Proposed Rule2022-07158
Affordability of Employer Coverage for Family Members of Employees
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 7, 2022
Effective
June 6, 2022
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains proposed regulations under section 36B of the Internal Revenue Code (the "Code") that would amend the existing regulations regarding eligibility for the premium tax credit ("PTC") to provide that affordability of employer-sponsored minimum essential coverage (employer coverage) for family members of an employee is determined based on the employee's share of the cost of covering the employee and those family members, not the cost of covering only the employee. The proposed regulations also would add a minimum value rule for family members of employees based on the benefits provided to the family members. The proposed regulations would affect taxpayers who enroll, or enroll a family member, in individual health insurance coverage through a Health Insurance Exchange ("Exchange") and who may be allowed a PTC for the coverage. This document also provides a notice of a public hearing on these proposed regulations.
Full Text
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<title>Federal Register, Volume 87 Issue 67 (Thursday, April 7, 2022)</title>
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[Federal Register Volume 87, Number 67 (Thursday, April 7, 2022)]
[Proposed Rules]
[Pages 20354-20364]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-07158]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-114339-21]
RIN 1545-BQ16
Affordability of Employer Coverage for Family Members of
Employees
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking; withdrawal of a notice of
proposed rulemaking; notification of hearing.
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SUMMARY: This document contains proposed regulations under section 36B
of the Internal Revenue Code (the ``Code'') that would amend the
existing regulations regarding eligibility for the premium tax credit
(``PTC'') to provide that affordability of employer-sponsored minimum
essential coverage (employer coverage) for family members of an
employee is determined based on the employee's share of the cost of
covering the employee and those family members, not the cost of
covering only the employee. The proposed regulations also would add a
minimum value rule for family members of employees based on the
benefits provided to the family members. The proposed regulations would
affect taxpayers who enroll, or enroll a family member, in individual
health insurance coverage through a Health Insurance Exchange
(``Exchange'') and who may be allowed a PTC for the coverage. This
document also provides a notice of a public hearing on these proposed
regulations.
DATES: Written or electronic comments must be received by June 6, 2022.
As of April 7, 2022, the notice of proposed rulemaking published in the
Federal Register on September 1, 2015 (80 FR 52678), is withdrawn. A
public hearing has been scheduled for Monday, June 27, 2022, at 10:00
a.m. EDT. The IRS must receive speakers' outlines of topics to be
discussed at the public hearing by Monday, June 13, 2022. If no
outlines are received by Monday, June 13, 2022, the public hearing will
be cancelled.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically. Submit electronic submissions via the Federal
eRulemaking Portal at <a href="http://www.regulations.gov">www.regulations.gov</a> (indicate IRS and REG-114339-
21) by following the online instructions for submitting comments. Once
submitted to the Federal eRulemaking Portal, comments cannot be edited
or withdrawn. The IRS expects to have limited personnel
[[Page 20355]]
available to process public comments that are submitted on paper
through mail. Until further notice, any comments submitted on paper
will be considered to the extent practicable. The Department of the
Treasury (``Treasury Department'') and the IRS will publish for public
availability any comment submitted electronically, and, to the extent
practicable any paper comments submitted, to its public docket. Send
paper submissions to: CC:PA:LPD:PR (REG-114339-21), Room 5203, Internal
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC
20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Clara Raymond at (202) 317-4718; concerning submission of comments or
outlines, the hearing, or any questions to attend the hearing by
teleconferencing, Regina Johnson at (202) 317-5177 (not toll-free
numbers) or preferably by email to <a href="/cdn-cgi/l/email-protection#58282d3a34313b303d392a31363f2b18312a2b763f372e"><span class="__cf_email__" data-cfemail="58282d3a34313b303d392a31363f2b18312a2b763f372e">[email protected]</span></a>. If emailing,
please include the following information in the subject line: Attend,
Testify, or Question and REG-114339-21.
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed amendments to the Income Tax
Regulations (26 CFR part 1) under section 36B of the Code.
Section 36B provides a PTC for applicable taxpayers who meet
certain eligibility requirements, including that a member of the
taxpayer's family enrolls in a qualified health plan (``QHP'') through
an Exchange for one or more ``coverage months.'' Under Sec. 1.36B-1(d)
of the Income Tax Regulations, a taxpayer's family consists of the
taxpayer, the taxpayer's spouse if filing jointly, and any dependents
of the taxpayer.
Section 1.36B-3(d)(1) provides that the PTC for a coverage month is
the lesser of: (i) The premiums for the month, reduced by any amounts
that were refunded, for one or more QHPs in which a taxpayer or a
member of the taxpayer's family enrolls (``enrollment premiums''); or
(ii) the excess of the adjusted monthly premium for the applicable
benchmark plan over 1/12 of the product of a taxpayer's household
income and the applicable percentage for the taxable year (``taxpayer's
contribution amount'').
Under section 36B(c)(2)(B) and Sec. 1.36B-3(c), a month is a
coverage month for an individual only if the individual is not eligible
for minimum essential coverage (``MEC'') for that month (other than
coverage under a health care plan offered in the individual market
within a state). Under section 5000A(f)(1)(B) of the Code, the term MEC
includes employer coverage. If an individual is eligible for employer
coverage for a given month, no PTC is allowed for the individual for
that month.
Section 36B(c)(2)(C) generally provides that an individual is not
eligible for employer coverage if the coverage offered is unaffordable
or does not provide minimum value. However, if the individual enrolls
in employer coverage, the individual is eligible for MEC, irrespective
of whether the employer coverage is affordable or provides minimum
value. See section 36B(c)(2)(C)(iii) and Sec. 1.36B-2(c)(3)(vii).
Section 36B(c)(2)(C)(i)(II) and Sec. 1.36B-2(c)(3)(v)(A)(1)
generally provide that employer coverage is unaffordable for an
employee if the share of the annual premium the employee must pay for
self-only coverage is more than the required contribution percentage of
household income. The required contribution percentage is 9.5 percent
and is indexed annually under section 36B(c)(2)(C)(iv).\1\ Likewise,
Sec. 1.36B-2(c)(3)(v)(A)(2) generally provides that employer coverage
is unaffordable for individuals eligible to enroll in employer coverage
because of their relationship to the employee (related individuals) if
the share of the annual premium the employee must pay for self-only
coverage is more than the required contribution percentage of household
income. Thus, the employee's share of the premium for family coverage,
as defined in Sec. 1.36B-1(m), is not considered in determining
whether employer coverage is affordable for related individuals.
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\1\ As adjusted, the required contribution percentage is 9.61
percent for 2022. See Rev. Proc. 2021-36, 2021-35 I.R.B. 357. For
simplicity, this preamble refers to 9.5 percent as the required
contribution percentage.
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Under section 36B(c)(2)(C)(ii) and Sec. 1.36B-6(a)(1), an eligible
employer-sponsored plan provides minimum value only if the plan's share
of the total allowed costs of benefits provided to an employee is at
least 60 percent. On November 4, 2014, the IRS released Notice 2014-69,
2014-48 I.R.B. 903, which advised taxpayers of the intent to propose
regulations providing that plans that fail to provide substantial
coverage for inpatient hospitalization or physician services also do
not provide minimum value. Notice 2014-69 noted that the Department of
Health and Human Services (HHS) was concurrently issuing parallel
guidance and also provided that, pending issuance of final Treasury
regulations, an employee will not be required to treat a non-hospital/
non-physician services plan as providing minimum value for purposes of
an employee's eligibility for a PTC.
On November 26, 2014, HHS issued proposed regulations providing
that an eligible employer-sponsored plan provides minimum value only
if, in addition to covering at least 60 percent of the total allowed
costs of benefits provided under the plan, the plan benefits include
substantial coverage of inpatient hospital services and physician
services. See 79 FR 70674. On February 27, 2015, HHS finalized this
minimum value rule at 45 CFR 156.145(a). See 80 FR 10750, 10872. On
September 1, 2015, the Treasury Department and the IRS issued proposed
regulations under section 36B (REG-143800-14, 80 FR 52678) (2015
proposed regulations) incorporating the substance of the minimum value
rule in the HHS final regulations. The rule in the 2015 proposed
regulations issued by the Treasury Department and the IRS relating to
substantial coverage of inpatient hospital services and physician
services has not been finalized.
On January 28, 2021, President Biden issued Executive Order (E.O.)
14009, Strengthening Medicaid and the Affordable Care Act (ACA).
Section 3(a) of E.O. 14009 directs the Secretary of the Treasury to
review, as soon as practicable, all existing regulations and other
agency actions to determine whether the actions are inconsistent with
the policy to protect and strengthen the ACA. Section 3(a)(v) of E.O.
14009 also directs the Secretary of the Treasury, as part of this
review, to examine policies or practices that may reduce the
affordability of coverage or financial assistance for coverage,
including for dependents. Consequently, the Treasury Department and the
IRS have reviewed the regulations under section 36B, including Sec.
1.36B-2(c)(3)(v)(A)(2), which provides that the affordability of
employer coverage for related individuals is based on the employee's
share of the annual premium for self-only coverage, not the cost of
family coverage. The Treasury Department and the IRS have tentatively
determined that the rule in Sec. 1.36B-2(c)(3)(v)(A)(2) is not
required by the relevant statutes and is inconsistent with the overall
purpose of the ACA to expand access to affordable health care coverage.
[[Page 20356]]
Explanation of Provisions
I. Reasons for Regulatory Changes to Affordability Rule
As explained in the Background section of this preamble,
individuals generally are not allowed a PTC if they are eligible for
non-individual market MEC, including employer coverage. However,
individuals are not eligible for employer coverage if the coverage is
unaffordable or does not provide minimum value, unless they enroll in
the coverage. Coverage is not affordable for an employee if the portion
of the premiums required to be paid by the employee for self-only
coverage exceeds 9.5 percent of household income. The current
regulations under section 36B provide that if self-only employer
coverage is affordable for an employee, then the coverage is also
affordable for a spouse with whom the employee is filing a joint return
and any dependents of the employee who may be eligible to enroll in the
employer coverage, regardless of the amount the employee must pay to
cover the spouse and dependents. See Sec. 1.36B-2(c)(3)(v)(A)(2).
Section 1.36B-2(c)(3)(v)(A)(2) was promulgated as a final
regulation in 2013. See TD 9611 (78 FR 7264). The Treasury Department
and the IRS explained in the preamble to the 2013 final regulation that
the language of section 36B, through the cross-reference to section
5000A(e)(1)(B),\2\ specifies that the affordability test for related
individuals is based on the cost of self-only coverage. However, the
approach in the current regulations has potentially impacted millions
of Americans. Among those impacted are families with children, some of
whom have suffered economic hardship. In addition, the current approach
has undermined access to more affordable health care coverage by
preventing access to lower-premium subsidized Exchange plans. Under the
current regulations, a PTC is not allowed for children and other family
members who have been offered employer coverage if the cost of the
employee's self-only coverage is affordable, regardless of the
employee's cost to cover those family members. Many of these families
purchase health insurance, either through a family member's job or an
Exchange, but pay high portions of their income towards premiums. Other
families forgo coverage altogether due to the high premium costs.
Several studies have analyzed this problem.\3\
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\2\ Section 5000A provides rules regarding the individual shared
responsibility payment, including an exemption from the payment for
individuals who have an offer of employer coverage that is
unaffordable.
\3\ For example, see <a href="https://www.healthaffairs.org/do/10.1377/hblog20210520.564880/full/">https://www.healthaffairs.org/do/10.1377/hblog20210520.564880/full/</a>.
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Pursuant to E.O. 14009, the Treasury Department and the IRS have
reexamined the current interpretation of section 36B(c)(2)(C)(i) in
Sec. 1.36B-2(c)(3)(v)(A)(2). The Treasury Department and the IRS have
preliminarily determined that section 36B(c)(2)(C)(i) does not compel
the result that if self-only employer coverage is affordable for an
employee, then the coverage also is affordable for a spouse and any
dependents. To the contrary, the Treasury Department and the IRS
believe that the statute is better read to require a separate
affordability determination for employees and for family members.
Further, the Treasury Department and the IRS are now of the view that
the interpretation in the current regulations unduly weakens the ACA by
basing affordability solely on the premium cost for the employee's
self-only coverage and, therefore, the interpretation in the current
regulations is contrary to the policy of the ACA to expand access to
affordable health care coverage.
As discussed more fully in part II of this Explanation of
Provisions, the Treasury Department and the IRS believe that section
36B(c)(2)(C)(i) is best interpreted in a manner that requires
consideration of the premium cost to the employee to cover not just the
employee, but also other members of the employee's family who may
enroll in the employer coverage. This interpretation would create
consistency across parallel provisions of the Code enacted by the ACA,
specifically with regard to the affordability tests in sections 36B and
5000A. Consequently, the Treasury Department and the IRS propose to
exercise the regulatory authority granted in section 36B(h) to adopt an
alternative reading of section 36B(c)(2)(C)(i). Under this alternative
reading, affordability of employer coverage for related individuals in
the employee's family is determined based on the cost of covering the
employee and those related individuals.
II. Affordability Rule for Related Individuals
A. Approach in Current Regulations
When the Treasury Department and the IRS promulgated Sec. 1.36B-
2(c)(3)(v)(A)(2) as a final regulation in 2013, it was after
considerable deliberation regarding the affordability rule for related
individuals. The Treasury Department and the IRS first issued proposed
regulations under section 36B in August 2011. See REG-131491-10 (76 FR
50931). In addition to proposing general rules on all aspects of the
PTC, the 2011 proposed regulations provided that affordability for
related individuals was based on the amount an employee must pay for
self-only coverage. In response to the 2011 proposed regulations, the
Treasury Department and the IRS received a significant number of
comments on the proposed affordability rule for related individuals. To
fully consider those comments and ensure a comprehensive analysis of
the issue, the Treasury Department and the IRS promulgated final
regulations in May 2012 that reserved with respect to the affordability
rule for related individuals and stated that future regulations would
address the issue. See TD 9590 (77 FR 30377). In February 2013, the
Treasury Department and the IRS finalized the affordability rule for
related individuals as initially proposed in 2011. See TD 9611 (78 FR
7264). In finalizing the rule as initially proposed in 2011--that is,
providing that affordability for related individuals was based on the
amount an employee must pay for self-only coverage--the Treasury
Department and the IRS focused on the relevant statutory provisions in
sections 36B(c)(2)(C)(i)(II), 5000A(e)(1)(B), and 5000A(e)(1)(C).
Under section 36B(c)(2)(C)(i)(II), an employee who does not enroll
in employer coverage is not considered eligible for the coverage if
``the employee's required contribution (within the meaning of section
5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of the
applicable taxpayer's household income.'' The flush language following
this provision provides that ``[t]his clause shall also apply to an
individual who is eligible to enroll in the plan by reason of a
relationship the individual bears to the employee.'' This flush
language does not specify how the language in section
36B(c)(2)(C)(i)(II) is intended to apply with respect to related
individuals or how the cross-reference to section 5000A(e)(1)(B) is to
be understood with regard to coverage of related individuals.
Section 5000A(e)(1)(B)(i) \4\ provides that, for an employee
eligible to purchase employer coverage, the term ``required
contribution'' means ``the portion of the annual premium which
[[Page 20357]]
would be paid by the individual . . . for self-only coverage.'' For
related individuals, the definition of ``required contribution'' in
section 5000A(e)(1)(B)(i) is modified by a ``special rule'' in section
5000A(e)(1)(C). Section 5000A(e)(1)(C) provides that ``[f]or purposes
of [section 5000A(e)(1)](B)(i), if an . . . individual is eligible for
minimum essential coverage through an employer by reason of a
relationship to an employee, the determination under subparagraph (A)
shall be made by reference to the required contribution of the
employee.'' The regulations under section 5000A interpret section
5000A(e)(1)(C) as modifying the required contribution rule in section
5000A(e)(1)(B)(i) with regard to coverage for related individuals to
take into account the cost of covering the employee and the related
individuals, not just the employee. Specifically, with respect to
related individuals, Sec. 1.5000A-3(e)(3)(ii)(B) provides that the
required contribution for related individuals is the amount an employee
must pay to cover the employee and the related individuals. The
affordability rule for related individuals in Sec. 1.5000A-
3(e)(3)(ii)(B) was proposed on the same day that the affordability rule
for related individuals in Sec. 1.36B-2(c)(3)(v)(A)(2) was finalized
in TD 9611.
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\4\ Section 5000A(e)(1) provides an exemption from the
requirement to maintain MEC for individuals who are eligible only
for coverage that is unaffordable. Under section 5000A(e)(1)(A),
coverage is unaffordable for an individual if the individual's
required contribution exceeds a certain percentage of the
individual's household income for the taxable year.
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When Sec. 1.36B-2(c)(3)(v)(A)(2) was promulgated as a final
regulation in 2013, the Treasury Department and the IRS considered the
statutory language of section 36B(c)(2)(C)(i)(II) and its cross-
reference to section 5000A(e)(1)(B), as well as the statutory language
of section 5000A(e)(1)(B) and the cross-reference in section
5000A(e)(1)(C) to section 5000A(e)(1)(B). Under one reading of section
36B(c)(2)(C)(i)(II), the affordability rule for related individuals is
determined solely by reference to section 5000A(e)(1)(B), without the
modification to that section for related individuals provided by
section 5000A(e)(1)(C). This reading results in affordability being
determined based on the cost of self-only coverage to the employee.
Under an alternative reading, the affordability rule for related
individuals is determined by reference to section 5000A(e)(1)(B) taking
into account the modification by section 5000A(e)(1)(C). With the
issuance of current Sec. 1.36B-2(c)(3)(v)(A)(2), the Treasury
Department and the IRS adopted the interpretation that affordability of
employer coverage for related individuals is based on the cost of self-
only coverage to the employee.
B. Approach in Proposed Regulations
The Treasury Department and the IRS recognize that the statutory
language in section 36B(c)(2)(C)(i)(II) supports two different
readings. Under one reading, reflected in current Sec. 1.36B-
2(c)(3)(v)(A)(2), the affordability rule for related individuals is
determined solely by reference to section 5000A(e)(1)(B), without the
modification to that section for related individuals provided by
section 5000A(e)(1)(C). This reading results in affordability being
determined based on the cost of self-only coverage to the employee.
Under an alternative reading, however, the affordability rule for
related individuals is determined by reference to section
5000A(e)(1)(B), but also encompasses the modification of 5000A(e)(1)(B)
by section 5000A(e)(1)(C), which provides a special rule for related
individuals.
These proposed regulations would adopt the alternative reading,
which the Treasury Department and the IRS have now preliminarily
concluded is the better reading of these provisions. Under this
interpretation, because section 5000A(e)(1)(C) begins with the language
``[f]or purposes of [section 5000A(e)(1)](B)(i),'' the parenthetical
cross reference in section 36B(c)(2)(C)(i)(II) to section
5000A(e)(1)(B)(i) is understood to incorporate the special rule in
section 5000A(e)(1)(C) that modifies the required contribution rule in
section 5000A(e)(1)(B)(i) when the coverage in question is for related
individuals. Under this interpretation, a specific reference in the
flush language of section 36B(c)(2)(C)(i) to section 5000A(e)(1)(C) is
not necessary to require the consideration of section 5000A(e)(1)(C) in
determining affordability for related individuals for section 36B
purposes.\5\
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\5\ In Joint Committee on Taxation, Technical Explanation of the
Revenue Provisions of the ''Reconciliation Act of 2010,'' as
amended, in combination with the ``Patient Protection and Affordable
Care Act,'' (JCX-18-10), March 21, 2010 (the JCT report), the Joint
Committee staff initially explained that ``[u]naffordable is defined
as coverage with a premium required to be paid by the employee that
is 9.5 percent or more of the employee's household income, based on
the type of coverage applicable (e.g., individual or family
coverage).'' The quoted language was later revised to state that
``[u]naffordable is defined as coverage with a premium required to
be paid by the employee that is 9.5 percent or more of the
employee's household income, based on self-only coverage.'' See
ERRATA for JCX-18-10, (JCX-27-10), May 4, 2010. Although the JCT
report does not compel any particular reading of section
36B(c)(2)(C)(i)(II) as it relates to family coverage, these
differing interpretations by the Joint Committee staff further
demonstrate the statutory ambiguity that renders either
interpretation available under the ACA.
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This proposed amendment to the affordability rule for related
individuals would create greater consistency between the affordability
rules in section 36B(c)(2)(C)(i) and the affordability rules in section
5000A(e)(1). The proposed amendment would also promote consistency
between the affordability rules in these provisions and 42 U.S.C.
18081(b)(4)(C), which requires Exchange applicants to separately
provide the required contributions of employees and of related
individuals in order to determine PTC eligibility; in the Treasury
Department's and the IRS's view, the requirement to provide this
information would make little sense if PTC eligibility depended only on
the cost to the employee for self-only coverage. In addition, the
proposed amendment would also support efforts to achieve the goal of
the ACA to provide affordable, quality health care for all Americans.
See H.R. Rep. No. 111-243 (2009).
The proposed regulations would provide that an eligible employer-
sponsored plan is affordable for related individuals if the portion of
the annual premium the employee must pay for family coverage, that is,
the employee's required contribution, does not exceed 9.5 percent of
household income. For this purpose, family coverage means all employer
plans that cover any related individual other than the employee,
including a self plus-one plan for an employee enrolling one other
family member in the coverage. An employee's required contribution for
family coverage is the portion of the annual premium the employee must
pay for coverage of the employee and all other individuals included in
the employee's family who are offered the coverage.
Some individuals who are not part of the tax family might
nonetheless be offered the employer coverage. For example, children up
to age 26 might be offered coverage by the taxpayer's employer, but
those adult children might not be reported on the employee's tax return
because they do not qualify as dependents of the employee. The cost of
covering individuals who are offered the coverage but are not in the
employee's family is not considered in determining whether the
employee's family members have an offer of affordable employer
coverage, regardless of whether the non-family member enrolls in the
coverage. That is because, under Sec. 1.36B-2(c)(4)(i), a related
individual who is not a spouse filing jointly with the employee or a
dependent of the employee, such as a child of the employee who is no
longer the employee's dependent, is treated as
[[Page 20358]]
eligible for the employer coverage only if he or she is enrolled in the
coverage. Consequently, a related individual who is not a spouse filing
jointly with the employee or a dependent of the employee does not need
a determination of unaffordable coverage to be eligible for the PTC. As
a result, the cost of covering that individual should not be considered
in determining whether other related individuals have an offer of
affordable employer coverage.
The proposed regulations would make changes only to the
affordability rule for related individuals; they would make no changes
to the affordability rule for employees. As required by statute,
employees continue to have an offer of affordable employer coverage if
the employee's required contribution for self-only coverage of the
employee does not exceed the required contribution percentage of
household income. Accordingly, under the proposed regulations, a spouse
or dependent of an employee may have an offer of employer coverage that
is unaffordable even though the employee has an affordable offer of
self-only coverage.
The proposed regulations also address situations in which an
individual has offers of coverage from multiple employers. Under the
proposed regulations, an individual with offers of coverage from
multiple employers, either as an employee or a related individual, has
an offer of affordable coverage if at least one of the offers is
affordable.\6\ Thus, for example, assume X is married and files a joint
return with X's spouse, Y. If X has offers of coverage from X's
employer and Y's employer, X has an offer of affordable coverage if the
self-only cost of X's employer coverage is affordable or if the family
cost of Y's employer coverage is affordable. This rule regarding
multiple offers of coverage is consistent with section 36B(c)(2)(B),
under which a month is not a coverage month for an individual if the
individual is eligible for MEC for the month, including employer
coverage that is affordable and provides minimum value. In this
example, X is eligible for affordable employer coverage if one or both
of the offers of coverage to X is affordable.
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\6\ The proposed rule for offers from multiple employers is
consistent with the treatment under Sec. 1.36B-2(c)(3)(i) for
situations in which an employee or family member may choose from
multiple plans offered by an employer. In those situations, an
individual has an offer of affordable coverage if at least one of
the plans offered by the employer is affordable.
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The proposed change to the affordability rule for related
individuals in Sec. 1.36B-2(c)(3)(v)(A)(2) requires a conforming
change to Sec. 1.36B-2(c)(3)(v)(B), which provides that the
affordability of employer coverage for an employment period that is
less than a full calendar year is based on the employee's required
contribution for self-only coverage (``part-year period rule''). The
proposed regulations would amend Sec. 1.36B-2(c)(3)(v)(B) to provide a
part-year period rule for employees that is based on the employee's
required contribution for self-only coverage and a part-year period
rule for related individuals that is based on the employee's required
contribution for family coverage. Changes to other existing rules such
as Sec. 1.36B-2(c)(3)(v)(A)(4) (wellness incentive programs) and (5)
(employer contributions to health reimbursement arrangements integrated
with eligible employer-sponsored plans) are not necessary because those
paragraphs refer to an ``employee's required contribution,'' which,
under the proposed regulations, would cover both the required
contribution for self-only coverage and the required contribution for
family coverage.
III. Minimum Value
A. Minimum Value Cost of Benefits Rule for Related Individuals
Section 1.36B-6(a)(1) provides that an eligible employer-sponsored
plan provides minimum value if the plan's share of the total allowed
cost of benefits provided to an employee is at least 60 percent. The
proposed regulations would expand Sec. 1.36B-6(a) to provide a similar
minimum value rule for related individuals that is based on the level
of coverage provided to related individuals under an employer-sponsored
plan.
Section 36B(c)(2)(C)(ii) provides that an employee is not eligible
for employer coverage when the employer-sponsored plan does not provide
minimum value. Section 36B(c)(2)(C)(ii) does not specifically mention
related individuals. Section 36B(c)(2)(C)(ii) could be interpreted to
mean that there is no minimum value requirement for related individuals
so that a related individual is eligible for employer coverage as long
as the coverage is affordable, regardless of whether the employer
coverage provides minimum value. Under such an interpretation, if an
employer offers coverage to an employee and related individuals that is
affordable, but does not provide minimum value for the employee, an
employee who does not enroll in the coverage would not be eligible for
the coverage, but related individuals offered the coverage would be
eligible because section 36B does not have a minimum value requirement
for related individuals.
That approach, however, was not adopted with the issuance of Sec.
1.36B-2(c)(3)(i)(A), which was promulgated in final regulations in
2012. See TD 9590 (77 FR 30377). Section 1.36B-2(c)(3)(i)(A) clarifies
that there is a minimum value requirement for both employees and
related individuals, stating that ``an employee who may enroll in an
eligible employer-sponsored plan . . . that is minimum essential
coverage, and . . . a related individual, are eligible for minimum
essential coverage under the plan for any month only if the plan is
affordable and provides minimum value.'' Under this long-standing rule,
a related individual who receives an offer of employer-sponsored
coverage that does not provide minimum value is ineligible for the
coverage, provided that the related individual does not enroll in the
coverage.
Section 1.36B-2(c)(3)(i)(A) clarifies that there is a minimum value
requirement for related individuals; however, Sec. 1.36B-6(a) provides
the rule for determining whether an eligible employer-sponsored plan
provides minimum value to related individuals. As explained in the
Background section of this preamble, under Sec. 1.36B-6(a)(1), an
eligible employer-sponsored plan provides minimum value if the plan's
share of the total allowed cost of benefits provided to an employee is
at least 60 percent, regardless of the total allowed costs of benefits
provided to the related individual. Thus, under this rule, if the
plan's share of the total allowed cost of benefits provided to an
employee is below 60 percent, the plan does not provide minimum value
to employees nor to any related individuals offered the coverage.
Without a separate minimum value rule for related individuals based on
the costs of benefits provided to related individuals, a PTC would not
be allowed for a related individual offered coverage under a plan that
was affordable but that provided minimum value to employees and not to
related individuals. This outcome would undermine the benefit a related
individual would derive from the proposed amendment of the
affordability rule for related individuals. That is, the affordability
of employer coverage for related individuals would be based on the
employee's cost of covering the related individuals, but there would be
no assurance that affordable coverage offered to the related
individuals provided a minimum value of benefits to the related
individuals.
[[Page 20359]]
The lack of a separate minimum value rule for related individuals
also would be inconsistent with the overall goal of the ACA in
providing comprehensive, affordable health coverage, as well as the
goal of improving access to quality and affordable health care.
Therefore, these proposed regulations provide in Sec. 1.36B-6(a)(2)(i)
that an eligible employer-sponsored plan satisfies the minimum value
requirement only if the plan's share of the total allowed costs of
benefits provided to related individuals is at least 60 percent,
similar to the existing rule in Sec. 1.36B-6(a)(1) for employees.
Further, to be considered to provide minimum value under Sec. 1.36B-
6(a)(2)(ii) of these proposed regulations, an eligible-employer
sponsored plan would have to include substantial coverage of inpatient
hospital services and physician services, as discussed in more detail
in section III.B. of this preamble.
B. Minimum Value Rule Regarding Inpatient Hospitalization and Physician
Services
As noted earlier in the Background section of this preamble, the
Treasury Department and the IRS issued proposed regulations in
September 2015 incorporating the substance of the minimum value rule
that was finalized by HHS in February 2015. The HHS final regulations
and Sec. 1.36B-6(a)(2) of the 2015 proposed regulations provide that
an eligible employer-sponsored plan provides minimum value only if, in
addition to covering at least 60 percent of the total allowed costs of
benefits provided to an employee under the plan, the plan benefits
include substantial coverage of inpatient hospital services and
physician services. The Treasury Department and the IRS have not
finalized these regulations. The Treasury Department and the IRS are
withdrawing the 2015 proposed regulations and reproposing in Sec.
1.36B-6(a)(1)(ii) without substantive change the minimum value rule
regarding inpatient hospital services and physician services for
employees. Pending issuance of final Treasury regulations, an employee
will not be required to treat a non-hospital/non-physician services
plan as providing minimum value for purposes of an employee's
eligibility for a PTC. See Notice 2014-69.
In addition, the Treasury Department and the IRS are proposing in
this document to expand the minimum value rule in Sec. 1.36B-6(a)(2)
of the 2015 proposed regulations to apply to related individuals. Thus,
Sec. 1.36B-6(a)(2)(ii) of the proposed regulations would provide that
an eligible employer-sponsored plan provides minimum value to a related
individual only if, in addition to covering at least 60 percent of the
total allowed costs of benefits provided to the related individual, the
plan benefits include substantial coverage of inpatient hospital
services and physician services.
IV. Premium Refunds Affecting the PTC Computation
Section 1.36B-3(d)(1)(i) provides that, in determining a taxpayer's
premium assistance amount \7\ for a coverage month, the taxpayer's
enrollment premiums for the month are the premiums for the month,
reduced by any amounts that were refunded, for one or more QHPs in
which a taxpayer or a member of the taxpayer's family enrolls.
Questions have arisen concerning refunds paid to a taxpayer in a
taxable year that is after the taxable year the premium is paid and
whether those refunds should be considered in determining the
taxpayer's premium assistance amount for the month to which the refund
relates. A medical loss ratio rebate under section 2718 of the Public
Health Service Act is an example of a premium refund that may be paid
to a taxpayer in a taxable year that is after the taxable year the
taxpayer paid the premium.
---------------------------------------------------------------------------
\7\ The terms ``premium assistance amount'' and ``premium tax
credit'' (or PTC) have the same meaning.
---------------------------------------------------------------------------
Tax liability for a taxable year generally is determined based on
events occurring in that taxable year (the current taxable year).
Events occurring in a later taxable year, such as a refund of a
deductible amount paid in the current taxable year, generally don't
affect the tax liability of the current taxable year. Thus, a
taxpayer's premium assistance amount for a month in the current taxable
year should not be affected by a premium refund that was paid in a
later taxable year.
Consequently, the proposed regulations would clarify that, in
computing the premium assistance amount for a coverage month, a
taxpayer's enrollment premiums for the month are the premiums for the
month, reduced by any amounts that were refunded in the same taxable
year the taxpayer incurred the premium liability.
V. Severability
If any provision in this rulemaking is held to be invalid or
unenforceable facially, or as applied to any person or circumstance, it
shall be severable from the remainder of this rulemaking, and shall not
affect the remainder thereof, or the application of the provision to
other persons not similarly situated or to other dissimilar
circumstances.
Statement of Availability of IRS Documents
Guidance cited in this preamble is published in the Internal
Revenue Bulletin and is available from the Superintendent of Documents,
U.S. Government Publishing Office, Washington, DC 20402, or by visiting
the IRS website at <a href="https://www.irs.gov">https://www.irs.gov</a>.
Proposed Applicability Dates
The proposed regulations under Sec. Sec. 1.36B-2, 1.36B-3, and
1.36B-6(a)(2) are proposed to apply for taxable years beginning after
the date these regulations are published as final regulations in the
Federal Register. As of the publication date of these proposed
regulations, the proposed regulations are expected to be finalized no
later than the end of this year. The Treasury Department and the IRS
have been working closely with HHS to ensure that the federally-
facilitated Exchange would be ready to implement the proposed changes
before the open enrollment for 2023 coverage. HHS, in coordination with
the Treasury Department and the IRS, intends to take all necessary
steps to support efforts by state-based Exchanges to implement any
changes before the open enrollment for 2023 coverage.
The proposed regulations under Sec. 1.36B-6(a)(1)(i) are proposed
to apply for taxable years ending after December 31, 2013.
The proposed regulations under Sec. 1.36B-6(a)(1)(ii) are proposed
to apply for plan years beginning after November 3, 2014.
Special Analyses
I. Regulatory Planning and Review--Economic Analysis
E.O.s 12866 and 13563 direct agencies to assess 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). E.O. 13563 emphasizes the importance
of quantifying both costs and benefits, of reducing costs, of
harmonizing rules, and of promoting flexibility.
These proposed regulations have been designated as subject to
review under E.O. 12866 pursuant to the Memorandum of Agreement (April
11, 2018) (MOA) between the Treasury Department and the Office of
Management and Budget (OMB) regarding review of tax regulations.
[[Page 20360]]
A. Background
1. Affordability of Employer Coverage for Family Members of an Employee
As noted earlier in this preamble, section 36B provides a PTC for
applicable taxpayers who meet certain eligibility requirements,
including that the taxpayer or one or more family members is enrolled
in a QHP through an Exchange (Exchange coverage) for one or more months
in which they are not eligible for other MEC. However, an individual
who is eligible to enroll in employer coverage, but chooses not to, is
not considered eligible for the employer coverage if it is
``unaffordable.'' Section 36B defines employer coverage as unaffordable
for an employee if the employee's share of the self-only premium is
more than 9.5 percent of the employee's household income.
Section 1.36B-2(c)(3)(v)(A)(2) provides that affordability of
employer coverage for each related individual of the employee is
determined by the cost of self-only coverage. Thus, the employee and
any related individuals included in the employee's family, within the
meaning of Sec. 1.36B-1(d), are eligible for MEC and are ineligible
for the PTC if (1) the plan provides minimum value and (2) the
employee's share of the self-only coverage is not more than 9.5 percent
of household income (that is, the self-only coverage for the employee
is ``affordable'').
2. Description of the Proposed Regulations
The proposed regulations would revise Sec. 1.36B-2(c)(3)(v)(A)(2)
to provide a separate affordability test for related individuals based
on the cost to the employee of family coverage. The proposed
regulations do not change the affordability test for the employee. As a
result, whenever a family applies for Exchange coverage and one or more
family members has an offer of employer coverage, the Exchange will
perform the following affordability determinations: One determination
for the employee based on the cost of self-only coverage, one
determination for the related individuals based on the cost of family
coverage, and additional determinations for any related individuals who
have an offer of coverage from another employer. It is therefore
possible that family members would be eligible for PTC but the employee
would not. In this case, if the entire family chooses to enroll in
Exchange coverage with advance payments of the premium tax credit
(APTC), the APTC would be paid only for coverage of the employee's
family members but would not be paid for coverage of the employee.
B. Baseline
The Treasury Department and the IRS have assessed the benefits and
costs of the proposed regulations relative to a no-action baseline
reflecting anticipated Federal income tax-related behavior in the
absence of these regulations.
C. Affected Entities
Some families with an offer of employer coverage to the employee
and at least one other family member would be newly eligible for a PTC
for the Exchange coverage of the non-employee family members. The
proposed regulations would have no effect on families for whom self-
only employer coverage costs more than 9.5 percent of household
income--given that family coverage is more expensive than self-only
coverage--because the affordability status of their employer coverage
is unchanged. Similarly, the proposed regulations would not affect
families for whom the cost of family employer coverage does not exceed
9.5 percent of household income because their coverage is determined to
be affordable either way. In contrast, the proposed regulations would
affect only family members--other than the employee--for whom the
employee's cost for the available employer coverage does not exceed 9.5
percent of household income for a self-only plan but exceeds 9.5
percent of household income for a family plan or for whom the offer of
the family plan is affordable but doesn't provide minimum value. The
Treasury Department and the IRS are unable to estimate the size of the
population affected by the proposed regulations because contribution
amounts for family coverage are not observed in the tax data.
Employers may see a shift for some of their employees from family
coverage to self-only coverage when family members newly qualify for
PTC. The cost per enrollee could increase or decrease depending on the
characteristics of those that remain covered. However, this shift would
likely lead to a decrease in the total amount employers are spending on
health insurance as the Federal government increases spending on PTC
for the non-employee family members.
D. Economic Analysis of the Proposed Regulations
1. Overview
For some families, the proposed regulations would lower the premium
contributions required to purchase coverage for all family members by
allowing family members other than the employee to qualify for a PTC.
For some families with offers of employer coverage who will be newly
eligible for the PTC, the combined cost of split coverage (self-only
employer coverage for the employee plus PTC-subsidized Exchange
coverage for related individuals) would be lower than what they pay for
family coverage through the employer. Some low-income families with
uninsured individuals where the employee is offered low-cost, self-only
employer coverage and relatively high-cost family employer coverage
would gain access to a lower-cost option through eligibility for the
PTC on behalf of one or more related individuals.
However, the cost for families to purchase Exchange coverage with
APTC is determined in part by the applicable percentage and household
income, which are the same regardless of the number of individuals
actually covered. Therefore, if the number of individuals needing
Exchange coverage is small--such as when some family members have
access to other MEC--the cost of Exchange coverage per enrollee is
relatively high when added to the cost of the employee share of self-
only employer coverage. Furthermore, split coverage also means multiple
deductibles and maximum out-of-pocket limits for the family, which
potentially increases out-of-pocket costs for families. As a result of
these features, many families with offers of employer coverage who
would be newly eligible for the PTC under the proposed regulations--
including families with some uninsured individuals--would not see any
savings in the combined cost of out-of-pocket premiums and cost
sharing. Lastly, many families may prefer the benefits and provider
networks of employer coverage, compared to Exchange coverage. Taking
all these factors into account, the Treasury Department and the IRS
have determined that new take-up of Exchange coverage may be modest for
eligible families because many would either still prefer employer
coverage or prefer to purchase other goods and services, or save or
invest, rather than insure all family members.
2. Benefits
Gain of health insurance coverage. For those individuals who are
uninsured because the premiums for family coverage through a family
member's employer are unaffordable, gaining access to PTC for the
purchase of Exchange coverage may be more affordable and prompt some of
them to take up coverage.
[[Page 20361]]
Additional health insurance option. For those individuals who are
covered by family coverage through a family member's employer that
costs more than 9.5 percent of their household income, the proposed
regulations would, by providing access to a PTC, give them an
additional option that could provide coverage at a lower cost or with
more comprehensive benefits.
The Treasury Department and the IRS are unable to estimate the size
of the benefits of the proposed regulations because contribution
amounts for family coverage are not observed in the tax data. The
Treasury Department and the IRS request comments that provide data,
other evidence, or models that provide insight on this issue.
3. Costs
Administrative costs. Adding this new option for eligibility for
PTC increases the cost to the IRS to evaluate PTC claims. The IRS's PTC
infrastructure will require one-time changes to certain processes,
forms, and instructions to be implemented in time for the 2023 tax
year, and the cost of these changes is expected to be negligible. The
Centers for Medicare & Medicaid Services (``CMS''), as the
administrator of the Federally-facilitated Exchanges and the federal
Exchange eligibility and enrollment platform, and the State-based
Exchanges that operate their own Exchange eligibility and enrollment
platforms will also incur administrative costs as the Exchanges will
have primary responsibility for implementing the rule as part of the
eligibility and enrollment process when families are applying for
Exchange coverage with APTC. Exchanges will incur one-time costs to
update Exchange eligibility systems to account for the new treatment of
family contribution amounts for employer coverage for purposes of
determining eligibility for APTC, and CMS, State-based Exchanges, State
Medicaid Agencies, and CMS-approved Enhanced Direct Enrollment partners
will incur administrative costs to make conforming updates to their
respective consumer applications and consumer-facing affordability
tools. The Treasury Department and the IRS anticipate total
administrative costs to CMS, Exchanges, State Medicaid Agencies, and
Enhanced Direct Enrollment partners associated with the proposed
regulation to be modest, and request comments from impacted
stakeholders to inform administrative cost estimates.
4. Transfers
Increased PTC costs for new Exchange enrollees. Because some
individuals may be newly eligible for PTC, some individuals may move
from employer coverage or uninsured status to Exchange coverage. Thus,
the proposed regulations may increase the amount of PTC being paid by
the government and reduce employer contributions.
Decreased employer exclusion for people who drop employer coverage.
If individuals drop their employer coverage, or do not enroll when they
otherwise would have, to take up Exchange coverage, the amount of money
that was going toward their employer coverage, which provides tax-
preferred health benefits, will go into the employee's wages, other
employees' wages, and employer profits and will no longer be tax
exempt. Thus, the proposed regulations may increase the amount of tax
revenue received from income and payroll taxes.
The Treasury Department and the IRS are unable to estimate the size
of the population affected by the proposed regulations because
contribution amounts for family coverage are not observed in the tax
data. The Treasury Department and the IRS request comments that provide
data, other evidence, or models that provide insight on this issue.
5. Impact on Small Entities
When an agency issues a proposed rulemaking, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) (the ``Act'') requires the agency
to ``prepare and make available for public comment an initial
regulatory flexibility analysis'' that ``describe[s] the impact of the
proposed rule on small entities.'' See 5 U.S.C. 603(a). The term
``small entities'' is defined in 5 U.S.C. 601 to mean ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction,'' which are also defined in 5 U.S.C. 601. Small business
size standards define whether a business is ``small'' and have been
established for types of economic activities, or industry, generally
under the North American Industry Classification System (NAICS). See
title 13, part 121 of the Code of Federal Regulations (titled ``Small
Business Size Regulations''). The size standards look at various
factors, including annual receipts, number of employees, and amount of
assets, to determine whether the business is small. See title 13, Sec.
121.201 of the Code of Federal Regulations for the Small Business Size
Standards by NAICS Industry.
Section 605 of the Act provides an exception to the requirement to
prepare an initial regulatory flexibility analysis if the agency
certifies that the proposed rulemaking will not have a significant
economic impact on a substantial number of small entities. The Treasury
Department and the IRS hereby certify that these proposed regulations
will not have a significant economic impact on a substantial number of
small entities. This certification is based on the fact that the
majority of the effect of the proposed regulations falls on individual
taxpayers, and entities will experience only small changes.
6. Impact on Small Business
Pursuant to section 7805(f) of the Code, these proposed regulations
have been submitted to the Chief Counsel for the Office of Advocacy of
the Small Business Administration for comment on their impact on small
business.
II. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (``UMRA'')
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditures in any one year by a
state, local, or tribal government, in the aggregate, or by the private
sector, of $100 million (updated annually for inflation). This proposed
rule does not include any Federal mandate that may result in
expenditures by state, local, or tribal governments, or by the private
sector in excess of that threshold.
III. Executive Order 13132: Federalism
E.O. 13132 (titled ``Federalism'') prohibits an agency from
publishing any rule that has federalism implications if the rule either
imposes substantial, direct compliance costs on state and local
governments, and is not required by statute, or preempts state law,
unless the agency meets the consultation and funding requirements of
section 6 of the E.O. This proposed rule does not have federalism
implications and does not impose substantial direct compliance costs on
state and local governments or preempt state law within the meaning of
the E.O.
Comments and Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to comments that are submitted timely to
the IRS as prescribed in this preamble in the ADDRESSES section. The
Treasury Department and the IRS request comments on all aspects of the
proposed regulations, including the economic impact of the proposed
regulations. Any electronic comments submitted, and to the extent
practicable any paper comments submitted, will be made
[[Page 20362]]
available at <a href="http://www.regulations.gov">www.regulations.gov</a> or upon request.
A public hearing has been scheduled for June 27, 2022, beginning at
10:00 a.m. EDT. Announcement 2020-4, 2020-17 IRB 1, provides that until
further notice, public hearings conducted by the IRS will be held
telephonically.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Individuals
who wish to testify (by telephone) at the public hearing must send an
email to <a href="/cdn-cgi/l/email-protection#14646176787d777c7175667d7a7367547d66673a737b62"><span class="__cf_email__" data-cfemail="adddd8cfc1c4cec5c8ccdfc4c3cadeedc4dfde83cac2db">[email protected]</span></a> to receive the telephone number and
access code for the hearing. The subject line of the email must contain
the regulation number (REG-114339-21) for the hearing and the word
TESTIFY. For example, the subject line may say: Request to TESTIFY at
Hearing for REG-114339-21. The email should also include a copy of the
speaker's outline of topics. The email requesting to speak must be
received by June 13, 2022. Speakers will have up to ten minutes to
testify and may be asked questions by the panel.
Individuals who want to attend the public hearing by telephone must
also send an email to <a href="/cdn-cgi/l/email-protection#6c1c190e00050f04090d1e05020b1f2c051e1f420b031a"><span class="__cf_email__" data-cfemail="44343126282d272c2125362d2a2337042d36376a232b32">[email protected]</span></a> to receive the telephone
number and access code for the hearing. The subject line of the email
must contain the regulation number (REG-114339-21) and the word ATTEND.
For example, the subject line may say: Request to ATTEND Hearing for
REG-114339-21. Email requests to attend the public hearing must be
received by 5:00 p.m. EDT on June 23, 2022.
The telephonic hearing will be made accessible to people with
disabilities. To request special assistance during the telephonic
hearing, please contact the Publications and Regulations Branch of the
Office of Associate Chief Counsel (Procedure and Administration) by
sending an email to <a href="/cdn-cgi/l/email-protection#18686d7a74717b707d796a71767f6b58716a6b367f776e"><span class="__cf_email__" data-cfemail="ee9e9b8c82878d868b8f9c8780899dae879c9dc0898198">[email protected]</span></a> (preferred) or by telephone
at (202) 317-5177 (not a toll-free number) by June 22, 2022. Any
questions regarding speaking at or attending the public hearing may
also be emailed to <a href="/cdn-cgi/l/email-protection#463633242a2f252e2327342f282135062f343568212930"><span class="__cf_email__" data-cfemail="0e7e7b6c62676d666b6f7c6760697d4e677c7d20696178">[email protected]</span></a>.
Drafting Information
The principal author of these proposed regulations is Suzanne R.
Sinno of the Office of Associate Chief Counsel (Income Tax and
Accounting). However, other personnel from the Treasury Department and
the IRS participated in the development of the regulations.
Withdrawal of Notice of Proposed Rulemaking
Accordingly, under the authority of 26 U.S.C. 7805, the notice of
proposed rulemaking (REG-143800-14) that was published in the Federal
Register on September 1, 2015 (80 FR 52678), is withdrawn.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is proposed to be amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.36B-2 is amended by:
0
1. Revising the first sentence and adding a sentence following the
first sentence of paragraph (c)(3)(v)(A)(2).
0
2. Adding paragraph (c)(3)(v)(A)(8).
0
3. Revising the second sentence of paragraph (c)(3)(v)(B).
0
4. In paragraph (c)(3)(v)(D), Examples 1 through 9 are designated as
paragraphs (c)(3)(v)(D)(1) through (9), respectively.
0
5. In newly designated paragraphs (c)(3)(v)(D)(3), (5), (6), (7), and
(9), redesignating the paragraphs in the first column as the paragraphs
in the second column:
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(c)(3)(v)(D)(3)(i) through (ii)........... (c)(3)(v)(D)(3)(i) through
(ii).
(c)(3)(v)(D)(5)(i) through (ii)........... (c)(3)(v)(D)(5)(i) through
(ii).
(c)(3)(v)(D)(6)(i) through (ii)........... (c)(3)(v)(D)(6)(i) through
(ii).
(c)(3)(v)(D)(7)(i) through (iv)........... (c)(3)(v)(D)(7)(i) through
(iv).
(c)(3)(v)(D)(9)(i) through (ii)........... (c)(3)(v)(D)(9)(i) through
(ii).
------------------------------------------------------------------------
0
6. Revising newly designated paragraphs (c)(3)(v)(D)(1) and (2).
0
7. Redesignating paragraphs (c)(3)(v)(D)(3) through (9) as paragraphs
(c)(3)(v)(D)(7) through (13), respectively.
0
8. Adding new paragraphs (c)(3)(v)(D)(3) through (6);
0
9. Revising the heading for newly redesignated paragraph
(c)(3)(v)(D)(7), the heading and first sentence of newly redesignated
paragraph (c)(3)(v)(D)(8), the heading of newly redesignated paragraph
(c)(3)(v)(D)(9), and the first sentence of newly redesignated paragraph
(c)(3)(v)(D)(9)(i).
0
10. In the headings for newly redesignated paragraphs (c)(3)(v)(D)(10)
through (13), removing the first period and adding a colon in its
place.
0
11. Revising paragraph (e)(1).
0
12. Adding paragraph (e)(5).
The revisions and additions read as follows:
Sec. 1.36B-2 Eligibility for premium tax credit.
* * * * *
(c) * * *
(3) * * *
(v) * * *
(A) * * *
(2) * * * Except as provided in paragraph (c)(3)(v)(A)(3) of this
section, an eligible employer-sponsored plan is affordable for a
related individual if the employee's required contribution for family
coverage under the plan does not exceed the required contribution
percentage, as defined in paragraph (c)(3)(v)(C) of this section, of
the applicable taxpayer's household income for the taxable year. For
purposes of this paragraph (c)(3)(v)(A)(2), an employee's required
contribution for family coverage is the portion of the annual premium
the employee must pay for coverage of the employee and all other
individuals included in the employee's family, as defined in Sec.
1.36B-1(d), who are offered coverage under the eligible employer-
sponsored plan. * * *
* * * * *
(8) Multiple offers of coverage. An individual who has offers of
coverage under eligible employer-sponsored plans from multiple
employers, either as an employee or a related individual, has an offer
of affordable coverage if at least one of the offers of coverage is
affordable under paragraph (c)(3)(v)(A)(1) or (2) of this section.
(B) * * * Coverage under an eligible employer-sponsored plan is
affordable for a part-year period if the annualized required
contribution for self-only coverage, in the case of an employee, or
family coverage, in the case of a related individual, under the plan
for the part-year period does not exceed the required contribution
percentage of the applicable taxpayer's household income for the
taxable year. * * *
* * * * *
(D) * * *
(1) Example 1: Basic determination of affordability. For all of
2023, taxpayer C works for an employer, X, that offers its employees
and their spouses a health insurance plan under which, to enroll in
self-only coverage, C must contribute an amount for 2023 that does not
exceed the required contribution percentage of C's 2023 household
income. Because C's required contribution for self-only
[[Page 20363]]
coverage does not exceed the required contribution percentage of C's
household income, under paragraph (c)(3)(v)(A)(1) of this section, X's
plan is affordable for C, and C is eligible for minimum essential
coverage for all months in 2023.
(2) Example 2: Basic determination of affordability for a related
individual. (i) The facts are the same as in paragraph (c)(3)(v)(D)(1)
of this section (Example 1), except that C is married to J, they file a
joint return, and to enroll C and J, X's plan requires C to contribute
an amount for coverage for C and J for 2023 that exceeds the required
contribution percentage of C's and J's household income. J does not
work for an employer that offers employer-sponsored coverage.
(ii) J is a member of C's family as defined in Sec. 1.36B-1(d).
Because C's required contribution for coverage of C and J exceeds the
required contribution percentage of C's and J's household income, under
paragraph (c)(3)(v)(A)(2) of this section, X's plan is unaffordable for
J. Accordingly, J is not eligible for minimum essential coverage for
2023. However, under paragraph (c)(3)(v)(A)(1) of this section, X's
plan is affordable for C, and C is eligible for minimum essential
coverage for all months in 2023.
(3) Example 3: Multiple offers of coverage. The facts are the same
as in paragraph (c)(3)(v)(D)(2) of this section (Example 2), except
that J works all year for an employer that offers employer-sponsored
coverage to employees. J's required contribution for the cost of self-
only coverage from J's employer does not exceed the required
contribution percentage of C's and J's household income. Although the
coverage offered by C's employer for C and J is unaffordable for J, the
coverage offered by J's employer is affordable for J. Consequently,
under paragraphs (c)(3)(v)(A)(1) and (8) of this section, J is eligible
for minimum essential coverage for all months in 2023.
(4) Example 4: Cost of covering individuals not part of taxpayer's
family. (i) D and E are married, file a joint return, and have two
children, F and G, under age 26. F is a dependent of D and E, but G is
not. D works all year for an employer that offers employer-sponsored
coverage to employees, their spouses, and their children under age 26.
E, F, and G do not work for employers offering coverage. D's required
contribution for self-only coverage under D's employer's coverage does
not exceed the required contribution percentage of D's and E's
household income. D's required contribution for coverage of D, E, F,
and G exceeds the required contribution percentage of D's and E's
household income, but D's required contribution for coverage of D, E,
and F does not exceed the required contribution percentage of the
household income.
(ii) E and F are members of D's family as defined in Sec. 1.36B-
1(d). G is not a member of D's family under Sec. 1.36B-1(d), because G
is not D's dependent. Under paragraph (c)(3)(v)(A)(1) of this section,
D's employer's coverage is affordable for D because D's required
contribution for self-only coverage does not exceed the required
contribution percentage of D's and E's household income. D's employer's
coverage also is affordable for E and F, because, under paragraph
(c)(3)(v)(A)(2) of this section, D's required contribution for coverage
of D, E, and F does not exceed the required contribution percentage of
D's and E's household income. Although D's cost to cover D, E, F, and G
exceeds the required contribution percentage of D's and E's household
income, under paragraph (c)(3)(v)(A)(2) of this section, the cost to
cover G is not considered in determining whether D's employer's
coverage is affordable for E and F, regardless of whether G actually
enrolls in the plan, because G is not in D's family. D, E, and F are
eligible for minimum essential coverage for all months in 2023. Under
paragraph (c)(4)(i) of this section, G is considered eligible for the
coverage offered by D's employer only if G enrolls in the coverage.
(5) Example 5: More than one family member with an employer
offering coverage. (i) K and L are married, file a joint return, and
have one dependent child, M. K works all year for an employer that
offers coverage to employees, spouses, and children under age 26. L
works all year for an employer that offers coverage to employees only.
K's required contribution for self-only coverage under K's employer's
coverage does not exceed the required contribution percentage of K's
and L's household income. Likewise, L's required contribution for self-
only coverage under L's employer's coverage does not exceed the
required contribution percentage of K's and L's household income.
However, K's required contribution for coverage of K, L, and M exceeds
the required contribution percentage of K's and L's household income.
(ii) L and M are members of K's family as defined in Sec. 1.36B-
1(d). Under paragraph (c)(3)(v)(A)(1) of this section, K's employer's
coverage is affordable for K because K's required contribution for
self-only coverage does not exceed the required contribution percentage
of K's and L's household income. Similarly, L's employer's coverage is
affordable for L, because L's required contribution for self-only
coverage does not exceed the required contribution percentage of K's
and L's household income. Thus, K and L are eligible for minimum
essential coverage for all months in 2023. However, under paragraph
(c)(3)(v)(A)(2) of this section, K's employer's coverage is
unaffordable for M, because K's required contribution for coverage of
K, L, and M exceeds the required contribution percentage of K's and L's
household income. Accordingly, M is not eligible for minimum essential
coverage for 2023.
(6) Example 6: Multiple offers of coverage for a related
individual. (i) The facts are the same as in paragraph (c)(3)(v)(D)(5)
of this section (Example 5), except that L works all year for an
employer that offers coverage to employees, spouses, and children under
age 26. L's required contribution for coverage of K, L, and M does not
exceed the required contribution percentage of K's and L's household
income.
(ii) Although M is not eligible for affordable employer coverage
under K's employer's coverage, paragraph (c)(3)(v)(A)(8) of this
section dictates that L's employer coverage must be evaluated to
determine whether L's employer coverage is affordable for M. Under
paragraph (c)(3)(v)(A)(2) of this section, L's employer's coverage is
affordable for M, because L's required contribution for K, L, and M
does not exceed the required contribution percentage of K's and L's
household income. Accordingly, M is eligible for minimum essential
coverage for all months in 2023.
(7) Example 7: Determination of unaffordability at enrollment. * *
*
(8) Example 8: Determination of unaffordability for plan year. The
facts are the same as in paragraph (c)(3)(v)(D)(7) of this section
(Example 7), except that X's employee health insurance plan year is
September 1 to August 31. * * *
(9) Example 9: No affordability information affirmatively provided
for annual redetermination. (i) The facts are the same as in paragraph
(c)(3)(v)(D)(7) of this section (Example 7), except the Exchange
redetermines D's eligibility for advance credit payments for 2015. * *
*
* * * * *
(e) * * *
(1) Except as provided in paragraphs (e)(2) through (5) of this
section, this section applies to taxable years ending after December
31, 2013.
* * * * *
[[Page 20364]]
(5) The first two sentences of paragraph (c)(3)(v)(A)(2), paragraph
(c)(3)(v)(A)(8), the second sentence of paragraph (c)(3)(v)(B),
paragraphs (c)(3)(v)(D)(1) through (6), and the first sentences of
paragraphs (c)(3)(v)(D)(8) and (9) of this section apply to taxable
years beginning after [date final regulations are published in the
Federal Register].
0
Par. 3. Section 1.36B-3 is amended by revising paragraphs (d)(1)(i) and
(n)(1) and adding paragraph (n)(3) to read as follows:
Sec. 1.36B-3 Computing the premium assistance credit amount.
* * * * *
(d) * * *
(1) * * *
(i) The premiums for the month, reduced by any amounts that were
refunded in the same taxable year as the premium liability is incurred,
for one or more qualified health plans in which a taxpayer or a member
of the taxpayer's family enrolls (enrollment premiums); or
* * * * *
(n) * * * (1) Except as provided in paragraphs (n)(2) and (3) of
this section, this section applies to taxable years ending after
December 31, 2013.
* * * * *
(3) Paragraph (d)(1)(i) of this section applies to taxable years
beginning after [the date final regulations are published in the
Federal Register].
0
Par. 4. Section 1.36B-6 is amended by revising paragraphs (a) and
(g)(2) to read as follows:
Sec. 1.36B-6 Minimum value.
(a) In general--(1) Employees. An eligible employer-sponsored plan
provides minimum value (MV) for an employee of the employer offering
the coverage only if--
(i) The plan's MV percentage, as defined in paragraph (c) of this
section, is at least 60 percent based on the plan's share of the total
allowed costs of benefits provided to the employee; and
(ii) The plan provides substantial coverage of inpatient hospital
services and physician services.
(2) Related individuals. An eligible employer-sponsored plan
provides MV for an individual who may enroll in the plan because of a
relationship to an employee of the employer offering the coverage (a
related individual) only if--
(i) The plan's MV percentage, as defined in paragraph (c) of this
section, is at least 60 percent based on the plan's share of the total
allowed costs of benefits provided to the related individual; and
(ii) The plan provides substantial coverage of inpatient hospital
services and physician services.
* * * * *
(g) * * *
(2) Exceptions. (i) Paragraph (a)(1)(ii) of this section applies
for plan years beginning after November 3, 2014; and
(ii) Paragraph (a)(2) of this section applies to taxable years
beginning after [date final regulations are published in the Federal
Register].
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2022-07158 Filed 4-5-22; 8:45 am]
BILLING CODE 4830-01-P
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