Page 1287 TITLE 26 INTERNAL REVENUE CODE 419

Page 1287 TITLE 26 INTERNAL REVENUE CODE 419 into account the plan s recent and anticipated financial experience, that the plan s available resources are not sufficient to pay benefits under the plan when due for the next plan year, the plan sponsor shall make such determination available to interested parties. (3) Determination of resource benefit level The plan sponsor of a plan in reorganization shall determine in writing for each insolvency year the resource benefit level and the level of basic benefits no later than 3 months before the insolvency year. (e) Notice requirements (1) Impending insolvency If the plan sponsor of a plan in reorganization determines under subsection (d)(1) or (2) that the plan may become insolvent (within the meaning of subsection (b)(1)), the plan sponsor shall (A) notify the Secretary, the Pension Benefit Guaranty Corporation, the parties described in section 418A(a)(2), and the plan participants and beneficiaries of that determination, and (B) inform the parties described in section 418A(a)(2) and the plan participants and beneficiaries that if insolvency occurs certain benefit payments will be suspended, but that basic benefits will continue to be paid. (2) Resource benefit level No later than 2 months before the first day of each insolvency year, the plan sponsor of a plan in reorganization shall notify the Secretary, the Pension Benefit Guaranty Corporation, the parties described in section 418A(a)(2), and the plan participants and beneficiaries of the resource benefit level determined in writing for that insolvency year. (3) Potential need for financial assistance In any case in which the plan sponsor anticipates that the resource benefit level for an insolvency year may not exceed the level of basic benefits, the plan sponsor shall notify the Pension Benefit Guaranty Corporation. (4) Regulations Notice required by this subsection shall be given in accordance with regulations prescribed by the Pension Benefit Guaranty Corporation, except that notice to the Secretary shall be given in accordance with regulations prescribed by the Secretary. (5) Corporation may prescribe time The Pension Benefit Guaranty Corporation may prescribe a time other than the time prescribed by this section for the making of a determination or the filing of a notice under this section. (f) Financial assistance (1) Permissive application If the plan sponsor of an insolvent plan for which the resource benefit level is above the level of basic benefits anticipates that, for any month in an insolvency year, the plan will not have funds sufficient to pay basic benefits, the plan sponsor may apply for financial assistance from the Pension Benefit Guaranty Corporation under section 4261 of the Employee Retirement Income Security Act of 1974. (2) Mandatory application A plan sponsor who has determined a resource benefit level for an insolvency year which is below the level of basic benefits shall apply for financial assistance from the Pension Benefit Guaranty Corporation under section 4261 of the Employee Retirement Income Security Act of 1974. (g) Financial assistance Any amount of any financial assistance from the Pension Benefit Guaranty Corporation to any plan, and any repayment of such amount, shall be taken into account under this subpart in such manner as determined by the Secretary. (Added Pub. L. 96 364, title II, 202(a), Sept. 26, 1980, 94 Stat. 1282; amended Pub. L. 109 280, title II, 213(a), Aug. 17, 2006, 120 Stat. 917.) REFERENCES IN TEXT Section 4022A(g)(5) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (a), is classified to section 1322a(g)(5) of Title 29, Labor. Section 4261 of the Employee Retirement Income Security Act of 1974, referred to in subsecs. (b)(3) and (f), is classified to section 1431 of Title 29. AMENDMENTS 2006 Subsec. (d)(1). Pub. L. 109 280 substituted 5 plan years for 3 plan years the second place it appeared and inserted at end If the plan sponsor makes such a determination that the plan will be insolvent in any of the next 5 plan years, the plan sponsor shall make the comparison under this paragraph at least annually until the plan sponsor makes a determination that the plan will not be insolvent in any of the next 5 plan years. EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109 280, title II, 213(b), Aug. 17, 2006, 120 Stat. 918, provided that: The amendments made by this section [amending this section] shall apply with respect to the determinations made in plan years beginning after 2007. SUBPART D TREATMENT OF WELFARE BENEFIT FUNDS Sec. 419. Treatment of funded welfare benefit plans. 419A. Qualified asset account; limitation on additions to account. 419. Treatment of funded welfare benefit plans (a) General rule Contributions paid or accrued by an employer to a welfare benefit fund (1) shall not be deductible under this chapter, but (2) if they would otherwise be deductible, shall (subject to the limitation of subsection (b)) be deductible under this section for the taxable year in which paid. (b) Limitation The amount of the deduction allowable under subsection (a)(2) for any taxable year shall not exceed the welfare benefit fund s qualified cost for the taxable year. (c) Qualified cost

419 TITLE 26 INTERNAL REVENUE CODE Page 1288 Except as otherwise provided in this subsection, the term qualified cost means, with respect to any taxable year, the sum of (A) the qualified direct cost for such taxable year, and (B) subject to the limitation of section 419A(b), any addition to a qualified asset account for the taxable year. (2) Reduction for funds after-tax income In the case of any welfare benefit fund, the qualified cost for any taxable year shall be reduced by such fund s after-tax income for such taxable year. (3) Qualified direct cost The term qualified direct cost means, with respect to any taxable year, the aggregate amount (including administrative expenses) which would have been allowable as a deduction to the employer with respect to the benefits provided during the taxable year, if (i) such benefits were provided directly by the employer, and (ii) the employer used the cash receipts and disbursements method of accounting. (B) Time when benefits provided For purposes of subparagraph (A), a benefit shall be treated as provided when such benefit would be includible in the gross income of the employee if provided directly by the employer (or would be so includible but for any provision of this chapter excluding such benefit from gross income). (C) 60-month amortization of child care facilities (i) In general In determining qualified direct costs with respect to any child care facility for purposes of subparagraph (A), in lieu of depreciation the adjusted basis of such facility shall be allowable as a deduction ratably over a period of 60 months beginning with the month in which the facility is placed in service. (ii) Child care facility The term child care facility means any tangible property which qualifies under regulations prescribed by the Secretary as a child care center primarily for children of employees of the employer; except that such term shall not include any property (I) not of a character subject to depreciation; or (II) located outside the United States. (4) After-tax income The term after-tax income means, with respect to any taxable year, the gross income of the welfare benefit fund reduced by the sum of (i) the deductions allowed by this chapter which are directly connected with the production of such gross income, and (ii) the tax imposed by this chapter on the fund for the taxable year. (B) Treatment of certain amounts In determining the gross income of any welfare benefit fund (i) contributions and other amounts received from employees shall be taken into account, but (ii) contributions from the employer shall not be taken into account. (5) Item only taken into account once No item may be taken into account more than once in determining the qualified cost of any welfare benefit fund. (d) Carryover of excess contributions If (1) the amount of the contributions paid (or deemed paid under this subsection) by the employer during any taxable year to a welfare benefit fund, exceeds (2) the limitation of subsection (b), such excess shall be treated as an amount paid by the employer to such fund during the succeeding taxable year. (e) Welfare benefit fund The term welfare benefit fund means any fund (A) which is part of a plan of an employer, and (B) through which the employer provides welfare benefits to employees or their beneficiaries. (2) Welfare benefit The term welfare benefit means any benefit other than a benefit with respect to which (A) section 83(h) applies, (B) section 404 applies (determined without regard to section 404(b)(2)), or (C) section 404A applies. (3) Fund The term fund means (A) any organization described in paragraph (7), (9), (17), or (20) of section 501(c), (B) any trust, corporation, or other organization not exempt from the tax imposed by this chapter, and (C) to the extent provided in regulations, any account held for an employer by any person. (4) Treatment of amounts held pursuant to certain insurance contracts Notwithstanding paragraph (3)(C), the term fund shall not include amounts held by an insurance company pursuant to an insurance contract if (i) such contract is a life insurance contract described in section 264(a)(1), or (ii) such contract is a qualified nonguaranteed contract. (B) Qualified nonguaranteed contract (i) In general For purposes of this paragraph, the term qualified nonguaranteed contract means

Page 1289 TITLE 26 INTERNAL REVENUE CODE 419 any insurance contract (including a reasonable premium stabilization reserve held thereunder) if (I) there is no guarantee of a renewal of such contract, and (II) other than insurance protection, the only payments to which the employer or employees are entitled are experience rated refunds or policy dividends which are not guaranteed and which are determined by factors other than the amount of welfare benefits paid to (or on behalf of) the employees of the employer or their beneficiaries. (ii) Limitation In the case of any qualified nonguaranteed contract, subparagraph (A) shall not apply unless the amount of any experience rated refund or policy dividend payable to an employer with respect to a policy year is treated by the employer as received or accrued in the taxable year in which the policy year ends. (f) Method of contributions, etc., having the effect of a plan If (1) there is no plan, but (2) there is a method or arrangement of employer contributions or benefits which has the effect of a plan, this section shall apply as if there were a plan. (g) Extension to plans for independent contractors If any fund would be a welfare benefit fund (as modified by subsection (f)) but for the fact that there is no employee-employer relationship (1) this section shall apply as if there were such a relationship, and (2) any reference in this section to the employer shall be treated as a reference to the person for whom services are provided, and any reference in this section to an employee shall be treated as a reference to the person providing the services. (Added Pub. L. 98 369, div. A, title V, 511(a), July 18, 1984, 98 Stat. 854; amended Pub. L. 99 514, title XVIII, 1851(a)(1), (8)(A), (b)(2)(c)(iv), Oct. 22, 1986, 100 Stat. 2858, 2860, 2863; Pub. L. 100 203, title IX, 10201(b)(4), Dec. 22, 1987, 101 Stat. 1330 387; Pub. L. 100 647, title I, 1018(t)(2)(C), Nov. 10, 1988, 102 Stat. 3587.) AMENDMENTS 1988 Subsec. (a)(1). Pub. L. 100 647 substituted chapter for subchapter. 1987 Subsec. (e)(2)(d). Pub. L. 100 203 struck out subpar. (D) which related to a benefit with respect to which an election under section 463 applies. 1986 Subsec. (a)(1). Pub. L. 99 514, 1851(b)(2)(C)(iv)(I), substituted under this subchapter for under section 162 or 212. Subsec. (a)(2). Pub. L. 99 514, 1851(b)(2)(C)(iv)(II), substituted they would otherwise be deductible for they satisfy the requirements of either of such sections. Subsec. (e)(4). Pub. L. 99 514, 1851(a)(8)(A), added par. (4). Subsec. (g)(1). Pub. L. 99 514, 1851(a)(1), substituted such a relationship for such a plan. 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 OF 1987 AMENDMENT Amendment by Pub. L. 100 203 applicable to taxable years beginning after Dec. 31, 1987, see section 10201(c)(1) of Pub. L. 100 203, set out as a note under section 404 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99 514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98 369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99 514, set out as a note under section 48 of this title. EFFECTIVE DATE Section 511(e) of Pub. L. 98 369, as amended by Pub. L. 99 514, title XVIII, 1851(a)(12), (14), Oct. 22, 1986, 100 Stat. 2862, provided that: (1) IN GENERAL. Except as otherwise provided in this subsection, the amendments made by this section [enacting this subpart] shall apply to contributions paid or accrued after December 31, 1985, in taxable years ending after such date. (2) SPECIAL RULE FOR COLLECTIVE BARGAINING AGREE- MENTS. In the case of plan maintained pursuant to 1 or more collective bargaining agreements (A) between employee representatives and 1 or more employers, and (B) in effect on July 1, 1985 (or ratified on or before such date), the amendments made by this section shall not apply to years beginning before the date on which the last of the collective bargaining agreements relating to the plan terminates (determined without regard to any extension thereof agreed to after July 1, 1985). (3) SPECIAL RULE FOR PARAGRAPH (2). For purposes of paragraph (2), any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination of such collective bargaining agreement. (4) SPECIAL EFFECTIVE DATE FOR CONTRIBUTIONS OF FACILITIES. Notwithstanding paragraphs (1) and (2), the amendments made by this section shall apply in the case of (A) any contribution after June 22, 1984, of a facility to a welfare benefit fund, and (B) any other contribution after June 22, 1984, to a welfare benefit fund to be used to acquire or improve a facility. (5) BINDING CONTRACT EXCEPTIONS TO PARAGRAPH (4). Paragraph (4) shall not apply to any facility placed in service before January 1, 1987 (A) which is acquired or improved by the fund (or contributed to the fund) pursuant to a binding contract in effect on June 22, 1984, and at all times thereafter, or (B) the construction of which by or for the fund began before June 22, 1984. (6) AMENDMENTS RELATED TO TAX ON UNRELATED BUSINESS INCOME. The amendments made by subsection (b) [amending section 512 of this title] shall apply with respect to taxable years ending after December 31, 1985. For purposes of section 15 of the Internal Revenue Code of 1954 [now 1986], such amendments shall be treated as a change in the rate of a tax imposed by chapter 1 of such Code. (7) AMENDMENTS RELATED TO EXCISE TAXES ON CER- TAIN WELFARE BENEFIT PLANS. The amendments made by subsection (c) [enacting section 4976 of this title] shall apply to benefits provided after December 31, 1985. 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

419A TITLE 26 INTERNAL REVENUE CODE Page 1290 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. EFFECTIVE DATE OF REGULATIONS Section 1851(a)(8)(B) of Pub. L. 99 514 provided that: Except in the case of a reserve for post-retirement medical or life insurance benefits and any other arrangement between an insurance company and an employer under which the employer has a contractual right to a refund or dividend based solely on the experience of such employer, any account held for an employer by any person and defined as a fund in regulations issued pursuant to section 419(e)(3)(C) of the Internal Revenue Code of 1954 [now 1986] shall be considered a fund no earlier than 6 months following the date such regulations are published in final form. 419A. Qualified asset account; limitation on additions to account (a) General rule For purposes of this subpart and section 512, the term qualified asset account means any account consisting of assets set aside to provide for the payment of (1) disability benefits, (2) medical benefits, (3) SUB or severance pay benefits, or (4) life insurance benefits. (b) Limitation on additions to account No addition to any qualified asset account may be taken into account under section 419(c)(1)(B) to the extent such addition results in the amount in such account exceeding the account limit. (c) Account limit Except as otherwise provided in this subsection, the account limit for any qualified asset account for any taxable year is the amount reasonably and actuarially necessary to fund (A) claims incurred but unpaid (as of the close of such taxable year) for benefits referred to in subsection (a), and (B) administrative costs with respect to such claims. (2) Additional reserve for post-retirement medical and life insurance benefits The account limit for any taxable year may include a reserve funded over the working lives of the covered employees and actuarially determined on a level basis (using assumptions that are reasonable in the aggregate) as necessary for (A) post-retirement medical benefits to be provided to covered employees (determined on the basis of current medical costs), or (B) post-retirement life insurance benefits to be provided to covered employees. (3) Amount taken into account for SUB or severance pay benefits The account limit for any taxable year with respect to SUB or severance pay benefits is 75 percent of the average annual qualified direct costs for SUB or severance pay benefits for any 2 of the immediately preceding 7 taxable years (as selected by the fund). (B) Special rule for certain new plans In the case of any new plan for which SUB or severance pay benefits are not available to any key employee, the Secretary shall, by regulations, provide for an interim amount to be taken into account under paragraph (1). (4) Limitation on amounts to be taken into account (A) Disability benefits For purposes of paragraph (1), disability benefits payable to any individual shall not be taken into account to the extent such benefits are payable at an annual rate in excess of the lower of (i) 75 percent of such individual s average compensation for his high 3 years (within the meaning of section 415(b)(3)), or (ii) the limitation in effect under section 415(b)(1)(A). (B) Limitation on SUB or severance pay benefits For purposes of paragraph (3), any SUB or severance pay benefit payable to any individual shall not be taken into account to the extent such benefit is payable at an annual rate in excess of 150 percent of the limitation in effect under section 415(c)(1)(A). (5) Special limitation where no actuarial certification Unless there is an actuarial certification of the account limit determined under this subsection for any taxable year, the account limit for such taxable year shall not exceed the sum of the safe harbor limits for such taxable year. (B) Safe harbor limits (i) Short-term disability benefits In the case of short-term disability benefits, the safe harbor limit for any taxable year is 17.5 percent of the qualified direct costs (other than insurance premiums) for the immediately preceding taxable year with respect to such benefits. (ii) Medical benefits In the case of medical benefits, the safe harbor limit for any taxable year is 35 percent of the qualified direct costs (other than insurance premiums) for the immediately preceding taxable year with respect to medical benefits. (iii) SUB or severance pay benefits In the case of SUB or severance pay benefits, the safe harbor limit for any taxable year is the amount determined under paragraph (3). (iv) Long-term disability or life insurance benefits In the case of any long-term disability benefit or life insurance benefit, the safe

Page 1291 TITLE 26 INTERNAL REVENUE CODE 419A harbor limit for any taxable year shall be the amount prescribed by regulations. (6) Additional reserve for medical benefits of bona fide association plans An applicable account limit for any taxable year may include a reserve in an amount not to exceed 35 percent of the sum of (i) the qualified direct costs, and (ii) the change in claims incurred but unpaid, for such taxable year with respect to medical benefits (other than post-retirement medical benefits). (B) Applicable account limit For purposes of this subsection, the term applicable account limit means an account limit for a qualified asset account with respect to medical benefits provided through a plan maintained by a bona fide association (as defined in section 2791(d)(3) of the Public Health Service Act (42 U.S.C. 300gg 91(d)(3)). 1 (d) Requirement of separate accounts for post-retirement medical or life insurance benefits provided to key employees In the case of any employee who is a key employee (A) a separate account shall be established for any medical benefits or life insurance benefits provided with respect to such employee after retirement, and (B) medical benefits and life insurance benefits provided with respect to such employee after retirement may only be paid from such separate account. The requirements of this paragraph shall apply to the first taxable year for which a reserve is taken into account under subsection (c)(2) and to all subsequent taxable years. (2) Coordination with section 415 For purposes of section 415, any amount attributable to medical benefits allocated to an account established under paragraph (1) shall be treated as an annual addition to a defined contribution plan for purposes of section 415(c). Subparagraph (B) of section 415(c)(1) shall not apply to any amount treated as an annual addition under the preceding sentence. (3) Key employee For purposes of this section, the term key employee means any employee who, at any time during the plan year or any preceding plan year, is or was a key employee as defined in section 416(i). (e) Special limitations on reserves for medical benefits or life insurance benefits provided to retired employees (1) Reserve must be nondiscriminatory No reserve may be taken into account under subsection (c)(2) for post-retirement medical 1 So in original. The period probably should be preceded by an additional closing parenthesis. benefits or life insurance benefits to be provided to covered employees unless the plan meets the requirements of section 505(b) with respect to such benefits (whether or not such requirements apply to such plan). The preceding sentence shall not apply to any plan maintained pursuant to an agreement between employee representatives and 1 or more employers if the Secretary finds that such agreement is a collective bargaining agreement and that post-retirement medical benefits or life insurance benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. (2) Limitation on amount of life insurance benefits Life insurance benefits shall not be taken into account under subsection (c)(2) to the extent the aggregate amount of such benefits to be provided with respect to the employee exceeds $50,000. (f) Definitions and other special rules (1) SUB or severance pay benefit The term SUB or severance pay benefit means (A) any supplemental unemployment compensation benefit (as defined in section 501(c)(17)(D)), and (B) any severance pay benefit. (2) Medical benefit The term medical benefit means a benefit which consists of the providing (directly or through insurance) of medical care (as defined in section 213(d)). (3) Life insurance benefit The term life insurance benefit includes any other death benefit. (4) Valuation For purposes of this section, the amount of the qualified asset account shall be the value of the assets in such account (as determined under regulations). (5) Special rule for collective bargained and employee pay-all plans No account limits shall apply in the case of any qualified asset account under a separate welfare benefit fund (A) under a collective bargaining agreement, or (B) an employee pay-all plan under section 501(c)(9) if (i) such plan has at least 50 employees (determined without regard to subsection (h)(1)), and (ii) no employee is entitled to a refund with respect to amounts in the fund, other than a refund based on the experience of the entire fund. (6) Exception for 10-or-more employer plans This subpart shall not apply in the case of any welfare benefit fund which is part of a 10 or more employer plan. The preceding sentence shall not apply to any plan which

419A TITLE 26 INTERNAL REVENUE CODE Page 1292 maintains experience-rating arrangements with respect to individual employers. (B) 10 or more employer plan For purposes of subparagraph (A), the term 10 or more employer plan means a plan (i) to which more than 1 employer contributes, and (ii) to which no employer normally contributes more than 10 percent of the total contributions contributed under the plan by all employers. (7) Adjustments for existing excess reserves (A) Increase in account limit The account limit for any of the first 4 taxable years to which this section applies shall be increased by the applicable percentage of any existing excess reserves. (B) Applicable percentage For purposes of subparagraph (A) The applicable In the case of: percentage is: The first taxable year to which this section applies... 80 The second taxable year to which this section applies... 60 The third taxable year to which this section applies... 40 The fourth taxable year to which this section applies... 20. (C) Existing excess reserve For purposes of computing the increase under subparagraph (A) for any taxable year, the term existing excess reserve means the excess (if any) of (i) the amount of assets set aside at the close of the first taxable year ending after July 18, 1984, for purposes described in subsection (a), over (ii) the account limit determined under this section (without regard to this paragraph) for the taxable year for which such increase is being computed. (D) Funds to which paragraph applies This paragraph shall apply only to a welfare benefit fund which, as of July 18, 1984, had assets set aside for purposes described in subsection (a). (g) Employer taxed on income of welfare benefit fund in certain cases In the case of any welfare benefit fund which is not an organization described in paragraph (7), (9), (17), or (20) of section 501(c), the employer shall include in gross income for any taxable year an amount equal to such fund s deemed unrelated income for the fund s taxable year ending within the employer s taxable year. (2) Deemed unrelated income For purposes of paragraph (1), the deemed unrelated income of any welfare benefit fund shall be the amount which would have been its unrelated business taxable income under section 512(a)(3) if such fund were an organization described in paragraph (7), (9), (17), or (20) of section 501(c). (3) Coordination with section 419 If any amount is included in the gross income of an employer for any taxable year under paragraph (1) with respect to any welfare benefit fund (A) the amount of the tax imposed by this chapter which is attributable to the amount so included shall be treated as a contribution paid to such welfare benefit fund on the last day of such taxable year, and (B) the tax so attributable shall be treated as imposed on the fund for purposes of section 419(c)(4)(A). (h) Aggregation rules For purposes of this subpart (1) Aggregation of funds (A) Mandatory aggregation For purposes of subsections (c)(4), (d)(2), and (e)(2), all welfare benefit funds of an employer shall be treated as 1 fund. (B) Permissive aggregation for purposes not specified in subparagraph (A) For purposes of this section (other than the provisions specified in subparagraph (A)), at the election of the employer, 2 or more welfare benefit funds of such employer may (to the extent not inconsistent with the purposes of this subpart and section 512) be treated as 1 fund. (2) Treatment of related employers Rules similar to the rules of subsections (b), (c), (m), and (n) of section 414 shall apply. (i) Regulations The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this subpart. Such regulations may provide that the plan administrator of any welfare benefit fund which is part of a plan to which more than 1 employer contributes shall submit such information to the employers contributing to the fund as may be necessary to enable the employers to comply with the provisions of this section. (Added Pub. L. 98 369, div. A, title V, 511(a), July 18, 1984, 98 Stat. 856; amended Pub. L. 99 514, title XVIII, 1851(a)(2), (3)(A), (4) (7), (9), (13), Oct. 22, 1986, 100 Stat. 2858 2860, 2862; Pub. L. 100 647, title I, 1018(t)(1)(C), (2)(A), (u)(12), Nov. 10, 1988, 102 Stat. 3587, 3590; Pub. L. 104 188, title I, 1704(t)(60), Aug. 20, 1996, 110 Stat. 1890; Pub. L. 109 280, title VIII, 843(a), Aug. 17, 2006, 120 Stat. 1010.) AMENDMENTS 2006 Subsec. (c)(6). Pub. L. 109 280 added par. (6). 1996 Subsec. (c)(3). Pub. L. 104 188 substituted severance for severence in heading. 1988 Subsec. (a). Pub. L. 100 647, 1018(u)(12), made technical amendment to directory language of Pub. L. 99 514, 1851(a)(6)(B). See 1986 Amendment note below. Subsec. (f)(5). Pub. L. 100 647, 1018(t)(2)(A), repealed Pub. L. 99 514, 1851(a)(4). See 1986 Amendment note below. Pub. L. 100 647, 1018(t)(1)(C), substituted account for accounts. 1986 Subsec. (a). Pub. L. 99 514, 1851(a)(6)(B), as amended by Pub. L. 100 647, 1018(u)(12), inserted and section 512 after this subpart.

Page 1293 TITLE 26 INTERNAL REVENUE CODE 420 Subsec. (c)(5)(a). Pub. L. 99 514, 1851(a)(5), substituted under this subsection for under paragraph (1). Subsec. (d)(1). Pub. L. 99 514, 1851(a)(2)(B), inserted The requirements of this paragraph shall apply to the first taxable year for which a reserve is taken into account under subsection (c)(2) and to all subsequent taxable years. Subsec. (d)(2). Pub. L. 99 514, 1851(a)(2)(A), inserted Subparagraph (B) of section 415(c)(1) shall not apply to any amount treated as an annual addition under the preceding sentence. Subsec. (e). Pub. L. 99 514, 1851(a)(3)(A), amended subsec. (e) generally. Prior to amendment, par. (1), benefits must be nondiscriminatory, read as follows: No reserve may be taken into account under subsection (c)(2) for post-retirement medical benefits or life insurance benefits to be provided to covered employees unless the plan meets the requirements of section 505(b)(1) with respect to such benefits., and par. (2), taxable life insurance benefits not taken into account, read as follows: No life insurance benefit may be taken into account under subsection (c)(2) to the extent (A) such benefit is includible in gross income under section 79, or (B) such benefit would be includible in gross income under section 101(b) (determined by substituting $50,000 for $5,000 ). Subsec. (f)(5). Pub. L. 99 514, 1851(a)(13), amended par. (5) generally. Prior to amendment, par. (5) read as follows: HIGHER LIMIT IN CASE OF COLLECTIVELY BAR- GAINED PLANS. Not later than July 1, 1985, the Secretary shall by regulations provide for special account limits in the case of any qualified asset account under a welfare benefit fund established under a collective bargaining agreement. Pub. L. 99 514, 1851(a)(4), which directed amendment of par. (5) by substituting welfare benefit fund maintained pursuant to for welfare benefit fund established under, was repealed by Pub. L. 100 647, 1018(t)(2)(A). Subsec. (f)(7)(c), (D). Pub. L. 99 514, 1851(a)(7), added subpars. (C) and (D) and struck out former subpar. (C) which read as follows: For purposes of this paragraph, the term existing excess reserve means the excess (if any) of (i) the amount of assets set aside for purposes described in subsection (a) as of the close of the first taxable year ending after the date of the enactment of the Tax Reform Act of 1984, over (ii) the account limit which would have applied under this section to such taxable year if this section had applied to such taxable year. Subsec. (g)(3). Pub. L. 99 514, 1851(a)(9), added par. (3). Subsec. (h)(1). Pub. L. 99 514, 1851(a)(6)(A), amended par. (1) generally. Prior to amendment, par. (1) read as follows: At the election of the employer, 2 or more welfare benefit funds of such employer may be treated as 1 fund. EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109 280, title VIII, 843(b), Aug. 17, 2006, 120 Stat. 1010, provided that: The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2006. 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 OF 1986 AMENDMENT Amendment by Pub. L. 99 514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98 369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99 514, set out as a note under section 48 of this title. 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. APPLICATION OF SECTION 419A(e) TO GROUP-TERM LIFE INSURANCE Section 1851(a)(3)(B) of Pub. L. 99 514, as amended by Pub. L. 100 647, title I, 1018(t)(2)(D), Nov. 10, 1988, 102 Stat. 3587, provided that: Subsection (e) of section 419A, section 505, and section 4976(b)(1)(B) of the Internal Revenue Code of 1954 [now 1986] (as amended by subparagraph (A)) shall not apply to any group-term life insurance to the extent that the amendments made by section 223(a) of the Tax Reform Act of 1984 [section 223(a) of Pub. L. 98 369, amending section 79 of this title] do not apply to such insurance by reason of paragraph (2) of section 223(d) of such Act [set out as a note under section 79 of this title]. SUBPART E TREATMENT OF TRANSFERS TO RETIREE HEALTH ACCOUNTS Sec. 420. Transfers of excess pension assets to retiree health accounts. 420. Transfers of excess pension assets to retiree health accounts (a) General rule If there is a qualified transfer of any excess pension assets of a defined benefit plan to a health benefits account which is part of such plan (1) a trust which is part of such plan shall not be treated as failing to meet the requirements of subsection (a) or (h) of section 401 solely by reason of such transfer (or any other action authorized under this section), (2) no amount shall be includible in the gross income of the employer maintaining the plan solely by reason of such transfer, (3) such transfer shall not be treated (A) as an employer reversion for purposes of section 4980, or (B) as a prohibited transaction for purposes of section 4975, and (4) the limitations of subsection (d) shall apply to such employer. (b) Qualified transfer The term qualified transfer means a transfer (A) of excess pension assets of a defined benefit plan to a health benefits account which is part of such plan in a taxable year beginning after December 31, 1990, (B) which does not contravene any other provision of law, and (C) with respect to which the following requirements are met in connection with the plan (i) the use requirements of subsection (c)(1), (ii) the vesting requirements of subsection (c)(2), and