1. Short title
This Act may be cited as the “Investing in Your Family's Future Act”.
Investing in Your Family's Future Act
A BILL
To amend the Internal Revenue Code of 1986 to permit treatment of child care payments as elective deferrals for purposes of employer matching contributions, and for other purposes.
2. Treatment of child care payments as elective deferrals for purposes of matching contributions
In general— Subparagraph (A) of section 401(m)(4) of the Internal Revenue Code of 1986 is amended by striking “and” at the end of clause (i), by striking the period at the end of clause (ii) and inserting “, and”, and by adding at the end the following new clause:
“(iii) subject to the requirements of paragraph (13), any employer contribution made to a defined contribution plan on behalf of an employee on account of a qualified child care payment.”
Qualified child care payment— Paragraph (4) of section 401(m) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
“(D) Qualified child care payment—The term qualified child care payment means any payment by an employee of employment-related expenses (within the meaning of section 21(b)(2)), but only to the extent such payments in the aggregate for the year do not exceed an amount equal to
“(i) the limitation applicable under section 402(g) for the year (or, if lesser, the employee’s compensation (as defined in section 415(c)(3)) for the year), reduced by
“(ii) the elective deferrals made by the employee for such year.”
Matching contributions for qualified child care payments— Subsection (m) of section 401 of the Internal Revenue Code of 1986 is amended by redesignating paragraph (13) as paragraph (14), and by inserting after paragraph (12) the following new paragraph:
“(13) Matching contributions for qualified child care payments
“(A) In general—For purposes of paragraph (4)(A)(iii), an employer contribution made to a defined contribution plan on account of a qualified child care payment shall be treated as a matching contribution for purposes of this title if—
“(i) the plan provides matching contributions on account of elective deferrals at the same rate as contributions on account of qualified child care payments,
“(ii) the plan provides matching contributions on account of qualified child care payments only on behalf of employees otherwise eligible to make elective deferrals, and
“(iii) under the plan, all employees eligible to receive matching contributions on account of elective deferrals are eligible to receive matching contributions on account of qualified child care payments.
“(B) Treatment for purposes of nondiscrimination rules, etc
“(i) Nondiscrimination rules—For purposes of subparagraph (A)(iii), subsection (a)(4), and section 410(b), matching contributions described in paragraph (4)(A)(iii) shall not fail to be treated as available to an employee solely because such employee does not have employment-related expenses (within the meaning of section 21(b)(2)).
“(ii) Child care payments not treated as plan contribution—Except as provided in clause (iii), a qualified child care payment shall not be treated as a contribution to a plan under this title.
“(iii) Matching contribution rules—Solely for purposes of meeting the requirements of paragraph (11)(B) or (12) of this subsection, or paragraph (11)(B)(i)(II), (12)(B), or (13)(D) of subsection (k), a plan may treat a qualified child care payment as an elective deferral or an elective contribution, whichever is applicable.”
Simple retirement accounts— Paragraph (2) of section 408(p) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
“(F) Matching contributions for qualified child care payments
“(i) In general—Subject to the rules of clause (iii), an arrangement shall not fail to be treated as meeting the requirements of subparagraph (A)(iii) solely because under the arrangement, solely for purposes of such subparagraph, qualified child care payments are treated as amounts elected by the employee under subparagraph (A)(i)(I) to the extent such payments do not exceed—
“(I) the applicable dollar amount under subparagraph (E) (after application of section 414(v)) for the year (or, if lesser, the employee’s compensation (as defined in section 415(c)(3)) for the year), reduced by
“(II) any other amounts elected by the employee under subparagraph (A)(i)(I) for the year.
“(ii) Qualified child care payment—For purposes of this subparagraph, the term qualified child care payment means any payment by an employee of employment-related expenses (within the meaning of section 21(b)(2)).
“(iii) Applicable rules—Clause (i) shall apply to an arrangement only if, under the arrangement—
“(I) matching contributions on account of qualified child care payments are provided only on behalf of employees otherwise eligible to elect contributions under subparagraph (A)(i)(I), and
“(II) all employees otherwise eligible to participate in the arrangement are eligible to receive matching contributions on account of qualified child care payments.”
403(b) plans— Subparagraph (A) of section 403(b)(12) of the Internal Revenue Code of 1986 is amended by adding at the end the following: “The fact that the employer offers matching contributions on account of qualified child care payments as described in section 401(m)(13) shall not be taken into account in determining whether the arrangement satisfies the requirements of clause (ii) (and any regulation thereunder).”.
457(b) plans— Subsection (b) of section 457 of the Internal Revenue Code of 1986 is amended by adding at the end the following: “A plan which is established and maintained by an employer which is described in subsection (e)(1)(A) shall not be treated as failing to meet the requirements of this subsection solely because the plan, or another plan maintained by the employer which meets the requirements of section 401(a), provides for matching contributions on account of qualified child care payments as described in section 401(m)(13).”.
Regulatory authority— The Secretary shall prescribe regulations for purposes of implementing the amendments made by this section, including regulations—
permitting a plan to make matching contributions for qualified child care payments, as defined in sections 401(m)(4)(D) and 408(p)(2)(F) of the Internal Revenue Code of 1986, as added by this section, at a different frequency than matching contributions are otherwise made under the plan, provided that the frequency is not less than annually;
permitting employers to establish reasonable procedures to claim matching contributions for such qualified child care payments under the plan, including an annual deadline (not earlier than 3 months after the close of each plan year) by which a claim must be made; and
promulgating model amendments which plans may adopt to implement matching contributions on such qualified child care payments for purposes of sections 401(m), 408(p), 403(b), and 457(b) of the Internal Revenue Code of 1986.
Effective date— The amendments made by this section shall apply to contributions made for years beginning after December 31, 2020.