I.R.C. § 4980D(a) General Rule —
There is hereby imposed a tax on any failure of a group health plan to meet the
requirements of chapter 100 (relating to group health plan requirements).
I.R.C. § 4980D(b) Amount Of Tax
I.R.C. § 4980D(b)(1) In General —
The amount of the tax imposed by subsection (a) on any failure shall be $100 for
each day in the noncompliance period with respect to each individual to whom such
failure relates.
I.R.C. § 4980D(b)(2) Noncompliance Period —
For purposes of this section, the term “noncompliance period” means, with respect
to any failure, the period—-
I.R.C. § 4980D(b)(2)(A) —
beginning on the date such failure first occurs, and
I.R.C. § 4980D(b)(2)(B) —
ending on the date such failure is corrected.
I.R.C. § 4980D(b)(3) Minimum Tax For Noncompliance Period Where Failure Discovered After Notice Of Examination —
Notwithstanding paragraphs (1) and (2) of subsection
(c)—-
I.R.C. § 4980D(b)(3)(A) In General —
In the case of 1 or more failures with respect to an individual—-
I.R.C. § 4980D(b)(3)(A)(i) —
which are not corrected before the date a notice of examination of income tax liability
is sent to the employer, and
I.R.C. § 4980D(b)(3)(A)(ii) —
which occurred or continued during the period under examination,
the amount of tax imposed by subsection
(a) by reason of such failures with respect to such individual shall not be less
than the lesser of $2,500 or the amount of tax which would be imposed by subsection
(a) without regard to such paragraphs.
I.R.C. § 4980D(b)(3)(B) Higher Minimum Tax Where Violations Are More Than De Minimis —
To the extent violations for which any person is liable under subsection (e) for
any year are more than de minimis, subparagraph
(A) shall be applied by substituting “$15,000” for “$2,500”
with respect to such person.
I.R.C. § 4980D(b)(3)(C) Exception For Church Plans —
This paragraph shall not apply to any failure under a church plan (as defined in
section 414(e)).
I.R.C. § 4980D(c) Limitations On Amount Of Tax
I.R.C. § 4980D(c)(1) Tax Not To Apply Where Failure Not Discovered Exercising Reasonable Diligence —
No tax shall be imposed by subsection (a) on any failure during any period for which
it is established to the satisfaction of the Secretary that the person otherwise
liable for such tax did not know, and exercising reasonable diligence would not have
known, that such failure existed.
I.R.C. § 4980D(c)(2) Tax Not To Apply To Failures Corrected Within Certain Periods —
No tax shall be imposed by subsection (a) on any failure if—-
I.R.C. § 4980D(c)(2)(A) —
such failure was due to reasonable cause and not to willful neglect, and
I.R.C. § 4980D(c)(2)(B)
I.R.C. § 4980D(c)(2)(B)(i) —
in the case of a plan other than a church plan (as defined in section 414(e)), such failure is corrected during the 30-day period beginning on the first date
the person otherwise liable for such tax knew, or exercising reasonable diligence
would have known, that such failure existed, and
I.R.C. § 4980D(c)(2)(B)(ii) —
in the case of a church plan (as so defined), such failure is corrected before the
close of the correction period (determined under the rules of section 414(e)(4)(C)).
I.R.C. § 4980D(c)(3) Overall Limitation For Unintentional Failures —
In the case of failures which are due to reasonable cause and not to willful neglect—-
I.R.C. § 4980D(c)(3)(A) Single Employer Plans
I.R.C. § 4980D(c)(3)(A)(i) In General —
In the case of failures with respect to plans other than specified multiple employer
health plans, the tax imposed by subsection (a) for failures during the taxable year
of the employer shall not exceed the amount equal to the lesser of—-
I.R.C. § 4980D(c)(3)(A)(i)(I) —
10 percent of the aggregate amount paid or incurred by the employer (or predecessor
employer) during the preceding taxable year for group health plans, or
I.R.C. § 4980D(c)(3)(A)(i)(II) —
$500,000.
I.R.C. § 4980D(c)(3)(A)(ii) Taxable Years In The Case Of Certain Controlled Groups —
For purposes of this subparagraph, if not all persons who are treated as a single
employer for purposes of this section have the same taxable year, the taxable years
taken Into account shall be determined under principles similar to the principles
of section 1561.
I.R.C. § 4980D(c)(3)(B) Specified Multiple Employer Health Plans
I.R.C. § 4980D(c)(3)(B)(i) In General —
In the case of failures with respect to a specified multiple employer health plan,
the tax imposed by subsection (a)
for failures during the taxable year of the trust forming part of such plan shall
not exceed the amount equal to the lesser of—-
I.R.C. § 4980D(c)(3)(B)(i)(I) —
10 percent of the amount paid or incurred by such trust during such taxable year
to provide medical care (as defined in section 9832(d)(3))
directly or through insurance, reimbursement, or otherwise, or
I.R.C. § 4980D(c)(3)(B)(i)(II) —
$500,000.
For purposes of the preceding sentence, all plans of which the same trust forms a
part shall be treated as one plan.
I.R.C. § 4980D(c)(3)(B)(ii) Special Rule For Employers Required To Pay Tax —
If an employer is assessed a tax imposed by subsection
(a) by reason of a failure with respect to a specified multiple employer health plan,
the limit shall be determined under subparagraph (A)
(and not under this subparagraph) and as if such plan were not a specified multiple
employer health plan.
I.R.C. § 4980D(c)(4) Waiver By Secretary —
In the case of a failure which is due to reasonable cause and not to willful neglect,
the Secretary may waive part or all of the tax imposed by subsection (a) to the extent
that the payment of such tax would be excessive relative to the failure involved.
I.R.C. § 4980D(d) Tax Not To Apply To Certain Insured Small Employer Plans
I.R.C. § 4980D(d)(1) In General —
In the case of a group health plan of a small employer which provides health insurance
coverage solely through a contract with a health insurance issuer, no tax shall be
imposed by this section on the employer on any failure (other than a failure attributable
to section 9811)
which is solely because of the health insurance coverage offered by such issuer.
I.R.C. § 4980D(d)(2) Small Employer
I.R.C. § 4980D(d)(2)(A) In General —
For purposes of paragraph (1), the term “small employer” means, with respect to
a calendar year and a plan year, an employer who employed an average of at least
2 but not more than 50 employees on business days during the preceding calendar year
and who employs at least 2 employees on the first day of the plan year. For purposes
of the preceding sentence, all persons treated as a single employer under subsection
(b), (c), (m), or (o) of section 414 shall be treated as one employer.
I.R.C. § 4980D(d)(2)(B) Employers Not In Existence In Preceding Year —
In the case of an employer which was not in existence throughout the preceding calendar
year, the determination of whether such employer is a small employer shall be based
on the average number of employees that it is reasonably expected such employer will
employ on business days in the current calendar year.
I.R.C. § 4980D(d)(2)(C) Predecessors —
Any reference in this paragraph to an employer shall include a reference to any
predecessor of such employer.
I.R.C. § 4980D(d)(3) Health Insurance Coverage; Health Insurance Issuer —
For purposes of paragraph (1), the terms “health insurance coverage” and “health
insurance issuer”
have the respective meanings given such terms by section 9832.
I.R.C. § 4980D(e) Liability For Tax —
The following shall be liable for the tax imposed by subsection (a) on a failure:
I.R.C. § 4980D(e)(1) —
Except as otherwise provided in this subsection, the employer.
I.R.C. § 4980D(e)(2) —
In the case of a multiemployer plan, the plan.
I.R.C. § 4980D(e)(3) —
In the case of a failure under section 9803 (relating
to guaranteed renewability) with respect to a plan described in subsection
(f)(2)(B), the plan.
I.R.C. § 4980D(f) Definitions —
For purposes of this section—-
I.R.C. § 4980D(f)(1) Group Health Plan —
The term “group health plan” has the meaning given such term by section 9832(a).
I.R.C. § 4980D(f)(2) Specified Multiple Employer Health Plan —
The term “specified multiple employer health plan” means a group health plan which
is—-
I.R.C. § 4980D(f)(2)(A) —
any multiemployer plan, or
I.R.C. § 4980D(f)(2)(B) —
any multiple employer welfare arrangement
(as defined in section 3(40) of the Employee Retirement Income Security Act of 1974,
as in effect on the date of the enactment of this section).
I.R.C. § 4980D(f)(3) Correction —
A failure of a group health plan shall be treated as corrected if—-
I.R.C. § 4980D(f)(3)(A) —
such failure is retroactively undone to the extent possible, and
I.R.C. § 4980D(f)(3)(B) —
the person to whom the failure relates is placed in a financial position which is
as good as such person would have been in had such failure not occurred.
(Added Pub. L. 104-191, title IV, Sec. 402(a), Jul. 21, 1996, 100 Stat. 2548; amended by Pub. L. 105-34, title XV, Sec. 1531, Aug. 5, 1997, 111 Stat 788; amended by Pub. L. 109-135, title IV, Sec. 412(ww), Dec. 21, 2005, 119 Stat. 2577.)
BACKGROUND NOTES
AMENDMENTS
2005 - Subsec. (a). Pub. L. 109-135, Sec. 412(ww), amended subsec. (a) by substituting “plan” for “plans”.
1997 - Subsec. (a). Pub. L. 105-34, Sec. 1531(b)(2)(A), amended subsec. (a) by substituting “plans” for “plan portability, access, and renewability”.
Subsec. (c)(3)(B)(i)(I). Pub. L. 105-34, Sec. 1531(b)(2)(B), amended subclause (I) by substituting “9832(d)(3)” for “9805(d)(3)”.
Subsec. (d)(1). Pub. L. 105-34, Sec. 1531(b)(2)(C), amended par. (1) by inserting “(other than a failure attributable to section 9811)”
after “on any failure”.
Subsec. (d)(3). Pub. L. 105-34, Sec. 1531(b)(2)(D), amended par. (3) by substituting “9832” for “9805”.
Subsec. (f)(1). Pub. L. 105-34, Sec. 1531(b)(2)(E), amended par. (1) by substituting “9832(a)” for “9805(a)”.
EFFECTIVE DATE OF 2005 AMENDMENT
Amendment by Sec. 412(ww) of Pub. L. 109-135 applicable on the date of the enactment of this Act [Enacted: Dec. 21, 2005].
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendments by Sec. 1531(b) of Pub. L. 105-34 applicable with respect to group health plans for plan years beginning on or after
January 1, 1998.
EFFECTIVE DATE
Effective for failures under chapter 100 of the Internal Revenue Code of 1986
(as added by section 402 of Pub L. 104-191).
