Source: http://www.law.cornell.edu/uscode/text/26/4980?quicktabs_8=4
Timestamp: 2015-01-27 21:54:33
Document Index: 69584989

Matched Legal Cases: ['§ 4980', '§ 4980', '§ 4980', '§ 1132', '§ 1011', '§ 5072', '§ 6069', '§ 12001', '§ 1704', '§ 901', '§ 108', '§ 12001', '§ 12002', '§ 6069', '§ 1011', '§ 1011', '§ 1011', '§ 1011', '§ 1011', '§ 5072', '§ 12003', '§ 12001', '§ 5072', '§ 6069', '§ 1132', '§ 1011', '§ 7861']

26 U.S. Code § 4980 - Tax on reversion of qualified plan assets to employer | LII / Legal Information Institute
U.S. Code › Title 26 › Subtitle D › Chapter 43 › § 4980 26 U.S. Code § 4980 - Tax on reversion of qualified plan assets to employer
Imposition of tax There is hereby imposed a tax of 20 percent of the amount of any employer reversion from a qualified plan.
Liability for tax The tax imposed by subsection (a) shall be paid by the employer maintaining the plan.
Qualified plan The term “qualified plan” means any plan meeting the requirements of section 401
(a), other than—
a governmental plan (within the meaning of section 414
Employer reversion (A)
In general The term “employer reversion” means the amount of cash and the fair market value of other property received (directly or indirectly) by an employer from the qualified plan.
Exceptions The term “employer reversion” shall not include—
any distribution to the employer which is allowable under section 401
any transfer described in section 420
(f)(2)(B)(ii)(II).
Exception for employee stock ownership plans (A)
In general If, upon an employer reversion from a qualified plan, any applicable amount is transferred from such plan to an employee stock ownership plan described in section 4975
(e)(7) or a tax credit employee stock ownership plan (as described in section 409), such amount shall not be treated as an employer reversion for purposes of this section (or includible in the gross income of the employer) if the requirements of subparagraphs (B), (C), and (D) are met.
Investment in employer securities The requirements of this subparagraph are met if, within 90 days after the transfer (or such longer period as the Secretary may prescribe), the amount transferred is invested in employer securities (as defined in section 409
(l)) or used to repay loans used to purchase such securities.
Allocation requirements The requirements of this subparagraph are met if the portion of the amount transferred which is not allocated under the plan to accounts of participants in the plan year in which the transfer occurs—
when allocated to accounts of participants under the plan, is treated as an employer contribution for purposes of section 415
(c), except that—
the annual addition (as determined under section 415
(c)) attributable to each such allocation shall not exceed the value of such securities as of the time such securities were credited to such suspense account, and
The amount allocated in the year of transfer shall not be less than the lesser of the maximum amount allowable under section 415 or1/8 of the amount attributable to the securities acquired. In the case of dividends on securities held in the suspense account, the requirements of this subparagraph are met only if the dividends are allocated to accounts of participants or paid to participants in proportion to their accounts, or used to repay loans used to purchase employer securities.
Participants The requirements of this subparagraph are met if at least half of the participants in the qualified plan are participants in the employee stock ownership plan (as of the close of the 1st plan year for which an allocation of the securities is required).
Applicable amount For purposes of this paragraph, the term “applicable amount” means any amount which—
No credit or deduction allowed No credit or deduction shall be allowed under chapter 1 for any amount transferred to an employee stock ownership plan in a transfer to which this paragraph applies.
Amount transferred to include income thereon, etc. The amount transferred shall not be treated as meeting the requirements of subparagraphs (B) and (C) unless amounts attributable to such amount also meet such requirements.
Time for payment of tax For purposes of subtitle F, the time for payment of the tax imposed by subsection (a) shall be the last day of the month following the month in which the employer reversion occurs.
Increase in tax for failure to establish replacement plan or increase benefits (1)
In general Subsection (a) shall be applied by substituting “50 percent” for “20 percent” with respect to any employer reversion from a qualified plan unless—
Qualified replacement plan For purposes of this subsection, the term “qualified replacement plan” means a qualified plan established or maintained by the employer in connection with a qualified plan termination (hereinafter referred to as the “replacement plan”) with respect to which the following requirements are met:
Participation requirement At least 95 percent of the active participants in the terminated plan who remain as employees of the employer after the termination are active participants in the replacement plan.
Asset transfer requirement (i)
25 percent cushion
Reduction for increase in benefits
Treatment of amount transferred
Allocation requirements (i)
Coordination with section 415 limitation
Unallocated amounts at termination
Pro rata benefit increases (A)
In general The requirements of this paragraph are met if a plan amendment to the terminated plan is adopted in connection with the termination of the plan which provides pro rata increases in the accrued benefits of all qualified participants which—
Pro rata increase For purposes of subparagraph (A), a pro rata increase is an increase in the present value of the accrued benefit of each qualified participant in an amount which bears the same ratio to the aggregate amount determined under subparagraph (A)(i) as—
the present value of such participant’s accrued benefit (determined without regard to this subsection), bears to
Coordination with other provisions (A)
Limitations A benefit may not be increased under paragraph (2)(B)(ii) or (3)(A), and an amount may not be allocated to a participant under paragraph (2)(C), if such increase or allocation would result in a failure to meet any requirement under section 401
(a)(4) or 415.
Treatment as employer contributions Any increase in benefits under paragraph (2)(B)(ii) or (3)(A), or any allocation of any amount (or income allocable thereto) to any account under paragraph (2)(C), shall be treated as an annual benefit or annual addition for purposes of section 415.
10-year participation requirement Except as provided by the Secretary, section 415
(b)(5)(D) shall not apply to any increase in benefits by reason of this subsection to the extent that the application of this subparagraph does not discriminate in favor of highly compensated employees (as defined in section 414
Qualified participant The term “qualified participant” means an individual who—
Present value Present value shall be determined as of the termination date and on the same basis as liabilities of the plan are determined on termination.
Reallocation of increase Except as provided in paragraph (2)(C), if any benefit increase is reduced by reason of the last sentence of paragraph (3)(A)(ii) or paragraph (4), the amount of such reduction shall be allocated to the remaining participants on the same basis as other increases (and shall be treated as meeting any allocation requirement of this subsection).
Plans taken into account For purposes of determining whether there is a qualified replacement plan under paragraph (2), the Secretary may provide that—
Special rule for participation requirement For purposes of paragraph (2)(A), all employers treated as 1 employer under section 414
(b), (c), (m), or (o) shall be treated as 1 employer.
Subsection not to apply to employer in bankruptcy This subsection shall not apply to an employer who, as of the termination date of the qualified plan, is in bankruptcy liquidation under chapter 7 of title 11 of the United States Code or in similar proceedings under State law.
(Added Pub. L. 99–514, title XI, § 1132(a),Oct. 22, 1986, 100 Stat. 2478; amended Pub. L. 100–647, title I, § 1011A(f)(1)–(3), (6), (7), title V, § 5072(a), title VI, § 6069(a),Nov. 10, 1988, 102 Stat. 3478, 3479, 3681, 3704; Pub. L. 101–508, title XII, §§ 12001, 12002(a),Nov. 5, 1990, 104 Stat. 1388–562; Pub. L. 104–188, title I, § 1704(a),Aug. 20, 1996, 110 Stat. 1878; Pub. L. 109–280, title IX, § 901(a)(2)(C),Aug. 17, 2006, 120 Stat. 1029; Pub. L. 110–458, title I, § 108(i)(3),Dec. 23, 2008, 122 Stat. 5110.)
2008—Subsec. (c)(2)(B)(iii). Pub. L. 110–458added cl. (iii).
2006—Subsec. (c)(3)(A). Pub. L. 109–280substituted “if the requirements of subparagraphs (B), (C), and (D) are met” for “if—
“(ii) under the plan, employer securities to which subparagraph (B) applies must, except to the extent necessary to meet the requirements of section 401
(a)(28), remain in the plan until distribution to participants in accordance with the provisions of such plan”.
1996—Subsecs. (a), (d). Pub. L. 104–188provided that, except as otherwise expressly provided, whenever in title XII of Pub. L. 101–508an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. Sections 12001 and 12002(a) of title XII of Pub. L. 101–508directed the amendment of this section without specifying that the amendment was to the Internal Revenue Code of 1986. See 1990 Amendment note below.
1990—Subsec. (a). Pub. L. 101–508, § 12001, which directed the substitution of “20 percent” for “15 percent” in “section 4980
(a)” without specifying the Internal Revenue Code of 1986, was executed to subsec. (a) of this section. See 1996 Amendment note above.
Subsec. (d). Pub. L. 101–508, § 12002(a), which directed the addition of subsec. (d) to “section 4980” without specifying the Internal Revenue Code of 1986, was executed to this section. See 1996 Amendment note above.
1988—Subsec. (a). Pub. L. 100–647, § 6069(a), substituted “15” for “10”.
Subsec. (c)(1)(A). Pub. L. 100–647, § 1011A(f)(1), substituted “subtitle A” for “this subtitle”.
Subsec. (c)(3)(A). Pub. L. 100–647, § 1011A(f)(2), inserted “or a tax credit employee stock ownership plan (as described in section 409)” after “section 4975
(e)(7)” in introductory text, and “, except to the extent necessary to meet the requirements of section 401
(a)(28),” after “must” in cl. (ii).
Subsec. (c)(3)(C). Pub. L. 100–647, § 1011A(f)(3), struck out “(by reason of the limitations of section 415)” after “not allocated” in introductory text, and inserted sentence at end relating to minimum amount allocated in year of transfer.
Pub. L. 100–647, § 1011A(f)(7), inserted sentence at end relating to dividends on securities held in suspense account.
Subsec. (c)(3)(F), (G). Pub. L. 100–647, § 1011A(f)(6), added subpars. (F) and (G).
Subsec. (c)(4). Pub. L. 100–647, § 5072(a), added par. (4).
Amendment by Pub. L. 109–280applicable to plan years beginning after Dec. 31, 2006, with special rules for collectively bargained agreements and certain employer securities held in an ESOP, see section 901(c) ofPub. L. 109–280, set out as a note under section 401 of this title.
Pub. L. 101–508, title XII, § 12003,Nov. 5, 1990, 104 Stat. 1388–566, provided that:
“(a) In General.—Except as provided in subsection (b), the amendments made by this subtitle [subtitle A (§§ 12001–12003) of title XII of Pub. L. 101–508, amending this section and sections 1002, 1104, and 1344 of Title 29, Labor] shall apply to reversions occurring after September 30, 1990.
“(b) Exception.—The amendments made by this subtitle shall not apply to any reversion after September 30, 1990, if—
“(1) in the case of plans subject to title IV of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1301 et seq.], a notice of intent to terminate under such title was provided to participants (or if no participants, to the Pension Benefit Guaranty Corporation) before October 1, 1990,
“(2) in the case of plans subject to title I [29 U.S.C. 1001 et seq.] (and not to title IV) of such Act, a notice of intent to reduce future accruals under section 204(h) of such Act [29 U.S.C. 1054
(h)] was provided to participants in connection with the termination before October 1, 1990,
“(3) in the case of plans not subject to title I or IV of such Act, a request for a determination letter with respect to the termination was filed with the Secretary of the Treasury or the Secretary’s delegate before October 1, 1990, or
“(4) in the case of plans not subject to title I or IV of such Act and having only 1 participant, a resolution terminating the plan was adopted by the employer before October 1, 1990.”
Amendment by section 1011A(f)(1)–(3), (6), (7) of Pub. L. 100–647effective, 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) ofPub. L. 100–647, set out as a note under section 1 of this title.
Pub. L. 100–647, title V, § 5072(b),Nov. 10, 1988, 102 Stat. 3681, provided that: “The amendment made by subsection (a) [amending this section] shall apply to reversions after December 31, 1988.”
Pub. L. 100–647, title VI, § 6069(b),Nov. 10, 1988, 102 Stat. 3704, provided that:
“(1) In general.—The amendment made by subsection (a) [amending this section] shall apply to reversions occurring on or after October 21, 1988.
“(2) Exception.—The amendment made by subsection (a) shall not apply to any reversion on or after October 21, 1988, pursuant to a plan termination if—
“(A) with respect to plans subject to title IV of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1301 et seq.], a notice of intent to terminate required under such title was provided to participants (or if no participants, to the Pension Benefit Guaranty Corporation) before October 21, 1988,
“(B) with respect to plans subject to title I of such Act [29 U.S.C. 1001 et seq.], a notice of intent to reduce future accruals required under section 204(h) of such Act [29 U.S.C. 1054
(h)] was provided to participants in connection with the termination before October 21, 1988,
“(C) with respect to plans not subject to title I or IV of such Act, the Board of Directors of the employer approved the termination or the employer took other binding action before October 21, 1988, or
“(D) such plan termination was directed by a final order of a court of competent jurisdiction entered before October 21, 1988, and notice of such order was provided to participants before such date.”
Pub. L. 99–514, title XI, § 1132(c),Oct. 22, 1986, 100 Stat. 2480, as amended by Pub. L. 100–647, title I, § 1011A(f)(4), (5),Nov. 10, 1988, 102 Stat. 3479, provided that:
“(1) In general.—The amendments made by this section [enacting this section] shall apply to reversions occurring after December 31, 1985.
“(2) Exception where termination date occurred before january 1, 1986.—
“(A) In general.—Except as provided in subparagraph (B), the amendments made by this section shall not apply to any reversion after December 31, 1985, which occurs pursuant to a plan termination where the termination date is before January 1, 1986.
“(B) Election to have amendments apply.—A corporation may elect to have the amendments made by this section apply to any reversion after 1985 pursuant to a plan termination occurring before 1986 if such corporation was incorporated in the State of Delaware in March, 1978, and became a parent corporation of the consolidated group on September 19, 1978, pursuant to a merger agreement recorded in the State of Nevada on September 19, 1978.
“(3) Termination date.—For purposes of paragraph (2), the term ‘termination date’ is the date of the termination (within the meaning of section 411(d)(3) of the Internal Revenue Code of 1986) of the plan.
“(4) Transition rule for certain terminations.—
“(A) In general.—In the case of a taxpayer to which this paragraph applies, the amendments made by this section shall not apply to any termination occurring before the date which is 1 year after the date of the enactment of this Act [Oct. 22, 1986].
“(B) Taxpayers to whom paragraph applies.—This paragraph shall apply to—
“(i) a corporation incorporated on June 13, 1917, which has its principal place of business in Bartlesville, Oklahoma,
“(ii) a corporation incorporated on January 17, 1917, which is located in Coatesville, Pennsylvania,
“(iii) a corporation incorporated on January 23, 1928, which has its principal place of business in New York, New York,
“(iv) a corporation incorporated on April 23, 1956, which has its principal place of business in Dallas, Texas, and
“(v) a corporation incorporated in the State of Nevada, the principal place of business of which is in Denver, Colorado, and which filed for relief from creditors under the United States Bankruptcy Code on August 28, 1986.
“(5) Special rule for employee stock ownership plans.—Section 4980(c)(3) of the Internal Revenue Code of 1986 (as added by subsection (a)) shall apply to reversions occurring after March 31, 1985.”
Pub. L. 101–239, title VII, § 7861(b),Dec. 19, 1989, 103 Stat. 2430, provided that:
“(1) Notwithstanding any other provision of law, in the case of any qualified pension plan and welfare benefit plan described in paragraph (2), the assets of such pension plan in excess of its liabilities may be transferred to such welfare benefit plan upon the termination of such pension plan if such assets are to be used to provide retiree health benefits.
“(2) For purposes of paragraph (1), a qualified pension plan and welfare benefit plan are described in this paragraph if—
“(A) both such plans are jointly administered pursuant to a collective bargaining agreement between the employer maintaining such plans and one or more employee representatives,
“(B) the welfare benefit plan provides retiree health benefits, and
“(C) the qualified pension plan has assets in excess of liabilities (determined on a termination basis) and the welfare benefit plan has assets which are less than the present value of the benefits to be provided under the plan (determined as of the time of termination of the pension plan).
“(3) For purposes of the Internal Revenue Code of 1986, any transfer of assets to which paragraph (1) applies shall be treated as a reversion of such assets to the employer maintaining the plan which is includible in the gross income of such employer and subject to the tax imposed by section 4980 of such Code.”