[Federal Register Volume 81, Number 131 (Friday, July 8, 2016)]
[Proposed Rules]
[Pages 44557-44576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15940]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
[REG-109086-15]
RIN 1545-BN50
Premium Tax Credit NPRM VI
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations relating to the
health insurance premium tax credit (premium tax credit) and the
individual shared responsibility provision. These proposed regulations
affect individuals who enroll in qualified health plans through Health
Insurance Exchanges (Exchanges, also called Marketplaces) and claim the
premium tax credit, and Exchanges that make qualified health plans
available to individuals and employers. These proposed regulations also
affect individuals who are eligible for employer-sponsored health
coverage and individuals who seek to claim an exemption from the
individual shared responsibility provision because of unaffordable
coverage. Although employers are not directly affected by rules
governing the premium tax credit, these proposed regulations may
indirectly affect employers through the employer shared responsibility
provisions and the related information reporting provisions.
DATES: Written (including electronic) comments and requests for a
public hearing must be received by September 6, 2016.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-109086-15), Room
5203, Internal Revenue Service, P.O. 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-
109086-15), 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 (REG-109086-15).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Shareen Pflanz, (202) 317-4727; concerning the submission of comments
and/or requests for a public hearing, Oluwafunmilayo Taylor, (202) 317-
6901 (not toll-free calls).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)). Comments on the collection of information should be sent to
the Office of Management and Budget, Attn: Desk Officer for the
Department of the Treasury, Office of Information and Regulatory
Affairs, Washington, DC 20503, with copies to the Internal Revenue
Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP,
Washington, DC 20224. Comments on the collection of information should
be received by September 6, 2016. Comments are specifically requested
concerning:
Whether the proposed collection of information is necessary for the
proper performance of the functions of the IRS, including whether the
information will have practical utility;
How the quality, utility, and clarity of the information to be
collected may be enhanced;
How the burden of complying with the proposed collection of
information may be minimized, including through the application of
automated collection techniques or other forms of information
technology; and
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
The collection of information in these proposed regulations is in
Sec. 1.36B-5. The collection of information is necessary to reconcile
advance payments of the premium tax credit and determine the allowable
premium tax credit. The collection of information is required to comply
with the provisions of section 36B of the Internal Revenue Code (Code).
The likely respondents are Marketplaces that enroll individuals in
qualified health plans.
The burden for the collection of information contained in these
proposed regulations will be reflected in the burden on Form 1095-A,
Health Insurance Marketplace Statement, which is the form that will
request the information from the Marketplaces in the proposed
regulations.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
Background
Beginning in 2014, under the Patient Protection and Affordable Care
Act,
[[Page 44558]]
Public Law 111-148 (124 Stat. 119 (2010)), and the Health Care and
Education Reconciliation Act of 2010, Public Law 111-152 (124 Stat.
1029 (2010)) (collectively, the Affordable Care Act), eligible
individuals who purchase coverage under a qualified health plan through
an Exchange may claim a premium tax credit under section 36B of the
Code. Section 36B was subsequently amended by the Medicare and Medicaid
Extenders Act of 2010, Public Law 111-309 (124 Stat. 3285 (2010)); the
Comprehensive 1099 Taxpayer Protection and Repayment of Exchange
Subsidy Overpayments Act of 2011, Public Law 112-9 (125 Stat. 36
(2011)); and the Department of Defense and Full-Year Continuing
Appropriations Act, 2011, Public Law 112-10 (125 Stat. 38 (2011)).
The Affordable Care Act also added section 5000A to the Code.
Section 5000A was subsequently amended by the TRICARE Affirmation Act
of 2010, Public Law 111-159 (124 Stat. 1123 (2010)) and Public Law 111-
173 (124 Stat. 1215 (2010)). Section 5000A provides that, for months
beginning after December 31, 2013, a nonexempt individual must have
qualifying healthcare coverage (called minimum essential coverage) or
make an individual shared responsibility payment.
Applicable Taxpayers
To be eligible for a premium tax credit, an individual must be an
applicable taxpayer. Among other requirements, under section 36B(c)(1)
an applicable taxpayer is a taxpayer whose household income for the
taxable year is between 100 percent and 400 percent of the Federal
poverty line (FPL) for the taxpayer's family size (or is a lawfully
present non-citizen who has income below 100 percent of the FPL and is
ineligible for Medicaid). A taxpayer's family size is equal to the
number of individuals in the taxpayer's family. Under section
36B(d)(1), a taxpayer's family consists of the individuals for whom the
taxpayer claims a personal exemption deduction under section 151 for
the taxable year. Taxpayers may claim a personal exemption deduction
for themselves, a spouse, and each of their dependents.
Under section 1412 of the Affordable Care Act, advance payments of
the premium tax credit (advance credit payments) may be made directly
to insurers on behalf of eligible individuals. The amount of advance
credit payments made on behalf of a taxpayer in a taxable year is
determined by a number of factors including projections of the
taxpayer's household income and family size for the taxable year.
Taxpayers who receive the benefit of advance credit payments are
required to file an income tax return to reconcile the amount of
advance credit payments made during the year with the amount of the
credit allowable for the taxable year.
Under Sec. 1.36B-2(b)(6), in general, a taxpayer whose household
income for a taxable year is less than 100 percent of the applicable
FPL is nonetheless treated as an applicable taxpayer if (1) the
taxpayer or a family member enrolls in a qualified health plan, (2) an
Exchange estimates at the time of enrollment that the taxpayer's
household income for the taxable year will be between 100 and 400
percent of the applicable FPL, (3) advance credit payments are
authorized and paid for one or more months during the taxable year, and
(4) the taxpayer would be an applicable taxpayer but for the fact that
the taxpayer's household income for the taxable year is below 100
percent of the applicable FPL.
Premium Assistance Credit Amount
Under section 36B(a), a taxpayer's premium tax credit is equal to
the premium assistance credit amount for the taxable year. Section
36B(b)(1) and Sec. 1.36B-3(d) generally provide that the premium
assistance credit amount is the sum of the premium assistance amounts
for all coverage months in the taxable year for individuals in the
taxpayer's family. The premium assistance amount for a coverage month
is the lesser of (1) the premiums for the month for one or more
qualified health plans that cover a taxpayer or family member
(enrollment premium), or (2) the excess of the adjusted monthly premium
for the second lowest cost silver plan (as described in section
1302(d)(1)(B) of the Affordable Care Act (42 U.S.C. 18022(d)(1)(B))
offered through the Exchange for the rating area where the taxpayer
resides that would provide coverage to the taxpayer's coverage family
(the benchmark plan), over 1/12 of the product of the taxpayer's
household income and the applicable percentage for the taxable year
(the contribution amount). In general, the benchmark plan's adjusted
monthly premium is the premium an insurer would charge for the plan
adjusted only for the ages of the covered individuals. The applicable
percentage is provided in a table that is updated annually and
represents the portion of a taxpayer's household income that the
taxpayer is expected to pay if the taxpayer's coverage family enrolls
in the benchmark plan. See, for example, Rev. Proc. 2014-62, 2014-2
C.B. 948 (providing the applicable percentage table for taxable years
beginning in 2016) and Rev. Proc. 2014-37, 2014-2 C.B. 363 (providing
the applicable percentage table for taxable years beginning in 2015). A
taxpayer's coverage family refers to all members of the taxpayer's
family who enroll in a qualified health plan in a month and are not
eligible for minimum essential coverage as defined in section 5000A(f)
(other than coverage in the individual market) for that month.
Under section 1301(a)(1)(B) of the Affordable Care Act, a qualified
health plan must offer the essential health benefits package described
in section 1302(a). Under section 1302(b)(1)(J) of the Affordable Care
Act, the essential health benefits package includes pediatric services,
including oral and vision care. Section 1302(b)(4)(F) of the Affordable
Care Act provides that, if an Exchange offers a plan described in
section 1311(d)(2)(B)(ii)(I) of the Affordable Care Act (42 U.S.C.
13031(d)(2)(B)(ii)(I)) (a stand-alone dental plan), other health plans
offered through the Exchange will not fail to be qualified health plans
solely because the plans do not offer pediatric dental benefits.
For purposes of calculating the premium assistance amount for a
taxpayer who enrolls in both a qualified health plan and a stand-alone
dental plan, section 36B(b)(3)(E) provides that the enrollment premium
includes the portion of the premium for the stand-alone dental plan
properly allocable to pediatric dental benefits that are included in
the essential health benefits required to be provided by a qualified
health plan.
Section 36B(b)(3)(B) provides that the benchmark plan with respect
to an applicable taxpayer is the second lowest cost silver plan offered
by the Marketplace through which the applicable taxpayer (or a family
member) enrolled and which provides (1) self-only coverage, in the case
of unmarried individuals (other than a surviving spouse or head of
household) who do not claim any dependents, or any other individual who
enrolls in self-only coverage, and (2) family coverage, in the case of
any other applicable taxpayer. Section 1.36B-1(l) provides that self-
only coverage means health insurance that covers one individual.
Section 1.36B-1(m) provides that family coverage means health insurance
that covers more than one individual.
Under Sec. 1.36B-3(f)(3), if there are one or more silver-level
plans offered through the Exchange for the rating area where the
taxpayer resides that do not cover all members of a taxpayer's
[[Page 44559]]
coverage family under one policy (for example, because of the
relationships within the family), the benchmark plan premium is the
second lowest-cost option for covering all members of the taxpayer's
family, which may be either a single silver-level policy or more than
one silver-level policy.
Section 1.36B-3(d)(2) provides that, 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 the enrollment premiums for the month (reduced by any amounts
that were refunded) or the excess of the benchmark plan premium for a
full month of coverage over the full contribution amount for the month.
Coverage Month
Under section 36B(c)(2)(A) and Sec. 1.36B-3(c)(1), a coverage
month is generally any month for which the taxpayer or a family member
is covered by a qualified health plan enrolled in through an Exchange
on the first day of the month and the premium is paid by the taxpayer
or through an advance credit payment. However, section 36B(c)(2)
provides that a month is not a coverage month for an individual who is
eligible for minimum essential coverage other than coverage in the
individual market. Under section 36B(c)(2)(B)(ii), minimum essential
coverage is defined by reference to section 5000A(f). Minimum essential
coverage includes government-sponsored programs such as most Medicaid
coverage, Medicare part A, the Children's Health Insurance Program
(CHIP), most TRICARE programs, most coverage provided to veterans under
title 38 of the United States Code, and the Nonappropriated Fund Health
Benefits Program of the Department of Defense. See section 5000A(f)(1)
and Sec. 1.5000A-2(b). Section 1.36B-2(c)(3)(i) provides that, for
purposes of section 36B, the government-sponsored programs described in
section 5000A(f)(1)(A) are not considered eligible employer-sponsored
plans.
Under Sec. 1.36B-2(c)(2)(i), an individual generally is treated as
eligible for government-sponsored minimum essential coverage as of the
first day of the first full month that the individual meets the
criteria for coverage and is eligible to receive benefits under the
government program. However, under Sec. 1.36B-2(c)(2)(v) an individual
is treated as not eligible for Medicaid, CHIP, or a similar program for
a period of coverage under a qualified health plan if, when the
individual enrolls in the qualified health plan, an Exchange determines
or considers (within the meaning of 45 CFR 155.302(b)) the individual
to be ineligible for such program. In addition, Sec. 1.36B-2(c)(2)(iv)
provides that if an individual receiving the benefit of advance credit
payments is determined to be eligible for a government-sponsored
program, and that eligibility is effective retroactively, then, for
purposes of the premium tax credit, the individual is treated as
eligible for the program no earlier than the first day of the first
calendar month beginning after the approval.
Coverage under an eligible employer-sponsored plan is minimum
essential coverage. In general, an eligible employer-sponsored plan is
coverage provided by an employer to its employees (and their
dependents) under a group health plan maintained by the employer. See
section 5000A(f)(2) and Sec. 1.5000A-2(c). Under section 5000A(f)(3)
and Sec. 1.5000A-2(g), minimum essential coverage does not include any
coverage that consists solely of excepted benefits described in section
2791(c)(1), (c)(2), (c)(3), or (c)(4) of the Public Health Service Act
(PHS Act) (42 U.S.C. 300gg-91(c)), or regulations issued under those
provisions (45 CFR 148.220). In general, excepted benefits are benefits
that are limited in scope or are conditional.
Under section 36B(c)(2)(C) and Sec. 1.36B-2(c)(3)(i), except as
provided in the next paragraph of this preamble, an individual is
treated as eligible for coverage under an eligible employer-sponsored
plan only if the employee's share of the premium is affordable and the
coverage provides minimum value. Under section 36B(c)(2)(C), an
eligible employer-sponsored plan is treated as affordable for an
employee if the amount of the employee's required contribution (within
the meaning of section 5000A(e)(1)(B)) for self-only coverage does not
exceed a specified percentage of the employee's household income. The
affordability of coverage for individuals related to an employee is
determined in the same manner. Thus, under section 36B(c)(2)(C)(i) and
Sec. 1.36B-2(c)(3)(v)(A)(2), an eligible employer-sponsored plan is
treated as affordable for an individual eligible for the plan because
of a relationship to an employee if the amount of the employee's
required contribution for self-only coverage does not exceed a
specified percentage of the employee's household income.
Under Sec. 1.36B-2(c)(3)(v)(A)(3), an eligible employer-sponsored
plan is not considered affordable if, when an individual enrolls in a
qualified health plan, the Marketplace determines that the eligible
employer-sponsored plan is not affordable. However, that rule does not
apply for an individual who, with reckless disregard for the facts,
provides incorrect information to a Marketplace concerning the
employee's portion of the annual premium for coverage under the
eligible employer-sponsored plan. In addition, under section
36B(c)(2)(C)(iii) and Sec. 1.36B-2(c)(3)(vii)(A), an individual is
treated as eligible for employer-sponsored coverage if the individual
actually enrolls in an eligible employer-sponsored plan, even if the
coverage is not affordable or does not provide minimum value.
Section 1.36B-2(c)(3)(iii)(A) provides that, subject to the rules
described above, an employee or related individual may be considered
eligible for coverage under an eligible employer-sponsored plan for a
month during a plan year if the employee or related individual could
have enrolled in the plan for that month during an open or special
enrollment period. Under Sec. 1.36B-2(c)(3)(ii), plan year means an
eligible employer-sponsored plan's regular 12-month coverage period (or
the remainder of a 12-month coverage period for a new employee or an
individual who enrolls during a special enrollment period).
Although coverage in the individual market is minimum essential
coverage under section 5000A(f)(1)(C), under section 36B(c)(2)(B)(i),
an individual who is eligible for or enrolled in coverage in the
individual market (whether or not obtained through the Marketplace)
nevertheless may have a coverage month for purposes of the premium tax
credit.
Required Contribution for Employer-Sponsored Coverage
Under section 36B(c)(2)(C) and Sec. 1.36B-2(c)(3)(v)(A)(1) and
(2), an eligible employer-sponsored plan is treated as affordable for
an employee or a related individual if the amount the employee must pay
for self-only coverage whether by salary reduction or otherwise (the
employee's required contribution) does not exceed a specified
percentage of the employee's household income. Under section
36B(c)(2)(C)(i)(II), an employee's required contribution has the same
meaning for purposes of the premium tax credit as in section
5000A(e)(1)(B).
Section 5000A provides that, for each month, taxpayers must have
minimum essential coverage, qualify for a health coverage exemption, or
make an individual shared responsibility
[[Page 44560]]
payment when they file a Federal income tax return. Section 5000A(e)(1)
and Sec. 1.5000A-3(e)(1) provide that an individual is exempt for a
month when the individual cannot afford minimum essential coverage. For
this purpose, an individual cannot afford coverage if the individual's
required contribution (determined on an annual basis) for minimum
essential coverage exceeds a specified percentage of the individual's
household income. Under section 5000A(e)(1)(B)(i) and Sec. 1.5000A-
3(e)(3)(ii)(A), for employees eligible for coverage under an eligible
employer-sponsored plan, the employee's required contribution is the
amount an employee would have to pay for self-only coverage (whether
paid through salary reduction or otherwise) under the plan. For
individuals eligible to enroll in employer-sponsored coverage because
of a relationship to an employee (related individual), under section
5000A(e)(1)(C) and Sec. 1.5000A-3(e)(3)(ii)(B), the required
contribution is the portion of the annual premium that the employee
would pay (whether through salary reduction or otherwise) for the
lowest cost family coverage that would cover the employee and all
related individuals who are included in the employee's family and are
not otherwise exempt under Sec. 1.5000A-3.
Notice 2015-87, 2015-52 I.R.B. 889, provides guidance on
determining the affordability of an employer's offer of eligible
employer-sponsored coverage for purposes of sections 36B, 5000A, and
4980H (and the related information reporting under section 6056).\1\ In
relevant part, Notice 2015-87 addresses how to determine the
affordability of an employer's offer of eligible employer-sponsored
coverage if an employer also makes available an opt-out payment, which
is a payment that (1) is available only if the employee declines
coverage (which includes waiving coverage in which the employee would
otherwise be enrolled) under the employer-sponsored plan, and (2)
cannot be used to pay for coverage under the employer-sponsored plan.
The arrangement under which the opt-out payment is made available is an
opt-out arrangement.
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\1\ An assessable payment under section 4980H(b) may arise if at
least one full-time employee (as defined in Sec. 54.4980H-1(a)(21))
of the applicable large employer (as defined in Sec. 54.4980H-
1(a)(4)) receives the premium tax credit. A full-time employee
generally is ineligible for the premium tax credit if the employee
is offered minimum essential coverage under an eligible employer-
sponsored plan that is affordable and provides minimum value. The
determination of whether an applicable large employer has made an
offer of affordable coverage under an eligible employer-sponsored
plan for purposes of section 4980H(b) generally is based on the
standard set forth in section 36B, which provides that an offer is
affordable if the employee's required contribution is at or below
9.5 percent (as indexed) of the employee's household income.
However, because an employer generally will not know the taxpayer
employee's household income, Sec. 54.4980H-5(e)(2) sets forth three
safe harbors under which an employer may determine affordability
(solely for purposes of section 4980H) based on information that is
readily available to the employer (that is, Form W-2 wages, the rate
of pay, or the Federal poverty line).
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As Notice 2015-87 explains, the Treasury Department and the IRS
have determined that it is generally appropriate to treat an opt-out
payment that is made available under an unconditional opt-out
arrangement in the same manner as a salary reduction contribution for
purposes of determining an employee's required contribution under
sections 36B and 5000A and any related consequences under sections
4980H(b) and 6056. Accordingly, Notice 2015-87 provides that the
Treasury Department and the IRS intend to propose regulations
reflecting this rule and to request comments on those regulations. For
this purpose, an unconditional opt-out arrangement refers to an
arrangement providing payments conditioned solely on an employee
declining coverage under employer-sponsored coverage and not on an
employee satisfying any other meaningful requirement related to the
provision of health care to employees, such as a requirement to provide
proof of coverage through a plan of a spouse's employer.
Notice 2015-87 also provides that the Treasury Department and the
IRS anticipate requesting comments on the treatment of conditional opt-
out arrangements, meaning opt-out arrangements under which payments are
conditioned not only on the employee declining employer-sponsored
coverage but also on satisfaction of one or more additional meaningful
conditions (such as the employee providing proof of enrollment in
coverage provided by a spouse's employer or other coverage).
Notice 2015-87 provides that, until the applicability date of any
final regulations (and in any event for plan years beginning before
2017), individuals may treat opt-out payments made available under
unconditional opt-out arrangements as increasing the employee's
required contribution for purposes of sections 36B and 5000A.\2\ In
addition, for the same period, an individual who can demonstrate that
he or she meets the condition(s) (in addition to declining the
employer's health coverage) that must be satisfied to receive an opt-
out payment (such as demonstrating that the employee has coverage under
a spouse's group health plan) may treat the amount of the conditional
opt-out payment as increasing the employee's required contribution for
purposes of sections 36B and 5000A. See the section of this preamble
entitled ``Effective/Applicability Date'' for additional related
discussion.
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\2\ Notice 2015-87 also provides that the Treasury Department
and the IRS anticipate that the regulations generally will apply
only for periods after the issuance of final regulations and that
for the period prior to the applicability date of the final
regulations, employers are not required to increase the amount of an
employee's required contribution by the amount of an opt-out payment
made available under an opt-out arrangement (other than a payment
made available under a non-relief-eligible opt-out arrangement) for
purposes of section 6056 (Form 1095-C), and an opt-out payment made
available under an opt-out arrangement (other than a payment made
available under a non-relief-eligible opt-out arrangement) will not
be treated as increasing an employee's required contribution for
purposes of any potential consequences under section 4980H(b). For a
discussion of non-relief-eligible opt-out arrangements see Notice
2015-87, Q&A-9.
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Notice 2015-87 included a request for comments on opt-out
arrangements. The Treasury Department and the IRS received a number of
comments, and the comments are discussed in section 2.f. of this
preamble entitled ``Opt-out arrangements and an employee's required
contribution.''
Information Reporting
Section 36B(f)(3) provides that Exchanges must report to the IRS
and to taxpayers certain information required to administer the premium
tax credit. Section 1.36B-5(c)(1) provides that the information
required to be reported annually includes (1) identifying information
for each enrollee, (2) identifying information for the coverage, (3)
the amount of enrollment premiums and advance credit payments for the
coverage, (4) the premium for the benchmark plan used to calculate the
amount of the advance credit payments made on behalf of the taxpayer or
other enrollee, if advance credit payments were made, and the benchmark
plan premium that would apply to all individuals enrolled in the
coverage if advance credit payments were not made, and (5) the dates
the coverage started and ended. Section 1.36B-5(c)(3)(i) provides that
an Exchange must report this information for each family enrolled in
the coverage.
Explanation of Provisions
1. Effective/Applicability Date
Except as otherwise provided in this section, these regulations are
proposed to apply for taxable years beginning after December 31, 2016.
As indicated in
[[Page 44561]]
this section, taxpayers may rely on certain provisions of the proposed
regulations for taxable years ending after December 31, 2013. In
addition, several rules are proposed to apply for taxable years
beginning after December 31, 2018. See the later section of this
preamble entitled ``Effective/Applicability Date'' for information on
the applicability date for the regulations on opt-out arrangements.
2. Eligibility
a. Applicable Taxpayers
To avoid repayments of advance credit payments for taxpayers who
experience an unforeseen decline in income, the existing regulations
provide that if an Exchange determines at enrollment that the
taxpayer's household income will be at least 100 percent but will not
exceed 400 percent of the applicable FPL, the taxpayer will not lose
his or her status as an applicable taxpayer solely because household
income for the year turns out to be below 100 percent of the applicable
FPL. To reduce the likelihood that individuals who recklessly or
intentionally provide inaccurate information to an Exchange will
benefit from an Exchange determination, the proposed regulations
provide that a taxpayer whose household income is below 100 percent of
the FPL for the taxpayer's family size is not treated as an applicable
taxpayer if, with intentional or reckless disregard for the facts, the
taxpayer provided incorrect information to an Exchange for the year of
coverage.
b. Exchange Determination of Ineligibility for Medicaid or CHIP
Similar to the rule for taxpayers who received the benefit of
advance credit payments but ended the taxable year with household
income below 100 percent of the applicable FPL, the existing
regulations do not require a repayment of advance credit payments for
taxpayers with household income within the range for eligibility for
certain government-sponsored programs if an Exchange determined or
considered (within the meaning of 45 CFR 155.302(b)) the taxpayer or a
member of the taxpayer's family to be ineligible for the program. To
reduce the likelihood that individuals who recklessly or intentionally
provide inaccurate information to an Exchange will benefit from an
Exchange determination, the proposed regulations provide that an
individual who was determined or considered by an Exchange to be
ineligible for Medicaid, CHIP, or a similar program (such as a Basic
Health Program) may be treated as eligible for coverage under the
program if, with intentional or reckless disregard for the facts, the
individual (or a person claiming a personal exemption for the
individual) provided incorrect information to the Exchange.
c. Nonappropriated Fund Health Benefits Program
The existing regulations under section 36B provide that government-
sponsored programs described in section 5000A(f)(1)(A), which include
the Nonappropriated Fund Health Benefits Program of the Department of
Defense, established under section 349 of the National Defense
Authorization Act for Fiscal Year 1995 (Public Law 103-337; 10 U.S.C.
1587 note), are not eligible employer-sponsored plans. However, Sec.
1.5000A-2(c)(2) provides that, because the Nonappropriated Fund Health
Benefits Program (Program) is offered by an instrumentality of the
Department of Defense to its employees, the Program is an eligible
employer-sponsored plan. The proposed regulations conform the section
36B regulations to the section 5000A regulations and provide that the
Program is treated as an eligible employer-sponsored plan for purposes
of determining if an individual is eligible for minimum essential
coverage under section 36B. Thus, if coverage under the Program does
not provide minimum value (under Sec. 1.36B-2(c)(3)(vi)) or is not
affordable (under Sec. 36B-2(c)(3)(v)) for an individual who does not
enroll in the coverage, he or she is not treated as eligible for
minimum essential coverage under the Program for purposes of premium
tax credit eligibility.
d. Eligibility for Employer-Sponsored Coverage for Months During a Plan
Year
The existing regulations under section 36B provide that an
individual is eligible for minimum essential coverage through an
eligible employer-sponsored plan if the individual had the opportunity
to enroll in the plan and the plan is affordable and provides minimum
value. The Treasury Department and the IRS are aware that in some
instances individuals may not be allowed an annual opportunity to
decide whether to enroll in eligible employer-sponsored coverage. This
lack of an annual opportunity to enroll in employer-sponsored coverage
should not limit an individual's annual choice from available coverage
options through the Marketplace with the possibility of benefitting
from the premium tax credit. Thus, the proposed regulations clarify
that if an individual declines to enroll in employer-sponsored coverage
for a plan year and does not have the opportunity to enroll in that
coverage for one or more succeeding plan years, for purposes of section
36B, the individual is treated as ineligible for that coverage for the
succeeding plan year or years for which there is no enrollment
opportunity.\3\
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\3\ Note that for purposes of section 4980H, in general, an
applicable large employer will not be treated as having made an
offer of coverage to a full-time employee for a plan year if the
employee does not have an effective opportunity to elect to enroll
in the coverage at least once with respect to the plan year. For
this purpose, a plan year must be twelve consecutive months, unless
a short plan year of less than twelve consecutive months is
permitted for a valid business purpose. For additional rules on the
definition of ``offer'' and ``plan year'' under section 4980H, see
Sec. Sec. 54.4980H-1(a)(35), 54.4980H-4(b), and 54.4980H-5(b).
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e. Excepted Benefits
Under section 36B and Sec. 1.36B-2(c)(3)(vii)(A), an individual is
treated as eligible for minimum essential coverage through an eligible
employer-sponsored plan if the individual actually enrolls in the
coverage, even if the coverage is not affordable or does not provide
minimum value. Although health coverage that consists solely of
excepted benefits may be a group health plan and, therefore, is an
eligible employer-sponsored plan under section 5000A(f)(2) and Sec.
1.5000A-2(c)(1), section 5000A(f)(3) provides that health coverage that
consists solely of excepted benefits is not minimum essential coverage.
Therefore, individuals enrolled in a plan consisting solely of excepted
benefits still must obtain minimum essential coverage to satisfy the
individual shared responsibility provision. The proposed regulations
clarify that for purposes of section 36B an individual is considered
eligible for coverage under an eligible employer-sponsored plan only if
that plan is minimum essential coverage. Accordingly, an individual
enrolled in or offered a plan consisting solely of excepted benefits is
not denied the premium tax credit by virtue of that excepted benefits
offer or coverage. Taxpayers may rely on this rule for all taxable
years beginning after December 31, 2013.
f. Opt-Out Arrangements and an Employee's Required Contribution
Sections 1.36B-2(c)(3)(v) and 1.5000A-3(e)(3)(ii)(A) provide that,
in determining whether employer-sponsored coverage is affordable to an
employee, an employee's required contribution for the coverage includes
the amount by which the employee's salary would be reduced to enroll in
the
[[Page 44562]]
coverage.\4\ If an employer makes an opt-out payment available to an
employee, the choice between cash and health coverage presented by the
opt-out arrangement is analogous to the cash-or-coverage choice
presented by the option to pay for coverage by salary reduction. In
both cases, the employee may purchase the employer-sponsored coverage
only at the price of forgoing a specified amount of cash compensation
that the employee would otherwise receive--salary, in the case of a
salary reduction, or an equal amount of other compensation, in the case
of an opt-out payment. Therefore, the economic cost to the employee of
the employer-sponsored coverage is the same under both arrangements.
Accordingly, the employee's required contribution generally should be
determined similarly regardless of the type of payment that an employee
must forgo.
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\4\ Section 5000A(e)(1)(C) and Sec. 1.5000A-3(e)(3)(ii)(B)
provide that, for purposes of the individual shared responsibility
provision, the required contribution for individuals eligible to
enroll in employer coverage because of a relationship to an employee
(related individual) is the portion of the annual premium that the
employee would pay (whether through salary reduction or otherwise)
for the lowest cost family coverage that would cover the employee
and all related individuals who are included in the employee's
family and are not otherwise exempt under Sec. 1.5000A-3.
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Notice 2015-87 requested comments on the proposed treatment of opt-
out arrangements outlined in Q&A-9 of that notice. Several commenters
objected to the proposal that the amount of an available unconditional
opt-out payment increases the employee's required contribution on the
basis that forgoing opt-out payments as part of enrolling in coverage
has not traditionally been viewed by employers or employees as
economically equivalent to making a salary reduction election and that
such a rule would discourage employers from making opt-out payments
available. None of the commenters, however, offered a persuasive
economic basis for distinguishing unconditional opt-out payments from
other compensation that an employee must forgo to enroll in employer-
sponsored coverage, such as a salary reduction. Because forgoing an
unconditional opt-out payment is economically equivalent to forgoing
salary pursuant to a salary reduction election, and because Sec. Sec.
1.36B-2(c)(3)(v) and 1.5000A-3(e)(3)(ii)(A) provide that the employee's
required contribution includes the amount of any salary reduction, the
proposed regulations adopt the approach described in Notice 2015-87 for
opt-out payments made available under unconditional opt-out
arrangements and provide that the amount of an opt-out payment made
available to the employee under an unconditional opt-out arrangement
increases the employee's required contribution.\5\
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\5\ To distinguish between opt-out payments and employer
contributions to a section 125 cafeteria plan (which in some cases
could be paid in cash to an employee who declines coverage in the
health plan or other available benefits), the proposed regulations
further clarify that an amount provided as an employer contribution
to a cafeteria plan and that may be used by the employee to purchase
minimum essential coverage is not an opt-out payment, whether or not
the employee may receive the amount as a taxable benefit. This
provision clarifies that the effect on an employee's required
contribution of employer contributions to a cafeteria plan is
determined under Sec. 1.36B-2(c)(3)(v)(A)(6) rather than Sec.
1.36B-2(c)(3)(v)(A)(7).
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Notice 2015-87 provides that, for periods prior to the
applicability date of any final regulations, employers are not required
to increase the amount of an employee's required contribution by
amounts made available under an opt-out arrangement for purposes of
section 4980H(b) or section 6056 (in particular Form 1095-C, Employer-
Provided Health Insurance Offer and Coverage), except that, for periods
after December 16, 2015, the employee's required contribution must
include amounts made available under an unconditional opt-out
arrangement that is adopted after December 16, 2015. However, Notice
2015-87 provided that, for this purpose, an opt-out arrangement will
not be treated as adopted after December 16, 2015, under limited
circumstances, including in cases in which a board, committee, or
similar body or an authorized officer of the employer specifically
adopted the opt-out arrangement before December 16, 2015.
Some commenters requested clarification that an unconditional opt-
out arrangement that is required under the terms of a collective
bargaining agreement in effect before December 16, 2015, should be
treated as having been adopted prior to December 16, 2015, and that
amounts made available under such an opt-out arrangement should not be
included in an employee's required contribution for purposes of
sections 4980H(b) or 6056 through the expiration of the collective
bargaining agreement that provides for the opt-out arrangement. The
Treasury Department and the IRS now clarify that, under Notice 2015-87,
for purposes of sections 4980H(b) and 6056, an unconditional opt-out
arrangement that is required under the terms of a collective bargaining
agreement in effect before December 16, 2015, will be treated as having
been adopted prior to December 16, 2015. In addition, until the later
of (1) the beginning of the first plan year that begins following the
expiration of the collective bargaining agreement in effect before
December 16, 2015 (disregarding any extensions on or after December 16,
2015), or (2) the applicability date of these regulations with respect
to sections 4980H and 6056, employers participating in the collective
bargaining agreement are not required to increase the amount of an
employee's required contribution by amounts made available under such
an opt-out arrangement for purposes of sections 4980H(b) or 6056 (Form
1095-C). The Treasury Department and the IRS further adopt these
commenters' request that this treatment apply to any successor employer
adopting the opt-out arrangement before the expiration of the
collective bargaining agreement in effect before December 16, 2015
(disregarding any extensions on or after December 16, 2015). Commenters
raised the issue of whether other types of agreements covering
employees may need a similar extension of the relief through the end of
the agreement's term. The Treasury Department and the IRS request
comments identifying the types of agreements raising this issue due to
their similarity to collective bargaining agreements because, for
example, the agreement is similar in scope to a collective bargaining
agreement, binding on the parties involved for a multi-year period, and
subject to a statutory or regulatory regime.
Several commenters suggested that, notwithstanding the proposal on
unconditional opt-out arrangements, the amount of an opt-out payment
made available should not increase an employee's required contribution
if the opt-out payment is conditioned on the employee having minimum
essential coverage through another source, such as a spouse's employer-
sponsored plan. These commenters argued that the amount of such a
conditional opt-out payment should not affect the affordability of an
employer's offer of employer-sponsored coverage for an employee who
does not satisfy the applicable condition because that employee is
ineligible to receive the opt-out payment. Moreover, commenters argued
that an employee who satisfies the condition (that is, who has
alternative minimum essential coverage) is ineligible for the premium
tax credit and does not need to determine the affordability of the
employer's coverage offer. Thus, the commenters asserted, an amount
made available under such an arrangement should be excluded from the
required contribution.
While it is clear that the availability of an unconditional opt-out
payment increases an individual's required
[[Page 44563]]
contribution, the effect of the availability of a conditional opt-out
payment is less obvious. In particular, under an unconditional opt-out
arrangement, an individual who enrolls in the employer coverage loses
the opt-out payment as a direct result of enrolling in the employer
coverage. By contrast, in the case of a conditional opt-out
arrangement, the availability of the opt-out payment may depend on
information that is not generally available to the employer (who, if it
is an applicable large employer, must report the required contribution
under section 6056 and whose potential liability under section 4980H
may be affected). Because of this difficulty of ascertaining which
individuals could have met the condition and, therefore, would actually
forgo the opt-out payment when enrolling in employer-sponsored
coverage, it generally is not feasible to have a rule under which the
required contribution perfectly captures the cost of coverage for each
specific individual offered a conditional opt-out payment.
Similarly, another way to view opt-out payments that are
conditioned on alternative coverage is that, rather than raising the
cost to the employee of the employer's coverage, they reduce the cost
to the employee of the alternative coverage. However, because employers
generally do not have information about the existence and cost of other
options available to the individual, it is not practical to take into
account any offer of coverage other than the offer made by the employer
in determining the required contribution with respect to the employer
coverage (that is, the coverage that the employee must decline to
receive the opt-out payment).
While commenters indicated that the required contribution with
respect to the employer coverage does not matter for an individual
enrolled in any other minimum essential coverage because the individual
would be ineligible for the premium tax credit, this statement is not
true if the other coverage is individual market coverage. In
particular, while enrollment in most types of minimum essential
coverage results in an individual being ineligible for a premium tax
credit, that is not the case for coverage in the individual market.
Moreover, for individual market coverage offered through a Marketplace,
the required contribution with respect to the employer coverage
frequently will be relevant in determining whether the individual is
eligible for a premium tax credit. In such cases, as in the case of an
unconditional opt-out payment, the availability of a conditional opt-
out payment effectively increases the cost to the individual of
enrolling in the employer coverage (at least relative to Marketplace
coverage).
Further, an opt-out arrangement that is conditioned on an
employee's ability to obtain other coverage (if that coverage can be
coverage in the individual market, whether inside or outside the
Marketplace) does not generally raise the issues described earlier in
this section of the preamble regarding the difficulty of ascertaining
which individuals could meet the condition under a conditional opt-out
arrangement. This is because generally all individuals are able to
obtain coverage in the individual market, pursuant to the guaranteed
issue requirements in section 2702 of the PHS Act. Thus, in the sense
that all individuals can satisfy the applicable condition, such an opt-
out arrangement is similar to an unconditional opt-out arrangement.
In an effort to provide a workable rule that balances these
competing concerns, the proposed regulations provide that amounts made
available under conditional opt-out arrangements are disregarded in
determining the required contribution if the arrangement satisfies
certain conditions (an ``eligible opt-out arrangement''), but otherwise
the amounts are taken into account. The proposed regulations define an
``eligible opt-out arrangement'' as an arrangement under which the
employee's right to receive the opt-out payment is conditioned on (1)
the employee declining to enroll in the employer-sponsored coverage and
(2) the employee providing reasonable evidence that the employee and
all other individuals for whom the employee reasonably expects to claim
a personal exemption deduction for the taxable year or years that begin
or end in or with the employer's plan year to which the opt-out
arrangement applies (employee's expected tax family) have or will have
minimum essential coverage (other than coverage in the individual
market, whether or not obtained through the Marketplace) during the
period of coverage to which the opt-out arrangement applies. For
example, if an employee's expected tax family consists of the employee,
the employee's spouse, and two children, the employee would meet this
requirement by providing reasonable evidence that the employee, the
employee's spouse, and the two children, will have coverage under the
group health plan of the spouse' s employer for the period to which the
opt-out arrangement applies.\6\
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\6\ The Treasury Department and the IRS note that if an opt-out
payment is conditioned on an employee obtaining individual market
coverage, that opt-out arrangement could act as a reimbursement
arrangement for some or all of the employee's premium for that
individual market coverage; therefore, the opt-out arrangement could
operate as an employer payment plan as discussed in Notice 2015-87,
Notice 2015-17, 2015-14 I.R.B. 845, and Notice 2013-54, 2013-40
I.R.B. 287. Nothing in these proposed regulations is intended to
affect the prior guidance on employer payment plans.
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The Treasury Department and the IRS invite comments on this
proposed rule, including suggestions for other workable rules that
result in the required contribution more accurately reflecting the
individual's cost of coverage while minimizing undesirable consequences
and incentives.
For purposes of the proposed eligible opt-out arrangement rule,
reasonable evidence of alternative coverage includes the employee's
attestation that the employee and all other members of the employee's
expected tax family, if any, have or will have minimum essential
coverage (other than coverage in the individual market, whether or not
obtained through the Marketplace) or other reasonable evidence.
Notwithstanding the evidence of alternative coverage required under the
arrangement, to qualify as an eligible opt-out arrangement, the
arrangement must also provide that any opt-out payment will not be made
(and the payment must not in fact be made) if the employer knows or has
reason to know that the employee or any other member of the employee's
expected tax family does not have (or will not have) the required
alternative coverage. An eligible opt-out arrangement must also require
that the evidence of coverage be provided no less frequently than every
plan year to which the eligible opt-out arrangement applies, and that
the evidence be provided no earlier than a reasonable period before the
commencement of the period of coverage to which the eligible opt-out
arrangement applies. Obtaining the reasonable evidence (such as an
attestation) as part of the regular annual open enrollment period that
occurs within a few months before the commencement of the next plan
year of employer-sponsored coverage meets this reasonable period
requirement. Alternatively, the eligible opt-out arrangement would be
permitted to require evidence of alternative coverage to be provided
later, such as after the plan year starts, which would enable the
employer to require evidence that the employee and other members of the
[[Page 44564]]
employee's expected tax family have already obtained the alternative
coverage.
Commenters on Notice 2015-87 generally stated that typical
conditions under an opt-out arrangement include a requirement that the
employee have alternative coverage through employer-sponsored coverage
of a spouse or another relative, such as a parent. Provided that, as
required under the opt-out arrangement, the employee provided
reasonable evidence of this alternative coverage for the employee and
the other members of the employee's expected tax family, and met the
related conditions described in this preamble, these types of opt-out
arrangements would be eligible opt-out arrangements, and opt-out
payments made available under such arrangements would not increase the
employee's required contribution.
The Treasury Department and the IRS did not receive comments on
opt-out arrangements indicating that the meaningful conditions imposed
include any requirement other than one relating to alternative
coverage. Therefore, the proposed rules do not address other opt-out
conditions and would not treat an opt-out arrangement based on other
conditions as an eligible opt-out arrangement. However, the Treasury
Department and the IRS invite comments on whether opt-out payments are
made subject to additional types of conditions in some cases, whether
those types of conditions should be addressed in further guidance, and,
if so, how.
One commenter suggested that, if opt-out payments conditioned on
alternative coverage are not included in an employee's required
contribution, rules will be needed for cases in which an employee
receives an opt-out payment and that employee's alternative coverage
subsequently terminates. The commenter suggested that, in that case,
the termination of the alternative coverage should have no impact on
the determination of the employee's required contribution for the
employer-sponsored coverage from which the employee opted out. In
response, under the proposed regulations, provided that the reasonable
evidence requirement is met, the amount of an opt-out payment made
available under an eligible opt-out arrangement may continue to be
excluded from the employee's required contribution for the remainder of
the period of coverage to which the opt-out payment originally applied.
The opt-out payment may be excluded for this period even if the
alternative coverage subsequently terminates for the employee or any
other member of the employee's expected tax family, regardless of
whether the opt-out payment is required to be adjusted or terminated
due to the loss of alternative coverage, and regardless of whether the
employee is required to provide notice of the loss of alternative
coverage to the employer.
The Treasury Department and the IRS are aware that the way in which
opt-out arrangements affect the calculation of affordability is
important not only to an employee and the other members of the
employee's expected tax family in determining whether they may be
eligible for a premium tax credit or whether an individual may be
exempt under the individual shared responsibility provisions, but also
to an employer subject to the employer shared responsibility provisions
under section 4980H in determining whether the employer may be subject
to an assessable payment under section 4980H(b). An employer subject to
the employer shared responsibility provisions will be subject to a
payment under section 4980H(b) only with respect to a full-time
employee who receives a premium tax credit, and an employee will not be
eligible for the premium tax credit if the employer's offer of coverage
was affordable and provided minimum value.\7\ Commenters expressed
concern that if the rule adopted for conditional opt-outs required an
employee to provide reasonable evidence that the employee has or will
have minimum essential coverage, the employer may not know whether the
employee is being truthful and has obtained (or will obtain) such
coverage, or how long such coverage will continue. Under these proposed
regulations, however, the employee's required contribution will not be
increased by an opt-out payment made available under an eligible opt-
out arrangement, provided that the arrangement provides that the
employer makes the payment only if the employee provides reasonable
evidence of alternative coverage and the employer does not know or have
reason to know that the employee or any other member of the employee's
expected tax family fails or will fail to meet the requirement to have
alternative coverage (other than individual market coverage, whether or
not obtained through the Marketplace).
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\7\ The affordability rules under section 36B, including rules
regarding opt-out payments, may also affect the application of
section 4980H(a) because one element that is required for an
applicable large employer to be subject to an assessable payment
under section 4980H(a) is that at least one full-time employee must
receive the premium tax credit.
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Some commenters requested exceptions for special circumstances from
the general rule that the employee's required contribution is increased
by the amount of an opt-out payment made available. These circumstances
include (1) conditional opt-out payments that are required under the
terms of a collective bargaining agreement and (2) opt-out payments
that are below a de minimis amount. Regarding opt-out arrangements
contained in collective bargaining agreements, the Treasury Department
and the IRS anticipate that the proposed treatment of eligible opt-out
arrangements, generally, will address the concerns raised in the
comments. Accordingly, the Treasury Department and the IRS do not
propose to provide a permanent exception for opt-out arrangements
provided under collective bargaining agreements. Earlier in this
section of the preamble, however, the Treasury Department and the IRS
clarify and expand the transition relief provided under Notice 2015-87
for opt-out arrangements provided under collective bargaining
agreements in effect before December 16, 2015. As for an exception for
de minimis amounts, the Treasury Department and the IRS decline to
adopt such an exception because there is neither a statutory nor an
economic basis for establishing a de minimis threshold under which an
unconditional opt-out payment would be excluded from the employee's
required contribution.
g. Effective Date of Eligibility for Minimum Essential Coverage When
Advance Credit Payments Discontinuance Is Delayed
Section 36B and the regulations under section 36B provide that an
individual who may enroll in minimum essential coverage outside the
Marketplace (other than individual market coverage) for a month is
generally not allowed a premium tax credit for that month.
Consequently, individuals enrolled in a qualified health plan with
advance credit payments must return to the Exchange to report
eligibility for other minimum essential coverage so the Exchange can
discontinue the advance credit payments for Marketplace coverage.
Similarly, individuals enrolled in a qualified health plan with advance
credit payments may be determined eligible for coverage under a
government-sponsored program, such as Medicaid. In some cases,
individuals may inform the Exchange of their opportunity to enroll in
other minimum essential coverage or receive approval for coverage under
a government-sponsored program after the time for which the Exchange
can discontinue advance credit payments for the next
[[Page 44565]]
month. Because taxpayers should generally not have to repay the advance
credit payments for that next month in these circumstances, the
proposed regulations provide a rule for situations in which an
Exchange's discontinuance of advance credit payments is delayed. Under
the proposed regulations, if an individual who is enrolled in a
qualified health plan for which advance credit payments are made
informs the Exchange that the individual is or will soon be eligible
for other minimum essential coverage and that advance credit payments
should be discontinued, but the Exchange does not discontinue advance
credit payments for the first calendar month beginning after the month
the individual notifies the Exchange, the individual is treated as
eligible for the other minimum essential coverage no earlier than the
first day of the second calendar month beginning after the first month
the individual may enroll in the other minimum essential coverage.
Similarly, if a determination is made that an individual is eligible
for Medicaid or CHIP but advance credit payments are not discontinued
for the first calendar month beginning after the eligibility
determination, the individual is treated as eligible for Medicaid or
CHIP no earlier than the first day of the second calendar month
beginning after the determination. Taxpayers may rely on this rule for
all taxable years beginning after December 31, 2013.
3. Premium Assistance Amount
a. Payment of Taxpayer's Share of Premiums for Advance Credit Payments
Following Appeal Determinations
Under Sec. 1.36B-3(c)(1)(ii), a month in which an individual who
is enrolled in a qualified health plan is a coverage month for the
individual only if the taxpayer's share of the premium for the
individual's coverage for the month is paid by the unextended due date
of the taxpayer's income tax return for the year of coverage, or the
premium is fully paid by advance credit payments.
One of the functions of an Exchange is to make determinations as to
whether an individual who enrolls in a qualified health plan is
eligible for advance credit payments for the coverage. If an Exchange
determines that the individual is not eligible for advance credit
payments, the individual may appeal that decision. An individual who is
initially determined ineligible for advance credit payments, does not
enroll in a qualified health plan under the contested determination,
and is later determined to be eligible for advance credit payments
through the appeals process, may elect to be retroactively enrolled in
a health plan through the Exchange. In that case, the individual is
treated as having been enrolled in the qualified health plan from the
date on which the individual would have enrolled had he or she
initially been determined eligible for advance credit payments. If
retroactively enrolled, the deadline for paying premiums for the
retroactive coverage may be after the unextended due date for filing an
income tax return for the year of coverage. Consequently, the proposed
regulations provide that a taxpayer who is eligible for advance credit
payments pursuant to an eligibility appeal for a member of the
taxpayer's coverage family who, based on the appeals decision,
retroactively enrolls in a qualified health plan, is considered to have
met the requirement in Sec. 1.36B-3(c)(1)(ii) for a month if the
taxpayer pays the taxpayer's share of the premium for coverage under
the plan for the month on or before the 120th day following the date of
the appeals decision. Taxpayers may rely on this rule for all taxable
years beginning after December 31, 2013.
b. Month That Coverage Is Terminated
Section 1.36B-3(d)(2) provides that if a qualified health plan is
terminated before the last day of a month, the premium assistance
amount for the month is the lesser of the enrollment premiums for the
month (reduced by any amounts that were refunded), or the excess of the
benchmark plan premium for a full month of coverage over the full
contribution amount for the month. Section 1.36B-3(c)(2) provides that
an individual whose enrollment in a qualified health plan is effective
on the date of the individual's birth or adoption, or placement for
foster care, or upon the effective date of a court order, is treated as
enrolled as of the first day of the month and, therefore, the month of
enrollment may be a coverage month. The regulations, however, do not
expressly address how the premium assistance amount is computed when a
covered individual disenrolls before the last day of a month but the
plan is not terminated because other individuals remain enrolled. For
purposes of the premium tax credit, the premium assistance amount for
an individual who is not enrolled for an entire month should be the
same regardless of the circumstances causing the partial-month
coverage, provided that the individual was enrolled, or is treated as
enrolled, as of the first day of the month (that is, so long as the
month is a coverage month). Accordingly, to provide consistency for all
individuals who have a coverage month that is less than a full calendar
month, the proposed regulations provide that the premium assistance
amount for a month is the lesser of the enrollment premiums for the
month (reduced by any amounts that were refunded), or the excess of the
benchmark plan premium over the contribution amount for the month.
Taxpayers may rely on this rule for all taxable years beginning after
December 31, 2013.
4. Benchmark Plan Premium
a. Effective/Applicability Date of Benchmark Plan Rules
The rules relating to the benchmark plan in this section are
proposed to apply for taxable years beginning after December 31, 2018.
b. Pediatric Dental Benefits
Under section 1311(d)(2)(B) of the Affordable Care Act, only
qualified health plans, including stand-alone dental plans offering
pediatric dental benefits, may be offered through a Marketplace. In
general, a qualified health plan is required to provide coverage for
all ten essential health benefits described in section 1302(b) of the
Affordable Care Act, including pediatric dental coverage. However,
under section 1302(b)(4)(F), a plan that does not provide pediatric
dental benefits may nonetheless be a qualified health plan if it covers
each essential health benefit described in section 1302(b) other than
pediatric dental benefits and if it is offered through a Marketplace in
which a stand-alone dental plan offering pediatric dental benefits is
offered as well.
Section 36B(b)(3)(E) and Sec. 1.36B-3(k) provide that if an
individual enrolls in both a qualified health plan and a stand-alone
dental plan, the portion of the premium for the stand-alone dental plan
properly allocable to pediatric dental benefits is treated as a premium
payable for the individual's qualified health plan. Thus, in
determining a taxpayer's premium assistance amount for a month in which
a member of the taxpayer's coverage family is enrolled in a stand-alone
dental plan, the taxpayer's enrollment premium includes the portion of
the premium for the stand-alone dental plan allocable to pediatric
dental benefits. The existing regulations do not provide a similar
adjustment for the taxpayer's applicable benchmark plan premium to
reflect the cost of pediatric dental benefits in cases where the
second-lowest cost silver plan does not provide pediatric dental
benefits.
Section 36B(b)(3)(B) provides that the applicable benchmark plan
with respect
[[Page 44566]]
to a taxpayer is the second lowest cost silver plan available through
the applicable Marketplace that provides ``self-only coverage'' or
``family coverage,'' depending generally on whether the coverage family
includes one or more individuals. Neither the Code nor the Affordable
Care Act defines the terms ``self-only coverage'' or ``family
coverage'' for this purpose.
Under the existing regulations, the references in section
36B(b)(3)(B) to plans that provide self-only coverage and family
coverage are interpreted to refer to all qualified health plans offered
through the applicable Marketplace, regardless of whether the coverage
offered by those plans includes all ten essential health benefits.
Because qualified health plans that do not offer pediatric dental
benefits tend to be cheaper than qualified health plans that cover all
ten essential health benefits, the second lowest-cost silver plan (and
therefore the premium tax credit) for taxpayers purchasing coverage
through a Marketplace in which stand-alone dental plans are offered is
likely to not account for the cost of obtaining pediatric dental
coverage.
The Treasury Department and the IRS believe that the current rule
frustrates the statute's goal of making coverage that provides the
essential health benefits affordable to individuals eligible for the
premium tax credit. Accordingly, the proposed regulations reflect a
modification in the interpretation of the terms ``self-only coverage''
and ``family coverage'' in section 36B(b)(3)(B) to refer to coverage
that provides each of the essential health benefits described in
section 1302(b) of the Affordable Care Act. This coverage may be
obtained from either a qualified health plan alone or from a qualified
health plan in combination with a stand-alone dental plan. In
particular, self-only coverage refers to coverage obtained from such
plans where the coverage family is a single individual. Similarly,
family coverage refers to coverage obtained from such plans where the
coverage family includes more than one individual.
Consistent with this interpretation, the proposed regulations
provide that for taxable years beginning after December 31, 2018, if an
Exchange offers one or more silver-level qualified health plans that do
not cover pediatric dental benefits, the applicable benchmark plan is
determined by ranking (1) the premiums for the silver-level qualified
health plans that include pediatric dental benefits offered by the
Exchange and (2) the aggregate of the premiums for the silver-level
qualified health plans offered by the Exchange that do not include
pediatric dental benefits plus the portion of the premium allocable to
pediatric dental benefits for stand-alone dental plans offered by the
Exchange. In constructing this ranking, the premium for the lowest-cost
silver plan that does not include pediatric dental benefits is added to
the premium allocable to pediatric dental benefits for the lowest cost
stand-alone dental plan, and similarly, the premium for the second
lowest-cost silver plan that does not include pediatric dental benefits
is added to the premium allocable to pediatric dental benefits for the
second lowest-cost stand-alone dental plan. The second lowest-cost
amount from this combined ranking is the taxpayer's applicable
benchmark plan premium.
c. Coverage Family Members Residing in Different Locations
Under Sec. 1.36B-3(f), a taxpayer's applicable benchmark plan is
the second lowest cost silver plan offered at the time a taxpayer or
family member enrolls in a qualified health plan through the Exchange
for the rating area where the taxpayer resides. Under Sec. 1.36B-
3(f)(4), if members of a taxpayer's family reside in different states
and enroll in separate qualified health plans, the premium for the
taxpayer's applicable benchmark plan is the sum of the premiums for the
applicable benchmark plans for each group of family members living in
the same state.
Referring to the residence of the taxpayer to establish the cost
for a benchmark health plan is appropriate when the taxpayer and all
members of the taxpayer's coverage family live in the same location
because it reflects the cost of available coverage for the taxpayer's
coverage family. However, because premiums and plan availability may
vary based on location, the existing rule for a taxpayer whose family
members reside in different locations in the same state may not
accurately reflect the cost of available coverage. In addition, the
rules for calculating the premium tax credit should operate the same
for families residing in multiple locations within a state and families
residing in multiple states. Accordingly, Sec. 1.36B-3(f)(4) of the
proposed regulations provides that if a taxpayer's coverage family
members reside in multiple locations, whether within the same state or
in different states, the taxpayer's benchmark plan is determined based
on the cost of available coverage in the locations where members of the
taxpayer's coverage family reside. In particular, if members of a
taxpayer's coverage family reside in different locations, the
taxpayer's benchmark plan premium is the sum of the premiums for the
applicable benchmark plans for each group of coverage family members
residing in different locations, based on the plans offered to the
group through the Exchange for the rating area where the group resides.
If all members of a taxpayer's coverage family reside in a single
location that is different from where the taxpayer resides, the
taxpayer's benchmark plan premium is the premium for the applicable
benchmark plan for the coverage family, based on the plans offered to
the taxpayer's coverage family through the Exchange for the rating area
where the coverage family resides.
d. Aggregation of Silver-Level Policies
Section 1.36B-3(f)(3) provides that if one or more silver-level
plans offered through an Exchange do not cover all members of a
taxpayer's coverage family under one policy (for example, because an
issuer will not cover a taxpayer's dependent parent on the same policy
the taxpayer enrolls in), the premium for the applicable benchmark plan
may be the premium for a single policy or for more than one policy,
whichever is the second lowest-cost silver option. This rule does not
specify which combinations of policies must be taken into account for
this purpose, suggesting that all such combinations must be considered,
which is unduly complex for taxpayers, difficult for Exchanges to
implement, and difficult for the IRS to administer. Accordingly, to
clarify and simplify the benchmark premium determination for situations
in which a silver-level plan does not cover all the members of a
taxpayer's coverage family under one policy, the proposed regulations
delete the existing rule and provide a new rule in its place.
Under the proposed regulations, if a silver-level plan offers
coverage to all members of a taxpayer's coverage family who reside in
the same location under a single policy, the plan premium taken into
account for purposes of determining the applicable benchmark plan is
the premium for that policy. In contrast, if a silver-level plan would
require multiple policies to cover all members of a taxpayer's coverage
family who reside in the same location, the plan premium taken into
account for purposes of determining the applicable benchmark plan is
the sum of the premiums for self-only policies under the plan for each
member of the coverage family who resides in the same location. Under
the proposed regulations, similar rules would apply to the portion of
premiums for stand-alone dental plans allocable to pediatric
[[Page 44567]]
dental coverage taken into account for purposes of determining the
premium for a taxpayer's applicable benchmark plan.
Comments are requested on the rule contained in the proposed
regulations, as well as on an alternative rule under which the plan
premium taken into account for purposes of determining a taxpayer's
applicable benchmark plan would be equal to the sum of the self-only
policies under a plan for each member of the taxpayer's coverage
family, regardless of whether all members of the taxpayer's coverage
family could be covered under a single policy under the plan.
e. Silver-Level Plan Not Available for Enrollment
Section 1.36B-3(f)(5) provides that if a qualified health plan is
closed to enrollment for a taxpayer or a member of the taxpayer's
coverage family, that plan is disregarded in determining the taxpayer's
applicable benchmark plan. Similarly, Sec. 1.36B-3(f)(6) provides that
a plan that is the applicable benchmark plan for a taxpayer does not
cease to be the applicable benchmark plan solely because the plan or a
lower cost plan terminates or closes to enrollment during the taxable
year. Because stand-alone dental plans are considered in determining a
taxpayer's applicable benchmark plan under the proposed regulations,
the proposed regulations provide consistency in the treatment of
qualified health plans and stand-alone dental plans that are closed to
enrollment or that terminate during the taxable year.
f. Only One Silver-Level Plan Offered to the Coverage Family
In general, Sec. 1.36B-3(f)(1) provides that a taxpayer's
applicable benchmark plan is the second lowest-cost silver-level plan
available to the taxpayer for self-only or family coverage. However,
for taxpayers who reside in certain locations, only one silver-level
plan providing such coverage may be available. Section 1.36B-3(f)(8) of
the proposed regulations clarifies that if there is only one silver-
level qualified health plan offered through the Exchange that would
cover all members of the taxpayer's coverage family (whether under one
policy or multiple policies), that silver-level plan is used for
purposes of the taxpayer's applicable benchmark plan. Similarly, if
there is only one stand-alone dental plan offered through the Exchange
that would cover all members of the taxpayer's coverage family (whether
under one policy or multiple policies), the portion of the premium of
that plan that is allocable to pediatric dental benefits is used for
purposes of determining the taxpayer's applicable benchmark plan.
5. Reconciliation of Advance Credit Payments
Section 301.6011-8 provides that a taxpayer who receives the
benefit of advance credit payments 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) and reconcile the advance credit
payments. In addition, the regulations under section 36B provide that
if advance credit payments are made for coverage of an individual for
whom no taxpayer claims a personal exemption deduction, the taxpayer
who attests to the Exchange to the intention to claim a personal
exemption deduction for the individual as part of the determination
that the taxpayer is eligible for advance credit payments for coverage
of the individual must reconcile the advance credit payments.
Questions have been raised concerning how these two rules apply,
and consequently which individual must reconcile advance credit
payments, when a taxpayer (a parent, for example) attests that he or
she will claim a personal exemption deduction for an individual, the
advance payments are made with respect to coverage for the individual,
the taxpayer does not claim a personal exemption deduction for the
individual, and the individual does not file a tax return for the year.
The intent of the existing regulation is that the taxpayer, not the
individual for whose coverage advance credit payments were made, must
reconcile the advance credit payments in situations in which a taxpayer
attests to the intention to claim a personal exemption for the
individual and no one claims a personal exemption deduction for the
individual. Consequently, the proposed regulations clarify that if
advance credit payments are made for coverage of an individual for whom
no taxpayer claims a personal exemption deduction, the taxpayer who
attests to the Exchange to the intention to claim a personal exemption
deduction for the individual, not the individual for whose coverage the
advance credit payments were made, must file a tax return and reconcile
the advance credit payments.
6. Information Reporting
a. Two or More Families Enrolled in Single Qualified Health Plan
Section 1.36B-3(h) provides that if a qualified health plan covers
more than one family under a single policy (for example, a plan covers
a taxpayer and the taxpayer's child who is 25 and not a dependent of
the taxpayer), the premium tax credit is computed for each applicable
taxpayer covered by the plan. In addition, in computing the tax credit
for each taxpayer, premiums for the qualified health plan the taxpayers
purchase (the enrollment premiums) are allocated to each taxpayer in
proportion to the premiums for each taxpayer's applicable benchmark
plan.
The existing regulations provide that the Exchange must report the
enrollment premiums for each family, but do not specify the manner in
which the Exchange must divide the enrollment premiums among the
families enrolled in the policy. Consequently, the proposed regulations
clarify that when multiple families enroll in a single qualified health
plan and advance credit payments are made for the coverage, the
enrollment premiums reported by the Exchange for each family is the
family's allocable share of the enrollment premiums, which is based on
the proportion of each family's applicable benchmark plan premium.
b. Partial Months of Enrollment
The existing regulations do not specify how the enrollment premiums
and benchmark plan premiums are reported in cases in which one or more
individuals is enrolled or disenrolled in coverage mid-month. To ensure
that this reporting is consistent with the rules for calculating the
premium assistance amounts for partial months of coverage, the proposed
regulations provide that, if an individual is enrolled in a qualified
health plan after the first day of a month, generally no value should
be reported for the individual's enrollment premium or benchmark plan
premium for that month. However, if an individual's coverage in a
qualified health plan is terminated before the last day of a month, or
an individual is enrolled in coverage after the first day of a month
and the coverage 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, an Exchange must report the premium
for the applicable benchmark plan for a full month of coverage
(excluding the premium allocated to benefits in excess of essential
health benefits). In addition, the proposed regulations provide that
the Exchange must report the enrollment premiums for the month
(excluding the premium allocated to benefits in excess of essential
health benefits), reduced by any amount that was refunded due to the
plan's termination.
[[Page 44568]]
c. Use of Electronic Media
Section 301.6011-2(b) provides that if the use of certain forms,
including the Form 1095 series, is required by the applicable
regulations or revenue procedures for the purpose of making an
information return, the information required by the form must be
submitted on magnetic media. Form 1095-A should not have been included
in Sec. 301.6011-2 because Form 1095-A is not an information return.
Consequently, the proposed regulations replace the general reference in
Sec. 301.6011-2(b) to the forms in the 1095 series with specific
references to Forms 1095-B and 1095-C, but not Form 1095-A.
Effective/Applicability Date
Except as otherwise provided, these regulations are proposed to
apply for taxable years beginning after December 31, 2016. In addition,
taxpayers may rely on certain provisions of the proposed regulations
for taxable years ending after December 31, 2013, as indicated earlier
in this preamble. In addition, rules relating to the benchmark plan
described in section 4 of this preamble are proposed to apply for
taxable years beginning after December 31, 2018.
Notwithstanding the proposed applicability date, nothing in the
proposed regulations is intended to limit any relief for opt-out
arrangements provided in Notice 2015-87, Q&A 9, or in section 2.f of
the preamble to these proposed regulations (regarding opt-out
arrangements provided for in collective bargaining agreements). For
purposes of sections 36B and 5000A, although under the proposed
regulations amounts made available under an eligible opt-out
arrangement are not added to an employee's required contribution, for
periods before the final regulations are applicable and, if later,
through the end of the most recent plan year beginning before January
1, 2017, an individual who can demonstrate that he or she meets the
condition for an opt-out payment under an eligible opt-out arrangement
is permitted to treat the opt-out payment as increasing the employee's
required contribution.\8\
---------------------------------------------------------------------------
\8\ For periods prior to the applicability date, an individual
who cannot demonstrate that he or she meets the condition for an
opt-out payment under an eligible opt-out arrangement is not
permitted to treat the opt-out payment as increasing the employee's
required contribution.
---------------------------------------------------------------------------
For purposes of the consequences of these regulations under
sections 4980H and 6056 (and in particular Form 1095-C), the
regulations regarding opt-out arrangements are proposed to be first
applicable for plan years beginning on or after January 1, 2017,\9\ and
for the period prior to this applicability date employers are not
required to increase the amount of an employee's required contribution
by the amount of an opt-out payment made available under an opt-out
arrangement (other than a payment made available under a non-relief-
eligible opt-out arrangement \10\). See also section 2.f of this
preamble for transition relief provided under Notice 2015-87 as
clarified and expanded for opt-out arrangements contained in collective
bargaining agreements in effect before December 16, 2015. See Sec.
601.601(d)(2)(ii)(b).
---------------------------------------------------------------------------
\9\ Notice 2015-87, Q&A 9 provides that the Treasury Department
and the IRS anticipate that the regulations on opt-out arrangements
generally will apply only for periods after the issuance of final
regulations. The Treasury Department and the IRS anticipate
finalizing these regulations prior to the end of 2016.
\10\ For a discussion of non-relief-eligible opt-out
arrangements see Notice 2015-87, Q&A-9.
---------------------------------------------------------------------------
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 assessment is not
required. It has also been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these regulations.
It is hereby certified that these regulations will not have a
significant economic impact on a substantial number of small entities.
This certification is based on the fact that the information collection
required under these regulations is imposed under section 36B.
Consistent with the statute, the proposed regulations require a person
that provides minimum essential coverage to an individual to file a
return with the IRS reporting certain information and to furnish a
statement to the responsible individual who enrolled an individual or
family in the coverage. These regulations merely provide the method of
filing and furnishing returns and statements under section 36B.
Moreover, the proposed regulations attempt to minimize the burden
associated with this collection of information by limiting reporting to
the information that the IRS requires to verify minimum essential
coverage and administer tax credits.
Based on these facts, a Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required.
Pursuant to section 7805(f) of the Code, this notice of proposed
rulemaking has been submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on its impact on small
business.
Comments and Requests for Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are submitted timely
to the IRS as prescribed in this preamble under the ADDRESSES heading.
Treasury and the IRS request comments on all aspects of the proposed
rules. All comments will be available at www.regulations.gov or upon
request. A public hearing will be scheduled if requested in writing by
any person who timely submits written comments. If a public hearing is
scheduled, notice of the date, time, and place for the hearing will be
published in the Federal Register.
Drafting Information
The principal authors of these proposed regulations are Shareen S.
Pflanz 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 the development of the
regulations.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 301 are proposed to be amended as
follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.36B-0 is amended by:
0
1. Adding the entries for Sec. Sec. 1.36B-2(b)(6)(i) and (ii).
0
2. Adding entries for Sec. Sec. 1.36B-2(c)(3)(v)(A)(7), (v)(A)(7)(i),
(ii), (iii), (iii)(A), (iii)(B), (iii)(C), and (iv).
0
3. Redesignating entry for Sec. 1.36B-2(c)(4) as (c)(5) and adding new
entries for Sec. 1.36B-2(c)(4), (c)(4)(i), (ii), (ii)(A), and (ii)(B).
[[Page 44569]]
0
4. Redesignating entry for Sec. 1.36B-3(c)(4) as (c)(5) and adding a
new entry for Sec. 1.36B-3(c)(4).
0
5. Revising entries for Sec. Sec. 1.36B-3(d)(1) and (d)(2).
0
6. Revising entries for Sec. Sec. 1.36B-3(f)(3), (4), (5), (6), and
(7).
0
7. Adding entries for Sec. Sec. 1.36B-3(f)(8), (9), and (10).
0
8. Adding entries for Sec. Sec. 1.36B-5(c)(3)(iii).
The revisions and additions read as follows:
Sec. 1.36B-0 Table of contents.
* * * * *
Sec. 1.36B-2 Eligibility for premium tax credit.
* * * * *
(b) * * *
(6) * * *
(i) In general.
(ii) Exceptions.
* * * * *
(c) * * *
(3) * * *
(v) * * *
(A) * * *
(7) Opt-out arrangements.
(i) In general.
(ii) Eligible opt-out arrangements.
(iii) Definitions.
(A) Opt-out payment.
(B) Opt-out arrangement.
(C) Eligible opt-out arrangement.
(iv) Examples.
* * * * *
(4) Special eligibility rules.
(i) Related individuals not claimed as a personal exemption
deduction.
(ii) Exchange unable to discontinue advance credit payments.
(A) In general.
(B) Medicaid or CHIP.
* * * * *
Sec. 1.36B-3 Computing the premium assistance credit amount.
* * * * *
(c) * * *
(4) Appeals of coverage eligibility.
(d) * * *
(1) Premium assistance amount.
(2) Examples.
* * * * *
(f) * * *
(3) Silver-level plan not covering pediatric dental benefits.
(4) Family members residing in different locations.
(5) Single or multiple policies needed to cover the family.
(i) Policy covering a taxpayer's family.
(ii) Policy not covering a taxpayer's family.
(6) Plan not available for enrollment.
(7) Benchmark plan terminates or closes to enrollment during the
year.
(8) Only one silver-level plan offered to the coverage family.
(9) Effective date.
(10) Examples.
* * * * *
Sec. 1.36B-5 Information reporting by Exchanges.
* * * * *
(c) * * *
(3) * * *
(iii) Partial month of coverage.
(A) In general.
(B) Certain mid-month enrollments.
* * * * *
0
Par. 3. Section 1.36B-1 is amended by revising paragraphs (l), (m), and
(o) to read as follows:
Sec. 1.36B-1 Premium tax credit definitions.
* * * * *
(l) Self-only coverage. Self-only coverage means health insurance
that covers one individual and provides coverage for the essential
health benefits as defined in section 1302(b)(1) of the Affordable Care
Act (42 U.S.C. 18022).
(m) Family coverage. Family coverage means health insurance that
covers more than one individual and provides coverage for the essential
health benefits as defined in section 1302(b)(1) of the Affordable Care
Act (42 U.S.C. 18022).
* * * * *
(o) Effective/applicability date. Except for paragraphs (l) and
(m), this section applies to taxable years ending after December 31,
2013. Paragraphs (l) and (m) of this section apply to taxable years
beginning after December 31, 2018. Paragraphs (l) and (m) of Sec.
1.36B-1 as contained in 26 CFR part I edition revised as of April 1,
2016, apply to taxable years ending after December 31, 2013, and
beginning before January 1, 2019.
0
Par. 4. Section 1.36B-2 is amended by:
0
1. Revise paragraph (b)(6) introductory text, (b)(6)(i) and (ii).
0
2. Adding three new sentences to the end of paragraph (c)(2)(v).
0
3. Revising paragraph (c)(3)(i).
0
4. Revising paragraph (c)(3)(iii)(A).
0
5. Adding three new sentences to the end of paragraph (c)(3)(v)(A)(3).
0
6. Adding new paragraphs (c)(3)(v)(A)(7)
0
7. Revising paragraph (c)(4).
0
8. Adding a new paragraph (e).
Sec. 1.36B-2 Eligibility for premium tax credit.
* * * * *
(b) * * *
(6) Special rule for taxpayers with household income below 100
percent of the Federal poverty line for the taxable year--(i) In
general. A taxpayer (other than a taxpayer described in paragraph
(b)(5) of this section) whose household income for a taxable year is
less than 100 percent of the Federal poverty line for the taxpayer's
family size is treated as an applicable taxpayer for the taxable year
if--
(A) The taxpayer or a family member enrolls in a qualified health
plan through an Exchange for one or more months during the taxable
year;
(B) An Exchange estimates at the time of enrollment that the
taxpayer's household income will be at least 100 percent but not more
than 400 percent of the Federal poverty line for the taxable year;
(C) Advance credit payments are authorized and paid for one or more
months during the taxable year; and
(D) The taxpayer would be an applicable taxpayer if the taxpayer's
household income for the taxable year was at least 100 but not more
than 400 percent of the Federal poverty line for the taxpayer's family
size.
(ii) Exceptions. This paragraph (b)(6) does not apply for an
individual who, with intentional or reckless disregard for the facts,
provides incorrect information to an Exchange for the year of coverage.
A reckless disregard of the facts occurs if the taxpayer makes little
or no effort to determine whether the information provided to the
Exchange is accurate under circumstances that demonstrate a substantial
deviation from the standard of conduct a reasonable person would
observe. A disregard of the facts is intentional if the taxpayer knows
the information provided to the Exchange is inaccurate.
* * * * *
(c) * * *
(2) * * *
(v) * * * This paragraph (c)(2)(v) does not apply for an individual
who, with intentional or reckless disregard for the facts, provides
incorrect information to an Exchange for the year of coverage. A
reckless disregard of the facts occurs if the taxpayer makes little or
no effort to determine whether the information provided to the Exchange
is accurate under circumstances that demonstrate a substantial
deviation from the standard of conduct a reasonable person would
observe. A disregard of the facts is intentional if the taxpayer knows
that information provided to the Exchange is inaccurate.
* * * * *
(3) * * *
(i) In general. For purposes of section 36B, an employee who may
enroll in an eligible employer-sponsored plan (as defined in section
5000A(f)(2) and the regulations under that section) that is minimum
essential coverage, and an individual who may enroll in the plan
because of a relationship to the employee (a related individual), are
eligible for minimum essential coverage under the plan for any month
only if the plan is affordable and provides minimum value. Except for
the Nonappropriated Fund Health Benefits
[[Page 44570]]
Program of the Department of Defense, established under section 349 of
the National Defense Authorization Act for Fiscal Year 1995 (Pub. L.
103-337; 10 U.S.C. 1587 note), government-sponsored minimum essential
coverage is not an eligible employer-sponsored plan. The
Nonappropriated Fund Health Benefits Program of the Department of
Defense is considered eligible employer-sponsored coverage, but not
government-sponsored coverage, for purposes of determining if an
individual is eligible for minimum essential coverage under this
section.
* * * * *
(iii) * * *
(A) Failure to enroll in plan. An employee or related individual
may be eligible for minimum essential coverage under an eligible
employer-sponsored plan for a month during a plan year if the employee
or related individual could have enrolled in the plan for that month
during an open or special enrollment period for the plan year. If an
enrollment period relates to coverage for not only the upcoming plan
year (or the current plan year in the case of an enrollment period
other than an open enrollment period), but also coverage in one or more
succeeding plan years, this paragraph (c)(3)(iii)(A) applies only to
eligibility for the coverage in the upcoming plan year (or the current
plan year in the case of an enrollment period other than an open
enrollment period).
* * * * *
(v) * * *
(A) * * *
(3) * * * This paragraph (c)(3)(v)(A)(3) does not apply for an
individual who, with intentional or reckless disregard for the facts,
provides incorrect information to an Exchange concerning the portion of
the annual premium for coverage for the employee or related individual
under the plan. A reckless disregard of the facts occurs if the
taxpayer makes little or no effort to determine whether the information
provided to the Exchange is accurate under circumstances that
demonstrate a substantial deviation from the standard of conduct a
reasonable person would observe. A disregard of the facts is
intentional if the taxpayer knows that the information provided to the
Exchange is inaccurate.
* * * * *
(7) Opt-out arrangements--(i) In general. Except as otherwise
provided in this paragraph (c)(3)(v)(A)(7), the amount of an opt-out
payment made available to an employee under an opt-out arrangement
increases the employee's required contribution for purposes of
determining the affordability of the eligible employer-sponsored plan
to which the opt-out arrangement relates, regardless of whether the
employee enrolls in the eligible employer-sponsored plan or declines to
enroll in that coverage and is paid the opt-out payment.
(ii) Eligible opt-out arrangements. The amount of an opt-out
payment made available to an employee under an eligible opt-out
arrangement does not increase the employee's required contribution for
purposes of determining the affordability of the eligible employer-
sponsored plan to which the eligible opt-out arrangement relates,
regardless of whether the employee enrolls in the eligible employer-
sponsored plan or is paid the opt-out payment.
(iii) Definitions. The following definitions apply for purposes of
this paragraph (c)(3)(v)(A)(7):
(A) Opt-out payment. The term opt-out payment means a payment that
is available only if an employee declines coverage, including waiving
coverage in which the employee would otherwise be enrolled, under an
eligible employer-sponsored plan and that is not permitted to be used
to pay for coverage under the eligible employer-sponsored plan. An
amount provided as an employer contribution to a cafeteria plan that is
permitted to be used by the employee to purchase minimum essential
coverage is not an opt-out payment, whether or not the employee may
receive the amount as a taxable benefit. See paragraph (c)(3)(v)(A)(6)
of this section for the treatment of employer contributions to a
cafeteria plan.
(B) Opt-out arrangement. The term opt-out arrangement means the
arrangement under which an opt-out payment is made available.
(C) Eligible opt-out arrangement. The term eligible opt-out
arrangement means an arrangement under which an employee's right to
receive an opt-out payment is conditioned on the employee providing
reasonable evidence that the employee and all other individuals for
whom the employee reasonably expects to claim a personal exemption
deduction for the taxable year or years that begin or end in or with
the employer's plan year to which the opt-out arrangement applies
(employee's expected tax family) have or will have minimum essential
coverage (other than coverage in the individual market, whether or not
obtained through the Marketplace) during the period of coverage to
which the opt-out arrangement applies. For this purpose, reasonable
evidence of alternative coverage may include the employee's attestation
that the employee and all other members of the employee's expected tax
family have or will have minimum essential coverage (other than
coverage in the individual market, whether or not obtained through the
Marketplace) for the relevant period. Regardless of the evidence of
alternative coverage required under the arrangement, to be an eligible
opt-out arrangement, the arrangement must provide that the opt-out
payment will not be made, and the employer in fact must not make the
payment, if the employer knows or has reason to know that the employee
or any other member of the employee's expected tax family does not have
or will not have the alternative coverage. The arrangement must also
require that the evidence of the alternative coverage be provided no
less frequently than every plan year to which the eligible opt-out
arrangement applies, and that it must be provided no earlier than a
reasonable period of time before the commencement of the period of
coverage to which the eligible opt-out arrangement applies. If the
reasonable evidence (such as an attestation) is obtained as part of the
regular annual open enrollment period that occurs within a few months
before the commencement of the next plan year of employer-sponsored
coverage, it will qualify as being provided no earlier than a
reasonable period of time before commencement of the applicable period
of coverage. An eligible opt-out arrangement is also permitted to
require evidence of alternative coverage to be provided at a later
date, such as after the plan year starts, which would enable the
employer to require evidence that the employee and all other members of
the employee's expected tax family have already obtained the
alternative coverage. Nothing in this rule prohibits an employer from
requiring reasonable evidence of alternative coverage other than an
attestation in order for an employee to qualify for an opt-out payment
under an eligible opt-out arrangement. Further, provided that the
reasonable evidence requirement is met, the amount of an opt-out
payment made available under an eligible opt-out arrangement continues
to be excluded from the employee's required contribution for the
remainder of the period of coverage to which the opt-out payment
originally applied even if the alternative coverage subsequently
terminates for the employee or for any other member of the employee's
expected tax family, regardless of whether the opt-out payment is
required to be adjusted or terminated due to the loss of alternative
coverage, and
[[Page 44571]]
regardless of whether the employee is required to provide notice of the
loss of alternative coverage to the employer.
(iv) Examples. The following examples illustrate the provisions of
this paragraph (c)(3)(v)(A)(7). In each example, the eligible employer-
sponsored plan's plan year is the calendar year.
Example 1. Taxpayer B is an employee of Employer X, which
offers its employees coverage under an eligible employer-sponsored
plan that requires B to contribute $3,000 for self-only coverage. X
also makes available to B a payment of $500 if B declines to enroll
in the eligible employer-sponsored plan. Therefore, the $500 opt-out
payment made available to B under the opt-out arrangement increases
B's required contribution under X's eligible employer-sponsored plan
from $3,000 to $3,500, regardless of whether B enrolls in the
eligible employer-sponsored plan or declines to enroll and is paid
the opt-out payment.
Example 2. The facts are the same as in Example 1, except that
availability of the $500 opt-out payment is conditioned not only on
B declining to enroll in X's eligible employer-sponsored plan but
also on B providing reasonable evidence no earlier than the regular
annual open enrollment period for the next plan year that B and all
other members of B's expected tax family are or will be enrolled in
minimum essential coverage through another source (other than
coverage in the individual market, whether or not obtained through
the Marketplace). B's expected tax family consists of B and B's
spouse, C, who is an employee of Employer Y. During the regular
annual open enrollment period for the upcoming plan year, B declines
coverage under X's eligible employer-sponsored plan and provides X
with reasonable evidence that B and C will be enrolled in Y's
employer-sponsored plan, which is minimum essential coverage. The
opt-out arrangement provided by X is an eligible opt-out
arrangement, and, therefore, the $500 opt-out payment made available
to B does not increase B's required contribution under X's eligible
employer-sponsored plan. B's required contribution for self-only
coverage under X's eligible employer-sponsored plan is $3,000.
Example 3. The facts are the same as in Example 2, except that B
and C have two children that B expects to claim as dependents for
the taxable year that coincides with the upcoming plan year. During
the regular annual open enrollment period for the upcoming plan
year, B declines coverage under X's eligible employer-sponsored plan
and provides X with reasonable evidence that B and C will be
enrolled in Y's employer-sponsored plan, which is minimum essential
coverage. However, B does not provide reasonable evidence that B's
children will be enrolled in minimum essential coverage (other than
coverage in the individual market, whether or not obtained through
the Marketplace); therefore, X determines B is not eligible for the
opt-out payment, and B does not receive it. The $500 opt-out payment
made available under the opt-out arrangement does not increase B's
required contribution under X's eligible employer-sponsored plan
because the opt-out arrangement provided by X is an eligible opt-out
arrangement. B's required contribution for self-only coverage under
X's eligible employer-sponsored plan is $3,000.
Example 4. Taxpayer D is married and is employed by Employer Z,
which offers its employees coverage under an eligible employer-
sponsored plan that requires D to contribute $2,000 for self-only
coverage. Z also makes available to D a payment of $300 if D
declines to enroll in the eligible employer-sponsored plan and
provides reasonable evidence no earlier than the regular annual open
enrollment period for the next plan year that D is or will be
enrolled in minimum essential coverage through another source (other
than coverage in the individual market, whether or not obtained
through the Marketplace); the opt-out arrangement is not conditioned
on whether the other members of D's expected tax family have other
coverage. This opt-out arrangement is not an eligible opt-out
arrangement because it does not condition the right to receive the
opt-out payment on D providing reasonable evidence that D and the
other members of D's expected tax family have (or will have) minimum
essential coverage (other than coverage in the individual market,
whether or not obtained through the Marketplace). Therefore, the
$300 opt-out payment made available to D under the opt-out
arrangement increases D's required contribution under Z's eligible
employer-sponsored plan. D's required contribution for self-only
coverage under Z's eligible employer-sponsored plan is $2,300.
* * * * *
(4) Special eligibility rules--(i) Related individual not claimed
as a personal exemption deduction. An individual who may enroll in
minimum essential coverage because of a relationship to another person
eligible for the coverage, but for whom the other eligible person does
not claim a personal exemption deduction under section 151, is treated
as eligible for minimum essential coverage under the coverage only for
months that the related individual is enrolled in the coverage.
(ii) Exchange unable to discontinue advance credit payments--(A) In
general. If an individual who is enrolled in a qualified health plan
for which advance credit payments are made informs the Exchange that
the individual is or will soon be eligible for other minimum essential
coverage and that advance credit payments should be discontinued, but
the Exchange does not discontinue advance credit payments for the first
calendar month beginning after the month the individual informs the
Exchange, the individual is treated as eligible for the other minimum
essential coverage no earlier than the first day of the second calendar
month beginning after the first month the individual may enroll in the
other minimum essential coverage.
(B) Medicaid or CHIP. If a determination is made that an individual
who is enrolled in a qualified health plan for which advance credit
payments are made is eligible for Medicaid or CHIP but the advance
credit payments are not discontinued for the first calendar month
beginning after the eligibility determination, the individual is
treated as eligible for the Medicaid or CHIP no earlier than the first
day of the second calendar month beginning after the eligibility
determination.
* * * * *
(e) Effective/applicability date. (1) Except as provided in
paragraph (f)(2) of this section, this section applies to taxable years
ending after December 31, 2013.
(2) Paragraph (b)(6)(ii), the last three sentences of paragraph
(c)(2)(v), paragraph (c)(3)(i), paragraph (c)(3)(iii)(A), the last
three sentences of paragraph (c)(3)(v)(A)(3), paragraph
(c)(3)(v)(A)(7), and paragraph (c)(4) of this section apply to taxable
years beginning after December 31, 2016. Paragraphs (b)(6), (c)(3)(i),
(c)(3)(iii)(A), and (c)(4) of Sec. 1.36B-2 as contained in 26 CFR part
I edition revised as of April 1, 2016, apply to taxable years ending
after December 31, 2013, and beginning before January 1, 2017.
0
Par. 5. Section 1.36B-3 is amended by:
0
1. Redesignating paragraph (c)(4) as paragraph (c)(5) and adding a new
paragraph (c)(4).
0
2. Revising paragraph (d)(1).
0
3. Revising paragraph (d)(2).
0
4. Revising paragraph (f)
0
5. Adding paragraph (n).
Sec. 1.36B-3 Computing the premium tax credit amount.
* * * * *
(c) * * *
(4) Appeals of coverage eligibility. A taxpayer who is eligible for
advance credit payments pursuant to an eligibility appeal decision
implemented under 45 CFR 155.545(c)(1)(ii) for coverage of a member of
the taxpayer's coverage family who, based on the appeal decision,
retroactively enrolls in a qualified health plan is considered to have
met the requirement in paragraph (c)(1)(ii) of this section for a month
if the taxpayer pays the taxpayer's share of the premiums for coverage
under the plan for the month on or before the 120th day following the
date of the appeals decision.
* * * * *
(d) * * *
[[Page 44572]]
(1) Premium assistance amount. The premium assistance amount for a
coverage month is the lesser of--
(i) The premiums for the month, reduced by any amounts that were
refunded, 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) Examples. The following examples illustrate the rules of
paragraph (d)(1) of this section.
Example 1. Taxpayer Q is single and has no dependents. Q enrolls
in a qualified health plan with a monthly premium of $400. Q's
monthly benchmark plan premium is $500, and his monthly contribution
amount is $80. Q's premium assistance amount for a coverage month is
$400 (the lesser of $400, Q's monthly enrollment premium, and $420,
the difference between Q's monthly benchmark plan premium and Q's
contribution amount).
Example 2. (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 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 issuer terminates coverage as of that date
and refunds the remaining portion of the September enrollment
premiums ($150) for R's coverage.
(iii) Under paragraph (d)(1) of this section, R's premium
assistance amount for September is the lesser of the enrollment
premiums for the month, reduced by any amounts that were refunded
($300 ($450 - $150)) or the difference between the benchmark plan
premium and the contribution amount for the month ($420). R's
premium assistance amount for September is $300, the lesser of $420
and $300.
Example 3. The facts are the same as in Example 2 of this
paragraph (d)(2), except that the qualified health plan issuer does
not refund any enrollment premiums for September. Under paragraph
(d)(1) of this section, R's premium assistance amount for September
is $420, the lesser of $450 and $420.
* * * * *
(f) Applicable benchmark plan--(1) In general. Except as otherwise
provided in this paragraph (f), the applicable benchmark plan for each
coverage month is the second-lowest-cost silver plan (as described in
section 1302(d)(1)(B) of the Affordable Care Act (42 U.S.C.
18022(d)(1)(B))) offered to the taxpayer's coverage family through the
Exchange for the rating area where the taxpayer resides for--
(i) Self-only coverage for a taxpayer--
(A) Who computes tax under section 1(c) (unmarried individuals
other than surviving spouses and heads of household) and is not allowed
a deduction under section 151 for a dependent for the taxable year;
(B) Who purchases only self-only coverage for one individual; or
(C) Whose coverage family includes only one individual; and
(ii) Family coverage for all other taxpayers.
(2) Family coverage. The applicable benchmark plan for family
coverage is the second lowest-cost silver plan that would cover the
members of the taxpayer's coverage family (such as a plan covering two
adults if the members of a taxpayer's coverage family are two adults).
(3) Silver-level plan not covering pediatric dental benefits. If
one or more silver-level qualified health plans offered through an
Exchange do not cover pediatric dental benefits, the premium for the
applicable benchmark plan is determined based on the second lowest-cost
option among--
(i) The silver-level qualified health plans that provide pediatric
dental benefits offered by the Exchange to the members of the coverage
family;
(ii) The lowest-cost silver-level qualified health plan that does
not provide pediatric dental benefits offered by the Exchange to the
members of the coverage family in conjunction with the lowest-cost
portion of the premium for a stand-alone dental plan (within the
meaning of section 1311(d)(2)(B)(ii) of the Affordable Care Act (42
U.S.C. 13031(d)(2)(B)(ii)) offered through the Exchange to the members
of the coverage family that is properly allocable to pediatric dental
benefits determined under guidance issued by the Secretary of Health
and Human Services; and
(iii) The second-lowest-cost silver-level qualified health plan
that does not provide pediatric dental benefits offered by the Exchange
to the members of the coverage family in conjunction with the second-
lowest-cost portion of the premium for a stand-alone dental plan
(within the meaning of section 1311(d)(2)(B)(ii) of the Affordable Care
Act (42 U.S.C. 13031(d)(2)(B)(ii)) offered through the Exchange to the
members of the coverage family that is properly allocable to pediatric
dental benefits determined under guidance issued by the Secretary of
Health and Human Services.
(4) Family members residing in different locations. If members of a
taxpayer's coverage family reside in different locations, the
taxpayer's benchmark plan premium is the sum of the premiums for the
applicable benchmark plans for each group of coverage family members
residing in different locations, based on the plans offered to the
group through the Exchange where the group resides. If all members of a
taxpayer's coverage family reside in a single location that is
different from where the taxpayer resides, the taxpayer's benchmark
plan premium is the premium for the applicable benchmark plan for the
coverage family, based on the plans offered through the Exchange to the
taxpayer's coverage family for the rating area where the coverage
family resides.
(5) Single or multiple policies needed to cover the family--(i)
Policy covering a taxpayer's family. If a silver-level plan or a stand-
alone dental plan offers coverage to all members of a taxpayer's
coverage family who reside in the same location under a single policy,
the premium (or allocable portion thereof, in the case of a stand-alone
dental plan) taken into account for the plan for purposes of
determining the applicable benchmark plan under paragraphs (f)(1),
(f)(2), and (f)(3) of this section is the premium for this single
policy.
(ii) Policy not covering a taxpayer's family. If a silver-level
qualified health plan or a stand-alone dental plan would require
multiple policies to cover all members of a taxpayer's coverage family
who reside in the same location (for example, because of the
relationships within the family), the premium (or allocable portion
thereof, in the case of a standalone dental plan) taken into account
for the plan for purposes of determining the applicable benchmark plan
under paragraphs (f)(1), (f)(2), and (f)(3) of this section is the sum
of the premiums (or allocable portion thereof, in the case of a stand-
alone dental plan) for self-only policies under the plan for each
member of the coverage family who resides in the same location.
(6) Plan not available for enrollment. A silver-level qualified
health plan or a stand-alone dental plan that is not open to enrollment
by a taxpayer or family member at the time the taxpayer or family
member enrolls in a qualified health plan is disregarded in determining
the applicable benchmark plan.
(7) Benchmark plan terminates or closes to enrollment during the
year. A silver-level qualified health plan or a stand-alone dental plan
that is used for purposes of determining the applicable benchmark plan
under this paragraph (f)
[[Page 44573]]
for a taxpayer does not cease to be the applicable benchmark plan for a
taxable year solely because the plan or a lower cost plan terminates or
closes to enrollment during the taxable year.
(8) Only one silver-level plan offered to the coverage family. If
there is only one silver-level qualified health plan providing
pediatric dental benefits, one silver-level qualified health plan not
providing pediatric dental benefits, or one stand-alone dental plan
offered through an Exchange that would cover all members of a
taxpayer's coverage family who reside in the same location (whether
under one policy or multiple policies), that plan is used for purposes
of determining the taxpayer's applicable benchmark plan.
(9) Examples. The following examples illustrate the rules of this
paragraph (f). Unless otherwise stated, in each example the plans are
open to enrollment to a taxpayer or family member at the time of
enrollment and are offered through the Exchange for the rating area
where the taxpayer resides:
Example 1. Single taxpayer enrolls in a qualified health plan.
Taxpayer A is single, has no dependents, and enrolls in a qualified
health plan. The Exchange in the rating area in which A resides
offers only silver-level qualified health plans that provide
pediatric dental benefits. Under paragraphs (f)(1) and (f)(2) of
this section, A's applicable benchmark plan is the second lowest
cost silver plan providing self-only coverage for A.
Example 2. Single taxpayer enrolls with dependent in a qualified
health plan. Taxpayer B is single and claims her daughter, C, as a
dependent. B purchases family coverage for herself and C. The
Exchange in the rating area in which B and C reside offers qualified
health plans that provide pediatric dental benefits but does not
offer qualified health plans without pediatric dental benefits.
Under paragraphs (f)(1) and (f)(2) of this section, B's applicable
benchmark plan is the second lowest-cost silver plan providing
family coverage to B and C.
Example 3. Benchmark plan for a coverage family with a family
member eligible for pediatric dental benefits. (i) Taxpayer D's
coverage family consists of D and D's 10-year old son, E, who is a
dependent of D and eligible for pediatric dental benefits. The
Exchange in the rating area in which D and E reside offers three
silver-level qualified health plans, two of which provide pediatric
dental benefits (S1 and S2) and one of which does not (S3), in which
D and E may enroll. The Exchange also offers two stand-alone dental
plans (DP1 and DP2) available to D and E. The monthly premiums
allocable to essential health benefits for the silver-level plans
are as follows:
S1--$1,250
S2--$1,200
S3--$1,180
(ii) The monthly premiums, and the portion of the premium
allocable to pediatric dental benefits, for the two dental plans are
as follows:
DP1--$100 ($25 allocable to pediatric dental benefits)
DP2--$80 ($40 allocable to pediatric dental benefits).
(iii) Under paragraph (f)(3) of this section, D's applicable
benchmark plan is the second lowest cost option among the following
offered by the rating area in which D resides: silver-level
qualified health plans providing pediatric dental benefits ($1,250
for S1 and $1,200 for S2); the lowest-cost silver-level qualified
health plan not providing pediatric dental benefits, in conjunction
with the lowest-cost portion of the premium for a stand-alone dental
plan properly allocable to pediatric dental benefits ($1,180 for S3
in conjunction with $25 for DP1 = $1,205); and the second lowest
cost silver-level qualified health plan not providing pediatric
health benefits, in conjunction with the second lowest-cost portion
of the premium for a stand-alone dental plan allocable to pediatric
dental benefits ($1,180 for S3 in conjunction with $40 for DP2 =
$1,220). Under paragraph (f)(8) of this section, S3, as the lone
silver-level qualified health plan not providing pediatric dental
benefits offered by the Exchange, is treated as the second lowest-
cost silver-level qualified health plan not providing pediatric
dental benefits. Under paragraph (e) of this section, the adjusted
monthly premium for D's applicable benchmark plan is $1,205.
Example 4. Benchmark plan for a coverage family with no family
members eligible for pediatric dental coverage. (i) The facts are
the same as in Example 3, except Taxpayer D's coverage family
consists of D and D's 22-year old son, F, who is a dependent of D
and not eligible for pediatric dental coverage and the monthly
premiums allocable to essential health benefits for the silver-level
plans are as follows:
S1--$1,210
S2--$1,190
S3--$1,180
(ii) Because no one in D's coverage family is eligible for
pediatric dental benefits, $0 of the premium for a stand-alone
dental plan is allocable to pediatric dental benefits in determining
A's applicable benchmark plan. Consequently, under paragraphs
(f)(1), (f)(2), and (f)(3) of this section, D's applicable benchmark
plan is the second lowest-cost option among the following options
offered by the rating area in which D resides: silver-level
qualified health plans providing pediatric dental benefits ($1,210
for S1 and $1,190 for S2), the lowest-cost silver-level qualified
health plan not providing pediatric dental benefits, in conjunction
with the lowest-cost portion of the premium for a stand-alone dental
plan properly allocable to pediatric dental benefits ($1,180 for S3
in conjunction with $0 for DP1 = $1,180), and the second lowest cost
silver-level qualified health plan not providing pediatric health
benefits, in conjunction with the second lowest-cost portion of the
premium for a stand-alone dental plan allocable to pediatric dental
benefits ($1,180 for S3 in conjunction with $0 for DP2 = $1,180).
Under paragraph (e) of this section, the adjusted monthly premium
for D's applicable benchmark plan is $1,180.
Example 5. Single taxpayer enrolls with dependent and
nondependent in a qualified health plan. Taxpayer G is single and
resides with his daughter, H, and with his teenage son, I, but may
only claim I as a dependent. G, H, and I enroll in coverage through
the Exchange in the rating area in which they all reside. The
Exchange offers only silver-level plans providing pediatric dental
benefits. Under paragraphs (f)(1) and (f)(2) of this section, G's
applicable benchmark plan is the second lowest-cost silver plan
covering G and I. However, H may qualify for a premium tax credit if
H is otherwise eligible. See paragraph (h) of this section.
Example 6. Change in coverage family. Taxpayer J is single and
has no dependents when she enrolls in a qualified health plan. The
Exchange in the rating area in which she resides offers only silver-
level plans that provide pediatric dental benefits. On August 1, J
has a child, K, whom she claims as a dependent. J enrolls in a
qualified health plan covering J and K effective August 1. Under
paragraphs (f)(1) and (f)(2) of this section, J's applicable
benchmark plan for January through July is the second lowest-cost
silver plan providing self-only coverage for J, and J's applicable
benchmark plan for the months August through December is the second
lowest-cost silver plan covering J and K.
Example 7. Minimum essential coverage for some coverage months.
Taxpayer L claims his daughter, M, as a dependent. L and M enroll in
a qualified health plan through an Exchange that offers only silver-
level plans that provide pediatric dental benefits. L, but not M, is
eligible for government-sponsored minimum essential coverage for
September to December. Thus, under paragraph (c)(1)(iii) of this
section, January through December are coverage months for M, and
January through August are coverage months for L. Because, under
paragraphs (d) and (f)(1) of this section, the premium assistance
amount for a coverage month is computed based on the applicable
benchmark plan for that coverage month, L's applicable benchmark
plan for January through August is the second lowest-cost option
covering L and M. Under paragraph (f)(1)(i)(C) of this section, L's
applicable benchmark plan for September through December is the
second lowest-cost silver plan providing self-only coverage for M.
Example 8. Family member eligible for minimum essential coverage
for the taxable year. The facts are the same as in Example 7, except
that L is not eligible for government-sponsored minimum essential
coverage for any months and M is eligible for government sponsored
minimum essential coverage for the entire year. Under paragraph
(f)(1)(i)(C) of this section, L's applicable benchmark plan is the
second lowest-cost silver plan providing self-only coverage for L.
Example 9. Benchmark plan premium for a coverage family with
family members who reside in different locations. (i) Taxpayer N's
coverage family consists of N and her three dependents O, P, and Q.
N, O, and P reside together but Q resides in a different location.
Under paragraphs (f)(1), (f)(2), and (f)(3) of
[[Page 44574]]
this section, the monthly applicable benchmark plan premium for N,
O, and P is $1,000 and the monthly applicable benchmark plan premium
for Q is $220.
(ii) Under paragraph (f)(4) of this section, because the members
of N's coverage family reside in different locations, the monthly
premium for N's applicable benchmark plan is the sum of $1,000, the
monthly premiums for the applicable benchmark plan for N, O, and P,
who reside together, and $220, the monthly applicable benchmark plan
premium for Q, who resides in a different location than N, O, and P.
Consequently, the premium for N's applicable benchmark plan is
$1,220.
Example 10. Aggregation of silver-level policies for plans not
covering a family under a single policy. (i) Taxpayers R and S are
married and live with S's mother, T, whom they claim as a dependent.
The Exchange for their rating area offers self-only and family
coverage at the silver level through Issuers A, B, and C, which each
offer only one silver-level plan. The silver-level plans offered by
Issuers A and B do not cover R, S, and T under a single policy. The
silver-level plan offered by Issuer A costs the following monthly
amounts for self-only coverage of R, S, and T, respectively: $400,
$450, and $600. The silver-level plan offered by Issuer B costs the
following monthly amounts for self-only coverage of R, S, and T,
respectively: $250, $300, and $450. The silver-level plan offered by
Issuer C provides coverage for R, S, and T under one policy for a
$1,200 monthly premium.
(ii) Under paragraph (f)(5) of this section, Issuer C's silver-
level plan that covers R, S, and T under one policy ($1,200 monthly
premium) and Issuer A's and Issuer B's silver-level plans that do
not cover R, S and T under one policy are considered in determining
R's and S's applicable benchmark plan. In addition, under paragraph
(f)(5)(ii) of this section, in determining R's and S's applicable
benchmark plan, the premium taken into account for Issuer A's plan
is $1,450 (the aggregate premiums for self-only policies covering R
($400), S ($450), and T ($600) and the premium taken into account
for Issuer B's plan is $1,000 (the aggregate premiums for self-only
policies covering R ($250), S ($300), and T ($450). Consequently,
R's and S's applicable benchmark plan is the Issuer C silver-level
plan covering R's and S's coverage family and the premium for their
applicable benchmark plan is $1,200.
Example 11. Benchmark plan premium for a taxpayer with family
members who cannot enroll in one policy and who reside in different
locations. (i) Taxpayer U's coverage family consists of U, U's
mother, V, and U's two daughters, W and X. U and V reside together
in Location 1 and W and X reside together in Location 2. The
Exchange in the rating area in which U and V reside does not offer a
silver-level plan that covers U and V under a single policy, whereas
all the silver-level plans offered through the Exchange in the
rating area in which W and X reside cover W and X under a single
policy. Both Exchanges offer only silver-level plans that provide
pediatric dental benefits. The silver plan offered by the Exchange
for the rating area in which U and V reside that would cover U and V
under self-only policies with the second-lowest aggregate premium
costs $400 a month for self-only coverage for U and $600 a month for
self-only coverage for V. The monthly premium for the second-lowest
cost silver plan covering W and X that is offered by the Exchange
for the rating area in which W and X reside is $500.
(ii) Under paragraph (f)(5)(ii) of this section, because
multiple policies are required to cover U and V, the members of U's
coverage family who reside together in Location 1, the premium taken
into account in determining U's benchmark plan is $1,000, the sum of
the premiums for the second-lowest aggregate cost of self-only
policies covering U ($400) and V ($600) offered by the Exchange to U
and V for the rating area in which U and V reside. Under paragraph
(f)(5)(i) of this section, because all silver-level plans offered by
the Exchange in which W and X reside cover W and X under a single
policy, the premium for W and X's coverage that is taken into
account in determining U's benchmark plan is $500, the second-lowest
cost silver policy covering W and X that is offered by the Exchange
for the rating area in which W and X reside. Under paragraph (f)(4)
of this section, because the members of U's coverage family reside
in different locations, U's monthly benchmark plan premium is
$1,500, the sum of the premiums for the applicable benchmark plans
for each group of family members residing in different locations
($1,000 for U and V, who reside in Location 1, plus $500 for W and
X, who reside in Location 2).
Example 12. Qualified health plan closed to enrollment. Taxpayer
Y has two dependents, Z and AA. Y, Z, and AA enroll in a qualified
health plan through the Exchange for the rating area where the
family resides. The Exchange, which offers only qualified health
plans that include pediatric dental benefits, offers silver-level
plans J, K, L, and M, which are, respectively, the first, second,
third, and fourth lowest cost silver plans covering Y's family. When
Y's family enrolls, Plan J is closed to enrollment. Under paragraph
(f)(6) of this section, Plan J is disregarded in determining Y's
applicable benchmark plan, and Plan L is used in determining Y's
applicable benchmark plan.
Example 13. Benchmark plan closes to new enrollees during the
year. (i) Taxpayers BB, CC, and DD each have coverage families
consisting of two adults. In that rating area, Plan 2 is the second
lowest cost silver plan and Plan 3 is the third lowest cost silver
plan covering the two adults in each coverage family offered through
the Exchange. The BB and CC families each enroll in a qualified
health plan that is not the applicable benchmark plan (Plan 4) in
November during the annual open enrollment period. Plan 2 closes to
new enrollees the following June. Thus, on July 1, Plan 3 is the
second lowest cost silver plan available to new enrollees through
the Exchange. The DD family enrolls in a qualified health plan in
July.
(ii) Under paragraphs (f)(1), (f)(2), (f)(3), and (f)(7) of this
section, the silver-level plan that BB and CC use to determine their
applicable benchmark plan for all coverage months during the year is
Plan 2. The applicable benchmark plan that DD uses to determine DD's
applicable benchmark plan is Plan 3, because Plan 2 is not open to
enrollment through the Exchange when the DD family enrolls.
Example 14. Benchmark plan terminates for all enrollees during
the year. The facts are the same as in Example 13, except that Plan
2 terminates for all enrollees on June 30. Under paragraphs (f)(1),
(f)(2), (f)(3), and (f)(7) of this section, Plan 2 is the silver-
level plan that BB and CC use to determine their applicable
benchmark plan for all coverage months during the year, and Plan 3
is the applicable benchmark plan that DD uses.
Example 15. Exchange offers only one silver-level plan. Taxpayer
EE's coverage family consists of EE, his spouse FF, and their two
dependent children GG and HH, who all reside together. The Exchange
for the rating area in which they reside offers only one silver-
level plan that EE's family may enroll in and the plan does not
provide pediatric dental benefits. The Exchange also offers one
stand-alone dental plan in which the family may enroll. Under
paragraph (f)(8) of this section, the silver-level plan and the
stand-alone dental plan offered by the Exchange are used for
purposes of determining EE's applicable benchmark plan under
paragraph (f)(3) of this section. Moreover, the lone silver-level
plan and the lone stand-alone dental plan offered by the Exchange
are used for purposes of determining EE's applicable benchmark plan
regardless of whether these plans cover EE's family under a single
policy or multiples policies.
* * * * *
(n) Effective/applicability date. (1) Except as provided in
paragraph (o)(2) of this section, this section applies to taxable years
ending after December 31, 2013.
(2) Paragraphs (c)(4) and (d)(2) apply to taxable years beginning
after December 31, 2016. Paragraphs (f)(1), (f)(3), (f)(4), (f)(6),
(f)(7), (f)(8), and (f)(9) of this section apply to taxable years
beginning after December 31, 2018. Paragraphs (c)(4) and (d)(2) of
Sec. 1.36B-3 as contained in 26 CFR part I edition revised as of April
1, 2016, apply to taxable years ending after December 31, 2013, and
beginning before January 1, 2017. Paragraphs (f)(1), (f)(3), (f)(4),
(f)(6), and (f)(7) of Sec. 1.36B-3 as contained in 26 CFR part I
edition revised as of April 1, 2016, apply to taxable years ending
after December 31, 2013, and beginning before January 1, 2019.
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Par. 6. Section 1.36B-5 is amended by:
0
1. Adding a new sentence to the end of paragraph (c)(3)(i).
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2. Adding paragraphs (c)(3)(iii) and (h).
Sec. 1.36B-5 Information reporting by Exchanges.
* * * * *
(c) * * *
[[Page 44575]]
(3) --* * *
(i) * * * If advance credit payments are made for coverage under
the plan, the enrollment premiums reported to each family under
paragraph (c)(1)(viii) of this section are the premiums allocated to
the family under Sec. 1.36B-3(h) (allocating enrollment premiums to
each taxpayer in proportion to the premiums for each taxpayer's
applicable benchmark plan).
* * * * *
(iii) Partial month of coverage--(A) In general. Except as provided
in paragraph (c)(iii)(B) of this section, if an individual is enrolled
in a qualified health plan after the first day of a month, the amount
reported for that month under paragraphs (c)(1)(iv), (c)(1)(v), and
(c)(1)(viii) of this section is $0.
(B) Certain mid-month enrollments. If an individual's qualified
health plan is terminated before the last day of a month, or if an
individual is enrolled in coverage after the first day of a month and
the coverage 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 amount reported under paragraphs
(c)(1)(iv) and (c)(1)(v) of this section is the premium for the
applicable benchmark plan for a full month of coverage (excluding the
premium allocated to benefits in excess of essential health benefits)
and the amount reported under paragraph (c)(1)(viii) of this section is
the enrollment premium for the month, reduced by any amounts that were
refunded.
* * * * *
(h) Effective/applicability date. Except for the last sentence of
paragraph (c)(3)(i) of this section and paragraph (c)(3)(iii) of this
section, this section applies to taxable years ending after December
31, 2013. The last sentence of paragraph (c)(3)(i) of this section and
paragraph (c)(3)(iii) of this section apply to taxable years beginning
after December 31, 2016. Paragraph (c)(3)(iii) of Sec. 1.36B-5 as
contained in 26 CFR part I edition revised as of April 1, 2016, applies
to taxable years ending after December 31, 2013, and beginning before
January 1, 2017.
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Par. 7. Section 1.5000A-3 is amended by adding a new paragraph
(e)(3)(ii)(G) to read as follows:
Sec. 1.5000A-3 Exempt individuals.
* * * * *
(e) * * *
(3) * * *
(ii) * * *
(G) Opt-out arrangements--(1) In general. Except as otherwise
provided in this paragraph (e)(3)(ii)(G), the amount of an opt-out
payment made available to an employee under an opt-out arrangement
increases the employee's (or related individual's) required
contribution for purposes of determining the affordability of the
eligible employer-sponsored plan to which the opt-out arrangement
relates, regardless of whether the employee (or related individual)
enrolls in the eligible employer-sponsored plan or declines to enroll
in that coverage and is paid the opt-out payment.
(2) Eligible opt-out arrangements. The amount of an opt-out payment
made available to an employee under an eligible opt-out arrangement
does not increase the employee's (or related individual's) required
contribution for purposes of determining the affordability of the
eligible employer-sponsored plan to which the eligible opt-out
arrangement relates, regardless of whether the employee (or related
individual) enrolls in the eligible employer-sponsored plan or is paid
the opt-out payment.
(3) Definitions. The following definitions apply for purposes of
this paragraph (e)(3)(ii)(G):
(A) Opt-out payment. The term opt-out payment means a payment that
is available only if an employee declines coverage, including waiving
coverage in which the employee would otherwise be enrolled, under an
eligible employer-sponsored plan and that is not permitted to be used
to pay for coverage under the eligible employer-sponsored plan. An
amount provided as an employer contribution to a cafeteria plan that is
permitted to be used by the employee to purchase minimum essential
coverage is not an opt-out payment, whether or not the employee may
receive the amount as a taxable benefit. See paragraph (e)(3)(ii)(E) of
this section for the treatment of employer contributions to a cafeteria
plan.
(B) Opt-out arrangement. The term opt-out arrangement means the
arrangement under which an opt-out payment is made available.
(C) Eligible opt-out arrangement. The term eligible opt-out
arrangement means an arrangement under which an employee's right to
receive an opt-out payment is conditioned on the employee providing
reasonable evidence that the employee and all other individuals for
whom the employee reasonably expects to claim a personal exemption
deduction for the taxable year or years that begin or end in or with
the employer's plan year to which the opt-out arrangement applies
(employee's expected tax family) have, or will have, minimum essential
coverage (other than coverage in the individual market, whether or not
obtained through the Marketplace) during the period of coverage to
which the opt-out arrangement applies. For this purpose, reasonable
evidence of alternative coverage may include the employee's attestation
that the employee and all other members of the employee's expected tax
family have, or will have, minimum essential coverage (other than
coverage in the individual market, whether or not obtained through the
Marketplace) for the relevant period. Regardless of the evidence of
alternative coverage required under the arrangement, to be an eligible
opt-out arrangement, the arrangement must provide that the opt-out
payment will not be made, and the employer in fact must not make the
payment, if the employer knows or has reason to know that the employee
or any other member of the employee's expected tax family does not
have, or will not have, the alternative coverage. The arrangement must
also require that the evidence of the alternative coverage be provided
no less frequently than every plan year to which the eligible opt-out
arrangement applies, and that it must be provided no earlier than a
reasonable period of time before the commencement of the period of
coverage to which the eligible opt-out arrangement applies. If the
reasonable evidence (such as an attestation) is obtained as part of the
regular annual open enrollment period that occurs within a few months
before the commencement of the next plan year of employer-sponsored
coverage, it will qualify as being provided no earlier than a
reasonable period of time before commencement of the applicable period
of coverage. An eligible opt-out arrangement is also permitted to
require evidence of alternative coverage to be provided at a later
date, such as after the plan year starts, which would enable the
employer to require evidence that the employee and all other members of
the employee's expected tax family have already obtained the
alternative coverage. Nothing in this rule prohibits an employer from
requiring reasonable evidence of alternative coverage other than an
attestation in order for an employee to qualify for an opt-out payment
under an eligible opt-out arrangement. Further, provided that the
reasonable evidence requirement is met, the amount of an opt-out
payment made available under an eligible opt-out arrangement continues
to be excluded from the employee's required contribution for the
remainder of the period of coverage to which the opt-out payment
originally applied even if the
[[Page 44576]]
alternative coverage subsequently terminates for the employee or for
any other member of the employee's expected tax family, regardless of
whether the opt-out payment is required to be adjusted or terminated
due to the loss of alternative coverage, and regardless of whether the
employee is required to provide notice of the loss of alternative
coverage to the employer.
* * * * *
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Par. 8. Section 1.5000A-5 is amended by revising paragraph (c).
Sec. 1.5000A-5 Administration and procedure.
* * * * *
(c) Effective/applicability date. (1) Except as provided in
paragraph (c)(2), this section and Sec. Sec. 1.5000A-1 through
1.5000A-4 apply for months beginning after December 31, 2013.
(2) Paragraph (e)(3)(ii)(G) of Sec. 1.5000A-3 applies to months
beginning after December 31, 2016.
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Par. 9. Revise Sec. 1.6011-8 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. Except as otherwise provided in this
paragraph (a), a taxpayer who receives the benefit of advance payments
of the premium tax credit under section 36B 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) and reconcile the advance
credit payments. However, if advance credit payments are made for
coverage of an individual for whom no taxpayer claims a personal
exemption deduction, the taxpayer who attests to the Exchange to the
intention to claim a personal exemption deduction for the individual as
part of the determination that the taxpayer is eligible for advance
credit payments must file a tax return and reconcile the advance credit
payments.
(b) Effective/applicability date. Except as otherwise provided,
this section applies for taxable years beginning after December 31,
2016. Paragraph (a) of Sec. 1.6011-8 as contained in 26 CFR part I
edition revised as of April 1, 2016, applies to taxable years ending
after December 31, 2013, and beginning before January 1, 2017.
Sec. 301.6011-2 [Amended]
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Par. 10. Section 301.6011-2(b)(1) is amended by adding ``1095-B, 1095-
C'' after ``1094 series'', and removing ``1095 series''.
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2016-15940 Filed 7-6-16; 11:15 am]
BILLING CODE 4830-01-P