§4980A. Tax on excess distributions from qualified retirement plans

(a) General rule

There is hereby imposed a tax equal to 15 percent of the excess distributions with respect to any individual during any calendar year.

(b) Liability for tax

The individual with respect to whom the excess distributions are made shall be liable for the tax imposed by subsection (a). The amount of the tax imposed by subsection (a) shall be reduced by the amount (if any) of the tax imposed by section 72(t) to the extent attributable to such excess distributions.

(c) Excess distributions

For purposes of this section-

(1) In general

The term "excess distributions" means the aggregate amount of the retirement distributions with respect to any individual during any calendar year to the extent such amount exceeds the greater of-

(A) $150,000, or

(B) $112,500 (adjusted at the same time and in the same manner as under section 415(d))..¹

(2) Exclusion of certain distributions

The following distributions shall not be taken into account under paragraph (1):

(A) Any retirement distribution with respect to an individual made after the death of such individual.

(B) Any retirement distribution with respect to an individual payable to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)) if includible in income of the alternate payee.

(C) Any retirement distribution with respect to an individual which is attributable to the individual's investment in the contract (as defined in section 72(f)).

(D) Any retirement distribution to the extent not included in gross income by reason of a rollover contribution.

(E) Any retirement distribution with respect to an individual of an annuity contract the value of which is not includible in gross income at the time of the distribution (other than distributions under, or proceeds from the sale or exchange of, such contract).

(F) Any retirement distribution with respect to an individual of-

(i) excess deferrals (and income allocable thereto) under section 402(g)(2)(A)(ii), or

(ii) excess contributions (and income allocable thereto) under section 401(k)(8) or 408(d)(4) or excess aggregate contributions (and income allocable thereto) under section 401(m)(6).

Any distribution described in subparagraph (B) shall be treated as a retirement distribution to the person to whom paid for purposes of this section.

(3) Aggregation of payments

If retirement distributions with respect to any individual during any calendar year are received by the individual and 1 or more other persons, all such distributions shall be aggregated for purposes of determining the amount of the excess distributions for the calendar year.

(4) Special rule where taxpayer elects income averaging

If the retirement distributions with respect to any individual during any calendar year include a lump sum distribution to which an election under section 402(d)(4)(B) applies-

(A) paragraph (1) shall be applied separately with respect to such lump sum distribution and other retirement distributions, and

(B) the limitation under paragraph (1) with respect to such lump sum distribution shall be equal to 5 times the amount of such limitation determined without regard to this subparagraph.

(d) Increase in estate tax if individual dies with excess accumulation

(1) In general

The tax imposed by chapter 11 with respect to the estate of any individual shall be increased by an amount equal to 15 percent of the individual's excess retirement accumulation.

(2) No credit allowable

No credit shall be allowable under chapter 11 with respect to any portion of the tax imposed by chapter 11 attributable to the increase under paragraph (1).

(3) Excess retirement accumulation

For purposes of paragraph (1), the term "excess retirement accumulation" means the excess (if any) of-

(A) the value of the individual's interests (other than as a beneficiary, determined after application of paragraph (5)) in qualified employer plans and individual retirement plans as of the date of the decedent's death (or, in the case of an election under section 2032, the applicable valuation date prescribed by such section), over

(B) the present value (as determined under rules prescribed by the Secretary as of the valuation date prescribed in subparagraph (A)) of a single life annuity with annual payments equal to the limitation of subsection (c) (as in effect for the year in which death occurs and as if the individual had not died).

(4) Rules for computing excess retirement accumulation

The excess retirement accumulation of an individual shall be computed without regard to-

(A) any community property law,

(B) the value of-

(i) amounts payable to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)) if includible in income of the alternate payee, and

(ii) the individual's investment in the contract (as defined in section 72(f)), and

(C) the excess (if any) of-

(i) any interests which are payable immediately after death, over

(ii) the value of such interests immediately before death.

(5) Election by spouse to have excess distribution rule apply

(A) In general

If the spouse of an individual is the beneficiary of all of the interests described in paragraph (3)(A), the spouse may elect-

(i) not to have this subsection apply, and

(ii) to have this section apply to such interests and any retirement distribution attributable to such interests as if such interests were the spouse's.

(B) De minimis exception

If 1 or more persons other than the spouse are beneficiaries of a de minimis portion of the interests described in paragraph (3)(A)-

(i) the spouse shall not be treated as failing to meet the requirements of subparagraph (A), and

(ii) if the spouse makes the election under subparagraph (A), this section shall not apply to such portion or any retirement distribution attributable to such portion.

(e) Retirement distributions

For purposes of this section-

(1) In general

The term "retirement distribution" means, with respect to any individual, the amount distributed during the taxable year under-

(A) any qualified employer plan with respect to which such individual is or was the employee, and

(B) any individual retirement plan.

(2) Qualified employer plan

The term "qualified employer plan" means-

(A) any plan described in section 401(a) which includes a trust exempt from tax under section 501(a),

(B) an annuity plan described in section 403(a), or

(C) an annuity contract described in section 403(b).

Such term includes any plan or contract which, at any time, has been determined by the Secretary to be such a plan or contract.

(f) Exemption of accrued benefits in excess of $562,500 on August 1, 1986

For purposes of this section-

(1) In general

If an election is made with respect to an eligible individual to have this subsection apply, the individual's excess distributions and excess retirement accumulation shall be computed without regard to any distributions or interests attributable to the accrued benefit of the individual as of August 1, 1986.

(2) Reduction in amounts which may be received without tax

If this subsection applies to any individual-

(A) Excess distributions

Subsection (c)(1) shall be applied-

(i) without regard to subparagraph (A), and

(ii) by reducing (but not below zero) the amount determined under subparagraph (B) thereof by retirement distributions attributable (as determined under rules prescribed by the Secretary) to the individual's accrued benefit as of August 1, 1986.

(B) Excess retirement accumulation

The amount determined under subsection (d)(3)(B) (without regard to subsection (c)(1)(A)) with respect to such individual shall be reduced (but not below zero) by the present value of the individual's accrued benefit as of August 1, 1986, which has not been distributed as of the date of death.

(3) Eligible individual

For purposes of this subsection, the term "eligible individual" means any individual if, on August 1, 1986, the present value of such individual's interests in qualified employer plans and individual retirement plans exceeded $562,500.

(4) Certain amounts excluded

In determining an individual's accrued benefit for purposes of this subsection, there shall not be taken into account any portion of the accrued benefit-

(A) payable to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)) if includible in income of the alternate payee, or

(B) attributable to the individual's investment in the contract (as defined in section 72(f)).

(5) Election

An election under paragraph (1) shall be made on an individual's return of tax imposed by chapter 1 or 11 for a taxable year beginning before January 1, 1989.

(Added Pub. L. 99–514, title XI, §1133(a), Oct. 22, 1986, 100 Stat. 2481 , §4981A; renumbered §4980A and amended Pub. L. 100–647, title I, §1011A(g)(1)(A), (2)–(6), (9), Nov. 10, 1988, 102 Stat. 3479–3482 ; Pub. L. 102–318, title V, §521(b)(42), July 3, 1992, 106 Stat. 313 .)

Amendments

1992-Subsec. (c)(4). Pub. L. 102–318 substituted "402(d)(4)(B)" for "402(e)(4)(B)".

1988-Pub. L. 100–647, §1011A(g)(1)(A), renumbered section 4981A of this title as this section.

Subsec. (c)(1). Pub. L. 100–647, §1011A(g)(2), substituted "the greater of-" for "$112,500 (adjusted at the same time and in the same manner as under section 415(d))" and added subpars. (A) and (B).

Subsec. (c)(2)(C). Pub. L. 100–647, §1011A(g)(3)(A), substituted "individual's" for "employee's".

Subsec. (c)(2)(E), (F). Pub. L. 100–647, §1011A(g)(3)(B), added subpars. (E) and (F).

Subsec. (c)(5). Pub. L. 100–647, §1011A(g)(4)(B), struck out par. (5) which related to special rule for accrued benefits as of Aug. 1, 1986.

Subsec. (d)(2). Pub. L. 100–647, §1011A(g)(5)(A), substituted "chapter 11" for "section 2010".

Subsec. (d)(3)(A). Pub. L. 100–647, §1011A(g)(9), inserted "(other than as a beneficiary, determined after application of paragraph (5))" after "individual's interests".

Subsec. (d)(3)(B). Pub. L. 100–647, §1011A(g)(6), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "the present value (as determined under rules prescribed by the Secretary as of the valuation date prescribed in subparagraph (A)) of an annuity for a term certain-

"(i) with annual payments equal to the limitation of subsection (c) (as in effect for the year in which the death occurs), and

"(ii) payable for a period equal to the life expectancy of the individual immediately before his death."

Subsec. (d)(4), (5). Pub. L. 100–647, §1011A(g)(5)(B), added pars. (4) and (5).

Subsec. (f). Pub. L. 100–647, §1011A(g)(4)(A), added subsec. (f).

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–318 applicable to distributions after Dec. 31, 1992, see section 521(e) of Pub. L. 102–318, set out as a note under section 402 of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date

Section 1133(c) of Pub. L. 99–514, as amended by Pub. L. 100–647, title I, §1011A(g)(8), Nov. 10, 1988, 102 Stat. 3482 , provided that:

"(1) In general.-Except as provided in this subsection, the amendments made by this section [enacting this section], shall apply to distributions made after December 31, 1986, other than a distribution with respect to a decedent dying before January 1, 1987.

"(2) Estate tax.-Section 4981A(d) [probably should be 4980A(d)] of the Internal Revenue Code of 1986 (as added by subsection (a)) shall apply to the estates of decedents dying after December 31, 1986.

"(3) Plan terminations before 1987.-The amendments made by this section shall not apply to distributions before January 1, 1988, which are made on account of the termination of a qualified employer plan if such termination occurred before January 1, 1987."

Regulations

Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out this section, see section 1141 of Pub. L. 99–514, set out as a note under section 401 of this title.

Plan Amendments Not Required Until January 1, 1994

For provisions directing that if any amendments made by subtitle B [§§521–523] of title V of Pub. L. 102–318 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, 1994, see section 523 of Pub. L. 102–318, set out as a note under section 401 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by section 1133(a) 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, set out as a note under section 401 of this title.

Section Referred to in Other Sections

This section is referred to in sections 691, 2013, 2053, 6018 of this title.

¹ So in original.