The collection of information contained in the final regulations has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-1816.

The collection of information in these final regulations is in §301.6103(c)-1(b)(2). This information is required by the IRS to identify the return or return information described in the request or consent; to search for and, where found, compile such return or return information; and to identify the person to whom any such return or return information is to be provided.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Books and records relating to the collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and return information are confidential, as required by section 6103.

This document contains amendments to the Procedure and Administration Regulations (26 CFR part 301), and amends §301.6103(c)-1 by extending the period for submission to the IRS of taxpayer authorizations permitting disclosure of returns and return information to designees of a taxpayer.

On December 18, 2009, the IRS published Notice 2010-8, 2010-3 I.R.B. 297 (available at IRS.gov), which announced the Treasury Department and the IRS’s intent to amend the regulations under §301.6103(c)-1 to expand the time frame for submission of section 6103(c) authorizations. The notice also announced interim rules extending from 60 days to 120 days the period within which section 6103(c) authorizations must be received to be effective. The time period was extended because some institutions charged with assisting taxpayers in their financial dealings encountered difficulty in obtaining written authorizations and submitting the authorizations within the 60-day period allowed by the existing regulations. The interim rules apply to authorizations signed and dated on or after October 19, 2009.

The Treasury Department and the IRS published a notice of proposed rulemaking (REG-153338-09) in the Federal Register, 76 FR 14827, on March 18, 2011, which adopted the interim rule in Notice 2010-8. A public hearing was scheduled for June 9, 2011. The IRS did not receive any requests to testify at the public hearing, and the public hearing was cancelled. One written comment responding to the NPRM was received and is available for public inspection at http://www.regulations.gov or upon request. After consideration of the comment, the proposed regulations are adopted by this Treasury decision without change.

The IRS received one comment in response to the NPRM. The commentator agreed that the period for submission of authorizations to allow for the disclosure of taxpayer information to third-party designees should be expanded. The commentator specifically suggested that any reasonable time period beyond 120 days also be considered. The Treasury Department and the IRS have concluded that the 120-day period is a sufficient extension of time to assist taxpayers whose designees have encountered difficulty in obtaining and submitting the written authorizations. The 120-day period is a reasonable limitation on the effective period of written authorizations that helps ensure the currency of the authorization while protecting taxpayer privacy. After carefully considering the comment, the proposed regulations are adopted without modification.

The following publication is obsolete as of May 7, 2013: Notice 2010-8, 2010-3 I.R.B. 297.

It has been determined that this final rule is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to this regulation. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding the final regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses, and no comments were received from that office.

When an agency issues a final rule, the Regulatory Flexibility Act (5 U.S.C. chapter 6) (RFA), requires the agency to “prepare a final regulatory flexibility analysis.” (5 U.S.C. 604(a)). Section 605 of the RFA provides an exception to this requirement if the agency certifies that the rulemaking will not have a significant economic impact on a substantial number of small entities. It is hereby certified that the collection of information in this regulation will not have a significant economic impact on a substantial number of small entities. This certification is based upon the fact that any burden on taxpayers is minimal, since the regulation applies only to taxpayers who request or consent to the disclosure of their own returns or return information, and since the information collected is only that necessary to carry out the disclosure of returns or return information requested or consented to by the taxpayer (such as the name and taxpayer identification number of the taxpayer, the return or return information to be disclosed, and the identity of the designee). Moreover, the certification is based upon the fact that the regulation reduces the burden imposed upon taxpayers by the prior regulation by extending the period in which consents may be received by the IRS. Accordingly, a Regulatory Flexibility Analysis is not required.

Paragraph 1. The authority citation for part 301 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 301.6103(c)-1 is amended by revising paragraphs (b)(2) and (f), and adding paragraph (g) to read as follows:

The collection of information contained in the final regulations has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-2242.

The collection of information in the final regulations is in §301.6109-1(d)(2)(ii)(A). The collection of this information is necessary to allow the IRS to gather correct application information with respect to persons that have EINs. The respondents are persons that have EINs.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by section 6103 of the Internal Revenue Code.

This document contains final amendments to the Procedure and Administration Regulations (26 CFR part 301) under section 6109 of the Internal Revenue Code relating to identifying numbers. The Department of Treasury and the IRS published a notice of proposed rulemaking (REG-135491-10) in the Federal Register, 77 FR 15004, on March 14, 2012, requiring persons issued EINs to provide updated application information to the IRS. The IRS did not receive any requests for a public hearing. Written comments responding to the proposed regulations were received and are available for public inspection at http://www.regulations.gov or upon request. After consideration of all the comments, the proposed regulations are adopted without amendment by this Treasury decision.

The IRS received four written comments in response to the proposed regulations. One comment supported the rule in the proposed regulations requiring any person issued an EIN to provide updated information to the IRS in the manner and frequency required by forms, instructions, or other appropriate guidance (including updated application information regarding the name and taxpayer identifying number of the responsible party). This commentator also recommended changes to either the Form SS-4, Application for Employer Identification Number, or the Form 5500, Annual Returns/Reports of Employee Benefit Plan, to require additional information confirming the active status of a trust’s EIN. Alternatively, the commentator suggested that the IRS could use a postcard to confirm the active status of trusts for EIN purposes. Although these suggestions are outside the scope of the regulations, the IRS will take them into consideration during future updates of those items.

Three of the comments did not support the rule in the proposed regulations. Two commentators objected to the increased burden on entities resulting from the updating requirement and questioned the necessity of this requirement. Additionally, two commentators suggested that the estimated annual average burden of 15 minutes provided in the Paperwork Reduction Act section of the proposed regulations underestimated the actual burden to entities and their agents. One commentator also argued that this rule is “material” because the related costs could reach over $100,000,000. Treasury and the IRS have considered these comments and, for the following reasons, these final regulations adopt the proposed regulations without change.

Treasury and the IRS continue to conclude that updating this application information is necessary for effective tax administration. Some EIN applicants continue to list individuals temporarily authorized to act on behalf of EIN applicants (sometimes referred to as “nominees”) as principal officers, general partners, grantors, owners, and trustors on EIN applications. The listing of nominees or other individuals who are no longer associated with the entity prevents the IRS from gathering and maintaining correct and current information with respect to the responsible party for the EIN applicant. The requirement in the final regulations to provide updated application information will allow the IRS to ascertain the true responsible party for persons who have an EIN. This knowledge will prevent unnecessary delays by allowing the IRS to contact the correct persons when resolving a tax matter related to a business with an EIN. In addition, this information will help the IRS combat schemes that abuse the tax system through the use of nominees, which results in the concealing of the true responsible party for entities that hide assets and income.

Treasury and the IRS also conclude that the costs related to this rule are not “material,” any associated burden on entities resulting from this requirement is minimal, and the costs and burden are outweighed by the benefits to tax administration described in the previous paragraph. An entity with an EIN will always know the identity of its appropriate responsible party, which is generally defined as the individual with the authority to control, manage, or direct the entity and the disposition of its funds and assets. The updating requirement in these final regulations requires entities to keep the IRS informed of the identity of the responsible party.

The 15 minute burden estimate provided in the Paperwork Reduction Act section of the proposed regulations is an estimate of the burden in reporting and disclosing the correct application information to the IRS, not the burden an entity or its agent may incur in determining this information (which, as noted, is minimal because an entity will always know the identity of its responsible party). Following the publication of these final regulations, the IRS will publish the relevant form for persons issued an EIN to use to disclose the correct application information to the IRS. The relevant form will require these persons to update application information regarding the name and taxpayer identifying number of the responsible party within the applicable timeframe. Treasury and the IRS have determined that the amount of time necessary to fill out the relevant form and submit it to the IRS is minimal.

These final regulations are applicable as of January 1, 2014, so that the IRS can publish the relevant form and instructions in advance of the applicability date.

It has been determined that these final rules are not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these final regulations.

When an agency issues a rulemaking, the Regulatory Flexibility Act (RFA) (5 U.S.C. chapter 6) requires the agency to “prepare and make available for public comment an initial regulatory flexibility analysis” that will “describe the impact of the proposed rule on small entities.” (5 U.S.C. 603(a)). Section 605 of the RFA provides an exception to this requirement if the agency certifies that the proposed rulemaking will not have a significant economic impact on a substantial number of small entities.

The rules affect entities that have an EIN and the IRS has determined that these rules will have an impact on a substantial number of small entities. The IRS has determined, however, that the impact on entities affected by the rules will not be significant. The current Form SS-4, Application for Employer Identification Number, requires entities to disclose the name of the EIN applicant’s “responsible party” and the responsible party’s Social Security Number, Individual Taxpayer Identification Number, or EIN. Employers are required to know the identity of their responsible party. The amount of time necessary to submit the updated information required in these regulations, therefore, should be minimal for these entities.

Based on these facts, the IRS hereby certifies that the collection of information contained in the final regulations will not have a significant economic impact on a substantial number of small entities. Accordingly, a Regulatory Flexibility Analysis is not required.

Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding the final regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business and no comments were received.

Paragraph 1. The authority citation for part 301 continues to read as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 301.6109-1 is amended by adding paragraph (d)(2)(ii) to read as follows:

Par. 3. The authority citation for part 602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 4. In §602.101, paragraph (b) is amended by adding the following entry in numerical order to the table:

Beginning in 2014, under the Patient Protection and Affordable Care Act, Public Law 111-148 (124 Stat. 119 (2010)), and the Health Care and Education Reconciliation Act of 2010, Public Law 111-152 (124 Stat. 1029 (2010)) (collectively, the Affordable Care Act), eligible individuals who purchase coverage under a qualified health plan through an Affordable Insurance Exchange may receive a premium tax credit under section 36B of the Internal Revenue Code (Code). Section 36B was subsequently amended by the Medicare and Medicaid Extenders Act of 2010, Public Law 111-309 (124 Stat. 3285 (2010)); the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, Public Law 112-9 (125 Stat. 36 (2011)); and the Department of Defense and Full-Year Continuing Appropriations Act, 2011, Public Law 112-10 (125 Stat. 38 (2011)).

Notice 2012-31, 2012-20 I.R.B. 906, requested comments on methods for determining whether health coverage under an eligible employer-sponsored plan provides minimum value (MV). Final regulations under section 36B (TD 9590) were published on May 23, 2012 (77 FR 30377). The final regulations requested comments on issues to be addressed in further guidance. The comments have been considered in developing these proposed regulations.

Individuals generally may not receive a premium tax credit if they are eligible for affordable coverage under an eligible employer-sponsored plan that provides MV. An applicable large employer (as defined in section 4980H(c)(2)) may be liable for an assessable payment under section 4980H if a full-time employee receives a premium tax credit.

Under section 36B(c)(2)(C)(ii), a plan fails to provide MV if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of the costs. Section 1302(d)(2)(C) of the Affordable Care Act provides that, in determining the percentage of the total allowed costs of benefits provided under a group health plan, the regulations promulgated by the Secretary of Health and Human Services (HHS) under section 1302(d)(2) apply.

HHS published final regulations under section 1302(d)(2) on February 25, 2013 (78 FR 12834). The HHS regulations at 45 CFR 156.20 define the percentage of the total allowed costs of benefits provided under a group health plan as (1) the anticipated covered medical spending for essential health benefits (EHB) coverage (as defined in 45 CFR 156.110(a)) paid by a health plan for a standard population, (2) computed in accordance with the plan’s cost-sharing, and (3) divided by the total anticipated allowed charges for EHB coverage provided to a standard population. In addition, 45 CFR 156.145(c) provides that the standard population used to compute this percentage for MV (as developed by HHS for this purpose) reflects the population covered by typical self-insured group health plans.

The HHS regulations describe several options for determining MV. Under 45 CFR 156.145(a)(1), plans may use the MV Calculator (available at http://cciio.cms.gov/resources/regulations/index.html). Alternatively, 45 CFR 156.145(a)(2) provides that a plan may determine MV through a safe harbor established by HHS and IRS. For plans with nonstandard features that are incompatible with the MV Calculator or a safe harbor, 45 CFR 156.145(a)(3) provides that the plan may determine MV through an actuarial certification from a member of the American Academy of Actuaries after performing an analysis in accordance with generally accepted actuarial principles and methodologies. Finally, 45 CFR 156.145(a)(4) provides that a plan in the small group market satisfies MV if it meets the requirements for any of the levels of metal coverage defined at 45 CFR 156.140(b) (bronze, silver, gold, or platinum).

To be eligible for a premium tax credit, an individual must be an applicable taxpayer. Under section 36B(c)(1), an applicable taxpayer is a taxpayer whose household income for the taxable year is between 100 percent and 400 percent of the federal poverty line (FPL) for the taxpayer’s family size.

Section 36B(b)(1) provides that the premium assistance credit amount is the sum of the premium assistance amounts for all coverage months in the taxable year for individuals in the taxpayer’s family. The premium assistance amount for a coverage month is the lesser of (1) the premiums for the month for one or more qualified health plans that cover a taxpayer or family member, or (2) the excess of the adjusted monthly premium for the second lowest cost silver plan (as described in section 1302(d)(1)(B) of the Affordable Care Act (42 U.S.C. 18022(d)(1)(B)) (the benchmark plan) that applies to the taxpayer over 1/12 of the product of the taxpayer’s household income and the applicable percentage for the taxable year. The adjusted monthly premium, in general, is the premium an insurer would charge for the plan adjusted only for the ages of the covered individuals.

Under section 36B(c)(2)(A), a coverage month is any month for which the taxpayer or a family member is covered by a qualified health plan enrolled in through an Exchange and the premium is paid by the taxpayer or through an advance credit payment. Section 36B(c)(2) provides that a month is not a coverage month for an individual who is eligible for other minimum essential coverage. If the other coverage is eligible employer-sponsored coverage, however, it is treated as minimum essential coverage only if it is affordable and provides MV. Eligible employer-sponsored coverage is affordable for an employee and related individuals if the portion of the annual premium the employee must pay for self-only coverage does not exceed the required contribution percentage (9.5 percent for taxable years beginning before January 1, 2015) of the taxpayer’s household income. The MV requirement is discussed in the Explanation of Provisions.

Any arrangement under which employees are required, as a condition of employment or otherwise, to be enrolled in an employer-sponsored plan that does not provide minimum value or is unaffordable, and that does not give the employees an effective opportunity to terminate or decline the coverage, raises a variety of issues. Proposed regulations under section 4980H indicate that if an employer maintains such an arrangement it would not be treated as having made an offer of coverage. As a result, an applicable large employer could be subject to an assessable payment under that section. See Proposed §54.4980H-4(b), 78 FR 250 (January 2, 2013). Such an arrangement would also raise additional concerns. For example, it is questionable whether the law permits interference with an individual’s ability to apply for a section 36B premium tax credit by seeking to involuntarily impose coverage that does not provide minimum value. (See, for example, the Fair Labor Standards Act, as amended by section 1558 of the Affordable Care Act, 29 U.S.C. 218c(a).) If an employer sought to involuntarily impose on its employees coverage that did not provide minimum value or was unaffordable, the IRS and Treasury, as well as other relevant departments, may treat such arrangements as impermissible interference with an employee’s ability to access premium tax credits, as contemplated by the Affordable Care Act.

The proposed regulations refer to the proportion of the total allowed costs of benefits provided to an employee that are paid by the plan as the plan’s MV percentage. The MV percentage is determined by dividing the cost of certain benefits (described in paragraph b.) the plan would pay for a standard population by the total cost of certain benefits for the standard population, including amounts the plan pays and amounts the employee pays through cost-sharing, and then converting the result to a percentage.

Commentators sought clarification of the health benefits considered in determining the share of benefit costs paid by a plan. Some commentators maintained that MV should be based on the plan’s share of the cost of coverage for all EHBs, including those a plan does not offer. Other commentators suggested that the MV percentage should be based on the plan’s share of the costs of only those categories of EHBs the plan covers.

The proposed regulations do not require employer-sponsored self-insured and insured large group plans to cover every EHB category or conform their plans to an EHB benchmark that applies to qualified health plans. The preamble to the HHS regulations (see 78 FR 12833) notes that employer-sponsored group health plans are not required to offer EHBs unless they are health plans offered in the small group market subject to section 2707(a) of the Public Health Service Act. The preamble also states that, under section 1302(d)(2) of the Affordable Care Act, MV is measured based on the provision of EHBs to a standard population and plans may account for any benefits covered by the employer that also are covered in any one of the EHB-benchmark plans. See 45 CFR 156.145(b)(2).

Consistent with 45 CFR 156.145(a)-(c) and the assumptions described in Notice 2012-31, these proposed regulations provide that MV is based on the anticipated spending for a standard population. The plan’s anticipated spending for benefits provided under any particular EHB-benchmark plan for any State counts towards MV.

Some commentators suggested that current year health savings account (HSA) contributions and amounts newly made available under a health reimbursement arrangement (HRA) should be fully counted toward the plan’s share of costs included in calculating MV. Some commentators suggested that only HRA contributions that may be used to pay for cost sharing and not HRAs restricted to other uses should be counted in the MV calculation.

Consistent with 45 CFR 156.135(c), the proposed regulations provide that all amounts contributed by an employer for the current plan year to an HSA are taken into account in determining the plan’s share of costs for purposes of MV and are treated as amounts available for first dollar coverage. Amounts newly made available under an HRA that is integrated with an eligible employer-sponsored plan for the current plan year count for purposes of MV in the same manner if the amounts may be used only for cost-sharing and may not be used to pay insurance premiums. It is anticipated that regulations will provide that whether an HRA is integrated with an eligible employer-sponsored plan is determined under rules that apply for purposes of section 2711 of the Public Health Service Act (42 U.S.C. 300gg-11). Commentators offered differing opinions about how nondiscriminatory wellness program incentives that may affect an employee’s cost sharing should be taken into account for purposes of the MV calculation. Some commentators noted that the rules governing wellness incentives require that they be available to all similarly situated individuals. These commentators suggested that because eligible individuals have the opportunity to reduce their cost-sharing if they choose, a plan’s share of costs should be based on the costs paid by individuals who satisfy the terms of the wellness program. Other commentators expressed concern that, despite the safeguards of the regulations governing wellness incentives, certain individuals inevitably will face barriers to participation and fail to qualify for rewards. These commentators suggested that a plan’s share of costs should be determined without assuming that individuals would qualify for the reduced cost-sharing available under a wellness program.

The proposed regulations provide that a plan’s share of costs for MV purposes is determined without regard to reduced cost-sharing available under a nondiscriminatory wellness program. However, for nondiscriminatory wellness programs designed to prevent or reduce tobacco use, MV may be calculated assuming that every eligible individual satisfies the terms of the program relating to prevention or reduction of tobacco use. This exception is consistent with other Affordable Care Act provisions (such as the ability to charge higher premiums based on tobacco use) reflecting a policy about individual responsibility regarding tobacco use.

Section 36B(c)(2)(C)(i)(II) and the final regulations provide that eligible employer-sponsored coverage is affordable only if an employee’s required contribution for self-only coverage does not exceed 9.5 percent of household income. The preamble to the final regulations indicated that rules for determining how HRAs and wellness program incentives are counted in determining the affordability of eligible employer-sponsored coverage would be provided in later guidance.

Some commentators asserted that an employer’s entire annual contribution to an HRA plus prior year contributions should be taken into account in determining affordability. The proposed regulations provide that amounts newly made available under an HRA that is integrated with an eligible employer-sponsored plan for the current plan year are taken into account only in determining affordability if the employee may use the amounts only for premiums or may choose to use the amounts for either premiums or cost-sharing. Treating amounts that may be used either for premiums or cost-sharing only towards affordability prevents double counting the HRA amounts when assessing MV and affordability of eligible employer-sponsored coverage.

It is anticipated that regulations under section 5000A will provide that amounts newly made available under an HRA that is integrated with an eligible employer-sponsored plan for the current plan year are also taken into account for purposes of the affordability exemption under section 5000A(e)(1) if the employee may use the amounts only for premiums or for either premiums or cost-sharing.

The final regulations requested specific comments on the nature of wellness incentives and how they should be treated for determining affordability. Commentators expressed similar views about the treatment of wellness incentives that affect the cost of premiums as about the treatment of wellness incentives that affect cost-sharing.

Like the rule for determining MV, the proposed regulations provide that the affordability of an employer-sponsored plan is determined by assuming that each employee fails to satisfy the requirements of a wellness program, except the requirements of a nondiscriminatory wellness program related to tobacco use. Thus, the affordability of a plan that charges a higher initial premium for tobacco users will be determined based on the premium that is charged to non-tobacco users, or tobacco users who complete the related wellness program, such as attending smoking cessation classes.

In many circumstances these rules relating to the effect of premium-related wellness program rewards on affordability will have no practical consequences. They matter only when the employer sets the level of the employee’s required contribution to self-only premium, and establishes a wellness program that provides for a level of premium discount, in such a manner that the employee’s required contribution to premium would exceed 9.5 percent of household income (or wages, under an affordability safe harbor under the section 4980H proposed regulations) but for the potential premium discount under the wellness program. If, for example, the employee’s household income was at least $25,000, and the employee’s required contribution for self-only coverage did not exceed $2,375 (9.5 percent of $25,000), the coverage would be affordable whether or not a wellness premium discount was taken into account to reduce the $2,375 required contribution.

It is anticipated that regulations under section 5000A will provide that nondiscriminatory wellness programs that affect premiums will be treated for purposes of the affordability exemption under section 5000A(e)(1) in the same manner as they are treated for purposes of determining affordability under section 36B.

Solely for purposes of applying section 4980H and solely for plan years of an employer’s group health plan beginning before January 1, 2015, with respect to an employee described in the next sentence, an employer will not be subject to an assessable payment under section 4980H(b) with respect to an employee who received a premium tax credit because the offer of coverage was not affordable or did not satisfy MV, if the offer of coverage to the employee under the employer’s group health plan would have been affordable or would have satisfied MV based on the total required employee premium and cost-sharing for that group health plan that would have applied to the employee if the employee satisfied the requirements of any wellness program described in the next sentence, including a wellness program with requirements unrelated to tobacco use. The rule in the preceding sentence applies only (1) to the extent of the reward as of May 3, 2013, expressed as either a dollar amount or a fraction of the total required employee contribution to the premium (or the employee cost-sharing, as applicable), (2) under the terms of a wellness program as in effect on May 3, 2013, and (3) with respect to an employee who is in a category of employees eligible under the terms of the wellness program as in effect on May 3, 2013 (regardless of whether the employee was hired before or after that date). Any required employee contribution to premium determined based upon assumed satisfaction of the requirements of a wellness program available under this transition relief may be applied to the use of an affordability safe harbor provided in the proposed regulations under section 4980H.

Consistent with 45 CFR 156.145(c), the proposed regulations provide that the standard population used to determine MV reflects the population covered by self-insured group health plans. HHS has developed the MV standard population and described it through summary statistics (for example, continuance tables). MV continuance tables and an explanation of the MV Calculator methodology and the health claims data HHS has used to develop the continuance tables are available at http://cciio.cms.gov/resources/regulations/index.html.

Notice 2012-31 and 45 CFR 156.145(a) describe several methods for determining MV: the MV Calculator, a safe harbor, actuarial certification, and, for small group market plans, a metal level. Some commentators requested that plans be allowed to choose one of the four methods in determining MV. Other commentators favored requiring employers to use the most precise method for plans that may be close to the 60 percent threshold.

The proposed regulations provide that taxpayers may determine whether a plan provides MV by using the MV Calculator made available by HHS and the IRS. Taxpayers must use the MV Calculator to measure standard plan features (unless a safe harbor applies), but the percentage may be adjusted based on an actuarial analysis of plan features that are outside the parameters of the calculator.

Certain safe harbor plan designs that satisfy MV will be specified in additional guidance under section 36B or 4980H, see §601.601(d). It is anticipated that the guidance will provide that the safe harbors are examples of plan designs that clearly would satisfy the 60 percent threshold if measured using the MV Calculator. The safe harbors are intended to provide an easy way for sponsors of typical employer-sponsored group health plans to determine whether a plan meets the MV threshold without having to use the MV Calculator.

Plan designs meeting the following specifications are proposed as safe harbors for determining MV if the plans cover all of the benefits included in the MV Calculator: (1) a plan with a $3,500 integrated medical and drug deductible, 80 percent plan cost-sharing, and a $6,000 maximum out-of-pocket limit for employee cost-sharing; (2) a plan with a $4,500 integrated medical and drug deductible, 70 percent plan cost-sharing, a $6,400 maximum out-of-pocket limit, and a $500 employer contribution to an HSA; and (3) a plan with a $3,500 medical deductible, $0 drug deductible, 60 percent plan medical expense cost-sharing, 75 percent plan drug cost-sharing, a $6,400 maximum out-of-pocket limit, and drug co-pays of $10/$20/$50 for the first, second and third prescription drug tiers, with 75 percent coinsurance for specialty drugs. Comments are requested on these and other common plan designs that would satisfy MV and should be designated as safe harbors.

Consistent with 45 CFR 156.145(a), the proposed regulations require plans with nonstandard features that cannot determine MV using the MV Calculator or a safe harbor to use the actuarial certification method. The actuary must be a member of the American Academy of Actuaries and must perform the analysis in accordance with generally accepted actuarial principles and methodologies and any additional standards that subsequent guidance requires.

Commentators suggested a de minimis exception to the MV 60 percent level of coverage, noting that similar de minimis variations are permitted in determining actuarial value for qualified health plans. However, as other commentators noted, permitting a de minimis exception would have the effect of lowering the minimum level of coverage to a percentage below 60 percent. Under section 36B(c)(2)(C)(ii), coverage below 60 percent does not provide MV. Accordingly, the proposed regulations do not provide for a de minimis exception.

Section 36B(d)(2) provides that the term household income means the modified adjusted gross income of the taxpayer plus the modified adjusted gross income of all members of the taxpayer’s family required to file a tax return under section 1 for the taxable year. The final regulations provide that the determination of whether a family member is required to file a return is made without regard to section 1(g)(7). Under section 1(g)(7), a parent may, if certain requirements are met, elect to include in the parent’s gross income, the gross income of his or her child. If the parent makes the election, the child is treated as having no gross income for the taxable year.

The proposed regulations remove “without regard to section 1(g)(7)” from the final regulations because that language implies that the child’s gross income is included in both the parent’s adjusted gross income and the child’s adjusted gross income in determining household income. Thus, the proposed regulations clarify that if a parent makes an election under section 1(g)(7), household income includes the child’s gross income included on the parent’s return and the child is treated as having no gross income.

Section 36B(b)(3)(B) determines the applicable benchmark plan by reference to the rating area where a taxpayer resides. The final regulations reserved the definition of rating area. The proposed regulations provide that the term rating area has the same meaning as used in section 2701(a)(2) of the Public Health Service Act (42 U.S.C. 300gg) and 45 CFR 156.255.

The section 36B final regulations provide that an individual who may enroll in continuation coverage required under Federal law or a State law that provides comparable continuation coverage is eligible for minimum essential coverage only for months that the individual is enrolled in the coverage. These proposed regulations apply this rule to former employees only. Active employees eligible for continuation coverage as a result of reduced hours should be subject to the same rules for eligibility of affordable employer-sponsored coverage offering MV as other active employees. The proposed regulations add a comparable rule for health coverage offered to retired employees (retiree coverage). Accordingly, an individual who may enroll in retiree coverage is eligible for minimum essential coverage under the coverage only for the months the individual is enrolled in the coverage.

Under section 36B(c)(2)(A)(i) and the final regulations, a month is a coverage month for an individual only if, as of the first day of the month, the individual is enrolled in a qualified health plan through an Exchange. A child born or adopted during the month is not enrolled in coverage on the first day and therefore would not be eligible for the premium tax credit or cost-sharing reductions for that month. Accordingly, the proposed regulations provide that a child enrolled in a qualified health plan in the month of the child’s birth, adoption, or placement with the taxpayer for adoption or in foster care, is treated as enrolled as of the first day of the month.

Under section 36B(c), the premium assistance amount for a coverage month is computed by reference to the adjusted monthly premium for an applicable benchmark plan. The final regulations provide that the applicable benchmark plan is the plan that applies to a taxpayer’s coverage family. The final regulations do not address whether changes to a coverage family, for example as the result of the birth and enrollment of a child or the disenrollment of another family member, that occur during the month affect the premium assistance amount. The proposed regulations provide that the adjusted monthly premium is determined as if all members of the coverage family for that month were enrolled in a qualified health plan for the entire month.

The final regulations do not address the computation of the premium assistance amount if coverage under a qualified health plan is terminated during the month. The proposed regulations provide that when coverage under a qualified health plan is terminated before the last day of a month and, as a result, the issuer reduces or refunds a portion of the monthly premium the premium assistance amount for the month is prorated based on the number of days of coverage in the month.

The final regulations reserved rules on determining the premium for the applicable benchmark plan if family members are geographically separated and enroll in separate qualified health plans. The proposed regulations provide that the premium for the applicable benchmark plan in this situation is the sum of the premiums for the applicable benchmark plans for each group of family members residing in a different State.

The applicable percentage table in the final regulations erroneously states that the 9.5 percentage applies only to taxpayers whose household income is less than 400 percent of the FPL. The proposed regulations clarify that the 9.5 percentage applies to taxpayers whose household income is not more than 400 percent of the FPL.

Under section 36B(b)(3)(D) and the final regulations, only the portion of the premium for a qualified health plan properly allocable to EHBs determines a taxpayer’s premium assistance amount. Premiums allocable to benefits other than EHBs (additional benefits) are disregarded. The final regulations do not address, however, whether a taxpayer’s benchmark plan is determined before or after premiums have been allocated to additional benefits. The proposed regulations provide that premiums are allocated to additional benefits before determining the applicable benchmark plan. Thus, only essential health benefits are considered in determining the applicable benchmark plan, consistent with the requirement in section 36B(b)(3)(D) that only essential health benefits are considered in determining the premium assistance amount. In addition, allocating premium to benefits that exceed EHBs before determining the applicable benchmark plan results in a more accurate determination of the premium assistance amount.

The final regulations provided that a taxpayer who receives advance credit payments must file an income tax return for that taxable year on or before the fifteenth day of the fourth month following the close of the taxable year. Under the proposed regulations, a taxpayer who receives advance credit payments must file an income tax return on or before the due date for the return (including extensions).

These regulations are proposed to apply for taxable years ending after December 31, 2013. Taxpayers may apply the proposed regulations for taxable years ending before January 1, 2015.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations and, because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under the “Addresses” heading. Treasury and the IRS request comments on all aspects of the proposed rules. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person who timely submits written comments. If a public hearing is scheduled, notice of the date, time and place for the hearing will be published in the Federal Register.

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.36B-0 is amended by:

1. Revising the introductory text.

2. Adding new entries for §§1.36B-2(c)(3)(iv) and (c)(3)(v)(A)(5) and 1.36B-3(c)(2) and (3), and (d)(1), (2), and (3).

3. Revising the entries for §§1.36B-2(c)(3)(v)(A)(4) and 1.36B-3(c)(4).

4. Adding new entries for §1.36B-6.

The revisions and additions read as follows.