IRS Form 8928 Guide: Employee Benefit Plan Excise Taxes

Introduction – What Is Form 8928?

IRS Form 8928, titled Return of Certain Excise Taxes on Employers and Plan Sponsors for Employee Benefit Plans Under Sections 4980B, 4980D, 4980E, and 4980G, is a federal tax return used to report and pay excise taxes on employee benefit plan failures. The Internal Revenue Service (IRS) administers this form to hold employers, plan sponsors, and administrators accountable for compliance with federal health plan rules.

If an employer makes a mistake with group health plan mandates—such as failing to send a required COBRA notice or making unfair Health Savings Account (HSA) contributions—federal tax law imposes daily or percentage-based excise taxes. Form 8928 is the specific form used to calculate, disclose, and pay these self-assessed penalties.

Purpose of the Form – Why Does Form 8928 Exist?

Federal laws such as COBRA, HIPAA, the Affordable Care Act (ACA), and Mental Health Parity require employers to follow strict rules when offering health and welfare benefits. These laws protect workers by ensuring fair access to healthcare coverage, continuity of benefits during job transitions, and equal financial contributions.

Rather than relying solely on Department of Labor audits, Congress enacted excise tax provisions under the Internal Revenue Code (IRC). These provisions require employers to monitor their own benefit plans and voluntarily self-report noncompliance. Form 8928 provides a structured mechanism for businesses to calculate these taxes and remit payment directly to the IRS.

Who Needs to File This Form?

You must file Form 8928 if your organization experienced an uncorrected compliance failure during the tax year under any of the following four code sections:

• Section 4980B (COBRA Failures): Failing to provide required COBRA continuation coverage, late election notices, or improper termination of continuation coverage.
• Section 4980D (Group Health Plan Mandates): Violating group health plan requirements, such as Affordable Care Act market reforms (e.g., adult child coverage up to age 26, preventive care coverage without cost-sharing), HIPAA nondiscrimination rules, or mental health parity provisions.
• Section 4980E (Archer MSA Contributions): Failing to make comparable employer contributions to Archer Medical Savings Accounts for all participating employees.
• Section 4980G (HSA Contributions): Failing to make comparable employer contributions to Health Savings Accounts for all eligible employees outside of a Section 125 cafeteria plan.

Depending on the nature of the violation and plan structure, the filer may be an employer, a plan sponsor, or a third-party administrator who assumed legal responsibility for the failure.

Who Is Exempt / Not Required to File?

Most employers with compliant benefit programs do not need to file Form 8928. You are exempt or excused from filing under the following circumstances:

• No Violations: Employers whose health plans operated in full compliance throughout the tax year.
• Small Employer COBRA Exemption: Small employers that regularly employed fewer than 20 employees on a typical business day during the preceding calendar year are exempt from federal COBRA rules and Section 4980B reporting.
• Exempt Organizations: Certain church plans and governmental plans are generally exempt from these federal excise tax requirements.
• The 30-Day Reasonable Cause Window: For failures under Sections 4980B and 4980D, no tax is imposed if the failure was due to reasonable cause (not willful neglect) and was fully corrected within 30 days of when the employer first discovered the error (or should have discovered it through reasonable diligence).

When to File Form 8928

Form 8928 is an event-triggered annual return. You only file it for tax years during which a reportable, uncorrected failure occurred. The filing deadline depends directly on which code section was violated:

• For Sections 4980B and 4980D (COBRA and Health Plan Mandates): The form is due on or before the due date (including extensions) of the employer’s federal income tax return. For multiemployer plans, it is due on or before the last day of the seventh month following the close of the plan year.
• For Sections 4980E and 4980G (Archer MSA and HSA Comparability): The form is due on or before the 15th day of the fourth month following the close of the employer’s calendar year (typically April 15 for calendar-year employers).

If you need extra time to file Form 8928, you must submit Form 7004. Note that an extension of time to file your business income tax return does not automatically extend the deadline for Form 8928.

Where and How to File

Form 8928 is a standalone return filed separately from your regular business tax return (Form 1120 or Form 1065). It is currently submitted as a physical paper document rather than through regular electronic filing software.

Sign and mail the completed form, along with any required payments or explanatory statements, to the designated IRS address as per instructions for Form 8928. To ensure proof of timely filing, send the package using certified mail, registered mail, or an IRS-approved private delivery service with date-tracking verification.

Step-by-Step Instructions to Fill Form 8928

Form 8928 is divided into a header section and five distinct parts. Fill out only the sections that apply to your company’s specific compliance failures.

Header Information

Enter the employer’s or plan sponsor’s legal name, Employer Identification Number (EIN), business address, and the specific three-digit plan number. Indicate the tax year or plan year for which the return is being prepared.

Line-by-Line Breakdown by Part

Part & Section	Key Focus	Calculation Method
Part I (Section 4980B)	COBRA continuation coverage failures	Calculated as $100 per day per affected individual ($200 per day if more than one individual in a family is affected) during the noncompliance period. Subject to statutory minimums and maximum caps.
Part II (Section 4980D)	Group health plan requirement failures (ACA, HIPAA, Parity)	Calculated at $100 per day per affected individual during the failure period. Subject to statutory maximum caps for unintentional failures (generally the lesser of $500,000 or 10% of total health plan costs).
Part III (Section 4980E)	Archer MSA comparability failures	A flat excise tax equal to 35% of the total amount contributed by the employer to Archer MSAs for that calendar year.
Part IV (Section 4980G)	HSA comparability failures	A flat excise tax equal to 35% of the total amount contributed by the employer to all employee HSAs during that calendar year.
Part V	Tax summary and payments	Add the tax amounts from Parts I through IV, subtract any estimated tax payments or prior credits, and report the final balance due or overpayment.

Required Documents and Information Needed Before Filling

Before completing Form 8928, collect comprehensive documentation to verify your dates, headcounts, and calculation methods:

• COBRA Distribution Records: Proof of when qualifying event notices and election packets were sent, received, or delayed.
• Health Plan Documents: Summary Plan Descriptions (SPDs) and insurance carrier certificates showing coverage provisions and effective dates.
• Payroll and Contribution Rosters: Detailed records of all employer contributions made to employee HSAs or Archer MSAs, categorized by employee tier (e.g., full-time, part-time).
• Healthcare Expense Ledgers: Proof of the total amount paid or incurred by the employer during the preceding tax year for group health coverage (required to calculate maximum statutory caps).
• Correction Records: Written records demonstrating the exact dates the failure was identified, when it was remedied, and the corrective actions taken.

Common Mistakes to Avoid

Navigating employee benefit rules can be tricky. Look out for these frequent oversights when evaluating your filing obligations:

• Assuming Small Administrative Errors Are Ignored: A late COBRA notice is treated as a daily statutory violation until corrected. Failing to self-report can lead to compounding penalties during an audit.
• Confusing HSA Rules: The 35% excise tax under Section 4980G applies to employer contributions made outside of a Section 125 cafeteria plan. If contributions are offered through a cafeteria plan, Section 125 nondiscrimination rules apply instead of comparability rules.
• Missing the 30-Day Cure Period: If you catch a COBRA or health plan error early and correct it within 30 days of discovery (and it was not willful neglect), you may owe zero excise tax and avoid Form 8928 altogether.
• Failing to File Form 7004 Separately: Assuming that your corporate tax extension also extends Form 8928 can result in automatic late-filing penalties.

Penalties for Non-Filing or Errors

Because Form 8928 is a tax return, failing to file it triggers standard IRS tax penalties in addition to the underlying excise tax:

• Failure-to-File Penalty: 5% of the unpaid tax for each month (or fraction of a month) the return is late, capped at 25% of the total tax due.
• Failure-to-Pay Penalty: 0.5% per month of the unpaid tax balance, up to a maximum of 25%.
• Statutory Interest: The IRS charges compound interest on all unpaid excise taxes from the original due date until the tax is paid in full.
• Department of Labor Exposure: Filing late or misrepresenting failures can also expose plan sponsors to civil lawsuits under ERISA and additional regulatory sanctions from the Department of Labor.

Related Forms and Schedules

Form 8928 often intersects with other employee benefit and business tax returns:

• Form 7004: Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.
• Form 5500: Annual Return/Report of Employee Benefit Plan.
• Form W-2: Wage and Tax Statement (specifically Box 12, Code W for employer HSA contributions).
• Form 8889: Health Savings Accounts (HSAs) (used by individual employees to report contributions).
• Form 1120 / Form 1065: Corporate or Partnership income tax returns where benefit expenses are deducted.

Frequently Asked Questions

Does a late COBRA notice automatically mean I owe excise taxes?

Not necessarily. If the error occurred despite reasonable diligence, was not due to willful neglect, and you fully corrected it within 30 days of discovering the mistake, no excise tax is imposed.

Can the IRS waive the 35% HSA comparability penalty?

No. Unlike Sections 4980B and 4980D, the statutory provisions for Section 4980E and 4980G do not include a general reasonable cause waiver. If employer contributions were non-comparable outside a cafeteria plan, the 35% excise tax is mandatory.

Are health plan contributions through a cafeteria plan subject to Form 8928?

HSA contributions made through a Section 125 cafeteria plan (including pre-tax employee salary reductions or employer matching) are governed by Section 125 nondiscrimination rules, not Section 4980G comparability rules, and are generally not reported on Form 8928.

Can Form 8928 be submitted electronically?

Currently, Form 8928 must be printed, signed, and mailed as a physical paper document to the IRS address designated in the official instructions.

What is the statutory cap on unintentional COBRA or health plan failures?

For unintentional failures, the total excise tax for a tax year is generally capped at the lesser of $500,000 or 10% of the total amount paid or incurred by the employer during the prior tax year for group health coverage.

Does paying excise taxes on Form 8928 resolve employee lawsuits?

No. Paying IRS excise taxes satisfies your tax obligation to the federal government under the Internal Revenue Code, but it does not prevent affected employees from seeking private civil remedies under ERISA.

Conclusion – Key Takeaways Summarized

IRS Form 8928 is an essential compliance tool for businesses that experience benefit plan failures under COBRA, ACA mandates, or HSA comparability rules. Because excise taxes can accumulate daily or apply as a steep 35% penalty, understanding these rules is vital for every employer and plan administrator.

Regular internal audits of your healthcare plans and COBRA administration can help you catch mistakes early. Taking advantage of the 30-day reasonable cause correction window can save your business from costly penalties and complex excise tax reporting.