§ 4980I. Excise tax on high cost employer-sponsored health coverage
(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
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—
(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
(C)
Applicable dollar limit
(i)
2018
In the case of 2018, the dollar limit under this subparagraph is—
(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
(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—
(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—
(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—
(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.
(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—
(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
(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—
(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.
(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—
(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.
(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.
(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.
(g)
Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out this section.
[1] So in original. The comma probably should be a period.