
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[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.
