26 U.S.C. § 408A — Roth IRAs

Page 1332 TITLE 26—INTERNAL REVENUE CODE § 408A TRANSITIONAL RULE FOR CONTRIBUTIONS FOR TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1978 Pub. L. 95–600, title I, § 157(c)(2)(B), Nov. 6, 1978, 92 Stat. 2805, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘In the case of con- tributions for taxable years beginning before January 1, 1978, paragraph (5) of section 408(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] shall be ap- plied as if such paragraph did not contain any dollar limitation.’’ EXCHANGE OF FIXED PREMIUM ANNUITY OR ENDOWMENT CONTRACT ISSUED ON OR BEFORE NOV. 6, 1978, FOR INDIVIDUAL RETIREMENT ANNUITY Pub. L. 95–600, title I, § 157(d)(3), Nov. 6, 1978, 92 Stat. 2806, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘In the case of any annuity or endowment contract issued on or before the date of the enactment of this Act [Nov. 6, 1978] which would be an individual retirement annuity within the meaning of section 408(b) of the Internal Revenue Code of 1986 [for- merly I.R.C. 1954] (as amended by paragraph (1) [amend- ing subsec. (b)(2) of this section]) but for the fact that the premiums under the contract are fixed, at the elec- tion of the taxpayer an exchange before January 1, 1981, of that contract for an individual retirement annuity within the meaning of such section 408(b) (as amended by paragraph (1)) shall be treated as a nontaxable ex- change which does not constitute a distribution.’’ § 408A. Roth IRAs (a) General rule Except as provided in this section, a Roth IRA shall be treated for purposes of this title in the same manner as an individual retirement plan. (b) Roth IRA For purposes of this title, the term ‘‘Roth IRA’’ means an individual retirement plan (as defined in section 7701(a)(37)) which is des- ignated (in such manner as the Secretary may prescribe) at the time of establishment of the plan as a Roth IRA. Such designation shall be made in such manner as the Secretary may pre- scribe. (c) Treatment of contributions (1) No deduction allowed No deduction shall be allowed under section 219 for a contribution to a Roth IRA. (2) Contribution limit The aggregate amount of contributions for any taxable year to all Roth IRAs maintained for the benefit of an individual shall not ex- ceed the excess (if any) of— (A) the maximum amount allowable as a deduction under section 219 with respect to such individual for such taxable year (com- puted without regard to subsection (g) of such section), over (B) the aggregate amount of contributions for such taxable year to all other individual retirement plans (other than Roth IRAs) maintained for the benefit of the individual. (3) Limits based on modified adjusted gross in- come (A) Dollar limit The amount determined under paragraph (2) for any taxable year shall not exceed an amount equal to the amount determined under paragraph (2)(A) for such taxable year, reduced (but not below zero) by the amount which bears the same ratio to such amount as— (i) the excess of— (I) the taxpayer’s adjusted gross in- come for such taxable year, over (II) the applicable dollar amount, bears to (ii) $15,000 ($10,000 in the case of a joint return or a married individual filing a sep- arate return). The rules of subparagraphs (B) and (C) of section 219(g)(2) shall apply to any reduction under this subparagraph. (B) Definitions For purposes of this paragraph— (i) adjusted gross income shall be deter- mined in the same manner as under sec- tion 219(g)(3), except that any amount in- cluded in gross income under subsection (d)(3) shall not be taken into account, and (ii) the applicable dollar amount is— (I) in the case of a taxpayer filing a joint return, $150,000, (II) in the case of any other taxpayer (other than a married individual filing a separate return), $95,000, and (III) in the case of a married individual filing a separate return, zero. (C) Marital status Section 219(g)(4) shall apply for purposes of this paragraph. (D) Inflation adjustment In the case of any taxable year beginning in a calendar year after 2006, the dollar amounts in subclauses (I) and (II) of sub- paragraph (B)(ii) shall each be increased by an amount equal to— (i) such dollar amount, multiplied by (ii) the cost-of-living adjustment deter- mined under section 1(f)(3) for the calendar year in which the taxable year begins, de- termined by substituting ‘‘calendar year 2005’’ for ‘‘calendar year 2016’’ in subpara- graph (A)(ii) thereof. Any increase determined under the pre- ceding sentence shall be rounded to the nearest multiple of $1,000. (E) Special rule for certain transfers from qualified tuition programs The amount determined under subpara- graph (A) shall be increased by the lesser of— (i) the amount of contributions described in section 529(c)(3)(E) for the taxable year, or (ii) the amount of the reduction deter- mined under such subparagraph (deter- mined without regard to this subpara- graph). (4) Mandatory distribution rules not to apply before death Notwithstanding subsections (a)(6) and (b)(3) of section 408 (relating to required distribu- tions), the following provisions shall not apply to any Roth IRA: (A) Section 401(a)(9)(A). Page 1333 TITLE 26—INTERNAL REVENUE CODE § 408A (B) The incidental death benefit require- ments of section 401(a). (5) Rollover contributions (A) In general No rollover contribution may be made to a Roth IRA unless it is a qualified rollover contribution. (B) Coordination with limit (i) In general A qualified rollover contribution shall not be taken into account for purposes of paragraph (2). (ii) Exception for rollovers from qualified tuition programs Clause (i) shall not apply to any quali- fied rollover contribution described in sub- section (e)(1)(C). (6) Time when contributions made For purposes of this section, the rule of sec- tion 219(f)(3) shall apply. (d) Distribution rules For purposes of this title— (1) Exclusion Any qualified distribution from a Roth IRA shall not be includible in gross income. (2) Qualified distribution For purposes of this subsection— (A) In general The term ‘‘qualified distribution’’ means any payment or distribution— (i) made on or after the date on which the individual attains age 591⁄2, (ii) made to a beneficiary (or to the es- tate of the individual) on or after the death of the individual, (iii) attributable to the individual’s being disabled (within the meaning of sec- tion 72(m)(7)), or (iv) which is a qualified special purpose distribution. (B) Distributions within nonexclusion period A payment or distribution from a Roth IRA shall not be treated as a qualified dis- tribution under subparagraph (A) if such payment or distribution is made within the 5-taxable year period beginning with the first taxable year for which the individual made a contribution to a Roth IRA (or such individual’s spouse, or employer in the case of a simple retirement account (as defined in section 408(p)) or simplified employee pen- sion (as defined in section 408(k)), made a contribution to a Roth IRA) established for such individual. (C) Distributions of excess contributions and earnings The term ‘‘qualified distribution’’ shall not include any distribution of any contribu- tion described in section 408(d)(4) and any net income allocable to the contribution. (3) Rollovers from an eligible retirement plan other than a Roth IRA (A) In general Notwithstanding sections 402(c), 403(b)(8), 408(d)(3), and 457(e)(16), in the case of any distribution to which this paragraph ap- plies— (i) there shall be included in gross in- come any amount which would be includ- ible were it not part of a qualified rollover contribution, (ii) section 72(t) shall not apply, and (iii) unless the taxpayer elects not to have this clause apply, any amount re- quired to be included in gross income for any taxable year beginning in 2010 by rea- son of this paragraph shall be so included ratably over the 2-taxable-year period be- ginning with the first taxable year begin- ning in 2011. Any election under clause (iii) for any dis- tributions during a taxable year may not be changed after the due date for such taxable year. (B) Distributions to which paragraph applies This paragraph shall apply to a distribu- tion from an eligible retirement plan (as de- fined by section 402(c)(8)(B)) maintained for the benefit of an individual which is contrib- uted to a Roth IRA maintained for the ben- efit of such individual in a qualified rollover contribution. This paragraph shall not apply to a distribution which is a qualified roll- over contribution from a Roth IRA or a qualified rollover contribution from a des- ignated Roth account which is a rollover contribution described in section 402A(c)(3)(A). (C) Conversions The conversion of an individual retirement plan (other than a Roth IRA) to a Roth IRA shall be treated for purposes of this para- graph as a distribution to which this para- graph applies. (D) Additional reporting requirements Trustees of Roth IRAs, trustees of indi- vidual retirement plans, persons subject to section 6047(d)(1), or all of the foregoing per- sons, whichever is appropriate, shall include such additional information in reports re- quired under section 408(i) or 6047 as the Sec- retary may require to ensure that amounts required to be included in gross income under subparagraph (A) are so included. (E) Special rules for contributions to which 2-year averaging applies In the case of a qualified rollover contribu- tion to a Roth IRA of a distribution to which subparagraph (A)(iii) applied, the following rules shall apply: (i) Acceleration of inclusion (I) In general The amount otherwise required to be included in gross income for any taxable year beginning in 2010 or the first tax- able year in the 2-year period under sub- paragraph (A)(iii) shall be increased by the aggregate distributions from Roth IRAs for such taxable year which are al- locable under paragraph (4) to the por- tion of such qualified rollover contribu- tion required to be included in gross in- come under subparagraph (A)(i). Page 1334 TITLE 26—INTERNAL REVENUE CODE § 408A (II) Limitation on aggregate amount in- cluded The amount required to be included in gross income for any taxable year under subparagraph (A)(iii) shall not exceed the aggregate amount required to be in- cluded in gross income under subpara- graph (A)(iii) for all taxable years in the 2-year period (without regard to sub- clause (I)) reduced by amounts included for all preceding taxable years. (ii) Death of distributee (I) In general If the individual required to include amounts in gross income under such sub- paragraph dies before all of such amounts are included, all remaining amounts shall be included in gross in- come for the taxable year which includes the date of death. (II) Special rule for surviving spouse If the spouse of the individual de- scribed in subclause (I) acquires the indi- vidual’s entire interest in any Roth IRA to which such qualified rollover con- tribution is properly allocable, the spouse may elect to treat the remaining amounts described in subclause (I) as in- cludible in the spouse’s gross income in the taxable years of the spouse ending with or within the taxable years of such individual in which such amounts would otherwise have been includible. Any such election may not be made or changed after the due date for the spouse’s tax- able year which includes the date of death. (F) Special rule for applying section 72 (i) In general If— (I) any portion of a distribution from a Roth IRA is properly allocable to a qualified rollover contribution described in this paragraph; and (II) such distribution is made within the 5-taxable year period beginning with the taxable year in which such contribu- tion was made, then section 72(t) shall be applied as if such portion were includible in gross in- come. (ii) Limitation Clause (i) shall apply only to the extent of the amount of the qualified rollover contribution includible in gross income under subparagraph (A)(i). (4) Aggregation and ordering rules (A) Aggregation rules Section 408(d)(2) shall be applied sepa- rately with respect to Roth IRAs and other individual retirement plans. (B) Ordering rules For purposes of applying this section and section 72 to any distribution from a Roth IRA, such distribution shall be treated as made— (i) from contributions to the extent that the amount of such distribution, when added to all previous distributions from the Roth IRA, does not exceed the aggre- gate contributions to the Roth IRA; and (ii) from such contributions in the fol- lowing order: (I) Contributions other than qualified rollover contributions to which para- graph (3) applies. (II) Qualified rollover contributions to which paragraph (3) applies on a first-in, first-out basis. Any distribution allocated to a qualified rollover contribution under clause (ii)(II) shall be allocated first to the portion of such contribution required to be included in gross income. (5) Qualified special purpose distribution For purposes of this section, the term ‘‘qualified special purpose distribution’’ means any distribution to which subparagraph (F) of section 72(t)(2) applies. (6) Taxpayer may make adjustments before due date (A) In general Except as provided by the Secretary, if, on or before the due date for any taxable year, a taxpayer transfers in a trustee-to-trustee transfer any contribution to an individual retirement plan made during such taxable year from such plan to any other individual retirement plan, then, for purposes of this chapter, such contribution shall be treated as having been made to the transferee plan (and not the transferor plan). (B) Special rules (i) Transfer of earnings Subparagraph (A) shall not apply to the transfer of any contribution unless such transfer is accompanied by any net income allocable to such contribution. (ii) No deduction Subparagraph (A) shall apply to the transfer of any contribution only to the extent no deduction was allowed with re- spect to the contribution to the transferor plan. (iii) Conversions Subparagraph (A) shall not apply in the case of a qualified rollover contribution to which subsection (d)(3) applies (including by reason of subparagraph (C) thereof). (7) Due date For purposes of this subsection, the due date for any taxable year is the date prescribed by law (including extensions of time) for filing the taxpayer’s return for such taxable year. (e) Qualified rollover contribution For purposes of this section— (1) In general The term ‘‘qualified rollover contribution’’ means a rollover contribution— (A) to a Roth IRA from another such ac- count, Page 1335 TITLE 26—INTERNAL REVENUE CODE § 408A (B) from an eligible retirement plan, but only if— (i) in the case of an individual retire- ment plan, such rollover contribution meets the requirements of section 408(d)(3), and (ii) in the case of any eligible retirement plan (as defined in section 402(c)(8)(B) other than clauses (i) and (ii) thereof), such rollover contribution meets the re- quirements of section 402(c), 403(b)(8), or 457(e)(16), as applicable, and ‘‘(C) from a qualified tuition program to the extent provided in section 529(c)(3)(E). For purposes of section 408(d)(3)(B), there shall be disregarded any qualified rollover contribution from an individual retirement plan (other than a Roth IRA) to a Roth IRA. The earnings and contributions of any quali- fied tuition program from which a qualified rollover contribution is made under subpara- graph (C) shall be treated in the same man- ner as the earnings and contributions of a Roth IRA from which a qualified rollover contribution is made under subparagraph (A). (2) Military death gratuity (A) In general The term ‘‘qualified rollover contribution’’ includes a contribution to a Roth IRA main- tained for the benefit of an individual made before the end of the 1-year period beginning on the date on which such individual re- ceives an amount under section 1477 of title 10, United States Code, or section 1967 of title 38 of such Code, with respect to a per- son, to the extent that such contribution does not exceed— (i) the sum of the amounts received dur- ing such period by such individual under such sections with respect to such person, reduced by (ii) the amounts so received which were contributed to a Coverdell education sav- ings account under section 530(d)(9). (B) Annual limit on number of rollovers not to apply Section 408(d)(3)(B) shall not apply with respect to amounts treated as a rollover by subparagraph (A). (C) Application of section 72 For purposes of applying section 72 in the case of a distribution which is not a quali- fied distribution, the amount treated as a rollover by reason of subparagraph (A) shall be treated as investment in the contract. (3) Simple retirement accounts In the case of any payment or distribution out of a simple retirement account (as defined in section 408(p)) with respect to which an election has been made under section 408(p)(12) and to which 72(t)(6) applies, the term ‘‘quali- fied rollover contribution’’ shall not include any payment or distribution paid into an ac- count other than another simple retirement account (as so defined). (Added Pub. L. 105–34, title III, § 302(a), Aug. 5, 1997, 111 Stat. 825; amended Pub. L. 105–206, title VI, § 6005(b)(1)–(7), (9), title VII, § 7004(a), July 22, 1998, 112 Stat. 796–800, 833; Pub. L. 105–277, div. J, title IV, § 4002(j), Oct. 21, 1998, 112 Stat. 2681–908; Pub. L. 107–16, title VI, § 617(e)(1), June 7, 2001, 115 Stat. 106; Pub. L. 109–222, title V, § 512(a), (b), May 17, 2006, 120 Stat. 365; Pub. L. 109–280, title VIII, §§ 824(a), (b), 833(c), Aug. 17, 2006, 120 Stat. 998, 1004; Pub. L. 110–245, title I, § 109(a), (b), June 17, 2008, 122 Stat. 1631, 1632; Pub. L. 110–458, title I, § 108(d), (h), Dec. 23, 2008, 122 Stat. 5109; Pub. L. 115–97, title I, §§ 11002(d)(1)(W), 13611(a), Dec. 22, 2017, 131 Stat. 2060, 2165; Pub. L. 115–141, div. U, title IV, § 401(a)(77), (78), Mar. 23, 2018, 132 Stat. 1187; Pub. L. 116–94, div. O, title I, § 107(c), Dec. 20, 2019, 133 Stat. 3149; Pub. L. 117–328, div. T, title I, § 126(b), title IV, § 401(b)(5), title VI, § 601(a), (c)(2), (d), Dec. 29, 2022, 136 Stat. 5316, 5388, 5390.) INFLATION ADJUSTED ITEMS FOR CERTAIN YEARS For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under section 1 of this title and Internal Revenue Notices listed in a table under section 401 of this title. Editorial Notes AMENDMENTS 2022—Subsec. (c)(2)(A). Pub. L. 117–328, § 401(b)(5), struck out ‘‘(d)(1) or’’ before ‘‘(g) of such section’’. Subsec. (c)(3)(E). Pub. L. 117–328, § 126(b)(2)(B), added subpar. (E). Subsec. (c)(5)(B). Pub. L. 117–328, § 126(b)(2)(A), des- ignated existing provisions as cl. (i), inserted heading, and added cl. (ii). Subsec. (d)(2)(B). Pub. L. 117–328, § 601(d), inserted ‘‘, or employer in the case of a simple retirement ac- count (as defined in section 408(p)) or simplified em- ployee pension (as defined in section 408(k)),’’ after ‘‘in- dividual’s spouse’’. Subsec. (e)(1). Pub. L. 117–328, § 126(b)(1)(C), inserted at end of concluding provisions ‘‘The earnings and con- tributions of any qualified tuition program from which a qualified rollover contribution is made under sub- paragraph (C) shall be treated in the same manner as the earnings and contributions of a Roth IRA from which a qualified rollover contribution is made under subparagraph (A).’’ Subsec. (e)(1)(C). Pub. L. 117–328, § 126(b)(1)(A), (B), added subpar. (C). Subsec. (e)(3). Pub. L. 117–328, § 601(c)(2), added par. (3). Subsec. (f). Pub. L. 117–328, § 601(a), struck out subsec. (f). Text read as follows: ‘‘For purposes of this section— ‘‘(1) a simplified employee pension or a simple re- tirement account may not be designated as a Roth IRA; and ‘‘(2) contributions to any such pension or account shall not be taken into account for purposes of sub- section (c)(2)(B).’’ 2019—Subsec. (c)(4) to (7). Pub. L. 116–94 redesignated pars. (5) to (7) as (4) to (6), respectively, and struck out former par. (4). Prior to amendment, text of par. (4) read as follows: ‘‘Contributions to a Roth IRA may be made even after the individual for whom the account is maintained has attained age 701⁄2.’’ 2018—Subsec. (d)(3)(B). Pub. L. 115–141, § 401(a)(77), in- serted period at end. Subsec. (e)(2)(B). Pub. L. 115–141, § 401(a)(78), sub- stituted ‘‘subparagraph (A)’’ for ‘‘the subparagraph (A)’’. 2017—Subsec. (c)(3)(D)(ii). Pub. L. 115–97, § 11002(d)(1)(W), substituted ‘‘for ‘calendar year 2016’ in subparagraph (A)(ii)’’ for ‘‘for ‘calendar year 1992’ in subparagraph (B)’’. Page 1336 TITLE 26—INTERNAL REVENUE CODE § 408A Subsec. (d)(6)(B)(iii). Pub. L. 115–97, § 13611(a), added cl. (iii). 2008—Subsec. (c)(3)(B). Pub. L. 110–458, § 108(d)(1), in introductory provisions, struck out second ‘‘an’’ before ‘‘eligible’’ and ‘‘other than a Roth IRA’’ before ‘‘during any taxable year’’, and inserted as concluding provi- sions ‘‘This subparagraph shall not apply to a qualified rollover contribution from a Roth IRA or to a qualified rollover contribution from a designated Roth account which is a rollover contribution described in section 402A(c)(3)(A).’’ Subsec. (c)(3)(C), (E). Pub. L. 110–458, § 108(h)(1), redes- ignated subpar. (C) relating to inflation adjustment as subpar. (E). Subsec. (d)(3)(B). Pub. L. 110–458, § 108(d)(2), struck out ‘‘(other than a Roth IRA)’’ after ‘‘section 402(c)(8)(B))’’ and inserted at end ‘‘This paragraph shall not apply to a distribution which is a qualified rollover contribution from a Roth IRA or a qualified rollover contribution from a designated Roth account which is a rollover contribution described in section 402A(c)(3)(A)’’. Subsec. (e). Pub. L. 110–245, § 109(b), amended subsec. (e), as in effect after amendment by section 824(a) of Pub. L. 109–280, by amending text generally. Prior to amendment, text read as follows: ‘‘For purposes of this section, the term ‘qualified rollover contribution’ means a rollover contribution— ‘‘(1) to a Roth IRA from another such account, ‘‘(2) from an eligible retirement plan, but only if— ‘‘(A) in the case of an individual retirement plan, such rollover contribution meets the requirements of section 408(d)(3), and ‘‘(B) in the case of any eligible retirement plan (as defined in section 402(c)(8)(B) other than clauses (i) and (ii) thereof), such rollover contribution meets the requirements of section 402(c), 403(b)(8), or 457(e)(16), as applicable. For purposes of section 408(d)(3)(B), there shall be dis- regarded any qualified rollover contribution from an individual retirement plan (other than a Roth IRA) to a Roth IRA.’’ Pub. L. 110–245, § 109(a), amended subsec. (e), as in ef- fect before amendment by section 824(a) of Pub. L. 109–280, by reenacting heading without change and amending text to read as follows: ‘‘For purposes of this section— ‘‘(1) IN GENERAL.—The term ‘qualified rollover con- tribution’ means a rollover contribution to a Roth IRA from another such account, or from an indi- vidual retirement plan, but only if such rollover con- tribution meets the requirements of section 408(d)(3). Such term includes a rollover contribution described in section 402A(c)(3)(A). For purposes of section 408(d)(3)(B), there shall be disregarded any qualified rollover contribution from an individual retirement plan (other than a Roth IRA) to a Roth IRA. ‘‘(2) MILITARY DEATH GRATUITY.— ‘‘(A) IN GENERAL.—The term ‘qualified rollover contribution’ includes a contribution to a Roth IRA maintained for the benefit of an individual made before the end of the 1-year period beginning on the date on which such individual receives an amount under section 1477 of title 10, United States Code, or section 1967 of title 38 of such Code, with respect to a person, to the extent that such contribution does not exceed— ‘‘(i) the sum of the amounts received during such period by such individual under such sec- tions with respect to such person, reduced by ‘‘(ii) the amounts so received which were con- tributed to a Coverdell education savings account under section 530(d)(9). ‘‘(B) ANNUAL LIMIT ON NUMBER OF ROLLOVERS NOT TO APPLY.—Section 408(d)(3)(B) shall not apply with respect to amounts treated as a rollover by sub- paragraph (A). ‘‘(C) APPLICATION OF SECTION 72.—For purposes of applying section 72 in the case of a distribution which is not a qualified distribution, the amount treated as a rollover by reason of subparagraph (A) shall be treated as investment in the contract.’’ See 2006 Amendment note below. 2006—Subsec. (c)(3)(B). Pub. L. 109–222, § 512(a)(1), re- designated subpar. (C) as (B) and struck out former sub- par. (B). Prior to amendment, text read as follows: ‘‘A taxpayer shall not be allowed to make a qualified roll- over contribution to a Roth IRA from an individual re- tirement plan other than a Roth IRA during any tax- able year if, for the taxable year of the distribution to which such contribution relates— ‘‘(i) the taxpayer’s adjusted gross income exceeds $100,000, or ‘‘(ii) the taxpayer is a married individual filing a separate return. This subparagraph shall not apply to a qualified roll- over contribution from a Roth IRA or to a qualified rollover contribution from a designated Roth account which is a rollover contribution described in section 402A(c)(3)(A).’’ See Effective Date of 2006 Amendment note below. Pub. L. 109–280, § 824(b)(1), substituted ‘‘eligible retire- ment plan’’ for ‘‘IRA’’ in heading and ‘‘an eligible re- tirement plan (as defined by section 402(c)(8)(B))’’ for ‘‘individual retirement plan’’ in introductory provi- sions. See Effective Date of 2006 Amendment note below. Subsec. (c)(3)(B)(i). Pub. L. 109–222, § 512(a)(2), sub- stituted ‘‘except that any amount included in gross in- come under subsection (d)(3) shall not be taken into ac- count, and’’ for ‘‘except that— ‘‘(I) any amount included in gross income under subsection (d)(3) shall not be taken into account; and ‘‘(II) any amount included in gross income by rea- son of a required distribution under a provision de- scribed in paragraph (5) shall not be taken into ac- count for purposes of subparagraph (B)(i), and’’. Subsec. (c)(3)(C). Pub. L. 109–222, § 512(a)(1), redesig- nated subpar. (D), relating to marital status, as (C). Former subpar. (C) redesignated (B). See Effective Date of 2006 Amendment note below. Pub. L. 109–280, § 833(c), added subpar. (C) relating to inflation adjustment. Subsec. (c)(3)(D), (E). Pub. L. 110–458, § 108(h)(2), redes- ignated subpar. (E) as (D) and substituted ‘‘subpara- graph (B)(ii)’’ for ‘‘subparagraph (C)(ii)’’. Subsec. (d)(3). Pub. L. 109–280, § 824(b)(2)(E), sub- stituted ‘‘an eligible retirement plan’’ for ‘‘an IRA’’ in heading. Subsec. (d)(3)(A). Pub. L. 109–280, § 824(b)(2)(A), sub- stituted ‘‘sections 402(c), 403(b)(8), 408(d)(3), and 457(e)(16)’’ for ‘‘section 408(d)(3)’’ in introductory provi- sions. Subsec. (d)(3)(A)(iii). Pub. L. 109–222, § 512(b)(1), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: ‘‘unless the taxpayer elects not to have this clause apply for any taxable year, any amount required to be included in gross income for such taxable year by reason of this paragraph for any distribution before January 1, 1999, shall be so included ratably over the 4-taxable year period beginning with such taxable year.’’ Subsec. (d)(3)(B). Pub. L. 109–280, § 824(b)(2)(B), sub- stituted ‘‘eligible retirement plan (as defined by sec- tion 402(c)(8)(B))’’ for ‘‘individual retirement plan’’. Subsec. (d)(3)(D). Pub. L. 109–280, § 824(b)(2)(C), (D), substituted ‘‘persons subject to section 6047(d)(1), or all of the foregoing persons’’ for ‘‘or both’’ and inserted ‘‘or 6047’’ after ‘‘408(i)’’. Subsec. (d)(3)(E). Pub. L. 109–222, § 512(b)(2)(B), sub- stituted ‘‘2-year’’ for ‘‘4-year’’ in heading. Subsec. (d)(3)(E)(i). Pub. L. 109–222, § 512(b)(2)(A), amended cl. (i) generally. Prior to amendment, text read as follows: ‘‘(I) IN GENERAL.—The amount required to be included in gross income for each of the first 3 taxable years in the 4-year period under subparagraph (A)(iii) shall be increased by the aggregate distributions from Roth IRAs for such taxable year which are allocable under paragraph (4) to the portion of such qualified rollover Page 1337 TITLE 26—INTERNAL REVENUE CODE § 408A contribution required to be included in gross income under subparagraph (A)(i). ‘‘(II) LIMITATION ON AGGREGATE AMOUNT INCLUDED.— The amount required to be included in gross income for any taxable year under subparagraph (A)(iii) shall not exceed the aggregate amount required to be included in gross income under subparagraph (A)(iii) for all taxable years in the 4-year period (without regard to subclause (I)) reduced by amounts included for all preceding tax- able years.’’ Subsec. (e). Pub. L. 109–280, § 824(a), reenacted heading without change and amended text of subsec. (e) gen- erally. Prior to amendments by Pub. L. 109–280, § 824(a), and Pub. L. 110–245, § 109(a), text read as follows: ‘‘For purposes of this section, the term ‘qualified rollover contribution’ means a rollover contribution to a Roth IRA from another such account, or from an individual retirement plan, but only if such rollover contribution meets the requirements of section 408(d)(3). For pur- poses of section 408(d)(3)(B), there shall be disregarded any qualified rollover contribution from an individual retirement plan (other than a Roth IRA) to a Roth IRA.’’ See 2008 Amendment note above. 2001—Subsec. (e). Pub. L. 107–16 inserted ‘‘Such term includes a rollover contribution described in section 402A(c)(3)(A).’’ after first sentence. 1998—Subsec. (c)(3)(A). Pub. L. 105–206, § 6005(b)(1), substituted ‘‘shall not exceed an amount equal to the amount determined under paragraph (2)(A) for such taxable year, reduced’’ for ‘‘shall be reduced’’ in intro- ductory provisions. Subsec. (c)(3)(A)(ii). Pub. L. 105–206, § 6005(b)(2)(A), in- serted ‘‘or a married individual filing a separate re- turn’’ after ‘‘joint return’’. Subsec. (c)(3)(B). Pub. L. 105–206, § 6005(b)(2)(B)(i), in- serted ‘‘, for the taxable year of the distribution to which such contribution relates’’ after ‘‘if’’ in introduc- tory provisions. Subsec. (c)(3)(B)(i). Pub. L. 105–206, § 6005(b)(2)(B)(ii), struck out ‘‘for such taxable year’’ after ‘‘gross in- come’’. Subsec. (c)(3)(C)(i). Pub. L. 105–206, § 7004(a), amended cl. (i) generally. Prior to amendment, cl. (i) read as fol- lows: ‘‘adjusted gross income shall be determined in the same manner as under section 219(g)(3), except that any amount included in gross income under subsection (d)(3) shall not be taken into account, and’’. Pub. L. 105–206, § 6005(b)(2)(C), struck out ‘‘and the de- duction under section 219 shall be taken into account’’ after ‘‘taken into account’’. Subsec. (c)(3)(C)(i)(II). Pub. L. 105–277 substituted ‘‘, and’’ for period at end. Subsec. (d)(1). Pub. L. 105–206, § 6005(b)(5)(B), sub- stituted ‘‘Exclusion’’ for ‘‘General rules’’ in heading and amended text generally. Prior to amendment, text read as follows: ‘‘(A) EXCLUSIONS FROM GROSS INCOME.—Any qualified distribution from a Roth IRA shall not be includible in gross income. ‘‘(B) NONQUALIFIED DISTRIBUTIONS.—In applying sec- tion 72 to any distribution from a Roth IRA which is not a qualified distribution, such distribution shall be treated as made from contributions to the Roth IRA to the extent that such distribution, when added to all previous distributions from the Roth IRA, does not ex- ceed the aggregate amount of contributions to the Roth IRA.’’ Subsec. (d)(2)(B). Pub. L. 105–206, § 6005(b)(3)(A), added subpar. (B) and struck out heading and text of former subpar. (B). Text read as follows: ‘‘A payment or dis- tribution shall not be treated as a qualified distribu- tion under subparagraph (A) if— ‘‘(i) it is made within the 5-taxable year period be- ginning with the 1st taxable year for which the indi- vidual made a contribution to a Roth IRA (or such in- dividual’s spouse made a contribution to a Roth IRA) established for such individual, or ‘‘(ii) in the case of a payment or distribution prop- erly allocable (as determined in the manner pre- scribed by the Secretary) to a qualified rollover con- tribution from an individual retirement plan other than a Roth IRA (or income allocable thereto), it is made within the 5-taxable year period beginning with the taxable year in which the rollover contribution was made.’’ Subsec. (d)(2)(C). Pub. L. 105–206, § 6005(b)(3)(B), added subpar. (C). Subsec. (d)(3)(A). Pub. L. 105–206, § 6005(b)(4)(A), added cl. (iii) and concluding provisions and struck out former cl. (iii) which read as follows: ‘‘in the case of a distribution before January 1, 1999, any amount re- quired to be included in gross income by reason of this paragraph shall be so included ratably over the 4-tax- able year period beginning with the taxable year in which the payment or distribution is made.’’ Subsec. (d)(3)(D). Pub. L. 105–206, § 6005(b)(6)(B), redes- ignated subpar. (E) as (D) and struck out heading and text of former subpar. (D). Text read as follows: ‘‘If, no later than the due date for filing the return of tax for any taxable year (without regard to extensions), an in- dividual transfers, from an individual retirement plan (other than a Roth IRA), contributions for such taxable year (and any earnings allocable thereto) to a Roth IRA, no such amount shall be includible in gross in- come to the extent no deduction was allowed with re- spect to such amount.’’ Subsec. (d)(3)(E). Pub. L. 105–206, § 6005(b)(6)(B), redes- ignated subpar. (F) as (E). Former subpar. (E) redesig- nated (D). Subsec. (d)(3)(F). Pub. L. 105–206, § 6005(b)(6)(B), redes- ignated subpar. (G) as (F). Former subpar. (F) redesig- nated (E). Pub. L. 105–206, § 6005(b)(4)(B), added subpar. (F). Subsec. (d)(3)(G). Pub. L. 105–206, § 6005(b)(6)(B), redes- ignated subpar. (G) as (F). Pub. L. 105–206, § 6005(b)(4)(B), added subpar. (G). Subsec. (d)(4). Pub. L. 105–206, § 6005(b)(5)(A), sub- stituted ‘‘Aggregation and ordering rules’’ for ‘‘Coordi- nation with individual retirement accounts’’ in heading and amended text generally. Prior to amendment, text read as follows: ‘‘Section 408(d)(2) shall be applied sepa- rately with respect to Roth IRAs and other individual retirement plans.’’ Subsec. (d)(6). Pub. L. 105–206, § 6005(b)(6)(A), added par. (6). Subsec. (d)(7). Pub. L. 105–206, § 6005(b)(7), added par. (7). Subsec. (f). Pub. L. 105–206, § 6005(b)(9), added subsec. (f). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2022 AMENDMENT Pub. L. 117–328, div. T, title I, § 126(d), Dec. 29, 2022, 136 Stat. 5317, provided that: ‘‘The amendments made by this section [amending this section and section 529 of this title] shall apply with respect to distributions after December 31, 2023.’’ Amendment by section 401(b)(5) of Pub. L. 117–328 ef- fective as if included in the section of div. O of Pub. L. 116–94 to which the amendment relates, see section 401(c) of Pub. L. 117–328, set out as a note under section 72 of this title. Amendment by section 601(a), (c)(2), (d) of Pub. L. 117–328 applicable to taxable years beginning after Dec. 31, 2022, see section 601(e) of Pub. L. 117–328, set out as a note under section 402 of this title. EFFECTIVE DATE OF 2019 AMENDMENT Amendment by Pub. L. 116–94 applicable to contribu- tions made for taxable years beginning after Dec. 31, 2019, see section 107(d)(1) of div. O of Pub. L. 116–94, set out in a note under section 219 of this title. EFFECTIVE DATE OF 2017 AMENDMENT Amendment by section 11002(d)(1)(W) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11002(e) of Pub. L. 115–97, set out as a note under section 1 of this title. Page 1338 TITLE 26—INTERNAL REVENUE CODE § 408A Pub. L. 115–97, title I, § 13611(b), Dec. 22, 2017, 131 Stat. 2165, provided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017.’’ EFFECTIVE DATE OF 2008 AMENDMENT Pub. L. 110–458, title I, § 108(h)(2), Dec. 23, 2008, 122 Stat. 5109, amended this section ‘‘[i]n the case of tax- able years beginning after December 31, 2009’’. 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. Pub. L. 110–245, title I, § 109(d), June 17, 2008, 122 Stat. 1633, provided that: ‘‘(1) IN GENERAL.—Except as provided by paragraphs (2) and (3), the amendments made by this section [amending this section and section 530 of this title] shall apply with respect to deaths from injuries occur- ring on or after the date of the enactment of this Act [June 17, 2008]. ‘‘(2) APPLICATION OF AMENDMENTS TO DEATHS FROM IN- JURIES OCCURRING ON OR AFTER OCTOBER 7, 2001, AND BE- FORE ENACTMENT.—The amendments made by this sec- tion shall apply to any contribution made pursuant to section 408A(e)(2) or 530(d)(5) of the Internal Revenue Code of 1986, as amended by this Act, with respect to amounts received under section 1477 of title 10, United States Code, or under section 1967 of title 38 of such Code, for deaths from injuries occurring on or after Oc- tober 7, 2001, and before the date of the enactment of this Act if such contribution is made not later than 1 year after the date of the enactment of this Act. ‘‘(3) PENSION PROTECTION ACT CHANGES.—Section 408A(e)(1) of the Internal Revenue Code of 1986 (as in ef- fect after the amendments made by subsection (b)) shall apply to taxable years beginning after December 31, 2007.’’ EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109–280, title VIII, § 824(b)(1), Aug. 17, 2006, 120 Stat. 998, provided that the amendment made by sec- tion 824(b)(1) amends this section as in effect before the Tax Increase Prevention and Reconciliation Act of 2005, Pub. L. 109–222. See below. Pub. L. 109–280, title VIII, § 824(c), Aug. 17, 2006, 120 Stat. 999, provided that: ‘‘The amendments made by this section [amending this section] shall apply to dis- tributions after December 31, 2007.’’ Amendment by section 833(c) of Pub. L. 109–280 appli- cable to taxable years beginning after 2006, see section 833(d) of Pub. L. 109–280, set out as a note under section 25B of this title. Pub. L. 109–222, title V, § 512(c), May 17, 2006, 120 Stat. 366, provided that: ‘‘The amendments made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 2009.’’ EFFECTIVE DATE OF 2001 AMENDMENT Amendment by Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2005, see section 617(f) of Pub. L. 107–16, set out as a note under section 402 of this title. EFFECTIVE DATE OF 1998 AMENDMENTS Amendment by Pub. L. 105–277 effective as if included in the provision of the Internal Revenue Service Re- structuring and Reform Act of 1998, Pub. L. 105–206, to which such amendment relates, see section 4002(k) of Pub. L. 105–277, set out as a note under section 1 of this title. Amendment by section 6005(b)(1)–(7), (9) of Pub. L. 105–206 effective, except as otherwise provided, as if in- cluded in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title. Pub. L. 105–206, title VII, § 7004(b), July 22, 1998, 112 Stat. 833, provided that: ‘‘The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2004.’’ EFFECTIVE DATE Section applicable to taxable years beginning after Dec. 31, 1997, see section 302(f) of Pub. L. 105–34, set out as an Effective Date of 1997 Amendment note under sec- tion 219 of this title. ROLLOVER OF AMOUNTS RECEIVED IN AIRLINE CARRIER BANKRUPTCY TO ROTH IRAS Pub. L. 110–458, title I, § 125, Dec. 23, 2008, 122 Stat. 5115, provided that: ‘‘(a) GENERAL RULE.—If a qualified airline employee receives any airline payment amount and transfers any portion of such amount to a Roth IRA within 180 days of receipt of such amount (or, if later, within 180 days of the date of the enactment of this Act [Dec. 23, 2008]), then such amount (to the extent so transferred) shall be treated as a qualified rollover contribution described in section 408A(e) of the Internal Revenue Code of 1986, and the limitations described in section 408A(c)(3) of such Code shall not apply to any such transfer. ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For purposes of this section— ‘‘(1) AIRLINE PAYMENT AMOUNT.— ‘‘(A) IN GENERAL.—The term ‘airline payment amount’ means any payment of any money or other property which is payable by a commercial pas- senger airline carrier to a qualified airline em- ployee— ‘‘(i) under the approval of an order of a Federal bankruptcy court in a case filed after September 11, 2001, and before January 1, 2007, and ‘‘(ii) in respect of the qualified airline employ- ee’s interest in a bankruptcy claim against the carrier, any note of the carrier (or amount paid in lieu of a note being issued), or any other fixed ob- ligation of the carrier to pay a lump sum amount. The amount of such payment shall be determined without regard to any requirement to deduct and withhold tax from such payment under sections 3102(a) and 3402(a). ‘‘(B) EXCEPTION.—An airline payment amount shall not include any amount payable on the basis of the carrier’s future earnings or profits. ‘‘(2) QUALIFIED AIRLINE EMPLOYEE.—The term ‘quali- fied airline employee’ means an employee or former employee of a commercial passenger airline carrier who was a participant in a defined benefit plan main- tained by the carrier which— ‘‘(A) is a plan described in section 401(a) of the In- ternal Revenue Code of 1986 which includes a trust exempt from tax under section 501(a) of such Code, and ‘‘(B) was terminated or became subject to the re- strictions contained in paragraphs (2) and (3) of sec- tion 402(b) of the Pension Protection Act of 2006 [Pub. L. 109–280, 26 U.S.C. 430 note]. ‘‘(3) REPORTING REQUIREMENTS.—If a commercial passenger airline carrier pays 1 or more airline pay- ment amounts, the carrier shall, within 90 days of such payment (or, if later, within 90 days of the date of the enactment of this Act [Dec. 23, 2008]), report— ‘‘(A) to the Secretary of the Treasury, the names of the qualified airline employees to whom such amounts were paid, and ‘‘(B) to the Secretary and to such employees, the years and the amounts of the payments. Such reports shall be in such form, and contain such additional information, as the Secretary may pre- scribe. ‘‘(c) EFFECTIVE DATE.—This section shall apply to transfers made after the date of the enactment of this Act [Dec. 23, 2008] with respect to airline payment amounts paid before, on, or after such date.’’ Page 1339 TITLE 26—INTERNAL REVENUE CODE § 409 1 See References in Text note below. § 409. Qualifications for tax credit employee stock ownership plans (a) Tax credit employee stock ownership plan de- fined Except as otherwise provided in this title, for purposes of this title, the term ‘‘tax credit em- ployee stock ownership plan’’ means a defined contribution plan which— (1) meets the requirements of section 401(a), (2) is designed to invest primarily in em- ployer securities, and (3) meets the requirements of subsections (b), (c), (d), (e), (f), (g), (h), and (o) of this sec- tion. (b) Required allocation of employer securities (1) In general A plan meets the requirements of this sub- section if— (A) the plan provides for the allocation for the plan year of all employer securities transferred to it or purchased by it (because of the requirements of section 41(c)(1)(B)) 1 to the accounts of all participants who are en- titled to share in such allocation, and (B) for the plan year the allocation to each participant so entitled is an amount which bears substantially the same proportion to the amount of all such securities allocated to all such participants in the plan for that year as the amount of compensation paid to such participant during that year bears to the compensation paid to all such partici- pants during that year. (2) Compensation in excess of $100,000 dis- regarded For purposes of paragraph (1), compensation of any participant in excess of the first $100,000 per year shall be disregarded. (3) Determination of compensation For purposes of this subsection, the amount of compensation paid to a participant for any period is the amount of such participant’s compensation (within the meaning of section 415(c)(3)) for such period. (4) Suspension of allocation in certain cases Notwithstanding paragraph (1), the alloca- tion to the account of any participant which is attributable to the basic employee plan credit or the credit allowed under section 41 1 (relat- ing to the employee stock ownership credit) may be extended over whatever period may be necessary to comply with the requirements of section 415. (c) Participants must have nonforfeitable rights A plan meets the requirements of this sub- section only if it provides that each participant has a nonforfeitable right to any employer secu- rity allocated to his account. (d) Employer securities must stay in the plan A plan meets the requirements of this sub- section only if it provides that no employer se- curity allocated to a participant’s account under subsection (b) (or allocated to a partici- pant’s account in connection with matched em- ployer and employee contributions) may be dis- tributed from that account before the end of the 84th month beginning after the month in which the security is allocated to the account. To the extent provided in the plan, the preceding sen- tence shall not apply in the case of— (1) death, disability, separation from service, or termination of the plan; (2) a transfer of a participant to the employ- ment of an acquiring employer from the em- ployment of the selling corporation in the case of a sale to the acquiring corporation of sub- stantially all of the assets used by the selling corporation in a trade or business conducted by the selling corporation, or (3) with respect to the stock of a selling cor- poration, a disposition of such selling corpora- tion’s interest in a subsidiary when the partic- ipant continues employment with such sub- sidiary. This subsection shall not apply to any distribu- tion required under section 401(a)(9) or to any distribution or reinvestment required under sec- tion 401(a)(28). (e) Voting rights (1) In general A plan meets the requirements of this sub- section if it meets the requirements of para- graph (2) or (3), whichever is applicable. (2) Requirements where employer has a reg- istration-type class of securities If the employer has a registration-type class of securities, the plan meets the requirements of this paragraph only if each participant or beneficiary in the plan is entitled to direct the plan as to the manner in which securities of the employer which are entitled to vote and are allocated to the account of such partici- pant or beneficiary are to be voted. (3) Requirement for other employers If the employer does not have a registration- type class of securities, the plan meets the re- quirements of this paragraph only if each par- ticipant or beneficiary in the plan is entitled to direct the plan as to the manner in which voting rights under securities of the employer which are allocated to the account of such participant or beneficiary are to be exercised with respect to any corporate matter which involves the voting of such shares with respect to the approval or disapproval of any cor- porate merger or consolidation, recapitaliza- tion, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or such similar transaction as the Secretary may prescribe in regulations. (4) Registration-type class of securities defined For purposes of this subsection, the term, ‘‘registration-type class of securities’’ means— (A) a class of securities required to be reg- istered under section 12 of the Securities Ex- change Act of 1934, and (B) a class of securities which would be re- quired to be so registered except for the ex- emption from registration provided in sub- section (g)(2)(H) of such section 12. (5) 1 vote per participant A plan meets the requirements of paragraph (3) with respect to an issue if—