[Federal Register Volume 80, Number 243 (Friday, December 18, 2015)]
[Rules and Regulations]
[Pages 78971-78977]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31866]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9745]
RIN 1545-BL43


Minimum Value of Eligible Employer-Sponsored Plans and Other 
Rules Regarding the Health Insurance Premium Tax Credit

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations on the health 
insurance premium tax credit enacted by the Patient Protection and 
Affordable Care Act and the Health Care and Education Reconciliation 
Act of 2010, as amended by the Medicare and Medicaid Extenders Act of 
2010, the Comprehensive 1099 Taxpayer Protection and Repayment of 
Exchange Subsidy Overpayments Act of 2011, and the Department of 
Defense and Full-Year Continuing Appropriations Act, 2011. These final 
regulations affect individuals who enroll in qualified health plans 
through Affordable Insurance Exchanges (Exchanges, sometimes called 
Marketplaces) and claim the health insurance premium tax credit, and 
Exchanges that make qualified health plans available to individuals and 
employers.

DATES: Effective Date: These regulations are effective on December 18, 
2015.
    Applicability Dates: For dates of applicability, see Sec. Sec.  
1.36B-1(o) and 1.36B-6(g).

FOR FURTHER INFORMATION CONTACT: For general questions on the premium 
tax credit, Shareen Pflanz, (202) 317-4718; for minimum value, Andrew 
Braden, (202) 317-7006 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains final regulations amending the Income Tax 
Regulations (26 CFR part 1) under section 36B of the Internal Revenue 
Code (Code) relating to the health insurance premium tax credit. 
Section 36B was enacted by 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). Final regulations 
under section 36B (TD 9590) were published on May 23, 2012 (77 FR 
30377) (2012 section 36B final regulations). On May 3, 2013, a notice 
of proposed rulemaking (REG-125398-12) was published in the Federal 
Register (78 FR 25909). Written comments responding to the proposed 
regulations were received. The comments have been considered in 
connection with these final regulations and are available for public 
inspection at www.regulations.gov or on request. No public hearing was 
requested or held. After consideration of all the comments, the 
proposed regulations are adopted, in part, as amended by this Treasury 
decision. Some rules proposed under REG-125398-12 on the minimum value 
of eligible employer-sponsored plans have been reserved and will be 
finalized separately under REG-119850-15. Two paragraphs on minimum 
value have been re-proposed, see REG-143800-14 (80 FR 52678) (2015 
proposed minimum value regulations), are finalized in part, and will be 
finalized in part under REG-143800-14.

Explanation of Revisions and Summary of Comments

1. Definition of Modified Adjusted Gross Income

    Section 36B(d)(2) provides that a taxpayer's household income 
includes the modified adjusted gross income of the taxpayer and the 
members of the taxpayer's tax family who are required to file an income 
tax return. The 2012 section 36B final regulations provide that, in 
computing household income, whether a family member must file a tax 
return is determined without regard to section 1(g)(7). Under section 
1(g)(7), a parent may elect to include a child's gross income in the 
parent's gross income if certain requirements are met.
    The proposed regulations removed ``without regard to section 
1(g)(7)'' from the 2012 section 36B final regulations because that 
language implied 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 clarified 
that when a parent makes an election under section 1(g)(7), household 
income includes the child's gross income included on the parent's 
return only. These final regulations adopt that rule without change and 
clarify that the modified adjusted gross income of a parent who makes 
the section 1(g)(7) election includes the child's modified adjusted 
gross income. Thus, the parent's modified adjusted gross income 
includes not only the child's gross income but also the child's tax-
exempt interest and nontaxable Social Security income, which are 
excluded from gross

[[Page 78972]]

income but included in modified adjusted gross income in computing 
household income. (A parent may not make a section 1(g)(7) election if 
the child has income excluded under section 911, the third type of 
nontaxable income included in modified adjusted gross income.)

2. Wellness Program Incentives

    Under section 36B(c)(2)(C)(i) and Sec.  1.36B-2(c)(3)(v), an 
eligible employer-sponsored plan is affordable for an employee and 
related individuals only if the portion of the annual premium the 
employee must pay for self-only coverage does not exceed the required 
contribution percentage of the taxpayer's household income. Under 
section 36B(c)(2)(C)(ii), an eligible employer-sponsored plan provides 
minimum value only if the plan's share of the total allowed cost of 
benefits is at least 60 percent and, under the 2015 proposed minimum 
value regulations, the plan provides substantial coverage of inpatient 
hospital services and physician services.
    The proposed regulations provide that, for an employee eligible to 
participate in a wellness program, the affordability and minimum value 
of eligible employer-sponsored coverage are 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 and minimum value of a plan 
that charges a higher initial premium or higher cost-sharing for 
tobacco users are determined based on the premium or cost-sharing that 
is charged to non-tobacco users or to tobacco users who complete the 
related wellness program, such as attending smoking cessation classes.
    Identical rules, addressing only an employee's required 
contribution for purposes of determining affordability, were proposed 
in regulations under section 5000A (REG-141036-13, 79 FR 4302, January 
27, 2014) (section 5000A proposed regulations). The preamble to 
regulations finalizing the section 5000A proposed regulations (TD 9705, 
79 FR 70464, November 26, 2014) (section 5000A final regulations) 
discusses the comments received on the proposed regulations under 
section 36B, except comments discussed in the next paragraph, and 
additional comments received on the section 5000A proposed regulations 
(79 FR 70466). Comments discussed in the preamble to the section 5000A 
proposed regulations are not discussed again in this preamble.
    Because the standard for affordability for individuals eligible for 
coverage by reason of a relationship to an employee (related 
individuals) under section 5000A is different than the standard under 
section 36B, the section 5000A final regulations do not address certain 
comments on the treatment of wellness program incentives in determining 
affordability for related individuals. These commenters requested that 
wellness incentives related to tobacco use be treated as unearned for 
related individuals. The commenters expressed concern that treating 
wellness incentives related to tobacco use as earned in all cases 
unfairly penalizes related individuals for an employee's tobacco use. 
However, section 36B(c)(2)(C) provides that the affordability of 
coverage for related individuals under section 36B is based on the cost 
of self-only coverage. Accordingly, the final regulations do not adopt 
this comment.
    Thus, after considering all the comments, these final regulations, 
like the section 5000A final regulations, retain the rules in the 
proposed regulations that wellness incentives unrelated to tobacco use 
are treated as unearned and wellness incentives related to tobacco use 
are treated as earned in determining affordability. For purposes of 
both the section 5000A final regulations and these final regulations, 
nondiscriminatory wellness programs include both participatory and 
health-contingent wellness programs. Both the section 5000A final 
regulations and these final regulations also clarify that (1) a 
wellness incentive that includes any component unrelated to tobacco use 
is treated as unearned (however, as stated in the preamble to the 
section 5000A final regulations, if there is an incentive for 
completing a program unrelated to tobacco use and a separate incentive 
for completing a program related to tobacco use, then the incentive 
related to tobacco use may be treated as earned), and (2) the term 
wellness program incentives has the same meaning as the term reward in 
regulations issued by the Departments of Health and Human Services 
(HHS) and Labor as well as the Treasury Department, see Sec.  54.9802-
1(f), 29 CFR 2590.702(f), and 45 CFR 146.121(f). These final 
regulations also apply the rules described in this section of the 
preamble for purposes of determining minimum value.

3. Employer Contributions to Health Reimbursement Arrangements (HRA)

    The proposed regulations provide that amounts newly made available 
in the current plan year under an HRA that is integrated with eligible 
employer-sponsored coverage and that an employee may use to pay 
premiums are counted toward the employee's required contribution for 
purposes of determining affordability. Amounts newly made available in 
the current plan year under an HRA that is integrated with eligible 
employer-sponsored coverage and that an employee may use only to reduce 
cost-sharing for medical expenses covered by the primary plan count 
toward a plan's minimum value percentage.
    The comments on the proposed regulations are discussed in the 
section 5000A final regulations. After considering all the comments, 
both the section 5000A final regulations and these final regulations 
(1) cross-reference Notice 2013-54 (2013-40 IRB 287, see Sec.  
601.601(d)) for guidance on the requirements for an HRA to be 
integrated with eligible employer-sponsored coverage, (2) clarify that 
amounts newly made available under an HRA reduce an employee's required 
contribution (or, for purposes of section 36B, count towards providing 
minimum value) if the HRA would have been integrated with eligible 
employer-sponsored coverage had the employee enrolled in the primary 
plan, (3) clarify that an HRA is taken into account in determining 
affordability (and minimum value for purposes of section 36B) only if 
the HRA and the primary eligible employer-sponsored coverage are 
offered by the same employer, (4) clarify that HRA contributions are 
taken into account for affordability and not minimum value if an 
employee may use the HRA contributions to pay premiums for the primary 
plan only or to pay cost-sharing or benefits not covered by the primary 
plan in addition to premiums, and (5) clarify that employer 
contributions to an HRA reduce an employee's required contribution (or 
count towards providing minimum value for section 36B purposes) only to 
the extent the amount of the annual contribution is required under the 
terms of the plan or is otherwise determinable within a reasonable time 
before the employee must decide whether to enroll. For more information 
on how contributions to an HRA are taken into account for purposes of 
section 4980H(b) and related reporting under section 6056, see Notice 
2015-87, 2015-52 IRB, released simultaneously with these final 
regulations.
    Additional regulations will finalize other rules on minimum value 
in the proposed regulations.

[[Page 78973]]

4. Employer Contributions to Cafeteria Plans (Flex Contributions)

    The preamble to the section 5000A proposed regulations requested 
comments on how employer contributions under a section 125 cafeteria 
plan (flex contributions) that employees may not opt to receive as a 
taxable benefit should be taken into account in determining an 
employee's required contribution for purposes of the affordability of 
coverage. The section 5000A final regulations discussed the comments 
received and adopted the rule that an employee's required contribution 
is reduced by employer contributions under a section 125 cafeteria plan 
that (1) may not be taken as a taxable benefit, (2) may be used to pay 
for minimum essential coverage, and (3) may be used only to pay for 
medical care within the meaning of section 213. These final regulations 
adopt this rule for purposes of determining affordability under section 
36B.
    For more information on the effect of flex contributions and other 
similar arrangements on affordability for purposes of sections 36B, 
5000A, and related consequences under section 4980H, see Notice 2015-
87, released simultaneously with these final regulations.

5. Post-Employment Coverage

    Section 1.36B-2(c)(3)(iv) provides 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. The proposed regulations provide that this 
rule applies only to former employees and extend the rule to retiree 
coverage. Accordingly, an individual who may enroll in retiree coverage 
is eligible for minimum essential coverage only for the months the 
individual is enrolled in the coverage.
    Commenters opined that the continuation and retiree coverage rules 
should apply to individuals eligible for the coverage by reason of a 
relationship to an employee, for example, the spouse of a retired 
employee. In response to these comments, the final regulations clarify 
that an individual who may enroll in continuation coverage or retiree 
coverage because of a relationship to a former employee is eligible for 
the coverage only for the months the individual is enrolled in the 
coverage.
    Commenters suggested that the rule for continuation coverage should 
apply to current employees eligible for continuation coverage as a 
result of reduced hours. The final regulations do not adopt this 
suggestion. Eligible employer-sponsored coverage for current employees 
does not present the same administrability issues as for former 
employees. Current employees with continuation coverage should be 
subject to the same general rules on eligibility for employer-sponsored 
coverage as other current employees. Although employees may be subject 
to a higher required contribution for continuation coverage than is 
required for other eligible employer-sponsored coverage, for purposes 
of the premium tax credit, employees are eligible for eligible 
employer-sponsored coverage only if the coverage is both affordable and 
provides minimum value. Thus, current employees offered continuation 
coverage, like other current employees, may be eligible for the premium 
tax credit if the coverage offered either is not affordable or does not 
provide minimum value.

6. Newborns, Adopted Children, and Other Individuals Enrolled Midmonth

    Regulations at 45 CFR 155.420(d)(2)(i) require issuers to provide 
coverage to a newborn child enrolled in a qualified health plan 
effective on the date of birth. Under section 36B(c)(2)(A)(i) and Sec.  
1.36B-3(c)(1)(i), a month is a coverage month for an individual only if 
the individual is enrolled in a qualified health plan through an 
Exchange as of the first day of the month. Under Sec.  1.36B-3(d), the 
monthly premium assistance amount is determined, in part, by the 
adjusted monthly premium for the applicable second lowest cost silver 
(benchmark) plan (benchmark plan premium). 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 (birth month) is treated as enrolled as of 
the first day of the month.
    Some commenters interpreted the coverage month rule for newborns as 
requiring that issuers must provide coverage for a newborn as of the 
first day of the month.
    Other commenters noted that applying a new adjusted monthly premium 
as of the first of the month, thus increasing the premium assistance 
amount for the month, is inconsistent with HHS regulations that provide 
that the amount of advance credit payments (which approximates the 
premium assistance amount) does not change until the first day of the 
month following the birth month.
    No changes are made to the final regulations to reflect these 
comments. The rules treat certain individuals as enrolled as of the 
first day of the month for purposes of the premium tax credit to 
conform with the general rules for coverage months but do not require 
issuers to enroll the individuals as of the first day of the month. 
Furthermore, HHS regulations published on July 15, 2013 (78 FR 42321) 
removed the rule providing that advance credit payments do not change 
until the month following a birth or other event for which a midmonth 
enrollment is allowed.
    Under 45 CFR 155.420(b)(2)(i), Exchanges must ensure that a 
taxpayer eligible to enroll an individual in coverage may choose for 
the individual's coverage to be effective as of the individual's date 
of birth, adoption, or placement for adoption or in foster care or as 
of the first day of the following month. Similarly, for individual's 
placed with a taxpayer by court order, 45 CFR 155.420(b)(2)(v) provides 
that Exchanges must allow the individual's coverage to be effective as 
of the date the court order is effective. Accordingly, the final 
regulations provide that an individual is treated as enrolled as of the 
first day of the month of birth, adoption, or placement in adoption or 
foster care if the individual's enrollment is effective as of the date 
of birth, adoption, or placement for adoption or in foster care, or on 
the effective date of a court order. The final regulations use the term 
individual instead of child to align with HHS regulations relating to 
midmonth enrollments.
    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 
intent of this rule was to specify that the adjusted monthly premium is 
determined as of the first day of a coverage month and is not prorated 
for midmonth changes in enrollment or eligibility for other minimum 
essential coverage. Accordingly, an individual who enrolls midmonth but 
who is treated as enrolled as of the first day of the month is a member 
of the coverage family (if all other requirements are met) in 
determining the adjusted monthly premium for that month. For other 
coverage family changes, the adjusted monthly premium does not change 
until the following month. The final regulations clarify these rules by 
providing that the term coverage family means the members of a 
taxpayer's family for whom a month is a coverage month (which requires 
being enrolled

[[Page 78974]]

on the first day of the month) and that the adjusted monthly premium is 
determined as of the first day of a coverage month.

7. Partial Months of Coverage

    The proposed regulations provide that the premium assistance amount 
for a coverage month is prorated by the number of days of coverage when 
a qualified health plan is terminated before the last day of a month 
and the issuer reduces or refunds a portion of the monthly premium.
    The proposed rule for computing a prorated premium assistance 
amount has proven to be complex and may be difficult to administer. 
Accordingly, the final regulations provide that the premium assistance 
amount for a termination month is the lesser of (1) the enrollment 
premiums charged (reduced by any amounts that were refunded) and (2) 
the difference between the benchmark plan premium and contribution 
amount for the full month. The final regulations clarify that this 
computation also applies to a month an individual is enrolled in 
coverage effective on the date of the individual's birth, adoption, or 
placement for adoption or in foster care, or on the effective date of a 
court order. The Treasury Department and the IRS anticipate publishing 
rules requiring Exchanges to report under section 36B(f)(3) for partial 
months of coverage the amount of enrollment premiums charged and 
advance credit payments made for the days of coverage and the benchmark 
plan premium for a full month of coverage.

Effective/Applicability Date

    These final regulations apply to taxable years ending after 
December 31, 2013.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. 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 requirement on 
small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) 
does not apply. Pursuant to section 7805(f) of the Internal Revenue 
Code, the notice of proposed rulemaking that preceded these final 
regulations was submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business. No comments were received.

Drafting Information

    The principal authors of these final regulations are Andrew Braden, 
Arvind Ravichandran, and Stephen J. Toomey of the Office of Associate 
Chief Counsel (Income Tax and Accounting). However, other personnel 
from the IRS and the Treasury Department participated in their 
development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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


0
Par. 2. Section 1.36B-0 is amended by:
0
1. Revising the introductory text.
0
2. Revising the entries for Sec. Sec.  1.36B-2(c)(3)(iv) and 1.36B-
2(c)(3)(v)(A)(4).
0
2. Adding entries for Sec. Sec.  1.36B-2(c)(3)(v)(A)(5) and (6).
0
3. Revising the entries for Sec. Sec.  1.36B-3(c)(2) and (3).
0
4. Adding entries for Sec. Sec.  1.36B-3(c)(4), 1.36B-3(d)(1) and (2), 
1.36B-3(d)(2)(i) and (ii) and 1.36B-6.
    The revisions and additions read as follows:


Sec.  1.36B-0  Table of contents.

    This section lists the captions contained in Sec. Sec.  1.36B-1 
through 1.36B-6.
* * * * *


Sec.  1.36B-2  Eligibility for premium tax credit.

* * * * *
    (c) * * *
    (3) * * *
    (iv) Post-employment coverage.
    (v) * * *
    (A) * * *
    (4) Wellness program incentives.
    (5) Employer contributions to health reimbursement arrangements.
    (6) Employer contributions to cafeteria plans.
* * * * *


Sec.  1.36B-3  Computing the premium assistance credit amount.

* * * * *
    (c) * * *
    (2) Certain individuals enrolled during a month.
    (3) Premiums paid for a taxpayer.
    (4) Examples.
    (d) * * *
    (1) In general.
    (2) Partial month of coverage.
    (i) In general.
    (ii) Examples.
* * * * *


Sec.  1.36B-6  Minimum value.

    (a) In general.
    (b) MV standard population.
    (c) MV percentage.
    (1) In general.
    (2) Wellness program incentives.
    (i) In general.
    (ii) Example.
    (3) Employer contributions to health savings accounts.
    (4) Employer contributions to health reimbursement arrangements.
    (5) Expected spending adjustments for health savings accounts and 
health reimbursement arrangements.
    (d) Methods for determining MV.
    (e) Scope of essential health benefits and adjustment for benefits 
not included in MV Calculator.
    (f) Actuarial certification.
    (1) In general.
    (2) Membership in American Academy of Actuaries.
    (3) Actuarial analysis.
    (4) Use of MV Calculator.
    (g) Effective/applicability date.
    (1) In general.
    (2) Exception.

0
Par. 3. Section 1.36B-1 is amended by revising paragraphs (e)(1)(i), 
(e)(1)(ii)(B), and (n) to read as follows:


Sec.  1.36B-1  Premium tax credit definitions.

* * * * *
    (e) * * *
    (1) * * *
    (i) A taxpayer's modified adjusted gross income (including the 
modified adjusted gross income of a child for whom an election under 
section 1(g)(7) is made for the taxable year);
    (ii) * * *
    (B) Are required to file a return of tax imposed by section 1 for 
the taxable year.
* * * * *
    (n) Rating area. 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(a)(2)) and 45 CFR 147.102(b).
* * * * *

0
Par. 4. Section 1.36B-2 is amended by:
0
1. Revising paragraphs (c)(3)(iv) and (c)(3)(v)(A)(4).
0
2. Adding paragraphs (c)(3)(v)(A)(5) and (6) and (c)(3)(v)(D), Example 
9.
0
3. Revising paragraph (c)(3)(vi).

[[Page 78975]]

    The revisions and additions read as follows:


Sec.  1.36B-2  Eligibility for premium tax credit.

* * * * *
    (c) * * *
    (3) * * *
    (iv) Post-employment coverage. A former employee (including a 
retiree), or an individual related (within the meaning of paragraph 
(c)(3)(i) of this section) to a former employee, who may enroll in 
eligible employer-sponsored coverage or in continuation coverage 
required under Federal law or a State law that provides comparable 
continuation coverage is eligible for minimum essential coverage under 
this coverage only for months that the former employee or related 
individual is enrolled in the coverage.
    (v) * * *
    (A) * * *
    (4) Wellness program incentives. Nondiscriminatory wellness program 
incentives offered by an eligible employer-sponsored plan that affect 
premiums are treated as earned in determining an employee's required 
contribution for purposes of affordability of an eligible employer-
sponsored plan to the extent the incentives relate exclusively to 
tobacco use. Wellness program incentives that do not relate to tobacco 
use or that include a component unrelated to tobacco use are treated as 
not earned for this purpose. For purposes of this section, the term 
wellness program incentive has the same meaning as the term reward in 
Sec.  54.9802-1(f)(1)(i) of this chapter.
    (5) Employer contributions to health reimbursement arrangements. 
Amounts newly made available for the current plan year under a health 
reimbursement arrangement that an employee may use to pay premiums, or 
may use to pay cost-sharing or benefits not covered by the primary plan 
in addition to premiums, reduce the employee's required contribution if 
the health reimbursement arrangement would be integrated, as that term 
is used in Notice 2013-54 (2013-40 IRB 287) (see Sec.  601.601(d) of 
this chapter), with an eligible employer-sponsored plan for an employee 
enrolled in the plan. The eligible employer-sponsored plan and the 
health reimbursement arrangement must be offered by the same employer. 
Employer contributions to a health reimbursement arrangement reduce an 
employee's required contribution only to the extent the amount of the 
annual contribution is required under the terms of the plan or 
otherwise determinable within a reasonable time before the employee 
must decide whether to enroll in the eligible employer-sponsored plan.
    (6) Employer contributions to cafeteria plans. Amounts made 
available for the current plan year under a cafeteria plan, within the 
meaning of section 125, reduce an employee's or a related individual's 
required contribution if--
    (i) The employee may not opt to receive the amount as a taxable 
benefit;
    (ii) The employee may use the amount to pay for minimum essential 
coverage; and
    (iii) The employee may use the amount exclusively to pay for 
medical care, within the meaning of section 213.
* * * * *
    (D) * * *

    Example 9. Wellness program incentives. (i) Employer X offers an 
eligible employer-sponsored plan with a nondiscriminatory wellness 
program that reduces premiums by $300 for employees who do not use 
tobacco products or who complete a smoking cessation course. 
Premiums are reduced by $200 if an employee completes cholesterol 
screening within the first six months of the plan year. Employee B 
does not use tobacco and the cost of his premiums is $3,700. 
Employee C uses tobacco and the cost of her premiums is $4,000.
    (ii) Under paragraph (c)(3)(v)(A)(4) of this section, only the 
incentives related to tobacco use are counted toward the premium 
amount used to determine the affordability of X's plan. C is treated 
as having earned the $300 incentive for attending a smoking 
cessation course regardless of whether C actually attends the 
course. Thus, the required contribution for determining 
affordability for both Employee B and Employee C is $3,700. The $200 
incentive for completing cholesterol screening is treated as not 
earned and does not reduce their required contribution.

    (vi) Minimum value. See Sec.  1.36B-6 for rules for determining 
whether an eligible employer-sponsored plan provides minimum value.
* * * * *

0
Par. 5. Section 1.36B-3 is amended by:
0
1. Revising paragraph (b)(2).
0
2. Redesignating paragraphs (c)(2) and (3) as paragraphs (c)(3) and (4) 
and adding paragraph (c)(2).
0
3. Revising paragraph (d).
0
4. Adding a sentence to the end of paragraph (e).
0
5. Revising paragraphs (f)(4), (g)(2), and (j)(1) and (3).
0
6. Removing the language ``(d)(1)'' everywhere it appears in paragraphs 
(h), (j), and (k), and adding the language ``(d)(1)(i)'' in its place 
and removing the language ``(d)(2)'' everywhere it appears in 
paragraphs (h) and (j) and adding the language ``(d)(1)(ii)'' in its 
place.
    The revisions and additions read as follows:


Sec.  1.36B-3  Computing the premium assistance credit amount.

* * * * *
    (b) * * *
    (2) The term coverage family means, in each month, the members of a 
taxpayer's family for whom the month is a coverage month.
    (c) * * *
    (2) Certain individuals enrolled during a month. If an individual 
enrolls in a qualified health plan and the enrollment is effective on 
the date of the individual's birth, adoption, or placement for adoption 
or in foster care, or on the effective date of a court order, the 
individual is treated as enrolled as of the first day of that month for 
purposes of this paragraph (c).
* * * * *
    (d) Premium assistance amount--(1) In general. Except as provided 
in paragraph (d)(2) of this section, the premium assistance amount for 
a coverage month is the lesser of--
    (i) The premiums for the month for one or more qualified health 
plans in which a taxpayer or a member of the taxpayer's family enrolls 
(enrollment premiums); or
    (ii) The excess of the adjusted monthly premium for the applicable 
benchmark plan (benchmark plan premium) over 1/12 of the product of a 
taxpayer's household income and the applicable percentage for the 
taxable year (the taxpayer's contribution amount).
    (2) Partial month of coverage--(i) In general. If a qualified 
health plan is terminated before the last day of a month or an 
individual is enrolled in coverage effective on the date of the 
individual's birth, adoption, or placement for adoption or in foster 
care, or on the effective date of a court order, the premium assistance 
amount for the month is the lesser of--
    (A) The enrollment premiums for the month (not including any 
amounts that were refunded); or
    (B) The excess of the benchmark plan premium for a full month of 
coverage over the full contribution amount for the month.
    (ii) Examples. The following examples illustrate the rules of this 
paragraph (d)(2).

    Example 1.  (i) Taxpayer R is single and has no dependents. R 
enrolls in a qualified health plan with a monthly premium of $450. 
The difference between R's benchmark plan premium and contribution 
amount for the month is $420. R's premium assistance amount for a 
coverage month with a full month of coverage is $420 (the lesser of 
$450 and $420).
    (ii) The issuer of R's qualified health plan is notified that R 
died on September 20. The

[[Page 78976]]

issuer terminates coverage as of that date and refunds the remaining 
portion of the September enrollment premiums ($150) for R's 
coverage.
    (iii) Under this paragraph (d)(2), R's premium assistance amount 
for September is the lesser of the enrollment premiums for the month 
($300 ($450--$150)) or the difference between the benchmark plan 
premium for a full month of coverage and the full contribution 
amount for the month ($420). R's premium assistance amount for 
September is $300, the lesser of $420 and $300.

    Example 2.  The facts are the same as in Example 1 of this 
paragraph (d)(2)(ii), except that the qualified health plan issuer 
does not refund any enrollment premiums for September. Under this 
paragraph (d)(2), R's premium assistance amount for September is 
$420, the lesser of $450 and $420.
    Example 3.  The facts are the same as in Example 1 of this 
paragraph (d)(2)(ii), except that the difference between R's 
benchmark plan premium and contribution amount for a month is $275. 
Accordingly, R's premium assistance amount for a coverage month with 
a full month of coverage is $275 (the lesser of $450 and $275). 
Under this paragraph (d)(2), R's premium assistance amount for 
September remains $275, the lesser of $300 and $275.

    (e) * * * The adjusted monthly premium for a coverage month is 
determined as of the first day of the month.
    (f) * * *
    (4) Family members residing at different locations. The benchmark 
plan premium determined under paragraphs (f)(1) and (2) of this section 
for family members who live in different States and enroll in separate 
qualified health plans is the sum of the premiums for the applicable 
benchmark plans for each group of family members living in the same 
State.
* * * * *
    (g) * * *
    (2) Applicable percentage table.

------------------------------------------------------------------------
 Household income percentage of Federal       Initial          Final
              poverty line                  percentage      percentage
------------------------------------------------------------------------
Less than 133%..........................             2.0             2.0
At least 133% but less than 150%........             3.0             4.0
At least 150% but less than 200%........             4.0             6.3
At least 200% but less than 250%........             6.3            8.05
At least 250% but less than 300%........            8.05             9.5
At least 300% but not more than 400%....             9.5             9.5
------------------------------------------------------------------------

* * * * *
    (j) Additional benefits--(1) In general. If a qualified health plan 
offers benefits in addition to the essential health benefits a 
qualified health plan must provide under section 1302 of the Affordable 
Care Act (42 U.S.C. 18022), or a State requires a qualified health plan 
to cover benefits in addition to these essential health benefits, the 
portion of the premium for the plan properly allocable to the 
additional benefits is excluded from the monthly premiums under 
paragraph (d)(1)(i) or (ii) of this section. Premiums are allocated to 
additional benefits before determining the applicable benchmark plan 
under paragraph (f) of this section.
* * * * *
    (3) Examples. The following examples illustrate the rules of this 
paragraph (j):

    Example 1.  (i) Taxpayer B enrolls in a qualified health plan 
that provides benefits in addition to essential health benefits 
(additional benefits). The monthly premiums for the plan in which B 
enrolls are $370, of which $35 is allocable to additional benefits. 
B's benchmark plan premium (determined after allocating premiums to 
additional benefits for all silver level plans) is $440, of which 
$40 is allocable to additional benefits. B's monthly contribution 
amount, which is the product of B's household income and the 
applicable percentage, is $60.
    (ii) Under this paragraph (j), B's enrollment premiums and the 
benchmark plan premium are reduced by the portion of the premium 
that is allocable to the additional benefits provided under that 
plan. Therefore, B's monthly enrollment premiums are reduced to $335 
($370 - $35) and B's benchmark plan premium is reduced to $400 ($440 
- $40). B's premium assistance amount for a coverage month is $335, 
the lesser of $335 (B's enrollment premiums, reduced by the portion 
of the premium allocable to additional benefits) and $340 (B's 
benchmark plan premium, reduced by the portion of the premium 
allocable to additional benefits ($400), minus B's $60 contribution 
amount).
    Example 2.  The facts are the same as in Example 1 of this 
paragraph (j)(3), except that the plan in which B enrolls provides 
no benefits in addition to the essential health benefits required to 
be provided by the plan. Thus, under paragraph (j) of this section, 
B's benchmark plan premium ($440) is reduced by the portion of the 
premium allocable to additional benefits provided under that plan 
($40). B's enrollment premiums ($370) are not reduced under this 
paragraph (j). B's premium assistance amount for a coverage month is 
$340, the lesser of $370 (B's enrollment premiums) and $340 (B's 
benchmark plan premium, reduced by the portion of the premium 
allocable to additional benefits ($400), minus B's $60 contribution 
amount).
* * * * *

0
Par. 6. Section 1.36B-6 is added to read as follows:


Sec.  1.36B-6  Minimum value.

    (a) In general. An eligible employer-sponsored plan provides 
minimum value (MV) only if--
    (1) The plan's share of the total allowed costs of benefits 
provided to an employee (the MV percentage) is at least 60 percent; and
    (2) [Reserved]
    (b) MV standard population. [Reserved]
    (c) MV percentage--(1) In general. [Reserved]
    (2) Wellness program incentives--(i) In general. Nondiscriminatory 
wellness program incentives offered by an eligible employer-sponsored 
plan that affect deductibles, copayments, or other cost-sharing are 
treated as earned in determining the plan's MV percentage if the 
incentives relate exclusively to tobacco use. Wellness program 
incentives that do not relate to tobacco use or that include a 
component unrelated to tobacco use are treated as not earned for this 
purpose. For purposes of this section, the term wellness program 
incentive has the same meaning as the term reward in Sec.  54.9802-
1(f)(1)(i) of this chapter.
    (ii) Example. The following example illustrates the rules of this 
paragraph (c)(2):

    Example.  (i) Employer X offers an eligible employer-sponsored 
plan that reduces the deductible by $300 for employees who do not 
use tobacco products or who complete a smoking cessation course. The 
deductible is reduced by $200 if an employee completes cholesterol 
screening within the first six months of the plan year. Employee B 
does not use tobacco and his deductible is $3,700. Employee C uses 
tobacco and her deductible is $4,000.
    (ii) Under paragraph (c)(2)(i) of this section, only the 
incentives related to tobacco use are considered in determining the 
plan's MV percentage. C is treated as having earned the $300 
incentive for attending a smoking cessation course regardless of 
whether C actually attends the course. Thus, the deductible for 
determining for the MV percentage for both Employees B and C is 
$3,700. The $200 incentive for completing cholesterol screening is 
disregarded.

    (3) Employer contributions to health savings accounts. Employer

[[Page 78977]]

contributions for the current plan year to health savings accounts that 
are offered with an eligible employer-sponsored plan are taken into 
account for that plan year towards the plan's MV percentage.
    (4) Employer contributions to health reimbursement arrangements. 
Amounts newly made available for the current plan year under a health 
reimbursement arrangement that would be integrated within the meaning 
of Notice 2013-54 (2013-40 IRB 287), see Sec.  601.601(d) of this 
chapter, with an eligible employer-sponsored plan for an employee 
enrolled in the plan are taken into account for that plan year towards 
the plan's MV percentage if the amounts may be used to reduce only 
cost-sharing for covered medical expenses. A health reimbursement 
arrangement counts toward a plan's MV percentage only if the health 
reimbursement arrangement and the eligible employer-sponsored plan are 
offered by the same employer. Employer contributions to a health 
reimbursement arrangement count for a plan year towards the plan's MV 
percentage only to the extent the amount of the annual contribution is 
required under the terms of the plan or otherwise determinable within a 
reasonable time before the employee must decide whether to enroll in 
the eligible employer-sponsored plan.
    (5) Expected spending adjustments for health savings accounts and 
health reimbursement arrangements. [Reserved]
    (d) Methods for determining MV. [Reserved]
    (e) Scope of essential health benefits and adjustment for benefits 
not included in MV Calculator. [Reserved]
    (f) Actuarial certification. [Reserved]
    (1) In general. [Reserved]
    (2) Membership in American Academy of Actuaries. [Reserved]
    (3) Actuarial analysis. [Reserved]
    (4) Use of MV Calculator. [Reserved]
    (g) Effective/applicability date--in general. (1) Except as 
provided in paragraph (g)(2) of this section, this section applies for 
taxable years ending after December 31, 2013.
    (2) Exception. [Reserved]

0
Par. 7. Section 1.6011-8 is amended by revising paragraph (a) to read 
as follows:


Sec.  1.6011-8  Requirement of income tax return for taxpayers who 
claim the premium tax credit under section 36B.

    (a) Requirement of return. A taxpayer for whom advance payments of 
the premium tax credit under section 36B are made in a taxable year 
must file an income tax return for that taxable year on or before the 
due date for the return (including extensions of time for filing).
* * * * *

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: December 11, 2015
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2015-31866 Filed 12-16-15; 4:15 pm]
 BILLING CODE 4830-01-P