What Is Form 8928 and When Is It Required?

Form 8928, “Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code,” is a tax form used by employers and group health plan administrators. It is used to report and pay excise taxes to the Internal Revenue Service (IRS) when specific failures occur within their group health plans related to federal mandates designed to protect participants.

The requirement to file this form is triggered by the plan’s non-compliance, not by a notice from the IRS. The employer or plan sponsor is responsible for identifying these failures and proactively filing the return. The form addresses several types of compliance issues, each with its own potential tax liability.

Events Triggering a Filing Requirement

Several compliance failures can require filing Form 8928, each tied to federal laws for group health plans. A common trigger involves failures related to COBRA continuation coverage, governed by Internal Revenue Code (IRC) Section 4980B. This can include not offering COBRA to a qualified beneficiary after an event like termination of employment or failing to provide required notices explaining COBRA rights. For instance, if an employer fails to send a COBRA election notice to a terminated employee, a compliance failure occurs for each day the notice is late.

Violations of the Affordable Care Act (ACA) also trigger a filing requirement under IRC Section 4980D. These failures can include a plan imposing a lifetime dollar limit on essential health benefits or failing to cover dependents up to age 26. An example is a health plan that terminates coverage for an employee’s otherwise eligible 24-year-old child.

The Mental Health Parity and Addiction Equity Act (MHPAEA) requires that financial requirements for mental health benefits be no more restrictive than those for medical benefits. A plan imposing a higher copayment for a therapy visit than for a comparable primary care visit would be in violation. Failures under the Health Insurance Portability and Accountability Act (HIPAA) related to portability and non-discrimination can also lead to excise taxes reported on this form.

Other triggers include failing to provide required coverage for pediatric vaccines or failing to make comparable contributions to Health Savings Accounts (HSAs) or Archer MSAs for all eligible employees. For example, if an employer contributes more to the HSAs of its executives than for other staff, this violates the comparability rules under IRC Section 4980G. This violation requires reporting on Form 8928.

Information and Documentation for Preparation

To complete Form 8928, you will need identifying information for both the filer and the plan. This includes the Employer Identification Number (EIN), the official plan name, and the plan number. This information can be found on the plan’s annual Form 5500 filing.

You must also have specific details about the compliance failure. This includes identifying the type of failure, the date it was discovered, and the date it was corrected. Correction means fixing the issue and making any affected individuals whole, as if the failure never occurred.

A required element for the form is determining the “noncompliance period,” which begins on the date the failure first occurred and ends on the date it is corrected. This timeline is necessary for calculating the excise tax. You will also need to know the total number of beneficiaries affected by the failure during this period.

The IRS provides Form 8928 and its accompanying instructions on its official website. These documents are the authoritative source for understanding the detailed requirements and any recent updates.

Calculating the Excise Tax

The excise tax calculation is a multi-step process. For failures related to COBRA, the ACA, and other mandates under Section 4980D, the tax is $100 per day for each individual affected by the noncompliance. This daily amount is multiplied by the number of days in the noncompliance period to determine the initial tax.

The Internal Revenue Code provides limitations, or “caps,” on the total excise tax, which can reduce the final amount owed. For a single employer, the tax for failures discovered after an IRS examination is limited to the lesser of 10% of the amount the employer paid for its group health plans in the prior year or $500,000.

A lower cap applies if the failure was due to reasonable cause and not willful neglect. In such cases, the tax for a single employer is limited to the lesser of 10% of the prior year’s plan costs or $500,000, with a potential per-beneficiary limit. If a filer can demonstrate they exercised reasonable diligence and corrected the failure within 30 days of discovery, the tax may be waived entirely.

You first calculate the base tax based on the daily penalty and then determine the applicable statutory cap, with the final tax liability being the lesser of these two amounts. For failures related to HSA or Archer MSA comparability rules, the tax is calculated as 35% of the aggregate amount the employer contributed to the accounts for that year.

How to File and Pay

The filing deadline for Form 8928 depends on the plan type and the compliance failure. For failures under sections 4980B and 4980D in single-employer plans, the form is due by the same date as the employer’s federal income tax return. For multi-employer plans, the due date is the last day of the seventh month after the end of the plan year. For failures related to HSA or MSA comparability rules, the form is due by the 15th day of the fourth month following the calendar year in which the non-comparable contributions were made.

An extension to file Form 8928 can be requested by filing Form 7004 by the original due date. An extension for filing does not extend the time to pay the excise tax.

Completed Forms 8928 should be mailed to the IRS service center in Kansas City, MO. Payment can be made by check or money order payable to the “United States Treasury” and mailed with the form. To ensure proper credit, write the filer’s EIN, the tax period, and “Form 8928” on the payment. Payment can also be made through the Electronic Federal Tax Payment System (EFTPS).