paragraph employees described in paragraphs (3) and (4)(A) of section 410
Separate application for certain excludable employees.— If employees described in section 410
(b)(4)(B) are covered under a plan which meets the requirements of subparagraph (A) separately with respect to such employees, such employees may be excluded from consideration in determining whether any plan of the employer meets such requirements if—
the benefits for such employees are provided under the same plan as benefits for other employees,
the benefits provided to such employees are not greater than comparable benefits provided to other employees under the plan, and
no highly compensated employee (within the meaning of section 414
(q)) is included in the group of such employees for more than 1 year.
Special rule for collective bargaining units.— Except to the extent provided in regulations, a plan covering only employees described in section 410
(b)(3)(A) may exclude from consideration any employees who are not included in the unit or units in which the covered employees are included.
Paragraph not to apply to multiemployer plans.— Except to the extent provided in regulations, this paragraph shall not apply to employees in a multiemployer plan (within the meaning of section 414
(f)) who are covered by collective bargaining agreements.
Special rule for certain dispositions or acquisitions.— Rules similar to the rules of section 410
(b)(6)(C) shall apply for purposes of this paragraph.
Separate lines of business.— At the election of the employer and with the consent of the Secretary, this paragraph may be applied separately with respect to each separate line of business of the employer. For purposes of this paragraph, the term “separate line of business” has the meaning given such term by section 414
(r) (without regard to paragraph (2)(A) or (7) thereof).
Exception for governmental plans.— This paragraph shall not apply to a governmental plan (within the meaning of section 414
Regulations.— The Secretary may by regulation provide that any separate benefit structure, any separate trust, or any other separate arrangement is to be treated as a separate plan for purposes of applying this paragraph.
Determinations as to profit-sharing plans.— (A)
Contributions need not be based on profits.— The determination of whether the plan under which any contributions are made is a profit-sharing plan shall be made without regard to current or accumulated profits of the employer and without regard to whether the employer is a tax-exempt organization.
Plan must designate type.— In the case of a plan which is intended to be a money purchase pension plan or a profit-sharing plan, a trust forming part of such plan shall not constitute a qualified trust under this subsection unless the plan designates such intent at such time and in such manner as the Secretary may prescribe.
Additional requirements relating to employee stock ownership plans.— (A)
In general.— In the case of a trust which is part of an employee stock ownership plan (within the meaning of section 4975
(e)(7)) or a plan which meets the requirements of section 409
(a), such trust shall not constitute a qualified trust under this section unless such plan meets the requirements of subparagraphs (B) and (C).
Diversification of investments.— (i)
In general.— A plan meets the requirements of this subparagraph if each qualified participant in the plan may elect within 90 days after the close of each plan year in the qualified election period to direct the plan as to the investment of at least 25 percent of the participant’s account in the plan (to the extent such portion exceeds the amount to which a prior election under this subparagraph applies). In the case of the election year in which the participant can make his last election, the preceding sentence shall be applied by substituting “50 percent” for “25 percent”.
Method of meeting requirements.— A plan shall be treated as meeting the requirements of clause (i) if—
the portion of the participant’s account covered by the election under clause (i) is distributed within 90 days after the period during which the election may be made, or
the plan offers at least 3 investment options (not inconsistent with regulations prescribed by the Secretary) to each participant making an election under clause (i) and within 90 days after the period during which the election may be made, the plan invests the portion of the participant’s account covered by the election in accordance with such election.
Qualified participant.— For purposes of this subparagraph, the term “qualified participant” means any employee who has completed at least 10 years of participation under the plan and has attained age 55.
Qualified election period.— For purposes of this subparagraph, the term “qualified election period” means the 6-plan-year period beginning with the later of—