§ 419. Treatment of funded welfare benefit plans
(b)
Limitation
The amount of the deduction allowable under subsection (a)(2) for any taxable year shall not exceed the welfare benefit fund’s qualified cost for the taxable year.
(c)
Qualified cost
For purposes of this section—
(1)
In general
Except as otherwise provided in this subsection, the term “qualified cost” means, with respect to any taxable year, the sum of—
(2)
Reduction for funds after-tax income
In the case of any welfare benefit fund, the qualified cost for any taxable year shall be reduced by such fund’s after-tax income for such taxable year.
(3)
Qualified direct cost
(A)
In general
The term “qualified direct cost” means, with respect to any taxable year, the aggregate amount (including administrative expenses) which would have been allowable as a deduction to the employer with respect to the benefits provided during the taxable year, if—
(B)
Time when benefits provided
For purposes of subparagraph (A), a benefit shall be treated as provided when such benefit would be includible in the gross income of the employee if provided directly by the employer (or would be so includible but for any provision of this chapter excluding such benefit from gross income).
(C)
60-month amortization of child care facilities
(i)
In general
In determining qualified direct costs with respect to any child care facility for purposes of subparagraph (A), in lieu of depreciation the adjusted basis of such facility shall be allowable as a deduction ratably over a period of 60 months beginning with the month in which the facility is placed in service.
(d)
Carryover of excess contributions
If—
(1)
the amount of the contributions paid (or deemed paid under this subsection) by the employer during any taxable year to a welfare benefit fund, exceeds
such excess shall be treated as an amount paid by the employer to such fund during the succeeding taxable year.
(e)
Welfare benefit fund
For purposes of this section—
(2)
Welfare benefit
The term “welfare benefit” means any benefit other than a benefit with respect to which—
(3)
Fund
The term “fund” means—
(4)
Treatment of amounts held pursuant to certain insurance contracts
(A)
In general
Notwithstanding paragraph (3)(C), the term “fund” shall not include amounts held by an insurance company pursuant to an insurance contract if—
(B)
Qualified nonguaranteed contract
(i)
In general
For purposes of this paragraph, the term “qualified nonguaranteed contract” means any insurance contract (including a reasonable premium stabilization reserve held thereunder) if—
(II)
other than insurance protection, the only payments to which the employer or employees are entitled are experience rated refunds or policy dividends which are not guaranteed and which are determined by factors other than the amount of welfare benefits paid to (or on behalf of) the employees of the employer or their beneficiaries.
(ii)
Limitation
In the case of any qualified nonguaranteed contract, subparagraph (A) shall not apply unless the amount of any experience rated refund or policy dividend payable to an employer with respect to a policy year is treated by the employer as received or accrued in the taxable year in which the policy year ends.
(f)
Method of contributions, etc., having the effect of a plan
If—
(2)
there is a method or arrangement of employer contributions or benefits which has the effect of a plan,
this section shall apply as if there were a plan.
(g)
Extension to plans for independent contractors
If any fund would be a welfare benefit fund (as modified by subsection (f)) but for the fact that there is no employee-employer relationship—