[Federal Register Volume 79, Number 17 (Monday, January 27, 2014)]
[Proposed Rules]
[Pages 4302-4308]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01439]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-141036-13]
RIN 1545-BL91
Minimum Essential Coverage and Other Rules Regarding the Shared
Responsibility Payment for Individuals
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
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SUMMARY: This document contains proposed regulations relating to the
requirement to maintain minimum essential coverage enacted by the
Patient Protection and Affordable Care Act and the Health Care and
Education Reconciliation Act of 2010, as amended by the TRICARE
Affirmation Act and Public Law 111-173. These proposed regulations
affect individual taxpayers who may be liable for the shared
responsibility payment for not maintaining minimum essential coverage.
This document also provides notice of a public hearing on these
proposed regulations.
DATES: Comments must be received by April 28, 2014. Outlines of topics
to be discussed at the public hearing scheduled for May 21, 2014, at 10
a.m., must be received by April 28, 2014.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-141036-13), room
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
141036-13), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at www.regulations.gov (IRS REG-141036-13). The
public hearing will be held in the IRS Auditorium, Internal Revenue
Building, 1111 Constitution Avenue NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Sue-Jean Kim or John B. Lovelace, (202)
[[Page 4303]]
317-7006; concerning the submission of comments, the public hearing,
and to be placed on the building access list to attend the public
hearing, Oluwafunmilayo Taylor, (202) 317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in Sec. 1.5000A-3(h)(3)
and Sec. 1.5000A-4(a)(1) of this notice of proposed rulemaking has
been reviewed and approved by the Office of Management and Budget in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d))
under control number 1545-0074 in conjunction with the final
regulations under section 5000A (TD 9632). The information is necessary
to determine whether the individual shared responsibility provision
applies to a taxpayer and, if it applies, the amount of the payment.
Comments on the collection of information should be sent to the Office
of Management and Budget, Attn: Desk Officer for the Department of the
Treasury, Office of Information and Regulatory Affairs, Washington, DC
20503, with copies to the Internal Revenue Service, Attn: IRS Reports
Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224.
Comments on the collection of information should be received by
March 28, 2014.
Background
The Patient Protection and Affordable Care Act, Public Law 111-148
(124 Stat. 119 (2010)), and the Health Care and Education
Reconciliation Act of 2010, Public Law 111-152 (124 Stat. 1029 (2010))
(collectively, the Affordable Care Act), added section 5000A to the
Internal Revenue Code. Section 5000A was subsequently amended by the
TRICARE Affirmation Act of 2010, Public Law 111-159 (124 Stat. 1123)
and Public Law 111-173 (124 Stat. 1215). Section 5000A provides that,
for months beginning after December 31, 2013, a nonexempt individual
must maintain minimum essential coverage or make a shared
responsibility payment.
Final regulations under section 5000A (TD 9632) were published on
August 30, 2013 (78 FR 53646). The preamble to the final regulations
indicates that subsequent proposed regulations will provide that
coverage under certain government-sponsored programs is not government-
sponsored minimum essential coverage. The preamble to the final
regulations also describes rules to be included in subsequent
regulations for determining, for purposes of the lack of affordable
coverage exemption, the required contribution for individuals eligible
to enroll in an eligible employer-sponsored plan that provides employer
contributions to health reimbursement arrangements (HRAs) or wellness
program incentives. These proposed regulations address these issues,
consistent with the rules contemplated in the preamble to the final
regulations. In addition, these proposed regulations provide or clarify
rules under section 5000A addressing the definition of excepted
benefits, hardship exemptions that may be claimed on a Federal income
tax return, and the computation of the monthly penalty amount.
Minimum Essential Coverage
Section 5000A(f)(1) enumerates the types of health care coverage
that qualify as minimum essential coverage. They include, among others,
coverage under specified government-sponsored programs and health
benefits coverage that the Secretary of Health and Human Services
(HHS), in coordination with the Secretary of the Treasury, recognizes
as minimum essential coverage. Under section 5000A(f)(1)(A), specified
government-sponsored programs include, among other things, the Medicaid
program under title XIX of the Social Security Act and medical coverage
under chapter 55 of title 10, United States Code, including the TRICARE
program.
Section 1.5000A-2(b)(1)(ii) of the final regulations provides that
government-sponsored programs that are minimum essential coverage
include the Medicaid program under Title XIX of the Social Security Act
(42 U.S.C. 1396 and following sections) other than certain Medicaid
coverage that may provide limited benefits: (1) Optional coverage of
family planning services under section 1902(a)(10)(A)(ii)(XXI) of the
Social Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XXI)); (2) optional
coverage of tuberculosis-related services under section
1902(a)(10)(A)(ii)(XII) of the Social Security Act (42 U.S.C.
1396a(a)(10)(A)(ii)(XI)); (3) coverage of pregnancy-related services
under section 1902(a)(10)(A)(ii)(IX) of the Social Security Act (42
U.S.C. 1396a(a)(10)(A)(ii)(IX)); and (4) coverage limited to the
treatment of emergency medical conditions in accordance with 8 U.S.C.
1611(b)(1)(A), as authorized by section 1903(v) of the Social Security
Act (42 U.S.C. 1396b(v)).
Excepted Benefits
Under section 5000A(f)(3) and Sec. 1.5000A-2(g) of the final
regulations, minimum essential coverage does not include any health
insurance coverage that consists solely of excepted benefits described
in section 2791(c)(1), (c)(2), (c)(3), or (c)(4) of the Public Health
Service Act (42 U.S.C. 300gg-91(c)), or regulations issued under these
provisions (45 CFR 148.220) (excepted benefits regulations). In
general, excepted benefits are benefits that are limited in scope or
are conditional. Under 2791(b)(1) of the Public Health Service Act (42
U.S.C. 300gg-91(b)(1)), health insurance coverage means benefits
consisting of medical care (provided directly, through insurance or
reimbursement, or otherwise and including items and services paid for
as medical care) under any hospital or medical service policy or
certificate, hospital or medical service plan contract, or health
maintenance organization contract offered by a health insurance issuer.
Lack of Affordable Coverage Exemption
Section 5000A(e)(1) and Sec. 1.5000A-3(e)(1) of the final
regulations provide that an individual is exempt for a month when the
individual cannot afford minimum essential coverage. For this purpose,
an individual cannot afford minimum essential coverage if the
individual's required contribution (determined on an annual basis) for
minimum essential coverage exceeds a percentage (8 percent for 2014) of
the individual's household income for the most recent taxable year for
which the Secretary of HHS, in consultation with the Secretary of the
Treasury, determines information is available.
For individuals ineligible for coverage under an eligible employer-
sponsored plan, the required contribution is the annual premium for the
applicable plan reduced by the premium tax credit allowable under
section 36B for the taxable year (determined as if the individual
enrolled in a plan through an Exchange for the entire taxable year).
The applicable plan is the lowest cost bronze plan available in the
Exchange serving the rating area where the individual resides that
would cover all members of the individual's nonexempt family taking
into account the rating factors that an Exchange would use to determine
the cost of coverage. If the Exchange serving the rating area where the
individual resides does not offer a single bronze plan that would cover
all members of the individual's nonexempt family, the premium for the
applicable plan is the sum of the premiums for the lowest cost bronze
plans available in the Exchange that provide coverage for all members
of the nonexempt family.
[[Page 4304]]
Hardship Exemptions
Section 5000A(e)(5) and Sec. 1.5000A-3(h)(1) of the final
regulations provide that, in general, an individual is exempt for a
month that includes a day on which the individual has in effect a
hardship exemption certification. A hardship exemption certification is
issued by an Exchange under section 1311(d)(4)(H) of the Affordable
Care Act (42 U.S.C. 18031(d)(4)(H)) certifying that the individual has
suffered a hardship (as that term is defined in 45 CFR 155.605(g)) with
respect to the individual's ability to obtain coverage under a
qualified health plan. Section 1.5000A-3(h)(3) of the final regulations
provides that a taxpayer who meets the requirements of 45 CFR
155.605(g)(3) or 45 CFR 155.605(g)(5) may claim a hardship exemption
for a calendar year on a Federal income tax return.
Pursuant to the authority under 45 CFR 155.605(g), the Secretary of
HHS has established an additional hardship exemption that applies to
individuals enrolling in a qualified health plan through an Exchange
prior to the close of the initial open enrollment period. Specifically,
an individual may claim a hardship exemption for the months prior to
the effective date of the individual's coverage on a Federal income tax
return for 2014 without the need to request an exemption from the
Exchange. See HHS Centers for Medicare and Medicaid Services, Shared
Responsibility Provision Question and Answer (Oct. 28, 2013).
Monthly Penalty Amount
Under section 5000A(c)(1), the amount of the shared responsibility
payment imposed on any taxpayer for any taxable year is equal to the
lesser of (A) the sum of monthly penalty amounts for months when one or
more failures to maintain minimum essential coverage occurred, or (B)
an amount equal to the national average premium for qualified health
plans that satisfy requirements enumerated in section 5000A(c).
Under section 5000A(c)(2), the monthly penalty amount, for any
month, is \1/12\ of the greater of (A) the flat dollar amount, or (B) a
specified percentage of the taxpayer's household income over the
taxpayer's applicable return filing threshold (as defined in section
6012(a)(1)).
The flat dollar amount is the lesser of (A) the sum of the defined
applicable dollar amounts for all individuals in the shared
responsibility family who did not have minimum essential coverage in a
particular month, or (B) 300 percent of the applicable dollar amount.
Under section 5000A(c)(3), the applicable dollar amount is $95 in 2014,
$325 in 2015, and $695 in 2016. After 2016, the applicable dollar
amount will be indexed by a cost-of-living adjustment.
The specified percentage is 1.0 percent for taxable years beginning
in 2014, 2.0 percent for taxable years beginning in 2015, and 2.5
percent for taxable years beginning after 2015.
The final regulations incorporate these provisions.
Explanation of Provisions
I. Minimum Essential Coverage
A. Medicaid-related programs
1. Coverage for the Medically Needy
The Social Security Act provides states with flexibility to extend
Medicaid eligibility to individuals with high medical expenses who
would be eligible for Medicaid but for their income level (medically
needy individuals). See section 1902(a)(10)(C) of the Social Security
Act (42 U.S.C. 1396a(a)(10)(C)) and 42 CFR 435.300 and following
sections. In general, individuals whose income is in excess of the
maximum allowed for Medicaid eligibility but who are otherwise eligible
for Medicaid may ``spend down'' their income, based on incurred medical
expenses, and thereby become eligible for the benefits provided for
medically needy individuals in the state. States providing coverage to
medically needy individuals must establish a ``budget period'' lasting
from one to six months. Eligibility for coverage as a medically needy
individual, which must be determined each budget period, is provided
only after an individual incurs sufficient medical expenses to spend
down to the qualifying income level. Thus, depending on an individual's
medical needs and the options exercised by the state program,
eligibility may be assessed as frequently as every month, and an
individual may move in and out of coverage for medically needy
individuals multiple times in a year. States are permitted, and some
states have adopted the option, to offer benefits to the medically
needy that are more limited than the benefits generally provided to
Medicaid beneficiaries.
Because the benefits provided to medically needy individuals are
not required to be comprehensive, the coverage is analogous to coverage
consisting of excepted benefits that is not minimum essential coverage
under section 5000A(f)(3). Other types of coverage under government-
sponsored programs that potentially provide limited benefits are not
minimum essential coverage under the final regulations (for example,
the optional coverage of family planning services under section
1902(a)(10)(A)(ii)(XXI) of the Social Security Act (42 U.S.C.
1396a(a)(10)(A)(ii)(XXI)), and the optional coverage of tuberculosis-
related services under section 1902(a)(10)(A)(ii)(XII) of the Social
Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XII)). Accordingly, the
proposed regulations provide that coverage for medically needy
individuals generally is not government-sponsored minimum essential
coverage. To the extent such coverage in a particular state is
comprehensive coverage, such coverage may be recognized as minimum
essential coverage by the Secretary of HHS, in coordination with the
Secretary of the Treasury, under section 5000A(f)(1)(E).
Because individuals receiving medically needy coverage may not know
at the time of open enrollment for the 2014 plan year that coverage
under the program is not minimum essential coverage, Notice 2014-10
(available at www.irs.gov), (see Sec. 601.601(d)(2)(ii)(b) of this
chapter), released concurrently with these proposed regulations,
provides that a taxpayer is not liable for the shared responsibility
payment for a month in 2014 with respect to individuals in the
taxpayer's shared responsibility family who are enrolled in medically
needy coverage.
2. Section 1115 Demonstration Projects
Section 1115 of the Social Security Act (42 U.S.C. 1315) authorizes
the Secretary of HHS to approve experimental, pilot, or demonstration
projects that promote the objectives of the Medicaid program (``Section
1115 demonstration projects''). Some Section 1115 demonstration
projects involve waivers of Medicaid requirements that affect
individuals eligible under the approved Medicaid state plan (for
instance, waivers to permit changes in manners of delivering Medicaid
services), but do not change the basic requirement to provide
comprehensive Medicaid coverage. Other Section 1115 demonstration
projects, authorized under section 1115(a)(2) of the Social Security
Act (42 U.S.C. 1315(a)(2)), allow a state to extend benefits to
additional populations (expansion populations). Because the expansion
populations are not described in approved Medicaid state plans, the
coverage authorized under those Section 1115 demonstration projects is
not required to be comprehensive and may be limited. Accordingly, the
proposed regulations provide that coverage under Section 1115
demonstration projects authorized under section 1115(a)(2) of the
Social Security Act generally is not
[[Page 4305]]
government-sponsored minimum essential coverage. However, comprehensive
coverage for expansion populations under certain Section 1115
demonstration programs may be recognized as minimum essential coverage
by the Secretary of HHS, in coordination with the Secretary of the
Treasury, under section 5000A(f)(1)(E).
The Treasury Department and IRS understand that individuals
receiving benefits as part of an expansion population under a
demonstration project authorized under section 1115(a)(2) may not know
at open enrollment for the 2014 plan year that the coverage they
receive under a Section 1115 demonstration project is not minimum
essential coverage. Accordingly, Notice 2014-10 (available at
www.irs.gov), (see Sec. 601.601(d)(2)(ii)(b) of this chapter),
released concurrently with these proposed regulations, provides that a
taxpayer will not be liable for the shared responsibility payment for a
month in 2014 with respect to individuals in the taxpayer's shared
responsibility family receiving benefits as part of an expansion
population authorized under section 1115(a)(2).
B. Limited-Benefit Coverage Under Chapter 55 of Title 10, U.S.C.
Similar to Medicaid programs that provide a limited scope of
benefits, two types of coverage provided under chapter 55 of Title 10,
U.S.C., do not provide a scope of benefits comparable to the full
TRICARE program under the same chapter. Under sections 1079(a),
1086(c)(1), and 1086(d)(1) of Title 10, U.S.C., the first type of
limited-benefit coverage is provided for certain individuals who are
excluded from TRICARE coverage for health care services from private
sector providers and only eligible for space available care in a
facility of the uniformed services (space available care). There is no
guarantee of care and any care received is subject to the availability
of space and facilities, as well as the capabilities of the medical and
dental staff. Coverage potentially available to an affected individual
may not be accessible if there is no space available at the facility
where the individual seeks care or treatment. These affected
individuals are not entitled to comprehensive health care coverage
under chapter 55 of Title 10, U.S.C., and the Department of Defense has
no statutory authority to pay claims for any outside care provided to
these individuals.
Under sections 1074a and 1074b of Title 10, U.S.C., the second type
of limited-benefit coverage is provided for certain individuals who are
not on active duty and are entitled to episodic care for an injury,
illness, or disease incurred or aggravated in the line of duty (line-
of-duty care). Line-of-duty care is limited to care appropriate for
treating the covered injury, illness, or disease. This type of limited-
benefit coverage is similar to coverage consisting of excepted
benefits, including workers' compensation, that is not minimum
essential coverage under section 5000A(f)(3).
Neither of these types of limited-benefit coverage offers
beneficiaries coverage for comprehensive medical care. Accordingly, the
proposed regulations provide that Military Health System eligibility
limited only to space available care and line-of-duty care are not
government-sponsored programs providing minimum essential coverage.
Because individuals enrolled in space available care or line-of-duty
care may not know at open enrollment for the 2014 plan year that space
available care and line-of-duty care are not minimum essential
coverage, Notice 2014-10 (available at www.irs.gov), (see Sec.
601.601(d)(2)(ii)(b) of this chapter), released concurrently with these
proposed regulations, provides that a taxpayer is not liable for the
shared responsibility payment for a month in 2014 with respect to
individuals in the taxpayer's shared responsibility family who are
enrolled in either space available care or line-of-duty care.
C. Excepted Benefits
Section 5000A(f)(3) and Sec. 1.5000A-2(g) of the final regulations
provide that minimum essential coverage does not include health
insurance coverage that consists solely of excepted benefits. In the
rulemaking process under section 5000A, the Treasury Department and the
IRS have provided that minimum essential coverage does not include
plans or programs that do not provide a comprehensive scope of
benefits. See, for example, Sec. 1.5000A-2(b)(1)(ii)(A) describing the
Medicaid program for family planning services and Sec. 1.5000A-
2(b)(1)(v) excluding from the definition of minimum essential coverage
medical care for veterans that does not provide comprehensive health
care benefits. Consistent with this treatment, the proposed regulations
clarify that minimum essential coverage excludes any coverage, whether
insurance or otherwise, that consists solely of excepted benefits.
II. Exemption for Individuals Who Cannot Afford Coverage
A. Health Reimbursement Arrangements
The preamble to the final regulations provides that guidance on how
employer contributions to HRAs are counted in determining an employee's
or a related individual's required contribution will be consistent with
final rulemaking under section 36B. The regulations proposed under
section 36B addressing the treatment of employer contributions to HRAs
were published on May 3, 2013 (78 FR 25909) (the section 36B proposed
regulations). The section 36B proposed regulations provide that amounts
newly made available for the current plan year under an HRA that is
integrated with an eligible employer-sponsored plan are counted toward
the employee's required contribution in determining the affordability
of the coverage if the employee may use the amounts only for premiums
or may choose to use the amounts for either premiums or cost sharing.
An HRA generally must be integrated with an eligible employer-sponsored
plan to satisfy the market reform provisions imposed by Title I of the
Affordable Care Act. See Notice 2013-54 (2013-40 IRB 287 (September 30,
2013)), (see Sec. 601.601(d)(2)(ii)(b) of this chapter), which is
available at www.irs.gov.
Similar to the 36B proposed regulations, under these proposed
regulations, an employer's new contributions to an HRA are taken into
account in determining (in other words, they reduce) an employee's
required contribution if the HRA is integrated with an employer-
sponsored plan and the employee may use the amounts to pay premiums.
Amounts in an HRA that may be used only for cost-sharing are not taken
into account when determining affordability because they cannot affect
the employee's out-of-pocket cost of acquiring minimum essential
coverage.
B. Contributions to a Cafeteria Plan
Many employers maintain section 125 cafeteria plans under which
employees are given the option of making salary reduction contributions
toward the cost of non-taxable benefits or receiving an equivalent
amount in taxable cash. The nontaxable benefit choices may include both
health and non-health benefits. If an employee elects to make salary
reduction contributions and to have those amounts applied towards the
cost of premiums, those contributions are treated as employee
contributions, and the employee's household income is increased by the
amount of the
[[Page 4306]]
contributions for purposes of the affordability determination under
section 5000A(e)(1)(A).
Alternatively, employers may make contributions that can be
received only in the form of nontaxable benefits under the plan
(sometimes referred to as flex contributions). In addition, some
employers subsidize benefits available under the section 125 cafeteria
plan so that an employee can elect a benefit while making salary
reduction contributions in an amount less than the value of the
benefit. Some employers will provide contributions even if the employee
declines the subsidized benefit. For example, an employer might offer a
benefit with a value of $10,000 for an employee salary reduction of
$4,000, but provide other benefits with a value of $3,000 if the
employee declines the $10,000 benefit.
Comments are requested on the treatment of employer contributions
under a section 125 cafeteria plan for purposes of section 5000A to the
extent employees may not opt to receive the employer contributions as a
taxable benefit, such as cash. Specifically, comments are requested
regarding how these contributions should be taken into account for
purposes of determining the affordability of coverage.
III. Wellness Program Incentives
A. Individuals Eligible for Employer-sponsored Coverage
The preamble to the final section 5000A regulations provides that
guidance on how wellness program incentives are counted in determining
the affordability of coverage under section 5000A will be consistent
with final rulemaking under section 36B. The proposed section 36B
regulations address the treatment of wellness incentives by providing
that, for purposes of determining an individual's required contribution
for employer-sponsored coverage under section 36B(c)(2)(C)(i), wellness
program incentives are treated as earned only if the incentives relate
to tobacco use. This rule is consistent with other Affordable Care Act
provisions (such as one allowing insurers to charge higher premiums
based on tobacco use). Accordingly, these proposed regulations provide
that, for purposes of determining for section 5000A an individual's
required contribution for coverage under an employer-sponsored plan,
wellness program incentives are treated as earned only if the
incentives relate to tobacco use.
B. Individuals Ineligible for Employer-sponsored Coverage
In general, for individuals ineligible for coverage under employer-
sponsored plans, the required contribution is the premium for the
applicable plan reduced by the maximum amount of any premium tax credit
allowable under section 36B for the taxable year. In general, the
applicable plan is the lowest cost bronze plan available in the
individual market through the Exchange serving the rating area in which
the individual resides that would cover all members of the individual's
nonexempt family. Pursuant to section 36B(b)(3)(C), the premium tax
credit allowable under section 36B is calculated by reference to the
adjusted monthly premium for the applicable second lowest cost silver
plan without regard to any premium discounts or rebates in a state
participating in the wellness discount demonstration project described
in section 2705(l) of the Public Health Service Act (42 U.S.C. 300gg-
4(l)).
A comment received on previously issued proposed regulations under
section 5000A asked that, for purposes of computing the required
contribution for an individual not eligible for coverage under an
eligible employer-sponsored plan, the applicable plan for an individual
residing in a rating area in a state participating in the individual
market wellness program demonstration project disregard any premium-
based wellness incentive requirements, including incentives relating to
tobacco use. Standards and processes implementing the individual market
wellness program demonstration project have not yet been established.
After the individual market wellness program demonstration project is
implemented, additional guidance will be provided on whether and how
individuals residing in a rating area participating in the project will
take wellness incentives into account in determining the affordability
of their coverage for purposes of section 5000A.
C. Simplified Method
Proposed regulations previously issued under section 5000A (78 FR
7314) included an alternative method of identifying the premium for the
applicable plan when a single bronze plan is not offered that would
cover all members of the nonexempt family. During the comment period to
the proposed regulations, questions arose concerning the efficacy of
the proposed simplified method, as well as whether an election to use
the simplified method should be revocable. The final regulations
removed the proposed alternative method, and the Treasury Department
and the IRS continue to consider this issue.
A taxpayer may be unable to find a single bronze plan that would
cover all members of the taxpayer's nonexempt family. The final
regulations provide the general rule that, if the Exchange serving the
rating area where the individual resides does not offer a single bronze
plan that would cover all members of the taxpayer's nonexempt family,
the premium for the applicable plan is the sum of the premiums for the
lowest cost bronze plans available in the Exchange that provide
coverage for all members of the nonexempt family. The Treasury
Department and the IRS request comments on alternative methods for
identifying the premium for the applicable plan when a single bronze
plan would not cover all members of the taxpayer's nonexempt family.
IV. Hardship Exemptions
The final regulations specify that an individual who meets the
requirements of 45 CFR 155.605(g)(3) (relating to individuals with
gross income below the applicable return filing threshold who filed a
return) or 45 CFR 155.605(g)(5) (relating to the affordability of
coverage under an eligible employer-sponsored plan for family members)
may claim a hardship exemption for a calendar year on a Federal income
tax return. Consistent with guidance released by the Secretary of HHS
on October, 28, 2013, the proposed regulations provide that an
individual who enrolls in a plan through an Exchange during the open
enrollment period for coverage for 2014 may claim a hardship exemption
for months in 2014 prior to the effective date of the individual's
coverage without obtaining a hardship exemption certification from an
Exchange.
If additional situations are identified where an individual should
be allowed to claim a hardship exemption without obtaining a hardship
exemption certification from an Exchange, the Secretary of HHS and the
Secretary of the Treasury will continue to coordinate guidance. To
facilitate issuing guidance in this situation, the proposed regulations
provide that a taxpayer may claim a hardship exemption on a return if
the Secretary of HHS issues published guidance of general applicability
describing the hardship and indicating that the hardship can be claimed
on a Federal income tax return pursuant to guidance published by the
Secretary of the Treasury, and the Secretary of the Treasury issues
published guidance of general applicability allowing an
[[Page 4307]]
individual to claim such hardship exemption on a Federal income tax
return without obtaining a hardship exemption from an Exchange.
Monthly Penalty Amounts
The final regulations provide that, for each taxable year, the
shared responsibility payment is the lesser of the sum of monthly
penalty amounts for each individual in the shared responsibility family
or the sum of the monthly national average bronze plan premiums for the
shared responsibility family. The monthly penalty amount is computed
for the taxpayer, not for each individual in the shared responsibility
family. To avoid any confusion about this treatment, the proposed
regulations remove from Sec. 1.5000A-4(a) the clause ``for each
individual in the shared responsibility family'' and add a reference to
the taxpayer on whom the shared responsibility payment is imposed under
Sec. 1.5000A-1(c).
Applicability Date
These regulations are proposed to apply for months beginning after
December 31, 2013.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866, as supplemented by Executive Order 13563. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
does not apply to the proposed regulations. Pursuant to the Regulatory
Flexibility Act (RFA) (5 U.S.C. chapter 6), it is hereby certified that
the proposed regulations will not have a significant economic impact on
a substantial number of small entities. The applicability of the
proposed regulations is limited to individuals, who are not small
entities as defined by the RFA (5 U.S.C. 601). Accordingly, the RFA
does not apply. Therefore, a regulatory flexibility analysis is not
required. Pursuant to section 7805(f) of the Code, the proposed
regulations have been submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
business.
Comments and Public Hearing
Before the proposed regulations are adopted as final regulations,
consideration will be given to any comments that are submitted timely
to the IRS as prescribed in this preamble under the ``Addresses''
heading. The Treasury Department and the IRS request comments on all
aspects of the proposed rules. All comments will be available at
www.regulations.gov or upon request.
A public hearing has been scheduled for May 21, 2014, beginning at
10 a.m., in the Auditorium, Internal Revenue Building, 1111
Constitution Avenue NW., Washington, DC. Due to building security
procedures, visitors must enter at the Constitution Avenue entrance. In
addition, all visitors must present photo identification to enter the
building. Because of access restrictions, visitors will not be admitted
beyond the immediate entrance area more than 30 minutes before the
hearing starts. For information about having your name placed on the
building access list to attend the hearing, see the FOR FURTHER
INFORMATION CONTACT section of this preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments at the hearing must submit electronic or
written comments, and an outline of the topics to be discussed and the
time to be devoted to each topic (signed original and eight (8) copies)
by April 28, 2014. A period of 10 minutes will be allotted to each
person for making comments. An agenda showing the scheduling of the
speakers will be prepared after the deadline for receiving outlines has
passed. Copies of the agenda will be available free of charge at the
hearing.
Drafting Information
The principal authors of the proposed regulations are Sue-Jean Kim
and John B. Lovelace, Office of the Associate Chief Counsel (Income Tax
& Accounting). Other personnel from the Treasury Department and the IRS
participated in the development of the regulations.
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 * * *
0
Par 2. An undesignated center heading is added immediately following
Sec. 1.1563-4 to read as follows:
Individual Shared Responsibility Payment for Not Maintaining
Minimum Essential Coverage
0
Par. 3. Section 1.5000A-0 is amended by:
0
1. Revising the entry for Sec. 1.5000A-2(b)(2).
0
2. Removing the entries for Sec. 1.5000A-2(b)(2)(i), (b)(2)(ii), and
(b)(2)(iii).
0
3. Revising the entries for Sec. 1.5000A-3(e)(4)(ii)(C) and
(e)(4)(ii)(D).
0
4. Adding a new entry for Sec. 1.5000A-3(e)(4)(ii)(E).
0
5. Revising the entry for Sec. 1.5000A-3(h)(3).
The revisions and addition read as follows.
Sec. 1.5000A-0 Table of contents.
* * * * *
Sec. 1.5000A-2 Minimum essential coverage.
* * * * *
(b) * * *
(2) Certain health care coverage not minimum essential coverage
under a government-sponsored program.
* * * * *
Sec. 1.5000A-3 Exempt individuals.
* * * * *
(e) * * *
(4) * * *
(ii) * * *
(C) Wellness program incentives.
(D) Credit allowable under section 36B.
(E) Required contribution for part-year period.
* * * * *
(h) * * *
(3) Hardship exemption without hardship exemption certification.
* * * * *
0
Par. 4. Section 1.5000A-2 is amended by:
0
1. Revising paragraphs (b)(1)(ii) and (b)(2).
0
2. Removing the language ``health insurance'' in paragraph (g).
The revisions read as follows:
Sec. 1.5000A-2 Minimum essential coverage.
* * * * *
(b) * * *
(1) * * *
(ii) Medicaid. The Medicaid program under Title XIX of the Social
Security Act (42 U.S.C. 1396 and following sections);
* * * * *
(2) Certain health care coverage not minimum essential coverage
under a government-sponsored program. Government-sponsored program does
not mean any of the following:
(i) Optional coverage of family planning services under section
1902(a)(10)(A)(ii)(XXI) of the Social Security Act (42 U.S.C.
1396a(a)(10)(A)(ii)(XXI));
[[Page 4308]]
(ii) Optional coverage of tuberculosis-related services under
section 1902(a)(10)(A)(ii)(XII) of the Social Security Act (42 U.S.C.
1396a(a)(10)(A)(ii)(XII));
(iii) Coverage of pregnancy-related services under section
1902(a)(10)(A)(i)(IV) and (a)(10)(A)(ii)(IX) of the Social Security Act
(42 U.S.C. 1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX));
(iv) Coverage limited to treatment of emergency medical conditions
in accordance with 8 U.S.C. 1611(b)(1)(A), as authorized by section
1903(v) of the Social Security Act (42 U.S.C. 1396b(v));
(v) Coverage for medically needy individuals under section
1902(a)(10)(C) of the Social Security Act (42 U.S.C. 1396a(a)(10)(C))
and 42 CFR 435.300 and following sections; or
(vi) Coverage authorized under section 1115(a)(2) of the Social
Security Act (42 U.S.C. 1315(a)(2));
(vii) Coverage under section 1079(a), 1086(c)(1), or 1086(d)(1) of
title 10, U.S.C., that is solely limited to space available care in a
facility of the uniformed services for individuals excluded from
TRICARE coverage for care from private sector providers; and
(viii) Coverage under sections 1074a and 1074b of title 10, U.S.C.
for an injury, illness, or disease incurred or aggravated in the line
of duty for individuals who are not on active duty.
* * * * *
0
Par. 5. Section 1.5000A-3 is amended by:
0
1. Revising paragraphs (e)(3)(ii)(D) and (e)(3)(ii)(E).
0
2. Redesignating paragraphs (e)(4)(ii)(C) and (e)(4)(ii)(D) as
(e)(4)(ii)(D) and (e)(4)(ii)(E), respectively, and adding and reserving
a new paragraph (e)(4)(ii)(C).
0
3. Revising paragraphs (h)(1) and (h)(3).
The revisions and additions read as follows:
Sec. 1.5000A-3 Exempt individuals.
* * * * *
(e) * * *
(3) * * *
(ii) * * *
(D) Employer contributions to health reimbursement arrangements.
Amounts newly made available for the current plan year under a health
reimbursement arrangement that is integrated with an eligible employer-
sponsored plan and that an employee may use to pay premiums are taken
into account in determining the employee's or a related individual's
required contribution.
(E) Wellness program incentives. Nondiscriminatory wellness program
incentives offered by an eligible employer-sponsored plan that affect
premiums are treated as earned in determining an employee's or a
related individual's required contribution to the extent the incentives
relate to tobacco use. Wellness program incentives that do not relate
to tobacco use are treated as not earned for this purpose.
* * * * *
(4) * * *
(ii) * * *
(C) Wellness programs incentives. [Reserved]
* * * * *
(h) Individuals with hardship exemption certification--(1) In
general. Except as provided in paragraph (h)(3) of this section, an
individual is an exempt individual for a month that includes a day on
which the individual has in effect a hardship exemption certification
described in paragraph (h)(2) of this section.
* * * * *
(3) Hardship exemption without hardship exemption certification. An
individual may claim an exemption without obtaining a hardship
exemption certification described in paragraph (h)(2) of this section--
(i) For any month that includes a day on which the individual meets
the requirements of 45 CFR 155.605(g)(3) or 45 CFR 155.605(g)(5);
(ii) For the months in 2014 prior to the individual's effective
date of coverage, if the individual enrolls in a plan through an
Exchange prior to the close of the open enrollment period for coverage
in 2014; or
(iii) For any month that includes a day on which the individual
meets the requirements of any other hardship for which:
(A) The Secretary of HHS issues guidance of general applicability
describing the hardship and indicating that an exemption for such
hardship can be claimed on a Federal income tax return pursuant to
guidance published by the Secretary; and
(B) The Secretary issues published guidance of general
applicability, see Sec. 601.601(d)(2) of this chapter, allowing an
individual to claim the hardship exemption on a return without
obtaining a hardship exemption from an Exchange.
* * * * *
0
Par. 6. Section 1.5000A-4 is amended by revising paragraph (a)
introductory text and paragraph (a)(1) to read as follows:
Sec. 1.5000A-4 Computation of shared responsibility payment.
(a) In general. For each taxable year, the shared responsibility
payment imposed on a taxpayer in accordance with Sec. 1.5000A-1(c) is
the lesser of--
(1) The sum of the monthly penalty amounts; or
* * * * *
John Dalyrmple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2014-01439 Filed 1-23-14; 4:15 pm]
BILLING CODE 4830-01-P