November 5, 2009

Welfare Benefit Plan Violations: Self-Reporting Required

On September 8, 2009, the Department of Treasury issued final regulations relating to self-reporting excise taxes imposed as a result of certain welfare benefit plan violations.  The excise taxes are not new; the self-reporting requirement is new.  These rules apply for plan years beginning on or after January 1, 2010. 

Employers sponsoring group health plans, as well as certain other responsible entities, such as insurers or third party administrators, are required to self-report violations of:

  1. COBRA continuation coverage provisions;
  2. HIPAA portability, access and renewability provisions including:
    • Preexisting condition limitation exclusions;
    • Certification of creditable coverage matters;
    • Special enrollments;
  3. Prohibitions against discrimination based on a health factor (including genetic information);
  4. Parity between mental health benefits and medical/surgical benefits;
  5. Minimum hospital lengths of stay in connection with childbirth;
  6. Continued coverage for post-secondary students with a serious medical condition (Michelle’s Law);
  7. Comparable employer contributions to Archer MSAs; and
  8. Comparable employer contributions to Health Savings Accounts (also seeHSA Comparability Rules Clarified from the October ’09 Benefit Beat).

A plan that does not satisfy any of these requirements could be subject to an excise tax of $100 per day per affected individual.  The self-reporting needs to be done on the Form 8928, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code.  The form has not yet been completed; although the IRS provides for an advanced copy of the form.  The reporting must be done by the employer or other responsible entity’s tax return filing due date, without extensions. 

Failure to self-report a violation can result in penalties, which can be as much as 25% of the tax due, as well as interest.  There is a ‘reasonable cause’ and ‘not-willful’ neglect exception available; in which case, interest and penalties would not be imposed as long as a correction of the violation is made within 30 days. 

This is just another example of how important it is to cross the benefit ‘T’s and dot the ‘I’s.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service

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