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).
(b) Amount of tax
(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.
(2) Noncompliance period
For purposes of this section, the term “noncompliance period” means, with respect to any failure, the period—
(A)beginning on the date such failure first occurs, and
(B)ending on the date such failure is corrected.
(3) Minimum tax for noncompliance period where failure discovered after notice of examination
Notwithstanding paragraphs (1) and (2) of subsection (c)—
(A) In general
In the case of 1 or more failures with respect to an individual—
(i)which are not corrected before the date a notice of examination of income tax liability is sent to the employer, and
(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.
(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.
(C) Exception for church plans
This paragraph shall not apply to any failure under a church plan (as defined in section
(c) Limitations on amount of tax
(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.
(2) Tax not to apply to failures corrected within certain periods
No tax shall be imposed by subsection (a) on any failure if—
(A)such failure was due to reasonable cause and not to willful neglect, and
(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
(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
(3) Overall limitation for unintentional failures
In the case of failures which are due to reasonable cause and not to willful neglect—
(A) Single employer plans
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)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
(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
(B) Specified multiple employer health plans
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)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
For purposes of the preceding sentence, all plans of which the same trust forms a part shall be treated as one plan.
(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.
(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.
(d) Tax not to apply to certain insured small employer plans
(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.
(2) Small employer
(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) ofsection
414 shall be treated as one employer.
(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.
Any reference in this paragraph to an employer shall include a reference to any predecessor of such employer.
(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
(e) Liability for tax
The following shall be liable for the tax imposed by subsection (a) on a failure:
(1)Except as otherwise provided in this subsection, the employer.
(2)In the case of a multiemployer plan, the plan.
(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.
For purposes of this section—
(1) Group health plan
The term “group health plan” has the meaning given such term by section
(2) Specified multiple employer health plan
The term “specified multiple employer health plan” means a group health plan which is—
(A)any multiemployer plan, or
(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).
A failure of a group health plan shall be treated as corrected if—
(A)such failure is retroactively undone to the extent possible, and
(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.
Section 1531(c) ofPub. L. 105–34provided that: “The amendments made by this section [enacting sections
9812 of this title, amending this section and sections
9831 of this title, and renumbering sections
9806 of this title as sections
9833 of this title] shall apply with respect to group health plans for plan years beginning on or after January 1, 1998.”
Section 402(c) ofPub. L. 104–191provided that: “The amendments made by this section [enacting this section] shall apply to failures under chapter 100 of the Internal Revenue Code of 1986 (as added by section 401 of this Act).”
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.
Description of Change
Statutes at Large
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