(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 -
(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
(i) which are not corrected before the date a notice of
examination of income tax liability is sent to the employer,
(ii) which occurred or continued during the period under
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
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
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) 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
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
(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
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
(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.
For purposes of this section -
(1) Group health plan
The term "group health plan" has the meaning given such term by
(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
A failure of a group health plan shall be treated as corrected
(A) such failure is retroactively undone to the extent
(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.