§45AA — Title 26 Internal Revenue Code | U.S. Code

Summary

Small employers can get a tax credit when they help military spouses save for retirement. The credit is $200 for each military spouse who takes part in a qualifying retirement plan during the year, plus up to $300 of the employer’s contributions for that spouse in the same year. Each military spouse counts for the year they start the plan and the two years after that. A "military spouse" is someone married to an active-duty member of the uniformed services as of their first day of work; the employer can accept a simple written note with the spouse’s name, rank, and branch. A military spouse who is a highly paid employee is not eligible. An "eligible small employer" means the same as an "eligible employer" under related tax rules. A qualifying retirement plan must let military spouses join within 2 months of hire, give them the same employer-contribution benefit a similar worker would get after 2 years, and make those employer contributions immediately nonforfeitable. Businesses treated as one employer under tax aggregation rules count as one employer for this credit.

Title 26, §45AA

Internal Revenue Code — Source: USLM XML via OLRC

(a)For purposes of section 38, in the case of any eligible small employer, the military spouse retirement plan eligibility credit determined under this section for any taxable year is an amount equal to the sum of—

(1)$200 with respect to each military spouse who is an employee of such employer and who participates in an eligible defined contribution plan of such employer at any time during such taxable year, plus

(2)so much of the contributions made by such employer (other than an elective deferral (as defined in section 402(g)(3)) 11 So in original. Probably should be followed by another closing parenthesis. to all such plans with respect to such employee during such taxable year as do not exceed $300.

(b)An individual shall only be taken into account as a military spouse under subsection (a) for the taxable year which includes the date on which such individual began participating in the eligible defined contribution plan of the employer and the 2 succeeding taxable years.

(c)For purposes of this section, the term “eligible small employer” means an eligible employer (as defined in section 408(p)(2)(C)(i)(I).22 So in original. Another closing parenthesis probably should precede the period.

(d)For purposes of this section—

(1)The term “military spouse” means, with respect to any employer, any individual who is married (within the meaning of section 7703 as of the first date that the employee is employed by the employer) to an individual who is a member of the uniformed services (as defined section 101(a)(5) of title 10, United States Code) serving on active duty. For purposes of this section, an employer may rely on an employee’s certification that such employee’s spouse is a member of the uniformed services if such certification provides the name, rank, and service branch of such spouse.

(2)With respect to any employer, the term “military spouse” shall not include any individual if such individual is a highly compensated employee of such employer (within the meaning of section 414(q)).

(e)For purposes of this section, the term “eligible defined contribution plan” means, with respect to any eligible small employer, any defined contribution plan (as defined in section 414(i)) of such employer if, under the terms of such plan—

(1)military spouses employed by such employer are eligible to participate in such plan not later than the date which is 2 months after the date on which such individual begins employment with such employer, and

(2)military spouses who are eligible to participate in such plan—

(A)are immediately eligible to receive an amount of employer contributions under such plan which is not less the amount of such contributions that a similarly situated participant who is not a military spouse would be eligible to receive under such plan after 2 years of service, and

(B)immediately have a nonforfeitable right to the employee’s accrued benefit derived from employer contributions under such plan.

(f)All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as one employer for purposes of this section.

Statutory Notes and Related Subsidiaries

Effective Date

Section applicable to taxable years beginning after Dec. 29, 2022, see section 112(e) of Pub. L. 117–328, set out as an

Effective Date

of 2022 Amendment note under section 38 of this title.

§45AA Military Spouse Retirement Plan Eligibility Credit for Small Employers

Summary

Title 26, §45AA

Notes & Related Subsidiaries

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

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