26 U.S.C. § 4980 — Tax on reversion of qualified plan assets

Page 3094 TITLE 26—INTERNAL REVENUE CODE § 4980 amendment, text read as follows: ‘‘If there is a prohib- ited allocation of qualified securities by any employee stock ownership plan or eligible worker-owned coopera- tive, there is hereby imposed a tax on such allocation equal to 50 percent of the amount involved.’’ Subsec. (c). Pub. L. 105–34, § 1530(c)(16), amended head- ing and text of subsec. (c) generally. Prior to amend- ment, text read as follows: ‘‘The tax imposed by this section shall be paid by— ‘‘(1) the employer sponsoring such plan, or ‘‘(2) the eligible worker-owned cooperative, which made the written statement described in section 1042(b)(3)(B).’’ Subsecs. (d), (e). Pub. L. 105–34, § 1530(c)(17), added subsec. (d) and redesignated former subsec. (d) as (e). 1996—Subsec. (c). Pub. L. 104–188 amended directory language of Pub. L. 101–239, § 7304(a)(2)(D)(ii). See 1989 Amendment note below. 1989—Subsec. (b)(1). Pub. L. 101–239, § 7304(a)(2)(D)(i), struck out ‘‘or section 2057’’ after ‘‘section 1042’’. Subsec. (c). Pub. L. 101–239, § 7304(a)(2)(D)(ii), as amended by Pub. L. 104–188, struck out ‘‘or section 2057(d)’’ after ‘‘section 1042(b)(3)(B)’’ in concluding pro- visions. 1986—Subsec. (b)(1). Pub. L. 99–514, § 1172(b)(2)(A), in- serted reference to section 2057. Subsec. (c). Pub. L. 99–514, § 1172(b)(2)(B), inserted ref- erence to section 2057(d). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2001 AMENDMENT Amendment by 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 AMENDMENT Amendment by 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. EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101–239 applicable to estates of decedents dying after Dec. 19, 1989, see section 7304(a)(3) of Pub. L. 101–239, set out as a note under sec- tion 409 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 1172(b)(2) of Pub. L. 99–514 ap- plicable to sales after Oct. 22, 1986, with respect to which election is made by executor of an estate who is required to file the return of the tax imposed by this title on a date (including extensions) after Oct. 22, 1986, see section 1172(c) of Pub. L. 99–514, set out as a note under section 409 of this title. EFFECTIVE DATE Pub. L. 99–514, title XVIII, § 1854(a)(9)(D), Oct. 22, 1986, 100 Stat. 2878, provided that: ‘‘The amendments made by this paragraph [enacting this section and amending section 1042 of this title] shall apply to sales of securi- ties after the date of the enactment of this Act [Oct. 22, 1986].’’ PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For 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. § 4980. Tax on reversion of qualified plan assets to employer (a) Imposition of tax There is hereby imposed a tax of 20 percent of the amount of any employer reversion from a qualified plan. (b) Liability for tax The tax imposed by subsection (a) shall be paid by the employer maintaining the plan. (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 mean- ing of section 414(d)). Such term shall include any plan which, at any time, has been determined by the Sec- retary to be a qualified plan. (2) Employer reversion (A) In general The term ‘‘employer reversion’’ means the amount of cash and the fair market value of other property received (directly or indi- rectly) by an employer from the qualified plan. (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 be- fore termination of such plan without vio- lating 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 mis- take 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 (A) In general If, upon an employer reversion from a qualified plan, any applicable amount is Page 3095 TITLE 26—INTERNAL REVENUE CODE § 4980 transferred from such plan to an employee stock ownership plan described in section 4975(e)(7) or a tax credit employee stock ownership plan (as described in section 409), such amount shall not be treated as an em- ployer reversion for purposes of this section (or includible in the gross income of the em- ployer) if the requirements of subparagraphs (B), (C), and (D) are met. (B) Investment in employer securities The requirements of this subparagraph are met if, within 90 days after the transfer (or such longer period as the Secretary may pre- scribe), the amount transferred is invested in employer securities (as defined in section 409(l)) or used to repay loans used to pur- chase such 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 ac- counts 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 par- ticipants under the plan, is treated as an employer contribution for purposes of sec- tion 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 sus- pense account, and (II) no additional employer contribu- tions shall be permitted to an employee stock ownership plan described in sub- paragraph (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 max- imum amount allowable under section 415 or 1⁄8 of the amount attributable to the securi- ties acquired. In the case of dividends on se- curities held in the suspense account, the re- quirements of this subparagraph are met only if the dividends are allocated to ac- counts of participants or paid to partici- pants in proportion to their accounts, or used to repay loans used to purchase em- ployer securities. (D) Participants The requirements of this subparagraph are met if at least half of the participants in the qualified plan are participants in the em- ployee stock ownership plan (as of the close of the 1st plan year for which an allocation of the securities is required). (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 No credit or deduction shall be allowed under chapter 1 for any amount transferred to an employee stock ownership plan in a transfer to which this paragraph applies. (G) Amount transferred to include income thereon, etc. The amount transferred shall not be treat- ed as meeting the requirements of subpara- graphs (B) and (C) unless amounts attrib- utable to such amount also meet such re- quirements. (4) Time for payment of tax For purposes of subtitle F, the time for pay- ment of the tax imposed by subsection (a) shall be the last day of the month following the month in which the employer reversion oc- curs. (d) Increase in tax for failure to establish re- placement plan or increase benefits (1) In general Subsection (a) shall be applied by sub- stituting ‘‘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 quali- fied plan established or maintained by the em- ployer in connection with a qualified plan ter- mination (hereinafter referred to as the ‘‘re- placement plan’’) with respect to which the following requirements are met: (A) Participation requirement At least 95 percent of the active partici- pants in the terminated plan who remain as employees of the employer after the termi- nation are active participants in the replace- ment plan. (B) Asset transfer requirement (i) 25 percent cushion A direct transfer from the terminated plan to the replacement plan is made be- fore any employer reversion, and the transfer is in an amount equal to the ex- cess (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 ac- crued benefits under the terminated plan of any participants or beneficiaries pursu- ant to a plan amendment which— Page 3096 TITLE 26—INTERNAL REVENUE CODE § 4980 (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 trans- ferred to the replacement plan under sub- paragraph (B)(i) is— (I) allocated under the plan to the ac- counts 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 rat- ably over the 7-plan-year period begin- ning with the year of the transfer. (ii) Coordination with section 415 limita- tion If, by reason of any limitation under sec- tion 415, any amount credited to a sus- pense 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 Any income on any amount credited to a suspense account under clause (i)(II) shall be allocated to accounts of participants no less rapidly than ratably over the remain- der of the period determined under such clause (after application of clause (ii)). (iv) Unallocated amounts at termination If any amount credited to a suspense ac- count under clause (i)(II) is not allocated as of the termination date of the replace- ment 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 limita- tion 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 ter- mination of the plan which provides pro rata increases in the accrued benefits of all quali- fied 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 ter- mination 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 deter- mined under subparagraph (A)(i) as— (i) the present value of such partici- pant’s accrued benefit (determined with- out regard to this subsection), bears to (ii) the aggregate present value of ac- crued 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 ex- ceed 40 percent of the aggregate amount de- termined under subparagraph (A)(i) by sub- stituting ‘‘equal to’’ for ‘‘not less than’’. (4) Coordination with other provisions (A) Limitations A benefit may not be increased under para- graph (2)(B)(ii) or (3)(A), and an amount may not be allocated to a participant under para- graph (2)(C), if such increase or allocation would result in a failure to meet any re- quirement under section 401(a)(4) or 415. (B) Treatment as employer contributions Any increase in benefits under paragraph (2)(B)(ii) or (3)(A), or any allocation of any amount (or income allocable thereto) to any account under paragraph (2)(C), shall be treated as an annual benefit or annual addi- tion for purposes of section 415. (C) 10-year participation requirement Except as provided by the Secretary, sec- tion 415(b)(5)(D) shall not apply to any in- crease in benefits by reason of this sub- section to the extent that the application of this subparagraph does not discriminate in favor of highly compensated employees (as defined in section 414(q)). (5) Definitions and special rules For purposes of this subsection— (A) Qualified participant The term ‘‘qualified participant’’ means an individual who— Page 3097 TITLE 26—INTERNAL REVENUE CODE § 4980 (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 cred- itable under the terminated plan, termi- nated 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 de- scribed in clause (iii)(II) and has a non- forfeitable right to an accrued benefit under the terminated plan as of the termi- nation date. (B) Present value Present value shall be determined as of the termination date and on the same basis as liabilities of the plan are determined on ter- mination. (C) Reallocation of increase Except as provided in paragraph (2)(C), if any benefit increase is reduced by reason of the last sentence of paragraph (3)(A)(ii) or paragraph (4), the amount of such reduction shall be allocated to the remaining partici- pants on the same basis as other increases (and shall be treated as meeting any alloca- tion requirement of this subsection). (D) Plans taken into account For purposes of determining whether there is a qualified replacement plan under para- graph (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 require- ment For purposes of paragraph (2)(A), all em- ployers treated as 1 employer under section 414(b), (c), (m), or (o) shall be treated as 1 employer. (6) Subsection not to apply to employer in bankruptcy This subsection shall not apply to an em- ployer who, as of the termination date of the qualified plan, is in bankruptcy liquidation under chapter 7 of title 11 of the United States Code or in similar proceedings under State law. (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.) Editorial Notes AMENDMENTS 2008—Subsec. (c)(2)(B)(iii). Pub. L. 110–458 added cl. (iii). 2006—Subsec. (c)(3)(A). Pub. L. 109–280 substituted ‘‘if the requirements of subparagraphs (B), (C), and (D) are met’’ for ‘‘if— ‘‘(i) the requirements of subparagraphs (B), (C), and (D) are met, and ‘‘(ii) under the plan, employer securities to which subparagraph (B) applies must, except to the extent necessary to meet the requirements of section 401(a)(28), remain in the plan until distribution to participants in accordance with the provisions of such plan’’. 1996—Subsecs. (a), (d). Pub. L. 104–188 provided that, except as otherwise expressly provided, whenever in title XII of Pub. L. 101–508 an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be con- sidered to be made to a section or other provision of the Internal Revenue Code of 1986. Sections 12001 and 12002(a) of title XII of Pub. L. 101–508 directed the amendment of this section without specifying that the amendment was to the Internal Revenue Code of 1986. See 1990 Amendment note below. 1990—Subsec. (a). Pub. L. 101–508, § 12001, which di- rected the substitution of ‘‘20 percent’’ for ‘‘15 percent’’ in ‘‘section 4980(a)’’ without specifying the Internal Revenue Code of 1986, was executed to subsec. (a) of this section. See 1996 Amendment note above. Subsec. (d). Pub. L. 101–508, § 12002(a), which directed the addition of subsec. (d) to ‘‘section 4980’’ without specifying the Internal Revenue Code of 1986, was exe- cuted to this section. See 1996 Amendment note above. 1988—Subsec. (a). Pub. L. 100–647, § 6069(a), substituted ‘‘15’’ for ‘‘10’’. Subsec. (c)(1)(A). Pub. L. 100–647, § 1011A(f)(1), sub- stituted ‘‘subtitle A’’ for ‘‘this subtitle’’. Subsec. (c)(3)(A). Pub. L. 100–647, § 1011A(f)(2), inserted ‘‘or a tax credit employee stock ownership plan (as de- scribed in section 409)’’ after ‘‘section 4975(e)(7)’’ in in- troductory text, and ‘‘, except to the extent necessary to meet the requirements of section 401(a)(28),’’ after ‘‘must’’ in cl. (ii). Subsec. (c)(3)(C). Pub. L. 100–647, § 1011A(f)(3), struck out ‘‘(by reason of the limitations of section 415)’’ after ‘‘not allocated’’ in introductory text, and inserted sen- tence at end relating to minimum amount allocated in year of transfer. Pub. L. 100–647, § 1011A(f)(7), inserted sentence at end relating to dividends on securities held in suspense ac- count. Subsec. (c)(3)(F), (G). Pub. L. 100–647, § 1011A(f)(6), added subpars. (F) and (G). Subsec. (c)(4). Pub. L. 100–647, § 5072(a), added par. (4). Statutory Notes and Related Subsidiaries 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 amend- ment 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 Amendment by Pub. L. 109–280 applicable to plan years beginning after Dec. 31, 2006, with special rules for collectively bargained agreements and certain em- ployer securities held in an ESOP, see section 901(c) of Pub. L. 109–280, set out as a note under section 401 of this title. EFFECTIVE DATE OF 1990 AMENDMENT Pub. L. 101–508, title XII, § 12003, Nov. 5, 1990, 104 Stat. 1388–566, provided that: ‘‘(a) IN GENERAL.—Except as provided in subsection (b), the amendments made by this subtitle [subtitle A Page 3098 TITLE 26—INTERNAL REVENUE CODE § 4980 (§§ 12001–12003) of title XII of Pub. L. 101–508, amending this section and sections 1002, 1104, and 1344 of Title 29, Labor] shall apply to reversions occurring after Sep- tember 30, 1990. ‘‘(b) EXCEPTION.—The amendments made by this sub- title shall not apply to any reversion after September 30, 1990, if— ‘‘(1) in the case of plans subject to title IV of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1301 et seq.], a notice of intent to terminate under such title was provided to participants (or if no participants, to the Pension Benefit Guaranty Cor- poration) before October 1, 1990, ‘‘(2) in the case of plans subject to title I [29 U.S.C. 1001 et seq.] (and not to title IV) of such Act, a notice of intent to reduce future accruals under section 204(h) of such Act [29 U.S.C. 1054(h)] was provided to participants in connection with the termination be- fore October 1, 1990, ‘‘(3) in the case of plans not subject to title I or IV of such Act, a request for a determination letter with respect to the termination was filed with the Sec- retary of the Treasury or the Secretary’s delegate be- fore October 1, 1990, or ‘‘(4) in the case of plans not subject to title I or IV of such Act and having only 1 participant, a resolu- tion terminating the plan was adopted by the em- ployer before October 1, 1990.’’ EFFECTIVE DATE OF 1988 AMENDMENT Amendment by section 1011A(f)(1)–(3), (6), (7) of 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. Pub. L. 100–647, title V, § 5072(b), Nov. 10, 1988, 102 Stat. 3681, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to re- versions after December 31, 1988.’’ Pub. L. 100–647, title VI, § 6069(b), Nov. 10, 1988, 102 Stat. 3704, provided that: ‘‘(1) IN GENERAL.—The amendment made by sub- section (a) [amending this section] shall apply to rever- sions occurring on or after October 21, 1988. ‘‘(2) EXCEPTION.—The amendment made by subsection (a) shall not apply to any reversion on or after October 21, 1988, pursuant to a plan termination if— ‘‘(A) with respect to plans subject to title IV of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1301 et seq.], a notice of intent to terminate re- quired under such title was provided to participants (or if no participants, to the Pension Benefit Guar- anty Corporation) before October 21, 1988, ‘‘(B) with respect to plans subject to title I of such Act [29 U.S.C. 1001 et seq.], a notice of intent to re- duce future accruals required under section 204(h) of such Act [29 U.S.C. 1054(h)] was provided to partici- pants in connection with the termination before Oc- tober 21, 1988, ‘‘(C) with respect to plans not subject to title I or IV of such Act, the Board of Directors of the em- ployer approved the termination or the employer took other binding action before October 21, 1988, or ‘‘(D) such plan termination was directed by a final order of a court of competent jurisdiction entered be- fore October 21, 1988, and notice of such order was provided to participants before such date.’’ EFFECTIVE DATE Pub. L. 99–514, title XI, § 1132(c), Oct. 22, 1986, 100 Stat. 2480, as amended by Pub. L. 100–647, title I, § 1011A(f)(4), (5), Nov. 10, 1988, 102 Stat. 3479, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [enacting this section] shall apply to reversions occurring after December 31, 1985. ‘‘(2) EXCEPTION WHERE TERMINATION DATE OCCURRED BEFORE JANUARY 1, 1986.— ‘‘(A) IN GENERAL.—Except as provided in subpara- graph (B), the amendments made by this section shall not apply to any reversion after December 31, 1985, which occurs pursuant to a plan termination where the termination date is before January 1, 1986. ‘‘(B) ELECTION TO HAVE AMENDMENTS APPLY.—A cor- poration may elect to have the amendments made by this section apply to any reversion after 1985 pursu- ant to a plan termination occurring before 1986 if such corporation was incorporated in the State of Delaware in March, 1978, and became a parent cor- poration of the consolidated group on September 19, 1978, pursuant to a merger agreement recorded in the State of Nevada on September 19, 1978. ‘‘(3) TERMINATION DATE.—For purposes of paragraph (2), the term ‘termination date’ is the date of the ter- mination (within the meaning of section 411(d)(3) of the Internal Revenue Code of 1986) of the plan. ‘‘(4) TRANSITION RULE FOR CERTAIN TERMINATIONS.— ‘‘(A) IN GENERAL.—In the case of a taxpayer to which this paragraph applies, the amendments made by this section shall not apply to any termination oc- curring before the date which is 1 year after the date of the enactment of this Act [Oct. 22, 1986]. ‘‘(B) TAXPAYERS TO WHOM PARAGRAPH APPLIES.— This paragraph shall apply to— ‘‘(i) a corporation incorporated on June 13, 1917, which has its principal place of business in Bartlesville, Oklahoma, ‘‘(ii) a corporation incorporated on January 17, 1917, which is located in Coatesville, Pennsylvania, ‘‘(iii) a corporation incorporated on January 23, 1928, which has its principal place of business in New York, New York, ‘‘(iv) a corporation incorporated on April 23, 1956, which has its principal place of business in Dallas, Texas, and ‘‘(v) a corporation incorporated in the State of Nevada, the principal place of business of which is in Denver, Colorado, and which filed for relief from creditors under the United States Bankruptcy Code on August 28, 1986. ‘‘(5) SPECIAL RULE FOR EMPLOYEE STOCK OWNERSHIP PLANS.—Section 4980(c)(3) of the Internal Revenue Code of 1986 (as added by subsection (a)) shall apply to rever- sions occurring after March 31, 1985.’’ TRANSFER OF EXCESS ASSETS FROM QUALIFIED PENSION PLAN TO WELFARE BENEFIT PLAN Pub. L. 101–239, title VII, § 7861(b), Dec. 19, 1989, 103 Stat. 2430, provided that: ‘‘(1) Notwithstanding any other provision of law, in the case of any qualified pension plan and welfare ben- efit plan described in paragraph (2), the assets of such pension plan in excess of its liabilities may be trans- ferred to such welfare benefit plan upon the termi- nation of such pension plan if such assets are to be used to provide retiree health benefits. ‘‘(2) For purposes of paragraph (1), a qualified pension plan and welfare benefit plan are described in this para- graph if— ‘‘(A) both such plans are jointly administered pur- suant to a collective bargaining agreement between the employer maintaining such plans and one or more employee representatives, ‘‘(B) the welfare benefit plan provides retiree health benefits, and ‘‘(C) the qualified pension plan has assets in excess of liabilities (determined on a termination basis) and the welfare benefit plan has assets which are less than the present value of the benefits to be provided under the plan (determined as of the time of termi- nation of the pension plan). ‘‘(3) For purposes of the Internal Revenue Code of 1986, any transfer of assets to which paragraph (1) ap- plies shall be treated as a reversion of such assets to the employer maintaining the plan which is includible in the gross income of such employer and subject to the tax imposed by section 4980 of such Code.’’ PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 Page 3099 TITLE 26—INTERNAL REVENUE CODE § 4980B 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. [§ 4980A. Repealed. Pub. L. 105–34, title X, § 1073(a), Aug. 5, 1997, 111 Stat. 948] Section, 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; Pub. L. 104–188, title I, §§ 1401(b)(12), 1452(b), Aug. 20, 1996, 110 Stat. 1789, 1816, related to tax on excess distributions from qualified retirement plans. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Pub. L. 105–34, title X, § 1073(c), Aug. 5, 1997, 111 Stat. 948, provided that: ‘‘(1) EXCESS DISTRIBUTION TAX REPEAL.—Except as pro- vided in paragraph (2), the repeal made by subsection (a) [repealing this section] shall apply to excess dis- tributions received after December 31, 1996. ‘‘(2) EXCESS RETIREMENT ACCUMULATION TAX REPEAL.— The repeal made by subsection (a) with respect to sec- tion 4980A(d) of the Internal Revenue Code of 1986 and the amendments made by subsection (b) [amending sec- tions 691, 2013, 2053, and 6018 of this title] shall apply to estates of decedents dying after December 31, 1996.’’ § 4980B. Failure to satisfy continuation coverage requirements of group health plans (a) General rule There is hereby imposed a tax on the failure of a group health plan to meet the requirements of subsection (f) with respect to any qualified bene- ficiary. (b) Amount of tax (1) In general The amount of the tax imposed by sub- section (a) on any failure with respect to a qualified beneficiary shall be $100 for each day in the noncompliance period with respect to such failure. (2) Noncompliance period For purposes of this section, the term ‘‘non- compliance period’’ means, with respect to any failure, the period— (A) beginning on the date such failure first occurs, and (B) ending on the earlier of— (i) the date such failure is corrected, or (ii) the date which is 6 months after the last day in the period applicable to the qualified beneficiary under subsection (f)(2)(B) (determined without regard to clause (iii) thereof). If a person is liable for tax under subsection (e)(1)(B) by reason of subsection (e)(2)(B) with respect to any failure, the noncompliance pe- riod for such person with respect to such fail- ure shall not begin before the 45th day after the written request described in subsection (e)(2)(B) is provided to such person. (3) Minimum tax for noncompliance period where failure discovered after notice of ex- amination Notwithstanding paragraphs (1) and (2) of subsection (c)— (A) In general In the case of 1 or more failures with re- spect to a qualified beneficiary— (i) which are not corrected before the date a notice of examination of income tax liability is sent to the employer, and (ii) which occurred or continued during the period under examination, the amount of tax imposed by subsection (a) by reason of such failures with respect to such beneficiary shall not be less than the lesser of $2,500 or the amount of tax which would be imposed by subsection (a) without regard to such paragraphs. (B) Higher minimum tax where violations are more than de minimis To the extent violations by the employer (or the plan in the case of a multiemployer plan) for any year are more than de minimis, subparagraph (A) shall be applied by sub- stituting ‘‘$15,000’’ for ‘‘$2,500’’ with respect to the employer (or such plan). (c) Limitations on amount of tax (1) Tax not to apply where failure not discov- ered exercising reasonable diligence No tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Sec- retary that none of the persons referred to in subsection (e) knew, or exercising reasonable diligence would have known, that such failure existed. (2) Tax not to apply to failures corrected with- in 30 days No tax shall be imposed by subsection (a) on any failure if— (A) such failure was due to reasonable cause and not to willful neglect, and (B) such failure is corrected during the 30- day period beginning on the 1st date any of the persons referred to in subsection (e) knew, or exercising reasonable diligence would have known, that such failure existed. (3) $100 limit on amount of tax for failures on any day with respect to a qualified bene- ficiary (A) In general Except as provided in subparagraph (B), the maximum amount of tax imposed by subsection (a) on failures on any day during the noncompliance period with respect to a qualified beneficiary shall be $100. (B) Special rule where more than 1 qualified beneficiary If there is more than 1 qualified bene- ficiary with respect to the same qualifying event, the maximum amount of tax imposed by subsection (a) on all failures on any day during the noncompliance period with re- spect to such qualified beneficiaries shall be $200. (4) Overall limitation for unintentional failures In the case of failures which are due to rea- sonable cause and not to willful neglect— (A) Single employer plans (i) In general In the case of failures with respect to plans other than multiemployer plans, the