installment acceleration amount
(7) Increases in alternate required installments in cases of excess compensation or extraordinary dividends or stock redemptions (A) In general If there is an installment acceleration amount with respect to a plan for any plan year in the restriction period with respect to an election year under paragraph (2)(D), then the shortfall amortization installment otherwise determined and payable under such paragraph for such plan year shall, subject to the limitation under subparagraph (B), be increased by such amount. (B) Total installments limited to shortfall base Subject to rules prescribed by the Secretary of the Treasury, if a shortfall amortization installment with respect to any shortfall amortization base for an election year is required to be increased for any plan year under subparagraph (A)— (i) such increase shall not result in the amount of such installment exceeding the present value of such installment and all succeeding installments with respect to such base (determined without regard to such increase but after application of clause (ii)), and (ii) subsequent shortfall amortization installments with respect to such base shall, in reverse order of the otherwise required installments, be reduced to the extent necessary to limit the present value of such subsequent shortfall amortization installments (after application of this paragraph) to the present value of the remaining unamortized shortfall amortization base. (C) Installment acceleration amount For purposes of this paragraph— (i) In general The term “installment acceleration amount” means, with respect to any plan year in a restriction period with respect to an election year, the sum of— (I) the aggregate amount of excess employee compensation determined under subparagraph (D) with respect to all employees for the plan year, plus (II) the aggregate amount of extraordinary dividends and redemptions determined under subparagraph (E) for the plan year. (ii) Annual limitation The installment acceleration amount for any plan year shall not exceed the excess (if any) of— (I) the sum of the shortfall amortization installments for the plan year and all preceding plan years in the amortization period elected under paragraph (2)(D) with respect to the shortfall amortization base with respect to an election year, determined without regard to paragraph (2)(D) and this paragraph, over (II) the sum of the shortfall amortization installments for such plan year and all such preceding plan years, determined after application of paragraph (2)(D) (and in the case of any preceding plan year, after application of this paragraph). (iii) Carryover of excess installment acceleration amounts (I) In general If the installment acceleration amount for any plan year (determined without regard to clause (ii)) exceeds the limitation under clause (ii), then, subject to subclause (II), such excess shall be treated as an installment acceleration amount with respect to the succeeding plan year. (II) Cap to apply If any amount treated as an installment acceleration amount under subclause (I) or this subclause with respect any succeeding plan year, when added to other installment acceleration amounts (determined without regard to clause (ii)) with respect to the plan year, exceeds the limitation under clause (ii), the portion of such amount representing such excess shall be treated as an installment acceleration amount with respect to the next succeeding plan year. (III) Limitation on years to which amounts carried for No amount shall be carried under subclause (I) or (II) to a plan year which begins after the first plan year following the last plan year in the restriction period (or after the second plan year following such last plan year in the case of an election year with respect to which 15-year amortization was elected under paragraph (2)(D)). (IV) Ordering rules For purposes of applying subclause (II), installment acceleration amounts for the plan year (determined without regard to any carryover under this clause) shall be applied first against the limitation under clause (ii) and then carryovers to such plan year shall be applied against such limitation on a first-in, first-out basis. (D) Excess employee compensation For purposes of this paragraph— (i) In general The term “excess employee compensation” means, with respect to any employee for any plan year, the excess (if any) of— (I) the aggregate amount includible in income under chapter 1 of title 26 for remuneration during the calendar year in which such plan year begins for services performed by the employee for the plan sponsor (whether or not performed during such calendar year), over (II) $1,000,000. (ii) Amounts set aside for nonqualified deferred compensation If during any calendar year assets are set aside or reserved (directly or indirectly) in a trust (or other arrangement as determined by the Secretary of the Treasury), or transferred to such a trust or other arrangement, by a plan sponsor for purposes of paying deferred compensation of an employee under a nonqualified deferred compensation plan (as defined in section 409A of such title) of the plan sponsor, then, for purposes of clause (i), the amount of such assets shall be treated as remuneration of the employee includible in income for the calendar year unless such amount is otherwise includible in income for such year. An amount to which the preceding sentence applies shall not be taken into account under this paragraph for any subsequent calendar year. (iii) Only remuneration for certain post-2009 services counted Remuneration shall be taken into account under clause (i) only to the extent attributable to services performed by the employee for the plan sponsor after February 28, 2010 . (iv) Exception for certain equity payments (I) In general There shall not be taken into account under clause (i)(I) any amount includible in income with respect to the granting after February 28, 2010 , of service recipient stock (within the meaning of section 409A of title 26 ) that, upon such grant, is subject to a substantial risk of forfeiture (as defined under section 83(c)(1) of such title) for at least 5 years from the date of such grant. (II) Secretarial authority The Secretary of the Treasury may by regulation provide for the application of this clause in the case of a person other than a corporation. (v) Other exceptions The following amounts includible in income shall not be taken into account under clause (i)(I): (I) Commissions Any remuneration payable on a commission basis solely on account of income directly generated by the individual performance of the individual to whom such remuneration is payable. (II) Certain payments under existing contracts Any remuneration consisting of nonqualified deferred compensation, restricted stock, stock options, or stock appreciation rights payable or granted under a written binding contract that was in effect on March 1, 2010 , and which was not modified in any material respect before such remuneration is paid. (vi) Self-employed individual treated as employee The term “employee” includes, with respect to a calendar year, a self-employed individual who is treated as an employee under section 401(c) of such title for the taxable year ending during such calendar year, and the term “compensation” shall include earned income of such individual with respect to such self-employment. (vii) Indexing of amount In the case of any calendar year beginning after 2010, the dollar amount under clause (i)(II) shall be increased by an amount equal to— (I) such dollar amount, multiplied by (II) the cost-of-living adjustment determined under section 1(f)(3) of such title for the calendar year, determined by substituting “calendar year 2009” for “calendar year 1992” in subparagraph (B) thereof. If the amount of any increase under clause (i) is not a multiple of $1,000, such increase shall be rounded to the next lowest multiple of $1,000. (E) Extraordinary dividends and redemptions (i) In general The amount determined under this subparagraph for any plan year is the excess (if any) of the sum of the dividends declared during the plan year by the plan sponsor plus the aggregate amount paid for the redemption of stock of the plan sponsor redeemed during the plan year over the greater of— (I) the adjusted net income (within the meaning of section 1343 of this title ) of the plan sponsor for the preceding plan year, determined without regard to any reduction by reason of interest, taxes, depreciation, or amortization, or (II) in the case of a plan sponsor that determined and declared dividends in the same manner for at least 5 consecutive years immediately preceding such plan year, the aggregate amount of dividends determined and declared for such plan year using such manner. (ii) Only certain post-2009 dividends and redemptions counted For purposes of clause (i), there shall only be taken into account dividends declared, and redemptions occurring, after February 28, 2010 . (iii) Exception for intra-group dividends Dividends paid by one member of a controlled group (as defined in section 1082(d)(3) of this title ) to another member of such group shall not be taken into account under clause (i). (iv) Exception for certain redemptions Redemptions that are made pursuant to a plan maintained with respect to employees, or that are made on account of the death, disability, or termination of employment of an employee or shareholder, shall not be taken into account under clause (i). (v) Exception for certain preferred stock (I) In general Dividends and redemptions with respect to applicable preferred stock shall not be taken into account under clause (i) to the extent that dividends accrue with respect to such stock at a specified rate in all events and without regard to the plan sponsor’s income, and interest accrues on any unpaid dividends with respect to such stock. (II) Applicable preferred stock For purposes of subclause (I), the term “applicable preferred stock” means preferred stock which was issued before March 1, 2010 (or which was issued after such date and is held by an employee benefit plan subject to the provisions of this subchapter). (F) Other definitions and rules For purposes of this paragraph— (i) Plan sponsor The term “plan sponsor” includes any member of the plan sponsor’s controlled group (as defined in section 1082(d)(3) of this title ). (ii) Restriction period The term “restriction period” means, with respect to any election year— (I) except as provided in subclause (II), the 3-year period beginning with the election year (or, if later, the first plan year beginning after December 31, 2009 ), and (II) if the plan sponsor elects 15-year amortization for the shortfall amortization base for the election year, the 5-year period beginning with the election year (or, if later, the first plan year beginning after December 31, 2009 ). (iii) Elections for multiple plans If a plan sponsor makes elections under paragraph (2)(D) with respect to 2 or more plans, the Secretary of the Treasury shall provide rules for the application of this paragraph to such plans, including rules for the ratable allocation of any installment acceleration amount among such plans on the basis of each plan’s relative reduction in the plan’s shortfall amortization installment for the first plan year in the amortization period described in subparagraph (A) (determined without regard to this paragraph). (iv) Mergers and acquisitions The Secretary of the Treasury shall prescribe rules for the application of paragraph (2)(D) and this paragraph in any case where there is a merger or acquisition involving a plan sponsor making the election under paragraph (2)(D).