PRIA, Government Policy, Made Personal

Summary

Small employers can get a tax credit when they hire a military spouse and put that spouse into a qualifying retirement plan. The credit is $200 for each military spouse who takes part in the plan during the year, plus up to $300 of the employer’s contributions for that spouse (not counting employee salary deferrals). Each military spouse can be counted for the year they start the plan and the two years after that. Terms in plain words: an eligible small employer means the kind of small employer the law defines elsewhere. A military spouse is someone married to an active‑duty member of the uniformed services; an employer may accept the employee’s written statement giving the spouse’s name, rank, and service. Highly paid employees are not counted. A qualifying defined contribution plan must let military spouses join no later than two months after hire, give them immediate employer contributions at least equal to what a similar worker would get after two years, and make those employer contributions fully vested right away. Related companies treated as one employer are counted as one for this credit.

Title 26, §45AA

Internal Revenue Code, Source: USLM XML via OLRC

(a)In general

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)

(2)so much of the contributions made by such employer (other than an elective deferral (as defined in section 402(g)(3)) to all such plans with respect to such employee during such taxable year as do not exceed $300.

(b)Limitation

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)Eligible small employer

For purposes of this section, the term “eligible small employer” means an eligible employer (as defined in section 408(p)(2)(C)(i)(I).

(d)Military spouse

For purposes of this section

(1) In general

(2)Exclusion of highly compensated employees

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)Eligible defined contribution plan

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)Aggregation rule

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

Citations & Metadata