Excise tax on employers for failure to meet group health plan requirements
As you are aware, an excise tax is imposed on employers for any failure of their group health plans to meet group health plan requirements with respect to:
- portability, access, and renewability requirements;
- benefits for mothers and newborns;
- mental health benefits;
- dependent students on medically necessary leave of absence; and
- the Affordable Care Act (ACA) (e.g., no pre-existing condition limitation, no annual or lifetime restricted limits, dependent coverage up to age 26, coverage for preventative services etc).
In the event that your group health plan fails to meet these requirements, the amount of the tax is generally $100 for each day in the noncompliance period with respect to each individual to whom the failure relates. For purposes of this tax, “noncompliance period” is defined as, with respect to any failure, the period (a) beginning on the date the failure first occurs, and (b) ending on the date the failure is corrected.
You, as the employer that sponsors the group health plan, are generally liable for this excise tax (in the case of a multiemployer plan, the plan is liable for the tax, and in the case of a failure relating to guaranteed renewability requirements with respect to a specified multiple employer health plan, the plan is also liable for the tax).
If you are liable for the excise tax, you must file a return with respect to the tax on Form 8928, “Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code.” The return must include the information required by Form 8928 and its instructions.
The excise tax will not be asserted for any failure to satisfy the market reforms of ACA by “employer payment plans”-which pay or reimburse employees for individual health policy premiums or Medicare part B or part D premiums- (i) for 2014, if you are an employer that is not “applicable large employers” (ALEs) for 2014; and (ii) for Jan. 1 through June 30, 2015, if you are an employer that is not ALEs for 2015. After June 30, 2015, you may be liable for the excise tax for employer payment plans regardless of whether you are an ALE. For purposes of this transition relief, an “ALE” is, for a calendar year, an employer that employed an average of at least 50 full-time employees (including full-time equivalent employees) on business days during the preceding calendar year. To determine whether an entity was an ALE for 2014 and for 2015, you may determine your status as an ALE by reference to a period of at least six consecutive calendar months, chosen by you, during the 2013 calendar year (for determining ALE status for 2014), and during the 2014 calendar year (for determining ALE status for 2015), as applicable. This would be in lieu of making the determination of ALE status by reference to the entire 2013 calendar year and the entire 2014 calendar year, as applicable.
In addition, through the end of 2015 (and until further guidance is issued, if later), the excise tax will not be asserted against you for any failure to satisfy ACA’s market reforms if you are a 2% shareholder-employee of an S corporation solely as a result of having a 2% shareholder-employee health care arrangement.
The above is a simplified explanation of the excise tax. Please call us if we can assist you in complying with this requirement.