26 U.S. Code § 4980D - Failure to meet certain group health plan requirements
(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).
(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—
(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
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) 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—
(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
(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
(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) 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 1561.
(B) Specified multiple employer health plans
(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) 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, orFor 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.
(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.
(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.
(e) Liability for tax
The following shall be liable for the tax imposed by subsection (a) on a failure:
(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
(2) Specified multiple employer health plan
The term “specified multiple employer health plan” means a group health plan which is—
A failure of a group health plan shall be treated as corrected if—
Source(Added Pub. L. 104–191, title IV, § 402(a),Aug. 21, 1996, 110 Stat. 2084; amended Pub. L. 105–34, title XV, § 1531(b)(2),Aug. 5, 1997, 111 Stat. 1085; Pub. L. 109–135, title IV, § 412(ww),Dec. 21, 2005, 119 Stat. 2640.)
References in Text
Section 3(40) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (f)(2)(B), is classified to section 1002 (40) of Title 29, Labor.
The date of the enactment of this section, referred to in subsec. (f)(2)(B), is the date of enactment of Pub. L. 104–191, which was approved Aug. 21, 1996.
2005—Subsec. (a). Pub. L. 109–135substituted “plan requirements” for “plans requirements”.
1997—Subsec. (a). Pub. L. 105–34, § 1531(b)(2)(A), substituted “plans” for “plan portability, access, and renewability”.
Subsec. (c)(3)(B)(i)(I). Pub. L. 105–34, § 1531(b)(2)(B), substituted “9832(d)(3)” for “9805(d)(3)”.
Subsec. (d)(1). Pub. L. 105–34, § 1531(b)(2)(C), inserted “(other than a failure attributable to section 9811)” after “on any failure”.
Subsec. (f)(1). Pub. L. 105–34, § 1531(b)(2)(E), substituted “section 9832 (a)” for “section 9805 (a)”.
Effective Date of 1997 Amendment
Pub. L. 105–34, title XV, § 1531(c),Aug. 5, 1997, 111 Stat. 1085, provided that: “The amendments made by this section [enacting sections 9811 and 9812 of this title, amending this section and sections 9801 and 9831 of this title, and renumbering sections 9804 to 9806 of this title as sections 9831 to 9833 of this title] shall apply with respect to group health plans for plan years beginning on or after January 1, 1998.”