General rule
Liability for tax
The tax imposed by subsection (a) shall be paid by the employer.
Excess contributions
For purposes of this section, the term “excess contributions” has the meaning given such term by sections 401(k)(8)(B), 408(k)(6)(C), and 501(c)(18).
Excess aggregate contribution
For purposes of this section, the term “excess aggregate contribution” has the meaning given to such term by section 401(m)(6)(B). For purposes of determining excess aggregate contributions under an annuity contract described in section 403(b), such contract shall be treated as a plan described in subsection (e)(1).
Plan
No tax where excess distributed within specified period after close of year
In general
No tax shall be imposed under this section on any excess contribution or excess aggregate contribution, as the case may be, to the extent such contribution (together with any income allocable thereto through the end of the plan year for which the contribution was made) is distributed (or, if forfeitable, is forfeited) before the close of the first 2½ months (6 months in the case of an excess contribution or excess aggregate contribution to an eligible automatic contribution arrangement (as defined in section 414(w)(3))) of the following plan year.
Year of inclusion
Any amount distributed as provided in paragraph (1) shall be treated as earned and received by the recipient in the recipient’s taxable year in which such distributions were made.
Pub. L. 99–514, title XI, § 1117(b)(1)100 Stat. 2461 Pub. L. 100–647, title I, § 1011l102 Stat. 3470 Pub. L. 109–280, title IX, § 902(e)(1)120 Stat. 1038 (Added , , ; amended ()(8)–(11), , , 3471; –(3)(A), , .)
Editorial Notes
Amendments
Pub. L. 109–280, § 902(e)(1)(B)2006—Subsec. (f). , substituted “specified period after” for “2½ months of” in heading.
Pub. L. 109–280, § 902(e)(1)(A)Subsec. (f)(1). , (3)(A), inserted “through the end of the plan year for which the contribution was made” after “thereto” and “(6 months in the case of an excess contribution or excess aggregate contribution to an eligible automatic contribution arrangement (as defined in section 414(w)(3)))” after “2½ months”.
Pub. L. 109–280, § 902(e)(2)Subsec. (f)(2). , reenacted heading without change and amended text of par. (2) generally. Prior to amendment, text read as follows:
In general“(A) .—Except as provided in subparagraph (B), any amount distributed as provided in paragraph (1) shall be treated as received and earned by the recipient in his taxable year for which such contribution was made.
De minimis distributions“(B) .—If the total excess contributions and excess aggregate contributions distributed to a recipient under a plan for any plan year are less than $100, such distributions (and any income allocable thereto) shall be treated as earned and received by the recipient in his taxable year in which such distributions were made.”
Pub. L. 100–647, § 1011l1988—Subsec. (a)(1). ()(8), struck out “a cash or deferred arrangement which is part of” after “contributions under”.
Pub. L. 100–647, § 1011lSubsec. (c). ()(9), struck out “403(b),” and substituted “408(k)(6)(C)” for “408(k)(8)(B)”.
Pub. L. 100–647, § 1011lSubsec. (d). ()(10), inserted sentence at end relating to determination of excess aggregate contributions under certain annuity contracts.
Pub. L. 100–647, § 1011lSubsec. (f)(2). ()(11), substituted “Year of inclusion” for “Included in prior year” as heading, and amended text generally. Prior to amendment, text read as follows: “Any amount distributed as provided in paragraph (1) shall be treated as received and earned by the recipient in his taxable year for which such contribution was made.”
Statutory Notes and Related Subsidiaries
Effective Date of 2006 Amendment
Pub. L. 109–280section 902(g) of Pub. L. 109–280section 401 of this titleAmendment by applicable to plan years beginning after , see , set out as a note under .
Effective Date of 1988 Amendment
Pub. L. 100–647Pub. L. 99–514section 1019(a) of Pub. L. 100–647section 1 of this titleAmendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .
Effective Date
section 403(b) of this titlesection 1117(d) of Pub. L. 99–514section 401 of this titleSection applicable to plan years beginning after , with special provisions for plans maintained pursuant to collective bargaining agreements ratified before , and for annuity contracts under , see , set out as an Effective Date of 1986 Amendment note under .
Regulations
section 1141 of Pub. L. 99–514section 401 of this titleSecretary of the Treasury or his delegate to issue before , final regulations to carry out this section, see , set out as a note under .
Plan Amendments Not Required Until January 1, 1989
Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor 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 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 , see , as amended, set out as a note under .