Tax on reversion of qualified plan assets to employer

There is hereby imposed a tax of 20 percent of the amount of any employer reversion from a qualified plan. The tax imposed by subsection (a) shall be paid by the employer maintaining the plan. For purposes of this section— The term “qualified plan” means any plan meeting the requirements of section 401(a) or 403(a), other than— The term “employer reversion” means the amount of cash and the fair market value of other property received (directly or indirectly) by an employer from the qualified plan. The term “employer reversion” shall not include— any distribution to the employer which is allowable under section 401(a)(2)— If, upon an employer reversion from a qualified plan, any applicable amount is 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 employer reversion for purposes of this section (or includible in the gross income of the employer) if the requirements of subparagraphs (B), (C), and (D) are met. The requirements of this subparagraph are met if, within 90 days after the transfer (or such longer period as the Secretary may prescribe), the amount transferred is invested in employer securities (as defined in section 409(l)) or used to repay loans used to purchase such securities. The requirements of this subparagraph are met if the portion of the amount transferred which is not allocated under the plan to accounts of participants in the plan year in which the transfer occurs— when allocated to accounts of participants under the plan, is treated as an employer contribution for purposes of section 415(c), except that— The requirements of this subparagraph are met if at least half of the participants in the qualified plan are participants in the employee stock ownership plan (as of the close of the 1st plan year for which an allocation of the securities is required). For purposes of this paragraph, the term “applicable amount” means any amount which— 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. The amount transferred shall not be treated as meeting the requirements of subparagraphs (B) and (C) unless amounts attributable to such amount also meet such requirements. For purposes of subtitle F, the time for payment of the tax imposed by subsection (a) shall be the last day of the month following the month in which the employer reversion occurs. Subsection (a) shall be applied by substituting “50 percent” for “20 percent” with respect to any employer reversion from a qualified plan unless— For purposes of this subsection, the term “qualified replacement plan” means a qualified plan established or maintained by the employer in connection with a qualified plan termination (hereinafter referred to as the “replacement plan”) with respect to which the following requirements are met: At least 95 percent of the active participants in the terminated plan who remain as employees of the employer after the termination are active participants in the replacement plan. A direct transfer from the terminated plan to the replacement plan is made before any employer reversion, and the transfer is in an amount equal to the excess (if any) of— The amount determined under this clause is an amount equal to the present value of the aggregate increases in the accrued benefits under the terminated plan of any participants or beneficiaries pursuant to a plan amendment which— In the case of the transfer of any amount under clause (i)— In the case of any defined contribution plan, the portion of the amount transferred to the replacement plan under subparagraph (B)(i) is— If, by reason of any limitation under section 415, any amount credited to a suspense account under clause (i)(II) may not be allocated to a participant before the close of the 7-year period under such clause— 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 remainder of the period determined under such clause (after application of clause (ii)). If any amount credited to a suspense account under clause (i)(II) is not allocated as of the termination date of the replacement plan— The requirements of this paragraph are met if a plan amendment to the terminated plan is adopted in connection with the termination of the plan which provides pro rata increases in the accrued benefits of all qualified participants which— 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 determined under subparagraph (A)(i) as— A benefit may not be increased under paragraph (2)(B)(ii) or (3)(A), and an amount may not be allocated to a participant under paragraph (2)(C), if such increase or allocation would result in a failure to meet any requirement under section 401(a)(4) or 415. 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 addition for purposes of section 415. Except as provided by the Secretary, section 415(b)(5)(D) shall not apply to any increase in benefits by reason of this subsection to the extent that the application of this subparagraph does not discriminate in favor of highly compensated employees (as defined in section 414(q)). For purposes of this subsection— The term “qualified participant” means an individual who— is a participant not described in clause (i) or (ii)— Present value shall be determined as of the termination date and on the same basis as liabilities of the plan are determined on termination. 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 participants on the same basis as other increases (and shall be treated as meeting any allocation requirement of this subsection). For purposes of determining whether there is a qualified replacement plan under paragraph (2), the Secretary may provide that— For purposes of paragraph (2)(A), all employers treated as 1 employer under section 414(b), (c), (m), or (o) shall be treated as 1 employer. This subsection shall not apply to an employer 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.