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Statutory Text

SEC. 9001. EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED
HEALTH COVERAGE.
(a) IN GENERAL.—Chapter 43 of the Internal Revenue Code of
1986, as amended by section 1513, is amended by adding at the
end the following:
‘‘SEC. 4980I. EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED
HEALTH COVERAGE.
‘‘(a) IMPOSITION OF TAX.—If—
‘‘(1) an employee is covered under any applicable employersponsored
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 employersponsored
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.—øAs revised by
section 1401(a) of HCERA
‘‘(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. øAs added by section
1401(a)(1)(B)of HCERA
‘‘(C) APPLICABLE DOLLAR LIMIT.—øAs revised by section
1401(a)(2) of HCERA
‘‘(i) 2018.—In the case of 2018, the dollar limit
‘‘(II) the dollar amount in clause (i)(II) shall
be increased by $3,450, øsic-final punctuation incorrect
¿
‘‘(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. øNote: a subparagraph (D)
was stricken by section 1401(a)(3) of HCERA¿
‘‘(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 employersponsored
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 employersponsored
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 øAs
revised by section 10901(b)¿
‘‘(ii) any policy 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 ¿As added by section
1401(a)(4) of HCERA¿
‘‘(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 pri-
marily 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 employersponsored
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 employersponsored
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.
øAs added by section 1401(a)(5) of HCERA¿
‘‘(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 firstresponders),
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. øAs revised by section
10901(a)¿
‘‘(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.’’.
(b) CLERICAL AMENDMENT.—The table of sections for chapter
43 of such Code, as amended by section 1513, is amended by adding
at the end the following new item:
‘‘Sec. 4980I. Excise tax on high cost employer-sponsored health coverage.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2017.
As revised by section 1401(b)(1) of HCERA
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—
øAs revised by section 1401(a)(2) of HCERA¿
‘‘(I) the dollar amount in clause (i)(I) shall be
increased by $1,650, and