### Question
How does the law define qualified salary reduction arrangement?


### Answer
Under *26 U.S.C. § 408*, **qualified salary reduction arrangement** is defined as:

> a written arrangement of an eligible employer under which—


(i) an employee eligible to participate in the arrangement may elect to have the employer make payments—


(I) as elective employer contributions to a simple retirement account on behalf of the employee, or


(II) to the employee directly in cash,


  

(ii) the amount which an employee may elect under clause (i) for any year is required to be expressed as a percentage of compensation and may not exceed a total of $6,000 for any year,


(iii) the employer is required to make a matching contribution to the simple retirement account for any year in an amount equal to so much of the amount the employee elects under clause (i)(I) as does not exceed the applicable percentage of compensation for the year, and


(iv) no contributions may be made other than contributions described in clause (i) or (iii)

#### Citation:
  - *26 U.S.C. § 408*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter D-Deferred Compensation, Etc. > PART I-PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC. > Subpart A-General Rule**

