View all text of Subpart D [§ 419 - § 419A]
§ 419A. Qualified asset account; limitation on additions to account
(a) General ruleFor 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
(c) Account limitFor purposes of this section—
(1) In generalExcept 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 benefitsThe 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
(A) In general
(B) Special rule for certain new plans
(4) Limitation on amounts to be taken into account
(A) Disability benefitsFor 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
(5) Special limitation where no actuarial certification
(A) In general
(B) Safe harbor limits
(i) Short-term disability benefits
(ii) Medical benefits
(iii) SUB or severance pay benefits
(iv) Long-term disability or life insurance benefits
(6) Additional reserve for medical benefits of bona fide association plans
(A) In generalAn 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
(d) Requirement of separate accounts for post-retirement medical or life insurance benefits provided to key employees
(1) In generalIn 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
(3) Key employee
(e) Special limitations on reserves for medical benefits or life insurance benefits provided to retired employees
(1) Reserve must be nondiscriminatory
(2) Limitation on amount of life insurance benefits
(f) Definitions and other special rulesFor purposes of this section—
(1) SUB or severance pay benefitThe 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
(3) Life insurance benefit
(4) Valuation
(5) Special rule for collective bargained and employee pay-all plansNo 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
(A) In general
(B) 10 or more employer planFor 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
(B) Applicable percentage
(C) Existing excess reserveFor 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
(g) Employer taxed on income of welfare benefit fund in certain cases
(1) In general
(2) Deemed unrelated income
(3) Coordination with section 419If 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 rulesFor purposes of this subpart—
(1) Aggregation of funds
(A) Mandatory aggregation
(B) Permissive aggregation for purposes not specified in subparagraph (A)
(2) Treatment of related employers
(i) Regulations
(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; Pub. L. 115–141, div. U, title IV, § 401(a)(96), (b)(21)(B), (C), Mar. 23, 2018, 132 Stat. 1188, 1202, 1203.)