26 USC 4980B - Failure to satisfy continuation coverage requirements of group health plans

U.S Code last checked for updates: Sep 10, 2025

§ 4980B.

Failure to satisfy continuation coverage requirements of group health plans

(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 earlier of—

(i)

the date such failure is corrected, or

(ii)

the date which is 6 months after the last day in the period applicable to the qualified beneficiary under subsection (f)(2)(B) (determined without regard to clause (iii) thereof).

(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 a qualified beneficiary—

(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 beneficiary 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)

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 30 days

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)

such failure is corrected during the 30-day period beginning on the 1st date any of the persons referred to in subsection (e) knew, or exercising reasonable diligence would have known, that such failure existed.

(3)

$100 limit on amount of tax for failures on any day with respect to a qualified beneficiary

(A)

In general

(B)

Special rule where more than 1 qualified beneficiary

(4)

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 multiemployer 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)

Multiemployer plans

(i)

In general

In the case of failures with respect to a multiemployer 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 213(d)) 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 1 plan.

(ii)

Special rule for employers required to pay tax

(C)

Special rule for persons providing benefits

(5)

Waiver by Secretary

(d)

Tax not to apply to certain plans

This section shall not apply to—

(1)

any failure of a group health plan to meet the requirements of subsection (f) with respect to any qualified beneficiary if the qualifying event with respect to such beneficiary occurred during the calendar year immediately following a calendar year during which all employers maintaining such plan normally employed fewer than 20 employees on a typical business day,

(2)

any governmental plan (within the meaning of section 414(d)), or

(3)

any church plan (within the meaning of section 414(e)).

(e)

Liability for tax

(1)

In general

Except as otherwise provided in this subsection, the following shall be liable for the tax imposed by subsection (a) on a failure:

(A)

(i)

In the case of a plan other than a multiemployer plan, the employer.

(ii)

In the case of a multiemployer plan, the plan.

(B)

Each person who is responsible (other than in a capacity as an employee) for administering or providing benefits under the plan and whose act or failure to act caused (in whole or in part) the failure.

(2)

Special rules for persons described in paragraph (1)(B)

(A)

No liability unless written agreement

(B)

Failure to cover qualified beneficiaries where current employees are covered

A person shall be treated as described in paragraph (1)(B) with respect to a qualified beneficiary if—

(i)

such person provides coverage under a group health plan for any similarly situated beneficiary under the plan with respect to whom a qualifying event has not occurred, and

(ii)

the—

(I)

employer or plan administrator, or

(II)

in the case of a qualifying event described in subparagraph (C) or (E) of subsection (f)(3) where the person described in clause (i) is the plan administrator, the qualified beneficiary,

submits to such person a written request that such person make available to such qualified beneficiary the same coverage which such person provides to the beneficiary referred to in clause (i).

(f)

Continuation coverage requirements of group health plans

(1)

In general

(2)

Continuation coverage

For purposes of paragraph (1), the term “continuation coverage” means coverage under the plan which meets the following requirements:

(A)

Type of benefit coverage

(B)

Period of coverage

The coverage must extend for at least the period beginning on the date of the qualifying event and ending not earlier than the earliest of the following:

(i)

Maximum required period

(I)

General rule for terminations and reduced hours

(II)

Special rule for multiple qualifying events

(III)

Special rule for certain bankruptcy proceedings

(IV)

General rule for other qualifying events

(V)

Special rule for PBGC recipients

(VI)

Special rule for TAA-eligible individuals

(VII)

Medicare entitlement followed by qualifying event

(VIII)

Special rule for disability

(ii)

End of plan

(iii)

Failure to pay premium

(iv)

Group health plan coverage or medicare entitlement

The date on which the qualified beneficiary first becomes, after the date of the election—

(I)

covered under any other group health plan (as an employee or otherwise) which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary (other than such an exclusion or limitation which does not apply to (or is satisfied by) such beneficiary by reason of chapter 100 of this title, part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or title XXVII of the Public Health Service Act), or

(II)

in the case of a qualified beneficiary other than a qualified beneficiary described in subsection (g)(1)(D) entitled to benefits under title XVIII of the Social Security Act.

(v)

Termination of extended coverage for disability

(C)

Premium requirements

The plan may require payment of a premium for any period of continuation coverage, except that such premium—

(i)

shall not exceed 102 percent of the applicable premium for such period, and

(ii)

may, at the election of the payor, be made in monthly installments.

In no event may the plan require the payment of any premium before the day which is 45 days after the day on which the qualified beneficiary made the initial election for continuation coverage. In the case of an individual described in the last sentence of subparagraph (B)(i), any reference in clause (i) of this subparagraph to “102 percent” is deemed a reference to “150 percent” for any month after the 18th month of continuation coverage described in subclause (I) or (II) of subparagraph (B)(i).

(D)

No requirement of insurability

(E)

Conversion option

(3)

Qualifying event

(A)

The death of the covered employee.

(B)

The termination (other than by reason of such employee’s gross misconduct), or reduction of hours, of the covered employee’s employment.

(C)

The divorce or legal separation of the covered employee from the employee’s spouse.

(D)

The covered employee becoming entitled to benefits under title XVIII of the Social Security Act.

(E)

A dependent child ceasing to be a dependent child under the generally applicable requirements of the plan.

(F)

A proceeding in a case under title 11, United States Code, commencing on or after July 1, 1986, with respect to the employer from whose employment the covered employee retired at any time.

In the case of an event described in subparagraph (F), a loss of coverage includes a substantial elimination of coverage with respect to a qualified beneficiary described in subsection (g)(1)(D) within one year before or after the date of commencement of the proceeding.

(4)

Applicable premium

For purposes of this subsection—

(A)

In general

(B)

Special rule for self-insured plans

To the extent that a plan is a self-insured plan—

(i)

In general

Except as provided in clause (ii), the applicable premium for any period of continuation coverage of qualified beneficiaries shall be equal to a reasonable estimate of the cost of providing coverage for such period for similarly situated beneficiaries which—

(I)

is determined on an actuarial basis, and

(II)

takes into account such factors as the Secretary may prescribe in regulations.

(ii)

Determination on basis of past cost

If a plan administrator elects to have this clause apply, the applicable premium for any period of continuation coverage of qualified beneficiaries shall be equal to—

(I)

the cost to the plan for similarly situated beneficiaries for the same period occurring during the preceding determination period under subparagraph (C), adjusted by

(II)

the percentage increase or decrease in the implicit price deflator of the gross national product (calculated by the Department of Commerce and published in the Survey of Current Business) for the 12-month period ending on the last day of the sixth month of such preceding determination period.

(iii)

Clause (ii) not to apply where significant change

(C)

Determination period

(5)

Election

For purposes of this subsection—

(A)

Election period

The term “election period” means the period which—

(i)

begins not later than the date on which coverage terminates under the plan by reason of a qualifying event,

(ii)

is of at least 60 days’ duration, and

(iii)

ends not earlier than 60 days after the later of—

(I)

the date described in clause (i), or

(II)

in the case of any qualified beneficiary who receives notice under paragraph (6)(D), the date of such notice.

(B)

Effect of election on other beneficiaries

(C)

Temporary extension of COBRA election period for certain individuals

(i)

In general

(ii)

Commencement of coverage; no reach-back

(iii)

Preexisting conditions

With respect to an individual who elects continuation coverage pursuant to clause (i), the period—

(I)

beginning on the date of the TAA-related loss of coverage, and

(II)

ending on the first day of the 60-day election period described in clause (i),

shall be disregarded for purposes of determining the 63-day periods referred to in section 9801(c)(2), section 701(c)(2) of the Employee Retirement Income Security Act of 1974, and section 2704(c)(2) of the Public Health Service Act.

(iv)

Definitions

For purposes of this subsection:

(I)

Nonelecting TAA-eligible individual

(II)

TAA-eligible individual

(III)

TAA-related election period

(IV)

TAA-related loss of coverage

(6)

Notice requirement

In accordance with regulations prescribed by the Secretary—

(A)

The group health plan shall provide, at the time of commencement of coverage under the plan, written notice to each covered employee and spouse of the employee (if any) of the rights provided under this subsection.

(B)

The employer of an employee under a plan must notify the plan administrator of a qualifying event described in subparagraph (A), (B), (D), or (F) of paragraph (3) with respect to such employee within 30 days (or, in the case of a group health plan which is a multiemployer plan, such longer period of time as may be provided in the terms of the plan) of the date of the qualifying event.

(C)

Each covered employee or qualified beneficiary is responsible for notifying the plan administrator of the occurrence of any qualifying event described in subparagraph (C) or (E) of paragraph (3) within 60 days after the date of the qualifying event and each qualified beneficiary who is determined, under title II or XVI of the Social Security Act, to have been disabled at any time during the first 60 days of continuation coverage under this section is responsible for notifying the plan administrator of such determination within 60 days after the date of the determination and for notifying the plan administrator within 30 days of the date of any final determination under such title or titles that the qualified beneficiary is no longer disabled.

(D)

The plan administrator shall notify—

(i)

in the case of a qualifying event described in subparagraph (A), (B), (D), or (F) of paragraph (3), any qualified beneficiary with respect to such event, and

(ii)

in the case of a qualifying event described in subparagraph (C) or (E) of paragraph (3) where the covered employee notifies the plan administrator under subparagraph (C), any qualified beneficiary with respect to such event,

of such beneficiary’s rights under this subsection.

The requirements of subparagraph (B) shall be considered satisfied in the case of a multiemployer plan in connection with a qualifying event described in paragraph (3)(B) if the plan provides that the determination of the occurrence of such qualifying event will be made by the plan administrator. For purposes of subparagraph (D), any notification shall be made within 14 days (or, in the case of a group health plan which is a multiemployer plan, such longer period of time as may be provided in the terms of the plan) of the date on which the plan administrator is notified under subparagraph (B) or (C), whichever is applicable, and any such notification to an individual who is a qualified beneficiary as the spouse of the covered employee shall be treated as notification to all other qualified beneficiaries residing with such spouse at the time such notification is made.

(7)

Covered employee

(8)

Optional extension of required periods

A group health plan shall not be treated as failing to meet the requirements of this subsection solely because the plan provides both—

(A)

that the period of extended coverage referred to in paragraph (2)(B) commences with the date of the loss of coverage, and

(B)

that the applicable notice period provided under paragraph (6)(B) commences with the date of the loss of coverage.

(g)

Definitions

For purposes of this section—

(1)

Qualified beneficiary

(A)

In general

The term “qualified beneficiary” means, with respect to a covered employee under a group health plan, any other individual who, on the day before the qualifying event for that employee, is a beneficiary under the plan—

(i)

as the spouse of the covered employee, or

(ii)

as the dependent child of the employee.

Such term shall also include a child who is born to or placed for adoption with the covered employee during the period of continuation coverage under this section.

(B)

Special rule for terminations and reduced employment

(C)

Exception for nonresident aliens

(D)

Special rule for retirees and widows

In the case of a qualifying event described in subsection (f)(3)(F), the term “qualified beneficiary” includes a covered employee who had retired on or before the date of substantial elimination of coverage and any other individual who, on the day before such qualifying event, is a beneficiary under the plan—

(i)

as the spouse of the covered employee,

(ii)

as the dependent child of the covered employee, or

(iii)

as the surviving spouse of the covered employee.

(2)

Group health plan

(3)

Plan administrator

(4)

Correction

A failure of a group health plan to meet the requirements of subsection (f) with respect to any qualified beneficiary shall be treated as corrected if—

(A)

such failure is retroactively undone to the extent possible, and

(B)

the qualified beneficiary is placed in a financial position which is as good as such beneficiary would have been in had such failure not occurred.

For purposes of applying subparagraph (B), the qualified beneficiary shall be treated as if he had elected the most favorable coverage in light of the expenses he incurred since the failure first occurred.

(Added Pub. L. 100–647, title III, § 3011(a), Nov. 10, 1988, 102 Stat. 3616; amended Pub. L. 101–239, title VI, §§ 6202(b)(3)(B), 6701(a)–(c), title VII, §§ 7862(c)(2)(B), (3)(C), (4)(B), (5)(A), 7891(d)(1)(B), (2)(A), Dec. 19, 1989, 103 Stat. 2233, 2294, 2295, 2432, 2433, 2446; Pub. L. 101–508, title XI, § 11702(f), Nov. 5, 1990, 104 Stat. 1388–515; Pub. L. 103–66, title XIII, § 13422(a), Aug. 10, 1993, 107 Stat. 566; Pub. L. 104–188, title I, § 1704(g)(1)(A), (t)(21), Aug. 20, 1996, 110 Stat. 1880, 1888; Pub. L. 104–191, title III, § 321(d)(1), title IV, § 421(c), Aug. 21, 1996, 110 Stat. 2058, 2088; Pub. L. 107–210, div. A, title II, § 203(e)(3), Aug. 6, 2002, 116 Stat. 971; Pub. L. 111–5, div. B, title I, § 1899F(b), Feb. 17, 2009, 123 Stat. 429; Pub. L. 111–344, title I, § 116(b), Dec. 29, 2010, 124 Stat. 3616; Pub. L. 112–40, title II, § 243(a)(3), (4), Oct. 21, 2011, 125 Stat. 420; Pub. L. 115–141, div. U, title IV, § 401(a)(235), (236), Mar. 23, 2018, 132 Stat. 1195.)

cite as: 26 USC 4980B

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