26 U.S.C. § 408: Individual retirement accounts

Except in the case of a rollover contribution described in subsection (d)(3) or in section 402(c), 403(a)(4), 403(b)(8), or 457(e)(16), no contribution will be accepted unless it is in cash, and contributions will not be accepted for the taxable year on behalf of any individual in excess of the amount in effect for such taxable year under section 219(b)(1)(A). The trustee is a bank (as defined in subsection (n)) or such other person who demonstrates to the satisfaction of the Secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section. No part of the trust funds will be invested in life insurance contracts. The interest of an individual in the balance in his account is nonforfeitable. The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund. Under regulations prescribed by the Secretary, rules similar to the rules of section 401(a)(9) and the incidental death benefit requirements of section 401(a) shall apply to the distribution of the entire interest of an individual for whose benefit the trust is maintained. The contract is not transferable by the owner. the premiums are not fixed, the annual premium on behalf of any individual will not exceed the dollar amount in effect under section 219(b)(1)(A), 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. Under regulations prescribed by the Secretary, rules similar to the rules of section 401(a)(9) and the incidental death benefit requirements of section 401(a) shall apply to the distribution of the entire interest of the owner. The entire interest of the owner is nonforfeitable. The trust satisfies the requirements of paragraphs (1) through (6) of subsection (a). There is a separate accounting for the interest of each employee or member (or spouse of an employee or member). There is a separate accounting for any interest of an employee or member (or spouse of an employee or member) in a Roth IRA. Except as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72. all individual retirement plans shall be treated as 1 contract, all distributions during any taxable year shall be treated as 1 distribution, and the value of the contract, income on the contract, and investment in the contract shall be computed as of the close of the calendar year in which the taxable year begins. 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) for the benefit of such individual not later than the 60th day after the day on which he receives the payment or distribution; or the entire amount received (including money and any other property) is paid into an eligible retirement plan for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received, except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross income (determined without regard to this paragraph). 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 1-year period ending on the day of such receipt such individual received any other amount described in that subparagraph from an individual retirement account or an individual retirement annuity which was not includible in his gross income because of the application of this paragraph. this paragraph shall not apply to any amount received by an individual from such an account or annuity (and no amount transferred from such account or annuity to another individual retirement account or annuity shall be excluded from gross income by reason of such transfer), and such inherited account or annuity shall not be treated as an individual retirement account or annuity for purposes of determining whether any other amount is a rollover contribution. the individual for whose benefit the account or annuity is maintained acquired such account by reason of the death of another individual, and such individual was not the surviving spouse of such other individual. If any amount paid or distributed out of an individual retirement account or individual retirement annuity would meet the requirements of subparagraph (A) but for the fact that the entire amount was not paid into an eligible plan as required by clause (i) or (ii) of subparagraph (A), such amount shall be treated as meeting the requirements of subparagraph (A) to the extent it is paid into an eligible plan referred to in such clause not later than the 60th day referred to in such clause. For purposes of clause (i), the term “eligible plan” means any account, annuity, contract, or plan referred to in subparagraph (A). This paragraph shall not apply to any amount to the extent such amount is required to be distributed under subsection (a)(6) or (b)(3). For purposes of this paragraph, rules similar to the rules of section 402(c)(7) (relating to frozen deposits) shall apply. In the case of any payment or distribution out of a simple retirement account (as defined in subsection (p)) to which section 72(t)(6)(A) applies, this paragraph shall not apply unless such payment or distribution is paid into another simple retirement account. a distribution is made from an individual retirement plan, and a rollover contribution is made to an eligible retirement plan described in section 402(c)(8)(B)(iii), (iv), (v), or (vi) with respect to all or part of such distribution, section 72 shall be applied separately to such distribution, notwithstanding the pro rata allocation of income on, and investment in, the contract to distributions under section 72, the portion of such distribution rolled over to an eligible retirement plan described in clause (i) shall be treated as from income on the contract (to the extent of the aggregate income on the contract from all individual retirement plans of the distributee), and appropriate adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years. The Secretary may waive the 60-day requirement under subparagraphs (A) and (D) 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. 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, no deduction is allowed under section 219 with respect to such contribution, and such distribution is accompanied by the amount of net income attributable to such contribution. if such distribution is received after the date described in paragraph (4), but only to the extent that no deduction has been allowed under section 219 with respect to such excess contribution. the taxpayer reasonably relies on information supplied pursuant to subtitle F for determining the amount of a rollover contribution, but the information was erroneous, The transfer of an individual’s interest in an individual retirement account or an individual retirement annuity to his spouse or former spouse under a divorce or separation instrument described in clause (i) of section 121(d)(3)(C) 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 or annuity for purposes of this subtitle is to be treated as maintained for the benefit of such spouse. Notwithstanding any other provision of this subsection or section 72(t), paragraph (1) and section 72(t)(1) shall apply to the transfer or distribution from a simplified employee pension of any contribution under a salary reduction arrangement described in subsection (k)(6) (or any income allocable thereto) before a determination as to whether the requirements of subsection (k)(6)(A)(iii) are met with respect to such contribution. For purposes of paragraphs (4) and (5) and section 4973, any amount excludable or excluded from gross income under section 402(h) or 402(k) shall be treated as an amount allowable or allowed as a deduction under section 219. the aggregate amount of deductions allowed to the taxpayer under section 219 for all taxable years ending on or after the date the taxpayer attains age 70½, over the aggregate amount of reductions under this sentence for all taxable years preceding the current taxable year. which is made directly by the trustee to an organization described in section 170(b)(1)(A) (other than any organization described in section 509(a)(3) or any fund or account described in section 4966(d)(2)), and which is made on or after the date that the individual for whose benefit the plan is maintained has attained age 70½. For purposes of this paragraph, a distribution to an organization described in subparagraph (B)(i) shall be treated as a qualified charitable distribution only if a deduction for the entire distribution would be allowable under section 170 (determined without regard to subsection (b) thereof and this paragraph). Notwithstanding section 72, in determining the extent to which a distribution is a qualified charitable distribution, the entire amount of the distribution 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 in all individual retirement plans of the individual 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. Qualified charitable distributions which are not includible in gross income pursuant to subparagraph (A) shall not be taken into account in determining the deduction under section 170. an election is not in effect under this subparagraph for a preceding taxable year, the aggregate amount of distributions of the taxpayer with respect to which an election under this subparagraph is made does not exceed $50,000, and such distribution meets the requirements of clauses (iii) and (iv). a charitable remainder annuity trust (as defined in section 664(d)(1)), but only if such trust is funded exclusively by qualified charitable distributions, a charitable remainder unitrust (as defined in section 664(d)(2)), but only if such unitrust is funded exclusively by qualified charitable distributions, or a charitable gift annuity (as defined in section 501(m)(5)), but only if such annuity is funded exclusively by qualified charitable distributions and commences fixed payments of 5 percent or greater not later than 1 year from the date of funding. in the case of a distribution to a charitable remainder annuity trust or a charitable remainder unitrust, a deduction for the entire value of the remainder interest in the distribution for the benefit of a specified charitable organization would be allowable under section 170 (determined without regard to subsection (b) thereof and this paragraph), and in the case of a charitable gift annuity, a deduction in an amount equal to the amount of the distribution reduced by the value of the annuity described in section 501(m)(5)(B) would be allowable under section 170 (determined without regard to subsection (b) thereof and this paragraph). no person holds an income interest in the split-interest entity other than the individual for whose benefit such account is maintained, the spouse of such individual, or both, and the income interest in the split-interest entity is nonassignable. Notwithstanding section 664(b), distributions made from a trust described in subclause (I) or (II) of clause (ii) shall be treated as ordinary income in the hands of the beneficiary to whom the annuity described in section 664(d)(1)(A) or the payment described in section 664(d)(2)(A) is paid. Qualified charitable distributions made to fund a charitable gift annuity shall not be treated as an investment in the contract for purposes of section 72(c). such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2022” for “calendar year 2016” in subparagraph (A)(ii) thereof. If any dollar amount increased under clause (i) is not a multiple of $1,000, such dollar amount shall be rounded to the nearest multiple of $1,000. In the case of an individual who is an eligible individual (as defined in section 223(c)) and who elects the application of this paragraph for a taxable year, gross income of the individual for the taxable year does not include a qualified HSA funding distribution to the extent such distribution is otherwise includible in gross income. For purposes of this paragraph, the term “qualified HSA funding distribution” means a distribution from an individual retirement plan (other than a plan described in subsection (k) or (p)) of the employee to the extent that such distribution is contributed to the health savings account of the individual in a direct trustee-to-trustee transfer. the annual limitation under section 223(b) computed on the basis of the type of coverage under the high deductible health plan covering the individual at the time of the qualified HSA funding distribution, over in the case of a distribution described in clause (ii)(II), the amount of the earlier qualified HSA funding distribution. Except as provided in subclause (II), an individual may make an election under subparagraph (A) only for one qualified HSA funding distribution during the lifetime of the individual. Such an election, once made, shall be irrevocable. If a qualified HSA funding distribution is made during a month in a taxable year during which an individual has self-only coverage under a high deductible health plan as of the first day of the month, the individual may elect to make an additional qualified HSA funding distribution during a subsequent month in such taxable year during which the individual has family coverage under a high deductible health plan as of the first day of the subsequent month. shall be includible in the gross income of the individual for the taxable year in which occurs the first month in the testing period for which such individual is not an eligible individual, and the tax imposed by this chapter for any taxable year on the individual shall be increased by 10 percent of the amount which is so includible. Subclauses (I) and (II) of clause (i) shall not apply if the individual ceased to be an eligible individual by reason of the death of the individual or the individual becoming disabled (within the meaning of section 72(m)(7)). The term “testing period” means the period beginning with the month in which the qualified HSA funding distribution is contributed to a health savings account and ending on the last day of the 12th month following such month. Notwithstanding section 72, in determining the extent to which an amount is treated as otherwise includible in gross income for purposes of subparagraph (A), the aggregate amount distributed from an individual retirement plan shall be treated as includible in gross income to the extent that such amount does not exceed the aggregate amount which would have been so includible if all amounts from all individual retirement plans were distributed. Proper adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years. 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 income of charitable, etc. organizations). the individual for whose benefit any account was established is treated as the creator of such account, 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, and each individual retirement plan of the individual shall be treated as a separate contract. 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). 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. 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. 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 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). 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). This section shall be applied without regard to any community property laws. 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 subsection (n)) or another person who demonstrates, to the satisfaction of the Secretary, 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. shall be filed at such time and in such manner as the Secretary prescribes, and not later than January 31 of the calendar year following the calendar year to which such reports relate, and in such manner as the Secretary prescribes. In the case of any simplified employee pension, subsections (a)(1) and (b)(2) of this section shall be applied by increasing the amounts contained therein by the amount of the limitation in effect under section 415(c)(1)(A). with respect to which the requirements of paragraphs (2), (3), (4), and (5) of this subsection are met, and if such account or annuity is part of a top-heavy plan (as defined in section 416), with respect to which the requirements of section 416(c)(2) are met. has attained age 21, has performed service for the employer during at least 3 of the immediately preceding 5 years, and received at least $450 in compensation (within the meaning of section 414(q)(4)) from the employer for the year. The requirements of this paragraph are met with respect to a simplified employee pension for a year if for such year the contributions made by the employer to simplified employee pensions for his employees do not discriminate in favor of any highly compensated employee (within the meaning of section 414(q)). For purposes of subparagraph (A), there shall be excluded from consideration employees described in subparagraph (A) or (C) of section 410(b)(3). For purposes of subparagraph (A), and except as provided in subparagraph (D), employer contributions to simplified employee pensions (other than contributions under an arrangement described in paragraph (6)) shall be considered discriminatory unless contributions thereto bear a uniform relationship to the compensation (not in excess of the first $200,000) of each employee maintaining a simplified employee pension. For purposes of subparagraph (C), the rules of section 401( l )(2) shall apply to contributions to simplified employee pensions (other than contributions under an arrangement described in paragraph (6)). employer contributions thereto are not conditioned on the retention in such pension of any portion of the amount contributed, and there is no prohibition imposed by the employer on withdrawals from the simplified employee pension. the requirements which an employee must satisfy to share in an allocation, and the manner in which the amount allocated is computed. as elective employer contributions to the simplified employee pension on behalf of the employee, or to the employee directly in cash. Clause (i) shall not apply to a simplified employee pension unless an election described in clause (i)(I) is made or is in effect with respect to not less than 50 percent of the employees of the employer eligible to participate. the average of the deferral percentages for such year of all employees (other than highly compensated employees) eligible to participate, multiplied by 1.25. Clause (i) shall not apply to a simplified employee pension unless the requirements of section 401(a)(30) are met. This paragraph shall not apply with respect to any year in the case of a simplified employee pension maintained by an employer with more than 25 employees who were eligible to participate (or would have been required to be eligible to participate if a pension was maintained) at any time during the preceding year. Rules similar to the rules of section 401(k)(8) shall apply to any excess contribution under this paragraph. Any excess contribution under a simplified employee pension shall be treated as an excess contribution for purposes of section 4979. For purposes of clause (i), the term “excess contribution” means, with respect to a highly compensated employee, the excess of elective employer contributions under this paragraph over the maximum amount of such contributions allowable under subparagraph (A)(iii). the amount of elective employer contributions actually paid over to the simplified employee pension on behalf of the employee for the year, to the employee’s compensation (not in excess of the first $200,000) for the year. a State or local government or political subdivision thereof, or any agency or instrumentality thereof, or an organization exempt from tax under this title. reporting requirements, and requirements which, notwithstanding paragraph (4), provide that contributions (and any income allocable thereto) may not be withdrawn from a simplified employee pension until a determination has been made that the requirements of subparagraph (A)(iii) have been met with respect to such contributions. For purposes of this paragraph, the term “highly compensated employee” has the meaning given such term by section 414(q). This paragraph shall not apply to years beginning after December 31, 1996 . The preceding sentence shall not apply to a simplified employee pension of an employer if the terms of simplified employee pensions of such employer, as in effect on December 31, 1996 , provide that an employee may make the election described in subparagraph (A). An individual retirement plan which is designated as a Roth IRA shall not be treated as a simplified employee pension under this subsection unless the employee elects for such plan to be so treated (at such time and in such manner as the Secretary may provide). The terms “employee”, “employer”, and “owner-employee” shall have the respective meanings given such terms by section 401(c). Except as provided in paragraph (2)(C), the term “compensation” has the meaning given such term by section 414(s). the calendar year, or if the employer elects, subject to such terms and conditions as the Secretary may prescribe, to maintain the simplified employee pension on the basis of the employer’s taxable year. The Secretary shall adjust the $450 amount in paragraph (2)(C) at the same time and in the same manner as under section 415(d) and shall adjust the $200,000 amount in paragraphs (3)(C) and (6)(D)(ii) at the same time, and by the same amount, as any adjustment under section 401(a)(17)(B); except that any increase in the $450 amount which is not a multiple of $50 shall be rounded to the next lowest multiple of $50. For excise tax on certain excess contributions, see section 4979. An employer who makes a contribution on behalf of an employee to a simplified employee pension shall provide such simplified reports with respect to such contributions as the Secretary may require by regulations. The reports required by this subsection shall be filed at such time and in such manner, and information with respect to such contributions shall be furnished to the employee at such time and in such manner, as may be required by regulations. Except as provided in this paragraph, no report shall be required under this section by an employer maintaining a qualified salary reduction arrangement under subsection (p). The name and address of the employer and the trustee or issuer. The requirements for eligibility for participation. The benefits provided with respect to the arrangement. The time and method of making elections with respect to the arrangement. The procedures for, and effects of, withdrawals (including rollovers) from the arrangement. The employer shall notify each employee immediately before the period for which an election described in subsection (p)(5)(C) may be made of the employee’s opportunity to make such election. Such notice shall include a copy of the description described in subparagraph (B). The acquisition by an individual retirement account or by an individually-directed account under a plan described in section 401(a) of any collectible shall be treated (for purposes of this section and section 402) as a distribution from such account in an amount equal to the cost to such account of such collectible. any work of art, any rug or antique, any metal or gem, any stamp or coin, any alcoholic beverage, or any other tangible personal property specified by the Secretary for purposes of this subsection. a gold coin described in paragraph (7), (8), (9), or (10) of section 5112(a) of title 31 , United States Code, a silver coin described in section 5112(e) of title 31 , United States Code, a platinum coin described in section 5112(k) of title 31 , United States Code, or a coin issued under the laws of any State, or any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 5 of the Commodity Exchange Act, 7 U.S.C. 7 ) requires for metals which may be delivered in satisfaction of a regulated futures contract, any bank (as defined in section 581), an insured credit union (within the meaning of paragraph (6) or (7) of section 101 of the Federal Credit Union Act), and a corporation which, under the laws of the State of its incorporation, is subject to supervision and examination by the Commissioner of Banking or other officer of such State in charge of the administration of the banking laws of such State. Subject to the provisions of this subsection, designated nondeductible contributions may be made on behalf of an individual to an individual retirement plan. The amount of the designated nondeductible contributions made on behalf of any individual for any taxable year shall not exceed the nondeductible limit for such taxable year. the amount allowable as a deduction under section 219 (determined without regard to section 219(g)), over the amount allowable as a deduction under section 219 (determined with regard to section 219(g)). If a taxpayer elects not to deduct an amount which (without regard to this clause) is allowable as a deduction under section 219 for any taxable year, the nondeductible limit for such taxable year shall be increased by such amount. For purposes of this paragraph, the term “designated nondeductible contribution” means any contribution to an individual retirement plan for the taxable year which is designated (in such manner as the Secretary may prescribe) as a contribution for which a deduction is not allowable under section 219. Any designation under clause (i) shall be made on the return of tax imposed by chapter 1 for the taxable year. In determining for which taxable year a designated nondeductible contribution is made, the rule of section 219(f)(3) shall apply. makes a designated nondeductible contribution to any individual retirement plan for any taxable year, or receives any amount from any individual retirement plan for any taxable year, The amount of designated nondeductible contributions for the taxable year. The amount of distributions from individual retirement plans for the taxable year. the aggregate amount of designated nondeductible contributions for all preceding taxable years, over the aggregate amount of distributions from individual retirement plans which was excludable from gross income for such taxable years. The aggregate balance of all individual retirement plans of the individual as of the close of the calendar year in which the taxable year begins. Such other information as the Secretary may prescribe. For penalty where individual reports designated nondeductible contributions not made, see section 6693(b). the deductible amount in effect for the taxable year under section 219(b), exceeds the amount of compensation includible in the individual’s gross income for the taxable year, with respect to which the requirements of paragraphs (3), (4), and (5) are met; and except in the case of a rollover contribution described in subsection (d)(3)(G) or a rollover contribution otherwise described in subsection (d)(3) or in section 402(c), 403(a)(4), 403(b)(8), or 457(e)(16), which is made after the 2-year period described in section 72(t)(6), with respect to which the only contributions allowed are contributions under a qualified salary reduction arrangement. as elective employer contributions to a simple retirement account on behalf of the employee, or to the employee directly in cash, the amount which an employee may elect under clause (i) for any year is required to be expressed as a percentage of compensation and may not exceed a total of the applicable dollar amount for any year, the employer is required to make a matching contribution to the simple retirement account for any year in an amount equal to so much of the amount the employee elects under clause (i)(I) as does not exceed the applicable percentage of compensation for the year, the employer may make nonelective contributions of a uniform percentage (up to 10 percent) of compensation for each employee who is eligible to participate in the arrangement, and who has at least $5,000 of compensation from the employer for the year, but such contributions with respect to any employee shall not exceed $5,000 for the year, and no contributions may be made other than contributions described in clause (i), (iii), or (iv). An employer shall be treated as meeting the requirements of subparagraph (A)(iii) for any year if, in lieu of the contributions described in such clause, the employer elects to make nonelective contributions of 2 percent of compensation for each employee who is eligible to participate in the arrangement and who has at least $5,000 of compensation from the employer for the year. If an employer makes an election under this subparagraph for any year, the employer shall notify employees of such election within a reasonable period of time before the 60-day period for such year under paragraph (5)(C). The compensation taken into account under clause (i) for any year shall not exceed the limitation in effect for such year under section 401(a)(17). In the case of an employer which had more than 25 employees who received at least $5,000 of compensation from the employer for the preceding year, and which makes the election under subparagraph (E)(i)(II) for any year, clause (i) shall be applied for such year by substituting “3 percent” for “2 percent”. The term “eligible employer” means, with respect to any year, an employer which had no more than 100 employees who received at least $5,000 of compensation from the employer for the preceding year. An eligible employer who establishes and maintains a plan under this subsection for 1 or more years and who fails to be an eligible employer for any subsequent year shall be treated as an eligible employer for the 2 years following the last year the employer was an eligible employer. If such failure is due to any acquisition, disposition, or similar transaction involving an eligible employer, the preceding sentence shall not apply. Except as provided in subclause (IV), the term “applicable percentage” means 3 percent. An employer may elect to apply a lower percentage (not less than 1 percent) for any year for all employees eligible to participate in the plan for such year if the employer notifies the employees of such lower percentage within a reasonable period of time before the 60-day election period for such year under paragraph (5)(C). An employer may not elect a lower percentage under this subclause for any year if that election would result in the applicable percentage being lower than the applicable percentage in more than 2 of the years in the 5-year period ending with such year. If any year in the 5-year period described in subclause (II) is a year prior to the first year for which any qualified salary reduction arrangement is in effect with respect to the employer (or any predecessor), the employer shall be treated as if the level of the employer matching contribution was at the applicable percentage of compensation for such prior year. In the case of an employer which had more than 25 employees who received at least $5,000 of compensation from the employer for the preceding year, and which makes the election under subparagraph (E)(i)(II) for any year, subclause (I) shall be applied for such year by substituting “4 percent” for “3 percent”. An arrangement shall not be treated as a qualified salary reduction arrangement for any year if the employer (or any predecessor employer) maintained a qualified plan with respect to which contributions were made, or benefits were accrued, for service in any year in the period beginning with the year such arrangement became effective and ending with the year for which the determination is being made. If only individuals other than employees described in subparagraph (A) of section 410(b)(3) are eligible to participate in such arrangement, then the preceding sentence shall be applied without regard to any qualified plan in which only employees so described are eligible to participate. For purposes of this subparagraph, the term “qualified plan” means a plan, contract, pension, or trust described in subparagraph (A) or (B) of section 219(g)(5). the adjusted dollar amount in the case of an eligible employer described in clause (iii) which had not more than 25 employees who received at least $5,000 of compensation from the employer for the preceding year, the adjusted dollar amount in the case of an eligible employer described in clause (iii) which is not described in subclause (I) and which elects, at such time and in such manner as prescribed by the Secretary, the application of this subclause for the year, and $10,000 in any other case. For purposes of clause (i), the adjusted dollar amount is an amount equal to 110 percent of the dollar amount in effect under clause (i)(III) for calendar year 2024. In the case of a year beginning after December 31, 2005 , the Secretary shall adjust the $10,000 amount under clause (i)(III) at the same time and in the same manner as under section 415(d), except that the base period taken into account shall be the calendar quarter beginning July 1, 2004 , and any increase under this subparagraph which is not a multiple of $500 shall be rounded to the next lower multiple of $500. In the case of a year beginning after December 31, 2024 , the Secretary shall adjust annually the adjusted dollar amount under clause (ii) in the manner provided under subclause (I) of this clause, except that the base period taken into account shall be the calendar quarter beginning July 1, 2023 . An eligible employer is described in this clause only if, during the 3-taxable-year period immediately preceding the 1st year the employer maintains the qualified salary reduction arrangement under this paragraph, neither the employer nor any member of any controlled group including the employer (or any predecessor of either) established or maintained any plan described in clause (i), (ii), or (iv) of section 219(g)(5)(A) with respect to which contributions were made, or benefits were accrued, for substantially the same employees as are eligible to participate in such qualified salary reduction arrangement. the applicable dollar amount under subparagraph (E) (after application of section 414(v)) for the year (or, if lesser, the employee’s compensation (as defined in section 415(c)(3)) for the year), reduced by any other amounts elected by the employee under subparagraph (A)(i)(I) for the year. The term “qualified student loan payment” means a payment made by an employee in repayment of a qualified education loan (as defined in section 221(d)(1)) incurred by the employee to pay qualified higher education expenses, but only if the employee certifies to the employer making the matching contribution that such payment has been made on such a loan. The term “qualified higher education expenses” has the same meaning as when used in section 401(m)(4)(D). matching contributions on account of qualified student loan payments are provided only on behalf of employees otherwise eligible to elect contributions under subparagraph (A)(i)(I), and all employees otherwise eligible to participate in the arrangement are eligible to receive matching contributions on account of qualified student loan payments. such amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “2023” for “2016” in subparagraph (A)(ii) thereof. An eligible employer which had not more than 25 employees who received at least $5,000 of compensation from the employer for 1 or more years, and which has more than 25 such employees for any subsequent year, shall be treated for purposes of subparagraph (E)(i) as having 25 such employees for the 2 years following the last year the employer had not more than 25 such employees, and not as having made the election under subparagraph (E)(i)(II) for such 2 years. Rules similar to the second sentence of subparagraph (C)(i)(II) shall apply for purposes of this subparagraph. The requirements of this paragraph are met with respect to a simple retirement account if the employee’s rights to any contribution to the simple retirement account are nonforfeitable. For purposes of this paragraph, rules similar to the rules of subsection (k)(4) shall apply. received at least $5,000 in compensation from the employer during any 2 preceding years, and are reasonably expected to receive at least $5,000 in compensation during the year, An employer may elect to exclude from the requirement under subparagraph (A) employees described in section 410(b)(3). make the elective employer contributions under paragraph (2)(A)(i) not later than the close of the 30-day period following the last day of the month with respect to which the contributions are to be made, and make the matching contributions under paragraph (2)(A)(iii) or the nonelective contributions under paragraph (2)(B) not later than the date described in section 404(m)(2)(B), an employee may elect to terminate participation in such arrangement at any time during the year, except that if an employee so terminates, the arrangement may provide that the employee may not elect to resume participation until the beginning of the next year, and each employee eligible to participate may elect, during the 60-day period before the beginning of any year (and the 60-day period before the first day such employee is eligible to participate), to participate in the arrangement, or to modify the amounts subject to such arrangement, for such year. The term “compensation” means amounts described in paragraphs (3) and (8) of section 6051(a). For purposes of the preceding sentence, amounts described in section 6051(a)(3) shall be determined without regard to section 3401(a)(3). In the case of an employee described in subparagraph (B), the term “compensation” means net earnings from self-employment determined under section 1402(a) without regard to any contribution under this subsection. The preceding sentence shall be applied as if the term “trade or business” for purposes of section 1402 included service described in section 1402(c)(6). The term “employee” includes an employee as defined in section 401(c)(1). The term “year” means the calendar year. A plan shall not be treated as failing to satisfy the requirements of this subsection or any other provision of this title merely because the employer makes all contributions to the individual retirement accounts or annuities of a designated trustee or issuer. The preceding sentence shall not apply unless each plan participant is notified in writing (either separately or as part of the notice under subsection ( l )(2)(C)) that the participant’s balance may be transferred without cost or penalty to another individual account or annuity in accordance with subsection (d)(3)(G). subsection (a)(1) shall be applied by substituting for “the amount in effect for such taxable year under section 219(b)(1)(A)” the following: “the sum of the dollar amount in effect under subsection (p)(2)(A)(ii), the employer contribution required under subsection (p)(2)(A)(iii) or (p)(2)(B)(i), whichever is applicable, and a contribution which meets the requirement of subsection (p)(2)(A)(iv) with respect to the employee”, and subsection (b)(2)(B) shall be applied by substituting for “the dollar amount in effect under section 219(b)(1)(A)” the following: “the sum of the dollar amount in effect under subsection (p)(2)(A)(ii), the employer contribution required under subsection (p)(2)(A)(iii) or (p)(2)(B)(i), whichever is applicable, and a contribution which meets the requirement of subsection (p)(2)(A)(iv) with respect to the employee”. Any matching contribution described in paragraph (2)(A)(iii) 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 to a simple retirement account for purposes of this title. the employer satisfies requirements similar to the requirements of section 410(b)(6)(C)(i)(II); and the qualified salary reduction arrangement maintained by the employer would satisfy the requirements of this subsection after the transaction if the employer which maintained the arrangement before the transaction had remained a separate employer. the requirement under paragraph (2)(A)(i) that an employer be an eligible employer; the requirement under paragraph (2)(D) that an arrangement be the only plan of an employer; and the participation requirements under paragraph (4). For purposes of this paragraph, the term “transition period” means the period beginning on the date of any transaction described in subparagraph (A) and ending on the last day of the second calendar year following the calendar year in which such transaction occurs. Subject to the requirements of this paragraph, an employer may elect (in such form and manner as the Secretary may prescribe) at any time during a year to terminate the qualified salary reduction arrangement under paragraph (2), but only if the employer establishes and maintains (as of the day after the termination date) a safe harbor plan to replace the terminated arrangement. the applicable dollar amount for such arrangement (determined on a full-year basis) under this subsection (after the application of section 414(v)) with respect to the employee for such last plan year multiplied by a fraction equal to the number of days in such plan year divided by 365, and the applicable dollar amount (as so determined) under section 402(g)(1) for such safe harbor plan on such elective contributions during the transition year multiplied by a fraction equal to the number of days in such transition year divided by 365. For purposes of this paragraph, the transition year is the period beginning after the termination date and ending on the last day of the calendar year during which the termination occurs. For purposes of this paragraph, the term “safe harbor plan” means a qualified cash or deferred arrangement which meets the requirements of paragraph (11), (12), (13), or (16) of section 401(k). An individual retirement plan which is designated as a Roth IRA shall not be treated as a simple retirement account under this subsection unless the employee elects for such plan to be so treated (at such time and in such manner as the Secretary may provide). a qualified employer plan elects to allow employees to make voluntary employee contributions to a separate account or annuity established under the plan, and under the terms of the qualified employer plan, such account or annuity meets the applicable requirements of this section or section 408A for an individual retirement account or annuity, For purposes of this title, a qualified employer plan shall not fail to meet any requirement of this title solely by reason of establishing and maintaining a program described in paragraph (1). 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). which is made by an individual as an employee under a qualified employer plan which allows employees to elect to make contributions described in paragraph (1), and with respect to which the individual has designated the contribution as a contribution to which this subsection applies. For tax on excess contributions in individual retirement accounts or annuities, see section 4973. For tax on certain accumulations in individual retirement accounts or annuities, see section 4974. The amendments made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [ Dec. 29, 2022 ]. Nothing in the amendments made by this section shall be construed to infer the proper treatment under the Internal Revenue Code of 1986 of individual retirement plans as 1 contract in the case of any other provision of such Code to which the amendments made by this section do not apply.” The amendments made by this section [amending this section, section 413 of this title , and sections 1002, 1023, 1024, and 1112 of Title 29, Labor] shall apply to plan years beginning after December 31, 2020 . Nothing in the amendments made by subsection (a) [amending this section and section 413 of this title ] shall be construed as limiting the authority of the Secretary of the Treasury or the Secretary’s delegate (determined without regard to such amendment) to provide for the proper treatment of a failure to meet any requirement applicable under the Internal Revenue Code of 1986 with respect to one employer (and its employees) in a multiple employer plan.” The amendment made by this section [amending this section] shall apply to distributions made in taxable years beginning after December 31, 2011 . any qualified charitable distribution made after December 31, 2012 , and before February 1, 2013 , shall be deemed to have been made on December 31, 2012 , and such portion is transferred in cash after the distribution to an organization described in section 408(d)(8)(B)(i) before February 1, 2013 , and such portion is part of a distribution that would meet the requirements of section 408(d)(8) but for the fact that the distribution was not transferred directly to an organization described in section 408(d)(8)(B)(i).” The amendment made by this section [amending this section] shall apply to distributions made in taxable years beginning after December 31, 2009 . For purposes of subsections (a)(6), (b)(3), and (d)(8) of section 408 of the Internal Revenue Code of 1986, at the election of the taxpayer (at such time and in such manner as prescribed by the Secretary of the Treasury) any qualified charitable distribution made after December 31, 2010 , and before February 1, 2011 , shall be deemed to have been made on December 31, 2010 .” The amendments made by this section [amending this section and section 403 of this title ] shall apply to distributions after December 31, 2001 . 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 under section 402 of this title ] 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 the amendments made by this section.” are written in a manner calculated to be understood by the average person, and can be used by both distributing eligible retirement plans and receiving retirement plans, and are written in a manner calculated to be understood by the average person, and can be used by both transferring individual retirement plans and individual retirement plans receiving the transfer. In developing the sample forms under subsection (a), the Secretary (or Secretary’s delegate) shall obtain relevant information from participants and plan sponsor representatives and consider potential coordination with sections 319 and 336 of this Act [div. T of Pub. L. 117–328 ; 136 Stat. 5353 , 5373].” If a qualified airline employee receives any airline payment amount and transfers any portion of such amount to a traditional IRA within 180 days of receipt of such amount (or, if later, within 180 days of the date of the enactment of this Act [ Feb. 14, 2012 ]), then such amount (to the extent so transferred) shall be treated as a rollover contribution described in section 402(c) of the Internal Revenue Code of 1986. A qualified airline employee making such a transfer may exclude from gross income the amount transferred, in the taxable year in which the airline payment amount was paid to the qualified airline employee by the commercial passenger airline carrier. A qualified airline employee who has contributed an airline payment amount to a Roth IRA that is treated as a qualified rollover contribution pursuant to section 125 of the Worker, Retiree, and Employer Recovery Act of 2008 [ Pub. L. 110–458 , 26 U.S.C. 408A note], may transfer to a traditional IRA, in a trustee-to-trustee transfer, all or any part of the contribution (together with any net income allocable to such contribution), and the transfer to the traditional IRA will be deemed to have been made at the time of the rollover to the Roth IRA, if such transfer is made within 180 days of the date of the enactment of this Act. A qualified airline employee making such a transfer may exclude from gross income the airline payment amount previously rolled over to the Roth IRA, to the extent an amount attributable to the previous rollover was transferred to a traditional IRA, in the taxable year in which the airline payment amount was paid to the qualified airline employee by the commercial passenger airline carrier. No amount so transferred to a traditional IRA may be treated as a qualified rollover contribution with respect to a Roth IRA within the 5-taxable year period beginning with the taxable year in which such transfer was made. A qualified airline employee who excludes an amount from gross income in a prior taxable year under paragraph (1) or (2) may reflect such exclusion in a claim for refund filed within the period of limitation under section 6511(a) of such Code (or, if later, April 15, 2015 ). 90 percent of the aggregate airline payment amounts received by the qualified airline employee during the taxable year and all preceding taxable years, over the aggregate amount of such transfers to which paragraphs (1) and (2) applied for all preceding taxable years. any airline payment amount received by the surviving spouse of any qualified employee, and any amount transferred to a traditional IRA by such spouse under subsection (d), shall be treated as an amount received or transferred by the qualified employee, and any amount transferred to a traditional IRA which is attributable to net income described in paragraph (2) shall not be taken into account. Paragraphs (1) and (2) shall not apply to any transfer by a qualified airline employee (or any transfer authorized under subsection (d) by a surviving spouse of the qualified airline employee) if at any time during the taxable year of the transfer or any preceding taxable year the qualified airline employee held a position described in subparagraph (A) or (B) of section 162(m)(3) [probably means section 162(m)(3) of the Internal Revenue Code of 1986] with the commercial passenger airline carrier from whom the airline payment amount was received. In the case of any amount which became an airline payment amount by reason of the amendments made by section 1(b) of Public Law 113–243 ( 26 U.S.C. 408 note), paragraph (1) shall be applied by substituting ‘(or, if later, within the period beginning on December 18, 2014 , and ending on the date which is 180 days after the date of enactment of the Protecting Americans from Tax Hikes Act of 2015 [ Dec. 18, 2015 ])’ for ‘(or, if later, within 180 days of the date of the enactment of this Act [ Feb. 14, 2012 ])’. For purposes of chapter 21 of the Internal Revenue Code of 1986 and section 209 of the Social Security Act [ 42 U.S.C. 409 ], an airline payment amount shall not fail to be treated as a payment of wages by the commercial passenger airline carrier to the qualified airline employee in the taxable year of payment because such amount is excluded from the qualified airline employee’s gross income under subsection (a). under the approval of an order of a Federal bankruptcy court in a case filed after September 11, 2001 , and before January 1, 2007 , or filed on November 29, 2011 , and in respect of the qualified airline employee’s interest in a bankruptcy claim against the carrier, any note of the carrier (or amount paid in lieu of a note being issued), or any other fixed obligation of the carrier to pay a lump sum amount. An airline payment amount shall not include any amount payable on the basis of the carrier’s future earnings or profits. is a plan described in section 401(a) of the Internal Revenue Code of 1986 which includes a trust exempt from tax under section 501(a) of such Code, and was terminated, became subject to the restrictions contained in paragraphs (2) and (3) of section 402(b) of the Pension Protection Act of 2006 [ Pub. L. 109–280 , 26 U.S.C. 430 note], or was frozen effective November 1, 2012 . The term ‘traditional IRA’ means an individual retirement plan (as defined in section 7701(a)(37) of the Internal Revenue Code of 1986) which is not a Roth IRA. The term ‘Roth IRA’ has the meaning given such term by section 408A(b) of such Code. If a qualified airline employee died after receiving an airline payment amount, or if an airline payment amount was paid to the surviving spouse of a qualified airline employee in respect of the qualified airline employee, the surviving spouse of the qualified airline employee may take all actions permitted under section 125 of the Worker, Retiree and Employer Recovery Act of 2008 [ Pub. L. 110–458 , 26 U.S.C. 408A note], or under this section, to the same extent that the qualified airline employee could have done had the qualified airline employee survived. This section shall apply to transfers made after the date of the enactment of this Act [ Feb. 14, 2012 ] with respect to airline payment amounts paid before, on, or after such date.” The Secretary of the Treasury (or the Secretary’s delegate) shall make available a form (or modify existing forms) for use by individuals to direct that a portion of any refund of overpayment of tax imposed by chapter 1 of the Internal Revenue Code of 1986 be paid directly to an individual retirement plan (as defined in section 7701(a)(37) of such Code) of such individual. The form required by subsection (a) shall be made available for taxable years beginning after December 31, 2006 .”