The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2021-0787; Project Identifier MCAI-2021-00252-T” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend the proposal because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to https://www.regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Chirayu Gupta, Aerospace Engineer, Mechanical Systems and Administrative Services Section, FAA, New York ACO Branch, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; fax 516-794-5531; email 9-avs-nyaco-cos@faa.gov. Any commentary that the FAA receives that is not specifically designated as CBI will be placed in the public docket for this rulemaking.

Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued TCCA AD CF-2021-06, dated February 26, 2021 (TCCA AD CF-2021-06) (also referred to after this as the Mandatory Continuing Airworthiness Information, or the MCAI), to correct an unsafe condition for certain Bombardier, Inc., Model CL-600-1A11 (600), CL-600-2A12 (601), and CL-600-2B16 (601-3A, 601-3R, and 604 Variants) airplanes. You may examine the MCAI in the AD docket at https://www.regulations.gov by searching for and locating Docket No. FAA-2021-0787.

This proposed AD was prompted by a report of a wing stall (wing drop/un-commanded roll) during a landing flare. Photographs after landing showed that the airplane had mixed ice on the leading edges of the wings; therefore, it was determined that during descent the WAI system had been OFF because the ice detector did not detect ice. Post-incident functional checks of the ice detectors revealed no faults with the ice detector units onboard the aircraft. After the investigation, it was revealed that the flightcrew had followed the AFM procedures, which did not require the WAI system to be selected ON. The FAA is proposing this AD to address ice accumulation on the wing leading edges, which could result in a wing stall during landing and consequent reduced controllability of the airplane. See the MCAI for additional background information.

Bombardier has issued the following service information, which specifies a revised AFM limitation and procedure for the WAI system in order to mitigate the risk of ice accumulation on the wing leading edge. These documents are distinct since they apply to different airplane configurations.

• Sub-sub section (2), Wing Anti-ice System, of sub-section I., Operation in Icing Conditions, of Chapter 3., OPERATION LIMITATIONS, of the LIMITATIONS section; and sub-section C., Icing Conditions During Flight, of Chapter 3., SYSTEMS OPERATIONS—ANTI-ICE, and sub-section I., Before Landing, of Chapter 42., CONSOLIDATED CHECK LIST, of NORMAL PROCEDURES section; of Canadair Challenger CL-600-1A11 AFM, Product Publication 600, Revision 114, dated April 16, 2020.

• Sub-sub section (2), Wing Anti-ice System, of sub-section I., Operation in Icing Conditions, of Chapter 4., OPERATION LIMITATIONS, of the LIMITATIONS section; and sub-section C., Icing Conditions During Flight, of Chapter 4., SYSTEMS OPERATIONS—ANTI-ICE, and sub-section I., Before Landing, of Chapter 23., CONSOLIDATED CHECK LIST, of the NORMAL PROCEDURES section; of Canadair Challenger CL-600-1A11 AFM, Product Support Publication (PSP) 600-1, Revision 106, dated April 16, 2020.

• Sub-sub section (2), Wing Anti-ice System, of sub-section I., Operation in Icing Conditions, of Chapter 3., OPERATING LIMITATIONS, of the LIMITATIONS section; and sub-section E., Icing Conditions During Flight, of Chapter 4., SYSTEMS OPERATIONS—ANTI-ICE, of the NORMAL PROCEDURES section; of Canadair Challenger CL-600-2A12 AFM, PSP 601-1A, Revision 123, dated April 16, 2020.

• Sub-sub section (2), Wing Anti-ice System, of sub-section I., Operation in Icing Conditions, of Chapter 3., OPERATING LIMITATIONS, of the LIMITATIONS section; and sub-section E., Icing Conditions During Flight, of Chapter 4., SYSTEMS OPERATIONS—ANTI-ICE, of the NORMAL PROCEDURES section; of Canadair Challenger CL-600-2A12 AFM, PSP 601-1A-1, Revision 82, dated April 16, 2020.

• Sub-sub section (2), Wing Anti-ice System, of sub-section I., Operation in Icing Conditions, of Chapter 3., OPERATING LIMITATIONS, of the LIMITATIONS section; and sub-section E., Icing Conditions During Flight, of Chapter 4., SYSTEMS OPERATIONS—ANTI-ICE, of the NORMAL PROCEDURES section; of Canadair Challenger CL-600-2A12 AFM, PSP 601-1B, Revision 86, dated April 16, 2020.

• Sub-sub section (2), Wing Anti-ice System, of sub-section I., Operation in Icing Conditions, of Chapter 3., OPERATING LIMITATIONS, of the LIMITATIONS section; and sub-section E., Icing Conditions During Flight, of Chapter 4., SYSTEMS OPERATIONS—ANTI-ICE, of the NORMAL PROCEDURES section; of Canadair Challenger CL-600-2A12 AFM, PSP 601-1B-1, Revision 84, dated April 16, 2020.

• Sub-sub section (2), Wing Anti-ice System, of sub-section I., Operation in Icing Conditions, of Chapter 3., OPERATING LIMITATIONS, of the LIMITATIONS section; and sub-section E., Icing Conditions During Flight, of Chapter 4., SYSTEMS OPERATIONS—ANTI-ICE, of the NORMAL PROCEDURES section; of Canadair Challenger CL-600-2B16 AFM, PSP 601A-1, Revision 106, dated April 16, 2020.

• Sub-sub section (2), Wing Anti-ice System, of sub-section I., Operation in Icing Conditions, of Chapter 3., OPERATING LIMITATIONS, of the LIMITATIONS section; and sub-section E., Icing Conditions During Flight, of Chapter 4., SYSTEMS OPERATIONS—ANTI-ICE, of the NORMAL PROCEDURES section; of Canadair Challenger CL-600-2B16 AFM, PSP 601A-1-1, Revision 95, dated April 16, 2020.

• Sub-sub section B., Wing Anti-ice System, of sub-section 4., Operation in Icing Conditions, of Section 02-04, Operating Limitations, of Chapter 2—LIMITATIONS; and sub-section M., Icing Conditions During Flight, of Section 04-14, Ice and Rain Protection, of Chapter 4—NORMAL PROCEDURES; of Bombardier Challenger 604 CL-600-2B16 AFM, PSP 604-1, Revision 116, dated December 18, 2019.

• Sub-sub section B., Wing Anti-ice System, of sub-section 4., Operation in Icing Conditions, of Section 02-04, Operating Limitations, of Chapter 2—LIMITATIONS; and sub-section M., Icing Conditions During Flight, of Section 04-14, Ice and Rain Protection, of Chapter 4—NORMAL PROCEDURES; of Bombardier Challenger 605 CL-600-2B16 AFM, PSP 605-1, Revision 54, dated December 18, 2019.

• Sub-sub section B., Wing Anti-ice System, of sub-section 4., Operation in Icing Conditions, of Section 02-04, Operating Limitations, of Chapter 2—LIMITATIONS; and sub-section M., Icing Conditions During Flight, of Section 04-14, Ice and Rain Protection, of Chapter 4—NORMAL PROCEDURES; of Bombardier Challenger 650 CL-600-2B16 AFM, PSP 650-1, Revision 19, dated December 18, 2019.

This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with the State of Design Authority, the FAA has been notified of the unsafe condition described in the MCAI and service information referenced above. The FAA is proposing this AD because the FAA evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop on other products of the same type design.

This proposed AD would require revising the existing AFM to incorporate the limitations and procedures for the WAI system described previously, in order to mitigate the risk of ice accumulation on the wing leading edges, except as discussed under “Differences Between this Proposed AD and the MCAI.”

This NPRM updates certain AFM revision levels identified in TCCA AD CF-2021-06, and therefore identifies the complete, most recent service information that will be incorporated by reference in the final rule.

The FAA estimates that this AD, if adopted as proposed, would affect 619 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Would not affect intrastate aviation in Alaska, and

(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

Titles I and IV of ERISA and the Internal Revenue Code (Code), generally require pension and other employee benefit plans to file annual returns/reports concerning, among other things, the financial condition and operations of the plan. Filing a Form 5500 Annual Return/Report of Employee Benefit Plan (Form 5500) or, if eligible, a Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan (Form 5500-SF), together with any required schedules and attachments (together “the Form 5500 Annual Return/Report”), 1 in accordance with their instructions, generally satisfies these annual reporting requirements.

ERISA section 103 broadly sets out annual financial reporting requirements for employee benefit plans under Title I of ERISA. The Form 5500 Annual Return/Report for Title I purposes is promulgated pursuant to DOL regulations under the ERISA provisions authorizing limited exemptions and simplified reporting and disclosure for welfare plans under ERISA section 104(a)(3), simplified annual reports under ERISA section 104(a)(2)(A) for pension plans that cover fewer than 100 participants, and alternative methods of compliance for all pension plans under ERISA section 110. The Form 5500 Annual Return/Report, and related instructions and regulations, are also promulgated under the DOL's general regulatory authority in ERISA sections 109 and 505.

In addition to being an important disclosure document for plan participants and beneficiaries, the Form 5500 Annual Return/Report is a critical enforcement, compliance, and research tool for the DOL, the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) (together “Agencies”). The Form 5500 Annual Return/Report is also an important source of information and data for use by other Federal agencies, Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies. In the United States, there are an estimated 2.5 million health plans, an estimated 885,000 other welfare plans, and nearly 772,000 private pension plans. These plans cover roughly 154 million private sector workers, retirees, and dependents, and have estimated assets of $12.2 trillion. The Form 5500 Annual Return/Report serves as the principal source of information and data available to the Agencies concerning the operations, funding, and investments of approximately 843,000 pension and welfare benefit plans that file. 2 Accordingly, the Form 5500 Annual Return/Report is essential to each Agency's enforcement, research, and policy formulation programs, as well for the regulated community, which makes increasing use of the information as more capabilities develop to interact with the data electronically. The data is also an important source of information and data for use by other Federal agencies, Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies. The Form 5500 Annual Return/Report also serves as the primary means for monitoring the operations of plans by participating employers in multiple employer plans and other group arrangements, plan participants and beneficiaries, and by the public.

The forms, schedules, and instructions, also serve to help the DOL carry out its statutory directives under sections 506 and 513 of ERISA. Specifically, section 506(a) of ERISA authorizes the Secretary of Labor to coordinate with other Agencies to avoid unnecessary expense and duplication of functions among Government agencies. The Agencies designed the Form 5500 Annual Return/Report so that it could be used simultaneously to satisfy annual return/report requirements to the Agencies, and to help the Agencies more effectively and efficiently (from both the public's and the Agencies' perspectives) provide oversight, assist with compliance, and enforce the provisions of ERISA and the Code. Section 506(b) gives the DOL responsibility for detecting and investigating civil and criminal violations of Title I of ERISA. The Form 5500 Annual Return/Report is one of the important tools the DOL uses to carry out its responsibility to detect and investigate such violations. Section 513(b)(2) of ERISA specifically directs DOL to undertake research studies relating to pension plans, including but not limited to (A) the effects of this subchapter upon the provisions and costs of pension plans, (B) the role of private pensions in meeting the economic security needs of the nation, and (C) the operation of private pension plans including types and levels of benefits, degree of reciprocity or portability, and financial and actuarial characteristics and practices, and methods of encouraging the growth of the private pension system.

Recent legislative and regulatory changes affecting multiple employer pension plans (MEPs) and similar arrangements are spurring the current need to update the Form 5500 Annual Return/Report and related regulations. Specifically, as discussed in more detail in the NPFR, the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), 3 included various provisions designed to improve the private employer-based retirement system. Among other things, the SECURE Act included changes designed to simplify retirement plan administration for certain eligible defined contribution plans and added provisions to the Code relating to MEPs, including MEPs with pooled plan providers, and adopted provisions under Title I of ERISA that designated these MEPs with pooled plan providers as pooled employer plans.

The NPFR published concurrently in this issue of the Federal Register sets forth a discussion of form and instruction changes that relate to these proposed regulations. These proposed revisions to the DOL's reporting regulations are needed for the DOL to implement the forms revisions proposed in the three-agency (DOL, IRS, and PBGC) Notice of Proposed Forms Revisions (NPFR).

Section 2520.103-1 generally describes the content of the Form 5500 Annual Return/Report as a limited exemption and alternative method of compliance for ERISA-covered employee benefit plans to satisfy annual reporting requirements under Title I. The proposal adds a reference to “section 202 of the SECURE Act” to paragraph (a)(2) of § 2520.103-1 to set forth the authority for prescribing a consolidated report alternative method of compliance for certain groups of defined contribution retirement plans under proposed §§ 2520.103-14 and 2520.104-51, discussed below, relating to defined contribution group (DCG) reporting arrangements.

Paragraphs (b) and (c) of § 2520.103-1 generally describes the contents of the annual report for large plans (generally those with 100 or more participants) and small plans (generally those with fewer than 100 participants). The proposal would amend § 2520.103-1(b)(1) to add a proposed multiple employer plan (MEP) schedule (titled Schedule MEP) to the list of schedules and attachments required to be included with the Form 5500 for large MEPs. A parallel update is being proposed to § 2520.103-1(c)(1) to add the Schedule MEP as a schedule that small MEPs must include with the Form 5500. 4

Paragraph (c) of § 2520.103-1 describes the conditions under which an eligible small plan (generally with fewer than 100 participants) may file the Form 5500-SF. The proposal would add § 2520.103-1(c)(2)(ii)(F) to state that MEPs, which include pooled employer plans, as well as MEPs described in the DOL's regulation at § 2510.3-55 (association retirement plans and professional employer organization (PEO) MEPs), are not permitted to use the Form 5500-SF regardless of whether the plan meets the size and other requirements for filing a Form 5500-SF. A similar prohibition applies under the current regulation to MEWA plans required to file the Form M-1 and to multiemployer plans. The proposal would also add a new § 2520.103-1(c)(2)(ii)(G) to provide a similar prohibition on filing the Form 5500-SF for DCG reporting arrangements. As described below in proposed §§ 2510.103-14 and 104-51, DCG reporting arrangements must file the aggregated annual report for participating plans using the Form 5500, including the schedules and attachments that are generally required for large retirement plans and Direct Filing Entities (DFEs) as well as a Schedule DCG (Individual Plan Information) for each plan whose reporting obligation is being satisfied by the DCG filing.

Section 2520.103-10 identifies financial schedules that are required to be included as part of the Form 5500 Annual Return/Report depending on the characteristics and operations of the plan. The listed schedules include the “Schedule of Assets Held for Investment” and “Schedule of Assets Acquired and Disposed within the Plan Year.” Paragraph (b) of § 2520.103-10 sets forth the content requirements for these schedules. The NPFR being published concurrently with this NPRM includes proposed additions and clarifications to the content of the “Schedules of Assets Held for Investment” and the “Schedule of Assets Acquired and Disposed within the Plan Year” that are designed to improve the consistency, transparency, and usability of the information reported regarding plan investments. The proposed changes to the contents and format of the schedule are described in detail in the NPFR and also set forth in the proposed amendment to the regulatory text in paragraph (b)(1)(i) of § 2520.103-10. Currently, filers typically file the schedule as a PDF. Of particular note, the proposal specifies that the schedules would have to be filed electronically through the ERISA Filing Acceptance System II (EFAST2) electronic filing system in a structured format in accordance with the EFAST2 requirements and the Form 5500's instructions.

The proposal would amend the ERISA annual reporting regulations to implement the SECURE Act section 202 directive to the Secretary of Labor to jointly with the Secretary of the Treasury provide for a single, aggregated Form 5500 option that would satisfy the annual reporting obligations for the defined contribution pension plans participating in the group. Under the proposal, several conditions relating to the DCG reporting arrangement, the participating plans, and the content of the Form 5500 filing would have to be satisfied before the aggregated filing would satisfy the annual reporting requirements of the separate participating plans. The NPFR describes those conditions in detail. The conditions also are set forth in a proposed new 29 CFR 2520.103-14 and 2520.104-51. 5

With respect to the content requirements for a DCG consolidated Form 5500 filing, proposed paragraph (b) of § 2520.103-14 provides that the consolidated DCG report would be required to include a Form 5500 “Annual Return/Report of Employee Benefit Plan” and various statements or schedules based on the characteristics and operations of the participating plans, including Schedule A (Insurance Information), Schedule C (Service Provider Information), Schedule D (DFE/Participating Plan Information), Schedule G (Financial Transaction Schedules), Schedule H (Financial Information), Schedule R (Retirement Plan Information), Schedule DCG (Individual Plan Information), 6 supplemental schedules referred to in 29 CFR 2520.103-10 with information aggregated for all the participating plans, the report and opinion of an independent qualified public accountant (IQPA) for the DCG trust, and an IQPA report and opinion for any individual participating plans with 100 or more participants that would be subject to the audit requirement if filing a separate Form 5500. This would include separate financial statements, if such financial statements are prepared in order for the independent qualified public accountant to form the required opinions on the DCG trust required under the proposal and the individual participating large plans required by section 103(a)(3)(A) of the Act and § 2520.103-2(b)(5). 7

Proposed paragraph (d) would make clear that the DCG reporting arrangement must comply with the electronic filing requirements that apply to all plan filers and direct filing entities (DFE). See § 2520.104a-2 and the instructions for the Form 5500 Annual Return/Report for electronic filing requirements. In addition, the proposed paragraph emphasizes that the common plan administrator of all the participating plans that is filing the consolidated Form 5500 must maintain an original copy, with all required signatures, as part of its records (which also would be treated as records of each of the participating plans).

The proposed new § 2520.104-51 would authorize the DCG consolidated report as an alternative method of compliance under ERISA section 110 for defined contribution pension plans that participate in DCG reporting arrangements. Specifically, filing of a complete and accurate consolidated Form 5500 for the DCG reporting arrangement would relieve the administrator of each individual participating defined contribution pension plan that meets the requirements of paragraph (b) of § 2520.104-51 of the obligation to file an individual annual report under Title I of ERISA. This alternative method of compliance would be available only for a defined contribution pension plan in a plan year in which (i) such plan participates in a DCG reporting arrangement that meets the conditions of paragraph (c) of this proposed § 2520.104-51; and (ii) the DCG reporting arrangement has filed with the Secretary of Labor in accordance with proposed § 2520.104a-9, a complete and accurate consolidated annual report that meets the content requirements under proposed § 2520.103-14. To make clear that the DCG reporting arrangement is a direct filing entity (DFE) that is submitting the aggregated Form 5500 on behalf of the participating plans, proposed § 2520.104-51(b)(2) provides that that the term “DCG reporting arrangement” shall be used in place of the term “plan” where it appears in §§ 2520.103-3, 2520.103-4, 2520.103-6, 2520.103-8, 2520.103-9, and 2520.103-10 and elsewhere in subparts C and D of 29 CFR part 2520, as applicable.

Proposed § 2520.104-51 would also provide that the reporting relief for individual plans would apply only if all plans participating in the DCG reporting arrangement (i) are individual account plans or defined contribution plans; (ii) have—(A) the same trustee (“common trustee”) and same trust holding the assets of the participating plans (“common trust”); (B) the same one or more named fiduciaries, except the proposal would allow for the employer/plan sponsor to be a named fiduciary of each employer's own plan provided that the other named fiduciaries under the plans are the same and common to all plans (“common named fiduciaries”); (C) a designated administrator that is the same plan administrator for all the participating plans (“common plan administrator”); (D) plan years beginning on the same date (“common plan year”); (iii) provide the same investments or investment options to participants and beneficiaries (“common investments or investment options”); (iv) have the investment assets held in a single trust of the DCG reporting arrangement; (v) not hold any employer securities; (vi) be 100% invested in certain secure, easy to value assets that meet the definition of “eligible plan assets” (see the instructions for line 6a of the Form 5500-SF), such as mutual fund shares, investment contracts with insurance companies and banks valued at least annually, publicly traded securities held by a registered broker dealer, cash and cash equivalents, and plan loans to participants; (vii) be audited by an IQPA or be eligible for the waiver of the annual examination and report of an IQPA under 29 CFR 2520.104-46, but not by reason of enhanced bonding; and (viii) may not be a multiemployer plan or a MEP (including association retirement plans, pooled employer plans and professional employer organization plans (PEO plans)).

Proposed § 2520.104-51 would also expressly state that the alternative method of complying with the Title I annual reporting requirements would not relieve the administrator of the individual participating plans from any other requirement of Title I of the Act, including, for example, the provisions that require that plan administrators furnish copies of the summary plan description to participants and beneficiaries (ERISA section 104(b)(1)), furnish certain documents to the Secretary of Labor upon request (ERISA section 104(a)(6)), and furnish a copy of a Summary Annual Report (SAR) to participants and beneficiaries of the plan (ERISA section 104(b)(3)). Proposed § 2520.104-51(c)(2)(iii) provides that all plans participating in a DCG reporting arrangement must have a designated common plan administrator that is the same plan administrator for all the participating plans. The SECURE Act was not explicit on whether this was intended to require the same person to be the plan administrator under ERISA section 3(16)(A) for the purpose of meeting the annual reporting requirements for each participating plan or was intended to require that the same person be the plan administrator of each participating plan for all purposes under ERISA. The proposal requires that the same person sign the DCG filing as the plan administrator for each participating plan. The Department solicits comments on whether the final rule should address whether individual plans participating in a DCG may have a separate statutory administrator responsible for other duties ERISA assigns to the plan administrator ( e.g., distribution of summary plan descriptions).

Finally, proposed new § 2520.104a-9 provides that, as would be the case for all of the participating plans in the DCG reporting arrangement if they were filing individually, the aggregated Form 5500 for the DCG is due no later than the end of the 7th month after the end of the common plan year that all the plans must have in order to participate in a DCG reporting arrangement pursuant to the requirement in section 202 of the SECURE Act and the proposed regulation at § 2520.104-51. Because the DCG filing is an alternative to each participating plan filing its own Form 5500, that would mean that each plan would have to submit its own IRS Form 5558 to extend the plan's due date, and, as a consequence, extend the due date for the DCG filing. A plan that did not submit a timely Form 5558 and that participated in a DCG filing that was submitted after the 7th month normal due date would be treated as having filed late. Public comments are specifically solicited on how the filing extension process should be structured for DCGs, including whether DCG reporting arrangements should be able to file a single Form 5558 to obtain an extension for filing the DCG consolidated report on behalf of the participating plans as an alternative to having each individual plan file a Form 5558 for there to be an extension for the reporting group as a whole. 8

As noted above, section 110 of ERISA permits the DOL to prescribe for pension plans alternative methods of complying with any of the reporting and disclosure requirements if the Secretary finds that: (1) The use of the alternative method is consistent with the purposes of ERISA and it provides adequate disclosure to plan participants and beneficiaries, and adequate reporting to the Secretary; (2) application of the statutory reporting and disclosure requirements would increase costs to the plan or impose unreasonable administrative burdens with respect to the operation of the plan; and (3) the application of the statutory reporting and disclosure requirements would be adverse to the interests of plan participants in the aggregate. The DOL believes that the proposal on DCG reporting arrangements meets those conditions, especially given the statutory direction in the SECURE Act to create such a reporting option, but also specifically solicits comments on the required findings under section 110.

As also discussed in the NPFR, the DOL expects that cost savings for plans relying on a DCG filing compared to plans filing separately will generally require the DCG to collectively exceed an aggregate participant count of 100 participants. In other words, the DOL does not expect a DCG filing to provide meaningful cost savings for plans compared to filing their own annual report in the case of DCG arrangements with an aggregate participant count of under 100 participants. Rather, we expect in such cases that the individual plans would likely qualify for filing the Form 5500-SF and that they will likely find it more cost effective to file their own separate Form 5500-SF. Accordingly, this proposal does not include an option under which such a “small” DCG could file as a small plan. Nonetheless, the DOL solicits comments regarding the merit of those expectations and assumption and whether the rules should provide a simplified reporting option for “small” DCG reporting arrangements.

Section 2520.104b-10 sets forth the requirements for the Summary Annual Report (SAR) appendix and prescribes formats for such reports. The DOL proposes updating this section to reflect the new filing option for DCG reporting arrangements and the addition of the new Schedule MEP and Schedule DCG to the 5500 Annual Report/Return. The proposal includes adding to the existing model language in the DOL's regulation new text that plans would use to provide a brief description of the plan based on the plan characteristic codes listed for the plan on the Form 5500, including whether it is a defined contribution or defined benefit plan, and whether the plan is a pooled employer plan, another type of multiple employer plan, a single employer plan, or a plan participating in a DCG reporting arrangement, respectively. The proposed new regulatory language also includes text for plans to use that states a copy of the Schedule DCG and the Schedule MEP are available on request, as applicable. For plans participating in a DCG reporting arrangement, the new language advises that a statement of the aggregate assets and liabilities of all the plans in the DCG reporting arrangement and accompanying notes, a statement of aggregate income and expenses of the DCG reporting arrangement and accompanying notes, and a copy of the audit report filed for the trust of the DCG reporting arrangement are available on request. Finally, the new SAR language would state that a copy of the Form 5500 annual report filed for the plan or DCG is available online from EBSA via a DOL website at www.efast.dol.gov.

If adopted, the proposed amendments to implement the SECURE Act's amendment of section 103(g) would apply to reporting for plan years beginning on or after January 1, 2021. The other proposed rules, including those under section 202 of the SECURE Act and structuring the schedules of assets held for investment, generally would apply to reporting for plan years beginning on or after January 1, 2022. The NPFR published concurrently in this issue of the Federal Register sets forth a comprehensive discussion of form and instruction changes that relate to these proposed regulations.

The following is a discussion of the DOL's examination of the effects of this rule as required by Executive Order 12866, 9 Executive Order 13563, 10 the Paperwork Reduction Act of 1995, 11 the Regulatory Flexibility Act, 12 section 202 of the Unfunded Mandates Reform Act of 1995, 13 Executive Order 13132, 14 and the Congressional Review Act. 15

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects; distributive impacts; and equity). Executive Order 13563 emphasizes the importance of quantifying costs and benefits, reducing costs, harmonizing rules, and promoting flexibility.

Under Executive Order 12866, “significant” regulatory actions are subject to review by the Office of Management and Budget (OMB). 16 Section 3(f) of the Executive order defines a “significant regulatory action” as an action that is likely to result in a rule (1) having an annual effect on the economy of $100 million or more, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities (also referred to as “economically significant”); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive order.

A full regulatory impact analysis must be prepared for major rules with economically significant effects (for example, $100 million or more in any 1 year), and the Office of Management and Budget (OMB) reviews “significant” regulatory actions. It has been determined that this rule is not economically significant within the meaning of section 3(f)(1) of the Executive order. Pursuant to the terms of the Executive order, OMB has determined, however, that this action is “significant” within the meaning of section 3(f)(4) of the Executive order. Therefore, the DOL has provided an assessment of the potential costs, benefits, and transfers associated with this proposed rule. In accordance with the provisions of Executive Order 12866, this proposed rule was reviewed by OMB. Pursuant to the Congressional Review Act, OMB has designated this proposed rule as not a “major rule,” as defined by 5 U.S.C. 804(2).

The Form 5500 Annual Return/Report is the principal source of information and data available to the Agencies concerning the operations, funding, and investments of pension and welfare benefit plans covered by ERISA and the Code. Accordingly, the Form 5500 Annual Return/Report is essential to each Agency's enforcement, research, and policy formulation programs and is a source of information and data for use by other Federal agencies, Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies. The Form 5500 Annual Return/Report also serves as the primary means by which the operations of plans can be monitored by plan participants and beneficiaries and the general public.

As discussed earlier in this document and the related NPFR publishing concurrently with this proposal, the SECURE Act included various provisions designed to improve the private employer-based retirement system by seeking to make it easier for businesses to offer retirement plans, and for individuals to save for retirement, through the creation of new plan structure and reporting options. These new structures will require new annual reporting, which has resulted in the need to update the Form 5500 Annual Return/Report and related regulations.

Pooled Employer Plans and Other MEPs: The SECURE Act amended ERISA and the Code to address certain MEPs administered by pooled plan providers. Under section 3(43) of ERISA such plans are called pooled employer plans. The proposed regulation would add a new Schedule MEP to the Form 5500 annual report to collect information on employers participating in MEPs and to gather compliance information on pooled employer plans. Some of the information on the proposed Schedule MEP is currently reported on the Form 5500 Annual Return/Report by MEPs, but it is reported on a nonstandard attachment. Only an image or picture of the attachment is available through the EFAST2 public disclosure function. Making the information data-capturable by including it on the proposed Schedule MEP would improve the uniformity and accuracy of the data and increase its usability.

“Defined Contribution Group (DCG) Reporting Arrangement”: Section 202 of the SECURE Act directs the Secretary of the Treasury and the Secretary of Labor (together “Secretaries”) to modify the returns required under section 6058 of the Code and the reports required by section 104 of the ERISA, respectively, so that all members of a group of defined contribution individual account plans that meet certain conditions may file a single aggregated annual return/report satisfying the requirements of both such sections. The SECURE Act provides that to constitute an eligible group of plans, all of the plans in the group must be either individual account plans or defined contribution plans, must have the same trustee, the same named fiduciaries, the same administrator, plans years beginning on the same date, and must provide the same investments or investment options to participants and beneficiaries. The proposed rule would establish the conditions, including the SECURE Act conditions, under which filing a single, aggregated Form 5500 Annual Return/Report by a “defined contribution group (DCG) reporting arrangement” would satisfy the individual, annual reporting obligations for each of the plans participating in the group. As discussed in more detail in the NPFR, the proposed rule also includes adding a new Schedule DCG (Individual Plan Information) to provide individual plan-level information for plans covered by a DCG consolidated Form 5500 filing.

In addition, although not directly implementing SECURE Act changes, some of the changes being proposed in this document are intended to ensure that annual reporting by pooled employer plans, other MEPs, and DCGs provides appropriate financial and operational transparency and accountability. Certain proposed changes would benefit workers in plans other than pooled employer plans and DCGs would apply more broadly, e.g., improving the quality of financial reporting. Other changes being proposed relate to efforts to improve compliance and oversight with respect to the Code issues and defined benefit plans subject to the PBGC insurance program under Title IV of ERISA.

Schedule H, Schedule of Assets Held for Investment, and Schedule of Assets Acquired and Disposed of Within the Year: As discussed in the NPFR, the Agencies are proposing structural, data element, and instruction changes to the current Schedule H, Line 4i Schedules of Assets. Current Line 4i would be broken into two items to identify the existing schedules separately: Line 4i(1) would identify the Schedule of Assets Held for Investment at End of Year, and Line 4i(2) would identify the Schedule of Assets Acquired and Disposed of Within Year (together “Schedules of Assets”). The current regulations and instructions require most large plans and DFEs to attach the Schedules of Assets to the Form 5500, Schedule H. 17 They are the only place on the Form 5500 Annual Return/Report where plans are required to list individual plan investments identified by major characteristics, such as issue, maturity date, interest rate, cost and current value. As such, they are the only part of the Form 5500 Annual Return/Report useful to evaluate the year-to-year performance, liquidity, and risk characteristics of a plan's individual investments.

The current reported information suffers from several shortcomings. First, filers currently submit this information as non-standard attachments to filers' electronic Form 5500 Annual Return/Report filings, so only an image or picture of the attachments is available through the EFAST2 public disclosure function. A survey panel of plan sponsors, service providers, representatives of plan participants, and researchers was conducted in 2014 as part of a Government Accountability Office (GAO) report; 11 of 31 respondents indicated that having no standard reporting format was a very or extremely significant challenge. GAO reported that attachments to the form may be as long as 400 pages, making it particularly difficult for users to find information. 18 Second, filers do not always provide the Line 4i Schedules of Assets in the same place in each annual return/report. For example, the Line 4i Schedules of Assets are often incorporated in the larger audit report of the plan's IQPA that itself is filed as a nonstandard attachment to the Form 5500 Annual Return/Report. Third, the schedules do not require a standardized method for identifying and describing assets on the Line 4i Schedules. Different filings may identify the same stock or mutual fund with various different names or abbreviations. In the aforementioned GAO survey, most researchers indicated that a lack of a standard reporting format or unique identifier for plan assets was a major challenge, while representatives of plan sponsors and service providers did not. 19

Data capturability of the Line 4i Schedules of Assets would make it much easier and more efficient to monitor plan holdings as computer programs can read and analyze the data much more efficiently. Currently, entities expend considerable resources collecting the data and presenting it in a usable format, to which they then sell access. Making the information data capturable at the submission stage of the process would be more cost effective as it removes the need for a second entity to gather the information, and allow more entities access to the data at a lower overall cost. The DOL's Office of Inspector General (“DOL-OIG”) and the GAO have both recommended that EBSA implement changes to create more detailed and structured Schedules of Assets. 20 It would also allow the Agencies and the interested public, including the participants and beneficiaries in impacted plans, to better monitor a larger number of pension plans and their asset allocations. A number of private entities have been using the information reported on Line 4i Schedule of Assets Held for Investment in larger pension plan Form 5500 Annual Return/Report filings into data-capturable information and have been using it to compare plan investment menus and investment allocations. The DOL believes this development is evidence that plans sponsors and their service providers are interested in having access to these data. For example, one company that uses the Schedules of Assets data sent a letter to DOL stating that they believe that the information on the Form 5500 Annual Return/Report is very useful in “helping the agency understand the performance and design of retirement plans in the market place” and that the data availability fosters “third party data collection and evaluation efforts that in turn help protect retirement plan participants.”  21 Plan sponsors can use this information to see better how their investment menus compare to similarly situated plans and service providers use this information to identify plans with underperforming investments in order to attract new business. This can lead to more competition and improved plan performance, which would ultimately benefit plan participants and beneficiaries.

Defined Benefit Pension Plan/ERISA Title IV Additions: The Form 5500 collects information from defined benefit pension plans in Schedules MB, SB, and R. The PBGC has determined that it needs more detail in these schedules accurately to project defined benefit pension plan and PBGC insurance program liabilities. The PBGC's proposed changes to the information required to be reported by PBGC-insured defined benefit plans would remedy the deficiencies of the current Form 5500 filings and better protect participants. There are 23,371 single employer defined benefit plans and 1,373 multiemployer defined benefit plans that are covered by the PBGC and would be impacted by these changes. 22

Internal Revenue Code Compliance Additions: Prior to 2009, Schedule E, ESOP Annual Information, Schedule P, Annual Return of Fiduciary of Employee Benefit Trust, and Schedule T, Qualified Pension Plan Coverage Information, were required as part of the annual return under section 6058(a) of the Code and associated regulations, but they were not information collections of the DOL or the PBGC. Beginning in 2009, DOL mandated electronic filing of Form 5500, Annual Return/Report of Employee Benefit Plan, and Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan. At that time limitations on the IRS' authority to require electronic filing of annual returns resulted in the removal of the “IRS-only” schedules from the Form 5500 filing requirements. The lack of information from these schedules has negatively impacted the IRS's ability to focus effectively on specific factors of noncompliance when selecting retirement plans for examination. Rather than reinstating the Schedules E, P, and T, the IRS is proposing to add new questions to the 2022 Form 5500 designed to assist the IRS in identifying plans that are non-compliant relating to Code section 410(b) coverage, Code section 401(a)(4) non-discrimination, and Code section 401(k) non-discrimination testing. Additionally, IRS is proposing to add a question that would help it identify whether adopters of pre-approved plans have been updated timely for changes in the law.

Major portions of this proposal relate to SECURE Act statutory changes that (1) recognized a new type of multiple employer plan under Title I of ERISA called pooled employer plans; and (2) called for the Secretaries to establish a new consolidated annual report for certain groups of defined contribution pension plans (herein called DCG reporting arrangements). The SECURE Act amendments first authorized pooled employer plans to begin operating beginning on January 1, 2021; even early adopted pooled employer plans generally will not file a Form 5500 before July 2022. Similarly, DCG reporting arrangements are a new filing option starting with the 2022 plan year; such consolidated filings will not begin until July 2023. Thus, there is no historical Form 5500 information that the DOL can use reliably to evaluate the number of affected entities. As a result, there is significant uncertainty regarding the DOL's ability to measure costs and benefits that may result from this proposal. The DOL nonetheless is presenting below an overview of potentially affected entities and an approach to evaluating the possible impacts of this proposal. In evaluating costs and benefits, the DOL took account of the fact that various types of plans could be affected by more than one proposed revision. DOL is also soliciting data relevant to an evaluation of costs and benefits and comments on alternative methodologies and assumptions for evaluating the costs and benefits.

Defined Contribution Pension Plans: In 2018, there were 675,007 defined contribution plans with 105.8 million total participants and 83.4 million active participants. Plans with fewer than 100 total participants (small plans) account for 87.4 percent of plans. 23

Defined Contribution Group (DCG) Reporting Arrangement: As this is a new type of annual reporting method, the DOL does not have data on how many DCGs would be created nor the number of plans that would choose to satisfy their individual filing obligations by meeting the requirements for being part of a DCG, including the filing of a consolidated Form 5500 Annual Return/Report by the common plan administrator. We note that in 2018 there were 499,234 small defined contribution plans that reported the plan characteristic code 3D in their Form 5500-SF to indicate that they are intended to operate as pre-approved plans under sections 401, 403(a), and 4975(e)(7) of the Code. The DOL assumes that a DCG reporting option may suit their existing plan and business models and that, therefore, some fraction of these plans may find it advantageous to join a DCG for filing purposes.

Defined Benefit Pension Plans: In 2018, there were 46,869 defined benefit plans with 34.0 million total participants and 13.1 million active participants. There were 45,275 single-employer defined benefit plans and 1,388 multiemployer defined benefit plans. 24

Multiple Employer Pension Plans: A MEP, for Form 5500 reporting purposes, generally is a retirement plan maintained by two or more employers that are not members of the same controlled group or affiliated service group under Code section 414(b), (c), or (m), and which is not a multiemployer plan. 25 In 2018, there were 4,730 MEPs filing a Form 5500, of which 207 were defined benefit pension plans and 4,523 were defined contribution pension plans. There were 6.9 million participants reported as covered by these plans. 26 The proposal, if finalized, would establish a new Schedule MEP to report information specific to pension MEPs. While the new Schedule MEP would retain ERISA section 103(g) participating employer information that MEPs must currently file as a non-standardized attachment, it also would add the SECURE Act requirement for pension MEPS to report aggregate account balances information for each participating employer in the MEP. Schedule MEP would also include questions intended to focus on SECURE Act issues and compliance for pooled employer plans.

Association Retirement Plan. An association retirement plan is a defined contribution MEP, sponsored by a bona fide group or association of employers that meets the conditions under 29 CFR 2510.3-55(b). The DOL does not have information on how many reporting MEPs are association retirement plans or otherwise to estimate the number of association retirement plans (a sub-class of MEPs) that currently exist.

Professional Employer Organizations (PEOs) Plan: A PEO MEP is a defined contribution pension plan sponsored by a bona fide PEO that meets the conditions under 29 CFR 2510.3-55(c). According to the National Association of Professional Employer Organizations, there are 487 PEOs in the United States. 27 The DOL does not have information on how many PEOs currently meet the conditions under 29 CFR 2510.3-55(c) to sponsor defined contribution MEPs for their clients, but assumes a substantial percentage of PEOs do sponsor MEPs, including defined contribution MEPs.

Pooled Employer Plans. The SECURE Act amended section 3(2) of ERISA and added section 3(43) to ERISA to authorize a new type of ERISA covered defined contribution MEP referred to as a “pooled employer plan” to be operated by a “pooled plan provider.” In its 2020 final rule on Registration Requirements for Pooled Plan Providers, the DOL noted the uncertainty surrounding the number of pooled employer plans that could be created based on the final rule, the number of employers that would participate in such plans, and the number of participants and beneficiaries that would be covered by them. 28 Approximately 50 pooled plan providers have filed an initial Form PR Pooled Plan Provider Registration (Form PR) and registered with the DOL. 29

The DOL does not have comprehensive data on how many employers are participating in pooled employer plans or the number of participants covered by the plans until the pooled employer plans file their first Forms 5500 in 2022 for their 2021 reporting year. The DOL attempted to review available public information on pooled employer plans by looking at information included in the filed Forms PR, and by examining news articles and statements on the pooled plan provider's websites. That review indicated that that there are a variety of approaches in how pooled employer plans are offered, and a variation in the number of employers that have joined a pooled employer plan. While pooled plan providers are required to update the Form PR to advise the DOL and the IRS about the establishment and offering of new pooled employer plans, the Form PR does not collect information on the number of employers participating in their pooled employer plans or the number of employees covered by each plan. One pooled plan provider was reported in another source as having 2,000 employers joined their pooled employer plan, whereas other providers reported five to 10 employers had joined their pooled employer plans. As part of the request for comments, the DOL is seeking information on the number of employers that have already joined a pooled employer plan and the number of employees covered by the plan in total and broken down by employer.

Pre-approved Pension Plans: These are plans that reported plan characteristics code 3D when filing the Form 5500 Annual Return/Report. The code 3D indicates “A pre-approved plan under sections 401, 403(a), and 4975(e)(7) of the Code that is subject to a favorable opinion letter from the IRS.” A pre-approved retirement plan is a plan offered to employers by financial institutions and others that are authorized to sponsor pre-approved plans. The pre-approved plan provider then makes the IRS-approved plan available to adopting employers. Providers must make reasonable and diligent efforts to ensure that adopting employers of the plan have actually received and are aware of all plan amendments and that such employers complete and sign new plans when necessary. 30 Of the 611,568 defined contribution pension plans that reported code 3D, 544,090 are reported as small plans, as they report having fewer than 100 participants each. Of these small defined contribution plans, 499,234 file the Form 5500-SF, cover approximately 10.0 million participants, and hold approximately $0.6 trillion in assets. The DOL expects that Form 5500-SF small pension plan filers are the most likely candidates to join a DCG or a pooled employer plan. The DOL lacks information on the number of plans, whether or not currently Form 5500-SF eligible filers, that would join a DCG or a pooled employer plan. The DOL is seeking comment on this issue.

Multiple Employer Welfare Arrangement (MEWA): A MEWA is defined in ERISA section 3(40)(B) generally as an employee welfare benefit plan or any other arrangement, which is established or maintained for the purpose of offering or providing welfare benefits to the employees of two or more employers, or to their beneficiaries. For purposes of this definition, two or more trades or businesses, whether or not incorporated, are deemed a single employer if such trades or businesses are under common control. Section 3(40) excludes from the definition of the term MEWA any plan or arrangement established or maintained under or pursuant to a collective bargaining agreement, or by a rural electric cooperative or rural telephone cooperative association. MEWAs that offer or provide coverage for medical benefits are generally required to file the Form M-1. In the 2018 calendar year, there were 640 total plan MEWAs that filed a Form M-1 with 2.0 million total participants. There were 47 non-plan MEWAs based on Form M-1 filings. 31

Plans affected by change in participant-count methodology for determining large plan versus small plan status and related filing requirements. As discussed in the NPFR, the Agencies are proposing a change in the methodology for defined contribution pension plans to determine whether the plan is a “large plan” (generally covers 100 or more participants) for purposes of Form 5500 annual reporting requirements, including the requirement to include an IQPA report and other schedules generally applicable to large pension plans. The plan size measure for this annual reporting distinction is based on the total number of participants at the beginning of the plan year and expressly includes employees eligible to participate in a Code section 401(k) plan (“401(k) plan”) even if the employees has not elected to participate and does not have an account balance. The proposed change would use a participant count based on the number of participants at the beginning of the year with an account balance. Current Form 5500 filings collect the number of participants at the end of the year with a balance, and does not currently collect such a figure for the beginning of the plan year. Accordingly, we used the end of year number of participants with a balance to estimate the number of plans impacted by this change. The actual number of plans effected could be higher or lower, depending on a plan's dynamics, but for plans that are growing, using the end of year number as a proxy for the beginning of year number could lead to an overestimate of the number of affected plans. Using the current definitions of large and small plans, there are 84,754 large defined contribution plans and 590,254 small defined contribution plans. Using the number of participants at the end of the year with an account balance as a proxy for the new proposed methodology, there are 65,312 large defined contribution plans and 609,695 small defined contribution plans. This would result in an estimated 19,442 defined contribution plans that, if the regulations are finalized as proposed, would be able to file as small plans instead of large ones and would experience cost savings, including due to being able to satisfy the conditions for being exempt from the IQPA report and from including the Schedules of Assets as part of their annual report.

Benefits of Changes for Pooled Employer Plans. The SECURE Act established a new type of ERISA-covered defined contribution pension plan, the pooled employer plan, that is established and maintained by a pooled plan provider that meets the conditions of the statute. By creating the pooled employer plan structure, the SECURE Act permitted multiple unrelated employers to participate without the need for any common interest among the employers (other than having adopted the plan). As discussed above, pooled employer plans need to provide ERISA section 103(g) participating employer information, as well as certain basic information regarding the pooled plan provider. Potentially increased reporting costs for those employers choosing to offer retirement benefits to their employees through participating in a pooled employer plan would be offset by other cost reductions or business benefits relative to not having administer an individual plan as further discussed below.

By participating in a pooled employer plan, employers could minimize their fiduciary responsibilities for ongoing administration and operation of the plan. Employers could benefit from reduced risk and liability because the pooled plan provider would bear most of the administrative and fiduciary responsibility for operating the pooled employer plan, including hiring and monitoring the 3(38) investment manager. Similarly, because the pooled plan provider handles the administrative tasks such as participant communications, plan recordkeeping, submitting the Form 5500 and complying with plan audits, this could increase the operating efficiency for participating employers. Also, as they are expected to be professional plan providers, it is anticipated that a pooled plan provider, relative to a small employer, would ensure that more accurate and complete data is reported to the DOL on the Form 5500. Further, as discussed in the regulatory impact analysis to the regulation establishing the Form PR, pooled employer plans generally would benefit from scale advantages, including the ability to obtain lower fees for investment options. 32 The marginal costs for pooled employer plans would diminish and pooled plan providers would spread fixed costs over a larger pool of member employers and employee participants, creating direct economic efficiencies. Szapiro's research finds that the per-employer cost of a large MEP can be lower than the cost of a small single employer plan. 33 Specifically, the study finds that a MEP with $125 million and 80 participating companies cost 78 basis points, whereas a single-employer plan with $1.5 million cost 111 basis points. Thus, compared to single-employer plans, MEPS can be a more cost-efficient option for small employers. The increased economic efficiency may result in small businesses being able to compete more easily with larger companies in recruiting and retaining workers due to a competitive employee benefit package. Finally, pooled employer plans may enable participants to achieve better retirement outcomes. VanDerhei's research finds that the adoption of a MEP in which the members do not need to share a common interest, other than participating in the same plan, with a 25 percent opt-out rate among employees, results in an overall 1.4 percent reduction in the retirement savings deficit, compared to when a MEP is not adopted. 34 The study also finds a 3.1 percent reduction in the retirement savings deficit for individuals working for employers with fewer than 100 employees and 3.3 percent reduction in the retirement savings deficit for individuals working for employers with 100 to 500 employees.

Benefits of Establishing the Proposed Schedule MEP. A benefit of the proposed Schedule MEP would provide a unified vehicle to report information related to new SECURE Act provisions, including information unique to MEPs. The participating employer information collected pursuant to section 103(g) of ERISA would also be data capturable and available at publicly viewable website containing images of the Form 5500 and related data sets. That public data would help protect plan participants and beneficiaries by allowing for improved analysis for oversight and research purposes by the government, the regulated community, and other interested stakeholders.

Benefits of DCGs. The proposal would update Form 5500 annual reporting requirements to establish requirements pursuant to section 202 of the SECURE Act for a consolidated return/report to provide eligible individual account plans with an alternative method of compliance with annual reporting requirements that would otherwise mandate a separate annual report for each plan. The consolidated reporting option for defined contribution pension plans also allows for more choice and flexibility in the reporting of information to the government. Eligible plans can choose, based on benefits and preferences, if they want to continue with the plan filing as individual plan or as part of a DCG. Plans whose individual reporting obligations would be satisfied by a DCG annual return/report filing may see a reduction in reporting costs depending on their circumstances.

The proposal includes the proposed Schedule DCG to provide individual plan-level information for those defined contribution pension plans whose annual reporting requirement would be satisfied by a DCG's consolidated filing. The uniformity of the DCG arrangement structure and the benefits of consolidated reporting may reduce the complexity and administrative burden of plans. Also, by having a common plan administrator who is expected to be a professional service provider filing on behalf of a group, it may increase the likelihood that more accurate and complete data is reported to the DOL. As a result, there may be an increase in annual reporting compliance and compliance with applicable ERISA requirements in general. Additionally, the Schedule DCG would help the Agency compare individual plan participation and aggregate asset and liability information from year-to-year. The Schedule DCG would include many of the questions that are currently required on the Form 5500-SF, and for large plans, the Schedule H questions regarding the report of an IQPA, as well as an IQPA report. While this requirement reduces the cost saving of filing as a DCG, the DOL and the IRS (collectively “Departments”) believe the information requested is consistent with the SECURE Act provision permitting the Departments to collect whatever plan level information is needed to perform adequate oversight and vital to provide to participants, beneficiaries, and the Departments information needed to adequately monitor the plans and keep track of their assets from year to year.

In light of changes in the financial environment and increasing concern about investments in hard-to-value assets and alternative investments, the proposed requirement that plans participating in DCGs must have investments that meet the currently applicable “eligible plan investment” criteria for filing a Form 5500 is important for regulatory, enforcement, and disclosure purposes. The proposal would also add trust questions to the Form 5500, the Form 5500-SF, and, the IRS Form 5500-EZ, regarding the name of the plan's trust, the trust's employer identification number (EIN), the name of the trustee or custodian, and the trustee's or custodian's telephone number. This information will enable the Agencies to focus more efficiently on compliance concerns for retirement plan trusts, including those for pooled employer plans and DCG reporting arrangements.

Changes to Method of Determining Small Plan Status for Certain Filing Exemptions and Requirements: As described in the NPFR, the proposal would change the current method of counting covered participants for purposes of determining when a defined contribution plan may file as a small plan and whether the plan may be exempt from the IQPA audit requirements generally applicable to large defined contribution pension plans. Under the proposal, defined contribution pension plans, including 401(k) plans and 403(b) plans, would determine whether they have to file as a large plan and whether they have to attach an IQPA report based on the number of participants with account balances as of the beginning of the plan year. Currently, the IQPA requirement includes the total number of eligible participants at the beginning of the plan year, even if the participant is not making contributions, receiving employer contributions, or maintaining an account in the plan. Further, some stakeholders have suggested that section 112 of the SECURE Act could make it even more likely that a plan with a small number of active participants might be required to bear the cost of an audit based on eligible, but not participating employees being counted toward the audit threshold. Specifically, because section 112 provides that, beginning January 1, 2024, long-term, part time workers that have reached the plan's minimum age requirement and have worked at least 500 hours in each of three consecutive 12-months period must be permitted to make elective contributions to a section 401(k) qualified cash or deferred arrangement, there could be more employees eligible to participate that would elect not to do so. This change in counting methodology would result in not counting, for this annual reporting purpose, those long-term, part time workers who are eligible to make elective contributions to a 401(k) plan, but have not in fact elected to participate in the plan. The DOL expects that excluding from the participant count participants who are eligible to participate but do not have an account balance at any time during the plan year will reduce expenses of establishing and maintaining a retirement plan, and as a consequence, encourage more employers to offer workplace-based retirement savings plans to their employees.

Improving Consistency and Enhancing Usability of Data Filed on the Schedules of Assets. The financial information reported on the Form 5500 Annual Return/Report, particularly the asset/liability statement, contained in the current Schedule H (Large Plan Financial Information), Schedule I (Small Plan Financial Information), as well as the more recently established Form 5500-SF, is based on data elements that have remained largely unchanged since the Form 5500 Annual Return/Report was established in 1975. Many investments in alternative and hard-to-value assets and held in collective investment funds do not fit squarely into any of the existing reporting categories on data captured financial schedules filed with the Form 5500 (Schedule H for large plans and Schedule I for small plans). The GAO has expressed concerns that many investments with widely varying risk, return, and disclosure considerations are often reported in the catchall “other plan asset” category. 35 GAO also noted that the plan asset categories on the Schedule H are not representative of current plan investments, and provide little insight into the investments themselves, the level of associated risk, or structures of the investments. 36 The DOL-OIG have also recommended that the Agencies revise the Form 5500 Annual Return/Report to improve reporting of hard-to-value assets and alternative investments. 37 As part of their overall evaluation of how best to structure financial reporting for pooled employer plans, MEPs, and DCG reporting arrangements to maximize usable data while limiting burden increases, the Agencies decided, as discussed in detail earlier in this document and the Notice of Proposed Forms Revisions published simultaneously, to propose format, data element and instruction changes to the Schedule H, Line 4i Schedule of Assets Held for Investment and the Schedule of Assets Acquired and Disposed of Within the Plan Year. Although driven by an interest in ensuring transparency and financial accountability for pooled employer plans, MEPs, and DCG reporting arrangements, the rationales for the changes applied more generally to large pension and retirement savings plans. These changes apply to large plans required to file the Schedules of Assets and would not increase the annual reporting burden for small plans. The proposed changes to the Schedule H Line 4i Schedules of Assets, in addition to better meeting the needs of the Agencies, other government users, and other end users of the data, should serve to address the shortcomings identified in these reports. The basic objective of general financial reporting is to provide information about the reporting entity for the Agencies' enforcement, research, and policy formulation programs, for other Federal agencies, Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies; and for plan participants and beneficiaries and the general public in monitoring employee benefit plans. Making consistent the financial reporting instruments would bring greater transparency to plan transactions, which would enhance the efficiency of the Agencies' enforcement efforts. Specifically, the Agencies would be better able to focus their enforcement efforts, which will reduce the number of investigations involving plans that are not engaging in problematic activities. Additionally, ERISA Section 513(a) authorizes and directs the Secretary of Labor and EBSA to conduct a research program on employee benefits. The Form 5500 Annual Return/Report is one of the leading sources of data used in this research program. Making uniform and receiving in a data searchable way the financial information reported on the Form 5500 Annual Return/Report would improve the quality of the research conducted by internal and external researchers. This improved research, in turn, would improve the quality of policy decisions made by DOL and other governmental policymakers that rely on the Form 5500 Annual Return/Report data.

Benefits of Maintaining Participating Employer Information for MEWAs and Expanding It to Non-Plan MEWAs that Provide Medical Benefits. The proposal, as described in the NPFR, would add new questions to the Form M-1 and instructions to require MEWAs (plan and non-plan) that offer or provide coverage for medical benefits to provide multiple employer participating employer information on the Form M-1 and not as an attachment to the Form 5500 Annual Return/Report. Plan MEWAs that provide other benefits and thus are not required to file a Form M-1 ( i.e., life and disability benefits) would continue to report the participating employer information as an attachment to the Form 5500 Annual Return/Report.

The proposal would also change which MEWAs are required to report the participating employer information. The current Form 5500 requirement for MEPs to report participating employer information applies to plan MEWAs only. Non-plan MEWAs providing health benefits would now have to provide the information. Based on 2018 Form M-1 filings, there were 640 plan MEWAs and 47 were non-plan MEWAs. 38 The proposal, by transferring the participating employer information from the Form 5500 Annual Return/Report to the Form M-1 for MEWAs that offer or provide coverage for medical benefits and continuing to require reporting of participating employer information on the Form 5500 Annual Return/Report for plan MEWAs that provide other benefits, would enable the Agencies to receive participating employer information from both plan and non-plan MEWAs, regardless of how they are funded or structured. This would help the Agencies better monitor activities of MEWAs and protect plan beneficiaries.

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.

On October 1, 2015, EPA promulgated a revision to the ozone NAAQS (2015 ozone NAAQS), lowering the level of both the primary and secondary standards to 0.070 parts per million (ppm). 1 Section 110(a)(1) of the CAA requires states to submit, within 3 years after promulgation of a new or revised standard, SIP submissions meeting the applicable requirements of section 110(a)(2). 2 One of these applicable requirements is found in section 110(a)(2)(D)(i)(I), otherwise known as the good neighbor provision, which generally requires SIPs to contain adequate provisions to prohibit in-state emissions activities from having certain adverse air quality effects on other states due to interstate transport of pollution. There are two so-called “prongs” within CAA section 110(a)(2)(D)(i)(I). A SIP for a new or revised NAAQS must contain adequate provisions prohibiting any source or other type of emissions activity within the state from emitting air pollutants in amounts that will: Significantly contribute to nonattainment of the NAAQS in another state (prong 1) or interfere with maintenance of the NAAQS in another state (prong 2). EPA and states must give independent significance to prong 1 and prong 2 when evaluating downwind air quality problems under CAA section 110(a)(2)(D)(i)(I). 3

We note that EPA has addressed the interstate transport requirements of CAA section 110(a)(2)(D)(i)(I) with respect to prior ozone NAAQS in several regional regulatory actions, including the Cross-State Air Pollution Rule (CSAPR), which addressed interstate transport with respect to the 1997 ozone NAAQS as well as the 1997 and 2006 fine particulate matter standards, 4 the Cross-State Air Pollution Rule Update (CSAPR Update), and, most recently, the Revised CSAPR Update for the 2008 ozone NAAQS. 5 6

Through the development and implementation of CSAPR and other regional rulemakings pursuant to the good neighbor provision, 7 EPA, working in partnership with states, developed the following four-step interstate transport framework to address the requirements of the good neighbor provision for the ozone NAAQS: (1) Identify downwind air quality problems; (2) identify upwind states that impact those downwind air quality problems sufficiently such that they are considered “linked” and therefore warrant further review and analysis; (3) identify the emissions reductions necessary (if any), applying a multi-factor analysis, to prevent linked upwind states identified in step 2 from contributing significantly to nonattainment or interfering with maintenance of the NAAQS at the locations of the downwind air quality problems; and (4) adopt permanent and enforceable measures needed to achieve those emissions reductions.

EPA has released several documents containing information relevant to evaluating interstate transport with respect to the 2015 ozone NAAQS. First, on January 6, 2017, EPA published a notice of data availability (NODA) with preliminary interstate ozone transport modeling with projected ozone design values (DVs) for 2023 using a 2011 base year platform, on which we requested public comment. 8 In the NODA, EPA used the year 2023 as the analytic year for this preliminary modeling because that year aligns with the expected attainment year for Moderate ozone nonattainment areas for the 2015 ozone NAAQS. 9 On October 27, 2017, we released a memorandum (2017 memo) containing updated modeling data for 2023, which incorporated changes made in response to comments on the NODA, and noted that the modeling may be useful for states developing SIPs to address good neighbor obligations for the 2008 ozone NAAQS. 10 On March 27, 2018, we issued a memorandum (March 2018 memo) noting that the same 2023 modeling data released in the 2017 memo could also be useful for identifying potential downwind air quality problems with respect to the 2015 ozone NAAQS at step 1 of the four-step interstate transport framework. The March 2018 memo also included the then newly available contribution modeling results to assist states in evaluating their impact on potential downwind air quality problems for the 2015 ozone NAAQS under step 2 of the interstate transport framework. EPA subsequently issued two more memoranda in August and October 2018, providing additional information to states developing good neighbor SIP submissions for the 2015 ozone NAAQS concerning, respectively, potential contribution thresholds that may be appropriate to apply in step 2 of the framework, and considerations for identifying downwind areas that may have problems maintaining the standard at step 1 of the framework. 11

On October 30, 2020, in the Notice of Proposed Rulemaking for the Revised CSAPR Update, EPA released and accepted public comment on updated 2023 modeling that used a 2016 emissions platform developed under the EPA/Multi-Jurisdictional Organization (MJO)/state collaborative project as the primary source for the base year and future year emissions data. 12 On March 15, 2021, EPA signed the final Revised CSAPR Update using the same modeling released at proposal. 13 Although Rhode Island relied on the modeling included in the March 2018 memo to develop its SIP submission as EPA had suggested, EPA now proposes to primarily rely on the updated and newly available 2016 base year modeling in evaluating these submissions. By using the updated modeling results, EPA is using the most current and technically appropriate information as the primary basis for this proposed rulemaking. EPA's independent analysis, which also evaluated historical monitoring data, recent DVs, and emissions trends, found that such information provides additional support and further substantiates the results of the 2016 base year modeling as the basis for this proposed rulemaking. Section III of this notice and the Air Quality Modeling technical support document (TSD) included in the docket for this proposal contain additional detail on this modeling. 14

In the CSAPR, CSAPR Update, and the Revised CSAPR Update, EPA used a threshold of one percent of the NAAQS to determine whether a given upwind state was “linked” at step 2 of the interstate transport framework and would, therefore, contribute to downwind nonattainment and maintenance sites identified in step 1. If a state's impact did not equal or exceed the one percent threshold, the upwind state was not “linked” to a downwind air quality problem, and EPA, therefore, concluded the state would not significantly contribute to nonattainment or interfere with maintenance of the NAAQS in the downwind states. However, if a state's impact equaled or exceeded the one percent threshold, the state's emissions were further evaluated in step 3, considering both air quality and cost considerations, to determine what, if any, emissions might be deemed “significant” and, thus, must be eliminated under the good neighbor provision. EPA is proposing to rely on the one percent threshold (which is 0.70 ppb) for the purpose of evaluating Rhode Island's contribution to nonattainment or maintenance of the 2015 ozone NAAQS in downwind areas.

Several D.C. Circuit court decisions address the issue of the relevant analytic year for the purposes of evaluating ozone transport air-quality problems. On September 13, 2019, the D.C. Circuit issued a decision in Wisconsin v. EPA, remanding the CSAPR Update to the extent that it failed to require upwind states to eliminate their significant contribution by the next applicable attainment date by which downwind states must come into compliance with the NAAQS, as established under CAA section 181(a). 938 F.3d 303, 313.

On May 19, 2020, the D.C. Circuit issued a decision in Maryland v. EPA that cited the Wisconsin decision in holding that EPA must assess the impact of interstate transport on air quality at the next downwind attainment date, including Marginal area attainment dates, in evaluating the basis for EPA's denial of a petition under CAA section 126(b). Maryland v. EPA, 958 F.3d 1185, 1203-04 (D.C. Cir. 2020). The court noted that “section 126(b) incorporates the Good Neighbor Provision,” and, therefore, “EPA must find a violation [of section 126] if an upwind source will significantly contribute to downwind nonattainment at the next downwind attainment deadline. Therefore, the agency must evaluate downwind air quality at that deadline, not at some later date.” Id. at 1204 (emphasis added). EPA interprets the court's holding in Maryland as requiring the Agency, under the good neighbor provision, to assess downwind air quality by the next applicable attainment date, including a Marginal area attainment date under CAA section 181 for ozone nonattainment. 15 The Marginal area attainment date for the 2015 ozone NAAQS is August 3, 2021. 16 Historically, EPA has considered the full ozone season prior to the attainment date as supplying an appropriate analytic year for assessing good neighbor obligations. While this would be 2020 for an August 2021 attainment date (which falls within the 2021 ozone season running from May 1 to September 30), in this circumstance, when the 2020 ozone season is wholly in the past, it is appropriate to focus on 2021 to address good neighbor obligations to the extent possible by the 2021 attainment date. EPA does not believe it would be appropriate to select an analytical year that is wholly in the past, because the agency interprets the good neighbor provision as forward looking. See 86 FR 23054 at 23074; see also Wisconsin, 938 F.3d at 322. Consequently, in this proposal EPA will use the analytical year of 2021 to evaluate Rhode Island's good neighbor obligation with respect to the 2015 ozone NAAQS.

On September 23, 2020, Rhode Island submitted a SIP revision addressing, among other CAA requirements, the CAA section 110(a)(2)(D)(i)(I) interstate transport requirements for the 2015 ozone NAAQS. Rhode Island asserted that its existing SIP contained adequate provisions to satisfy the requirements of CAA section 110(a)(2)(D)(i)(I).

Rhode Island relied on the results of EPA's modeling for the 2015 ozone NAAQS contained in the March 2018 memorandum to identify potential downwind nonattainment and maintenance receptors that may be impacted by emissions from sources in Rhode Island in the year 2023. These results indicate Rhode Island's greatest impact on any potential downwind nonattainment or maintenance receptor would be 0.04 ppb to a monitor in Queens, New York (monitoring site 360810124). Rhode Island compared this value to a screening threshold of 0.70 ppb, representing one percent of the 2015 ozone NAAQS. Because Rhode Island's impacts to potential receptors in downwind states are projected to be less than 0.70 ppb in 2023, Rhode Island concluded that air emissions from sources within the state will not significantly contribute to nonattainment or interfere with maintenance of the 2015 ozone NAAQS in any other state.

Rhode Island's September 2020 good neighbor SIP submission also notes that, in 2018 and 2019, the state adopted several air pollution control regulations based on EPA Control Techniques Guidelines, which represent Reasonably Available Control Technology (RACT) for several industry sectors. 17

In addition, to reduce air pollution from mobile sources, Rhode Island states in its submittal that it has adopted California's vehicle emissions standards, implements an inspection and maintenance program for vehicle emissions-control systems and programs to enhance emissions control technology for diesel engines, and participates in regional and state efforts to build and incentivize zero-emission vehicle infrastructure and ownership. The state explains that these emissions reduction efforts “will result in lower contributions of ozone precursors from sources or activities within Rhode Island to downwind areas, and lead to greater air quality benefits locally and regionally.”  18

Rhode Island's SIP submission relies on analysis of the year 2023 to show that Rhode Island does not significantly contribute to nonattainment or interfere with maintenance of the 2015 ozone NAAQS in any other state. 19 As explained in Section 1 of this proposal, the EPA has conducted an updated analysis for the 2021 analytical year that is being used to evaluate Rhode Island's transport SIP submission. While EPA has focused its analysis in this notice on the year 2021, modeling data in the record for years 2023 and 2028 confirm that no new linkages to downwind receptors are projected in later years. This is not surprising as it is consistent with an overall, long-term downward trend in emissions from the state.

As explained in Section I of this notice, in consideration of the holdings in Wisconsin and Maryland, EPA's analysis relies on 2021 as the relevant attainment year for evaluating Rhode Island's good neighbor obligations with respect to the 2015 ozone NAAQS using the four-step interstate transport framework. In step 1, we identify locations where the Agency expects there to be nonattainment or maintenance receptors for the 2015 8-hour ozone NAAQS in the 2021 analytic year. Where EPA's analysis shows that an area or site does not fall under the definition of a nonattainment or maintenance receptor in 2021, that site is excluded from further analysis under EPA's four-step interstate transport framework. For areas that are identified as a nonattainment or maintenance receptor, we proceed to the next step of our four-step framework by identifying the upwind state's contribution to those receptors.

EPA's approach to identifying ozone nonattainment and maintenance receptors in this action is consistent with the approach used in previous transport rulemakings. EPA's approach gives independent consideration to both the “contribute significantly to nonattainment” and the “interfere with maintenance” prongs of CAA section 110(a)(2)(D)(i)(I), consistent with the D.C. Circuit's direction in North Carolina. 20

For the purpose of this proposal, EPA identifies nonattainment receptors as those monitoring sites that are projected to have average design values that exceed the NAAQS and that are also measuring nonattainment based on the most recent monitored design values. This approach is consistent with prior transport rulemakings, such as CSAPR Update, where EPA defined nonattainment receptors as those areas that both currently monitor nonattainment and that EPA projects will be in nonattainment in the future analytic year. 21

In addition, in this proposal, EPA identifies a receptor to be a “maintenance” receptor for purposes of defining interference with maintenance, consistent with the method used in the CSAPR and upheld by the D.C. Circuit in EME Homer City Generation, L.P. v. EPA, 795 F.3d 118, 136 (D.C. Cir. 2015). 22 Specifically, monitoring sites with a projected maximum design value in 2021 that exceeds the NAAQS are considered maintenance receptors. EPA's method of defining these receptors takes into account both measured data and reasonable projections based on modeling analysis.

Recognizing that nonattainment receptors are also, by definition, maintenance receptors, EPA often uses the term “maintenance-only” to refer to receptors that are not currently nonattainment receptors. Consistent with the methodology described above, those sites that are currently measuring ozone concentrations below the level of the applicable NAAQS, but that are projected to be nonattainment based on the average or maximum design values, are also identified as maintenance-only receptors.

To evaluate future air quality in steps 1 and 2 of the interstate transport framework, EPA is using the 2016 and 2023 base case emissions developed under the EPA/MJO/state collaborative emissions modeling platform project as the primary source for base year and 2023 future year emissions data for this proposal. 23 Because this platform does not include emissions for 2021, EPA developed an interpolation technique based on modeling for 2023 and measured ozone data to determine ozone concentrations for 2021. To estimate average and maximum design values for 2021, EPA first performed air quality modeling for 2016 and 2023 to obtain design values in 2023. The 2023 design values were then coupled with the corresponding 2016 measured design values to estimate design values in 2021. Details on the modeling, including the interpolation methodology, can be found in the Air Quality Modeling TSD, found in the docket of this proposal.

To quantify the contribution of emissions from specific upwind states on 2021 8-hour design values for the identified downwind nonattainment and maintenance receptors, EPA first performed nationwide, state-level ozone source apportionment modeling for 2023. The source apportionment modeling provided contributions to ozone from precursor emissions of anthropogenic nitrogen oxides (NO X ) and volatile organic compounds (VOCs) in each state, individually. The modeled contributions were then applied in a relative sense to the 2021 average design value to estimate the contributions in 2021 from each state to each receptor. Details on the source apportionment modeling and the methods for determining contributions in 2021 are in the Air Quality Modeling TSD in the docket.

The 2021 design values and contributions were examined to determine if Rhode Island contributes at or above the threshold of one percent of the 2015 ozone NAAQS (0.70 ppb) to any downwind nonattainment or maintenance receptor. The data  24 indicate that the highest contribution in 2021 from Rhode Island to a downwind nonattainment or maintenance receptor is 0.09 ppb to a maintenance receptor in Fairfield County, Connecticut (monitoring site 90013007). The data also show modeled ozone contributions from Rhode Island to the design values of a larger set of monitoring sites (independent of attainment status) and indicate that the highest projected contribution in 2021 from Rhode Island to any of these sites is 2.50 ppb to Bristol County in Massachusetts (monitoring site 250051004; #242 on the Design Values and Contributions spreadsheet). While Rhode Island's modeled contribution to the Bristol County monitor exceeds one percent of the 2015 ozone NAAQS, EPA's analysis at step 1 does not identify the Bristol County monitor as a downwind area that may have problems maintaining the 2015 ozone NAAQS. The Bristol County monitor's projected average design value in 2021 is 65.7 ppb.

EPA also analyzed emissions trends for ozone precursors in Rhode Island to support the findings from the air quality analysis. In evaluating emissions trends, we first reviewed the information submitted by Rhode Island and then reviewed additional information available to the Agency. We focused on state-wide emissions of nitrogen oxides and volatile organic compounds. 25 Emissions from mobile sources, electric generating units (“EGUs”), industrial facilities, gasoline vapors, and chemical solvents are some of the major anthropogenic sources of ozone precursors. This evaluation looks at both past emissions trends, as well as projected trends.

As shown in Table 1, for Rhode Island, between 2016 and 2023, annual total NO X and VOC emissions are projected to decline by 33 percent and 5 percent, respectively. The projected reductions are a result of the implementation of existing control programs that will continue to decrease NO X and VOC emissions in Rhode Island, as indicated by EPA's most recent 2021 and 2023 projected emissions.

As shown in Table 2, on-road and nonroad mobile source emissions collectively comprise a large portion of Rhode Island's total anthropogenic NO X and VOC. For example, in 2019, NOx emissions from mobile sources in Rhode Island comprised 75 percent of total NO X emissions and 35 percent of total VOC emissions.

The large decrease in NO X emissions between 2016 emissions and projected 2023 emissions in Rhode Island is primarily driven by reductions in emissions from on-road and nonroad mobile sources. EPA projects that both VOC and NO X emissions will continue declining out to 2023 as newer vehicles and engines that are subject to the most recent, stringent mobile source standards replace older vehicles and engines. 26

In summary, based on the projected downward trend in projected future emissions trends, in combination with the historical decline in actual emissions, there is no evidence to suggest that the overall emissions trend demonstrated in Table 2 would suddenly reverse or spike in 2021 compared to historical emissions levels or those projected for 2023. Further, there is no evidence that the projected ozone precursor emissions trends beyond 2021 would not continue to show a decline in emissions. In addition, EPA's normal practice is to include in our modeling only changes in NO X or VOC emissions that result from final regulatory actions. Any potential changes in NO X or VOC emissions that may result from possible future or proposed regulatory actions are speculative.

This downward trend in emissions in Rhode Island adds support to the air quality analyses presented above and indicates that the contributions from emissions from sources in Rhode Island to ozone receptors in downwind states will continue to decline and remain below one percent of the NAAQS.

Thus, EPA's air quality and emissions analyses indicate that emissions from Rhode Island will not significantly contribute to nonattainment or interfere with maintenance of the 2015 ozone NAAQS in any other state in 2021.

As discussed in Section II, Rhode Island concluded that emissions from sources in their state will not contribute to nonattainment or interfere with maintenance of the 2015 ozone NAAQS in any other state. EPA conducted an independent analysis to determine whether the state's conclusions would remain valid for the analytic year 2021, based on more recent data and updated modeling. EPA's evaluation of measured and monitored data, including interpolating values to generate a reasonable expectation of air quality and contribution values in 2021, as discussed in Section III, is consistent with conclusions made by Rhode Island that emissions from sources in the state will not contribute to nonattainment or interfere with maintenance of the 2015 ozone NAAQS in any other state. This conclusion remains true for later modeled years 2023 and 2028 in the updated modeling EPA is relying on. Because our analysis corroborates the state's conclusion that emissions from within its state do not contribute to nonattainment or interfere with maintenance of the 2015 ozone NAAQS in another state, we propose to approve the Rhode Island submission as meeting the requirements of CAA section 110(a)(2)(D)(i)(I).

EPA is soliciting public comments on this notice. Significant comments will be considered before taking final action. Interested parties may participate in the Federal rulemaking procedure by submitting written comments to this proposed rule by following the instructions listed in the ADDRESSES section of this Federal Register .

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this proposed action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:

• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

On May 16, 2016, the Pennsylvania Department of Environmental Protection (PADEP) submitted a revision to its SIP for RACT Regulations for the 1997 and 2008 ozone NAAQS.

On May 9, 2019, EPA published a final action fully approving certain provisions of Pennsylvania's May 16, 2016 SIP revision submission to implement RACT for both the 1997 and 2008 Ozone NAAQS (hereafter the “RACT II rule”), and conditionally approving other provisions of the SIP revision. 84 FR 20274 (May 9, 2019). Specifically, EPA's action fully approved “25 Pa. Code sections 121.1, 129.96, 129.97, and 129.100 as meeting certain aspects of major stationary source RACT in CAA section 172, 182, and 184 for the 1997 and 2008 ozone NAAQS submitted May 16, 2016” and conditionally approved “25 Pa. Code sections 129.98 and 129.99 based on the commitment provided by Pennsylvania to submit additional SIP revisions to address the deficiencies identified by EPA in the May 16, 2016 SIP revision.” Id. at 20290. The RACT requirements in CAA section 182(b)(2) apply to all ozone nonattainment areas classified as Moderate or higher (Serious, Severe, or Extreme). Section 184(b)(1)(B) of the CAA also applies RACT to all areas located within ozone transport regions established pursuant to section 184 of the CAA. The entire Commonwealth of Pennsylvania is part of the Ozone Transport Region (OTR) established under section 184 of the CAA and therefore subject statewide to the RACT requirements. The May 16, 2016 SIP submittal was intended to satisfy CAA sections 182(b)(2)(C), 182(f), and 184 for the 1997 and 2008 8-hour ozone NAAQS for all major sources of nitrogen oxides (NO X ) and volatile organic compounds (VOCs) in Pennsylvania not subject to control techniques guidelines (CTG), with a few exceptions not relevant to this action.

The Sierra Club commented on EPA's proposed approval of the RACT II rule, and following EPA's final approval, filed a petition for review with the U.S. Third Circuit Court of Appeals. The petition challenged EPA's approval of that portion of the RACT II rule applicable to coal-fired electricity generating units (EGUs) equipped with selective catalytic reduction (SCR) for control of NO X , which is a precursor pollutant to ozone regulated under CAA section 182. Specifically, the petition challenged EPA's approval of the presumptive RACT NO X limit for these EGUs of 0.12 pounds of NO X per Million British Thermal Units (MMBtu) of heat input (lbs/MMBtu) when the inlet temperature to the SCR was 600 degrees Fahrenheit or above, found at 25 Pa. Code 129.97(g)(1)(viii); the application of the less stringent NO X limits of 25 Pa Code 129.97(g)(1)(vi) to EGUs with SCR when the inlet temperature to the SCR was below 600 degrees Fahrenheit;  1 and the failure of the RACT II rule at 25 Pa. Code 129.100(d) to specifically require these EGUs to keep temperature data for the inlet temperature to the SCRs and report that data to PADEP.

On August 27, 2020, the Third Circuit found for the Sierra Club on all three of these issues, vacated the Agency's approval of the SIP submission on each of these three pieces of the Pennsylvania plan as it pertained to coal-fired EGUs equipped with SCRs, and remanded to the Agency. The court further stated that “[o]n remand, the agency must either approve a revised, compliant SIP within two years or formulate a new federal implementation plan.” Sierra Club, 972 F.3d 290, 309 (3d Cir. 2020).

The purpose of this action is to propose a partial disapproval for those portions of Pennsylvania's RACT II SIP for which the Third Circuit vacated EPA's approval. In light of the court's order regarding EPA actions on remand, EPA is proposing this action in part to ensure that we have authority to promulgate a FIP if Pennsylvania does not submit a timely or approvable SIP revision addressing the Third Circuit's decision.

The specific section of Pennsylvania's regulation in the SIP that is at issue here is 25 Pa. Code 129.97(g)(1)(viii), which sets a “presumptive” RACT limit for coal-fired combustion units equipped with SCR. The court held that EPA's approval of 25 Pa. Code 129.97(g)(1)(viii) was arbitrary and capricious because the record did not support EPA's finding that the emission limit of 0.12 lb NO X /MMBtu of heat input was RACT for these EGU sources, particularly in light of submitted evidence that EGUs in Pennsylvania regulated by 25 Pa. Code 129.97(g)(1)(viii) had achieved much lower emission rates for NO X in the past, and that other states had adopted lower RACT NO X limits for coal-fired sources. Sierra Club at 299-303. In addition, the court held that EPA's approval of the 600 degree Fahrenheit temperature “exemption” to the 0.12 lb/MMBtu limit for NO X in 25 Pa Code 129.97(g)(1)(viii) was arbitrary and capricious because the record failed to support the need for the 600 degree exemption or explain why 600 degrees was chosen as the threshold for the exemption. Id. at 303-307. Thus, the court vacated EPA's approval of these two provisions, both of which are only found in 25 Pa. Code 129.97(g)(1)(viii). See Id. at 309.

Regarding the reporting and record keeping requirement of 25 Pa. Code 129.100(d), the court also found EPA's approval of the specific SIP revisions discussed above to be arbitrary and capricious based upon the lack of a specific record keeping and reporting requirement for the 600 degree inlet temperature exemption to the SCR. See Id. Specifically, the court held that “[b]ecause the SIP's 600-degree threshold necessarily depends upon accurate temperature reporting, the EPA's approval of such inadequate requirements on this record was arbitrary and capricious.” Id. at 309. Lacking evidence in the record that this language would require sources subject to 25 Pa. Code 129.97(g)(1)(viii) to keep specific SCR temperature inlet data, report that data to PADEP, and make it available to the public, the court agreed with the Sierra Club that in this scenario the terms are too vague to be enforceable. Id. at 308. Further, the court explained that “[t]he combination of this lack of mandatory reporting and the temperature waiver created a potent loophole for polluters to walk through.” Id. at 297. For these reasons, EPA now finds that the previously approved recordkeeping and reporting provisions are inadequate in this specific context, which further supports this proposed partial disapproval.

EPA has been and will continue to work with PADEP to address revised RACT determinations during the state's development of the SIP revision in response to the court decision.

Consistent with the Third Circuit's decision, and based on the reasoning contained therein, EPA is proposing under CAA section 110(k)(3) to revise its full approval of certain provisions of the Pennsylvania RACT II rule that were vacated and remanded to EPA by the Third Circuit Court of Appeals. EPA's proposed partial disapproval of this previously-approved SIP revision is limited to the regulatory provision related to presumptive RACT requirements for coal-fired combustion units at EGUs equipped with SCR, specifically 25 Pa. Code 129.97(g)(1)(viii). Because we are now proposing to disapprove 25 Pa. Code 129.97(g)(1)(viii), and the 600 degree temperature threshold along with the 0.12 lbs/MMBtu limit is contained entirely within this section, no additional federal regulatory revisions are necessary to address the court's holding that EPA's approval of the record-keeping requirement was arbitrary and capricious.

Section 110(c)(1) of the CAA requires the Administrator to promulgate a FIP at any time within two years after the Administrator finds that a state has failed to make a required SIP submission, finds a SIP submission to be incomplete, or disapproves a SIP submission, unless the state corrects the deficiency, and the Administrator approves the SIP revision, before the Administrator promulgates a FIP. Therefore, if EPA finalizes this proposed partial disapproval, EPA will be obligated under CAA section 110(c)(1) to promulgate a FIP within two years after the effective date of the partial disapproval, unless the State submits and the EPA approves SIP revisions to correct the identified deficiencies in the RACT II rule before EPA promulgates the FIP. Notwithstanding this timeframe established under CAA section 110(c)(1) for EPA's promulgation of a FIP, the Third Circuit has ordered the EPA to issue a FIP within two years of the date of its decision in Sierra Club, 972 F.3d 290, 309 (3rd Cir., August 27, 2020), if the Agency has not approved a SIP correcting the identified deficiencies in the RACT II rule within this timeframe. In addition, final partial disapproval would trigger mandatory sanctions under CAA section 179 and 40 CFR 52.31 unless the State submits, and EPA approves, SIP revisions that correct the identified deficiencies in the RACT II rule within 18 months of the effective date of the final partial disapproval action.

EPA is soliciting public comments on our proposed partial disapproval as explained herein. We will accept comments from the public on this proposal for the next 30 days.

Under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011), this action is not a “significant regulatory action” and, therefore, is not subject to review by the Office of Management and Budget.

This action is not an Executive Order 13771 regulatory action because this action is not significant under Executive Order 12866.

This rulemaking does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

This action merely proposes to disapprove state requirements as not meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rulemaking will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ).

Because this rulemaking proposes to disapprove pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This action also does not have Federalism implications because it does not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely proposes to disapprove a state requirement and does not alter the relationship or the distribution of power and responsibilities established in the CAA.

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rulemaking does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

This rulemaking also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it proposes to disapprove a state rule.

Because it is not a “significant regulatory action” under Executive Order 12866 or a “significant energy action,” this action is also not subject to Executive Order 13211 (66 FR 28355, May 22, 2001).

In reviewing state submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. In this context, in the absence of a prior existing requirement for the state to use voluntary consensus standards (VCS), EPA has no authority to disapprove a state submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a state submission, to use VCS in place of a state submission that otherwise satisfies the provisions of the CAA. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply.

Executive Order 12898 (59 FR 7629 (February 16, 1994)) establishes Federal executive policy on environmental justice. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States. EPA lacks the discretionary authority to address environmental justice in this action. In reviewing SIP submissions, EPA's role is to approve or disapprove state choices, based on the criteria of the CAA.

Accordingly, this action proposing partial disapproval of Pennsylvania's RACT regulations for the 1997 and 2008 ozone NAAQS, merely disapproves certain state requirements for inclusion into the SIP under section 110 of the CAA and will not in-and-of itself create any new requirements. Accordingly, it does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898.

Throughout this document whenever “we,” “us,” or “our” is used, it is intended to refer to EPA.

On December 14, 2012, EPA promulgated a revised primary annual PM 2.5 NAAQS to provide increased protection of public health from fine particle pollution. 78 FR 3086 (January 15, 2013). In that action, EPA strengthened the primary annual PM 2.5 standard from 15.0 micrograms per cubic meter (mg/m 3 ) to 12.0 mg/m 3 , which is attained when the 3-year average of the annual arithmetic means does not exceed 12.0 mg/m 3 . On December 18, 2014, EPA promulgated initial designations for the 2012 primary PM 2.5 NAAQS based on 2011-2013 air quality monitoring data for the majority of the United States. 80 FR 2206 (January 15, 2015). In that action, EPA designated the West Silver Valley in Shoshone County, Idaho as a moderate nonattainment area for the 2012 annual PM 2.5 NAAQS. See 40 CFR 81.313.

On April 6, 2018, EPA published a “finding of failure to submit” required SIP elements for the 2012 annual PM 2.5 NAAQS for several nonattainment areas nationwide, including the West Silver Valley in Idaho. See 83 FR 14759. In particular, Idaho failed to submit the following specific moderate area SIP elements for the West Silver Valley: An attainment demonstration; control strategies, including reasonably available control measures (RACM) and reasonably available control technologies (RACT); a reasonable further progress (RFP) plan; quantitative milestones; and contingency measures. This finding triggered the sanctions clock under section 179 of the CAA, as well as an obligation under section 110(c) of the CAA for EPA to promulgate a Federal Implementation Plan no later than 2 years from the effective date of the finding, if Idaho has not submitted, and EPA has not approved, the required SIP submission.

On December 21, 2018, EPA determined that the West Silver Valley attained the 2012 annual PM 2.5 NAAQS based on 2015-2017 ambient air quality monitoring data and made a “clean data determination.” 83 FR 65535. A clean data determination suspends certain planning requirements for the area, including the requirement to submit an attainment demonstration and associated RACM, including RACT, an RFP plan, and contingency measures for failure to attain or meet RFP. These requirements are suspended as long as the area continues to meet the 2012 annual PM 2.5 NAAQS. When the area is redesignated to attainment, the requirements are permanently discharged.

The CAA provides the requirements for redesignating a nonattainment area to attainment. Specifically, section 107(d)(3)(E) of the CAA, 42 U.S.C. 7407(d)(3)(E), allows for redesignation provided that: (1) EPA determines that the area has attained the applicable NAAQS; (2) EPA has fully approved the applicable implementation plan for the area under section 110(k) of the CAA; (3) EPA determines that the improvement in air quality is due to permanent and enforceable reductions in emissions resulting from implementation of the applicable SIP and applicable Federal air pollutant control regulations and other permanent and enforceable reductions; (4) EPA has fully approved a maintenance plan for the area as meeting the requirements of section 175A of the CAA; and (5) the state containing such area has met all requirements applicable to the area under section 110 and part D of the CAA. In this proposed action, EPA will review CAA section 107(d)(3)(E) requirements (2) and (5) together as part of our evaluation of Idaho's redesignation request.

EPA has provided guidance on redesignation in the CAA “General Preamble,”  1 and has provided further guidance on processing redesignation requests in the following documents: (1) “Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992 (Calcagni memorandum); (2) “State Implementation Plan (SIP) Actions Submitted in Response to Clean Air Act (CAA) Deadlines,” Memorandum from John Calcagni, Director, Air Quality Management Division, October 28, 1992; and (3) “Part D New Source Review (Part D NSR) Requirements for Areas Requesting Redesignation to Attainment,” Memorandum from Mary D. Nichols, Assistant Administrator for Air and Radiation, October 14, 1994. These documents are included in the docket for this proposed action.

EPA is proposing to redesignate the West Silver Valley to attainment for the 2012 annual PM 2.5 NAAQS and to approve Idaho's related maintenance plan. EPA's proposed approval of the redesignation request and maintenance plan is based upon EPA's determination that the area continues to attain the 2012 annual PM 2.5 NAAQS and that all other redesignation criteria have been met for the area. The following is a description of how Idaho's June 2, 2020, submission satisfies the requirements of section 107(d)(3)(E) of the CAA for the 2012 annual PM 2.5 standard.

To redesignate an area from nonattainment to attainment, the CAA requires EPA to determine that the area has attained the applicable NAAQS (CAA section 107(d)(3)(E)(i)). An area is attaining the 2012 annual PM 2.5 NAAQS if it meets the standard, as determined in accordance with 40 CFR 50.13 and appendix N of 40 CFR part 50. To attain the 2012 annual PM 2.5 NAAQS, the 3-year average of the annual arithmetic mean concentration, as determined in accordance with 40 CFR part 50, appendix N, must be less than or equal to 12.0 mg/m 3 at all relevant monitoring sites in the subject area over a 3-year period. The relevant data must be collected and quality-assured in accordance with 40 CFR part 58 and recorded in EPA's Air Quality System (AQS) database.

There is one PM 2.5 ambient air quality monitor in the West Silver Valley, located in Pinehurst, Idaho (AQS ID 160790017). As noted, EPA first determined that the West Silver Valley attained the 2012 annual PM 2.5 NAAQS based on 2015-2017 ambient air quality monitoring data at this monitor on December 21, 2018. 83 FR 65535.

EPA has reviewed the certified, quality-controlled and quality-assured PM 2.5 Pinehurst monitoring data for the 2018-2020 design value period and determined that the design value is 10.9 mg/m 3 , which is less than or equal to 12.0 mg/m 3 , and therefore the area continues to meet the 2012 annual PM 2.5 NAAQS. On this basis, EPA is proposing to determine that the West Silver Valley is attaining the 2012 annual PM 2.5 NAAQS. The monitoring data is summarized in Tables 1 and 2 is also available in the docket for this action available online at https://www.regulations.gov, Docket ID: EPA-R10-OAR-2020-0305.

In accordance with section 107(d)(3)(E)(v) of the CAA, Idaho must meet all the requirements applicable to the West Silver Valley under section 110 of the CAA (general SIP requirements) and part D of title I of the CAA (SIP requirements for nonattainment areas). Under section 107(d)(3)(E)(ii) of the CAA, Idaho's SIP revisions for the 2012 annual PM 2.5 NAAQS for the West Silver Valley must be fully approved under section 110(k) of the CAA. Section 110(k) of the CAA sets out the requirements for EPA's actions on SIP revision submittals.

The September 4, 1992 Calcagni memorandum describes EPA's interpretation of section 107(d)(3)(E) with respect to the timing of applicable requirements. Under this interpretation, to qualify for redesignation, states requesting redesignation to attainment must meet only the relevant CAA requirements that come due prior to the submittal of a complete redesignation request. See also Shapiro memorandum, September 17, 1993, 2 and 60 FR 12459, 12465-12466, (March 7, 1995) (redesignation of Detroit-Ann Arbor). Applicable requirements of the CAA that come due subsequent to the area's submittal of a complete redesignation request remain applicable until a redesignation is approved but are not required as a prerequisite to redesignation. See CAA section 175A(c). Sierra Club v. EPA, 375 F .3d 537 (7th Cir. 2004). See also 68 FR 25418, 25424 and 25427 (May 12, 2003) (redesignation of the St. Louis/East St. Louis area to attainment of the 1-hour ozone NAAQS).

In the case of the West Silver Valley, the base year emissions inventory was due prior to Idaho's submittal of the complete redesignation request for the area. Therefore, the base year inventory is an applicable requirement. The attainment plan, including RACM/RACT, and contingency measures for failure to attain or meet RFP, were also due prior to Idaho's submittal of complete redesignation requests for the West Silver Valley. However, as described in detail later in this notice of proposed rulemaking (NPRM), the clean data determination suspended these requirements for as long as the West Silver Valley continues to meet the 2012 annual PM 2.5 NAAQS. When the area is redesignated to attainment, these requirements are permanently discharged.

Section 110(a)(2) of title I of the CAA delineates the general requirements for a SIP, which include enforceable emissions limitations and other control measures, means, or techniques, provisions for the establishment and operation of appropriate devices necessary to collect data on ambient air quality, and programs to enforce the limitations. The general SIP elements and requirements set forth in section 110(a)(2) of the CAA include, but are not limited to the following: (1) Submittal of a SIP that has been adopted by the state after reasonable public notice and hearing; (2) provisions for establishment and operation of appropriate procedures needed to monitor ambient air quality; (3) implementation of a minor source permit program; (4) provisions for the implementation of part C requirements (referred to as prevention of significant deterioration or PSD); (5) provisions for the implementation of part D requirements for nonattainment new source review (referred to as part D NNSR, NNSR, nonattainment NSR, or NSR) permit programs; (6) provisions for air pollution modeling; and (7) provisions for public and local agency participation in planning and emission control rule development.

CAA section 110(a)(2)(D) requires that SIPs contain certain measures to prevent sources in a state from significantly contributing to air quality problems in another state. However, CAA section 110(a)(2)(D) requirements for a state are not linked with a particular nonattainment area's designation and classification in that state. EPA believes that the requirements linked with a particular nonattainment area's designation and classifications are the relevant measures to evaluate in reviewing a redesignation request. The transport SIP submittal requirements, where applicable, continue to apply to a state regardless of the designation of any one particular area in the state. Thus, EPA does not believe that these requirements are applicable requirements for purposes of redesignation.

In addition, EPA believes that the other CAA section 110(a)(2) elements not connected with nonattainment plan submissions and not linked with an area's attainment status are not applicable requirements for purposes of redesignation because the area will still be subject to these requirements after it is redesignated. EPA concludes that the CAA section 110(a)(2) and part D requirements, which are linked with a particular area's designation and classification, are the relevant measures to evaluate in reviewing a redesignation request, and that CAA section 110(a)(2) elements not linked to the area's nonattainment status are not applicable for purposes of redesignation. This approach is consistent with EPA's existing policy on applicability of conformity ( i.e., for redesignations) and oxygenated fuels requirement. See Reading, Pennsylvania, proposed rulemaking and final rule (61 FR 53174, October 10, 1996), (62 FR 24826, May 7, 1997); Cleveland-Akron-Lorain, Ohio final rule (61 FR 20458, May 7, 1996); and Tampa, Florida, final rule (60 FR 62748, December 7, 1995). See also, the discussion on this issue in the Cincinnati, Ohio redesignation (65 FR at 37890, June 19, 2000), and in the Pittsburgh-Beaver Valley, Pennsylvania redesignation (66 FR at 53099, October 19, 2001).

EPA has reviewed the Idaho SIP and has concluded that it meets the general SIP requirements under section 110(a)(2) of the CAA to the extent they are applicable for the purposes of redesignation. EPA has previously approved provisions of Idaho's SIP as demonstrating compliance with the CAA section 110(a)(2) requirements for the 2012 annual PM 2.5 NAAQS (82 FR 57132, December 4, 2017 and 83 FR 48240, September 24, 2018). However, as noted above, the requirements of section 110(a)(2) are statewide requirements that are not linked to the PM 2.5 nonattainment status of the West Silver Valley area. Therefore, EPA believes that these SIP elements are not applicable requirements for purposes of review of this proposed redesignation.

Because PSD requirements will apply after redesignation, areas being redesignated must have an approved PSD program. Once the West Silver Valley is redesignated to attainment, Idaho's PSD program, and not NNSR, will become effective in the area. Idaho's PSD regulations are codified in the Idaho Administrative Procedures Act (IDAPA) at 58.01.01.200-228. We most recently approved revisions to Idaho's PSD program on August 20, 2018 (83 FR 42033), May 12, 2017 (82 FR 22083) and August 12, 2016 (81 FR 53290).

Areas seeking redesignation need not comply with the requirement that a NNSR program be approved prior to redesignation, provided that the area demonstrates maintenance of the NAAQS without NNSR. A more detailed rationale for this is described in the Nichols memorandum. Nevertheless, on August 20, 2018, EPA approved Idaho's SIP as meeting applicable NNSR requirements. (83 FR 42033). EPA has reviewed the Idaho SIP and has concluded that it meets the general SIP requirements under section 110(a)(2) of the CAA to the extent they are applicable for purposes of redesignation, namely a SIP-approved PSD program.

Part D of Title I of the CAA sets forth the basic nonattainment plan requirements applicable to all nonattainment areas at subpart 1 (CAA sections 172-176) and requirements specific to PM 10 and PM 2.5 areas at subpart 4 (CAA section 189). On August 24, 2016, EPA promulgated the Fine Particulate Matter National Ambient Air Quality Standards; State Implementation Plan Requirements rule. 3 This rule implements the requirements of part D of title I of the CAA for areas designated nonattainment for any PM 2.5 NAAQS.

EPA's longstanding interpretation of the nonattainment planning requirements of CAA section 172 is that once an area is attaining the NAAQS, those requirements are not “applicable” for purposes of CAA section 107(d)(3)(E)(ii) and therefore need not be approved into the SIP before EPA can redesignate the area. In the 1992 General Preamble for Implementation of CAA title I, EPA set forth its interpretation of applicable requirements for purposes of evaluating redesignation requests when an area is attaining a standard. See 57 FR 13498, 13564 (April 16, 1992). EPA noted that the requirements for RFP and other measures designed to provide for attainment do not apply in evaluating redesignation requests because those nonattainment planning requirements “have no meaning” for an area that has already attained the standard. Id. This interpretation was also set forth in the Calcagni memorandum. EPA's understanding of CAA section 172 also forms the basis of its Clean Data Policy, which was articulated with regard to PM 2.5 in 40 CFR 51.1015 and suspends a state's obligation to submit most of the attainment planning requirements that would otherwise apply, including an attainment demonstration and planning SIPs to provide for RFP, RACM, and contingency measures under section 172(c)(9). 4 Courts have upheld EPA's interpretation of CAA section 172(c)(1)'s “reasonably available” control measures and control technology as meaning only those controls that advance attainment, which precludes the need to require additional measures where an area is already attaining. NRDC v. EPA, 571 F.3d 1245, 1252 (D.C. Cir. 2009); Sierra Club v. EPA, 294 F.3d 155, 162 (D.C. Cir. 2002); Sierra Club v. EPA, 314 F.3d 735, 744 (5th Cir. 2002).

As stated previously, EPA determined that the West Silver Valley has attained the 2012 annual PM 2.5 NAAQS in a “clean data determination.” 83 FR 65535, December 21, 2018. Furthermore, as shown in section III.A of this document, the West Silver Valley continues to attain the 2012 annual PM 2.5 NAAQS. Therefore, because attainment has been reached in the West Silver Valley, no additional measures are needed to provide for attainment, and CAA section 172(c)(1) requirements for an attainment demonstration and RACM are no longer considered to be applicable for purposes of redesignation as long as the West Silver Valley continues to attain the standard until redesignation.

The CAA section 172(c)(2) requirement that nonattainment plans contain provisions promoting reasonable further progress toward attainment is also not relevant for purposes of redesignation because EPA has determined that the West Silver Valley has monitored attainment of the 2012 annual PM 2.5 NAAQS. In addition, because the West Silver Valley has attained the 2012 annual PM 2.5 NAAQS and is no longer subject to RFP requirements, the requirement to submit the section 172(c)(9) contingency measures is not applicable for purposes of redesignation. CAA section 172(c)(6) requires the SIP to contain control measures necessary to provide for attainment of the NAAQS. Because attainment has been reached, no additional measures are needed to provide for attainment.

Section 172(c)(3) of the CAA requires submission and approval of a comprehensive, accurate and current inventory of actual emissions. The requirement under CAA section 172(c)(3) was not suspended by EPA's clean data determination for the 2012 annual PM 2.5 NAAQS and is the only remaining requirement under CAA section 172 to be considered for purposes of redesignation of the West Silver Valley. On September 29, 2017, Idaho submitted to EPA a 2013 base year emissions inventory for the West Silver Valley for the 2012 annual PM 2.5 NAAQS. The 2013 base year inventory covers the general source categories of point sources, nonroad mobile sources, area sources, and onroad mobile sources and includes PM 2.5 emissions and precursors, NO X , sulfur dioxide (SO 2 ), VOCs, and ammonia (NH 3 ). EPA approved the 2013 base year inventory on September 11, 2018 (83 FR 45830).

CAA section 172(c)(4) requires the identification and quantification of allowable emissions for major new and modified sources in an area, and section 172(c)(5) requires source permits for the construction and operation of new and modified major stationary sources anywhere in the nonattainment area. As stated previously in this document, EPA has determined that, since PSD requirements will apply after redesignation, areas being redesignated need not comply with the requirement that a NNSR program be approved prior to redesignation, provided that the area demonstrates maintenance of the NAAQS without NNSR. A more detailed rationale for this view is described in the Nichols memorandum. Nevertheless, EPA first approved the requirements of the part D NSR permit program for Idaho under subpart 1 on November 26, 2010 (75 FR 72719). Subsequently, on March 20, 2018, Idaho submitted rule revisions to meet additional part D NSR requirements promulgated by EPA under subpart 4 (81 FR 58010, August 24, 2016). We approved Idaho's submission on August 20, 2018 (83 FR 42033).

Once the West Silver Valley is redesignated to attainment, Idaho's PSD program, and not NNSR, will become effective in the area. Idaho's PSD regulations are codified in the Idaho Administrative Procedures Act (IDAPA) at 58.01.01.200-228 (permit to construct) and governed by IDAPA 58.01.01.205 (permit requirements for new major facilities or major modifications in attainment or unclassifiable areas). We most recently approved revisions to Idaho's PSD program on August 20, 2018 (83 FR 42033), May 12, 2017 (82 FR 22083) and August 12, 2016 (81 FR 53290). EPA finds that Idaho's PSD provisions meet all applicable Federal requirements for any area designated unclassifiable or attainment.

CAA section 172(c)(7) requires the SIP to meet the applicable provisions of CAA section 110(a)(2). As noted above, we find that the Idaho SIP meets the CAA section 110(a)(2) applicable requirements for purposes of redesignation.

Section 175A of the CAA requires a state seeking redesignation to attainment to submit a SIP revision to provide for the maintenance of the NAAQS in the area “for at least 10 years after the redesignation.” In conjunction with its requests to redesignate the West Silver Valley to attainment, Idaho submitted a plan to provide for maintenance of the 2012 annual PM 2.5 NAAQS in the West Silver Valley for at least 10 years after redesignation, through 2031. Idaho is requesting that EPA approve the submission as meeting the requirement of section 175A of the CAA. Once approved, the maintenance plan will ensure that the Idaho SIP meets the requirements of the CAA regarding maintenance of the 2012 annual PM 2.5 NAAQS for the West Silver Valley. EPA's analysis of the maintenance plan is provided in section III.D of this document.

EPA concludes that Idaho has met the requirements of subpart 1 of part D relevant for redesignation. Specifically, pursuant to section 110(k) of the CAA, EPA has approved Idaho's 2013 base year inventory for the West Silver Valley into the Idaho SIP.

CAA section 107(d)(3)(E)(iii) of the CAA provides that for an area to be redesignated to attainment, the Administrator must determine that the improvement in air quality is due to permanent and enforceable reductions in emissions resulting from implementation of the applicable implementation plan, implementation of applicable Federal air pollutant control regulations, and other permanent and enforceable reductions.

In making this demonstration for the West Silver Valley, Idaho explained that control measures for the area focused on residential wood combustion, onroad, and nonroad sources, which contributed to PM 2.5 formation in the 2013 base year emissions inventory (2013 was one of the years used to designate the area as nonattainment). The 2017 attainment year emissions inventory recorded reductions in directly emitted PM 2.5 and precursors for those categories (2017 is one of the years used to monitor attainment). Idaho states that the emissions reductions occurred because of permanent and enforceable federal reduction programs, public outreach, and financial incentives.

Idaho's residential wood combustion control measures for the West Silver Valley addressed smoke from heating devices, such as fireplaces and wood stoves. In comparing emissions between the 2013 base year inventory and the 2017 attainment year inventory for the West Silver Valley, Idaho showed a 63 percent decrease in PM 2.5 emissions from residential wood combustion, from 55.38 tons per year (tpy) in the 2013 base year emissions inventory to 20.45 tpy in the 2017 attainment year emissions inventory. Idaho attributed these emission reductions primarily to Federal standards for wood heaters and to the West Silver Valley woodstove changeout program.

Idaho explained that EPA's 2015 Standards of Performance for New Residential Wood Heaters strengthened emissions limits for residential wood heaters, making devices significantly cleaner. 5 The 2015 rule requires, among other things, that new residential wood heaters be certified to meet the 2015 emission limits before they may be imported, sold, or distributed in the U.S. To accelerate the removal of uncertified wood stoves, Idaho incentivized wood stove replacements in the West Silver Valley through a wood stove changeout program. Participants in the changeout program replaced uncertified wood stoves with EPA-certified devices or gas appliances, and were required to surrender their uncertified wood stoves, making the emissions reductions permanent. Between 2013 and 2017, Idaho replaced 65 wood stoves in the West Silver Valley. Although Idaho's future year emissions projections assume residential wood combustion to be constant for years beyond 2017, Idaho anticipates additional emissions reductions as phase II of the Standards of Performance for New Residential Wood Heaters is implemented and as remaining funding for an additional 140 wood stove replacements in the West Silver Valley is distributed.

Idaho states that despite increasing vehicle populations and vehicle miles traveled, emissions from mobile sources in the West Silver Valley have decreased as a result of Federal motor vehicle regulations. In comparing the 2013 base year emissions inventory with the 2017 attainment year emissions, EPA found that onroad emissions decreased by 2.55 tpy and nonroad emissions decreased by 3.65 tpy. 6

Idaho primarily attributes the reduction in onroad emissions to the Federal Tier 2 (65 FR 6698, February 10, 2000) and Tier 3 (79 FR 23414, April 28, 2014) vehicle emissions standards and gasoline sulfur control requirements, and to the Federal rule for heavy-duty engine and vehicle standards and highway diesel fuel sulfur control requirements (66 FR 5002, January 18, 2001). Idaho explained that the vehicle standards reduce tailpipe and evaporative emissions, reductions which increase as vehicle turnover increases over time, and that the gasoline sulfur standards make emissions control systems more effective for both existing and new vehicles.

Idaho identified several Federal rules that have been promulgated to address nonroad mobile emissions sources. On June 29, 2004, EPA adopted a comprehensive national program to reduce emissions from nonroad diesel engines (69 FR 38958). The rule phased in tighter emissions limits for large nonroad diesel engines and requirements for reducing the sulfur content of nonroad diesel fuel.

Idaho has several SIP-approved rules that apply statewide and complement the Federal control strategies in the West Silver Valley. For example, the following rules assist in the control of PM 2.5 in the West Silver Valley: The rules for the control of open burning at IDAPA 58.01.01.600 through 624; the requirements to reasonably control fugitive dust at sections 650 through 652; the permitting of industrial sources (sections 200, 300 and 400), and the specific requirements for nonmetallic mineral processing plants at sections 795 through 799. Additionally, sections 550 through 562 provide authority to limit emissions during degraded air quality episodes.

Idaho also assessed the potential role that changing meteorological conditions might have played in improving air quality in the West Silver Valley. Idaho reviewed temperature and precipitation data as well as the frequency of wintertime stagnation events. Idaho concluded that it is unlikely that favorable meteorological conditions played a significant role in attaining the 2012 annual PM 2.5 NAAQS.

Based on the evaluation of these control measures, EPA proposes to determine that the improvement in air quality is reasonably attributable to permanent and enforceable reductions in emissions resulting from implementation of the applicable Federal air pollutant control regulations, and other permanent and enforceable emissions reductions.

In conjunction with Idaho's request to redesignate the West Silver Valley to attainment, Idaho submitted SIP revisions to provide for maintenance of the 2012 annual PM 2.5 NAAQS through 2031. EPA is proposing to approve Idaho's maintenance plan for the West Silver Valley. If this proposed action is finalized, the West Silver Valley will have an approved maintenance plan.

CAA section 107(d)(3)(E)(iv) requires that, for a nonattainment area to be redesignated to attainment, EPA must fully approve a maintenance plan which meets the requirements of CAA section 175A. The plan must demonstrate continued attainment of the relevant NAAQS in the area for at least 10 years after our approval of the redesignation. Eight years after our approval of a redesignation, the State must submit a revised maintenance plan demonstrating attainment for the 10 years following the initial 10-year period. The maintenance plan must also contain a contingency plan to ensure prompt correction of any violation of the NAAQS. The Calcagni Memo provides additional guidance on the content of a maintenance plan, stating that a maintenance plan should include the following elements: (1) An attainment emissions inventory; (2) a maintenance demonstration showing attainment for 10 years following redesignation; (3) a commitment to maintain the existing monitoring network; (4) verification of continued attainment; and (5) a contingency plan to prevent or correct future violations of the NAAQS. The following paragraphs describe how each of these elements is addressed in Idaho's maintenance plan.

As discussed in the CAA General Preamble ( see 57 FR 13498, April 16, 1992) and the Calcagni Memo, PM 2.5 maintenance plans should include an attainment emission inventory to identify the level of emissions in the area which is sufficient to maintain the NAAQS. The attainment inventory should be consistent with EPA's most recent guidance on emission inventories for nonattainment areas available at the time and should include the emissions during the time period associated with the monitoring data showing attainment.

Idaho submitted a maintenance plan for the West Silver Valley that includes an attainment year inventory for the area for 2017, which is one of the years in the period during which the West Silver Valley first monitored attainment of the 2012 annual PM 2.5 NAAQS (see section III.A of this document). The attainment year inventory includes emissions of PM 2.5 , NO X , SO 2 , VOC, and NH 3 . The 2017 attainment levels of emissions are summarized in Table 3, along with future year projected emissions for 2026 and 2031.

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In the January 14, 2021 Federal Register , we published a final rule titled “Medicare Program; Medicare Coverage of Innovative Technology (MCIT) and Definition of `Reasonable and Necessary' (86 FR 2987) (hereinafter referred to as the “MCIT/R&N final rule”). The MCIT/R&N final rule established a Medicare coverage pathway to provide Medicare beneficiaries nationwide with faster access to recently market authorized medical devices designated as breakthrough by the Food and Drug Administration (FDA). Under the final rule, MCIT would result in 4 years of national Medicare coverage starting on the date of FDA market authorization or a manufacturer chosen date within 2 years thereafter. The MCIT/R&N final rule would also implement regulatory standards to be used in making reasonable and necessary determinations under section 1862(a)(1)(A) of the Social Security Act (the Act) for items and services that are furnished under Medicare Parts A and B.

In response to the January 20, 2021 memorandum from the Assistant to the President and Chief of Staff titled “Regulatory Freeze Pending Review” (“Regulatory Freeze Memorandum”) (86 FR 7424, January 28, 2021) and guidance on implementation of the memorandum issued by the Office of Management and Budget (OMB) in Memorandum M-21-14 dated January 20, 2021, we determined that a 60-day delay of the effective date of the MCIT/R&N final rule was appropriate to ensure that—

• The rulemaking process was procedurally adequate;

• We properly considered all relevant facts;

• We considered statutory or other legal obligations;

• We had reasonable judgment about the legally relevant policy considerations; and

• We adequately considered public comments objecting to certain elements of the rule, including whether interested parties had fair opportunities to present contrary facts and arguments.

Therefore, in an interim final rule with comment period that went on display at the Federal Register and took effect on March 12, 2021 (hereinafter referred to as the “March 2021 IFC”), and was published in the March 17, 2021 Federal Register (86 FR 14542), we—(1) delayed the MCIT/R&N final rule effective date until May 15, 2021 (that is, 60 days after the original effective date of March 15, 2021); and (2) opened a 30-day public comment period on the facts, law, and policy underlying the MCIT/R&N final rule.

Many commenters on the March 2021 IFC supported further delaying the MCIT/R&N final rule. Based upon the public comments, we did not believe that it was in the best interest of Medicare beneficiaries for the MCIT/R&N final rule to become effective on May 15, 2021. Therefore, in a final rule that went on display at the Federal Register and took effect on May 14, 2021 (hereinafter referred to as the “May 2021 final rule”), and was published in the May 18, 2021 Federal Register (86 FR 26849), we summarized the comments on the March 2021 IFC and further delayed the MCIT/R&N final rule effective date until December 15, 2021. We explained that the additional delay would provide us an opportunity to address all of the issues raised by stakeholders, especially those related to Medicare patient protections and evidence criteria. We announced that during the delay, we would determine appropriate next steps that are in the best interest of all Medicare stakeholders, and beneficiaries in particular.

We propose to repeal the MCIT/R&N final rule. Our rationale for our proposal as well as our requests for comments on this proposed rule are explained in the following section.

CMS developed MCIT in part due to concerns that delays and uncertainty in Medicare coverage slowed innovation and impaired beneficiary access to important new technologies, specifically those designated as breakthrough devices by FDA. In response to these concerns, the rule provided 4 years of expedited coverage to FDA market authorized Breakthrough Devices on the first day of FDA market authorization or a select date up to 2 years after the market authorization date as requested by the device manufacturer. While the final rule did not require manufacturers to develop additional scientific evidence supporting the use of the Breakthrough Devices in the Medicare population, manufacturers were aware that, upon conclusion of MCIT coverage, the existing coverage pathways would be available (that is, reasonable and necessary determinations would be made via claim-by-claim adjudication, local coverage determinations (LCDs), and national coverage determinations (NCDs), which include the coverage with evidence development pathway). The NCD and LCD development processes include reviews of publicly available clinical evidence to determine whether or not the items or services are reasonable and necessary and would be covered by Medicare.

We believe that the finalized MCIT/R&N rule is not in the best interest of Medicare beneficiaries because the rule may provide coverage without adequate evidence that the Breakthrough Device would be a reasonable and necessary treatment for the Medicare patients that have the particular disease or condition that the device is intended to treat or diagnose. While the rule tried to address stakeholder concerns about accelerating coverage of new devices, significant concerns persist about the availability of clinical evidence on Breakthrough Devices when used in the Medicare population as well as the benefit or risks of these devices with respect to use in the Medicare population upon receipt of coverage. Based on the comments received throughout the development of the MCIT pathway, we do not believe that the final rule as currently drafted, is the best way to achieve the goals of MCIT as outlined in the MCIT/R&N final rule, in particular, to more precisely meet the needs Medicare beneficiaries and other stakeholders in a timely fashion. We believe that there are other ways to achieve our stated goals. This may include better utilizing existing pathways or conducting future rulemaking.

As noted in the May 2021 final rule, our prior policies permitted the Medicare program to deny coverage for particular devices if we learned that a particular device may be harmful to Medicare beneficiaries. Specifically, Medicare Administrative Contractors (MACs) could have denied claims under certain circumstances (86 FR 26851, May 18, 2021). Under the MCIT/R&N final rule, this case-specific flexibility would have been removed. While we could remove coverage through the NCD process, we would only be able to expeditiously remove a Breakthrough Device from the MCIT coverage pathway for limited reasons, such as if FDA issued a safety communication or warning letter regarding the Breakthrough Device, or removed the marketing authorization for a device. We believe that this limitation on our authority is impracticable as it may lead to preventable harm to Medicare beneficiaries and it impedes Medicare's ability to make case-by-case determinations regarding whether a device is reasonable and necessary based on clinical evidence.

Further, while the finalized MCIT policy in the MCIT/R&N final rule would have provided expedited Medicare coverage following market authorization for breakthrough designated devices, there is currently no FDA requirement that Medicare beneficiaries must be included in clinical studies needed for market-authorization. Because the MCIT/R&N final rule did not require data concerning Medicare beneficiaries, there is the potential that Medicare would cover devices, even in the absence of data demonstrating that the device is reasonable and necessary for Medicare patients will benefit from the device. Additionally, several medical device manufacturers suggested that, for inclusion in MCIT, FDA pivotal studies should require inclusion of sufficient numbers of Medicare beneficiaries (86 FR 26851, May 18, 2021).

Certain proponents of accelerated Medicare coverage have argued that FDA's determination that a product meets applicable safety and effectiveness standards for marketing authorization should be sufficient to support Medicare coverage of Breakthrough Devices. However, after further consideration of all public comments, we no longer agree that the FDA safety and effectiveness standards alone are sufficient to support open-ended Medicare coverage. FDA and CMS act under different statutes that have different goals and the standard for coverage (that is, a determination that a device is reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member) is not synonymous with standards for safety and efficacy standards for marketing authorization for the broader population. Among other things, FDA conducts premarket review of certain devices to evaluate their safety and effectiveness and determines if they meet the applicable standard to be marketed in the United States. In doing so, FDA relies on scientific and medical evidence that does not necessarily include patients from the Medicare population. In general, under the Medicare statute, CMS is charged with determining whether items and services are reasonable and necessary to diagnose or treat an illness or injury or to improve the functioning of a malformed body member. One consideration for CMS in making national coverage determinations under the reasonable and necessary statute is whether the item/service improves health outcomes for Medicare beneficiaries. It is important to determine whether Medicare beneficiaries' health outcomes are improved because these individuals are often older, with multiple comorbidities, 1 and are often underrepresented or not represented in many clinical studies.

The Medicare national coverage determination process includes a robust review of available clinical evidence and focuses on the Medicare population to make reasonable and necessary determinations. In contrast, the MCIT pathway would establish an expedited 4-year coverage pathway for all Breakthrough Devices that fall under a Medicare benefit category without a specific requirement that the device must demonstrate it is reasonable and necessary for the Medicare population. In general, Medicare patients have more comorbidities and often require additional and higher acuity clinical treatments which may impact the outcomes differently than the patients generally enrolled in early clinical trials. These considerations are often not addressed in the early device development process.

When we issued the MCIT/R&N final rule on January 14, 2021, we responded to commenters who suggested that CMS should take a different approach. Some commenters suggested that we should require manufacturers to provide data about Medicare outcomes before providing coverage as reasonable and necessary. Other commenters suggested that we provide incentives to manufacturers to include Medicare beneficiaries in clinical studies, similar to CMS's Coverage with Evidence Development (CED) paradigm, before coverage under section 1862(a)(1)(A) of the Act was allowed (86 FR 2990, January 14, 2021). 2 In response to the March 2021 IFC, additional commenters supported evidence development as part of the requirements to participate in the MCIT pathway. Some commenters noted that some clinical trials that were conducted to support market authorization through the Breakthrough Devices pathway lack data on patients older than 65, patients with disabilities, and patients with end stage renal disease (ESRD). They asserted that the absence of this clinical information poses some uncertainty about whether FDA's determination of safety and efficacy could be generalized to the Medicare population (86 FR 26850 and 26851, May 18, 2021). CMS acknowledges that after further consideration of public comments, we have changed our position on this issue. In response to commenters' concerns about expedited coverage without adequate evidentiary support, CMS agrees that guaranteeing coverage for all Breakthrough Devices receiving market authorization for any Medicare patient could be problematic if there is no evidence demonstrating a health benefit or addressing the additional risks for Medicare beneficiaries (86 FR 26850 and 26851, May 18, 2021). We noted that a Breakthrough Device may only be beneficial in a subset of the Medicare population or when used only by clinicians within a certain specialty to ensure benefit. Without additional clinical evidence on the device's clinical utility for the Medicare population or appropriate providers, it is challenging to determine appropriate Medicare coverage of newly market-authorized Breakthrough Devices (86 FR 26850 and 26851, May 18, 2021).

We recognize that the breakthrough designation may be granted by FDA before sufficient clinical evidence is available to prove there is a health benefit for Medicare patients. FDA has explained in guidance that because decisions on requests for breakthrough designation will be made prior to marketing authorization, FDA considers whether there is a “reasonable expectation that a device could provide for more effective treatment or diagnosis relative to the current standard of care (SOC) in the U.S” for purposes of the designation. This reasonable expectation can be “supported by literature or preliminary data (bench, animal, or clinical)”. 3 Without sufficient evidence developed to show the device improves health outcomes for Medicare beneficiaries, it may be challenging for the Medicare program to determine the health benefit of these devices for Medicare beneficiaries. Public comments expressed concern about how the Medicare population is often excluded from clinical trials due to age and health status.

Previously, in the MCIT/R&N final rule, we noted that “device coverage under the MCIT pathway is reasonable and necessary for a duration of time under section 1862(a)(1)(A) of the Act because the device has met the very unique criteria of the FDA Breakthrough Devices Program” (86 FR 2988, January 14, 2021). 4 Through further consideration of the breakthrough designation process, we have changed our position on this issue and determined that Breakthrough Device designation is not, by itself, sufficient for expedited Medicare coverage purposes. Rather, as explained previously, we understand that FDA may grant a device breakthrough designation when the device has shown a “reasonable expectation” of providing more effective treatment or diagnosis of a life-threatening or irreversibly debilitating disease or condition relative to the current U.S. SOC and that it meets the other criterion for designation in section 515B(b)(2) of the Federal Food, Drug, and Cosmetic Act (FD&C) Act (21 U.S.C. 360e-3(b)(2)). In turn, we now do not believe it is in the best interest of Medicare beneficiaries to base expedited, multiyear, broad national coverage through section 1862(a)(1)(A) of the Act on this designation alone.

Clinical studies that are conducted in order to gain market authorization for FDA Breakthrough Devices may not always include information on patients with similar demographics and characteristics of the Medicare population. Additionally, there may be devices designated as breakthrough that do not have adequate data on the effectiveness of the device for the Medicare population. Without requiring any evidence specific to the Medicare patients, there may not be any evidence to demonstrate whether the device is beneficial or not after the conclusion of MCIT coverage after 4 years. Without such evidence, it is possible that Medicare would be covering and paying for devices that may have little or no Medicare relevant clinical evidence to assist physicians and patients in making potentially life-saving treatment decisions. Evidence-based coverage policy is essential to our objective of improving health outcomes while delivering greater value. Supportive clinical evidence that ensures a device is both safe and effective and reasonable and necessary in the Medicare population is crucial in order to grant coverage for a device under section 1862(a)(1)(A) of the Act. Such evidence is used to determine whether a new technology meets the appropriateness criteria of the longstanding Medicare Program Integrity Manual Chapter 13 definition of reasonable and necessary. 5 We believe that it is important to require manufacturers participating in an innovative coverage pathway, such as MCIT, to produce evidence that demonstrates the health benefit of the device and the related services for patients with demographics similar to that of the Medicare population.

In response to the March 2021 IFC, some commenters cited evidence that FDA-mandated postmarket studies are not reliably completed (less than 20 percent of required studies are completed within 3 to 5 years after market authorization), 6 and asserted that evidence demonstrating a device's health benefit in Medicare beneficiaries is essential. Commenters also recommended that CMS outline in guidance documents the types of evidence that would be acceptable for applications for national or local coverage determinations once the MCIT pathway's 4 years had expired, such as real-world data or randomized, controlled trials (86 FR 26851, May 18, 2021). By voluntarily developing this evidence during the time a device is covered under the MCIT pathway, the manufacturer could have the evidence base needed for one of the other coverage pathways after the MCIT pathway ends. However, the MCIT/R&N final rule did not require manufacturers of Breakthrough Devices to develop evidence as part of their participation requirements under MCIT. In the May 2021 final rule, we noted that numerous commenters, including physicians with experience in clinical research and medical specialty societies, sought modifications to the MCIT/R&N final rule regarding evidence development, including the addition of real-world evidence requirements.

As was noted by commenters in response to the March 2021 IFC that delayed the MCIT/R&N final rule until December 15, 2021, early and unrestricted adoption of devices may have consequences that may not be easy to reverse. CMS expects physicians to consider the available evidence and assess the care needs of each patient when considering the best treatment options. However, by guaranteeing coverage of devices based solely on breakthrough status and FDA marketing authorization, rather than also taking into account whether the device provides an effective, reasonable and necessary treatment for Medicare patients, there may be an incentive for physicians to use a device that has coverage under the MCIT pathway rather than a device that is not covered under the MCIT pathway but is nonetheless covered under an existing coverage pathway and that may be more beneficial to patients. This early adoption by physicians could potentially lead to these devices being prematurely viewed as the standard of care, which could adversely impact beneficiaries if there is another item or service available to treat the patient that has an evidence-base to suggest that it may lead to better health outcomes. We believe that providers' clinical treatment decisions should take the individual needs of the patient into account; therefore, we seek to avoid the appearance of incentivizing the use of MCIT-covered devices when an alternative item or service may be more appropriate.

While the MCIT/R&N final rule may provide beneficiaries and manufacturers an assurance of national Medicare coverage, evidence development under MCIT as previously finalized is voluntary and there was no requirement that manufacturers conduct studies to generate evidence to demonstrate clinical benefit to Medicare patients. We acknowledge that we no longer believe that voluntary evidence development is in the best interests of Medicare beneficiaries as we believe such evidence is key to determining the best treatments for Medicare patients to ensure that the benefits of treatments outweigh the potential harms. For devices that lack evidence that is generalizable to the Medicare population, we believe it is important for evidence to be developed and some public commenters suggested that we establish the coverage criteria (for example, provider experience, site of service, availability of supporting services) to ensure delivery of high-quality, evidence-based care.

While we are proposing to repeal the MCIT/R&N final rule, this action would not prohibit coverage of Breakthrough Devices. As we noted in the May 2021 final rule, even without the MCIT/R&N final rule in effect, a review of claims data showed that Breakthrough Devices have received and are receiving Medicare coverage when medically necessary. Many of the eligible Breakthrough Devices are coverable and payable through existing mechanisms. Some Breakthrough Devices may be addressed by an existing LCD or NCD. New items and services can also be adjudicated on a claim-by-claim basis and be covered and paid under the applicable Medicare payment system if the MAC determines them to be reasonable and necessary for specific patients upon a more individualized MAC assessment. The MACs take into account a beneficiary's particular clinical circumstances to determine whether a beneficiary may benefit from the device. CMS acknowledges, among other factors, that MCIT was developed in response to stakeholder concerns about time lags and coverage uncertainty for devices subject to claim-by-claim coverage determinations.

The MCIT/R&N final rule limited MCIT only to Breakthrough Devices that are designated as part of FDA's Breakthrough Devices Program. In accordance with section 515B of the FD&C (21 U.S.C. 360e-3), FDA's Breakthrough Devices Program is for certain medical devices and device-led combination products, and can include lab tests. 7 To be granted a Breakthrough Device designation under the Breakthrough Devices Program, medical devices and device-led combination products must meet two criteria. The first criterion is that the device provides for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions. The second criterion is that the device must satisfy one of the following elements:

• It represents a breakthrough technology.

• No approved or cleared alternatives exist.

• It offers significant advantages over existing approved or cleared alternatives.

• Device availability is in the best interest of patients (for more information see 21 U.S.C. 360e-3(b)(2)).

We acknowledge that some stakeholders, and device manufacturers in particular, supported MCIT and the concept of faster coverage.

Some commenters to the September 2020 MCIT/R&N proposed rule expressed concern that the MCIT pathway could give specific technologies an unfair advantage that would be unavailable to subsequent market entrants, thereby decreasing innovation and market competition (86 FR 2998). Commenters submitted a variety of alternative approaches to covering second-to-market and non-breakthrough designated new technology to remedy this unintended consequence. Some commenters supported that CMS cover iterative refinements of the same Breakthrough Device for the duration of the original device's MCIT term. Other commenters suggested coverage under the MCIT pathway for subsequent similar breakthrough and non-breakthrough designated devices of the same type and indication for the balance of the first device's MCIT term. Yet other commenters proposed that new market entrants that are very similar to a Breakthrough Device should each receive the full 4 years of MCIT coverage, not tied to the timeline of the original product. Commenters also suggested policies related to coverage options for second-to-market or subsequent technologies of the same type, even for the same indication or subsequent-to-market non-breakthrough designated technologies that fall under the same class or category as the predicate breakthrough technology and approved for the same indication.

CMS acknowledges that we have changed our policy position on this issue after further consideration of public comments. We agree with commenters that there are many drawbacks to limiting coverage through the MCIT pathway only to those devices that are part of the Breakthrough Devices Program. As noted previously, the potential incentives created by offering immediate coverage of Breakthrough Devices may disincentivize development of innovative technologies that do not meet the criteria for the Breakthrough Devices Program, such as some non-breakthrough-designated second-to-market devices and subsequent technologies of the same type. Additionally, we now believe a more flexible coverage pathway that leverages existing statutory authorities may be better able to provide faster coverage of new technologies to Medicare beneficiaries while prioritizing patient health and outcomes. CMS invites public comment on our proposal to repeal the MCIT coverage pathway of the MCIT/R&N final rule for the reasons previously described.

While we are proposing to repeal the MCIT/R&N final rule as it is currently written, we are considering future policies and potential rulemaking to provide improved access to innovative and beneficial technologies. We are committed to exploring other policy options and statutory authorities for coverage that better suit the needs of Medicare beneficiaries and other stakeholders when the items or services are supported by adequate evidence.

In general, section 1862(a)(1)(A) of the Act permits Medicare payment under Part A or Part B for items or services that are reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. The definition of “reasonable and necessary” in the MCIT/R&N final rule mirrored the longstanding CMS Program Integrity Manual's definition of “reasonable and necessary” with a modification to the appropriateness factor to specify when and how (upon publication of guidance) we would utilize commercial insurer coverage policies.

Expanding the reasonable and necessary definition to systematically consider commercial insurer coverage presents implementation and appeals process challenges that would likely persist. In the preamble to the MCIT/R&N final rule, we stated our intention to gather additional public input on the methodology by which commercial insurers' policies are determined to be relevant to the reasonable and necessary appropriateness criteria in response to commenters concerns that the commercial insurer appropriateness criteria was vague. We stated that not later than 12 months after the effective date of the MCIT/R&N final rule (that is, December 15, 2021), we would publish for public comment, a draft methodology for determining when commercial insurers' policies could be considered to meet the reasonable and necessary definition appropriateness criteria for coverage of an item or service. Comments received in response to the March 2021 IFC expressed concern about how the commercial insurer policy provision would be implemented. Commenters also expressed concerns that the R&N definition included in the MCIT/R&N final rule, and more specifically the commercial insurance aspects of the definition, will remove existing flexibilities and potentially impact CMS' ability to ensure equitable health care access for all Medicare beneficiaries. Additionally, commenters suggested that the reasonable and necessary definition should be included in a separate rule as MCIT because R&N are independent and distinct provisions with different implications for Medicare policy. In light of our proposal to repeal the R&N definition, including the commercial insurance aspects of the MCIT/R&N final rule, we will not be issuing subregulatory guidance by March 15, 2022 on consideration of commercial insurer coverage polices when there is insufficient evidence to make a national or local coverage determination.

While we are proposing to fully repeal the MCIT/R&N final rule as it is currently written, we invite comments on the R&N aspect of our proposal. In lieu of fully repealing the R&N rule, should the final rule instead merely repeal the commercial insurance aspects of the rule? If CMS does consider future rulemaking to include defining reasonable and necessary, what criteria should CMS consider as part of the reasonable and necessary definition? For example, should CMS maintain the codification of the definition of “Reasonable and Necessary” as found in the Chapter 13 of the CMS Program Integrity Manual (PIM) or consider different criteria?

If the MCIT/R&N final rule is repealed as proposed, the revisions to part 405 of Title 42 of the Code of Federal Regulations would not occur and the text would remain unchanged. Specifically, a definition of “reasonable and necessary” would not be included among the terms defined at 42 CFR 405.201(b) and the guidance that the rule would have required (subregulatory guidance on the topic of utilization of commercial insurer polies) would not be introduced. Additionally, Subpart F, which wholly consisted of Medicare Coverage of Innovative Technology, would not be added, and Subpart F would remain reserved for other purposes.

This proposed rule would repeal the MCIT pathway and codification of the definition of “reasonable and necessary.” Because the January 2021 final rule effective date was delayed until December 15, 2021, the MCIT coverage pathway and definition of “reasonable and necessary” have not been implemented, and no payments for items and services could have been made in relation to these provisions since they have not taken effect. In the January 2021 final rule, we included a robust regulatory impact analysis of these provisions. Because the final rule has not gone into effect, and this proposal would repeal the provisions, there has not been an impact from these provisions nor would there be an impact, relative to current coverage practice, upon repeal; however, effects would be non-negligible relative to the future trajectory without this proposed repeal.

In the MCIT/R&N final rule, we examined the impact of the final rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs (January 30, 2017).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). The MCIT/R&N 2021 final rule reached the economic threshold and thus was considered a major rule. Because this proposed rule would completely repeal the provisions, this proposed rule also reaches the economic threshold and its finalization is anticipated to be a major rule.

CMS considered alternatives to repealing the MCIT pathway and the definition of reasonable and necessary, such as maintaining the provisions of the MCIT/R&N final rule and further delaying the effective date. For the reasons described in detail in section II. of this proposed rule such as patient safety and need for further public engagement, we chose to propose to repeal the provisions. We note that further delay of the MCIT/R&N final rule would not alter the patient safety concerns inherent in the MCIT pathway.

As described in the MCIT/R&N final rule, the impacts of the MCIT pathway and defining “reasonable and necessary” were hard to quantify without knowing the specific Breakthrough Devices that would seek MCIT and other items and services that would be included in future NCDs and LCDs and the criteria that CMS will use for determining which commercial insurers will be considered.

In order to demonstrate the potential impact on Medicare spending for the definition of “reasonable and necessary” in the MCIT/R&N final rule we developed scenarios that illustrated the impact of implementing the two alternatives considered (no change/not codifying a definition and codifying a definition). One of the options was making no change, that is not codifying the definition of “reasonable and necessary” in regulations. The impact for no change was $0, thus, we reflect that value in Table 1 as repealing the MCIT/R&N final rule would have the same impact. The number of NCDs and LCDs finalized in a given year can vary and the cost of items and services within the coverage decisions varies. Further, while we reviewed coverage of items and services, we did not take into account unique Medicare rules regarding which type of providers/clinicians may furnish certain services, place of service requirements, or payment rules. Our analysis was based on whether Medicare covered or non-covered an item or service and whether we could find coverage for that item or service by any commercial insurer. Lastly, this impact analysis was based on the numbers of NCDs and LCDs finalized in 2020 (see Table 1).

In 2020, CMS and the MACs finalized 3 NCDs and 31 LCDs (This number represents new LCDs in 2020 and made publicly available via the Medicare Coverage Database. If more than one MAC jurisdiction issued an LCD on the same item or service with the same coverage decision, only 1 of the LCDs was included in the count.)

Of the NCDs finalized in 2020, all 3 resulted in expanded national Medicare coverage. Because none of those NCDs resulted in non-coverage, we did not evaluate whether commercial insurers would have covered the item or service. Therefore, based on 2020 data for NCDs only, the impact would be $0.

Of the 31 LCDs, 27 provided Medicare positive coverage and 4 resulted in non-coverage. For those items and services non-covered we identified 3 of those items and services were covered in at least 1 commercial insurer policy. For these non-covered items and services we established that the possible range of the cumulative cost of covering them could be from $0 to $3.4 billion for a single year (based on price and approximate Medicare beneficiary utilization). Because our analysis looked for any commercial insurer that covered the item or service, the cost may be less when utilizing commercial insurer polices that represent a majority of covered lives. In addition, even if a commercial insurer covers an item or service, the final rule did not require automatic Medicare coverage. Therefore, not all items and services that are non-covered by Medicare but covered by commercial insurance would be presumed covered under the MCIT/R&N final rule. Rather, commercial insurer coverage would have been a factor that CMS would have taken into account as part of the body of evidence in determining coverage through the NCD and LCDs processes. Because not all commercial insurer positive coverage will necessarily translate to Medicare coverage and because CMS was to define which types of commercial insurers (based on majority of covered lives) would be relevant, we believe that commercial insurer coverage impact is likely much smaller, closer to 15 to 25 percent of $3.4 billion, that is, $51 to $880 million.

In the MCIT/R&N final rule specifically for MCIT, we considered regulatory alternatives to combine Medicare coverage with clinical evidence development under section 1862(a)(1)(E) of the Act, to take no regulatory action, or to adjust the duration of the MCIT pathway. The impact of implementing the MCIT pathway was difficult to determine without knowing the specific Breakthrough Devices that would be covered. In addition, many of these devices would be eligible for coverage in the absence of the rule, such as through a local or national coverage determination, so the impact for certain items may be the acceleration of coverage by just a few months. Furthermore, some of these devices would be covered immediately if the MACs decide to pay for them, which would result in no impact on Medicare spending for devices approved under this pathway. However, it is possible that some of these Breakthrough Devices would not otherwise be eligible for coverage in the absence of the rule. Because it was not known how these new technologies would otherwise come to market and be reimbursed, it was not possible to develop a point estimate of the impact. In general, we believed the MCIT coverage pathway would range in impact from having no impact on Medicare spending, to a temporary cost for innovations that are adopted under an accelerated basis.

The decision to enter the MCIT pathway would have been voluntary for the manufacturer. Because manufacturers typically join the Medicare coverage pathway that is most financially beneficial to them, this could result in selection against the existing program coverage pathways (to what degree is unknown at this point). In addition, the past trend of new technology costing more than existing technology could lead to a higher cost for Medicare if this trend continued for technologies enrolling in the MCIT pathway. Nevertheless, new technology may also mitigate ongoing chronic health issues or improve efficiency of services thereby reducing some costs for Medicare.

To demonstrate the potential impact on Medicare spending, for the MCIT/R&N final rule the CMS Office of the Actuary (OACT) developed three hypothetical scenarios that illustrate the impact of implementing the MCIT pathway. Scenarios two and three assumed that the device would not have been eligible for coverage in the absence of the proposed rule (see Table 2). The illustration used the new devices that applied for a NTAP in FY 2020 as a proxy for the new devices that would utilize the MCIT pathway. The submitted cost and anticipated utilization for these devices was published in the Federal Register . 8 In addition, we assumed that two manufacturers would elect to utilize the MCIT pathway in the first year, three manufacturers in the second year, four manufacturers in the third year, and five manufacturers in the fourth year each year for all three scenarios. This assumption is based on the number of medical devices that received FY 2020 NTAP and were non-covered in at least one MAC jurisdiction by LCDs and related articles and our impression from the FDA that the number of devices granted breakthrough status is increasing. For the first scenario, the no-cost scenario, we assumed that all the devices would be eligible for coverage in the absence of MCIT. If the devices received coverage and payment nationally and at the same time then there would be no additional cost under this pathway. For the second scenario, the low-cost scenario, we assumed that the new technologies would have the average costs ($2,044) and utilization (2,322 patients) of similar technologies included in the FY 2020 NTAP application cycle. Therefore, to estimate the first year of MCIT, we multiplied the add-on payment for a new device by the anticipated utilization for a new device by the number of anticipated devices in the pathway ($2,044 × 2,322 × 2 = $ 9.5 million). For the third scenario, the high-cost scenario, we assumed the new technologies would receive the maximum add-on payment from the FY2020 NTAP application cycle ($22,425) and the highest utilization of a device (6,500 patients). Therefore, to estimate for the first year of MCIT, we estimated similarly ($22,425 × 6,500 patients × 2 = $ 291.5 million). For subsequent years, we increased the number of anticipated devices in the pathway by three, four, and five in the last two scenarios until 2024. 9 In addition to not taking into account inflation, the illustration does not reflect any offsets for the costs of these technologies that would be utilized through existing authorities nor the cost of other treatments (except as noted). It is not possible to explicitly quantify these offsetting costs but they could substantially reduce or eliminate the net program cost. However, by assuming that only two to five manufacturers would elect MCIT coverage, we implicitly assumed that, while more manufacturers could potentially elect coverage under MCIT, the majority of devices would have been covered under a different coverage pathway. Therefore, a substantial portion of the offsetting costs are implicitly reflected.

Based on this analysis, there was a range of potential impacts of MCIT as shown in Table 2. The difference between the three estimates demonstrates how sensitive the impact is to the cost and utilization of these unknown devices.

Because MCIT has not yet been implemented, we lack evidence with which to update the earlier estimates, so Table 2, only differs from the analogous table accompanying the MCIT/R&N final rule in terms of the sign (that is, the direction) on the estimates and a shifting of the time horizon by one year so as to avoid stating this proposed rule would have effects in the nearly-ended FY 2021.

The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Some hospitals and other providers and suppliers are small entities, either by nonprofit status or by having revenues of less than $7.5 million to $38.5 million in any 1 year. Individuals and States are not included in the definition of a small entity. For the MCIT/R&N final rule, we reviewed the Small Business Administration's Table of Small Business Size Standards Matched to North American Industry Classification System (NAICS) Codes to determine the NAICS U.S. industry titles and size standards in millions of dollars and/or number of employees that apply to small businesses that could be impacted by this rule. We determined that small businesses potentially impacted by that rule include surgical and medical instrument manufacturers (NAICS code 339112, dollars not provided/1,000 employees), Offices of Physicians (except Mental Health Specialists) (NAICS code 621111, $12 million/employees not provided), and Freestanding Ambulatory Surgical and Emergency Centers (NAICS code 621493, $16.5 million/employees not provided). Because the impact of this proposed rule would be no change in current coverage policy, we determined that small businesses identified would not be impacted by this proposed rule. Given the nature of the breakthrough devices market authorized thus far and the timely notification of the MCIT/R&N final rule's delay of effective date, we do not anticipate that small businesses would have made investment decisions or experienced a loss of anticipated positive reimbursement as a result of the MCIT/R&N final rule. Because MCIT has not gone into effect, and we are proposing to repeal the rule, payments have not occurred nor would they occur under MCIT; therefore, the impact of this proposed rule is neither an increase nor decrease in revenue for providers. We are not preparing a further analysis for the RFA because we have determined, and the Secretary of the Department of Health and Human Services (the Secretary) certifies, that the proposed rule and this subsequent final rule will not have a significant negative economic impact on a substantial number of small entities because small entities are not being asked to undertake additional effort or take on additional costs outside of the ordinary course of business.

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that the proposed rule and the final rule would not have a significant impact on the operations of a substantial number of small rural hospitals because small rural hospitals are not being asked to undertake additional effort or take on additional costs outside of the ordinary course of business. Obtaining Breakthrough Devices for patients is at the discretion of providers. We are not requiring the purchase and use of Breakthrough Devices. Providers should continue to work with their patients to choose the best treatment. For small rural hospitals that provide Breakthrough Devices to their patients, this proposed rule would not change the way they are currently covered through the Medicare program.

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2021, that threshold was approximately $158 million. This proposed rule would have no consequential effect on State, local, or tribal governments or on the private sector.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. Since this final rule does not impose any costs on State or local governments, the requirements of Executive Order 13132 are not applicable.

In accordance with the provisions of Executive Order 12866, this final rule was reviewed by the Office of Management and Budget.

We ordinarily publish a notice of proposed rulemaking in the Federal Register and invite public comment prior to a rule taking effect in accordance with section 1871 of the Act and section 553(b) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b). Section 1871(a)(2) of the Act provides, in relevant part, that no rule, requirement, or other statement of policy that establishes or changes a substantive legal standard governing the scope of benefits, the payment for services, or the eligibility of individuals, entities, or organizations to furnish or receive services or benefits under Medicare shall take effect unless it is promulgated through notice and comment rulemaking. Unless there is a statutory exception, section 1871(b)(1) of the Act generally requires the Secretary to provide a period of not less than 60 days for public comment. Similarly, under 5 U.S.C. 553(b), the agency is required to publish a notice of proposed rulemaking in the Federal Register before a substantive rule takes effect.

However, section 1871(b)(2) of the Act, permits exceptions to the 60-day time period, including in situations where there would be good cause under 5 U.S.C. 553(b). Section 553(b) of the APA permits no public comment period when the agency, for good cause, finds the notice and public procedure are impracticable, unnecessary, or contrary to the public interest. We find good cause to reduce the public comment period to 30 days with respect to the proposed repeal of the MCIT/R&N final rule that would otherwise become effective on December 15, 2021. If we were to provide the full 60-day public comment period on this proposed rule, there would not be adequate opportunity to meaningfully consider public comments before a final action was needed. In addition, we have already provided two opportunities for public comments relating to the subject matter of this rule earlier this year in connection with the delay of the effective date. Although repealing a final rule is different than delaying the effective date, the familiarity with the subject matter reduces the time the public needs to formulate comments on this proposed rule. Based on the prior comment periods, we are aware that some public commenters opposed to the MCIT/R&N final rule are likely to support repeal, while other commenters were in favor of implementing that rule. The 30-day public comment period will provide another opportunity to submit views on the proposed repeal, as well as suggestions for future rulemaking. Under these specific circumstances, we find that a 60-day comment period is unnecessary and a 30-day public comment period will provide a sufficient opportunity for the public to fully participate in this rulemaking and that there is good cause to reduce the time period to 30 days.

We also find good cause to provide for a 30-day public comment period in light of the potential for harm to Medicare beneficiaries should this proposed repeal rule not be finalized before the effective date of the MCIT/R&N final rule. If we did not finalize this rule by the effective date, there would be confusion and uncertainty among beneficiaries and their treating clinicians of coverage if the proposed repeal rule became effective and then rescinded at a later date. To avoid confusion and uncertainty this rule must be finalized no later than December 15, 2021. In order for the repeal rule to be finalized by the current MCIT effective date of December 15, 2021, CMS would require 30 days for public comment once the proposed rule is posted, an additional 30 days for CMS to review the comments, draft and post the repeal final rule, and an additional 30-day notice before the repeal final rule becomes effective.

As noted previously, the MCIT/R&N final rule did not have sufficient patient protections. While the MCIT/R&N rule attempted to address concerns about accelerating coverage of new devices, significant concerns persist about the availability of clinical evidence on the devices when used in the Medicare population, including the benefit or risks of these devices with respect to use in the Medicare population. For example, there is no requirement that the studies for FDA market-approval include Medicare patients. Medicare patients have different clinical profiles and considerations due to the complexity of their medical conditions and concomitant treatments compared to other age groups. Further, the MCIT/R&N final rule takes away tools that CMS has to deny coverage when it becomes apparent that a particular device can be harmful to the Medicare population. To remove a device from Medicare coverage under MCIT/R&N final rule, FDA must issue a safety communication, warning letter, or remove the device from the market. Therefore, if CMS observes a trend of higher risk or harm with a device in the Medicare population, CMS authority to expeditiously deny, limit to the appropriate patient population or withdraw coverage is limited.

For all the aforementioned reasons, we find good cause to waive the 60-day comment period and provide a 30-day comment period for this proposed rule.

Because of the large number of public comments, we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this preamble, and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document.

Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & Medicaid Services, approved this document on September 10, 2021.

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services proposes to amend 42 CFR part 405 as set forth below:

This is a summary of a Public Notice in WT Docket No. 19-348, DA 21-1024, released August 20, 2021. The full text of the Public Notice is available for public inspection at the following internet address: https://www.fcc.gov/document/345-ghz-clearinghouse-search-committee-public-notice. Alternative formats are available for people with disabilities (Braille, large print, electronic files, audio format), by sending an email to FCC504@fcc.gov or calling the Consumer and Governmental Affairs Bureau at 202-418-0530 (voice) or 202-418-0432 (TTY). Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments on or before the dates indicated on the first page of this document.

This proceeding shall continue to be treated as a “permit-but-disclose” proceeding in accordance with the Commission's ex parte rules (47 CFR 1.1200). Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentation within two business days after the presentation (unless a different deadline applicable to the Sunshine period applies). Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all persons attending or otherwise participating in the meeting at which the ex parte presentation was made, and (2) summarize all data presented and arguments made during the presentation. If the presentation consisted in whole or in part of the presentation of data or arguments already reflected in the presenter's written comments, memoranda or other filings in the proceeding, the presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission staff during ex parte meetings are deemed to be written ex parte presentations and must be filed consistent with rule 1.1206(b). In proceedings governed by rule 1.49(f) or for which the Commission has made available a method of electronic filing, written ex parte presentations and memoranda summarizing oral ex parte presentations, and all attachments thereto, must be filed through the electronic comment filing system available for that proceeding, and must be filed in their native format ( e.g., .doc, .xml, .ppt, searchable .pdf). Participants in this proceeding should familiarize themselves with the Commission's ex parte rules.

As required by the Regulatory Flexibility Act of 1980 (RFA), the Bureau has prepared a Supplemental Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities of the policies and requirements proposed in the Public Notice. It requests written public comment on the Supplemental IRFA contained in the Public Notice. Comments must be filed in accordance with the same deadlines as comments filed in response to the Public Notice as set forth on the first page of this document and have a separate and distinct heading designating them as responses to the Supplemental IRFA. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, will send a copy of the Public Notice, including the Supplemental IRFA, to the Chief Counsel for Advocacy of the Small Business Administration.

This document contains proposed information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and the Office of Management and Budget (OMB) to comment on the information collection requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Commission seeks specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees.

In the 3.45 GHz Band Second R&O, the Commission adopted rules to make 100 megahertz of mid-band spectrum available for flexible use throughout the contiguous United States. To facilitate this goal, the Commission previously had determined that secondary, non-federal radiolocation licensees in the band would be relocated to the 2.9-3.0 GHz band. In the 3.45 GHz Band Second R&O, the Commission further determined that secondary, non-federal radiolocation authorizations would sunset 180 days after new 3.45 GHz Service licenses are granted in the band. In addition, the Commission required new flexible-use licensees in the 3.45 GHz Service to reimburse secondary, non-federal radiolocation licensees for reasonable costs related to the relocation of those operations to the 2.9-3.0 GHz band, including the costs of a relocation clearinghouse's administration of the reimbursement. Specifically, each new 3.45 GHz Service licensee will be responsible for reimbursement of a pro rata share of reasonable relocation costs of non-federal radiolocation operations.

The Commission in the 3.45 GHz Band Second R&O delegated authority to the Bureau, working in coordination with the Office of the Managing Director, to develop and implement a clearinghouse selection process similar to the process used in the 3.7 GHz proceeding. Consistent with that delegation, the Bureau now seeks comment on the appropriate industry stakeholders to be included in the search committee for a 3.45 GHz band Clearinghouse. As in the 3.7 GHz proceeding, the Commission in the 3.45 GHz Band Second R&O provided for the creation of a neutral, independent clearinghouse to oversee the collection and distribution of relocation reimbursement payments from new 3.45 GHz Service licensees to non-federal secondary radiolocation incumbents. Unlike in the 3.7 GHz context, however, in the 3.45 GHz proceeding, the Commission did not identify the specific industry stakeholders who would compose the search committee to select the Clearinghouse.

In the 3.7 GHz proceeding, the Commission determined that the clearinghouse search committee would be composed of nine members appointed by nine entities that the Commission found, collectively, reasonably represented the interests of the stakeholders in the 3.7 GHz band transition. These entities represented incumbents in the band (space station operators—three entities, and earth station operators—three entities) and prospective flexible-use licensees (three entities). The Commission determined that the range of entities it had chosen would fairly represent the broad interests of the relevant stakeholders in the 3.7 GHz band transition. The Commission directed the search committee to proceed by consensus, but noted that if a vote on the selection of a clearinghouse was required, it would be by a majority vote.

As in the 3.7 GHz proceeding, the Bureau expects that an effective 3.45 GHz Clearinghouse search committee should be composed of a mix of entities representing incumbent and prospective licensee interests. The Bureau seeks comment on which industry stakeholders should be included in the 3.45 GHz Clearinghouse search committee. The Bureau notes that in this proceeding, incumbents are two broadcasters—NBCUniversal and Nexstar—operating weather radar systems in the band. Are incumbent interests sufficiently aligned such that one entity can represent both incumbents? Regarding prospective licensee interests, the Bureau anticipates Auction 110 for 3.45 GHz Service licensees to attract a variety of participants. Who should represent these prospective licensee interests on the search committee? Should it be one or more individual service providers, one or more industry associations? Are industry associations better positioned to serve as clearinghouse participants than individual service providers, particularly in advance of known auction winners? Should the Bureau take a different approach, such as combining categories of stakeholders? Given that each licensee, regardless of size or location, must pay a pro rata share of the relocation costs, is there a need for separate representation of small and rural businesses and if so, on what basis? Are there any other entities that should be included in the search committee?

The Bureau also seeks comment on the optimal number of members to include on the search committee. As noted above, the 3.7 GHz search committee was composed of nine members. As the Commission noted, compared to the 3.7 GHz band transition, however, the incumbent relocation in the 3.45 GHz band presents a less complex and costly process, with only two incumbents to be relocated at an estimated cost of $3.1 million. In light of the relatively simpler relocation process involved here, is a nine-member search committee warranted or necessary? Would a smaller committee size suffice and perhaps be more efficient here? For example, would it be sufficient to have three members here—one representing the relocating incumbents, one representing the wireless industry, and one representing other prospective bidders in the band? If not, what other interests or combinations of interests should be included?

Consistent with the 3.7 GHz proceeding, the Bureau proposes that after it releases a public notice announcing the entities that will comprise the search committee, each selected search committee entity would nominate one individual to serve on the search committee. The Bureau seeks comment on this proposal and any alternatives. Further, as in the 3.7 GHz proceeding, the Bureau proposes that the search committee would proceed by consensus, but if a vote on the selection of a clearinghouse is required, it would be by a majority vote. The Bureau also proposes that the search committee be composed of an odd number of representatives to prevent deadlock. The Bureau seeks comment on these proposals.

In the 3.7 GHz proceeding, the Commission directed the search committee to notify the Commission of the detailed selection criteria for the position of clearinghouse, consistent with the qualifications, roles, and duties of the Clearinghouse. The Commission also asked the search committee to ensure that the Clearinghouse meets relevant best practices and standards in its operation to ensure an effective and efficient transition. Consistent with this requirement, the 3.7 GHz band search committee submitted to the Commission a Request for Proposal that detailed the selection criteria and instructions for filing proposals for the 3.7 GHz band clearinghouse. The Bureau proposes that the search committee in the 3.45 GHz Service also submit to the Bureau detailed selection criteria for the role of Clearinghouse; such selection criteria must be consistent with the 3.45 GHz Band Second R&O and the Commission's rules. Should the Bureau include more specific requirements for the search committee's selection criteria? If so, what selection criteria are appropriate here? Further, should the search committee provide copies of the proposals or applications submitted to it by the potential Clearinghouse applicants? What oversight role by the Bureau is appropriate to ensure proper performance of the search committee and ultimately the entity that is selected as the Clearinghouse? The Bureau seeks comment on these issues.

The Bureau notes that, in the 3.7 GHz proceeding, the Commission instructed the search committee to impose a series of specific requirements on the Clearinghouse's work in administering the transition, e.g., to (1) engage in strategic planning and adopt goals and metrics to evaluate its performance, (2) adopt internal controls for its operations, (3) use enterprise risk management practices, and (4) use best practices to protect against improper payments and to prevent fraud, waste, and abuse in its handling of funds. The Commission did not impose those requirements for this transition. The comparatively smaller size and lower level of complexity of the 3.45 GHz transition may mean imposing similar requirements on the 3.45 GHz Clearinghouse is unnecessary. The Bureau seeks comment on whether it should direct the search committee to require the Clearinghouse to fulfill some or all of these requirements. Are there alternate requirements we should direct the search committee to require? To what extent should the Bureau supervise the compliance with any such requirements?

In addition, we seek comment on the necessity of the search committee releasing a formal Request for Proposal here or whether a less formal selection process may be appropriate for the relocation process anticipated in the 3.45 GHz band. The Bureau seeks comment on any alternative proposals for the search committee to select the Clearinghouse, as long as any such alternatives are consistent with 3.45 GHz Band Second R&O and related rules. The Bureau also seeks comment on any other ways in which to tailor the Clearinghouse search committee process to the unique circumstances of the 3.45 GHz band.

Finally, the Bureau notes that the Commission's Prohibited Communications rules are in effect for this proceeding, and reminds interested parties to be mindful of these rules when speaking publicly about this proceeding, including through the filing of comments in response to this document.