§ 4980.
(c)
Definitions and special rules
For purposes of this section—
(1)
Qualified plan
The term “qualified plan” means any plan meeting the requirements of section 401(a) or 403(a), other than—
(A)
a plan maintained by an employer if such employer has, at all times, been exempt from tax under subtitle A, or
(B)
a governmental plan (within the meaning of section 414(d)).
Such term shall include any plan which, at any time, has been determined by the Secretary to be a qualified plan.
(2)
Employer reversion
(B)
Exceptions
The term “employer reversion” shall not include—
(i)
except as provided in regulations, any amount distributed to or on behalf of any employee (or his beneficiaries) if such amount could have been so distributed before termination of such plan without violating any provision of section 401,
(ii)
any distribution to the employer which is allowable under section 401(a)(2)—
(I)
in the case of a multiemployer plan, by reason of mistakes of law or fact or the return of any withdrawal liability payment,
(II)
in the case of a plan other than a multiemployer plan, by reason of mistake of fact, or
(III)
in the case of any plan, by reason of the failure of the plan to initially qualify or the failure of contributions to be deductible, or
(iii)
any transfer described in section 420(f)(2)(B)(ii)(II).
(3)
Exception for employee stock ownership plans
(B)
Investment in employer securities
(C)
Allocation requirements
The requirements of this subparagraph are met if the portion of the amount transferred which is not allocated under the plan to accounts of participants in the plan year in which the transfer occurs—
(i)
is credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over a period not to exceed 7 years, and
(ii)
when allocated to accounts of participants under the plan, is treated as an employer contribution for purposes of section 415(c), except that—
(I)
the annual addition (as determined under section 415(c)) attributable to each such allocation shall not exceed the value of such securities as of the time such securities were credited to such suspense account, and
(II)
no additional employer contributions shall be permitted to an employee stock ownership plan described in subparagraph (A) of the employer before the allocation of such amount.
The amount allocated in the year of transfer shall not be less than the lesser of the maximum amount allowable under section 415 or ⅛ of the amount attributable to the securities acquired. In the case of dividends on securities held in the suspense account, the requirements of this subparagraph are met only if the dividends are allocated to accounts of participants or paid to participants in proportion to their accounts, or used to repay loans used to purchase employer securities.
(E)
Applicable amount
For purposes of this paragraph, the term “applicable amount” means any amount which—
(i)
is transferred after March 31, 1985, and before January 1, 1989, or
(ii)
is transferred after December 31, 1988, pursuant to a termination which occurs after March 31, 1985, and before January 1, 1989.
(F)
No credit or deduction allowed
(G)
Amount transferred to include income thereon, etc.
(4)
Time for payment of tax
(d)
Increase in tax for failure to establish replacement plan or increase benefits
(1)
In general
Subsection (a) shall be applied by substituting “50 percent” for “20 percent” with respect to any employer reversion from a qualified plan unless—
(A)
the employer establishes or maintains a qualified replacement plan, or
(B)
the plan provides benefit increases meeting the requirements of paragraph (3).
(2)
Qualified replacement plan
For purposes of this subsection, the term “qualified replacement plan” means a qualified plan established or maintained by the employer in connection with a qualified plan termination (hereinafter referred to as the “replacement plan”) with respect to which the following requirements are met:
(A)
Participation requirement
(B)
Asset transfer requirement
(i)
25 percent cushion
A direct transfer from the terminated plan to the replacement plan is made before any employer reversion, and the transfer is in an amount equal to the excess (if any) of—
(I)
25 percent of the maximum amount which the employer could receive as an employer reversion without regard to this subsection, over
(II)
the amount determined under clause (ii).
(ii)
Reduction for increase in benefits
The amount determined under this clause is an amount equal to the present value of the aggregate increases in the accrued benefits under the terminated plan of any participants or beneficiaries pursuant to a plan amendment which—
(I)
is adopted during the 60-day period ending on the date of termination of the qualified plan, and
(II)
takes effect immediately on the termination date.
(iii)
Treatment of amount transferred
In the case of the transfer of any amount under clause (i)—
(I)
such amount shall not be includible in the gross income of the employer,
(II)
no deduction shall be allowable with respect to such transfer, and
(III)
such transfer shall not be treated as an employer reversion for purposes of this section.
(C)
Allocation requirements
(i)
In general
In the case of any defined contribution plan, the portion of the amount transferred to the replacement plan under subparagraph (B)(i) is—
(I)
allocated under the plan to the accounts of participants in the plan year in which the transfer occurs, or
(II)
credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over the 7-plan-year period beginning with the year of the transfer.
(ii)
Coordination with section 415 limitation
If, by reason of any limitation under section 415, any amount credited to a suspense account under clause (i)(II) may not be allocated to a participant before the close of the 7-year period under such clause—
(I)
such amount shall be allocated to the accounts of other participants, and
(II)
if any portion of such amount may not be allocated to other participants by reason of any such limitation, shall be allocated to the participant as provided in section 415.
(iii)
Treatment of income
(iv)
Unallocated amounts at termination
If any amount credited to a suspense account under clause (i)(II) is not allocated as of the termination date of the replacement plan—
(I)
such amount shall be allocated to the accounts of participants as of such date, except that any amount which may not be allocated by reason of any limitation under section 415 shall be allocated to the accounts of other participants, and
(II)
if any portion of such amount may not be allocated to other participants under subclause (I) by reason of such limitation, such portion shall be treated as an employer reversion to which this section applies.
(3)
Pro rata benefit increases
(A)
In general
The requirements of this paragraph are met if a plan amendment to the terminated plan is adopted in connection with the termination of the plan which provides pro rata increases in the accrued benefits of all qualified participants which—
(i)
have an aggregate present value not less than 20 percent of the maximum amount which the employer could receive as an employer reversion without regard to this subsection, and
(ii)
take effect immediately on the termination date.
(B)
Pro rata increase
For purposes of subparagraph (A), a pro rata increase is an increase in the present value of the accrued benefit of each qualified participant in an amount which bears the same ratio to the aggregate amount determined under subparagraph (A)(i) as—
(i)
the present value of such participant’s accrued benefit (determined without regard to this subsection), bears to
(ii)
the aggregate present value of accrued benefits of the terminated plan (as so determined).
Notwithstanding the preceding sentence, the aggregate increases in the present value of the accrued benefits of qualified participants who are not active participants shall not exceed 40 percent of the aggregate amount determined under subparagraph (A)(i) by substituting “equal to” for “not less than”.
(4)
Coordination with other provisions
(B)
Treatment as employer contributions
(C)
10-year participation requirement
(5)
Definitions and special rules
For purposes of this subsection—
(A)
Qualified participant
The term “qualified participant” means an individual who—
(i)
is an active participant,
(ii)
is a participant or beneficiary in pay status as of the termination date,
(iii)
is a participant not described in clause (i) or (ii)—
(I)
who has a nonforfeitable right to an accrued benefit under the terminated plan as of the termination date, and
(II)
whose service, which was creditable under the terminated plan, terminated during the period beginning 3 years before the termination date and ending with the date on which the final distribution of assets occurs, or
(iv)
is a beneficiary of a participant described in clause (iii)(II) and has a nonforfeitable right to an accrued benefit under the terminated plan as of the termination date.
(C)
Reallocation of increase
(D)
Plans taken into account
For purposes of determining whether there is a qualified replacement plan under paragraph (2), the Secretary may provide that—
(i)
2 or more plans may be treated as 1 plan, or
(ii)
a plan of a successor employer may be taken into account.
(E)
Special rule for participation requirement
(6)
Subsection not to apply to employer in bankruptcy
(Added [Pub. L. 99–514, title XI, § 1132(a)], Oct. 22, 1986, [100 Stat. 2478]; amended [Pub. L. 100–647, title I, § 1011A(f)(1)]–(3), (6), (7), title V, § 5072(a), title VI, § 6069(a), Nov. 10, 1988, [102 Stat. 3478], 3479, 3681, 3704; [Pub. L. 101–508, title XII], §§ 12001, 12002(a), Nov. 5, 1990, [104 Stat. 1388–562]; [Pub. L. 104–188, title I, § 1704(a)], Aug. 20, 1996, [110 Stat. 1878]; [Pub. L. 109–280, title IX, § 901(a)(2)(C)], Aug. 17, 2006, [120 Stat. 1029]; [Pub. L. 110–458, title I, § 108(i)(3)], Dec. 23, 2008, [122 Stat. 5110].)