U.S Code last checked for updates: Jul 21, 2024
§ 4980D.
Failure to meet certain group health plan requirements
(a)
General rule
(b)
Amount of tax
(1)
In general
(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
(C)
Exception for church plans
(c)
Limitations on amount of tax
(1)
Tax not to apply where failure not discovered exercising reasonable diligence
(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
(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
(4)
Waiver by Secretary
(d)
Tax not to apply to certain insured small employer plans
(1)
In general
(2)
Small employer
(A)
In general
(B)
Employers not in existence in preceding year
(C)
Predecessors
(3)
Health insurance coverage; health insurance issuer
(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
(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, § 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.)
cite as: 26 USC 4980D