Group Health Plan Excise Tax Reporting Obligations Coming in 2010

Failing to comply with various federal group health plan mandates, including Consolidated Omnibus Budget Reconciliation Act (COBRA), and Heath Insurance Portability and Accountability Act (HIPAA) Portability, just got riskier and costlier for employers.  Since the date of enactment of COBRA, HIPAA Portability and other federal mandates applicable to group health plans, the Internal Revenue Code has provided that employers are liable for excise taxes for failure to comply with such provisions.  However, there had never been a method for self-reporting the excise tax, and the Internal Revenue Service (IRS) had not historically imposed these excise taxes as part of an audit.  With the publication of final regulations on excise tax reporting, effective January 1, 2010, employers who sponsor group health plans now will be required to report and pay excise taxes for failing to satisfy certain federal group health plan mandates, unless timely corrected.  In addition, excise tax reporting is required if comparable employer contribution rules are not satisfied for health savings accounts (HSAs) and Archer medical savings accounts (MSAs).  Failure to file the excise tax return and pay the excise tax on or before the required due date will result, under Internal Revenue Code section 6651, in penalties and related interest unless the failure to timely file or pay is due to reasonable cause and not to willful neglect.  Please see the attached article for further details.