§ 4980D. — Failure to meet certain group health plan requirements.
[Laws in effect as of January 7, 2003]
[Document not affected by Public Laws enacted between
January 7, 2003 and December 19, 2003]
[CITE: 26USC4980D]
TITLE 26--INTERNAL REVENUE CODE
Subtitle D--Miscellaneous Excise Taxes
CHAPTER 43--QUALIFIED PENSION, ETC., PLANS
Sec. 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 plans
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 414(e)).
(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
(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
(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)).
(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) $500,000.
(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, or
(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.
(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) of section 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.
(C) Predecessors
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 9832.
(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.
(f) Definitions
For purposes of this section--
(1) Group health plan
The term ``group health plan'' has the meaning given such term
by section 9832(a).
(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).
(3) Correction
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.
(Added Pub. L. 104-191, title IV, Sec. 402(a), Aug. 21, 1996, 110 Stat.
2084; amended Pub. L. 105-34, title XV, Sec. 1531(b)(2), Aug. 5, 1997,
111 Stat. 1085.)
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.
Amendments
1997--Subsec. (a). Pub. L. 105-34, Sec. 1531(b)(2)(A), substituted
``plans'' for ``plan portability, access, and renewability''.
Subsec. (c)(3)(B)(i)(I). Pub. L. 105-34, Sec. 1531(b)(2)(B),
substituted ``9832(d)(3)'' for ``9805(d)(3)''.
Subsec. (d)(1). Pub. L. 105-34, Sec. 1531(b)(2)(C), inserted
``(other than a failure attributable to section 9811)'' after ``on any
failure''.
Subsec. (d)(3). Pub. L. 105-34, Sec. 1531(b)(2)(D), substituted
``section 9832'' for ``section 9805''.
Subsec. (f)(1). Pub. L. 105-34, Sec. 1531(b)(2)(E), substituted
``section 9832(a)'' for ``section 9805(a)''.
Effective Date of 1997 Amendment
Section 1531(c) of Pub. L. 105-34 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.''
Effective Date
Section 402(c) of Pub. L. 104-191 provided 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).''
Section Referred to in Other Sections
This section is referred to in section 9812 of this title.
