§4980E — Title 26 Internal Revenue Code | U.S. Code

Summary

An employer that contributes to employees' Archer medical savings accounts must contribute fairly across the workforce. For every employee with the same category of coverage under the employer's high deductible health plan, contributions must be either the same dollar amount or the same percentage of the plan's annual deductible. Part-time employees, meaning those who usually work fewer than 30 hours a week, are compared separately, and contributions for someone employed part of the year can be prorated. If the employer fails this test for a calendar year, it owes a tax equal to 35 percent of everything it contributed to employees' Archer MSAs for that year. The IRS can waive some or all of the tax if the failure was due to reasonable cause, not willful neglect, and the tax would be excessive compared to the failure. Related companies are treated as one employer.

Title 26, §4980E

Internal Revenue Code — Source: USLM XML via OLRC

(a)In the case of an employer who makes a contribution to the Archer MSA of any employee with respect to coverage under a high deductible health plan of the employer during a calendar year, there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection (d) for such calendar year.

(b)The amount of the tax imposed by subsection (a) on any failure for any calendar year is the amount equal to 35 percent of the aggregate amount contributed by the employer to Archer MSAs of employees for taxable years of such employees ending with or within such calendar year.

(c)In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved.

(d)(1)An employer meets the requirements of this subsection for any calendar year if the employer makes available comparable contributions to the Archer MSAs of all comparable participating employees for each coverage period during such calendar year.

(2)(A)For purposes of paragraph (1), the term “comparable contributions” means contributions—

(i)which are the same amount, or

(ii)which are the same percentage of the annual deductible limit under the high deductible health plan covering the employees.

(B)In the case of an employee who is employed by the employer for only a portion of the calendar year, a contribution to the Archer MSA of such employee shall be treated as comparable if it is an amount which bears the same ratio to the comparable amount (determined without regard to this subparagraph) as such portion bears to the entire calendar year.

(3)For purposes of paragraph (1), the term “comparable participating employees” means all employees—

(A)who are eligible individuals covered under any high deductible health plan of the employer, and

(B)who have the same category of coverage.

(4)(A)Paragraph (3) shall be applied separately with respect to part-time employees and other employees.

(B)For purposes of subparagraph (A), the term “part-time employee” means any employee who is customarily employed for fewer than 30 hours per week.

(e)For purposes of this section, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer.

(f)Terms used in this section which are also used in section 220 have the respective meanings given such terms in section 220.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2002—Pub. L. 107–147 substituted “Archer MSA contributions” for “medical savings account contributions” in section catchline. 2000—Subsec. (a). Pub. L. 106–554, § 1(a)(7) [title II, § 202(a)(8)], substituted “Archer MSA” for “medical savings account”. Subsecs. (b), (d)(1). Pub. L. 106–554, § 1(a)(7) [title II, § 202(b)(2)(D)], substituted “Archer MSAs” for “medical savings accounts”. Subsec. (d)(2)(B). Pub. L. 106–554, § 1(a)(7) [title II, § 202(a)(8)], substituted “Archer MSA” for “medical savings account”.

Statutory Notes and Related Subsidiaries

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1996, see section 301(j) of Pub. L. 104–191, set out as an

Effective Date

of 1996 Amendment note under section 62 of this title.

§4980E Failure of Employer to Make Comparable Archer Msa Contributions

Summary

Title 26, §4980E

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata