26 U.S.C. § 4975
There is hereby imposed a tax on each prohibited transaction. The rate of tax shall be equal to 15 percent of the amount involved with respect to the prohibited transaction for each year (or part thereof) in the taxable period. The tax imposed by this subsection shall be paid by any disqualified person who participates in the prohibited transaction (other than a fiduciary acting only as such).
In any case in which an initial tax is imposed by subsection (a) on a prohibited transaction and the transaction is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of the amount involved. The tax imposed by this subsection shall be paid by any disqualified person who participated in the prohibited transaction (other than a fiduciary acting only as such).
For purposes of this section, the term "prohibited transaction" means any direct or indirect-
The Secretary shall establish an exemption procedure for purposes of this subsection. Pursuant to such procedure, he may grant a conditional or unconditional exemption of any disqualified person or transaction, orders of disqualified persons or transactions, from all or part of the restrictions imposed by paragraph (1) of this subsection. Action under this subparagraph may be taken only after consultation and coordination with the Secretary of Labor. The Secretary may not grant an exemption under this paragraph unless he finds that such exemption is-
Before granting an exemption under this paragraph, the Secretary shall require adequate notice to be given to interested persons and shall publish notice in the Federal Register of the pendency of such exemption and shall afford interested persons an opportunity to present views. No exemption may be granted under this paragraph with respect to a transaction described in subparagraph (E) or (F) of paragraph (1) unless the Secretary affords an opportunity for a hearing and makes a determination on the record with respect to the findings required under subparagraphs (A), (B), and (C) of this paragraph, except that in lieu of such hearing the Secretary may accept any record made by the Secretary of Labor with respect to an application for exemption under section 408(a) of title I of the Employee Retirement Income Security Act of 1974.
An individual for whose benefit an individual retirement account is established and his beneficiaries shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be an individual retirement account by reason of the application of section 408(e)(2)(A) or if section 408(e)(4) applies to such account.
An individual for whose benefit an Archer MSA (within the meaning of section 220(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 220(e)(2) applies to such transaction.
An individual for whose benefit a Coverdell education savings account is established and any contributor to such account shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 530(d) applies with respect to such transaction.
An individual for whose benefit a health savings account (within the meaning of section 223(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be a health savings account by reason of the application of section 223(e)(2) to such account.
Any party to an arrangement which satisfies the requirements of section 408(h) of the Employee Retirement Income Security Act of 1974 shall be exempt from the tax imposed by this section with respect to such arrangement.
Except as provided in subsection (f)(6), the prohibitions provided in subsection (c) shall not apply to-
The written report shall also notify the plan fiduciary of the plan's right to terminate participation in the investment manager's cross-trading program at any time,1
For purposes of this section, the term "plan" means-
For purposes of this section, the term "disqualified person" means a person who is-
which is an employer or an employee organization described in subparagraph (C) or (D);
is owned directly or indirectly, or held by persons described in subparagraph (A), (B), (C), (D), or (E);
The Secretary, after consultation and coordination with the Secretary of Labor or his delegate, may by regulation prescribe a percentage lower than 50 percent for subparagraphs (E) and (G) and lower than 10 percent for subparagraphs (H) and (I).
For purposes of this section, the term "fiduciary" means any person who-
Such term includes any person designated under section 405(c)(1)(B) of the Employee Retirement Income Security Act of 1974.
For purposes of paragraphs (2)(E)(i) and (G)(i) there shall be taken into account indirect stockholdings which would be taken into account under section 267(c), except that, for purposes of this paragraph, section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of paragraph (6).
For purposes of paragraphs (2)(E)(ii) and (iii), (G)(ii) and (iii), and (I) the ownership of profits or beneficial interests shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of paragraph (6).
For purposes of paragraph (2)(F), the family of any individual shall include his spouse, ancestor, lineal descendant, and any spouse of a lineal descendant.
The term "employee stock ownership plan" means a defined contribution plan-
A plan shall not be treated as an employee stock ownership plan unless it meets the requirements of section 409(h), section 409(o), and, if applicable, section 409(n), section 409(p), and section 664(g) and, if the employer has a registration-type class of securities (as defined in section 409(e)(4)), it meets the requirements of section 409(e).
The term "qualifying employer security" means any employer security within the meaning of section 409(l). If any moneys or other property of a plan are invested in shares of an investment company registered under the Investment Company Act of 1940, the investment shall not cause that investment company or that investment company's investment adviser or principal underwriter to be treated as a fiduciary or a disqualified person for purposes of this section, except when an investment company or its investment adviser or principal underwriter acts in connection with a plan covering employees of the investment company, its investment adviser, or its principal underwriter.
For purposes of this section-
The term "plan" includes a trust described in section 501(c)(22).
In the case of any trust to which this section applies by reason of subparagraph (A), the term "disqualified person" includes any person who is a disqualified person with respect to any plan to which such trust is permitted to make payments under section 4223 of the Employee Retirement Income Security Act of 1974.
For purposes of this section-
If more than one person is liable under subsection (a) or (b) with respect to any one prohibited transaction, all such persons shall be jointly and severally liable under such subsection with respect to such transaction.
The term "taxable period" means, with respect to any prohibited transaction, the period beginning with the date on which the prohibited transaction occurs and ending on the earliest of-
A transfer or real or personal property by a disqualified person to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan assumes or if it is subject to a mortgage or similar lien which a disqualified person placed on the property within the 10-year period ending on the date of the transfer.
The term "amount involved" means, with respect to a prohibited transaction, the greater of the amount of money and the fair market value of the other property given or the amount of money and the fair market value of the other property received; except that, in the case of services described in paragraphs (2) and (10) of subsection (d) the amount involved shall be only the excess compensation. For purposes of the preceding sentence, the fair market value-
The terms "correction" and "correct" mean, with respect to a prohibited transaction, undoing the transaction to the extent possible, but in any case placing the plan in a financial position not worse than that in which it would be if the disqualified person were acting under the highest fiduciary standards.
In the case of a trust described in section 401(a) which is part of a plan providing contributions or benefits for employees some or all of whom are owner-employees (as defined in section 401(c)(3)), the exemptions provided by subsection (d) (other than paragraphs (9) and (12)) shall not apply to a transaction in which the plan directly or indirectly-
any such owner-employee, a member of the family (as defined in section 267(c)(4)) of any such owner-employee, or any corporation in which any such owner-employee owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation.
For purposes of subparagraph (A), the following shall be treated as owner-employees:
Subparagraph (A)(iii) shall not apply to a transaction which consists of a sale of employer securities to an employee stock ownership plan (as defined in subsection (e)(7)) by a shareholder-employee, a member of the family (as defined in section 267(c)(4)) of such shareholder-employee, or a corporation in which such a shareholder-employee owns stock representing a 50 percent or greater interest described in subparagraph (A).
For purposes of subparagraph (A)(i), the term "owner-employee" shall only include a person described in subclause (II) or (III) of clause (i).
For purposes of subparagraph (B), the term "shareholder-employee" means an employee or officer of an S corporation who owns (or is considered as owning within the meaning of section 318(a)(1)) more than 5 percent of the outstanding stock of the corporation on any day during the taxable year of such corporation.
A plan shall not be treated as violating the requirements of section 401 or 409 or subsection (e)(7), or as engaging in a prohibited transaction for purposes of subsection (d)(3), merely by reason of any distribution (as described in section 1368(a)) with respect to S corporation stock that constitutes qualifying employer securities, which in accordance with the plan provisions is used to make payments on a loan described in subsection (d)(3) the proceeds of which were used to acquire such qualifying employer securities (whether or not allocated to participants). The preceding sentence shall not apply in the case of a distribution which is paid with respect to any employer security which is allocated to a participant unless the plan provides that employer securities with a fair market value of not less than the amount of such distribution are allocated to such participant for the year which (but for the preceding sentence) such distribution would have been allocated to such participant.
The prohibitions provided in subsection (c) shall not apply to transactions described in subsection (d)(17) if the investment advice provided by a fiduciary adviser is provided under an eligible investment advice arrangement.
For purposes of this paragraph, the term "eligible investment advice arrangement" means an arrangement-
An investment advice program meets the requirements of this subparagraph if the requirements of clauses (ii), (iii), and (iv) are met.
The requirements of this clause are met if the investment advice provided under the investment advice program is provided pursuant to a computer model that-
The requirements of this clause are met with respect to any investment advice program if an eligible investment expert certifies, prior to the utilization of the computer model and in accordance with rules prescribed by the Secretary of Labor, that the computer model meets the requirements of clause (ii).
If, as determined under regulations prescribed by the Secretary of Labor, there are material modifications to a computer model, the requirements of this clause are met only if a certification described in subclause (I) is obtained with respect to the computer model as so modified.
The term "eligible investment expert" means any person which meets such requirements as the Secretary of Labor may provide and which does not bear any material affiliation or contractual relationship with any investment adviser or a related person thereof (or any employee, agent, or registered representative of the investment adviser or related person).
The requirements of this clause are met with respect to any investment advice program if-
Nothing in the preceding sentence shall preclude the participant or beneficiary from requesting investment advice other than that described in clause (i), but only if such request has not been solicited by any person connected with carrying out the arrangement.
The requirements of this subparagraph are met with respect to an arrangement if the arrangement is expressly authorized by a plan fiduciary other than the person offering the investment advice program, any person providing investment options under the plan, or any affiliate of either.
The requirements of this subparagraph are met if an independent auditor, who has appropriate technical training or experience and proficiency and so represents in writing-
In the case of a plan described in subparagraphs (B) through (F) (and so much of subparagraph (G) as relates to such subparagraphs) of subsection (e)(1), in lieu of the requirements of clause (i), audits of the arrangement shall be conducted at such times and in such manner as the Secretary of Labor may prescribe.
For purposes of this subparagraph, an auditor is considered independent if it is not related to the person offering the arrangement to the plan and is not related to any person providing investment options under the plan.
The requirements of this subparagraph are met if-
The requirements of this subparagraph are met if-
The requirements of this subparagraph are met if the notification required to be provided to participants and beneficiaries under subparagraph (F)(i) is written in a clear and conspicuous manner and in a manner calculated to be understood by the average plan participant and is sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of the information required to be provided in the notification.
The Secretary of Labor shall issue a model form for the disclosure of fees and other compensation required in subparagraph (F)(i)(III) which meets the requirements of clause (i).
The requirements of this subparagraph are met if a fiduciary adviser who has provided advice referred to in subparagraph (A) maintains, for a period of not less than 6 years after the provision of the advice, any records necessary for determining whether the requirements of the preceding provisions of this paragraph and of subsection (d)(17) have been met. A transaction prohibited under subsection (c) shall not be considered to have occurred solely because the records are lost or destroyed prior to the end of the 6-year period due to circumstances beyond the control of the fiduciary adviser.
For purposes of this paragraph and subsection (d)(17)-
The term "fiduciary adviser" means, with respect to a plan, a person who is a fiduciary of the plan by reason of the provision of investment advice referred to in subsection (e)(3)(B) by the person to a participant or beneficiary of the plan and who is-
For purposes of this title, a person who develops the computer model described in subparagraph (C)(ii) or markets the investment advice program or computer model shall be treated as a person who is a fiduciary of the plan by reason of the provision of investment advice referred to in subsection (e)(3)(B) to a participant or beneficiary and shall be treated as a fiduciary adviser for purposes of this paragraph and subsection (d)(17), except that the Secretary of Labor may prescribe rules under which only 1 fiduciary adviser may elect to be treated as a fiduciary with respect to the plan.
The term "affiliate" of another entity means an affiliated person of the entity (as defined in section 2(a)(3) of the Investment Company Act of 1940 ( 15 U.S.C. 80a-2(a)(3))).
The term "registered representative" of another entity means a person described in section 3(a)(18) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) (substituting the entity for the broker or dealer referred to in such section) or a person described in section 202(a)(17) of the Investment Advisers Act of 1940 ( 15 U.S.C. 80b-2(a)(17)) (substituting the entity for the investment adviser referred to in such section).
The term "block trade" means any trade of at least 10,000 shares or with a market value of at least $200,000 which will be allocated across two or more unrelated client accounts of a fiduciary.
The term "adequate consideration" means-
For purposes of subsection (d)(23), the term "correction period" means the 14-day period beginning on the date on which the disqualified person discovers, or reasonably should have discovered, that the transaction would (without regard to this paragraph and subsection (d)(23)) constitute a prohibited transaction.
Subsection (d)(23) does not apply to any transaction between a plan and a plan sponsor or its affiliates that involves the acquisition or sale of an employer security (as defined in section 407(d)(1) of the Employee Retirement Income Security Act of 1974) or the acquisition, sale, or lease of employer real property (as defined in section 407(d)(2) of such Act).
In the case of any disqualified person, subsection (d)(23) does not apply to a transaction if, at the time the transaction is entered into, the disqualified person knew (or reasonably should have known) that the transaction would (without regard to this paragraph) constitute a prohibited transaction.
If a transaction is not treated as a prohibited transaction by reason of subsection (d)(23), then no tax under subsections (a) and (b) shall be assessed with respect to such transaction, and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpayment.
For purposes of this paragraph and subsection (d)(23)-
The term "security" has the meaning given such term by section 475(c)(2) (without regard to subparagraph (F)(iii) and the last sentence thereof).
The term "commodity" has the meaning given such term by section 475(e)(2) (without regard to subparagraph (D)(iii) thereof).
The term "correct" means, with respect to a transaction-
For purposes of subsection (d)(25)-
An automatic portability transaction is a transfer of assets made-
An automatic portability provider is a person, other than an individual, who executes transfers described in clause (i).
Subsection (d)(25) shall not apply to an automatic portability transaction unless the following requirements are satisfied:
An automatic portability provider shall acknowledge in writing, at such time and format as specified by the Secretary of Labor, that the provider is a fiduciary with respect to the individual retirement plan described in subparagraph (A)(i)(I).
The fees and compensation received, directly or indirectly, by the automatic portability provider for services provided in connection with the automatic portability transaction (including any increase in such fees or compensation and any fees or compensation in connection with, but received before, the transaction)-
An automatic portability provider shall not receive any fees or compensation in connection with an automatic portability transaction involving a plan which is sponsored or maintained by the automatic portability provider.
The automatic portability provider shall not market or sell data relating to the individual retirement plan described in subparagraph (A)(i)(I) or to the participants of the plan described in subparagraph (A)(i)(II).
The automatic portability provider shall offer automatic portability transactions on the same terms to any plan described in subparagraph (A)(i)(II).
At least 60 days in advance of an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established which includes-
Not later than 3 business days after an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established of-
The notices required under clauses (v) and (vi) shall be written in a manner calculated to be understood by the average person and shall not include inaccurate or misleading statements.
The automatic portability provider shall query on at least a monthly basis whether any individual with an individual retirement plan described in subparagraph (A)(i)(I) has an account in a plan described in subparagraph (A)(i)(II).
After liquidating the assets of an individual retirement plan described in subparagraph (A)(i)(I) to cash, an automatic portability provider shall transfer the account balance of such plan as soon as practicable to the plan described in subparagraph (A)(i)(II).
The automatic portability provider shall neither have nor exercise discretion to affect the timing or amount of the transfer pursuant to an automatic portability transaction other than to deduct the appropriate fees as described in clause (ii).
An automatic portability provider shall, for not less than 6 years after the automatic portability transaction has occurred, maintain the records sufficient to demonstrate the terms of this subparagraph have been met. The automatic portability provider shall make such records available to any authorized employee of the Department of the Treasury or the Department of Labor within 30 calendar days of the date of a written request for such records.
An automatic portability provider shall conduct an annual audit, in accordance with regulations promulgated by the Secretary of Labor, of automatic portability transactions occurring during the calendar year to demonstrate compliance with this paragraph and any regulations thereunder and identify any instances of noncompliance therewith, and shall submit such audit annually to the Secretary of Labor, in such form and manner as specified by such Secretary.
The automatic portability provider shall maintain a website which contains-
This section shall not apply-
In the case of a plan which invests in any security issued by an investment company registered under the Investment Company Act of 1940, the assets of such plan shall be deemed to include such security but shall not, by reason of such investment, be deemed to include any assets of such company.
Before sending a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary shall notify the Secretary of Labor and provide him a reasonable opportunity to obtain a correction of the prohibited transaction or to comment on the imposition of such tax.
For provisions concerning coordination procedures between Secretary of Labor and Secretary of the Treasury with respect to application of tax imposed by this section and for authority to waive imposition of the tax imposed by subsection (b), see section 3003 of the Employee Retirement Income Security Act of 1974.
1 So in original. The comma probably should be a semicolon.
2 So in original. Probably should be "arm's-length".
3 So in original. The word "if" probably should not appear.
26 U.S.C. § 4975
EDITORIAL NOTES
REFERENCES IN TEXTThe Employee Retirement Income Security Act of 1974, referred to in text, is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829. Part 1 of subtitle E of title IV of such Act is classified generally to part 1 (29 U.S.C. 1381 et seq.) of subtitle E of subchapter III of chapter 18 of Title 29, Labor. Sections 401, 405 to 408, 3003, 4044, 4223, and 4231 of such Act are classified to sections 1101, 1105 to 1108, 1203, 1344, 1403, and 1411, respectively, of Title 29. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 29 and Tables.The date of the enactment of this paragraph, referred to in subsec. (d)(16)(B), is the date of enactment of Pub. L. 108-357, which was approved Oct. 22, 2004. The Investment Company Act of 1940, referred to in subsecs. (e)(8) and (g), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, which is classified generally to subchapter I (§80a-1 et seq.) of chapter 2D of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 80a-51 of Title 15 and Tables.The Investment Advisers Act of 1940, referred to in subsec. (f)(8)(J)(i)(I), is title II of act Aug. 22, 1940, ch. 686, 54 Stat. 847, which is classified generally to subchapter II (§80b-1 et seq.) of chapter 2D of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 80b-20 of Title 15 and Tables.The Securities Exchange Act of 1934, referred to in subsec. (f)(8)(J)(i)(IV), (10)(A)(i), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§78a et seq.) of Title 15, Commerce and Trade. Section 6 of the Act is classified to section 78f of Title 15. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables.
AMENDMENTS2022-Subsec. (d)(24). Pub. L. 117-328, §113(c), added par. (24).Subsec. (d)(25). Pub. L. 117-328, §120(a), added par. (25).Subsec. (f)(12). Pub. L. 117-328, §120(b), added par. (12). 2019-Subsec. (c)(7). Pub. L. 116-94 added par. (7).2018-Subsec. (d)(3). Pub. L. 115-141, §401(a) (229), substituted "a leveraged" for "an leveraged" in introductory provisions.Subsec. (d)(16)(A). Pub. L. 115-141, §401(a) (190), substituted "1813(w)(1)))," for "1813(w)(1)),". Subsec. (d)(17). Pub. L. 115-141, §401(a) (230), substituted "any transaction" for "Any transaction" in introductory provisions. Subsec. (d)(21). Pub. L. 115-141, §401(a) (231), substituted "person" for "person person" in introductory provisions. Subsec. (f)(8)(C)(iv)(II). Pub. L. 115-141, §401(a) (232), inserted "subsection" before "(d)(17)(A)(ii)".Subsec. (f)(8)(F)(i)(I). Pub. L. 115-141, §401(a) (233), struck out comma after "adviser".Subsec. (f)(8)(F)(i)(V). Pub. L. 115-141, §401(a) (234), inserted "of" before "the manner". 2008-Subsec. (d)(17). Pub. L. 110-458, §106(a)(2)(A), substituted "that permits" for "and that permits" in introductory provisions.Subsec. (d)(18). Pub. L. 110-458, §106(b)(2)(A), in introductory provisions, substituted "disqualified person" for "party in interest" and "subsection (e)(3)" for "subsection (e)(3)(B)".Subsec. (d)(19) to (21). Pub. L. 110-458, §106(b)(2)(B), substituted "disqualified person" for "party in interest" wherever appearing.Subsec. (d)(21)(C). Pub. L. 110-458, §106(b)(2)(C), struck out "or less" before "than 3 percent". Subsec. (f)(8)(A). Pub. L. 110-458, §106(a)(2)(B)(i), substituted "subsection (d)(17)" for "subsection (b)(14)".Subsec. (f)(8)(C)(iv)(II). Pub. L. 110-458, §106(a)(2)(B) (ii), substituted "(d)(17)(A)(ii)" for "subsection (b)(14)(B)(ii)".Subsec. (f)(8)(F)(i)(I). Pub. L. 110-458, §106(a)(2)(B) (iii), substituted "fiduciary adviser," for "financial adviser".Subsec. (f)(8)(I). Pub. L. 110-458, §106(a)(2)(B) (iv), substituted "subsection (c)" for "section 406".Subsec. (f)(8)(J)(i). Pub. L. 110-458, §106(a)(2)(B)(v), substituted "a participant" for "the participant" in introductory provisions and concluding provisions, inserted "referred to in subsection (e)(3)(B)" after "investment advice" in introductory provisions, and substituted "subsection (d)(4)" for "section 408(b)(4)" in subcl. (II).Subsec. (f)(11)(B)(i). Pub. L. 110-458, §106(c), inserted "of the Employee Retirement Income Security Act of 1974" after "section 407(d)(1)" and "of such Act" after "section 407(d)(2)".2006-Subsec. (d)(17). Pub. L. 109-280, §601(b)(1), added par. (17).Subsec. (d)(18). Pub. L. 109-280, §611(a)(2)(A), added par. (18).Subsec. (d)(19). Pub. L. 109-280, §611(c)(2), added par. (19). Subsec. (d)(20). Pub. L. 109-280, §611(d)(2)(A), added par. (20).Subsec. (d)(21). Pub. L. 109-280, §611(e)(2), added par. (21).Subsec. (d)(22). Pub. L. 109-280, §611(g)(2), added par. (22).Subsec. (d)(23). Pub. L. 109-280, §612(b)(1), added par. (23).Subsec. (f)(8). Pub. L. 109-280, §601(b)(2), added par. (8).Subsec. (f)(9). Pub. L. 109-280, §611(a)(2)(B), added par. (9). Subsec. (f)(10). Pub. L. 109-280, §611(d)(2)(B), added par. (10).Subsec. (f)(11). Pub. L. 109-280, §612(b)(2), added par. (11).2005-Subsec. (d)(16)(A). Pub. L. 109-135, §413(a)(2)(A), inserted "or a depository institution holding company (as defined in section 3(w)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(1))" after "a bank (as defined in section 581)". Subsec. (d)(16)(C). Pub. L. 109-135, §413(a)(2)(B), inserted "or company" after "such bank".2004-Subsec. (d)(16). Pub. L. 108-357, §233(c), added par. (16). Subsec. (f)(7). Pub. L. 108-357, §240(a), added par. (7).2003-Subsec. (c)(6). Pub. L. 108-173, §1201(f)(1), added par. (6).Subsec. (e)(1)(E) to (G). Pub. L. 108-173, §1201(f)(2), added subpar. (E) and redesignated former subpars. (E) and (F) as (F) and (G), respectively. 2001-Subsec. (c)(5). Pub. L. 107-22, §1(b)(1)(D), (3)(D), in heading, substituted "Coverdell education savings" for "education individual retirement" and in text, substituted "a Coverdell education savings" for "an education individual retirement".Subsec. (e)(1)(E). Pub. L. 107-22, §1(b)(1)(D), substituted "a Coverdell education savings" for "an education individual retirement".Subsec. (e)(7). Pub. L. 107-16, §656(b), inserted ", section 409(p)," after "409(n)" in concluding provisions.Subsec. (f)(6)(B)(iii). Pub. L. 107-16, §612(a), added cl. (iii). 2000-Subsec. (c)(4). Pub. L. 106-554, §1(a)(7) [title II, §202(b)(10)], substituted "an Archer" for "a Archer". Pub. L. 106-554, §1(a)(7) [title II, §202(a)(7), (b)(7)], substituted "Archer MSAs" for "medical savings accounts" in heading and "Archer MSA" for "medical savings account" in text.Subsec. (e)(1)(D). Pub. L. 106-554, §1(a)(7) [title II, §202(b)(10)], substituted "an Archer" for "a Archer". Pub. L. 106-554, §1(a)(7) [title II, §202(a)(7)], substituted "Archer MSA" for "medical savings account".1998-Subsec. (c)(3). Pub. L. 105-206, §6023 (19)(A), substituted "exempt from the tax" for "exempt for the tax".Subsec. (i). Pub. L. 105-206, §6023 (19)(B), substituted "Secretary of the Treasury" for "Secretary of Treasury".1997-Subsec. (a). Pub. L. 105-34, §1074(a), substituted "15 percent" for "10 percent". Subsec. (c)(4). Pub. L. 105-34, §1602(a)(5), substituted "if section 220(e)(2) applies to such transaction." for "if, with respect to such transaction, the account ceases to be a medical savings account by reason of the application of section 220(e)(2) to such account." Subsec. (c)(5). Pub. L. 105-34, §213(b)(2), added par. (5).Subsec. (d). Pub. L. 105-34, §1506(b)(1)(B) (ii), struck out concluding provisions which read as follows: "The exemptions provided by this subsection (other than paragraphs (9) and (12)) shall not apply to any transaction with respect to a trust described in section 401(a) which is part of a plan providing contributions or benefits for employees some or all of whom are owner-employees (as defined in section 401(c)(3)) in which a plan directly or indirectly lends any part of the corpus or income of the plan to, pays any compensation for personal services rendered to the plan to, or acquires for the plan any property from or sells any property to, any such owner-employee, a member of the family (as defined in section 267(c)(4)) of any such owner-employee, or a corporation controlled by any such owner-employee through the ownership, directly or indirectly, of 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation. For purposes of the preceding sentence, a shareholder-employee (as defined in section 1379, as in effect on the day before the date of the enactment of the Subchapter S Revision Act of 1982), a participant or beneficiary of an individual retirement account or an individual retirement annuity (as defined in section 408), and an employer or association of employees which establishes such an account or annuity under section 408(c) shall be deemed to be an owner-employee." Pub. L. 105-34, §1506(b)(1)(B)(i), substituted "Except as provided in subsection (f)(6), the prohibitions" for "The prohibitions" in introductory provisions. Subsec. (e)(1)(D) to (F). Pub. L. 105-34, §213(b)(1), struck out "or" at end of subpar. (D), added subpar. (E), and redesignated former subpar. (E) as (F).Subsec. (e)(7). Pub. L. 105-34, §1530(c) (10), inserted "and section 664(g)" after "section 409(n)" in concluding provisions.Subsec. (f)(6). Pub. L. 105-34, §1506(b)(1)(A), added par. (6). 1996-Subsec. (a). Pub. L. 104-188, §1453(a), substituted "10 percent" for "5 percent".Subsec. (c)(4). Pub. L. 104-191, §301(f)(1), added par. (4).Subsec. (d)(13). Pub. L. 104-188, §1702(g)(3), substituted "408(b)(12)" for "408(b)".Subsec. (e)(1). Pub. L. 104-191, §301(f)(2), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: "For purposes of this section, the term 'plan' means a trust described in section 401(a) which forms a part of a plan, or a plan described in section 403(a), which trust or plan is exempt from tax under section 501(a), an individual retirement account described in section 408(a) or an individual retirement annuity described in section 408(b) (or a trust, plan, account, or annuity which, at any time, has been determined by the Secretary to be such a trust, plan, or account)." 1990-Subsec. (d)(13). Pub. L. 101-508 inserted before semicolon at end "or which is exempt from section 406 of such Act by reason of section 408(b) of such Act".1986-Subsec. (d). Pub. L. 99-514, §1899A(51), inserted a closing parenthesis after "and (12)" in second sentence.Subsec. (d)(1)(B). Pub. L. 99-514, §1114(b)(15)(A), substituted "highly compensated employees (within the meaning of section 414(q))" for "highly compensated employees, officers, or shareholders".Subsec. (e)(7). Pub. L. 99-514, §1854(f)(3)(A), inserted ", section 409(o), and, if applicable, section 409(n)" in last sentence.1984-Subsec. (d). Pub. L. 98-369, §491(d)(45), substituted in provision following par. (15) "or an individual retirement annuity (as defined in section 408)" for ", individual retirement annuity, or an individual retirement bond (as defined in section 408 or 409)".Subsec. (e)(1). Pub. L. 98-369, §491(d)(46), struck out "or 405(a)" after "section 403(a)" and "or a retirement bond described in section 409" after "section 408(b)", and substituted "or annuity" for "annuity, or bond" and "or account" for "account, or bond".Subsec. (e)(7). Pub. L. 98-369, §491(e)(7), substituted "section 409(h)" for "section 409A(h)", "section 409(e)(4)" for "section 409A(e)(4)", and "section 409(e)" for "section 409A(e)". Subsec. (e)(8). Pub. L. 98-369, §491(e)(8), substituted "section 409(l)" for "section 409A(l)".1983-Subsec. (d). Pub. L. 97-448 inserted ", as in effect on the day before the date of the enactment of the Subchapter S Revision Act of 1982" after "section 1379" in last sentence.1980-Subsec. (b). Pub. L. 96-596, §2(a)(1)(K), substituted "taxable period" for "correction period".Subsec. (d)(14), (15). Pub. L. 96-364, §208(b), added pars. (14) and (15).Subsec. (e)(7). Pub. L. 96-222, §101(a)(7)(K), (L)(iv)(III), (v)(XI), substituted references to an employee stock ownership plan, for references to a leveraged employee stock ownership plan wherever appearing therein, and substituted provisions relating to treatment of a plan as an employee stock ownership plan, for provisions relating to treatment of a plan as a leveraged employee stock ownership plan.Subsec. (e)(8). Pub. L. 96-222, §101(a)(7)(C), substituted provisions defining "qualifying employer security" within the meaning of section 409A(l), for provisions defining such term as stock, or otherwise an equity security, or within the meaning of section 503(e)(1) to (3).Subsec. (e)(9). Pub. L. 96-364, §209(b), added par. (9).Subsec. (f)(2)(B), (C). Pub. L. 96-596, §2(a)(2)(I), added subpar. (B) and redesignated former subpar. (B) as (C).Subsec. (f)(4)(B). Pub. L. 96-596, §2(a)(1)(L), substituted "taxable period" for "correction period".Subsec. (f)(6). Pub. L. 96-596, §2(a)(3)(F), struck out par. (6), which defined correction period, with respect to a prohibited transaction, as the period beginning on the date on which the prohibited transaction occurs and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsec. (b) of this section under section 6212 of this title, extended by any period in which a deficiency cannot be assessed under section 6213(a) of this title and any other period which the Secretary determines is reasonable and necessary to bring about the correction of the prohibited transaction.1978-Subsec. (d)(3). Pub. L. 95-600, §141(f)(6), substituted "leveraged employee" for "employee".Subsec. (e)(7). Pub. L. 95-600, §141(f)(5), substituted in heading "Leveraged employee" for "Employee", and in text, "leveraged employee" for "employee" and inserted provision that a plan not be treated as a leveraged employee stock ownership plan unless it meet the requirements of section 409A(e) and (h). 1976-Subsecs. (c) to (f). Pub. L. 94-455 struck out "or his delegate" after "Secretary" wherever appearing.
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2022 AMENDMENT Amendment by section 113(c) of Pub. L. 117-328 applicable with respect to plan years beginning after Dec. 29, 2022, see section 113(e) of Pub. L. 117-328, set out as a note under section 401 of this title. Pub. L. 117-328, div. T, title I, §120(e), Dec. 29, 2022, 136 Stat. 5308, provided that: "The amendments made by this section [amending this section] shall apply to transactions occurring on or after the date which is 12 months after the date of the enactment of this Act [Dec. 29, 2022]."
EFFECTIVE DATE OF 2008 AMENDMENT Amendment by Pub. L. 110-458 effective as if included in the provisions of Pub. L. 109-280 to which the amendment relates, except as otherwise provided, see section 112 of Pub. L. 110-458, set out as a note under section 72 of this title.
EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109-280, §601(b)(4), Aug. 17, 2006, 120 Stat. 966, as amended by Pub. L. 110-458, §106(a)(3), Dec. 23, 2008, 122 Stat. 5106, provided that: "Except as provided in this subsection [amending this section and enacting provisions set out as notes under this section], the amendments made by this subsection shall apply with respect to advice referred to in section 4975(e)(3)(B) of the Internal Revenue Code of 1986 provided after December 31, 2006." Pub. L. 109-280, §611(h), Aug. 17, 2006, 120 Stat. 975, provided that:"(1) IN GENERAL.-Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 1002, 1108, and 1112 of Title 29, Labor] shall apply to transactions occurring after the date of the enactment of this Act [Aug. 17, 2006]."(2) BONDING RULE.-The amendments made by subsection (b) [amending section 1112 of Title 29] shall apply to plan years beginning after such date." Pub. L. 109-280, §612(c), Aug. 17, 2006, 120 Stat. 977, provided that: "The amendments made by this section [amending this section and section 1108 of Title 29, Labor] shall apply to any transaction which the fiduciary or disqualified person discovers, or reasonably should have discovered, after the date of the enactment of this Act [Aug. 17, 2006] constitutes a prohibited transaction."
EFFECTIVE DATE OF 2005 AMENDMENTAmendment by Pub. L. 109-135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108-357, to which such amendment relates, see section 413(d) of Pub. L. 109-135, set out as a note under section 1361 of this title.
EFFECTIVE DATE OF 2004 AMENDMENT Amendment by section 233(c) of Pub. L. 108-357 effective Oct. 22, 2004, see section 233(e) of Pub. L. 108-357, set out as a note under section 512 of this title. Pub. L. 108-357, §240(b), Oct. 22, 2004, 118 Stat. 1437, provided that: "The amendment made by this section [amending this section] shall apply to distributions with respect to S corporation stock made after December 31, 1997."
EFFECTIVE DATE OF 2003 AMENDMENT Amendment by Pub. L. 108-173 applicable to taxable years beginning after Dec. 31, 2003, see section 1201(k) of Pub. L. 108-173, set out as a note under section 62 of this title.
EFFECTIVE DATE OF 2001 AMENDMENTAmendment by Pub. L. 107-22 effective July 26, 2001, see section 1(c) of Pub. L. 107-22, set out as a note under section 26 of this title. Pub. L. 107-16, §612(c), June 7, 2001, 115 Stat. 100, provided that: "The amendment made by this section [amending this section and section 1108 of Title 29, Labor] shall apply to years beginning after December 31, 2001."Amendment by section 656(b) of Pub. L. 107-16 applicable to plan years beginning after Dec. 31, 2004, except that in the case of any employee stock ownership plan established after Mar. 14, 2001, or established on or before such date if employer securities held by the plan consist of stock in a corporation with respect to which an election under section 1362(a) of this title is not in effect on such date, amendment applicable to plan years ending after Mar. 14, 2001, see section 656(d) of Pub. L. 107-16, set out as a note under section 409 of this title.
EFFECTIVE DATE OF 1997 AMENDMENTAmendment by section 213(b) of Pub. L. 105-34 applicable to taxable years beginning after Dec. 31, 1997, see section 213(f) of Pub. L. 105-34, set out as a note under section 26 of this title. Pub. L. 105-34, §1074(b), Aug. 5, 1997, 111 Stat. 949, provided that: "The amendment made by this section [amending this section] shall apply to prohibited transactions occurring after the date of the enactment of this Act [Aug. 5, 1997]."Amendment by section 1506(b)(1) of Pub. L. 105-34 applicable to taxable years beginning after Dec. 31, 1997, see section 1506(c) of Pub. L. 105-34, set out as a note under section 409 of this title.Amendment by section 1530(c)(10) of Pub. L. 105-34 applicable to transfers made by trusts to, or for the use of, an employee stock ownership plan after Aug. 5, 1997, see section 1530(d) of Pub. L. 105-34, set out as a note under section 401 of this title. Amendment by section 1602(a)(5) of Pub. L. 105-34 effective as if included in the provisions of the Health Insurance Portability and Accountability Act of 1996, Pub. L. 104-191, to which such amendment relates, see section 1602(i) of Pub. L. 105-34, set out as a note under section 26 of this title.
EFFECTIVE DATE OF 1996 AMENDMENTSAmendment by Pub. L. 104-191 applicable to taxable years beginning after Dec. 31, 1996, see section 301(j) of Pub. L. 104-191, set out as a note under section 62 of this title. Pub. L. 104-188, §1453(b), Aug. 20, 1996, 110 Stat. 1817, provided that: "The amendment made by this section [amending this section] shall apply to prohibited transactions occurring after the date of the enactment of this Act [Aug. 20, 1996]."Amendment by section 1702(g)(3) of Pub. L. 104-188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101-508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104-188, set out as a note under section 38 of this title.
EFFECTIVE DATE OF 1990 AMENDMENT Amendment by Pub. L. 101-508 effective, except as otherwise provided, as if included in the provision of the Revenue Reconciliation Act of 1989, Pub. L. 101-239, title VII, to which such amendment relates, see section 11701(n) of Pub. L. 101-508, set out as a note under section 42 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 1114(b)(15)(A) of Pub. L. 99-514 applicable to years beginning after Dec. 31, 1988, see section 1114(c)(3) of Pub. L. 99-514, set out as a note under section 414 of this title.Amendment by section 1854(f)(3)(A) of Pub. L. 99-514 effective Oct. 22, 1986, see section 1854(f)(4)(A) of Pub. L. 99-514, set out as a note under section 409 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT Amendment by section 491(d)(45), (46) of Pub. L. 98-369 applicable to obligations issued after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 98-369, set out as a note under section 62 of this title. Amendment by section 491(e)(7), (8) of Pub. L. 98-369 effective Jan. 1, 1984, see section 491(f)(3) of Pub. L. 98-369, set out as a note under section 401 of this title.
EFFECTIVE DATE OF 1983 AMENDMENTAmendment by Pub. L. 97-448 effective on date of enactment of Subchapter S Revision Act of 1982 [Oct. 19, 1982], see section 311(c)(4) of Pub. L. 97-448, set out as a note under section 1368 of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS For effective date of amendment by Pub. L. 96-596 with respect to any first tier tax and to any second tier tax, see section 2(d) of Pub. L. 96-596, set out as an Effective Date note under section 4961 of this title. Amendment by section 208(b) of Pub. L. 96-364 effective Sept. 26, 1980, see section 210(a) of Pub. L. 96-364, set out as an Effective Date note under section 194A of this title.Amendment by section 209(b) of Pub. L. 96-364 applicable to taxable years ending after Sept. 26, 1980, see section 210(c) of Pub. L. 96-364, set out as an Effective Date note under section 194A of this title.Pub. L. 96-222, title I, §101(b)(1)(C), Apr. 1, 1980, 94 Stat. 205, provided that: "The amendment made by subparagraph (C) of subsection (a)(6) [probably should be '(a)(7)', which amended this section] shall apply to stock acquired after December 31, 1979."Amendment by section 101(a)(7)(K), (L)(iv)(III), (v)(XI) of Pub. L. 96-222 effective, except as otherwise provided, as if it had been included in the provision of the Revenue Act of 1978, Pub. L. 95-600, to which such amendment relates, see section 201 of Pub. L. 96-222, set out as a note under section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENTPub. L. 95-600, title I, §141(h), as added by Pub. L. 96-222, title I, §101(a)(7)(B), Apr. 1, 1980, 94 Stat. 197; Pub. L. 99-514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: "Paragraphs (5) and (6) of subsection (f) [section 141(f)(5), (6) of Pub. L. 95-600] shall apply-"(1) insofar as they make the requirements of subsections (e) and (h)(1)(B) of section 409A [now section 409] of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applicable to section 4975 of such Code, to stock acquired after December 31, 1979, and"(2) insofar as they make paragraphs (1)(A) and (2) of section 409A(h) [now section 409(h)] of such Code applicable to such section 4975, to distributions after December 31, 1978."
EFFECTIVE DATE; SAVINGS PROVISION Pub. L. 93-406, title II, §2003(c), Sept. 2, 1974, 88 Stat. 978, as amended by Pub. L. 99-514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:"(1)(A) The amendments made by this section [enacting this section and amending section 503 of this title] shall take effect on January 1, 1975."(B) If, before the amendments made by this section [enacting this section and amending section 503 of this title] take effect, an organization described in section 401(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] is denied exemption under section 501(a) of such Code by reason of section 503 of such Code, the denial of such exemption shall not apply if the disqualified person elects (in such manner and at such time as the Secretary or his delegate shall by regulations prescribe) to pay, with respect to the prohibited transaction (within the meaning of section 503(b) or (g)) which resulted in such denial of exemption, a tax in the amount and in the manner provided with respect to the tax imposed under section 4975 of such Code. An election made under this subparagraph, once made, shall be irrevocable. The Secretary of the Treasury or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph."(2) Section 4975 of the Internal Revenue Code of 1986 (relating to tax on prohibited transactions) shall not apply to-"(A) a loan of money or other extension of credit between a plan and a disqualified person under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984, if such loan or other extension of credit remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be, and if the execution of the contract, the making of the loan, or the extension of credit was not, at the time of such execution, making, or extension, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law);"(B) a lease of joint use of property involving the plan and a disqualified person pursuant to a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984, if such lease or joint use remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the execution of the contract was not, at the time of such execution, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law;"(C) the sale, exchange, or other disposition of property described in subparagraph (B) between a plan and a disqualified person before June 30, 1984, if-"(i) in the case of a sale, exchange, or other disposition of the property by the plan to the disqualified person, the plan receives an amount which is not less than the fair market value of the property at the time of such disposition; and"(ii) in the case of the acquisition of the property by the plan, the plan pays an amount which is not in excess of the fair market value of the property at the time of such acquisition:"(D) Until June 30, 1977, the provision of services to which subparagraphs (A), (B), and (C) do not apply between a plan and a disqualified person (i) under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such contract), or (ii) if the disqualified person ordinarily and customarily furnished such services on June 30, 1974, if such provision of services remains at least as favorable to the plan as an arm's-length transaction with an unrelated party would be and if the provision of services was not, at the time of such provision, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law; or"(E) the sale, exchange, or other disposition of property which is owned by a plan on June 30, 1974, and all times thereafter, to a disqualified person, if such plan is required to dispose of such property in order to comply with the provisions of section 407(a)(2)(A) (relating to the prohibition against holding excess employer securities and employer real property) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1107(a)(2)] and if the plan receives not less than adequate consideration.For the purposes of this paragraph, the term 'disqualified person' has the meaning provided by section 4975(e)(2) of the Internal Revenue Code of 1986."
REGULATORY AUTHORITY Pub. L. 117-328, div. T, title I, §120(c), Dec. 29, 2022, 136 Stat. 5306, provided that: "Not later than 12 months after the date of the enactment of this Act [Dec. 29, 2022], the Secretary of Labor shall issue such guidance as may be necessary to carry out the purposes of the amendments made by this section [amending this section], including regulations or other guidance which-"(1) require an automatic portability provider to provide a notice to individuals on whose behalf the individual retirement plan described in paragraph (12)(A)(i)(I) of section 4975(f) of the Internal Revenue Code of 1986, as added by this section, is established in advance of the notices specified in paragraph (12)(B)(v) of such section, as so added,"(2) require an automatic portability provider to disclose to plans described in paragraph (12)(A)(i)(II) of section 4975(f) of the Internal Revenue Code of 1986, as added by this section, information required to be provided by a covered service provider pursuant to section 2550.408b-2(c) of title 29, Code of Federal Regulations, "(3) require a plan described in such paragraph (12)(A)(i)(II), as so added, to fully disclose fees related to an automatic portability transaction in its summary plan description or summary of material modifications, as relevant,"(4) require a plan described in such paragraph, as so added, to invest amounts received on behalf of a participant pursuant to an automatic portability transaction in the participant's current investment election under the plan or, if no election is made or permitted, in the plan's qualified default investment alternative (within the meaning of section 2550.404c-5 of title 29, Code of Federal Regulations) or another investment selected by a fiduciary with respect to such plan,"(5) prohibit or restrict the receipt or payment of third party compensation (other than a direct fee paid by a plan sponsor which is in lieu of a fee imposed on an individual retirement plan owner) by an automatic portability provider in connection with an automatic portability transaction,"(6) prohibit exculpatory provisions in an automatic portability provider's contracts or communications with individuals disclaiming or limiting its liability in the event that an automatic portability transaction results in an improper transfer,"(7) require an automatic portability provider to take actions necessary to reasonably ensure that participant and beneficiary data is current and accurate,"(8) limit the use of data related to automatic portability transactions for any purpose other than the execution of such transactions or locating missing participants, except as permitted by the Secretary of Labor,"(9) provide for corrections procedures in the event an auditor determines the automatic portability provider was not in compliance with this provision and related regulations as specified in paragraph (12)(B)(ix)(II) [probably should be "(12)(B)(xi)(II)"] of section 4975(f) of such Code, as so added, including deadlines, supplemental audits, and corrective actions which may include a temporary prohibition from relying on the exemption provided by paragraph (25) of section 4975(d) of such Code, as added by this section, "(10) ensure that the appropriate participants and beneficiaries, in fact, receive all the required notices and disclosures, and "(11) make clear that the exemption provided by paragraph (25) of section 4975(d) of such Code, as added by this section, applies solely to the automatic portability transactions described therein, and, to the extent the Secretary deems necessary or advisable, specify how the application of the exemption relates to or coordinates with the application of other statutory provisions, regulations, administrative guidance, or exemptions. Any term used in this subsection which is used in paragraph (12) of section 4975(f) of such Code, as added by this section, has the same meaning as when used in such paragraph."
REGULATIONS Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out as a note under section 401 of this title.
APPLICABILITY OF AMENDMENTS BY Pub. L. 116-94 Pub. L. 116-94, div. P, title XIII, §1302(c), Dec. 20, 2019, 133 Stat. 3205, provided that: "With respect to a group health plan subject to subsection (h) of section 408 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1108) (as amended by subsection (a)) and subsection (c) of section 4975 of the Internal Revenue Code of 1986 (as amended by subsection (b)), beginning at the end of the fifth plan year of such group health plan that begins after the date of enactment of this Act [Dec. 20, 2019], such subsection (h) of such section 408 and such subsection (c) of such [sic] shall have no force or effect."
REPORT TO CONGRESS Pub. L. 117-328, div. T, title I, §120(d), Dec. 29, 2022, 136 Stat. 5307, provided that:"(1) IN GENERAL.-Not later than 2 years after the date of the first audit report received by the Secretary of Labor from any automatic portability provider, and every 3 years thereafter, the Secretary of Labor shall report to the Committees on Health, Education, Labor and Pensions and Finance of the Senate and the Committees on Education and Labor [now Committee on Education and the Workforce] and Ways and Means of the House of Representatives on-"(A) the effectiveness of automatic portability transactions under the exemption provided by paragraph (25) of section 4975(d) of the Internal Revenue Code of 1986, as added by this section, detailing-"(i) the number of automatic cash outs from qualified plans to individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code,"(ii) the number of completed automatic portability transactions to employer-sponsored retirement plans described in section 4975(f)(12)(A)(i)(II) of such Code,"(iii) the number of individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code which have been transferred to designated beneficiaries,"(iv) the number of individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code for which the automatic portability provider is searching for next of kin due to a deceased account holder without a designated beneficiary, and"(v) the number of accounts that were reduced to a zero balance while in the automatic portability provider's custody; "(B) a summary of any consumer complaints submitted to the Employee Benefits Security Administration regarding automatic portability transactions;"(C) a summary of compliance issues found in the annual audit described in section 4975(f)(12)(B)(xiii)(II) [probably should be "4975(f)(12)(B)(xi)(II)"] of such Code, if any, and their corrections;"(D) a summary of the fees individuals are charged in connection with automatic portability transactions, including whether those fees have increased since the last report;"(E) recommendations of any necessary statutory changes to this exemption to improve the effectiveness of automatic portability transactions, including repeal of this provision in the event of a pattern of noncompliance; and "(F) any other information the Secretary of Labor deems important.The report required by this subsection shall be made publicly available."(2) REPORT ON NOTICES RELATING TO AUTOMATIC TRANSFERS.-Not later than 2 years after the date of the enactment of this Act [Dec. 29, 2022], the Secretary of Treasury shall report to the Committee on Finance of the Senate and the Committee on Ways and Means on the adequacy of the notices relating to transfers under section 401(a)(31)(B)(i) of the Internal Revenue Code of 1986."
DETERMINATION OF FEASIBILITY OF APPLICATION OF COMPUTER MODEL INVESTMENT ADVICE PROGRAMS FOR INDIVIDUAL RETIREMENT AND SIMILAR PLANS Pub. L. 109-280, §601(b)(3), Aug. 17, 2006, 120 Stat. 964, provided that: "(A) SOLICITATION OF INFORMATION.-As soon as practicable after the date of the enactment of this Act [Aug. 17, 2006], the Secretary of Labor, in consultation with the Secretary of the Treasury, shall-"(i) solicit information as to the feasibility of the application of computer model investment advice programs for plans described in subparagraphs (B) through (F) (and so much of subparagraph (G) as relates to such subparagraphs) of section 4975(e)(1) of the Internal Revenue Code of 1986, including soliciting information from-"(I) at least the top 50 trustees of such plans, determined on the basis of assets held by such trustees, and "(II) other persons offering computer model investment advice programs based on nonproprietary products, and"(ii) shall on the basis of such information make the determination under subparagraph (B).The information solicited by the Secretary of Labor under clause (i) from persons described in subclauses (I) and (II) of clause (i) shall include information on computer modeling capabilities of such persons with respect to the current year and preceding year, including such capabilities for investment accounts maintained by such persons. "(B) DETERMINATION OF FEASIBILITY.-The Secretary of Labor, in consultation with the Secretary of the Treasury, shall, on the basis of information received under subparagraph (A), determine whether there is any computer model investment advice program which may be utilized by a plan described in subparagraph (A)(i) to provide investment advice to the account beneficiary of the plan which-"(i) utilizes relevant information about the account beneficiary, which may include age, life expectancy, retirement age, risk tolerance, other assets or sources of income, and preferences as to certain types of investments,"(ii) takes into account the full range of investments, including equities and bonds, in determining the options for the investment portfolio of the account beneficiary, and"(iii) allows the account beneficiary, in directing the investment of assets, sufficient flexibility in obtaining advice to evaluate and select investment options.The Secretary of Labor shall report the results of such determination to the committees of Congress referred to in subparagraph (D)(ii) not later than December 31, 2007."(C) APPLICATION OF COMPUTER MODEL INVESTMENT ADVICE PROGRAM.-"(i) CERTIFICATION REQUIRED FOR USE OF COMPUTER MODEL.-"(I) RESTRICTION ON USE.-Subclause (II) of section 4975(f)(8)(B)(i) of the Internal Revenue Code of 1986 shall not apply to a plan described in subparagraph (A)(i)."(II) RESTRICTION LIFTED IF MODEL CERTIFIED.-If the Secretary of Labor determines under subparagraph (B) or (D) that there is a computer model investment advice program described in subparagraph (B), subclause (I) shall cease to apply as of the date of such determination."(ii) CLASS EXEMPTION IF NO INITIAL CERTIFICATION BY SECRETARY.-If the Secretary of Labor determines under subparagraph (B) that there is no computer model investment advice program described in subparagraph (B), the Secretary of Labor shall grant a class exemption from treatment as a prohibited transaction under section 4975(c) of the Internal Revenue Code of 1986 to any transaction described in section 4975(d)(17)(A) of such Code with respect to plans described in subparagraph (A)(i), subject to such conditions as set forth in such exemption as are in the interests of the plan and its account beneficiary and protective of the rights of the account beneficiary and as are necessary to-"(I) ensure the requirements of sections 4975(d)(17) and 4975(f)(8) (other than subparagraph (C) thereof) of the Internal Revenue Code of 1986 are met, and"(II) ensure the investment advice provided under the investment advice program utilizes prescribed objective criteria to provide asset allocation portfolios comprised of securities or other property available as investments under the plan.If the Secretary of Labor solicits any information under subparagraph (A) from a person and such person does not provide such information within 60 days after the solicitation, then, unless such failure was due to reasonable cause and not wilful neglect, such person shall not be entitled to utilize the class exemption under this clause."(D) SUBSEQUENT DETERMINATION.- "(i) IN GENERAL.-If the Secretary of Labor initially makes a determination described in subparagraph (C)(ii), the Secretary may subsequently determine that there is a computer model investment advice program described in subparagraph (B). If the Secretary makes such subsequent determination, then the class exemption described in subparagraph (C)(ii) shall cease to apply after the later of-"(I) the date which is 2 years after such subsequent determination, or"(II) the date which is 3 years after the first date on which such exemption took effect. "(ii) REQUESTS FOR DETERMINATION.-Any person may request the Secretary of Labor to make a determination under this subparagraph with respect to any computer model investment advice program, and the Secretary of Labor shall make a determination with respect to such request within 90 days. If the Secretary of Labor makes a determination that such program is not described in subparagraph (B), the Secretary shall, within 10 days of such determination, notify the Committee on Ways and Means and the Committee on Education and the Workforce of the House of Representatives and the Committee on Finance and the Committee on Health, Education, Labor, and Pensions of the Senate of such determination and the reasons for such determination."(E) EFFECTIVE DATE.-The provisions of this paragraph shall take effect on the date of the enactment of this Act [Aug. 17, 2006]."
COORDINATION OF 2006 AMENDMENT WITH EXISTING EXEMPTIONS Pub. L. 109-280, §601(c), Aug. 17, 2006, 120 Stat. 966, provided that: "Any exemption under section 408(b) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1108(b)] and section 4975(d) of the Internal Revenue Code of 1986 provided by the amendments made by this section [amending this section and section 1108 of Title 29, Labor] shall not in any manner alter existing individual or class exemptions, provided by statute or administrative action."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998For provisions directing that if any amendments made by subtitle D [§§1401-1465] of title I of Pub. L. 104-188 require an amendment to any plan or annuity contract, such amendment shall not be required to be made before the first day of the first plan year beginning on or after Jan. 1, 1998, see section 1465 of Pub. L. 104-188, set out as a note under section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101-1147 and 1171-1177] or title XVIII [§§1800-1899A] of Pub. L. 99-514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out as a note under section 401 of this title.
INTENT OF CONGRESS CONCERNING EMPLOYEE STOCK OWNERSHIP PLANSPub. L. 94-455, title VIII, §803(h), Oct. 4, 1976, 90 Stat. 1590, provided that: "The Congress, in a series of laws (the Regional Rail Reorganization Act of 1973, the Employee Retirement Income Security Act of 1974, the Trade Act of 1974, and the Tax Reduction Act of 1975) and this Act has made clear its interest in encouraging employee stock ownership plans as a bold and innovative method of strengthening the free private enterprise system which will solve the dual problems of securing capital funds for necessary capital growth and of bringing about stock ownership by all corporate employees. The Congress is deeply concerned that the objectives sought by this series of laws will be made unattainable by regulations and rulings which treat employee stock ownership plans as conventional retirement plans, which reduce the freedom of the employee trusts and employers to take the necessary steps to implement the plans, and which otherwise block the establishment and success of these plans. Because of the special purposes for which employee stock ownership plans are established, it is consistent with the intent of Congress to permit these plans (whether structured as pension, stock bonus, or profit-sharing plans) to distribute income on employer securities currently."
- Internal Revenue Code of 1986
- The term "Internal Revenue Code of 1986" means this title, and the term "Internal Revenue Code of 1939" means the Internal Revenue Code enacted February 10, 1939, as amended.
- Secretary of the Treasury
- The term "Secretary of the Treasury" means the Secretary of the Treasury, personally, and shall not include any delegate of his.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- State
- The term "State" shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- fiduciary
- The term "fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person.
- individual retirement plan
- The term "individual retirement plan" means-(A) an individual retirement account described in section 408(a), and(B) an individual retirement annuity described in section 408(b).
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- shareholder
- The term "shareholder" includes a member in an association, joint-stock company, or insurance company.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- transaction
- The term "transaction" includes a series of transactions.