Proposed regulations under section 469 of the Code provide guidance regarding the definition of an “interest in a limited partnership as a limited partner” for purposes of determining whether a taxpayer materially participates in an activity.

This notice provides guidance for employers that seek to claim the Work Opportunity Tax Credit (WOTC) for hiring veterans. The notice also provides information on alternative methods for filing Form 8850 with the Department of Labor/Designated Local Agencies. Announcement 2002-44 supplemented.

This notice addresses the application of section 367 of the Code to transfers of stock subject to section 304.

Weighted average interest rate update; corporate bond indices; 30-year Treasury securities; segment rates. This notice contains updates for the corporate bond weighted average interest rate for plan years beginning in February 2012; the 24-month average segment rates; the funding transitional segment rates applicable for February 2012; and the minimum present value transitional rates for January 2012.

This notice provides guidance for employers that seek to claim the Work Opportunity Tax Credit (WOTC) for hiring veterans. The notice also provides information on alternative methods for filing Form 8850 with the Department of Labor/Designated Local Agencies. Announcement 2002-44 supplemented.

This notice answers to frequently asked questions from employers regarding certain provisions of the Patient Protection and Affordable Care Act, specifically the provisions dealing with automatic enrollment, employer shared responsibility and waiting periods.

This notice provides guidance on Returning Heroes and Wounded Warriors Work Opportunity Tax Credits, included as § 261 of the VOW to Hire Heroes Act of 2011, Tit. II, subtitle D, of Pub. L. No. 112-056 (Act), enacted on November 21, 2011. Section 261 of the Act amended §§ 51, 52, and 3111 of the Internal Revenue Code to provide a credit for hiring certain qualified veterans. This notice also provides employers who hire qualified veterans additional time beyond the 28-day deadline in § 51(d)(13) for submitting Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to Designated Local Agencies (DLAs)

This notice provides additional guidance on electronic signature and electronic submission of Form 8850 and also informs all employers that the Internal Revenue Service (IRS) will allow the signature and submission of Form 8850 by facsimile to DLAs that choose to accept such submissions.

This notice also requests comments on alternative methods for certification of a veteran as a qualified veteran described in clause (ii)(II), (iii), or (iv) of § 51(d)(3)(A),

Section 51 provides for a Work Opportunity Tax Credit (WOTC) for employers who hire individuals who are members of targeted groups. An employer must obtain certification that an individual is a targeted group member before the employer may claim the credit. Certification of an individual’s targeted group status is obtained from a DLA. A DLA is a State employment security agency established in accordance with 29 U.S.C. §§ 49-49n. An employer must submit Form 8850 to the DLA not later than the 28^th day after the individual begins work for the employer.

The WOTC applies to certain wages paid or incurred by employers with respect to a member of a targeted group. Prior to enactment of the Act, § 51(c)(4)(B) provided that wages paid or incurred with respect to an individual who begins work for the employer after December 31, 2011, are not taken into account for purposes of the WOTC. Thus, the credit is not available with respect to wages for persons who begin work after December 31, 2011, other than qualified veterans. The Act extended the credit only with respect to qualified veterans who begin work for the employer on or before December 31, 2012.

The Act amends § 51(d)(3) to add two new categories to the qualified veteran targeted group. Under new § 51(d)(3)(A)(iii) and (iv), a qualified veteran is a veteran certified as having aggregate periods of unemployment of at least 4 weeks but less than 6 months in the year prior to being hired or certified as having aggregate periods of unemployment of 6 months or more in the year prior to being hired.

The amount of wages that an employer may take into account in computing the credit differs for the various categories of qualified veterans. The Act amends § 51(b)(3), which provides the amount of qualified wages that an employer may take into account in calculating the WOTC. Section 51(b)(3), as amended, provides that the amount of qualified wages taken into account is limited to $6,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(i) (a veteran certified as being a member of a family receiving assistance under a supplemental nutrition assistance program under the Food and Nutrition Act of 2008 for at least a 3-month period ending during the 12-month period ending on the hiring date) and subsection (d)(3)(A)(iii) (a veteran certified as having aggregate periods of unemployment of at least 4 weeks but less than 6 months in the year prior to being hired); $12,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(I) (a disabled veteran who is certified as having a hiring date which is not more than 1 year after discharge or release from active duty); $14,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(iv) (a veteran certified as having aggregate periods of unemployment of 6 months or more in the year prior to being hired); and $24,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(II) (a disabled veteran who is certified as having aggregate periods of unemployment of 6 months or more in the year prior to being hired).

The Act amends § 51(d)(13)(D) to provide that a veteran will be treated as being certified as having the requisite aggregate period of unemployment by the DLA if the veteran is certified as being in receipt of unemployment compensation for the applicable period. The Act also allows the Secretary of the Treasury to provide, at the Secretary’s discretion, alternative methods for certification of a veteran as a qualified veteran described in clause (ii)(II), (iii), or (iv) of § 51(d)(3)(A).

The Act amends § 51(c)(4)(B) to extend the credit and allow an employer to claim the WOTC for qualified wages paid or incurred by the employer to a qualified veteran who begins work on or before December 31, 2012.

The Act also amends § 52 and § 3111 to make a credit available to “qualified tax-exempt organizations” that hire qualified veterans for which the WOTC would have been allowable under § 51 if the organization were not a qualified tax-exempt organization. Specifically, the Act adds new § 3111(e), which permits qualified tax-exempt organizations that hire qualified veterans on or after November 22, 2011, to claim a credit against the employer share of social security tax imposed under § 3111(a).

The credit under § 3111(e)(1) is a credit against the tax imposed by § 3111(a) on wages paid by the qualified tax-exempt organization with respect to employment of all employees of the organization during the applicable period. Section 3111(e)(4) defines the “applicable period” as the 1-year period beginning with the day the qualified veteran begins work for the organization. The amount of the credit under § 3111(e) equals the amount of the credit determined under § 51 (after application of the modifications under § 3111(e)(3)) with respect to wages paid to the qualified veteran during the applicable period. However, under § 3111(e)(2), the aggregate amount allowed as a credit under § 3111(e) for all qualified veterans for any period with respect to which tax is imposed under § 3111(a) cannot exceed the amount of the employer social security tax imposed by § 3111(a) on all wages paid by the employer during such period.

As indicated above, the amount of the credit under § 3111(e) is determined under § 51 but is subject to modifications under § 3111(e)(3). Specifically, § 3111(e)(3) modifies the amount of the credit available to the qualified tax-exempt organization to 16.25 percent (rather than 25 percent) of the qualified first-year wages for the applicable period if the veteran performs less than 400 hours but at least 120 hours of service, or 26 percent (rather than 40 percent) of the qualified first-year wages for the applicable period if the veteran performs at least 400 hours of service for the qualified tax-exempt organization. Further, to calculate the amount of the credit, the qualified tax-exempt organization only takes into account the wages paid to a qualified veteran for services in furtherance of activities related to the purpose or function constituting the basis of the organization’s exemption under § 501. For example, wages for services in an unrelated trade or business (as defined in § 513) are not counted for purposes of the credit. Although wages are defined for purposes of the WOTC under § 51 as wages under the Federal Unemployment Tax Act, for purposes of the credit available to qualified tax-exempt organizations under § 3111(e), the term “wages” refers to wages under the Federal Insurance Contributions Act.

New § 3111(e)(5)(A) defines “qualified tax-exempt organization” as an employer that is an organization described in § 501(c) and exempt from taxation under § 501(a). Accordingly, an employer that is an agency or instrumentality of the federal government, or of a state, local, or Indian tribal government, is not a qualified tax-exempt organization unless it is an organization described in § 501(c) that is exempt from tax under § 501(a).

The requirements for certification under § 51, as amended by the Act, apply to qualified tax-exempt organizations as well as to taxable employers. Accordingly, a qualified tax-exempt organization must obtain certification, as required under § 51, that an individual is a qualified veteran before it may claim the credit. The transition relief, guidance on filing Forms 8850 with electronic signatures, and allowance of signature and submission of Form 8850 by facsimile provided for in this notice apply to all employers, including qualified tax-exempt organizations.

Section 51(d)(13)(A) provides that an individual shall not be treated as a member of a targeted group unless (1) on or before the day the individual begins work, the employer obtains certification from the DLA that the individual is a member of a targeted group; or (2) the employer completes a pre-screening notice (Form 8850) on or before the day the individual is offered employment and submits such notice to the DLA to request certification not later than 28 days after the individual begins work. Because the credit, as amended, became effective on the day after enactment, the Treasury Department and the IRS believe it is appropriate to provide employers with additional time to file Form 8850 with a DLA. Accordingly, any employer who hires any qualified veteran described in § 51(d)(3) on or after November 22, 2011, and before May 22, 2012, will be considered to satisfy the requirements of § 51(d)(13)(A)(ii) if the employer submits the completed pre-screening notice to the DLA to request certification not later than June 19, 2012.

Before any employer may claim the WOTC for hiring any member of a targeted group (or, for qualified tax-exempt organizations, the § 3111(e) credit for hiring a qualified veteran), that individual must be certified by the DLA as a member of a targeted group. Section 51(d)(13)(A)(ii)(II) requires that, not later than the 28^th day after the individual begins work for the employer, the employer submit a notice, signed by the employer and the individual under penalties of perjury, to the DLA as part of a written request for certification. For purposes of this Section IV, “employer” refers to any employer required to submit a Form 8850 in order to obtain the WOTC under § 51 or the equivalent credit under § 3111(e), or an authorized representative of such an employer.

Employers may submit Form 8850 to the DLA electronically if the employer’s system satisfies the requirements in Ann. 2002-44, 2002-1 C.B. 809. This notice makes available to employers two alternative methods of certification using electronic signatures in addition to the electronic submission of Form 8850 as provided in Ann. 2002-44. The alternative methods are available to any employer required to submit a Form 8850 in order to obtain the WOTC for any member of any targeted group under § 51 or the equivalent credit under § 3111(e).

First, an employer may print out a paper copy of the Form 8850 that was signed electronically by both the applicant and the employer in accordance with the requirements of Ann. 2002-44, and transmit that paper copy to the DLA (by mail or by facsimile following the rules in Section V of this notice).

Second, an employer may file Form 8850 using a method under which the applicant signs electronically but the employer signs in ink. More specifically, the applicant signs Form 8850 electronically and the Form 8850 is transmitted electronically to the employer in accordance with the requirements detailed below. Once received and printed out, the paper copy of the Form 8850 shows “signed electronically” in the field for the applicant’s signature. The employer signs that paper copy of that Form 8850 in ink, complying with the signature and jurat requirements on Form 8850 and the Form 8850 instructions for the paper copy of Form 8850, and transmits that paper copy to the DLA (by mail or by facsimile following the rules in Section V of this notice). Under this second alternative method, the employer must satisfy all five of the following requirements with respect to the Form 8850 that is electronically signed by the applicant:

(i) In General . The electronic system must ensure that the information received is the information sent, and it must document all occasions of access that result in the transmission of a Form 8850. In addition, the design and operation of the electronic system, including access procedures, must make it reasonably certain that the applicant signing the Form 8850, accessing the system, and submitting the Form 8850 is the applicant identified in the form.

(ii) Same Information as Paper Form 8850. The electronically signed Form 8850 must provide the DLA with exactly the same information as the paper Form 8850.

(iii) Jurat and Signature Requirements. The Form 8850 must be signed electronically by the applicant under penalties of perjury.

(A) Jurat . The jurat (perjury statement) must contain the language that appears on the paper Form 8850 for the applicant. The electronic system must inform the applicant that he or she must make the declaration contained in the jurat and that the declaration is made by signing the Form 8850. The instructions and the language of the jurat must immediately follow the information provided by the applicant, and must immediately precede the applicant’s electronic signature.

(B) Electronic Signature . The electronic signature must (1) identify the applicant whose name is on the Form 8850 and the employer submitting the Form 8850, and (2) authenticate and verify the form. For this purpose, the terms “authenticate” and “verify” have the same meaning as they do when applied to a written signature on a paper Form 8850. An electronic signature can be in any form that satisfies the foregoing requirements.

(iv) Copies of Form 8850 . The employer must be able to supply and, upon request by the IRS, the employer must supply (1) a paper copy of the Form 8850 submitted to the DLA, and (2) a statement that, to the best of the employer’s knowledge, the Form 8850 was submitted by the employer with respect to the named applicant. The paper copy of the electronically signed Form 8850 must provide exactly the same information as, but need not be a facsimile of, the paper Form 8850.

(v) Retention of Forms 8850 by the DLAs and Employers . Forms 8850 with an applicant’s electronic signature have the same status as paper Forms 8850. Therefore, guidance that applies to paper Forms 8850 also applies to these Forms 8850. For example, as is the case for paper Forms 8850, electronic Forms 8850 are required to be retained by employers under their established record-keeping systems. For further information, see Rev. Proc. 98-25, 1998-1 C.B. 689, on information regarding the retention of records within an Automatic Data Processing System.

In addition to the electronic signature method of filing Form 8850 described in Section IV, the IRS will also allow the facsimile transmission of applicant and employer signatures on a Form 8850 if the applicable DLA accepts Form 8850 via facsimile, the applicant and employer intend the signatures on the faxed copy to be their signatures for purposes of the document, and the requirements of paragraphs (1) and (2) below are satisfied:

(1) Same Information as Paper Form 8850. The facsimile submission is a reproduction of Form 8850 that provides the DLA with exactly the same information as the paper Form 8850.

(2) Signature and Transmission Requirements. The Form 8850 is signed by the applicant and the employer, under penalties of perjury, and transmitted to the DLA in the following manner:

(i) An original Form 8850 is completed in paper copy and then signed in ink by the applicant;

(ii) The original Form 8850, signed by the applicant, is delivered to the employer either in person or by facsimile;

(iii) The employer signs in ink either the paper copy of Form 8850 that was signed by the applicant or the facsimile of that paper copy; and

(iv) The employer mails or faxes the signed Form 8850 to the DLA within the time prescribed by § 51(d)(13)(A)(ii) (or within the period authorized under Section III of this notice).

For purposes of this Section V, “employer” refers to any employer required to submit a Form 8850 in order to obtain the WOTC for any member of any targeted group under § 51 or the equivalent credit under § 3111(e), or an authorized representative of such an employer.

Qualified tax-exempt organizations entitled to a credit under § 3111(e) must use Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, to claim the credit. Although the credit under § 3111(e) is applied against the employer social security tax liability for the employment tax period in which the credit is claimed, the liability reported on the qualified tax-exempt organization’s employment tax return (e.g., Form 941) is not reduced when that return is filed. Rather, the IRS will process Form 5884-C separately and refund the amount properly claimed on Form 5884-C to the qualified tax-exempt organization, subject to the limit of the amount of employer social security tax liability for the period in which the credit is claimed. Because Form 5884-C will generally not be processed simultaneously with the qualified tax-exempt organization’s employment tax return, it is recommended that qualified tax-exempt organizations not reduce their required deposits in anticipation of any credit. A qualified tax-exempt organization that reduces its required employment tax deposits in anticipation of a credit under § 3111(e) may receive a system-generated notice; however, the balance due, including any related penalties and interest, resulting from the reduction in deposits to reflect the credit under § 3111(e), will be abated when the credit is applied, generally without any taxpayer action.

Form 5884-C is filed separately and should not be attached to any other return filed by the qualified tax-exempt organization. Form 5884-C should be filed after the qualified tax-exempt organization files its employment tax return for the tax period for which the credit is claimed and in accordance with the Form 5884-C instructions. Form 5884-C can be filed immediately after the qualified tax-exempt organization files its employment tax return and it must be filed within 2 years from the date the tax reported on the employment tax return was paid, or 3 years from the date the employment tax return was filed, whichever is later.

The qualified tax-exempt organization using Form 5884-C must calculate the cumulative credit to which the qualified tax-exempt organization is entitled under § 3111(e) for all qualified veterans hired on or after November 22, 2011. The qualified tax-exempt organization must reduce the cumulative credit by any credits claimed on any Forms 5884-C filed for prior tax periods. The amount refunded will be limited to the amount of employer social security tax reported on the employment tax return filed by the qualified tax-exempt organization for the employment tax period for which the credit is claimed. Any excess credit (i.e., any credit that exceeds the employer social security tax for the period the credit is claimed) may be carried forward and will be included in the qualified tax-exempt organization’s cumulative calculation on Form 5884-C filed for a subsequent tax period to the extent provided in the instructions to Form 5884-C.

The Treasury Department and the IRS request comments on alternative methods for certification of a veteran as a qualified veteran described in § 51(d)(3) in addition to the methods of signing and filing electronically or by facsimile described in this notice. In particular, comments related to certification of a veteran as a qualified veteran described in clause (ii)(II), (iii), or (iv) of § 51(d)(3)(A) are requested. Comments are also requested on alternative methods of filing Form 8850. Comments must be submitted by April 12, 2012. All materials submitted will be available for public inspection and copying. Comments should be submitted to Internal Revenue Service, CC:PA:LPD:RU (Notice 2012-13), Room 5203, PO Box 7604, Ben Franklin Station, Washington, DC 20224. Submissions may also be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to the Courier’s Desk, 1111 Constitution Avenue, NW, Washington, DC 20224, Attn: CC:PA:LPD:RU (Notice 2012-13), Room 5203. Submissions may also be sent electronically via the internet to the following email address: Notice.comments@irscounsel.treas.gov. Include the notice number (Notice 2012-13) in the subject line.

This notice supplements Ann. 2002-44, 2002-1 C.B. 809.

Amendments made to § 51, § 52, and § 3111 by the Act are effective for individuals who begin work for the employer on or after November 22, 2011. As described in Section III, any employer who hires any qualified veteran described in § 51(d)(3) on or after November 22, 2011, and before May 22, 2012, will be considered to satisfy the requirements of § 51(d)(13)(A)(ii) if the employer submits the completed pre-screening notice to the DLA to request certification not later than June 19, 2012. The alternative methods of signing and filing Forms 8850, as described in Sections IV and V, are effective for Forms 8850 filed with a DLA on or after March 10, 2012.

The principal authors of this notice are Robin Ehrenberg and Ligeia Donis of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information on the submission of comments or the comments submitted, contact Regina Johnson at (202) 622-7180 (not a toll-free number). For further information regarding the WOTC for qualified veterans, electronic filing, and facsimile submissions, contact Ms. Ehrenberg at (202) 622-6080 (not a toll-free number). For further information on how to claim the WOTC on behalf of tax-exempt organizations, contact Ligeia Donis at (202) 622-6040 (not a toll-free number).

This notice provides guidance under section 367(a) and (b) of the Internal Revenue Code (Code) in the case of certain transfers of stock to foreign corporations in exchange for property under section 304. The Internal Revenue Service (IRS) and the Department of the Treasury (Treasury Department) will amend the regulations under section 367 to incorporate the guidance described in this notice. The amendments to the regulations will apply to transfers occurring on or after February 10, 2012.

After consideration of the comments received and the underlying policies of section 367(a) and (b), the IRS and the Treasury Department believe that the amount of income taken into account as a result of a section 304 distribution generally should not affect the application of section 367 to the deemed section 351 exchange. Furthermore, in the case of a transfer of stock by a U.S. person to a foreign corporation, the revised GRA regulations should substantially reduce the complexity and uncertainty resulting from the filing of a GRA in connection with a deemed section 351 exchange. Accordingly, the IRS and the Treasury Department believe it is appropriate to revise the approach to the interaction of sections 367 and 304 under the 2006 regulations and 2009 regulations by providing that section 367(a) and (b) apply fully to the deemed section 351 exchange.

The IRS and the Treasury Department will amend the section 367 regulations to provide that the section 351 exchange that is deemed to occur in a section 304 transaction is subject to section 367(a) and (b) in the manner described below.

The IRS and the Treasury Department will finalize the portions of the 2009 regulations that address the application of section 1248 to gain recognized with respect to stock upon distributions, including gain under section 301(c)(3), in separate published guidance effective February 10, 2009.

The regulations described in this notice shall apply to section 304 transactions occurring on or after February 10, 2012. Pending the issuance of the regulations described in this notice, the IRS will not challenge reasonable interpretations of the application of section 367(a) and (b) to deemed section 351 exchanges and related deemed redemptions completed on or after February 10, 2012, including reasonable interpretations of the GRA rules as applied to such deemed section 351 exchanges and deemed redemptions under the principles of § 1.367(a)-8(k)(14)(ii) and (iii).

The IRS and the Treasury Department request comments on the regulations to be issued under this notice.

The collections of information in this notice were previously reviewed and approved by the Office of Management and Budget in connection with Treasury Decision 9446 in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-2056.

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

The collections of information are in sections 4.01 and 4.02 of this notice. Responses to the collections of information are required to avoid recognizing gain under section 367, including under an existing gain recognition agreement, and to facilitate electronic filing. The likely respondents are large corporations.

The estimated burden will change as follows:

The estimated total annual reporting burden will increase by 100 hours.

The estimated annual burden per respondent remains 2 hours. The estimated number of respondents will increase by 50.

The estimated annual frequency of responses remains once per year.

Books and records relating to these collections 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 26 U.S.C. 6103.

The principal author of this notice is Ryan A. Bowen of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in its development. For further information regarding this notice, contact Mr. Bowen at (202) 622-3860 (not a toll-free call).

Sections 412(b)(5)(B)(ii) and 412(l)(7)(C)(i), as amended by the Pension Funding Equity Act of 2004 and by the Pension Protection Act of 2006 (PPA), provide that the interest rates used to calculate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 through 2007 must be within a permissible range based on the weighted average of the rates of interest on amounts invested conservatively in long term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year.

Notice 2004-34, 2004-1 C.B. 848, provides guidelines for determining the corporate bond weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability. That notice establishes that the corporate bond weighted average is based on the monthly composite corporate bond rate derived from designated corporate bond indices. The methodology for determining the monthly composite corporate bond rate as set forth in Notice 2004-34 continues to apply in determining that rate. See Notice 2006-75, 2006-2 C.B. 366.

The composite corporate bond rate for January 2012 is 4.56 percent. Pursuant to Notice 2004-34, the Service has determined this rate as the average of the monthly yields for the included corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below.

Generally for plan years beginning after 2007 (except for delayed effective dates for certain plans under sections 104, 105, and 106 of PPA), § 430 of the Code specifies the minimum funding requirements that apply to single employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates. Section 430(h)(2)G) set forth a transitional rule applicable to plan years beginning in 2008 and 2009 under which the segment rates were blended with the corporate bond weighted average described above, including an election under § 430(h)(2)(G)(iv) for an employer to use the segment rates without the transitional rule.

Notice 2007-81, 2007-2 C.B. 899, provides guidelines for determining the monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Pursuant to Notice 2007-81, the monthly corporate bond yield curve derived from January 2012 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of January 2012 are, respectively, 1.84, 4.36, and 5.19. The three 24-month average corporate bond segment rates applicable for February 2012 are as follows:

The transitional rule of § 430(h)(2)(G) does not apply to plan years beginning after December 31, 2009. Therefore, for a plan year beginning after 2009 with a lookback month to February 2012, the funding segment rates are the three 24-month average corporate bond segment rates applicable for February 2012, listed above without blending for any transitional period.

Section 417(e)(3)(A)(ii)(II) (prior to amendment by PPA) defines the applicable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)-1(d)(3) of the Income Tax Regulations provides that the applicable interest rate for a month is the annual rate of interest on 30-year Treasury securities as specified by the Commissioner for that month in revenue rulings, notices or other guidance published in the Internal Revenue Bulletin.

The rate of interest on 30-year Treasury securities for January 2012 is 3.03 percent. The Service has determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in November 2041.

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in section 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88-73, 1988-2 C.B. 383, provides guidelines for determining the weighted average interest rate. The following rates were determined for plan years beginning in the month shown below.

Generally for plan years beginning after December 31, 2007, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. For plan years beginning in 2008 through 2011, the applicable interest rates are the monthly spot segment rates blended with the applicable rate under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning in 2007. Notice 2007-81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value transitional segment rates determined for January 2012, taking into account the January 2012 30-year Treasury rate of 3.03 stated above, are as follows:

The principal author of this notice is Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. Mr. Montanaro may be e-mailed at RetirementPlanQuestions@irs.gov.

Many provisions of the Patient Protection and Affordable Care Act (Affordable Care Act) that become effective beginning in 2014 are designed to expand access to affordable health coverage. These include provisions for automatic enrollment of full-time employees in an employer’s health plan, shared responsibility of employers regarding health coverage, coverage to be offered through State-based Affordable Insurance Exchanges (Exchanges), premium tax credits to assist individuals in purchasing coverage through Exchanges, and other related provisions. The Departments of Labor, Health and Human Services, and the Treasury (the Departments) are working together to develop regulations and other administrative guidance that will respond to questions and assist stakeholders with implementation.

This notice, which is being issued in substantially identical form by the other two Departments, provides information on questions from employers and other stakeholders regarding the provisions of the Affordable Care Act governing automatic enrollment, employer shared responsibility, and the 90-day limitation on waiting periods. Also outlined below are various approaches that the Departments are considering proposing in future regulations or other guidance. Comments and input are welcome on all intended proposals below.

The following questions and answers respond to inquiries the Departments are receiving regarding automatic enrollment, employer shared responsibility, and the 90-day limitation on waiting periods. As discussed above, the questions and answers below provide information and identify various approaches that the Departments are considering proposing in future regulations or other guidance. Guidance that employers may rely upon with respect to the issues addressed below will be provided with sufficient lead time for employers to comply. Comments are requested on these approaches.

Q1. What is the current timeline for issuing guidance on automatic enrollment under FLSA section 18A?

A1. The Department of Labor has been working with stakeholders to ensure that it has the necessary information and data to develop regulations relating to automatic enrollment, and is sensitive to stakeholder concerns regarding the need for adequate time to comply with any regulations that are ultimately issued. In addition, the Department of Labor is aware of the need to coordinate the work it will be undertaking to develop guidance relating to automatic enrollment with the guidance being developed regarding other related Affordable Care Act provisions, including the employer shared responsibility provision and the 90-day limitation on waiting periods, described above.

In view of the need for coordinated guidance and a smooth implementation process, including an applicability date that gives employers sufficient time to comply, the Department of Labor has concluded that its automatic enrollment guidance will not be ready to take effect by 2014. It remains the Department of Labor’s view that, until final regulations under FLSA section 18A are issued and become applicable, employers are not required to comply with FLSA section 18A.

Q2. Do Treasury and the IRS intend to issue proposed regulations or other guidance permitting employers to use an employee’s W-2 wages as a safe harbor in determining the affordability of employer coverage, as outlined in IRS Notice 2011-73?

A2. Yes. As described in Notice 2011-73, Treasury and the IRS intend to issue proposed regulations or other guidance permitting employers to use an employee’s Form W-2 wages (as reported in Box 1) as a safe harbor in determining the affordability of employer coverage.

Q3. Do Treasury and the IRS intend to issue proposed regulations or other guidance addressing how the employer shared responsibility provisions under Code section 4980H and the 90-day waiting period limitation under PHS Act section 2708 are coordinated?

A3. Yes. Treasury and the IRS intend to issue proposed regulations or other guidance under Code section 4980H (which imposes shared responsibility on large employers with respect to coverage of full-time employees). That guidance is expected to address the intersection of the Code section 4980H rules and the PHS Act section 2708 rules applicable to the 90-day waiting period limitation and will be coordinated with upcoming tri-Department proposed rules under PHS Act section 2708 (discussed below). Treasury and the IRS are mindful of employers’ requests for safe harbors and simplicity and will seek to accommodate those requests to the extent feasible and consistent with the terms of the statute.

The upcoming guidance is expected to provide that, at least for the first three months following an employee’s date of hire, an employer that sponsors a group health plan will not, by reason of failing to offer coverage to the employee under its plan during that three-month period, be subject to the employer responsibility payment under Code section 4980H.

Q4. For purposes of determining whether an employee (other than a newly-hired employee) is a full-time employee for purposes of Code section 4980H, do Treasury and the IRS intend to issue proposed regulations or other guidance allowing employers to use a look-back/stability period safe harbor, based on the approach outlined in IRS Notice 2011-36?

A4. Yes. Having reviewed the comments in response to IRS Notice 2011-36, Treasury and the IRS intend to issue proposed regulations or other guidance that would allow employers to use a “look-back/stability period safe harbor” method based on the approach outlined in the notice for purposes of determining whether an employee (other than a newly-hired employee) is a full-time employee. Accordingly, it is anticipated that the guidance will allow look-back and stability periods not exceeding 12 months.

For a description of anticipated guidance regarding newly-hired employees, see Q&A-5.

Q5. For purposes of determining whether a newly-hired employee is a full-time employee, do Treasury and the IRS intend to issue proposed regulations or other guidance under Code section 4980H?

A5. Yes. Treasury and the IRS also intend to issue proposed regulations or other guidance that will address how to determine whether a newly-hired employee is a full-time employee for purposes of Code section 4980H.

As stated in Q&A-3, the upcoming guidance is expected to provide that, at least for the first three months following an employee’s date of hire, an employer that sponsors a group health plan will not, by reason of failing to offer coverage to the employee under its plan during that three-month period, be subject to the employer responsibility payment under Code section 4980H. The guidance is also expected to provide that, in certain circumstances, employers have six months to determine whether a newly-hired employee is a full-time employee for purposes of section 4980H and will not be subject to a section 4980H payment during that six-month period with respect to that employee. Treasury and the IRS intend to propose an approach under which the period of time that an employer will have to determine whether a newly-hired employee is a full-time employee (within the meaning of section 4980H) will depend upon whether, based on the facts and circumstances, (a) the employee is reasonably expected as of the time of hire to work an average of 30 or more hours per week on an annual basis and (b) the employee’s first three months of employment are reasonably viewed, as of the end of that period, as representative of the average hours the employee is expected to work on an annual basis.

Specifically, it is intended that the upcoming proposed regulations or other guidance would provide, for purposes of section 4980H, that:

This policy describes the applicability of a potential section 4980H payment with respect to newly-hired employees. Forthcoming guidance is expected also to coordinate the rules for newly-hired employees with those applicable to other employees (including employees who are transferred from one employment classification or status to another).

The following examples illustrate the intended approach described above:

Example 1: Newly-hired employee expected to work full time.

Facts: Employer D, an applicable large employer ( i.e., an employer with at least 50 full-time equivalent employees), hires Employee X as a computer programmer on December 1. Employee X is expected to work full-time on an annual basis and does work full-time for the months of December, January, and February. Employer D offers health coverage to its full-time workers (and their dependents).

Conclusion: Employee X must be able to enroll in coverage beginning in March or the employer potentially would be subject to a section 4980H payment. However, failure to offer coverage to Employee X during the first three months (December-February) would not subject Employer D to a potential section 4980H payment.

Example 2: Newly-hired employee who seasonally works full-time

Facts: Same as Example 1 except that Employer D hires Employee Y as a salesperson who is expected to work full-time during the holiday season and part-time the rest of the year. Employee Y works an average of 35 hours per week in December, January, and February and 20 hours per week in March, April, and May.

Conclusion: If, based on the facts and circumstances at the end of the period, the three-month period of December through February is reasonably viewed as not representative of the average hours Employee Y is reasonably expected to work on an annual basis, Employer D may use a second three-month period (March-May) as a look-back period. Failure to offer coverage under Employer D’s group health plan to Employee Y during the first (December-February) and the second (March-May) three-month periods would not subject Employer D to a potential section 4980H payment. (Failure to offer coverage to Employee Y for June also would not subject Employer D to a potential section 4980H payment because Employee Y was determined to be part-time during the March-May look-back period.)

Q6. When PHS Act section 2708 (which imposes a 90-day limitation on waiting periods) becomes effective in 2014, will it require an employer to offer coverage to part-time employees or to any other particular category of employees?

A6. No. Many employers make distinctions in eligibility for coverage based on full-time or part-time status, as defined by the employer’s group health plan (which may differ from the standard under Code section 4980H). PHS Act section 2708 does not require the employer to offer coverage to any particular employee or class of employees, including part-time employees. PHS Act section 2708 merely prohibits requiring an otherwise eligible employee to wait more than 90 days before coverage is effective. Furthermore, nothing in the Affordable Care Act penalizes small employers for choosing not to offer coverage to any employee, or large employers for choosing to limit their offer of coverage to full-time employees, as defined in the employer shared responsibility provisions.

Q7. How do the Departments intend to address the application of the 90-day waiting period limitation in PHS Act section 2708 to an offer of coverage by an employer?

A7. Having reviewed the comments in response to IRS Notice 2011-36, the Departments intend to retain, for purposes of PHS Act section 2708, the definition in existing regulations that the 90-day waiting period begins when an employee is otherwise eligible for coverage under the terms of the group health plan. This is the definition of waiting period used for purposes of Title XXVII of the PHS Act, Part 7 of ERISA, and chapter 100 of the Code.^[6] Under this approach, if a plan were to provide that full-time employees are eligible for coverage without satisfying any other condition, and an employee were hired as a full-time employee, the waiting period (if the employer were to choose to impose one) for that employee would begin on the date of hire and could not exceed 90 days. Consistent with PHS Act section 2708, eligibility conditions that are based solely on the lapse of a time period would be permissible for no more than 90 days.

Other conditions for eligibility under the terms of a group health plan would generally be permissible under PHS Act section 2708, unless the condition is designed to avoid compliance with the 90-day waiting period limitation. For example, eligibility conditions such as full-time status, a bona fide job category, or receipt of a license would be permissible.

The upcoming guidance under section 2708 is also expected to address situations in which, under the terms of an employer’s plan, employees (or certain classes of employees) are eligible for coverage once they complete a specified cumulative number of hours of service within a specified period (such as 12 months). It is anticipated that, under the upcoming guidance, such eligibility conditions will not be treated as designed to avoid compliance with the 90-day waiting period limitation so long as the required cumulative hours of service do not exceed a number of hours to be specified in that guidance.

Comments are requested on how this possible approach would apply to plans that credit hours of service from multiple different employers and plans that use hours banks.

Example 3: Employee ineligible under terms of plan by reason of job classification

Facts: Same as Example 1 except that Employer D’s plan does not cover computer programmers.

Conclusion: Unlike Code section 4980H, in which the determination of full-time status is governed by a statutory standard (working an average of 30 hours per week), the waiting period limitation under PHS Act 2708 applies only to employees who are otherwise eligible under the terms of the plan. Because Employee X is excluded under the plan’s eligibility criteria, and the plan’s terms are not designed to avoid compliance with PHS Act section 2708, the plan’s eligibility provision does not violate PHS Act section 2708.

Example 4: Part-time employee, hours of service requirement

Facts: Employer E hires Employee Z to work 20 hours per week. Employer E’s plan requires part-time employees to complete 750 hours of service in order to participate. Solely for purposes of illustration in this example, it is assumed that upcoming guidance under PHS Act section 2708 permits plans to require part-time employees to complete up to, but no more than, 750 hours of service in order to participate.

Conclusion: Part-time employees who work 20 hours per week will complete 750 hours of service in 37¹/₂ weeks or just under 9 months. The waiting period under PHS Act section 2708 begins when Employee Z satisfies the cumulative service requirement, thereby becoming eligible (but for the waiting period) for coverage under the plan. Employer E must provide coverage to Employee Z no later than 90 days after Employee Z completes 750 hours of service, which is about one year after Employee Z is hired and begins working part-time. (No Code section 4980H payment applies because Employee Z is part-time.)

Comments are requested by April 9, 2012. WARNING: Do not include any personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All comments are posted on the Internet as received, and can be retrieved by most Internet search engines. Comments may be submitted anonymously. Comments will be shared by the Departments.

Comments may be sent electronically to: e-ohpsca-er.ebsa@dol.gov. Alternatively, comments may be sent via mail or hand delivery to: Office of Health Plan Standards and Compliance Assistance, Employee Benefits Security Administration, Room N-5653, U.S. Department of Labor, 200 Constitution Avenue, NW, Washington, DC 20210.

The Departments have coordinated on the information contained in this notice and are publishing substantively identical issuances. Questions concerning the information contained herein may be directed to the Department of Labor’s Office of Health Plan Standards and Compliance Assistance at 202-693-8335; the Internal Revenue Service at 202-927-9639; or the Department of Health and Human Services at 410-786-1565 or phig@cms.hhs.gov. Additional information for employers regarding the Affordable Care Act is available at www.healthcare.gov and www.dol.gov/ebsa/healthreform.

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking.

This document contains proposed regulations regarding the definition of an “interest in a limited partnership as a limited partner” for purposes of determining whether a taxpayer materially participates in an activity under section 469 of the Internal Revenue Code (Code). These proposed regulations affect individuals who are partners in partnerships.

Written or electronic comments and requests for a public hearing must be received by February 27, 2012.

Send submissions to: CC:PA:LPD:PR (REG-109369-10), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-109369-10), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically, via the Federal eRulemaking Portal at http://www.regulations.gov/ (IRS REG-109369-10).

Concerning the proposed regulations, Michala Irons, (202) 622-3050; concerning submissions of comments and requests for public hearing, Oluwafunmilayo Taylor, (202) 622-7180 (not toll-free numbers).

Accordingly, 26 CFR part 1 is proposed to be amended as follows: