26 U.S.C. § 406 : US Code - Section 406: Employees of foreign affiliates covered by section 3121(l) agreements

Search 26 U.S.C. § 406 : US Code - Section 406: Employees of foreign affiliates covered by section 3121(l) agreements

(a) Treatment as employees of American employer
For purposes of applying this part with respect to a pension,
profit-sharing, or stock bonus plan described in section 401(a) or
an annuity plan described in section 403(a), of an American
employer (as defined in section 3121(h)), an individual who is a
citizen or resident of the United States and who is an employee of
a foreign affiliate (as defined in section 3121(l)(6)) of such
American employer shall be treated as an employee of such American
employer, if -
(1) such American employer has entered into an agreement under
section 3121(l) which applies to the foreign affiliate of which
such individual is an employee;
(2) the plan of such American employer expressly provides for
contributions or benefits for individuals who are citizens or
residents of the United States and who are employees of its
foreign affiliates to which an agreement entered into by such
American employer under section 3121(l) applies; and
(3) contributions under a funded plan of deferred compensation
(whether or not a plan described in section 401(a) or 403(a)) are
not provided by any other person with respect to the remuneration
paid to such individual by the foreign affiliate.
(b) Special rules for application of section 401(a)
(1) Nondiscrimination requirements
For purposes of applying section 401(a)(4) and section 410(b)
with respect to an individual who is treated as an employee of an
American employer under subsection (a) -
(A) if such individual is a highly compensated employee
(within the meaning of section 414(q)), he shall be treated as
having such capacity with respect to such American employer;
and
(B) the determination of whether such individual is a highly
compensated employee (as so defined) shall be made by treating
such individual's total compensation (determined with the
application of paragraph (2) of this subsection) as
compensation paid by such American employer and by determining
such individual's status with regard to such American employer.
(2) Determination of compensation
For purposes of applying paragraph (5) of section 401(a) with
respect to an individual who is treated as an employee of an
American employer under subsection (a) -
(A) the total compensation of such individual shall be the
remuneration paid to such individual by the foreign affiliate
which would constitute his total compensation if his services
had been performed for such American employer, and the basic or
regular rate of compensation of such individual shall be
determined under regulations prescribed by the Secretary; and
(B) such individual shall be treated as having paid the
amount paid by such American employer which is equivalent to
the tax imposed by section 3101.
[(c) Repealed. Pub. L. 104-188, title I, Sec. 1401(b)(7), Aug. 20,
1996, 110 Stat. 1789]
(d) Deductibility of contributions
For purposes of applying section 404 with respect to
contributions made to or under a pension, profit-sharing, stock
bonus, or annuity plan by an American employer, or by another
taxpayer which is entitled to deduct its contributions under
section 404(a)(3)(B), on behalf of an individual who is treated as
an employee of such American employer under subsection (a) -
(1) except as provided in paragraph (2), no deduction shall be
allowed to such American employer or to any other taxpayer which
is entitled to deduct its contributions under such sections,
(2) there shall be allowed as a deduction to the foreign
affiliate of which such individual is an employee an amount equal
to the amount which (but for paragraph (1)) would be deductible
under section 404 by the American employer if he were an employee
of the American employer, and
(3) any reference to compensation shall be considered to be a
reference to the total compensation of such individual
(determined with the application of subsection (b)(2)).
Any amount deductible by a foreign affiliate under this subsection
shall be deductible for its taxable year with or within which the
taxable year of such American employer ends.
(e) Treatment as employee under related provisions
An individual who is treated as an employee of an American
employer under subsection (a) shall also be treated as an employee
of such American employer, with respect to the plan described in
subsection (a)(2), for purposes of applying the following
provisions of this title:
(1) Section 72(f) (relating to special rules for computing
employees' contributions).
(2) Section 2039 (relating to annuities).