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

(a) Individual retirement account For purposes of this section, the term “individual retirement account” means a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries, but only if the written governing instrument creating the trust meets the following requirements:

§ 11.408(a)(2)-1 Trustee of individual retirement accounts.

Amended 1982, 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 521(b)(1), struck out par. (7) which provided that if (A) an individual for whose benefit the trust is maintained dies before his entire interest has been distributed to him, or (B) distribution has been commenced as provided in paragraph (6) to his surviving spouse and such surviving spouse dies before the entire interest has been distributed to such spouse, the entire interest (or the remaining part of such interest if distribution thereof has commenced) will be distributed within 5 years after his death (or the death of the surviving spouse). The preceding sentence shall not apply if distributions over a term certain commenced before the death of the individual for whose benefit the trust was maintained and the term certain is for a period permitted under paragraph (6).
1982 Pub. L. 97-248 Pub. L. 97–248, § 243(a)(1), amended par. (7) generally, designating existing provisions as subpars. (A) and (B), in subpar. (B), as so designated, striking out “if” before “distribution”, in provisions following subpar. (B) substituting “will be distributed within 5 years after his death (or the death of the surviving spouse)” for “will, within 5 years after his death (or the death of the surviving spouse), be distributed, or applied to the purchase of an immediate annuity for his beneficiary or beneficiaries (or the beneficiary or beneficiaries of his surviving spouse) which will be payable for the life of such beneficiary or beneficiaries (or for a term certain not extending beyond the life expectancy of such beneficiary or beneficiaries) and which annuity will be immediately distributed to such beneficiary or beneficiaries”, and substituting “shall not apply” for “does not apply”.

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(1) 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).

Amended 1978, 1980, 1981, 1984, 1992, 2001, 2004, 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(75), inserted “or” after “subsection (d)(3)”.
2004 Pub. L. 108-311 Pub. L. 108–311, § 408(a)(12), substituted “457(e)(16),” for “457(e)(16)”.
2001 Pub. L. 107-16 Pub. L. 107–16, § 641(e)(8), substituted “403(b)(8), or 457(e)(16)” for “or 403(b)(8),”.
2001 Pub. L. 107-16 Pub. L. 107–16, § 601(b)(1), substituted “on behalf of any individual in excess of the amount in effect for such taxable year under section 219(b)(1)(A)” for “in excess of $2,000 on behalf of any individual”.
1992 Pub. L. 102-318 Pub. L. 102–318, § 521(b)(16), substituted “402(c)” for “402(a)(5), 402(a)(7)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 491(d)(19), substituted “or 403(b)(8)” for “403(b)(8), 405(d)(3), or 409(b)(3)(C)”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 313(b)(2), inserted reference to section 405(d)(3).
1981 Pub. L. 97-34 Pub. L. 97–34, § 311(g)(1)(A), substituted “$2,000” for “$1,500”.
1980 Pub. L. 96-222 Pub. L. 96–222, § 101(a)(14)(B), inserted reference to section 402(a)(7).
1978 Pub. L. 95-600 Pub. L. 95–600, § 156(c)(3), inserted reference to section 403(b)(8).

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(2) 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.

Amended 1976, 1982

1982 Pub. L. 97-248 Pub. L. 97–248, § 237(e)(3)(A), substituted reference to subsection (n) of this section, for reference to section 401(d)(1).
1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

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(3) No part of the trust funds will be invested in life insurance contracts.

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(4) The interest of an individual in the balance in his account is nonforfeitable.

(5) The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund.

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(6) 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.

Amended 1976, 1984, 1986, 1989

1989 Pub. L. 101-239 Pub. L. 101–239, § 7811(m)(7), struck out “(without regard to subparagraph (C)(ii) thereof)” after “section 401(a)(9)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1852(a)(1), substituted “(without regard to subparagraph (C)(ii) thereof) and the incidental death benefit requirements of section 401(a)” for “(relating to required distributions)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 521(b)(1), added par. (6) and struck out former par. (6) which provided that the entire interest of an individual for whose benefit the trust is maintained will be distributed to him not later than the close of his taxable year in which he attains age 70½, or will be distributed, commencing before the close of such taxable year, in accordance with regulations prescribed by the Secretary, over (A) the life of such individual or the lives of such individual and his spouse, or (B) a period not extending beyond the life expectancy of such individual or the life expectancy of such individual and his spouse.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

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(b) Individual retirement annuity For purposes of this section, the term “individual retirement annuity” means an annuity contract, or an endowment contract (as determined under regulations prescribed by the Secretary), issued by an insurance company which meets the following requirements:

Amended 1976, 1981, 1984, 2001, 2019, 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 107(d), in concluding provisions, substituted “the applicable age (determined under section 401(a)(9)(C)(v) for the calendar year in which such taxable year begins)” for “age 72”.
2019 Pub. L. 116-94 Pub. L. 116–94, § 114(c), substituted “age 72” for “age 70½” in concluding provisions.
2001 Pub. L. 107-16 Pub. L. 107–16, § 601(b)(3), substituted “the dollar amount in effect under section 219(b)(1)(A)” for “$2,000” in concluding provisions.
1984 Pub. L. 98-369 Pub. L. 98–369, § 521(b)(2), redesignated par. (5) as (4) and struck out former par. (4) which provided that if (A) the owner dies before his entire interest has been distributed to him, or (B) distribution has been commenced as provided in paragraph (3) to his surviving spouse and such surviving spouse dies before the entire interest has been distributed to such spouse, the entire interest (or the remaining part of such interest if distribution thereof has commenced) will be distributed within 5 years after his death (or the death of the surviving spouse). The preceding sentence shall not apply if distributions over a term certain commenced before the death of the owner and the term certain is for a period permitted under paragraph (3).
1981 Pub. L. 97-34 Pub. L. 97–34, § 311(g)(1)(B), substituted in par. (2)(B) and provision following par. (5) “$2,000” for “$1,500”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

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(1) The contract is not transferable by the owner.

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(2) Under the contract—

Amended 1978

1978 Pub. L. 95-600 Pub. L. 95–600, § 157(d)(1), (e)(1)(A), designated existing provisions as subpars. (B) and (C) and added subpar. (A), and in subpar. (B) as so designated, inserted “on behalf of any individual” after “annual premium”, respectively.

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(A) the premiums are not fixed,

(B) the annual premium on behalf of any individual will not exceed the dollar amount in effect under section 219(b)(1)(A), and

Amended 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 601(b)(2), substituted “the dollar amount in effect under section 219(b)(1)(A)” for “$2,000”.

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(C) any refund of premiums will be applied before the close of the calendar year following the year of the refund toward the payment of future premiums or the purchase of additional benefits.

(3) 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.

Amended 1984, 1986, 1989

1989 Pub. L. 101-239 Pub. L. 101–239, § 7811(m)(7), struck out “(without regard to subparagraph (C)(ii) thereof)” after “section 401(a)(9)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1852(a)(1), substituted “(without regard to subparagraph (C)(ii) thereof) and the incidental death benefit requirements of section 401(a)” for “(relating to required distributions)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 521(b)(2), added par. (3) and struck out former par. (3) which provided that the entire interest of the owner will be distributed to him not later than the close of his taxable year in which he attains age 70½, or will be distributed, in accordance with regulations prescribed by the Secretary, over (A) the life of such owner or the lives of such owner and his spouse, or (B) a period not extending beyond the life expectancy of such owner or the life expectancy of such owner and his spouse.

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(4) The entire interest of the owner is nonforfeitable.

Amended 1982, 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 521(b)(2), redesignated par. (5) as (4) and struck out former par. (4) which provided that if (A) the owner dies before his entire interest has been distributed to him, or (B) distribution has been commenced as provided in paragraph (3) to his surviving spouse and such surviving spouse dies before the entire interest has been distributed to such spouse, the entire interest (or the remaining part of such interest if distribution thereof has commenced) will be distributed within 5 years after his death (or the death of the surviving spouse). The preceding sentence shall not apply if distributions over a term certain commenced before the death of the owner and the term certain is for a period permitted under paragraph (3).
1982 Pub. L. 97-248 Pub. L. 97–248, § 243(a)(2), amended par. (4) generally, designating existing provisions, as subpars. (A) and (B), in subpar. (B), as so redesignated, striking out “if” before “distribution”, in provisions following subpar. (B) substituting “will be distributed within 5 years after his death (or the death of the surviving spouse)” for “will, within 5 years after his death (or the death of the surviving spouse), be distributed, or applied to the purchase of an immediate annuity for his beneficiary or beneficiaries (or the beneficiary or beneficiaries of his surviving spouse) which will be payable for the life of such beneficiary or beneficiaries (or for a term certain not extending beyond the life expectancy of such beneficiary or beneficiaries) and which annuity will be immediately distributed to such beneficiary or beneficiaries”, and substituting “shall not apply” for “shall have no application”.

Such term does not include such an annuity contract for any taxable year of the owner in which it is disqualified on the application of subsection (e) or for any subsequent taxable year. For purposes of this subsection, no contract shall be treated as an endowment contract if it matures later than the taxable year in which the individual in whose name such contract is purchased attains the applicable age (determined under section 401(a)(9)(C)(v) for the calendar year in which such taxable year begins); if it is not for the exclusive benefit of the individual in whose name it is purchased or his beneficiaries; or if the aggregate annual premiums under all such contracts purchased in the name of such individual for any taxable year exceed the dollar amount in effect under section 219(b)(1)(A).

(c) Accounts established by employers and certain associations of employees A trust created or organized in the United States by an employer for the exclusive benefit of his employees or their beneficiaries, or by an association of employees (which may include employees within the meaning of section 401(c)(1)) for the exclusive benefit of its members or their beneficiaries, shall be treated as an individual retirement account (described in subsection (a)), but only if the written governing instrument creating the trust meets the following requirements:

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(1) The trust satisfies the requirements of paragraphs (1) through (6) of subsection (a).

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1852(a)(7)(A), substituted “paragraphs (1) through (6)” for “paragraphs (1) through (7)”.

(2) There is a separate accounting for the interest of each employee or member (or spouse of an employee or member).

Amended 1976

1976 Pub. L. 94-455 Pub. L. 94–455, § 1501(b)(2), substituted “member (or spouse of an employee or member)” for “member”.

(3) There is a separate accounting for any interest of an employee or member (or spouse of an employee or member) in a Roth IRA.

Amended 2019

2019 Pub. L. 116-94 Pub. L. 116–94, § 101(a)(3), added par. (3).

The assets of the trust may be held in a common fund for the account of all individuals who have an interest in the trust.

(d) Tax treatment of distributions

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(1) In general 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.

Amended 1976, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1102(c), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “Except as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement account or under an individual retirement annuity shall be included in gross income by the payee or distributee, as the case may be, for the taxable year in which the payment or distribution is received. Notwithstanding any other provision of this title (including chapters 11 and 12), the basis any person in such an account or annuity is zero.”
1976 Pub. L. 94-455 Pub. L. 94–455, § 1501(b)(10), substituted “Notwithstanding any other provision of this title (including chapters 11 and 12), the basis” for “The basis”.

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(2) Special rules for applying section 72 For purposes of applying section 72 to any amount described in paragraph (1)—

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1102(c), substituted “Special rules for applying section 72” for “Distributions of annuity contracts” in heading and amended par. generally. Prior to amendment, par. (2) read as follows: “Paragraph (1) does not apply to any annuity contract which meets the requirements of paragraphs (1), (3), (4), and (5) of subsection (b) and which is distributed from an individual retirement account. Section 72 applies to any such annuity contract, and for purposes of section 72 the investment in such contract is zero.”

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(A) all individual retirement plans shall be treated as 1 contract,

(B) all distributions during any taxable year shall be treated as 1 distribution, and

(C) 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.

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(b)(1), substituted “in which the taxable year begins” for “with or within which the taxable year ends”.

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For purposes of subparagraph (C), the value of the contract shall be increased by the amount of any distributions during the calendar year.

(3) Rollover contribution An amount is described in this paragraph as a rollover contribution if it meets the requirements of subparagraphs (A) and (B).

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(A) In general Paragraph (1) does not apply to any amount paid or distributed out of an individual retirement account or individual retirement annuity to the individual for whose benefit the account or annuity is maintained if—

Amended 1978, 1986, 1988, 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 642(a), inserted “or” at end of cl. (i), added cl. (ii) and concluding provisions, and struck out former cls. (ii) and (iii) which read as follows:
2001 “(ii) no amount in the account and no part of the value of the annuity is attributable to any source other than a rollover contribution (as defined in section 402) from an employee’s trust described in section 401(a) which is exempt from tax under section 501(a) or from an annuity plan described in section 403(a) (and any earnings on such contribution), and the entire amount received (including property and other money) is paid (for the benefit of such individual) into another such trust or annuity plan not later than the 60th day on which the individual receives the payment or the distribution; or
2001 “(iii)(I) the entire amount received (including money and other property) represents the entire interest in the account or the entire value of the annuity,
2001 “(II) no amount in the account and no part of the value of the annuity is attributable to any source other than a rollover contribution from an annuity contract described in section 403(b) and any earnings on such rollover, and
2001 “(III) the entire amount thereof is paid into another annuity contract described in section 403(b) (for the benefit of such individual) not later than the 60th day after he receives the payment or distribution.”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1011A(a)(2)(A), struck out at end “Clause (ii) shall not apply during the 5-year period beginning on the date of the qualified total distribution referred to in such clause if the individual was treated as a 5-percent owner with respect to such distribution under section 402(a)(5)(F)(ii).”
1986 Pub. L. 99-514 Pub. L. 99–514, § 1875(c)(8)(C), inserted at end “Clause (ii) shall not apply during the 5-year period beginning on the date of the qualified total distribution referred to in such clause if the individual was treated as a 5-percent owner with respect to such distribution under section 402(a)(5)(F)(ii).”
1978 Pub. L. 95-600 Pub. L. 95–600, § 156(c)(1), added cl. (iii).

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(i) the entire amount received (including money and any other property) is paid into an individual retirement account or individual retirement annuity (other than an endowment contract) for the benefit of such individual not later than the 60th day after the day on which he receives the payment or distribution; or

Amended 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 491(d)(20), struck out “or retirement bond” before “for the benefit”.

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(ii) 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).

Amended 1984, 1986, 1992

1992 Pub. L. 102-318 Pub. L. 102–318, § 521(b)(17), amended clause (ii) generally. Prior to amendment, clause (ii) read as follows: “the entire amount received (including money and any other property) represents the entire amount in the account or the entire value of the annuity and no amount in the account and no part of the value of the annuity is attributable to any source other than a rollover contribution of a qualified total distribution (as defined in section 402(a)(5)(E)(i)) from an employee’s trust described in section 401(a) which is exempt from tax under section 501(a), or an annuity plan described in section 403(a) and any earnings on such sums and the entire amount thereof is paid into another such trust (for the benefit of such individual) or annuity plan not later than the 60th day on which he receives the payment or distribution; or”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1875(c)(8)(A), (B), struck out “(other than a trust forming part of a plan under which the individual was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan)” after “section 501(a)” and struck out “(other than a plan under which the individual was an employee within the meaning of section 401(c)(1) at the time contributions were made on his behalf under the plan)” after “section 403(a)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1121(c)(2), made amendment identical to Pub. L. 99–514, § 1875(c)(8)(A), (B), see above.
1984 Pub. L. 98-369 Pub. L. 98–369, § 522(d)(12), substituted “rollover contribution of a qualified total distribution (as defined in section 402(a)(5)(E)(i)) from an employee’s trust” for “rollover contribution from an employee’s trust”.

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For purposes of clause (ii), the term “eligible retirement plan” means an eligible retirement plan described in clause (iii), (iv), (v), or (vi) of section 402(c)(8)(B).

(B) Limitation This paragraph does not apply to any amount described in subparagraph (A)(i) received by an individual from an individual retirement account or individual retirement annuity if at any time during the 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.

Amended 1978, 1984, 1992

1992 Pub. L. 102-318 Pub. L. 102–318, § 521(b)(18), struck out at end “Clause (ii) of subparagraph (A) shall not apply to any amount paid or distributed out of an individual retirement account or an individual retirement annuity to which an amount was contributed which was treated as a rollover contribution by section 402(a)(7) (or in the case of an individual retirement annuity, such section as made applicable by section 403(a)(4)(B)).”
1984 Pub. L. 98-369 Pub. L. 98–369, § 491(d)(21), substituted “or an individual retirement annuity” for “, individual retirement annuity, or a retirement bond”.
1978 Pub. L. 95-600 Pub. L. 95–600, § 157(g)(3), (h)(2), inserted provision relating to the applicability of clause (ii) of subparagraph (A) to any amount paid or distributed out of an individual retirement account or annuity to which an amount was contributed which was treated as a rollover contribution by section 402(a)(7) and substituted “1-year period” for “3-year period”.

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(C) Denial of rollover treatment for inherited accounts, etc.

Amended 1982, 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 713(g)(2), designated the subpar. (C), as added by section 335(a)(1) of Pub. L. 97–248, relating to permitting partial rollovers, as subpar. (D).
1982 Pub. L. 97-248 Pub. L. 97–248, § 243(b)(1)(A), added subpar. (C) relating to denial of rollover treatment for inherited accounts.
1982 Pub. L. 97-248 Pub. L. 97–248, § 335(a)(1), added subpar. (C) relating to permitting partial rollovers.

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(i) In general In the case of an inherited individual retirement account or individual retirement annuity—

(I) 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

(II) 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.

(ii) Inherited individual retirement account or annuity An individual retirement account or individual retirement annuity shall be treated as inherited if—

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(I) the individual for whose benefit the account or annuity is maintained acquired such account by reason of the death of another individual, and

(II) such individual was not the surviving spouse of such other individual.

(D) Partial rollovers permitted

Amended 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 713(g)(2), designated the subpar. (C), as added by section 335(a)(1) of Pub. L. 97–248, relating to permitting partial rollovers, as subpar. (D).

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(i) In general 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.

Textual readingALL OF= treated as meeting subparagraph (A)

“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”

“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”

Amended 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 642(b)(2), substituted “(i) or (ii)” for “(i), (ii), or (iii)”.

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(ii) Eligible plan For purposes of clause (i), the term “eligible plan” means any account, annuity, contract, or plan referred to in subparagraph (A).

Amended 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 491(d)(22), struck out “bond,” after “annuity,”.

(E) Denial of rollover treatment for required distributions 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).

Amended 1986, 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1018(t)(3)(D), substituted “paragraph” for “subparagraph”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1852(a)(5)(C), added subpar. (E).

(F) Frozen deposits For purposes of this paragraph, rules similar to the rules of section 402(c)(7) (relating to frozen deposits) shall apply.

Amended 1986, 1992

1992 Pub. L. 102-318 Pub. L. 102–318, § 521(b)(19), substituted “402(c)(7)” for “402(a)(6)(H)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1122(e)(2)(B), added subpar. (F).

(G) Simple retirement accounts 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.

Amended 1996, 2001, 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 332(b)(2), substituted “72(t)(6)(A)” for “72(t)(6)”.
2001 Pub. L. 107-16 Pub. L. 107–16, § 642(b)(3), reenacted heading without change and amended text of subpar. (G) generally. Prior to amendment, text read as follows: “This paragraph shall not apply to any amount paid or distributed out of a simple retirement account (as defined in subsection (p)) unless—
“(i) it is paid into another simple retirement account, or
“(ii) in the case of any payment or distribution to which section 72(t)(6) does not apply, it is paid into an individual retirement plan.”
1996 Pub. L. 104-188 Pub. L. 104–188, § 1421(b)(3)(B), added subpar. (G).

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(H) Application of section 72

Amended 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 643(c), added subpar. (H).

(i) In general If—

“if it meets the requirements of subparagraphs (A) and (B).” Enclosing § 408(d)(3)

Textual readingALL OF= a clause (i) case under subparagraph (H)

(I) a distribution is made from an individual retirement plan, and

(II) 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,

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then, notwithstanding paragraph (2), the rules of clause (ii) shall apply for purposes of applying section 72.

(ii) Applicable rules In the case of a distribution described in clause (i)—

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(I) section 72 shall be applied separately to such distribution,

(II) 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

(III) appropriate adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years.

(I) Waiver of 60-day requirement 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.

Amended 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 644(b), added subpar. (I).

(4) Contributions returned before due date of return Paragraph (1) does not apply to the distribution of any contribution paid during a taxable year to an individual retirement account or for an individual retirement annuity if—

“the distribution of any contribution paid during a taxable year to an individual retirement account or for an individual retirement annuity” Opening words

Textual readingALL OF= paragraph (1) does not apply

(A) such distribution is received on or before the day prescribed by law (including extensions of time) for filing such individual’s return for such taxable year,

(B) no deduction is allowed under section 219 with respect to such contribution, and

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(C) such distribution is accompanied by the amount of net income attributable to such contribution.

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In the case of such a distribution, for purposes of section 61, any net income described in subparagraph (C) shall be deemed to have been earned and receivable in the taxable year in which such contribution is made.

Amended 1976, 1978, 1981, 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(b)(2), substituted “Contributions” for “Excess contributions” in heading, struck out “to the extent that such contribution exceeds the amount allowable as a deduction under section 219” after “individual retirement annuity” in introductory provisions, and substituted “such contribution” for “such excess contribution” in subpars. (B) and (C) and in last sentence.
1981 Pub. L. 97-34 Pub. L. 97–34, § 311(h)(2), substituted section “219” for “219 or 220” in provision preceding subpar. (A) and in subpar. (B).
1978 Pub. L. 95-600 Pub. L. 95–600, § 703(c)(4), amended Pub. L. 94–455, § 1501(b)(5). See 1976 Amendment note below.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1501(b)(5), as amended by Pub. L. 95–600, § 703(c)(4), inserted reference to section 220 and substituted “In the case of such a distribution, for purposes of section 61, any net income described in subparagraph (C) shall be deemed to have been earned and receivable in the taxable year in which such excess contribution is made” for “Any net income described in subparagraph (C) shall be included in the gross income of the individual for the taxable year in which received”.

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(5) Distributions of excess contributions after due date for taxable year and certain excess rollover contributions

Amended 1978, 1980, 1986, 1988, 2000

2000 Pub. L. 106-554 Pub. L. 106–554 amended heading generally. Prior to amendment, heading read as follows: “Certain distributions of excess contributions after due date for taxable year”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(b)(3), substituted “shall be computed without regard to section 219(g)” for “(after application of section 408(o)(2)(B)(ii)) shall be increased by the nondeductible limit under section 408(o)(2)(B)” in last sentence.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1102(b)(2), inserted at end “For purposes of this paragraph, the amount allowable as a deduction under section 219 (after application of section 408(o)(2)(B)(ii)) shall be increased by the nondeductible limit under section 408(o)(2)(B).”
1980 Pub. L. 96-222 Pub. L. 96–222, § 101(a)(10)(C), (14)(E)(ii), in subpar. (A) inserted provisions requiring that if employer contributions on behalf of the individual are paid for the taxable year to a simplified employee pension, the dollar amount of the preceding sentence be increased by the lessor of the amount of such contributions or $7,500 and restructured subpar. (B).
1978 Pub. L. 95-600 Pub. L. 95–600, § 157(c)(1), added par. (5) and redesignated former par. (5) as (6).

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(A) In general In the case of any individual, if the aggregate contributions (other than rollover contributions) paid for any taxable year to an individual retirement account or for an individual retirement annuity do not exceed the dollar amount in effect under section 219(b)(1)(A), paragraph (1) shall not apply to the distribution of any such contribution to the extent that such contribution exceeds the amount allowable as a deduction under section 219 for the taxable year for which the contribution was paid—

Amended 1981, 1986, 1996

1996 Pub. L. 104-188 Pub. L. 104–188, § 1427(b)(3), substituted “the dollar amount in effect under section 219(b)(1)(A)” for “$2,250” in introductory provisions.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1875(c)(6)(A), substituted “the dollar limitation in effect under section 415(c)(1)(A) for such taxable year” for “$15,000”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 312(c)(5), substituted “$15,000” for “$7,500”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 311(g)(2), (h)(2), substituted “$2,250” for “$1,750” and “219” for “219 or 220” in two places.

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(i) if such distribution is received after the date described in paragraph (4),

(ii) but only to the extent that no deduction has been allowed under section 219 with respect to such excess contribution.

If employer contributions on behalf of the individual are paid for the taxable year to a simplified employee pension, the dollar limitation of the preceding sentence shall be increased by the lesser of the amount of such contributions or the dollar limitation in effect under section 415(c)(1)(A) for such taxable year.

(B) Excess rollover contributions attributable to erroneous information If—

Textual readingALL OF= increased excess contribution dollar limit

“the taxpayer reasonably relies on information supplied pursuant to subtitle F for determining the amount of a rollover contribution”

“Reasonably” implies facts and circumstances. No regulation cites this provision (eCFR, Oct 19, 2026)

“the information was erroneous”

(i) the taxpayer reasonably relies on information supplied pursuant to subtitle F for determining the amount of a rollover contribution, but

(ii) the information was erroneous,

subparagraph (A) shall be applied by increasing the dollar limit set forth therein by that portion of the excess contribution which was attributable to such information.

For purposes of this paragraph, the amount allowable as a deduction under section 219 shall be computed without regard to section 219(g).

(6) Transfer of account incident to divorce 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.

Amended 1978, 1984, 1989, 2017

2017 Pub. L. 115-97 Pub. L. 115–97 substituted “clause (i) of section 121(d)(3)(C)” for “subparagraph (A) of section 71(b)(2)”.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7841(a)(1), substituted “his spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 71(b)(2)” for “his former spouse under a divorce decree or under a written instrument incident to such divorce”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 491(d)(23), substituted “or an individual retirement annuity” for “, individual retirement annuity, or retirement bond”, and “or annuity” for “, annuity, or bond”.
1978 Pub. L. 95-600 Pub. L. 95–600, § 157(c)(1), added par. (5) and redesignated former par. (5) as (6).

(7) Special rules for simplified employee pensions or simple retirement accounts

Amended 1988, 1998

1998 Pub. L. 105-206 Pub. L. 105–206, § 6018(b)(2), inserted “or simple retirement accounts” after “pensions” in heading.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(f)(5), added par. (7).

(A) Transfer or rollover of contributions prohibited until deferral test met 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.

(B) Certain exclusions treated as deductions 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.

Amended 1998

1998 Pub. L. 105-206 Pub. L. 105–206, § 6018(b)(1), inserted “or 402(k)” after “section 402(h)”.

(9) Distribution for health savings account funding

Amended 2006

2006 Pub. L. 109-432 Pub. L. 109–432 added par. (9).

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(A) In general 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.

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(B) Qualified HSA funding distribution 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.

(C) Limitations

(i) Maximum dollar limitation The amount excluded from gross income by subparagraph (A) shall not exceed the excess of—

(I) 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

(II) in the case of a distribution described in clause (ii)(II), the amount of the earlier qualified HSA funding distribution.

(ii) One-time transfer

(I) In general 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.

(II) Conversion from self-only to family coverage 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.

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(D) Failure to maintain high deductible health plan coverage

(i) In general If, at any time during the testing period, the individual is not an eligible individual, then the aggregate amount of all contributions to the health savings account of the individual made under subparagraph (A)—

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(I) 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

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(II) 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.

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(ii) Exception for disability or death 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)).

Textual readingALL OF= subclauses (I) and (II) of clause (i) inapplicable

“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)).”

(iii) Testing period 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.

(E) Application of section 72 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.

(e) Tax treatment of accounts and annuities

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(1) Exemption from tax Any individual retirement account is exempt from taxation under this subtitle unless such account has ceased to be an individual retirement account by reason of paragraph (2) or (3). Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations).

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(2) Loss of exemption of account where employee engages in prohibited transaction

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(A) In general If, during any taxable year of the individual for whose benefit any individual retirement account is established, that individual or his beneficiary engages in any transaction prohibited by section 4975 with respect to such account, such account ceases to be an individual retirement account as of the first day of such taxable year. For purposes of this paragraph—

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(i) the individual for whose benefit any account was established is treated as the creator of such account,

(ii) the separate account for any individual within an individual retirement account maintained by an employer or association of employees is treated as a separate individual retirement account, and

(iii) each individual retirement plan of the individual shall be treated as a separate contract.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 322(a), added cl. (iii).

(B) Account treated as distributing all its assets In any case in which any account ceases to be an individual retirement account by reason of subparagraph (A) as of the first day of any taxable year, paragraph (1) of subsection (d) applies as if there were a distribution on such first day in an amount equal to the fair market value (on such first day) of all assets in the account (on such first day).

(3) Effect of borrowing on annuity contract If during any taxable year the owner of an individual retirement annuity borrows any money under or by use of such contract, the contract ceases to be an individual retirement annuity as of the first day of such taxable year. Such owner shall include in gross income for such year an amount equal to the fair market value of such contract as of such first day.

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(4) Effect of pledging account as security If, during any taxable year of the individual for whose benefit an individual retirement account is established, that individual uses the account or any portion thereof as security for a loan, the portion so used is treated as distributed to that individual.

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(5) Purchase of endowment contract by individual retirement account If the assets of an individual retirement account or any part of such assets are used to purchase an endowment contract for the benefit of the individual for whose benefit the account is established—

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(A) to the extent that the amount of the assets involved in the purchase are not attributable to the purchase of life insurance, the purchase is treated as a rollover contribution described in subsection (d)(3), and

(B) to the extent that the amount of the assets involved in the purchase are attributable to the purchase of life, health, accident, or other insurance, such amounts are treated as distributed to that individual (but the provisions of subsection (f) do not apply).

(6) Commingling individual retirement account amounts in certain common trust funds and common investment funds Any common trust fund or common investment fund of individual retirement account assets which is exempt from taxation under this subtitle does not cease to be exempt on account of the participation or inclusion of assets of a trust exempt from taxation under section 501(a) which is described in section 401(a).

[(f) Repealed. Pub. L. 99–514, title XI, § 1123(d)(2), Oct. 22, 1986, 100 Stat. 2475]

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1123(d)(2), struck out subsec. (f) which related to additional tax on certain amounts included in gross income before age 59½.

Cases: In the Matter of Richard L. Kochell, Debtor. Appeal of United States of America, 804 F.2d 84 (7th Cir. 1986)

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(g) Community property laws This section shall be applied without regard to any community property laws.

(h) Custodial accounts For purposes of this section, a custodial account shall be treated as a trust if the assets of such account are held by a bank (as defined in 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.

Amended 1976, 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 713(c)(2)(B), substituted “(as defined in subsection (n))” for “(as defined in section 401(d)(1))”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

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(i) Reports The trustee of an individual retirement account and the issuer of an endowment contract described in subsection (b) or an individual retirement annuity shall make such reports regarding such account, contract, or annuity to the Secretary and to the individuals for whom the account, contract, or annuity is, or is to be, maintained with respect to contributions (and the years to which they relate), distributions aggregating $10 or more in any calendar year, and such other matters as the Secretary may require. The reports required by this subsection—

Amended 1976, 1984, 1986, 1996, 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 1601(d)(1)(A), substituted “31 days” for “30 days” in concluding provisions.
1997 Pub. L. 105-34 Pub. L. 105–34, § 302(d), struck out “under regulations” after “may require” in introductory provisions and struck out “in such regulations” after “prescribes” in pars. (1) and (2)(B).
1996 Pub. L. 104-188 Pub. L. 104–188, § 1455(b)(1), inserted “aggregating $10 or more in any calendar year” after “distributions” in introductory provisions.
1996 Pub. L. 104-188 Pub. L. 104–188, § 1421(b)(6), inserted at end “In the case of a simple retirement account under subsection (p), only one report under this subsection shall be required to be submitted each calendar year to the Secretary (at the time provided under paragraph (2)) but, in addition to the report under this subsection, there shall be furnished, within 30 days after each calendar year, to the individual on whose behalf the account is maintained a statement with respect to the account balance as of the close of, and the account activity during, such calendar year.”
1986 Pub. L. 99-514 Pub. L. 99–514, § 1102(e)(2), amended last sentence generally. Prior to amendment, last sentence read as follows: “The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required by those regulations.”
1984 Pub. L. 98-369 Pub. L. 98–369, § 147(a), inserted “(and the years to which they relate)”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.

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(1) shall be filed at such time and in such manner as the Secretary prescribes, and

(2) shall be furnished to individuals—

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(A) not later than January 31 of the calendar year following the calendar year to which such reports relate, and

(B) in such manner as the Secretary prescribes.

In the case of a simple retirement account under subsection (p), only one report under this subsection shall be required to be submitted each calendar year to the Secretary (at the time provided under paragraph (2)) but, in addition to the report under this subsection, there shall be furnished, within 31 days after each calendar year, to the individual on whose behalf the account is maintained a statement with respect to the account balance as of the close of, and the account activity during, such calendar year.

(j) Increase in maximum limitations for simplified employee pensions 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).

Amended 1978, 1980, 1981, 1982, 1983, 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 601(b)(4), struck out “$2,000” before “amounts”.
1983 Pub. L. 97-448 Pub. L. 97–448, § 103(d)(1)(B), substituted “$17,000” for “$15,000” in provisions preceding par. (1).
1982 Pub. L. 97-248 Pub. L. 97–248, § 238(d)(3), amended subsec. (j) generally, substituting provisions increasing amount by the amount of the limitation in effect under section 415(c)(1)(A), for provisions increasing amount by substituting “$15,000” for “$2,000”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 312(c)(5), substituted “$15,000” for “$7,500”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 311(g)(1)(C), substituted “$2,000” for “$1,500”.
1980 Pub. L. 96-222 Pub. L. 96–222, § 101(a)(10)(J)(i), struck out par. (3) which made reference to paragraph (5) of subsection (b).
1978 Pub. L. 95-600 Pub. L. 95–600, § 152(a), added subsecs. (j) to (l) and redesignated former subsec. (j) as (m).

(k) Simplified employee pension defined

Amended 1978, 1980

1980 Pub. L. 96-222 Pub. L. 96–222, § 101(a)(10)(A), (F), (G), substituted in par. (1) “(5), and (6)” for “and (5)” and in par. (3)(D) “If the employer does not maintain an integrated plan at any time during the taxable year, taxes paid” for “Taxes paid”, inserted in par. (2) provisions requiring that for purposes of this paragraph there be excluded from consideration employees described in subparagraph (A) or (C) of section 410(b)(2) and pars. (3)(E) and (6), and redesignated former par. (6) as (7).
1978 Pub. L. 95-600 Pub. L. 95–600, § 152(a), added subsecs. (j) to (l) and redesignated former subsec. (j) as (m).

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(1) In general For purposes of this title, the term “simplified employee pension” means an individual retirement account or individual retirement annuity—

“an individual retirement account or individual retirement annuity” Opening words

Textual readingALL OF= a simplified employee pension

(A) with respect to which the requirements of paragraphs (2), (3), (4), and (5) of this subsection are met, and

(B) 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.

Amended 1982, 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 713(f)(2), amended par. (1) generally, designating existing provisions as subpar. (A) and adding subpar. (B).
1982 Pub. L. 97-248 Pub. L. 97–248, § 238(d)(4)(B), struck out reference to par. (6) of this subsection.

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(2) Participation requirements This paragraph is satisfied with respect to a simplified employee pension for a year only if for such year the employer contributes to the simplified employee pension of each employee who—

Amended 1980, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(d), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “This paragraph is satisfied with respect to a simplified employee pension for a calendar year only if for such year the employer contributes to the simplified employee pension of each employee who—
“(A) has attained age 21, and
“(B) has performed service for the employer during at least 3 of the immediately preceding 5 calendar years.
For purposes of this paragraph, there shall be excluded from consideration employees described in subparagraph (A) or (C) of section 410(b)(3).”
1980 Pub. L. 96-605 Pub. L. 96–605, § 225(b)(3), (4), substituted “section 410(b)(3)” for “section 410(b)(2)”.

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(A) has attained age 21,

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1898(a)(5), substituted “age 21” for “age 25”.

(B) has performed service for the employer during at least 3 of the immediately preceding 5 years, and

(C) received at least $450 in compensation (within the meaning of section 414(q)(4)) from the employer for the year.

Amended 1996, 2002

2002 Pub. L. 107-147 Pub. L. 107–147, § 411(j)(1)(A), substituted “$450” for “$300”.
1996 Pub. L. 104-188 Pub. L. 104–188, § 1431(c)(1)(B), substituted “section 414(q)(4)” for “section 414(q)(7)”.

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For purposes of this paragraph, there shall be excluded from consideration employees described in subparagraph (A) or (C) of section 410(b)(3). For purposes of any arrangement described in subsection (k)(6), any employee who is eligible to have employer contributions made on the employee’s behalf under such arrangement shall be treated as if such a contribution was made.

(3) Contributions may not discriminate in favor of the highly compensated, etc.

Amended 1984, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(g)(1)(C), added subpar. (D) and struck out former subpar. (D), treatment of certain contributions and taxes, which read “Except as provided in this subparagraph, employer contributions do not meet the requirements of this paragraph unless such contributions meet the requirements of this paragraph without taking into account contributions or benefits under chapter 2 (relating to tax on self-employment income), chapter 21 (relating to Federal Insurance Contribution Act), title II of the Social Security Act, or any other Federal or State law. If the employer does not maintain an integrated plan at any time during the taxable year, OASDI contributions (as defined in section 401(l)(2)) may, for purposes of this paragraph, be taken into account as contributions by the employer to the employee’s simplified employee pension, but only if such contributions are so taken into account with respect to each employee maintaining a simplified employee pension.”, and former subpar. (E), integrated plan defined, which read “For purposes of subparagraph (D), the term ‘integrated plan’ means a plan which meets the requirements of section 401(a) or 403(a) but would not meet such requirements if contributions or benefits under chapter 2 (relating to tax on self-employment income), chapter 21 (relating to Federal Insurance Contributions Act), title II of the Social Security Act, or any other Federal or State law were not taken into account.”
1984 Pub. L. 98-369 Pub. L. 98–369, § 491(d)(24), substituted “or 403(a)” for “, 403(a), or 405(a)”.

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(A) In general 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)).

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(g)(4), substituted “year” for “calendar year”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(g)(1)(A), substituted “any highly compensated employee (within the meaning of section 414(q))” for “any employee who is—
“(i) an officer,
“(ii) a shareholder,
“(iii) a self-employed individual, or
“(iv) highly compensated”.

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(B) Special rules For purposes of subparagraph (A), there shall be excluded from consideration employees described in subparagraph (A) or (C) of section 410(b)(3).

Amended 1980, 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(i)(5), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “For purposes of subparagraph (A)—
“(i) there shall be excluded from consideration employees described in subparagraph (A) or (C) of section 410(b)(3), and
“(ii) an individual shall be considered a shareholder if he owns (with the application of section 318) more than 10 percent of the value of the stock of the employer.”
1980 Pub. L. 96-605 Pub. L. 96–605, § 225(b)(3), (4), substituted “section 410(b)(3)” for “section 410(b)(2)”.

(C) Contributions must bear uniform relationship to total compensation 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.

Amended 1981, 1982, 1983, 1984, 1986, 1988, 1993, 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 611(c)(1), substituted “$200,000” for “$150,000”.
1993 Pub. L. 103-66 Pub. L. 103–66, § 13212(b)(1), substituted “$150,000” for “$200,000”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(f)(3)(C), struck out “total” before “compensation”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(g)(1)(B), inserted “and except as provided in subparagraph (D),” and “(other than contributions under an arrangement described in paragraph (6))”, and struck out end sentence which read as follows: “The Secretary shall annually adjust the $200,000 amount contained in the preceding sentence at the same time and in the same manner as he adjusts the dollar amount contained in section 415(c)(1)(A).”
1984 Pub. L. 98-369 Pub. L. 98–369, § 713(f)(5)(B), inserted provision which required annual adjustment of the $200,000 amount concurrently with the dollar amount adjustment in section 415(c)(1)(A).
1983 Pub. L. 97-448 Pub. L. 97–448, § 103(d)(1)(A), inserted “(other than an employee within the meaning of section 401(c)(1))” after “a simplified employee pension on behalf of each employee”.
1982 Pub. L. 97-248 Pub. L. 97–248, § 238(d)(4)(C), amended subpar. (C) generally, striking out cl. “(i)” designation and cl. (ii) which related to taking into account compensation in excess of $100,000 with respect to a simplified employee pension.
1981 Pub. L. 97-34 Pub. L. 97–34, § 312(b)(2), designated provision relating to compensation bearing a uniform relationship to total compensation as cl. (i), and in cl. (i) as so designated, substituted “$200,000” for “$100,000”, and added cl. (ii).

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(D) Permitted disparity 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)).

Amended 1984, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(g)(1)(C), added subpar. (D) and struck out former subpar. (D), treatment of certain contributions and taxes, which read “Except as provided in this subparagraph, employer contributions do not meet the requirements of this paragraph unless such contributions meet the requirements of this paragraph without taking into account contributions or benefits under chapter 2 (relating to tax on self-employment income), chapter 21 (relating to Federal Insurance Contribution Act), title II of the Social Security Act, or any other Federal or State law. If the employer does not maintain an integrated plan at any time during the taxable year, OASDI contributions (as defined in section 401(l)(2)) may, for purposes of this paragraph, be taken into account as contributions by the employer to the employee’s simplified employee pension, but only if such contributions are so taken into account with respect to each employee maintaining a simplified employee pension.”, and former subpar. (E), integrated plan defined, which read “For purposes of subparagraph (D), the term ‘integrated plan’ means a plan which meets the requirements of section 401(a) or 403(a) but would not meet such requirements if contributions or benefits under chapter 2 (relating to tax on self-employment income), chapter 21 (relating to Federal Insurance Contributions Act), title II of the Social Security Act, or any other Federal or State law were not taken into account.”
1984 Pub. L. 98-369 Pub. L. 98–369, § 713(j), substituted in penultimate sentence “OASDI contributions (as defined in section 401(l)(2)” for “taxes paid under section 3111 (relating to tax on employers) with respect to an employee” and “as contributions by the employer to the employee’s simplified employee pension, but only if such contributions are so taken into account with respect to each employee maintaining a simplified employee pension” for “as a contribution by the employer to an employee’s simplified pension” and struck out third sentence which provided “If contributions are made to the simplified employee pension of an owner-employee, the preceding sentence shall not apply unless taxes paid by all such owner-employees under chapter 2, and the taxes which would be payable under chapter 2 by such owner-employees but for paragraphs (4) and (5) of section 1402(c), are taken into account as contributions by the employer on behalf of such owner-employees.”

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(4) Withdrawals must be permitted A simplified employee pension meets the requirements of this paragraph only if—

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(A) employer contributions thereto are not conditioned on the retention in such pension of any portion of the amount contributed, and

(B) there is no prohibition imposed by the employer on withdrawals from the simplified employee pension.

(5) Contributions must be made under written allocation formula The requirements of this paragraph are met with respect to a simplified employee pension only if employer contributions to such pension are determined under a definite written allocation formula which specifies—

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(A) the requirements which an employee must satisfy to share in an allocation, and

(B) the manner in which the amount allocated is computed.

(6) Employee may elect salary reduction arrangement

Amended 1982, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(a), added par. (6).
1982 Pub. L. 97-248 Pub. L. 97–248, § 238(d)(4)(A), struck out par. (6) which related to prohibition on employer maintaining plan to which section 401(j) applies.

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(A) Arrangements which qualify

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(f)(1), substituted “Arrangements which qualify” for “In general” in heading and amended text generally. Prior to amendment, text read as follows: “A simplified employee pension shall not fail to meet the requirements of this subsection for a year merely because, under the terms of the pension—
“(i) an employee may elect to have the employer make payments—
“(I) as elective employer contributions to the simplified employee pension on behalf of the employee, or
“(II) to the employee directly in cash,
“(ii) 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, and
“(iii) the deferral percentage for such year of each highly compensated employee eligible to participate is not more than the product derived by multiplying the average of the deferral percentages for such year of all employees (other than highly compensated employees) eligible to participate by 1.25.”

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(i) In general A simplified employee pension shall not fail to meet the requirements of this subsection for a year merely because, under the terms of the pension, an employee may elect to have the employer make payments—

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(I) as elective employer contributions to the simplified employee pension on behalf of the employee, or

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(II) to the employee directly in cash.

(ii) 50 percent of eligible employees must elect 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.

(iii) Requirements relating to deferral percentage Clause (i) shall not apply to a simplified employee pension for any year unless the deferral percentage for such year of each highly compensated employee eligible to participate is not more than the product of—

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(I) the average of the deferral percentages for such year of all employees (other than highly compensated employees) eligible to participate, multiplied by

(II) 1.25.

(iv) Limitations on elective deferrals Clause (i) shall not apply to a simplified employee pension unless the requirements of section 401(a)(30) are met.

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(c)(7)(C), added cl. (iv).

(B) Exception where more than 25 employees 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.

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(f)(2), inserted “who were eligible to participate (or would have been required to be eligible to participate if a pension was maintained)” after “than 25 employees”.

(C) Distributions of excess contributions

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(i) In general 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.

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(ii) Excess contribution 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).

(D) Deferral percentage For purposes of this paragraph, the deferral percentage for an employee for a year shall be the ratio of—

(i) the amount of elective employer contributions actually paid over to the simplified employee pension on behalf of the employee for the year, to

(ii) the employee’s compensation (not in excess of the first $200,000) for the year.

Amended 1988, 1993, 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 611(c)(1), substituted “$200,000” for “$150,000”.
1993 Pub. L. 103-66 Pub. L. 103–66, § 13212(b)(1), substituted “$150,000” for “$200,000”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(f)(3)(A), substituted “(not in excess of the first $200,000)” for “(within the meaning of section 414(s))”.

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(E) Exception for State and local and tax-exempt pensions This paragraph shall not apply to a simplified employee pension maintained by—

“to a simplified employee pension maintained by—” Opening words

Textual readingANY OF= paragraph does not apply

(i) a State or local government or political subdivision thereof, or any agency or instrumentality thereof, or

(ii) an organization exempt from tax under this title.

(F) Exception where pension does not meet requirements necessary to insure distribution of excess contributions This paragraph shall not apply with respect to any year for which the simplified employee pension does not meet such requirements as the Secretary may prescribe as are necessary to insure that excess contributions are distributed in accordance with subparagraph (C), including—

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(f)(4), added subpar. (f) and redesignated former subpar. (F) as (G).

(i) reporting requirements, and

(ii) 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.

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

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(f)(4), added subpar. (f) and redesignated former subpar. (F) as (G).

(H) Termination 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).

Amended 1996, 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 1601(d)(1)(B), substituted “of an employer if the terms of simplified employee pensions of such employer” for “if the terms of such pension”.
1996 Pub. L. 104-188 Pub. L. 104–188, § 1421(c), added subpar. (H).

(7) Roth contribution election 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).

Amended 1986, 1988, 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 601(b)(3), added par. (7) and redesignated former pars. (7) to (9) as (8) to (10), respectively.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(f)(3)(B), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “The term ‘compensation’ means, in the case of an employee within the meaning of section 401(c)(1), earned income within the meaning of section 401(c)(2).”
1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(f), added subpar. (C).

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(8) Definitions For purposes of this subsection and subsection (l)—

Amended 1986, 1988, 1993, 1994, 2001, 2002, 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 601(b)(3), added par. (7) and redesignated former pars. (7) to (9) as (8) to (10), respectively.
2002 Pub. L. 107-147 Pub. L. 107–147, § 411(j)(1)(B), substituted “$450” for “$300” in two places.
2001 Pub. L. 107-16 Pub. L. 107–16, § 611(c)(1), substituted “$200,000” for “$150,000”.
1994 Pub. L. 103-465 Pub. L. 103–465 inserted before period at end “; except that any increase in the $300 amount which is not a multiple of $50 shall be rounded to the next lowest multiple of $50”.
1993 Pub. L. 103-66 Pub. L. 103–66, § 13212(b)(2), amended heading and text of par. (8) generally. Prior to amendment, text read as follows: “The Secretary shall adjust the $300 amount in paragraph (2)(C) and the $200,000 amount in paragraphs (3)(C) and (6)(D)(ii) at the same time and in the same manner as under section 415(d), except that in the case of years beginning after 1988, the $200,000 amount (as so adjusted) shall not exceed the amount in effect under section 401(a)(17).”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(f)(3)(D), (10), substituted “paragraphs (3)(C) and (6)(D)(ii)” for “paragraph (3)(C)” and inserted “, except that in the case of years beginning after 1988, the $200,000 amount (as so adjusted) shall not exceed the amount in effect under section 401(a)(17)” after “under section 415(d)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(e), added par. (8).

(A) Employee, employer, or owner-employee The terms “employee”, “employer”, and “owner-employee” shall have the respective meanings given such terms by section 401(c).

(B) Compensation Except as provided in paragraph (2)(C), the term “compensation” has the meaning given such term by section 414(s).

(C) Year The term “year” means—

(i) the calendar year, or

(ii) 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.

(9) Cost-of-living adjustment 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.

Amended 1986, 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 601(b)(3), added par. (7) and redesignated former pars. (7) to (9) as (8) to (10), respectively.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1108(g)(6), added par. (9).

(10) Cross reference For excise tax on certain excess contributions, see section 4979.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 601(b)(3), added par. (7) and redesignated former pars. (7) to (9) as (8) to (10), respectively.

(l) Simplified employer reports

Amended 1978, 1996

1996 Pub. L. 104-188 Pub. L. 104–188, § 1421(b)(5), designated existing provisions as par. (1), inserted heading, and added par. (2).
1978 Pub. L. 95-600 Pub. L. 95–600, § 152(a), added subsecs. (j) to (l) and redesignated former subsec. (j) as (m).

(1) In general 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.

(2) Simple retirement accounts

(A) No employer reports 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).

(B) Summary description The trustee of any simple retirement account established pursuant to a qualified salary reduction arrangement under subsection (p) and the issuer of an annuity established under such an arrangement shall provide to the employer maintaining the arrangement, each year a description containing the following information:

Amended 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 1601(d)(1)(C)(i), inserted “and the issuer of an annuity established under such an arrangement” after “under subsection (p)” in introductory provisions and “or issuer” after “trustee” in cl. (i).

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(i) The name and address of the employer and the trustee or issuer.

(ii) The requirements for eligibility for participation.

(iii) The benefits provided with respect to the arrangement.

(iv) The time and method of making elections with respect to the arrangement.

(v) The procedures for, and effects of, withdrawals (including rollovers) from the arrangement.

(C) Employee notification 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).

(m) Investment in collectibles treated as distributions

Amended 1978, 1981, 1983

1983 Pub. L. 97-448 Pub. L. 97–448, § 103(e)(1), amended directory language of Pub. L. 97–34, § 314(b)(1), thereby correcting subsec. designations. See 1981 Amendment note below for subsecs. (m) and (n).
1981 Pub. L. 97-34 Pub. L. 97–34, § 314(b)(1), as amended by Pub. L. 97–448, § 103(e)(1), added subsec. (m) and redesignated former subsec. (m) as (n).
1978 Pub. L. 95-600 Pub. L. 95–600, § 152(a), added subsecs. (j) to (l) and redesignated former subsec. (j) as (m).

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(1) In general 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.

(2) Collectible defined For purposes of this subsection, the term “collectible” means—

Textual readingANY OF= Collectible

(A) any work of art,

(B) any rug or antique,

(C) any metal or gem,

(D) any stamp or coin,

(E) any alcoholic beverage, or

(F) any other tangible personal property specified by the Secretary for purposes of this subsection.

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(3) Exception for certain coins and bullion For purposes of this subsection, the term “collectible” shall not include—

Amended 1986, 1988, 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 304(a), amended heading and text of par. (3) generally. Prior to amendment, text read as follows: “In the case of an individual retirement account, paragraph (2) shall not apply to—
“(A) any gold coin described in paragraph (7), (8), (9), or (10) of section 5112(a) of title 31,
“(B) any silver coin described in section 5112(e) of title 31, or
“(C) any coin issued under the laws of any State.”
1988 Pub. L. 100-647 Pub. L. 100–647, § 6057(a), amended par. (3) generally. Prior to amendment, par. (3) read as follows: “In the case of an individual retirement account, paragraph (2) shall not apply to any gold coin described in paragraph (7), (8), (9), or (10) of section 5112(a) of title 31 or any silver coin described in section 5112(e) of title 31.”
1986 Pub. L. 99-514 Pub. L. 99–514, § 1144(a), added par. (3).

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(A) any coin which is—

(i) a gold coin described in paragraph (7), (8), (9), or (10) of section 5112(a) of title 31, United States Code,

(ii) a silver coin described in section 5112(e) of title 31, United States Code,

(iii) a platinum coin described in section 5112(k) of title 31, United States Code, or

(iv) a coin issued under the laws of any State, or

(B) 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,

Amended 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(76), substituted “section 5” for “section 7”.

if such bullion is in the physical possession of a trustee described under subsection (a) of this section. [OLRC note: So in original. Concluding provisions probably should be part of subpar. (B).]

(n) Bank For purposes of subsection (a)(2), the term “bank” means—

Amended 1981, 1982, 1983

1983 Pub. L. 97-448 Pub. L. 97–448, § 103(e)(1), amended directory language of Pub. L. 97–34, § 314(b)(1), thereby correcting subsec. designations. See 1981 Amendment note below for subsecs. (m) and (n).
1982 Pub. L. 97-248 Pub. L. 97–248, § 237(e)(3)(B), added subsec. (n) and redesignated former subsec. (n) as (o).
1981 Pub. L. 97-34 Pub. L. 97–34, § 314(b)(1), as amended by Pub. L. 97–448, § 103(e)(1), added subsec. (m) and redesignated former subsec. (m) as (n).

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(1) any bank (as defined in section 581),

(2) an insured credit union (within the meaning of paragraph (6) or (7) of section 101 of the Federal Credit Union Act), and

Amended 2004

2004 Pub. L. 108-311 Pub. L. 108–311, § 408(a)(13), substituted “paragraph (6) or (7) of section 101” for “section 101(6)”.

(3) 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.

(o) Definitions and rules relating to nondeductible contributions to individual retirement plans

Amended 1982, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1102(a), added subsec. (o) and redesignated former subsec. (o) as (p).
1982 Pub. L. 97-248 Pub. L. 97–248, § 237(e)(3)(B), added subsec. (n) and redesignated former subsec. (n) as (o).

(1) In general Subject to the provisions of this subsection, designated nondeductible contributions may be made on behalf of an individual to an individual retirement plan.

(2) Limits on amounts which may be contributed

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(A) In general 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.

(B) Nondeductible limit For purposes of this paragraph—

(i) In general The term “nondeductible limit” means the excess of—

(I) the amount allowable as a deduction under section 219 (determined without regard to section 219(g)), over

(II) the amount allowable as a deduction under section 219 (determined with regard to section 219(g)).

(ii) Taxpayer may elect to treat deductible contributions as nondeductible 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.

(C) Designated nondeductible contributions

(i) In general 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.

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(ii) Designation Any designation under clause (i) shall be made on the return of tax imposed by chapter 1 for the taxable year.

(3) Time when contributions made In determining for which taxable year a designated nondeductible contribution is made, the rule of section 219(f)(3) shall apply.

(4) Individual required to report amount of designated nondeductible contributions

(A) In general Any individual who—

(i) makes a designated nondeductible contribution to any individual retirement plan for any taxable year, or

(ii) receives any amount from any individual retirement plan for any taxable year,

shall include on his return of the tax imposed by chapter 1 for such taxable year and any succeeding taxable year (or on such other form as the Secretary may prescribe for any such taxable year) information described in subparagraph (B).

(B) Information required to be supplied The following information is described in this subparagraph:

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(i) The amount of designated nondeductible contributions for the taxable year.

(ii) The amount of distributions from individual retirement plans for the taxable year.

(iii) The excess (if any) of—

(I) the aggregate amount of designated nondeductible contributions for all preceding taxable years, over

(II) the aggregate amount of distributions from individual retirement plans which was excludable from gross income for such taxable years.

(iv) 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.

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1011(b)(1), substituted “in which the taxable year begins” for “with or within which the taxable year ends”.

(v) Such other information as the Secretary may prescribe.

(C) Penalty for reporting contributions not made For penalty where individual reports designated nondeductible contributions not made, see section 6693(b).

(5) Special rule for difficulty of care payments excluded from gross income In the case of an individual who for a taxable year excludes from gross income under section 131 a qualified foster care payment which is a difficulty of care payment, if—

Amended 2019

2019 Pub. L. 116-94 Pub. L. 116–94, § 116(a)(1), added par. (5).

(A) the deductible amount in effect for the taxable year under section 219(b), exceeds

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 401(b)(4), substituted “section 219(b)” for “subsection (b)”.

(B) the amount of compensation includible in the individual’s gross income for the taxable year,

the individual may elect to increase the nondeductible limit under paragraph (2) for the taxable year by an amount equal to the lesser of such excess or the amount so excluded.

(p) Simple retirement accounts

Amended 1986, 1996

1996 Pub. L. 104-188 Pub. L. 104–188, § 1421(a), added subsec. (p) and redesignated former subsec. (p) as (q).
1986 Pub. L. 99-514 Pub. L. 99–514, § 1102(a), added subsec. (o) and redesignated former subsec. (o) as (p).

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(1) In general For purposes of this title, the term “simple retirement account” means an individual retirement plan (as defined in section 7701(a)(37))—

“an individual retirement plan (as defined in section 7701(a)(37))” Opening words

Textual readingALL OF= a simple retirement account

(A) with respect to which the requirements of paragraphs (3), (4), and (5) are met; and

(B) 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.

Amended 2015

2015 Pub. L. 114-113 Pub. L. 114–113, § 306(a), inserted “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),” before “with respect to which the only contributions allowed”.

(2) Qualified salary reduction arrangement

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(A) In general For purposes of this subsection, the term “qualified salary reduction arrangement” means a written arrangement of an eligible employer under which—

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 116(a)(2), inserted concluding provisions.

(i) an employee eligible to participate in the arrangement may elect to have the employer make payments—

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(I) as elective employer contributions to a simple retirement account on behalf of the employee, or

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(II) to the employee directly in cash,

(ii) 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,

Amended 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 611(f)(1), substituted “the applicable dollar amount” for “$6,000”.

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(iii) 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,

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(iv) 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

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 116(a)(1), added cl. (iv). Former cl. (iv) redesignated (v).

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(v) no contributions may be made other than contributions described in clause (i), (iii), or (iv).

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 116(b)(1), substituted “, (iii), or (iv)” for “or (iii)”.
2022 Pub. L. 117-328 Pub. L. 117–328, § 116(a)(1), redesignated cl. (iv) as (v).

The compensation taken into account under clause (iv) for any year shall not exceed the limitation in effect for such year under section 401(a)(17).

(B) Employer may elect 2-percent nonelective contribution

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(i) In general 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).

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(ii) Compensation limitation 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).

(iii) Special rule for electing larger employers 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”.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(d), added cl. (iii).

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(C) Definitions For purposes of this subsection—

(i) Eligible employer

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(I) In general 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.

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(II) 2-year grace period 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.

Amended 1998

1998 Pub. L. 105-206 Pub. L. 105–206, § 6016(a)(1)(C)(i), substituted “the preceding sentence shall not apply” for “the preceding sentence shall apply only in accordance with rules similar to the rules of section 410(b)(6)(C)(i)” in last sentence.

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(ii) Applicable percentage

(I) In general Except as provided in subclause (IV), the term “applicable percentage” means 3 percent.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(c)(1), substituted “Except as provided in subclause (IV), the term” for “The term”.

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(II) Election of lower percentage 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.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(c)(3), substituted “the applicable percentage” for “3 percent”.

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(III) Special rule for years arrangement not in effect 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.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(c)(3), substituted “the applicable percentage” for “3 percent”.

(IV) Special rule for electing larger employers 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”.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(c)(2), added subcl. (IV).

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(D) Arrangement may be only plan of employer

Amended 1997, 1998

1998 Pub. L. 105-206 Pub. L. 105–206, § 6016(a)(1)(C)(ii), struck out heading and text of cl. (iii). Text read as follows: “In the case of an employer who establishes and maintains a plan under this subsection for 1 or more years and who fails to meet any requirement of this subsection for any subsequent year due to any acquisition, disposition, or similar transaction involving another such employer, rules similar to the rules of section 410(b)(6)(C) shall apply for purposes of this subsection.”
1997 Pub. L. 105-34 Pub. L. 105–34, § 1601(d)(1)(F), added cl. (iii).

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(i) In general 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.

Amended 1997, 1998

1998 Pub. L. 105-206 Pub. L. 105–206, § 6016(a)(1)(A), struck out “or (B)” after “(A)” in last sentence.
1997 Pub. L. 105-34 Pub. L. 105–34, § 1601(d)(1)(E), inserted at end “If only individuals other than employees described in subparagraph (A) or (B) 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.”

(ii) Qualified plan 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).

(E) Applicable dollar amount; cost-of-living adjustment

Amended 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 611(f)(2), amended heading and text of subpar. (E) generally. Prior to amendment, text read as follows: “The Secretary shall adjust the $6,000 amount under subparagraph (A)(ii) 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 ending September 30, 1996, and any increase under this subparagraph which is not a multiple of $500 shall be rounded to the next lower multiple of $500.”

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(i) In general For purposes of subparagraph (A)(ii), the applicable dollar amount is—

Amended 2014, 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(a), substituted “dollar amount is—” and subcls. (I) to (III) for “amount is $10,000.” in cl. (i), added cl. (ii) and redesignated former cl. (ii) as (iii), and, in cl. (iii), designated existing provisions as subcl. (I), inserted subcl. heading, substituted “clause (i)(III)” for “clause (i)”, and added subcl. (II).
2014 Pub. L. 113-295 Pub. L. 113–295, § 221(a)(53), amended cl. (i) generally. Prior to amendment, cl. (i) listed applicable dollar amounts for subsec. (p)(2)(A)(ii) for calendar years 2002 to 2005 and thereafter.

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(I) 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,

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(II) 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

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(III) $10,000 in any other case.

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(ii) Adjusted dollar amount 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.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(a), substituted “dollar amount is—” and subcls. (I) to (III) for “amount is $10,000.” in cl. (i), added cl. (ii) and redesignated former cl. (ii) as (iii), and, in cl. (iii), designated existing provisions as subcl. (I), inserted subcl. heading, substituted “clause (i)(III)” for “clause (i)”, and added subcl. (II).

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(iii) Cost-of-living adjustment

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(a), substituted “dollar amount is—” and subcls. (I) to (III) for “amount is $10,000.” in cl. (i), added cl. (ii) and redesignated former cl. (ii) as (iii), and, in cl. (iii), designated existing provisions as subcl. (I), inserted subcl. heading, substituted “clause (i)(III)” for “clause (i)”, and added subcl. (II).

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(I) Certain large employers 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.

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(II) Other employers 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.

(iv) Employer has not had another plan within 3 years 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.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(f), added cl. (iv).

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(F) Matching contributions for qualified student loan payments

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 110(d), added subpar. (F).

(i) In general Subject to the rules of clause (iii), an arrangement shall not fail to be treated as meeting the requirements of subparagraph (A)(iii) solely because under the arrangement, solely for purposes of such subparagraph, qualified student loan payments are treated as amounts elected by the employee under subparagraph (A)(i)(I) to the extent such payments do not exceed—

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(I) 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

(II) any other amounts elected by the employee under subparagraph (A)(i)(I) for the year.

(ii) Qualified student loan payment For purposes of this subparagraph—

(I) In general 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.

Textual readingALL OF= a qualified student loan payment

“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”

“the employee certifies to the employer making the matching contribution that such payment has been made on such a loan”

(II) Qualified higher education expenses The term “qualified higher education expenses” has the same meaning as when used in section 401(m)(4)(D).

(iii) Applicable rules Clause (i) shall apply to an arrangement only if, under the arrangement—

Textual readingALL OF= clause (i) may apply to arrangement

(I) 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

(II) all employees otherwise eligible to participate in the arrangement are eligible to receive matching contributions on account of qualified student loan payments.

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(G) Adjustment for inflation In the case of taxable years beginning after December 31, 2024, the $5,000 amount in subparagraph (A)(iv)(II) shall be increased by an amount equal to—

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 116(a)(4), added subpar. (G).

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(i) such amount, multiplied by

(ii) 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.

If any amount as adjusted under the preceding sentence is not a multiple of $100, such amount shall be rounded to the nearest multiple of $100.

(H) 2-year grace period 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.

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 117(e), added subpar. (H).

(3) Vesting requirements 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.

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(4) Participation requirements

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(A) In general The requirements of this paragraph are met with respect to any simple retirement account for a year only if, under the qualified salary reduction arrangement, all employees of the employer who—

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(i) received at least $5,000 in compensation from the employer during any 2 preceding years, and

(ii) are reasonably expected to receive at least $5,000 in compensation during the year,

are eligible to make the election under paragraph (2)(A)(i) or receive the nonelective contribution described in paragraph (2)(B).

(B) Excludable employees An employer may elect to exclude from the requirement under subparagraph (A) employees described in section 410(b)(3).

(5) Administrative requirements The requirements of this paragraph are met with respect to any simple retirement account if, under the qualified salary reduction arrangement—

Amended 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 1601(d)(1)(G), substituted “simple” for “simplified” in introductory provisions.

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(A) an employer must—

(i) 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

(ii) 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),

(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

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(C) 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.

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(6) Definitions For purposes of this subsection—

(A) Compensation

(i) In general 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).

Amended 2004

2004 Pub. L. 108-311 Pub. L. 108–311, § 404(d), inserted at end “For purposes of the preceding sentence, amounts described in section 6051(a)(3) shall be determined without regard to section 3401(a)(3).”

(ii) Self-employed 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).

Amended 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 611(g)(2), inserted at end “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).”

(B) Employee The term “employee” includes an employee as defined in section 401(c)(1).

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(C) Year The term “year” means the calendar year.

(7) Use of designated financial institution 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).

(8) Coordination with maximum limitation In the case of any simple retirement account—

Amended 1997, 1998, 2001, 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 116(a)(3), amended par. (8) generally. Prior to amendment, text read as follows: “In the case of any simple retirement account, subsections (a)(1) and (b)(2) shall be applied by substituting ‘the sum of the dollar amount in effect under paragraph (2)(A)(ii) of this subsection and the employer contribution required under subparagraph (A)(iii) or (B)(i) of paragraph (2) of this subsection, whichever is applicable’ for ‘the dollar amount in effect under section 219(b)(1)(A)’.”
2001 Pub. L. 107-16 Pub. L. 107–16, § 601(b)(5), substituted “the dollar amount in effect under section 219(b)(1)(A)” for “$2,000”.
1998 Pub. L. 105-206 Pub. L. 105–206, § 6015(a), redesignated par. (8), relating to matching contributions on behalf of self-employed individuals not treated as elective employer contributions, as (9).
1997 Pub. L. 105-34 Pub. L. 105–34, § 1601(d)(1)(D), added par. (8) relating to coordination with maximum limitation under subsection (a).
1997 Pub. L. 105-34 Pub. L. 105–34, § 1501(b), added par. (8) relating to matching contributions on behalf of self-employed individuals not treated as elective employer contributions.

(A) 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

(B) 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”.

(9) Matching contributions on behalf of self-employed individuals not treated as elective employer contributions 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.

Amended 1998

1998 Pub. L. 105-206 Pub. L. 105–206, § 6015(a), redesignated par. (8), relating to matching contributions on behalf of self-employed individuals not treated as elective employer contributions, as (9).

(10) Special rules for acquisitions, dispositions, and similar transactions

Amended 1998

1998 Pub. L. 105-206 Pub. L. 105–206, § 6016(a)(1)(B), added par. (10).

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(A) In general An employer which fails to meet any applicable requirement by reason of an acquisition, disposition, or similar transaction shall not be treated as failing to meet such requirement during the transition period if—

“fails to meet any applicable requirement by reason of an acquisition, disposition, or similar transaction” Opening words

“during the transition period” Opening words

Textual readingALL OF= employer not treated as failing requirement

(i) the employer satisfies requirements similar to the requirements of section 410(b)(6)(C)(i)(II); and

(ii) 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.

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(B) Applicable requirement For purposes of this paragraph, the term “applicable requirement” means—

(i) the requirement under paragraph (2)(A)(i) that an employer be an eligible employer;

(ii) the requirement under paragraph (2)(D) that an arrangement be the only plan of an employer; and

(iii) the participation requirements under paragraph (4).

(C) Transition period 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.

(11) Replacement of simple retirement accounts with safe harbor plans during plan year

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 332(a), added par. (11).

(A) In general 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.

(B) Combined limits on contributions The terminated arrangement and safe harbor plan shall both be treated as violating the requirements of paragraph (2)(A)(ii) or section 401(a)(30) (whichever is applicable) if the aggregate elective contributions of the employee under the terminated arrangement during its last plan year and under the safe harbor plan during its transition year exceed the sum of—

(i) 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

(ii) 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.

(C) Transition year 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.

(D) Safe harbor plan 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).

Textual readingALL OF= a safe harbor plan

“a qualified cash or deferred arrangement”

“meets the requirements of paragraph (11), (12), (13), or (16) of section 401(k)”

(12) Roth contribution election 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).

NOT“unless the employee elects for such plan to be so treated (at such time and in such manner as the Secretary may provide).” Opening words

Textual readingALL OF= roth ira not a simple account

“An individual retirement plan which is designated as a Roth IRA”

NOT“the employee elects for such plan to be so treated”

Amended 2022

2022 Pub. L. 117-328 Pub. L. 117–328, § 601(c)(1), added par. (12).

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(q) Deemed IRAs under qualified employer plans

§ 1.408(q)-1 Deemed IRAs in qualified employer plans.

Amended 1996, 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 602(a), added subsec. (q) and redesignated former subsec. (q) as (r).
1996 Pub. L. 104-188 Pub. L. 104–188, § 1421(a), added subsec. (p) and redesignated former subsec. (p) as (q).

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(1) General rule If—

Textual readingALL OF= account treated as individual retirement plan

(A) a qualified employer plan elects to allow employees to make voluntary employee contributions to a separate account or annuity established under the plan, and

(B) 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,

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then such account or annuity shall be treated for purposes of this title in the same manner as an individual retirement plan and not as a qualified employer plan (and contributions to such account or annuity as contributions to an individual retirement plan and not to the qualified employer plan). For purposes of subparagraph (B), the requirements of subsection (a)(5) shall not apply.

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(2) Special rules for qualified employer plans 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).

(3) Definitions For purposes of this subsection—

(A) Qualified employer plan The term “qualified employer plan” has the meaning given such term by section 72(p)(4)(A)(i); except that such term shall also include an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A).

Amended 2002

2002 Pub. L. 107-147 Pub. L. 107–147, § 411(i)(1), reenacted heading without change and amended text of subpar. (A) generally. Prior to amendment, text read as follows: “The term ‘qualified employer plan’ has the meaning given such term by section 72(p)(4); except such term shall not include a government plan which is not a qualified plan unless the plan is an eligible deferred compensation plan (as defined in section 457(b)).”

(B) Voluntary employee contribution The term “voluntary employee contribution” means any contribution (other than a mandatory contribution within the meaning of section 411(c)(2)(C))—

(i) 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

(ii) with respect to which the individual has designated the contribution as a contribution to which this subsection applies.

(r) Cross references

Amended 2001

2001 Pub. L. 107-16 Pub. L. 107–16, § 602(a), added subsec. (q) and redesignated former subsec. (q) as (r).

(1) For tax on excess contributions in individual retirement accounts or annuities, see section 4973.

(2) For tax on certain accumulations in individual retirement accounts or annuities, see section 4974.