What Is IRS Form 8928 and When Is It Required?

Internal Revenue Service (IRS) Form 8928 is used by employers and group health plans to self-report and pay excise taxes for failing to comply with federal requirements. When a group health plan does not meet these standards, the responsible entity must use this form to calculate and remit the tax.

Triggers for Filing Form 8928

One of the most common triggers relates to the Consolidated Omnibus Budget Reconciliation Act (COBRA). Failures under COBRA include not providing a qualified beneficiary with timely notice of their right to elect continuation coverage after a qualifying event, such as termination of employment. Any lapse in following the notification, election period, and coverage duration rules can require filing the form.

Compliance issues under the Health Insurance Portability and Accountability Act (HIPAA) also trigger the need to file Form 8928. These failures can involve discriminating against individuals based on health status or genetic information, which is protected under the Genetic Information Nondiscrimination Act (GINA). For instance, charging a higher premium based on medical history or denying enrollment because of a genetic predisposition to a disease would be a reportable failure.

Violations of the Affordable Care Act (ACA) can lead to excise taxes reported on Form 8928. An example of an ACA-related failure is imposing a prohibited lifetime or annual dollar limit on essential health benefits. Another trigger is failing to extend dependent coverage to children until age 26 or enforcing a waiting period for coverage that exceeds 90 days.

Failures under the Mental Health Parity and Addiction Equity Act (MHPAEA) are also reportable. This occurs if a plan imposes more restrictive limitations on mental health or substance use disorder benefits than on medical or surgical benefits. This could involve higher cost-sharing or stricter preauthorization rules for mental health services. Failures to provide required coverage for pediatric vaccines or to make comparable contributions to Health Savings Accounts (HSAs) are also reportable events.

Information and Calculations for Form 8928

Before completing Form 8928, a filer must gather specific information. This begins with identifying the filer, such as the employer or plan administrator, and includes their name, address, and Employer Identification Number (EIN). Details about the group health plan are also necessary, including the plan name, three-digit plan number, and plan year. The filer must also document the type of failure and the dates the noncompliance period began and ended.

A key part of the preparation is determining the date the failure was discovered and the date of correction. The IRS defines discovery as the point at which the entity knew, or through reasonable diligence would have known, that the failure existed. This information is needed to accurately calculate any tax owed, as the duration of noncompliance directly impacts the penalty.

The standard excise tax for a group health plan failure is $100 per day for each individual affected by the noncompliance. This tax accrues for every day within the noncompliance period, which starts when the failure first occurred and ends when it is corrected. To correct a failure, the plan must retroactively undo the error and place the affected individual in a financial position as good as they would have been in had the failure not occurred.

Several rules can modify the total tax liability. If a failure was unintentional and is corrected, the tax is capped. For a single-employer plan, the maximum tax is the lesser of 10% of the amount the employer paid for the group health plan during the prior year or $500,000. A provision may eliminate the tax for failures due to reasonable cause and not willful neglect, provided the failure is corrected within 30 days of discovery. If a failure is not corrected before the IRS issues a notice of examination, a minimum tax may be imposed.

The form has different parts for different filers and failures. Part I is for multiemployer plans, while Part II is for single-employer plans. Part III is used to report failures related to Health Savings Accounts (HSAs), which have a tax calculation based on 35% of aggregate employer contributions. The filer transfers the collected data into the appropriate lines to arrive at the final tax due.

Filing the Form and Paying the Tax

The filing deadline for Form 8928 depends on the plan type and the compliance failure. For single-employer plans, the due date is the same as the employer’s federal income tax return due date, not including extensions. For multi-employer plans, the deadline is the last day of the seventh month after the end of the plan year in which the failure occurred. For failures related to Health Savings Account (HSA) comparability rules, the form is due by the 15th day of the fourth month of the following calendar year.

An extension to file an income tax return does not extend the Form 8928 deadline. A filer may request a separate extension to file the form, but this does not extend the time to pay the excise tax.

Payment can be made electronically through the Electronic Federal Tax Payment System (EFTPS) or by mailing a check or money order with the form. If paying by mail, the check should be made payable to the “United States Treasury” and include the filer’s EIN, “Form 8928,” and the tax period. The form should be mailed to the address specified in the form’s instructions.