Home > Data > Subtitle D > Chapter 43 > Sec. 4980
Employer
Last Updated: January 8, 2012
(a) Imposition of tax
If -
(1) an employee is covered under any applicable employer-
sponsored coverage of an employer at any time during a taxable
period, and
(2) there is any excess benefit with respect to the coverage,
there is hereby imposed a tax equal to 40 percent of the excess
benefit.
(b) Excess benefit
For purposes of this section -
(1) In general
The term "excess benefit" means, with respect to any applicable
employer-sponsored coverage made available by an employer to an
employee during any taxable period, the sum of the excess amounts
determined under paragraph (2) for months during the taxable
period.
(2) Monthly excess amount
The excess amount determined under this paragraph for any month
is the excess (if any) of -
(A) the aggregate cost of the applicable employer-sponsored
coverage of the employee for the month, over
(B) an amount equal to 1/12 of the annual limitation under
paragraph (3) for the calendar year in which the month occurs.
(3) Annual limitation
For purposes of this subsection -
(A) In general
The annual limitation under this paragraph for any calendar
year is the dollar limit determined under subparagraph (C) for
the calendar year.
(B) Applicable annual limitation
(i) In general
Except as provided in clause (ii), the annual limitation
which applies for any month shall be determined on the basis
of the type of coverage (as determined under subsection
(f)(1)) provided to the employee by the employer as of the
beginning of the month.
(ii) Multiemployer plan coverage
Any coverage provided under a multiemployer plan (as
defined in section 414(f)) shall be treated as coverage other
than self-only coverage.
(C) Applicable dollar limit
(i) 2018
In the case of 2018, the dollar limit under this
subparagraph is -
(I) in the case of an employee with self-only coverage,
$10,200 multiplied by the health cost adjustment percentage
(determined by only taking into account self-only
coverage), and
(II) in the case of an employee with coverage other than
self-only coverage, $27,500 multiplied by the health cost
adjustment percentage (determined by only taking into
account coverage other than self-only coverage).
(ii) Health cost adjustment percentage
For purposes of clause (i), the health cost adjustment
percentage is equal to 100 percent plus the excess (if any)
of -
(I) the percentage by which the per employee cost for
providing coverage under the Blue Cross/Blue Shield
standard benefit option under the Federal Employees Health
Benefits Plan for plan year 2018 (determined by using the
benefit package for such coverage in 2010) exceeds such
cost for plan year 2010, over
(II) 55 percent.
(iii) Age and gender adjustment
(I) In general
The amount determined under subclause (I) or (II) of
clause (i), whichever is applicable, for any taxable period
shall be increased by the amount determined under subclause
(II).
(II) Amount determined
The amount determined under this subclause is an amount
equal to the excess (if any) of -
(aa) the premium cost of the Blue Cross/Blue Shield
standard benefit option under the Federal Employees
Health Benefits Plan for the type of coverage provided
such individual in such taxable period if priced for the
age and gender characteristics of all employees of the
individual's employer, over
(bb) that premium cost for the provision of such
coverage under such option in such taxable period if
priced for the age and gender characteristics of the
national workforce.
(iv) Exception for certain individuals
In the case of an individual who is a qualified retiree or
who participates in a plan sponsored by an employer the
majority of whose employees covered by the plan are engaged
in a high-risk profession or employed to repair or install
electrical or telecommunications lines -
(I) the dollar amount in clause (i)(I) shall be increased
by $1,650, and
(II) the dollar amount in clause (i)(II) shall be
increased by $3,450,(!1)
(v) Subsequent years
In the case of any calendar year after 2018, each of the
dollar amounts under clauses (i) (after the application of
clause (ii)) and (iv) shall be increased to the amount equal
to such amount as in effect for the calendar year preceding
such year, increased by an amount equal to the product of -
(I) such amount as so in effect, multiplied by
(II) the cost-of-living adjustment determined under
section 1(f)(3) for such year (determined by substituting
the calendar year that is 2 years before such year for
"1992" in subparagraph (B) thereof), increased by 1
percentage point in the case of determinations for calendar
years beginning before 2020.
If any amount determined under this clause is not a multiple
of $50, such amount shall be rounded to the nearest multiple
of $50.
(c) Liability to pay tax
(1) In general
Each coverage provider shall pay the tax imposed by subsection
(a) on its applicable share of the excess benefit with respect to
an employee for any taxable period.
(2) Coverage provider
For purposes of this subsection, the term "coverage provider"
means each of the following:
(A) Health insurance coverage
If the applicable employer-sponsored coverage consists of
coverage under a group health plan which provides health
insurance coverage, the health insurance issuer.
(B) HSA and MSA contributions
If the applicable employer-sponsored coverage consists of
coverage under an arrangement under which the employer makes
contributions described in subsection (b) or (d) of section
106, the employer.
(C) Other coverage
In the case of any other applicable employer-sponsored
coverage, the person that administers the plan benefits.
(3) Applicable share
For purposes of this subsection, a coverage provider's
applicable share of an excess benefit for any taxable period is
the amount which bears the same ratio to the amount of such
excess benefit as -
(A) the cost of the applicable employer-sponsored coverage
provided by the provider to the employee during such period,
bears to
(B) the aggregate cost of all applicable employer-sponsored
coverage provided to the employee by all coverage providers
during such period.
(4) Responsibility to calculate tax and applicable shares
(A) In general
Each employer shall -
(i) calculate for each taxable period the amount of the
excess benefit subject to the tax imposed by subsection (a)
and the applicable share of such excess benefit for each
coverage provider, and
(ii) notify, at such time and in such manner as the
Secretary may prescribe, the Secretary and each coverage
provider of the amount so determined for the provider.
(B) Special rule for multiemployer plans
In the case of applicable employer-sponsored coverage made
available to employees through a multiemployer plan (as defined
in section 414(f)), the plan sponsor shall make the
calculations, and provide the notice, required under
subparagraph (A).
(d) Applicable employer-sponsored coverage; cost
For purposes of this section -
(1) Applicable employer-sponsored coverage
(A) In general
The term "applicable employer-sponsored coverage" means, with
respect to any employee, coverage under any group health plan
made available to the employee by an employer which is
excludable from the employee's gross income under section 106,
or would be so excludable if it were employer-provided coverage
(within the meaning of such section 106).
(B) Exceptions
The term "applicable employer-sponsored coverage" shall not
include -
(i) any coverage (whether through insurance or otherwise)
described in section 9832(c)(1) (other than subparagraph (G)
thereof) or for long-term care, or
(ii) any coverage under a separate policy, certificate, or
contract of insurance which provides benefits substantially
all of which are for treatment of the mouth (including any
organ or structure within the mouth) or for treatment of the
eye, or
(iii) any coverage described in section 9832(c)(3) the
payment for which is not excludable from gross income and for
which a deduction under section 162(l) is not allowable.
(C) Coverage includes employee paid portion
Coverage shall be treated as applicable employer-sponsored
coverage without regard to whether the employer or employee
pays for the coverage.
(D) Self-employed individual
In the case of an individual who is an employee within the
meaning of section 401(c)(1), coverage under any group health
plan providing health insurance coverage shall be treated as
applicable employer-sponsored coverage if a deduction is
allowable under section 162(l) with respect to all or any
portion of the cost of the coverage.
(E) Governmental plans included
Applicable employer-sponsored coverage shall include coverage
under any group health plan established and maintained
primarily for its civilian employees by the Government of the
United States, by the government of any State or political
subdivision thereof, or by any agency or instrumentality of any
such government.
(2) Determination of cost
(A) In general
The cost of applicable employer-sponsored coverage shall be
determined under rules similar to the rules of section
4980B(f)(4), except that in determining such cost, any portion
of the cost of such coverage which is attributable to the tax
imposed under this section shall not be taken into account and
the amount of such cost shall be calculated separately for self-
only coverage and other coverage. In the case of applicable
employer-sponsored coverage which provides coverage to retired
employees, the plan may elect to treat a retired employee who
has not attained the age of 65 and a retired employee who has
attained the age of 65 as similarly situated beneficiaries.
(B) Health FSAs
In the case of applicable employer-sponsored coverage
consisting of coverage under a flexible spending arrangement
(as defined in section 106(c)(2)), the cost of the coverage
shall be equal to the sum of -
(i) the amount of employer contributions under any salary
reduction election under the arrangement, plus
(ii) the amount determined under subparagraph (A) with
respect to any reimbursement under the arrangement in excess
of the contributions described in clause (i).
(C) Archer MSAs and HSAs
In the case of applicable employer-sponsored coverage
consisting of coverage under an arrangement under which the
employer makes contributions described in subsection (b) or (d)
of section 106, the cost of the coverage shall be equal to the
amount of employer contributions under the arrangement.
(D) Allocation on a monthly basis
If cost is determined on other than a monthly basis, the cost
shall be allocated to months in a taxable period on such basis
as the Secretary may prescribe.
(3) Employee
The term "employee" includes any former employee, surviving
spouse, or other primary insured individual.
(e) Penalty for failure to properly calculate excess benefit
(1) In general
If, for any taxable period, the tax imposed by subsection (a)
exceeds the tax determined under such subsection with respect to
the total excess benefit calculated by the employer or plan
sponsor under subsection (c)(4) -
(A) each coverage provider shall pay the tax on its
applicable share (determined in the same manner as under
subsection (c)(4)) of the excess, but no penalty shall be
imposed on the provider with respect to such amount, and
(B) the employer or plan sponsor shall, in addition to any
tax imposed by subsection (a), pay a penalty in an amount equal
to such excess, plus interest at the underpayment rate
determined under section 6621 for the period beginning on the
due date for the payment of tax imposed by subsection (a) to
which the excess relates and ending on the date of payment of
the penalty.
(2) Limitations on penalty
(A) Penalty not to apply where failure not discovered
exercising reasonable diligence
No penalty shall be imposed by paragraph (1)(B) on any
failure to properly calculate the excess benefit during any
period for which it is established to the satisfaction of the
Secretary that the employer or plan sponsor neither knew, nor
exercising reasonable diligence would have known, that such
failure existed.
(B) Penalty not to apply to failures corrected within 30 days
No penalty shall be imposed by paragraph (1)(B) on any such
failure if -
(i) such failure was due to reasonable cause and not to
willful neglect, and
(ii) such failure is corrected during the 30-day period
beginning on the 1st date that the employer knew, or
exercising reasonable diligence would have known, that such
failure existed.
(C) Waiver by Secretary
In the case of any such failure which is due to reasonable
cause and not to willful neglect, the Secretary may waive part
or all of the penalty imposed by paragraph (1), to the extent
that the payment of such penalty would be excessive or
otherwise inequitable relative to the failure involved.
(f) Other definitions and special rules
For purposes of this section -
(1) Coverage determinations
(A) In general
Except as provided in subparagraph (B), an employee shall be
treated as having self-only coverage with respect to any
applicable employer-sponsored coverage of an employer.
(B) Minimum essential coverage
An employee shall be treated as having coverage other than
self-only coverage only if the employee is enrolled in coverage
other than self-only coverage in a group health plan which
provides minimum essential coverage (as defined in section
5000A(f)) to the employee and at least one other beneficiary,
and the benefits provided under such minimum essential coverage
do not vary based on whether any individual covered under such
coverage is the employee or another beneficiary.
(2) Qualified retiree
The term "qualified retiree" means any individual who -
(A) is receiving coverage by reason of being a retiree,
(B) has attained age 55, and
(C) is not entitled to benefits or eligible for enrollment
under the Medicare program under title XVIII of the Social
Security Act.
(3) Employees engaged in high-risk profession
The term "employees engaged in a high-risk profession" means
law enforcement officers (as such term is defined in section 1204
of the Omnibus Crime Control and Safe Streets Act of 1968),
employees in fire protection activities (as such term is defined
in section 3(y) of the Fair Labor Standards Act of 1938),
individuals who provide out-of-hospital emergency medical care
(including emergency medical technicians, paramedics, and first-
responders), individuals whose primary work is longshore work
(as defined in section 258(b) of the Immigration and Nationality
Act (8 U.S.C. 1288(b)), determined without regard to paragraph
(2) thereof), and individuals engaged in the construction,
mining, agriculture (not including food processing), forestry,
and fishing industries. Such term includes an employee who is
retired from a high-risk profession described in the preceding
sentence, if such employee satisfied the requirements of such
sentence for a period of not less than 20 years during the
employee's employment.
(4) Group health plan
The term "group health plan" has the meaning given such term by
section 5000(b)(1).
(5) Health insurance coverage; health insurance issuer
(A) Health insurance coverage
The term "health insurance coverage" has the meaning given
such term by section 9832(b)(1) (applied without regard to
subparagraph (B) thereof, except as provided by the Secretary
in regulations).
(B) Health insurance issuer
The term "health insurance issuer" has the meaning given such
term by section 9832(b)(2).
(6) Person that administers the plan benefits
The term "person that administers the plan benefits" shall
include the plan sponsor if the plan sponsor administers benefits
under the plan.
(7) Plan sponsor
The term "plan sponsor" has the meaning given such term in
section 3(16)(B) of the Employee Retirement Income Security Act
of 1974.
(8) Taxable period
The term "taxable period" means the calendar year or such
shorter period as the Secretary may prescribe. The Secretary may
have different taxable periods for employers of varying sizes.
(9) Aggregation rules
All employers treated as a single employer under subsection
(b), (c), (m), or (o) of section 414 shall be treated as a single
employer.
(10) Denial of deduction
For denial of a deduction for the tax imposed by this
section, see section 275(a)(6).
(g) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out this section.
-SOURCE
(Added and amended Pub. L. 111-148, title IX, Sec. 9001(a), title
X, Sec. 10901(a), (b), Mar. 23, 2010, 124 Stat. 847, 1015, 1016;
Pub. L. 111-152, title I, Sec. 1401(a), Mar. 30, 2010, 124 Stat.
1059.)
-MISC1
AMENDMENTS
2010 - Subsec. (b)(3)(B). Pub. L. 111-152, Sec. 1401(a)(1),
designated existing provisions as cl. (i), inserted heading,
substituted "Except as provided in clause (ii), the annual" for
"The annual", and added cl. (ii).
Subsec. (b)(3)(C). Pub. L. 111-152, Sec. 1401(a)(2)(A), struck
out introductory provisions which read: "Except as provided in
subparagraph (D) - ".
Subsec. (b)(3)(C)(i). Pub. L. 111-152, Sec. 1401(a)(2)(B)(i),
substituted "2018" for "2013" in heading and introductory
provisions.
Subsec. (b)(3)(C)(i)(I). Pub. L. 111-152, Sec. 1401(a)(2)(B)(ii),
substituted "$10,200 multiplied by the health cost adjustment
percentage (determined by only taking into account self-only
coverage)" for "$8,500".
Subsec. (b)(3)(C)(i)(II). Pub. L. 111-152, Sec.
1401(a)(2)(B)(iii), substituted "$27,500 multiplied by the health
cost adjustment percentage (determined by only taking into account
coverage other than self-only coverage)" for "$23,000".
Subsec. (b)(3)(C)(ii), (iii). Pub. L. 111-152, Sec.
1401(a)(2)(C), added cls. (ii) and (iii). Former cls. (ii) and
(iii) redesignated (iv) and (v), respectively.
Subsec. (b)(3)(C)(iv). Pub. L. 111-152, Sec. 1401(a)(2)(D),
inserted "covered by the plan" after "whose employees" in
introductory provisions, added subcls. (I) and (II), and struck out
former subcls. (I) and (II) which read as follows:
"(I) the dollar amount in clause (i)(I) (determined after the
application of subparagraph (D)) shall be increased by $1,350, and
"(II) the dollar amount in clause (i)(II) (determined after the
application of subparagraph (D)) shall be increased by $3,000."
Pub. L. 111-152, Sec. 1401(a)(2)(C), redesignated cl. (ii) as
(iv).
Subsec. (b)(3)(C)(v). Pub. L. 111-152, Sec. 1401(a)(2)(E)(i),
(ii), substituted "2018" for "2013" and "clauses (i) (after the
application of clause (ii)) and (iv)" for "clauses (i) and (ii)" in
introductory provisions.
Pub. L. 111-152, Sec. 1401(a)(2)(C), redesignated cl. (iii) as
(v).
Subsec. (b)(3)(C)(v)(II). Pub. L. 111-152, Sec.
1401(a)(2)(E)(iii), inserted "in the case of determinations for
calendar years beginning before 2020" after "1 percentage point".
Subsec. (b)(3)(D). Pub. L. 111-152, Sec. 1401(a)(3), struck out
subpar. (D) which provided transition rule for States with highest
coverage costs.
Subsec. (d)(1)(B)(i). Pub. L. 111-148, Sec. 10901(b), substituted
"section 9832(c)(1) (other than subparagraph (G) thereof)" for
"section 9832(c)(1)(A)".
Subsec. (d)(1)(B)(ii), (iii). Pub. L. 111-152, Sec. 1401(a)(4),
added cl. (ii) and redesignated former cl. (ii) as (iii).
Subsec. (d)(3). Pub. L. 111-152, Sec. 1401(a)(5), added par. (3).
Subsec. (f)(3). Pub. L. 111-148, Sec. 10901(a), inserted
"individuals whose primary work is longshore work (as defined in
section 258(b) of the Immigration and Nationality Act (8 U.S.C.
1288(b)), determined without regard to paragraph (2) thereof),"
before "and individuals engaged in the construction, mining".
EFFECTIVE DATE OF 2010 AMENDMENT
Pub. L. 111-148, title X, Sec. 10901(c), Mar. 23, 2010, 124 Stat.
1016, as amended by Pub. L. 111-152, title I, Sec. 1401(b)(2), Mar.
30, 2010, 124 Stat. 1060, provided that: "The amendments made by
this section [amending this section] shall apply to taxable years
beginning after December 31, 2017."
EFFECTIVE DATE
Pub. L. 111-148, title IX, Sec. 9001(c), Mar. 23, 2010, 124 Stat.
853, as amended by Pub. L. 111-152, title I, Sec. 1401(b)(1), Mar.
30, 2010, 124 Stat. 1060, provided that: "The amendments made by
this section [enacting this section] shall apply to taxable years
beginning after December 31, 2017."
-REFTEXT
REFERENCES IN TEXT
The Social Security Act, referred to in subsec. (f)(2)(C), is act
Aug. 14, 1935, ch. 531, 49 Stat. 620. Title XVIII of the Act is
classified generally to subchapter XVIII (Sec. 1395 et seq.) of
chapter 7 of Title 42, The Public Health and Welfare. For complete
classification of this Act to the Code, see section 1305 of Title
42 and Tables.
Section 1204 of the Omnibus Crime Control and Safe Streets Act of
1968, referred to in subsec. (f)(3), is classified to section 3796b
of Title 42, The Public Health and Welfare.
Section 3(y) of the Fair Labor Standards Act of 1938, referred to
in subsec. (f)(3), is classified to section 203(y) of Title 29,
Labor.
Section 3(16)(B) of the Employee Retirement Income Security Act
of 1974, referred to in subsec. (f)(7), is classified to section
1002(16)(B) of Title 29, Labor.