Amendments to Excepted Benefits, 13995-14009 [2015-06066]
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13995
Rules and Regulations
Federal Register
Vol. 80, No. 52
Wednesday, March 18, 2015
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9714]
RIN 1545–BM44
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
RIN 1210–AB70
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
45 CFR Part 146
[CMS–9946–F2]
RIN 0938–AS52
Amendments to Excepted Benefits
Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration,
Department of Labor; Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services.
ACTION: Final rules.
AGENCY:
This document contains final
regulations that amend the regulations
regarding excepted benefits under the
Employee Retirement Income Security
Act of 1974, the Internal Revenue Code,
and the Public Health Service Act to
specify requirements for limited
wraparound coverage to qualify as an
excepted benefit. Excepted benefits are
generally exempt from the requirements
that were added to those laws by the
Health Insurance Portability and
Accountability Act and the Affordable
Care Act.
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SUMMARY:
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These final regulations are
effective on May 18, 2015.
DATES:
FOR FURTHER INFORMATION CONTACT:
Amy Turner or Elizabeth Schumacher,
Employee Benefits Security
Administration, Department of Labor, at
(202) 693–8335; Karen Levin, Internal
Revenue Service, Department of the
Treasury, at (202) 317–5500; Jacob
Ackerman, Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, at (410)
786–1565.
Customer Service Information:
Individuals interested in obtaining
information from the Department of
Labor concerning employment-based
health coverage laws, may call the EBSA
Toll-Free Hotline at 1–866–444–EBSA
(3272) or visit the Department of Labor’s
Web site (https://www.dol.gov/ebsa). In
addition, information from HHS on
private health insurance for consumers
can be found on the Centers for
Medicare & Medicaid Services (CMS)
Web site (www.cms.gov/cciio) and
information on health reform can be
found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Health Insurance Portability and
Accountability Act of 1996 (HIPAA),
Public Law 104–191, 110 Stat. 1936
added title XXVII of the Public Health
Service Act (PHS Act), part 7 of the
Employee Retirement Income Security
Act of 1974 (ERISA), and chapter 100 of
the Internal Revenue Code (the Code),
providing portability and
nondiscrimination provisions with
respect to health coverage. These
provisions of the PHS Act, ERISA, and
the Code were later augmented by other
consumer protection laws, including the
Mental Health Parity Act of 1996,1 the
Mental Health Parity and Addiction
Equity Act of 2008,2 the Newborns’ and
Mothers’ Health Protection Act,3 the
Women’s Health and Cancer Rights
Act,4 the Genetic Information
Nondiscrimination Act of 2008,5 the
Children’s Health Insurance Program
1 Public Law 104–204, 110 Stat. 2944 (September
26, 1996).
2 Public Law 110–343, 122 Stat. 3881 (October 3,
2008).
3 Public Law 104–204, 110 Stat. 2935 (September
26, 1996).
4 Public Law 105–277, 112 Stat. 2681–436
(October 21, 1998).
5 Public Law 110–233, 122 Stat. 881 (May 21,
2008).
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Reauthorization Act of 2009,6 Michelle’s
Law,7 and the Affordable Care Act.8
The Affordable Care Act reorganizes,
amends, and adds to the provisions of
part A of title XXVII of the PHS Act
relating to group health plans and
health insurance issuers in the group
and individual markets. The term
‘‘group health plan’’ includes both
insured and self-insured group health
plans.9 Section 715(a)(1) of ERISA and
section 9815(a)(1) of the Code, as added
by the Affordable Care Act, incorporate
the provisions of part A of title XXVII
of the PHS Act into ERISA and the Code
to make them applicable to group health
plans and health insurance issuers
providing health insurance coverage in
connection with group health plans.
The PHS Act sections incorporated by
these references are sections 2701
through 2728.
Sections 2722 and 2763 of the PHS
Act, section 732 of ERISA, and section
9831 of the Code provide that the
requirements of title XXVII of the PHS
Act, part 7 of ERISA, and chapter 100
of the Code, respectively, generally do
not apply to excepted benefits. Excepted
benefits are described in section 2791 of
the PHS Act, section 733 of ERISA, and
section 9832 of the Code.
The parallel statutory provisions
establish four categories of excepted
benefits. The first category includes
benefits that are generally not health
coverage 10 (such as automobile
insurance, liability insurance, workers
compensation, and accidental death and
dismemberment coverage). The benefits
in this category are excepted in all
circumstances. In contrast, the benefits
in the second, third, and fourth
categories are types of health coverage
6 Public Law 111–3, 123 Stat. 65 (February 4,
2009).
7 Public Law 110–381, 122 Stat. 4081 (October 9,
2008).
8 The Patient Protection and Affordable Care Act,
Public Law 111–148, was enacted on March 23,
2010, and the Health Care and Education
Reconciliation Act, Public Law 111–152, was
enacted on March 30, 2010. (These statutes are
collectively known as the ‘‘Affordable Care Act’’.)
9 The term ‘‘group health plan’’ is used in title
XXVII of the PHS Act, part 7 of ERISA, and chapter
100 of the Code, and is distinct from the term
‘‘health plan,’’ as used in other provisions of title
I of the Affordable Care Act. The term ‘‘health plan’’
does not include self-insured group health plans.
10 See 62 FR 16894, 16903 (Apr. 8, 1997), which
states that these benefits are generally not health
insurance coverage.
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but are excepted only if certain
conditions are met.
The second category of excepted
benefits is limited excepted benefits,
which may include limited scope vision
or dental benefits, and benefits for longterm care, nursing home care, home
health care, or community based care.
Section 2791(c)(2)(C) of the PHS Act,
section 733(c)(2)(C) of ERISA, and
section 9832(c)(2)(C) of the Code
authorize the Secretaries of Health and
Human Services (HHS), Labor, and the
Treasury (collectively, the Secretaries)
to issue regulations establishing other,
similar limited benefits as excepted
benefits. The Secretaries exercised this
authority previously with respect to
certain health flexible spending
arrangements (health FSAs).11 To be
excepted under this second category,
the statute (specifically, ERISA section
732(c)(1), PHS Act section 2722(c)(1),
and Code section 9831(c)(1)) provides
that limited benefits must either: (1) Be
provided under a separate policy,
certificate, or contract of insurance; or
(2) otherwise not be an integral part of
a group health plan, whether insured or
self-insured.12
The third category of excepted
benefits, referred to as ‘‘noncoordinated
excepted benefits,’’ includes both
coverage for only a specified disease or
illness (such as cancer-only policies),
and hospital indemnity or other fixed
indemnity insurance. In the group
market, these benefits are excepted only
if all of the following conditions are
met: (1) The benefits are provided under
a separate policy, certificate, or contract
of insurance; (2) there is no
coordination between the provision of
such benefits and any exclusion of
benefits under any group health plan
maintained by the same plan sponsor;
and (3) the benefits are paid with
respect to any event without regard to
whether benefits are provided under
any group health plan maintained by
the same plan sponsor.13
The fourth category of excepted
benefits is supplemental excepted
benefits.14 Such benefits must be: (1)
11 26 CFR 54.9831–1(c)(3)(v); 29 CFR
2590.732(c)(3)(v); 45 CFR 146.145(b)(3)(v).
12 See the discussion in the 2014 final regulations
concerning the application of these requirements to
benefits such as limited-scope dental and vision
benefits and employee assistance programs at 79 FR
59131 (Oct. 1, 2014).
13 26 CFR 54.9831–1(c)(4); 29 CFR 2590.732(c)(4);
45 CFR 146.145(b)(4). See also Q7 in Affordable
Care Act Implementation FAQs Part XI, available at
https://www.dol.gov/ebsa/faqs/faq-aca11.html and
https://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs11.html.
14 On February 13, 2015, the Departments issued
guidance to clarify whether insurance coverage that
supplements group health coverage by providing
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Coverage supplemental to Medicare,
coverage supplemental to the Civilian
Health and Medical Program of the
Department of Veterans Affairs
(CHAMPVA) or to Tricare, or similar
coverage that is supplemental to
coverage provided under a group health
plan; and (2) provided under a separate
policy, certificate, or contract of
insurance.15
In 2004, the Departments of the
Treasury, Labor, and HHS published
final regulations with respect to
excepted benefits (the HIPAA
regulations).16 (Subsequent references to
the ‘‘Departments’’ include all three
Departments, unless the headings or
context indicate otherwise.)
On December 24, 2013, the
Departments published additional
proposed regulations with respect to the
second category of excepted benefits,
limited excepted benefits (2013
proposed regulations).17 The 2013
proposed regulations proposed to: (1)
Eliminate the requirement that
participants in self-insured plans pay an
additional premium or contribution for
limited-scope vision or dental benefits
to qualify as benefits that are not an
integral part of the plan; (2) set forth the
criteria under which employee
assistance programs (EAPs) that do not
provide significant benefits in the
nature of medical care constitute
excepted benefits; and (3) allow plan
sponsors in certain limited
circumstances to offer, as excepted
benefits, coverage that wraps around
certain individual health insurance
coverage. The intent of limited
wraparound coverage is to permit
employers to provide certain employees,
dependents, and retirees who are
enrolled in some type of individual
market coverage with overall coverage
that is generally comparable to the
coverage provided under the employers’
additional categories of benefits (and does not also
fill gaps in group health plan coverage for costsharing obligations, such as coinsurance or
deductibles) can be characterized as an excepted
benefit. See Affordable Care Act Implementation
FAQs Part XXIII, available at https://www.dol.gov/
ebsa/faqs/faq-aca23.html and https://www.cms.gov/
CCIIO/Resources/Fact-Sheets-and-FAQs/
Downloads/Supplmental-FAQ_2-13-15-final.pdf.
15 26 CFR 54.9831–1(c)(5); 29 CFR 2590.732(c)(5);
45 CFR 146.145(b)(5). The Departments issued
additional guidance regarding supplemental health
insurance coverage as excepted benefits. See EBSA
Field Assistance Bulletin No. 2007–04 (available at
https://www.dol.gov/ebsa/pdf/fab2007-4.pdf); CMS
Insurance Standards Bulletin 08–01 (available at
https://www.cms.gov/CCIIO/Resources/Files/
Downloads/hipaa_08_01_508.pdf); and IRS Notice
2008–23 (available at https://www.irs.gov/irb/200807_IRB/ar09.html).
16 69 FR 78720 (Dec. 30, 2004).
17 78 FR 77632.(Dec. 23, 2014).
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group health plan, without eroding
employer-sponsored coverage.
After consideration of comments
received on the 2013 proposed
regulations, the Departments published
final regulations regarding dental and
vision benefits and EAP benefits on
October 1, 2014 (2014 final
regulations).18 In the 2014 final
regulations, the Departments also stated
their intent to publish regulations that
addressed limited wraparound coverage
in the future, taking into account the
extensive comments received on this
issue.19 After consideration of
comments on the 2013 proposed
regulations, on December 23, 2014, the
Departments published new proposed
regulations with respect to limited
wraparound coverage (2014 proposed
regulations), which set forth five
requirements under which limited
benefits provided through a group
health plan that wrap around either
eligible individual insurance or
coverage under a Multi-State Plan
would constitute excepted benefits.20 A
description of the 2014 proposed
regulations is set forth below, together
with a summary of the comments
received on the 2014 proposed
regulations and an overview of these
final regulations.
II. Overview of the Final Regulations
Under the 2014 proposed regulations,
limited benefits provided through a
group health plan that wrap around
either (1) eligible individual health
insurance, or (2) coverage under a
Multi-State Plan (collectively referred to
as ‘‘limited wraparound coverage’’)
could constitute excepted benefits, if
five requirements were met. For this
purpose, the 2014 proposed regulations
defined ‘‘eligible individual health
insurance’’ as individual health
insurance coverage that is not a
grandfathered health plan,21 not a
transitional individual health insurance
market plan,22 and does not consist
solely of excepted benefits. The
preamble to the 2014 proposed
regulations acknowledged that, in States
that elect to establish a Basic Health
Program (BHP), certain low-income
individuals (for example, those with
household income between 133 percent
and 200 percent of the Federal poverty
18 79
FR 59131 (Oct. 1, 2014).
FR 59131 (Oct. 1, 2014).
20 79 FR 76931 (Dec. 23, 2014).
21 See section 1251 of the Affordable Care Act, 29
CFR 2590.715–1251, and 45 CFR 147.140.
22 As described in CMS Insurance Standards
Bulletin (March 5, 2014) available at: https://
www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/transition-to-compliantpolicies-03-06-2015.pdf.
19 79
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level) who would otherwise qualify for
a tax credit to obtain a qualified health
plan through an Exchange would
instead be enrolled in coverage through
the BHP. The Departments invited
comments on how an employer might
make wraparound coverage available to
BHP enrollees.23
Comments addressing the BHP all
supported permitting wraparound of
BHP coverage. The Departments agree
and, therefore, these final regulations
permit limited wraparound coverage of
BHP coverage in the same manner as
limited wraparound coverage of eligible
individual health insurance.
A. Covers Additional Benefits
The 2014 proposed regulations stated
that limited wraparound coverage
would have to be specifically designed
to wrap around eligible individual
health insurance or Multi-State Plan
coverage. That is, the limited
wraparound coverage would have to
provide meaningful benefits beyond
coverage of cost sharing under the
eligible individual health insurance or
Multi-State Plan coverage. The preamble
to the 2014 proposed regulations
provided examples, such as that limited
wraparound coverage could provide
coverage for expanded in-network
medical clinics or providers, or provide
benefits that are not essential health
benefits (EHBs) and that are not covered
under the eligible individual health
insurance.24 The preamble to the 2014
proposed regulations also provided that
limited wraparound coverage would not
be permitted to provide benefits solely
under a coordination-of-benefits
provision and could not be an accountbased reimbursement arrangement.25
Limited wraparound coverage that
covers solely cost sharing would not be
permissible, as stated in the preamble to
the 2014 proposed regulations, because
reduced cost sharing can be obtained by
choosing an individual health insurance
policy with a higher actuarial value (for
example, a platinum plan with a 90
percent actuarial value).26 The
Departments invited comment on safe
harbors standardizing the benefits in the
limited wraparound coverage that could
be established.
Many commenters requested
additional clarity on the type of benefits
that could be offered as meaningful
benefits in limited wraparound
coverage. Suggestions included
reimbursement for the full cost of
primary care, the cost of prescription
23 79
FR 76935, footnote 32.
FR 76935
25 79 FR 76936
26 Id.
24 79
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drugs not on the formulary of the
primary plan, ten physician visits per
year, services considered to be provided
out-of-network by the primary plan,
access to onsite clinics or specific health
facilities at no cost, or benefits targeted
to a specific population (such as
coverage for certain orthopedic injuries),
home health coverage, or coverage of
other benefits that are not covered EHBs
under the primary plan. The
Departments consider all of these
examples to qualify as additional,
meaningful benefits under this first
requirement to be limited wraparound
coverage that qualifies as excepted
benefits. As discussed further below, the
Departments reiterate that limited
wraparound coverage that is an
excepted benefit cannot be an accountbased mechanism and instead must be
a risk-sharing product that covers a
defined package of services.
B. Limited in Amount
For the second requirement to be
limited wraparound coverage that
qualifies as excepted benefits, the
Departments proposed that the limited
wraparound coverage be limited in
amount. Specifically, the 2014 proposed
regulations provided that the annual
cost of coverage per employee (and any
covered dependents) under the limited
wraparound coverage could not exceed
the maximum annual contribution for
health FSAs (which was $2,500 in
2014), indexed in the manner prescribed
under Code section 125(i)(2) (which
amounts to $2,550 for 2015), and the
cost of coverage would include both
employer and employee contributions
towards coverage and be determined in
the same manner as the applicable
premium is calculated under a COBRA
continuation provision. The preamble to
the 2014 proposed regulations stated
that the bright-line limitation was
intended to be simpler to administer
than a cap of 15 percent of the cost of
the plan sponsor’s primary coverage as
set forth in the 2013 proposed
regulations.
Many comments stated that the limits
on the amount should be higher so that
individuals eligible for the limited
wraparound coverage would not
experience gaps in coverage. Some
commenters suggested that the
Departments consider an alternative,
referencing the higher health savings
account (HSA) limits, which are $3,350
for individual coverage and $6,650 for
families in 2015, indexed annually.
Others suggested the Departments set
the limit as the greater of: The
maximum permitted annual salary
reduction towards a health FSA (as was
set forth in the 2014 proposed
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13997
regulations), or a percentage of the cost
of coverage under the primary plan (as
was set forth in the 2013 proposed
regulations).
These final regulations adopt the last
suggestion. Either the dollar or percent
limitation would satisfy the
Departments’ objective of ensuring that
the limited wraparound coverage
provides a limited benefit, as required
by the statute, and be similar to other
limited excepted benefits (that is, dental
benefits, vision benefits, long term care,
nursing home care, home health care,
community-based care, or health FSAs
as described in 26 CFR 54.9831–1(c)(3);
29 CFR 2590.732(c)(3); 45 CFR
146.145(b)(3)). The percentage, as in the
2013 proposed regulations, is 15 percent
of the cost of coverage under the
primary plan.
The final regulations do not adopt the
suggestion to use much higher limits on
the cost of coverage (for example, the
HSA limits). Too large a benefit that is
not limited in scope (c.f., limited-scope
dental and vision excepted benefits)
would not constitute a ‘‘similar, limited
benefit’’ under ERISA section 733(c)(2),
PHS Act section 2791(c)(2), or Code
section 9832(c)(2).
The Departments also received
requests for clarification regarding the
administration of the second
requirement (that is, that the limited
wraparound coverage be limited in
amount). Some comments requested
that the determination of the cost of
coverage be permitted to be made on an
aggregate basis in advance of each plan
year by an actuary, and not based on
actual experience of the group or any
individual during the plan year. This
approach is precisely the approach that
was intended by the Departments. As
stated earlier, to qualify as excepted
benefits, the limited wraparound
coverage could not be an account-based
reimbursement arrangement. That is, the
coverage must include a risk-sharing
element. As such, making a
determination regarding the cost of
coverage must occur on an aggregate
basis. Moreover, to the extent this
determination for a given plan year is
made on sound actuarial principles that
are appropriately documented, the
actual experience of the group or any
individual during the plan year would
not be a factor in determining the cost
of coverage for that plan year (although
it could impact future years by
providing additional information on
which the actuarial estimate of the cost
of coverage for future years would be
based). The final regulations include
this clarification.
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C. Nondiscrimination
Under the 2014 proposed regulations,
the third requirement for limited
wraparound coverage to qualify as
excepted benefits related to
nondiscrimination. Specifically, the
Departments proposed three subrequirements relating to
nondiscrimination. First, the
wraparound coverage could not impose
any preexisting condition exclusion,
consistent with the requirements of
section 2704 of the PHS Act (as
incorporated into section 715 of ERISA
and section 9815 of the Code) and
implementing regulations.27 Second, the
wraparound coverage could not
discriminate against individuals in
eligibility, benefits, or premiums based
on any health factor of an individual (or
any dependent of the individual),
consistent with the requirements of
section 702 of ERISA, section 9802 of
the Code, and section 2705 of the PHS
Act (as incorporated into section 715 of
ERISA and section 9815 of the Code)
and implementing regulations.28
Finally, neither the primary group
health plan coverage nor the limited
wraparound coverage could fail to
comply with section 2716 of the PHS
Act (as incorporated into section 715 of
ERISA and section 9815 of the Code) or
fail to be excludible from income with
respect to any individual due to the
application of section 105(h) of the Code
(as applicable). These final regulations
adopt the approach outlined in the 2014
proposed regulations.
The Departments received two
comments on this third requirement.
One commenter inquired as to the
potential interaction between excepted
benefits and the excise tax on high cost
employer-sponsored health coverage
under Code section 4980I. The Treasury
and the IRS issued Notice 2015–16 on
February 23, 2015 describing potential
approaches with regard to a number of
issues under Code section 4980I and
inviting comments by May 15, 2015.
Issues relating to Code section 4980I
will be addressed as part of that
rulemaking. Another commenter
requested that the Departments consider
‘‘modernizing’’ the nondiscrimination
provisions under Code section 105(h)
and section 2716 of the PHS Act relating
27 29 CFR 2590.715–2704 and 45 CFR 147.108.
See also Q2 in Affordable Care Act Implementation
FAQs Part XXII, available at https://www.dol.gov/
ebsa/faqs/faq-aca22.html and https://www.cms.gov/
CCIIO/Resources/Fact-Sheets-and-FAQs/
Downloads/FAQs-Part-XXII-FINAL.pdf regarding
the prohibition against offering employees with
high claims risk a choice between enrollment in its
standard group health plan or cash.
28 26 CFR 54.9802–1, 29 CFR 2590.702, and 45
CFR 146.121.
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to prohibiting discrimination in favor of
highly compensated employees. The
Departments are considering this
suggestion and other comments
previously received for purposes of
future guidance relating to these
provisions.
D. Plan Eligibility Requirements
The fourth requirement to qualify as
excepted benefits concerned plan
eligibility requirements. First, under the
2014 proposed regulations, individuals
eligible for the limited wraparound
coverage could not be enrolled in
excepted benefit coverage that is a
health FSA. One commenter suggested
permitting dual enrollment in limited
wraparound coverage and health FSA
coverage. However, as described earlier,
the Departments are using their
discretion under ERISA section
733(c)(2), PHS Act section 2791(c)(2),
and Code section 9832(c)(2) to define
‘‘other similar, limited benefits’’ as
excepted benefits and do not adopt this
suggestion. To ensure that wraparound
coverage is a limited benefit, like health
FSAs, the Departments do not intend to
allow plan sponsors to combine
multiple excepted benefits into an
arrangement that functions as a material
substitute for primary group health plan
coverage and still be exempt from the
health market reforms.
Under the 2014 proposed regulations,
as part of the fourth requirement for
limited wraparound coverage to
constitute excepted benefits, coverage
would be required to comply with one
of two alternative sets of standards
relating to eligibility and benefits: one
set of plan eligibility requirements for
wraparound benefits offered in
conjunction with eligible individual
health insurance (or BHP coverage) for
persons who are not full-time
employees, and a separate set of
standards for coverage that wraps
around certain Multi-State Plan
coverage. As described further below,
limited wraparound coverage for
persons who are not full-time
employees is intended for employers
that are generally offering affordable,
minimum value coverage to their fulltime workers but want to offer an
additional limited benefit to their parttime workers. Limited wraparound
coverage offered in conjunction with a
Multi-State Plan is intended for
employers that were offering reasonably
comprehensive coverage prior to the
promulgation of these final rules, and
wish to offer limited wraparound
coverage while still contributing
roughly the same total amount toward
their employees’ health benefits.
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1. Limited Wraparound Coverage
Offered in Conjunction With Eligible
Individual Health Insurance (or BHP
Coverage) for Persons Who Are Not
Full-Time Employees
As under the 2014 proposed
regulations, limited coverage that wraps
around eligible individual health
insurance (or BHP coverage) for an
individual who is not a full-time
employee is required to satisfy three
standards relating to plan eligibility.
i. Employer Obligations With Respect to
Full-Time Employees
First, for each year that wraparound
coverage is offered, the employer that is
the sponsor of the plan offering
wraparound coverage, or the employer
participating in a plan offering
wraparound coverage, must offer to its
full-time employees coverage that: (1) Is
substantially similar to coverage that the
employer would need to offer to its fulltime employees in order not to be
subject to a potential assessable
payment under the employer shared
responsibility provisions of section
4980H(a) of the Code, if such provisions
were applicable (that is, substantially
similar to an offer of minimum essential
coverage (as defined in Code section
5000A(f)) to at least 95 percent of its
full-time employees (or to all but five of
its full-time employees, if five is greater
than five percent of its full-time
employees)); (2) provides minimum
value (as defined in section
36B(c)(2)(C)(ii) of the Code); and (3) is
reasonably expected to be affordable
(permitting use of the safe harbor rules
for determining affordability set forth in
26 CFR 54.4980H–5(e)(2)). The
preamble to the 2014 proposed
regulations stated that, if a plan or
issuer providing limited wraparound
coverage takes reasonable steps to
ensure that employers disclose
necessary information regarding their
coverage offered and affordability
information to the plan or issuer, the
plan or issuer could rely on reasonable
representations by employers regarding
this information, unless the plan or
issuer has specific knowledge to the
contrary.
Several commenters requested that, in
the context of small employers and
multiemployer plans, there be an
exemption from the requirement that, to
be considered excepted benefits, the
employer offer to its full-time
employees coverage that is substantially
similar to coverage that the employer
would need to offer pursuant to Code
section 4980H(a). However, these final
excepted benefits regulations are
designed to allow plan sponsors an
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option to offer additional workers health
coverage comparable to that which they
already offer, rather than to serve as a
substitute for primary coverage.
Other commenters asked the
Departments to clarify that any Code
section 4980H-related requirements are
met in instances in which the employer
has no full-time employees. These final
regulations clarify that, in the event that
the employer has no full-time
employees, but the plan covers retirees
(and their dependents), or covers parttime employees (and their dependents),
the requirements to provide coverage
that is substantially similar to coverage
that the employer would need to offer
to its full-time employees in order not
to be subject to a potential assessable
payment section 4980H(a) of the Code,
that provides minimum value, and that
is reasonably expected to be affordable,
are all considered satisfied.
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ii. Limited Eligibility
Second, eligibility for the limited
wraparound coverage must be limited to
employees who are not full-time
employees (and their dependents), or
who are retirees (and their dependents).
In the preamble to the 2014 proposed
regulations, the Departments stated that
‘‘full-time employees’’ would be
employees who are reasonably expected
to work at least an average of 30 hours
per week. Plans and issuers would not
be required to define ‘‘full-time
employees’’ strictly in accordance with
the rules of Code section 4980H, but
employers could rely on the Code
section 4980H definition, or any
reasonable interpretation of who is
reasonably expected to work an average
of 30 hours a week, for purposes of this
provision. The Departments invited
comment on this approach.
Some commenters argued that plan
sponsors should be able to offer limited
coverage that wraps around eligible
individual health insurance to full-time
employees. The Departments do not
adopt this change. A rationale for
treating the wraparound coverage as an
excepted benefit is that recipients will
be able to use this limited type of
coverage in conjunction with individual
coverage purchased through an
Exchange without being disqualified
from claiming the premium tax credit.
This may be attractive to employers as
a means of providing some health
coverage to employees who may not
otherwise have been offered coverage,
such as part-time employees or retirees.
However, this is not intended to
incentivize or permit employers to fail
to offer minimum essential coverage to
full-time employees, a population to
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whom employers have typically offered
coverage.
One commenter sought clarification
that plan sponsors offering limited
wraparound coverage may rely on a
determination of full-time employee
status at the time of enrollment. The
Departments agree that employers
offering limited wraparound coverage
will make determinations based on the
expected status of an employee in the
future as a part-time employee versus
full-time employee. Accordingly, the
final regulations include a clarification
that this standard is met if it is
reasonably determined at the time of
enrollment that the employee will on
average work fewer than 30 hours per
week during the plan year. Moreover,
for purposes of administering the
premium tax credit under section 36B of
the Code, if it is reasonably determined
at the time of enrollment that the
employee will on average work fewer
than 30 hours per week during the plan
year and therefore the employee is
offered limited coverage that wraps
around eligible individual health
insurance, but the employee later during
the coverage period meets the definition
of a full-time employee, the coverage
will not fail to be excepted benefits and
the employee will not become ineligible
for premium tax credits for the
remainder of the plan year solely
because the original reasonable
determination proves incorrect.
Whether, to be reasonable, that
determination would need to be
changed for future plan years will
depend on all the facts and
circumstances.
Several commenters sought
clarification regarding the definition of
‘‘dependent.’’ Specifically, commenters
asked whether the term ‘‘dependent’’
includes ‘‘spouses’’ (as the term is
defined under 26 CFR 54.9801–2, 29
CFR 2590.701–2, and 45 CFR 144.103
for purposes of chapter 100 of the Code,
part 7 of ERISA, and title XXVII of the
PHS Act), or whether it is limited to
‘‘dependent children’’ (as the term is
defined under Code section 4980H and
its implementing regulations). These
final regulations clarify that, for
purposes of excepted benefits, the term
‘‘dependent’’ is defined by reference to
the definitions section governing the
market reforms (that is, 26 CFR
54.9801–2, 29 CFR 2590.701–2, and 45
CFR 144.103) and not the employer
shared responsibility provisions under
Code section 4980H and its
implementing regulations. Accordingly,
spouses may qualify as dependents to
the extent they are eligible for coverage
under the terms of the limited
wraparound coverage. Moreover, some
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13999
commenters sought clarification as to
whether a plan could permit enrollment
of a spouse beneficiary without
enrollment of an employee participant.
While nothing in these final regulations,
nor any other provision of ERISA, the
Code, or the PHS Act requires plans to
enroll spouse beneficiaries for coverage
(other than COBRA coverage) if the
participant does not enroll, nothing in
these provisions prohibits plans from
enrolling such a spouse if plans choose
to do so.29
iii. Offer of Other Group Health Plan
Coverage
Third, under the 2014 proposed
regulations, other group health plan
coverage, not limited to excepted
benefits, would be required to be offered
to the individuals eligible for the
wraparound coverage. Only individuals
eligible for other group health plan
coverage could be eligible for the
wraparound coverage.
Some commenters contended that
plan sponsors should not be required to
offer other group health plan coverage to
individuals who are not full-time
employees. This provision does not
require employers to offer group health
plan coverage to workers who are not
full-time employees but it does limit the
ability to offer the wrap-around
coverage only to workers otherwise
eligible for other group health plan
coverage. That is because this provision
is not intended to create an opportunity
or incentive for employers to
discontinue providing group health plan
coverage and to encourage its employees
to obtain coverage through the Exchange
subsidized through the premium tax
credit while still receiving meaningful
employer-provided health benefits.
Further, the same standard is applied in
order for a health FSA to be an excepted
benefit, and this provision in the final
regulation is intended to allow
employers to offer a limited benefit,
similar to a health FSA.
2. Limited Wraparound Coverage
Offered in Conjunction With Multi-State
Plan Coverage
For limited coverage that wraps
around Multi-State Plan coverage, four
requirements would be required to be
met under the 2014 proposed
regulations.
i. OPM Review and Approval
The first of the four standards would
require that the limited wraparound
29 See ERISA section 601, Code section 4980B and
PHS Act section 2201, which requires enrollment
of qualified beneficiaries (including spouses) after
a loss of coverage in connection with a qualifying
event.
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coverage be specifically designed and
approved by the Office of Personnel
Management (OPM) to provide benefits
in conjunction with coverage under a
Multi-State Plan authorized under
section 1334 of the Affordable Care Act.
Several comments sought clarification
as to whether OPM would be designing
limited wraparound coverage, or
whether that would more appropriately
be the role of the plan sponsor or health
insurance issuer. These final rules
include a modification to clarify that
OPM would not design limited
wraparound coverage. Instead, OPM’s
role would be to review and approve
such coverage. Moreover, as indicated
in the preamble to the 2014 proposed
regulations, with respect to the
maintenance of effort standard
(discussed below), OPM’s role is to
ensure that group health plans and
health insurance issuers offering MultiState Plan wraparound coverage have a
reasonable process in place for assuring
employers meet the criteria set forth in
these regulations for excepted benefits.
ii. Maintenance of Effort
The 2014 proposed regulations
provided that the employer would have
had to offer coverage in the plan year
that began in 2014 that is substantially
similar to coverage that the employer
would need to have offered to its fulltime employees in order to not be
subject to an assessable payment under
the employer shared responsibility
provisions of section 4980H(a) of the
Code, if such provisions had been
applicable. In addition, in the plan year
that began in 2014, the employer would
have had to have offered coverage to a
substantial portion of full-time
employees that provided ‘‘minimum
value’’ (as defined in section
36B(c)(2)(C)(ii) of the Code) and was
affordable (applying the safe harbor
rules for determining affordability set
forth in 26 CFR 54.4980H–5(e)(2)).
Finally, for the duration of the pilot
program (described later in this
preamble), the employer’s annual
aggregate contributions for both primary
and limited wraparound coverage must
be substantially the same as the
employer’s aggregate contributions for
coverage offered to full-time employees
in 2014. The Departments stated in the
preamble that they were considering
interpreting this ‘‘substantially the
same’’ condition as a percentage (for
example, 80 or 90 percent) and
potentially applying it on a per-worker
basis to allow for fluctuations in an
employer’s workforce.
Citing that some employers may have
made changes to their coverage in 2014
because Exchange coverage was first
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available in 2014, several commenters
requested that plan sponsors be
permitted to use either 2013 or 2014 as
the base year for this maintenance of
effort requirement set forth in these
second and third requirements for
limited coverage that wraps around
Multi-State Plan coverage. These final
regulations adopt this suggestion.
Other comments stated that an
employer’s annual aggregate
contribution toward primary and
limited wraparound coverage should
include any assessable payments under
Code section 4980H owed by the
employer. An applicable large employer
may become subject to an assessable
payment if it fails to offer minimum
essential coverage to its full-time
employees and one or more of those
employees obtains a premium tax credit,
or it fails to provide a full-time
employee minimum essential coverage
that provides minimum value and is
affordable for that employee and that
employee obtains a premium tax credit.
In neither case does the payment of an
assessable payment provide coverage to
the employee or otherwise assist that
employee in obtaining coverage. Nor
does the fact that the failure to provide
coverage may permit the employee to
obtain the premium tax credit mean that
the resulting fee is contributing toward
that employee’s health coverage. The
final regulations, therefore, do not make
this change.
Some comments sought clarification
regarding whether the employer’s
annual aggregate contributions for both
primary and limited wraparound
coverage must be substantially the same
as the employer’s aggregate
contributions for coverage offered to
full-time employees in 2013 or 2014.
Some requested OPM be given
discretion to determine whether the
maintenance of effort standard has been
met by each employer. Others requested
a threshold of 60 percent in determining
whether this standard has been met.
Many factors, including fluctuations in
workforce size, cost of coverage, and
employer contributions towards other
fringe benefits may affect employer
contributions from year to year. The
final regulations retain the standard set
forth in the 2014 proposed regulations
that the employer’s annual aggregate
contributions for both primary and
limited wraparound coverage must be
substantially the same as the employer’s
aggregate contributions for coverage
offered to full-time employees in 2014
(or 2013). For this purpose, the
Departments consider this
‘‘substantially the same’’ condition to be
met if contributions were at least 80
percent of contributions made in 2013
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or 2014, applied on an average, full-time
worker basis (to allow for fluctuations in
an employer’s workforce). OPM may
make a finding, based on all the facts
and circumstances, that other employer
contribution arrangements also meet
this standard. OPM may provide
additional guidance (such as examples
and safe harbors) in the future.
As with coverage that wraps around
eligible individual health insurance (or
that wraps around Basic Health Plan
coverage), commenters asked the
Departments to clarify that any Code
section 4980H-related requirements are
met in instances in which the employer
has no full-time employees. These final
regulations adopt a parallel clarification
for coverage that wraps around MultiState Plan coverage as for coverage that
wraps around eligible individual health
insurance (or that wraps around Basic
Health Plan coverage). That is, while
these final regulations do not permit
new employers to provide wraparound
coverage as an excepted benefit, these
final regulations clarify that, in the
event that the employer has no full-time
employees, but the plan covers retirees
(and their dependents), or covers parttime employees (and their dependents),
the requirements that, in the plan year
that began in 2013 or 2014, the
employer would have had to have
offered coverage to a substantial portion
of full-time employees that provided
minimum value and was affordable is
met, as is the requirement that, for the
duration of the pilot program, the
employer’s annual aggregate
contributions for both primary and
limited wraparound coverage must be
substantially the same as the employer’s
aggregate contributions for coverage
offered to full-time employees in 2013
or 2014.
For purposes of administering this
provision with respect to limited
wraparound coverage offered in
conjunction with Multi-State Plan
coverage, the Departments had proposed
that the term ‘‘full-time employee’’
means a ‘‘full-time employee’’ as
defined in 26 CFR 54.4980H–1(a)(21)
who is not in a limited non-assessment
period for certain employees (as defined
in 26 CFR 54.4980H–1(a)(26)).
Moreover, if a plan or issuer providing
limited wraparound coverage takes
reasonable steps to ensure that
employers disclose necessary
information regarding their coverage
offered and contribution levels for 2013
or 2014 to the plan or issuer, the plan
or issuer may rely on reasonable
representations by employers regarding
this information, unless the plan or
issuer has specific knowledge to the
contrary. Consistent with the reporting
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and evaluation criteria described later in
this preamble, the Departments stated
that OPM may verify that plans and
issuers have reasonable mechanisms in
place to ensure that contributing
employers meet these standards.
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E. Reporting
The fifth and final requirement for
limited wraparound coverage to qualify
as excepted benefits under the 2014
proposed regulations is a reporting
requirement, for group health plans and
group health insurance issuers, as well
as group health plan sponsors. The final
regulations adopt the approach outlined
in the 2014 proposed regulations.
A self-insured group health plan, or a
health insurance issuer offering or
proposing to offer Multi-State Plan
wraparound coverage, would report to
OPM, in a form and manner specified in
OPM guidance, information OPM
reasonably requires to determine
whether the plan or issuer qualifies to
offer such coverage or complies with the
applicable requirements of this section.
In addition, the plan sponsor of any
group health plan offering any type of
limited wraparound coverage would
report to HHS, in a form and manner
specified in guidance, information HHS
reasonably requires to determine
whether the exception for limited
wraparound coverage is allowing plan
sponsors to provide workers with
comparable benefits whether enrolled in
minimum essential coverage under a
group health plan offered by the plan
sponsor, or enrolled in eligible
individual health insurance, BHP
coverage, or Multi-State Plan coverage,
with additional limited wraparound
coverage offered by the plan sponsor,
without causing an erosion of coverage.
Commenters requested that there be
coordination of any reporting
requirements with existing reporting
requirements and some made specific
suggestions regarding data elements that
should be required for reporting. The
Departments agree with the principle of
non-duplication and will seek comment
on any new reporting requirements
through the process established by
Paperwork Reduction Act of 1995.
F. Pilot Program With Sunset Date
Under the 2014 proposed regulations,
limited wraparound coverage would be
permitted under a pilot program for a
limited time. Specifically, this type of
wraparound coverage could be offered
as excepted benefits if it is first offered
no later than December 31, 2017, and
ends on the later of: (1) The date that is
three years after the date wraparound
coverage is first offered; or (2) the date
on which the last collective bargaining
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agreement relating to the plan
terminates after the date wraparound
coverage is first offered (determined
without regard to any extension agreed
to after the date the wraparound
coverage is first offered). The 2014
proposed regulations invited comments
on this time frame for applicability,
including whether the Departments
should have the option to provide for an
earlier termination date.
Many commenters cited uncertainty
and the lack of lead time as negatively
impacting full utilization of the pilot
program and requested a longer
implementation period. The
Departments agree that the timing for
publication of these final rules makes
2015 plan year implementation
impossible or impracticable for most
plans. Accordingly, these final rules
specify that wraparound coverage could
be offered as excepted benefits if the
coverage is first offered no earlier than
January 1, 2016 and no later than
December 31, 2018. The end date is
unchanged from the proposal, that is the
later of: (1) The date that is three years
after the date wraparound coverage is
first offered; or (2) the date on which the
last collective bargaining agreement
relating to the plan terminates after the
date wraparound coverage is first
offered (determined without regard to
any extension agreed to after the date
the wraparound coverage is first
offered).
III. Economic Impact and Paperwork
Burden
A. Summary
As discussed in detail above, these
regulations amend the definition of
‘‘limited excepted benefits’’ in the group
market to provide plan sponsors with
two options to offer limited wraparound
coverage to certain individuals. Under
the first option, a plan sponsor could
offer limited benefits provided through
a group health plan that wraps around
eligible individual health insurance to
employees who are not full-time
employees (and their dependents), or
who are retirees (and their dependents).
For this purpose, full-time employees
are employees who are reasonably
expected to work at least an average of
30 hours per week. Under the second
option, the limited wraparound
coverage that satisfies the requirements
outlined in the regulations must be
approved by OPM and be offered in
conjunction with Multi-State Plan
coverage authorized under section 1334
of the Affordable Care Act. Under the
first option, the limited benefits would
also be permitted to wrap around the
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Basic Health Program authorized under
section 1331 of the Affordable Care Act.
B. Executive Orders 12866 and 13563—
Departments of Labor and HHS
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, and public health and
safety effects; distributive impacts; and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits,
reducing costs, harmonizing rules, and
promoting flexibility.
Section 3(f) of Executive Order 12866
defines a ‘‘significant regulatory action’’
as an action that is likely to result in a
regulation: (1) Having an annual effect
on the economy of $100 million or more
in any one year, or adversely and
materially affecting a sector of the
economy, productivity, competition,
jobs, the environment, public health or
safety, or state, local, or tribal
governments or communities (also
referred to as ‘‘economically
significant’’); (2) creating a serious
inconsistency or otherwise interfering
with an action taken or planned by
another agency; (3) materially altering
the budgetary impacts of entitlement
grants, user fees, or loan programs or the
rights and obligations of recipients
thereof; or (4) raising novel legal or
policy issues arising out of legal
mandates, the President’s priorities, or
the principles set forth in the Executive
Order. OMB has determined that the
action is significant within the meaning
of section 3(f)(4) of Executive Order
12866, and the Departments accordingly
provide the following assessment of its
potential benefits and costs.
The Departments recognize that many
plan sponsors provide comprehensive
health benefits to their workers. One
objective of the Affordable Care Act is
to allow individuals with
comprehensive health insurance plans
to maintain their current level of
benefits. Some employers are interested
in offering wraparound coverage to
employees who are enrolled in a MultiState Plan authorized under section
1334 of the Affordable Care Act or to
part-time employees. These regulations
provide two options to employers that
clarify the circumstances under which
plan sponsors can provide to their
employees such limited wraparound
coverage that qualifies as an excepted
benefit.
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The cost (and Federal budget
impact 30) of these final regulations is
difficult to quantify. The Departments
solicited comments in the regulatory
impact analysis section of the preamble
to the 2014 proposed regulations.
Comments were invited generally and
on specific questions, including: To
what degree, if any, might this
regulation increase employers’
propensity to provide health insurance?
To what extent, if any, this proposed
regulation could affect plan sponsors’
decision making? Are there any
particular sectors of the economy in
which employers will be more or less
inclined to pursue wraparound coverage
programs?
Comments were also invited on the
effects of the proposal and the
Departments requested detailed data
that would inform the following
questions: What will be the impact of
limiting the cost of the wraparound
coverage to $2,500 per employee (and
any covered dependents)? How many
employers offer coverage that provides
minimum value and is affordable for a
substantial portion (under the first
option) or 95 percent (under the second
option) of employees who are eligible
for coverage? To what extent would
premiums for comprehensive health
coverage change in the presence and
absence of this rule?
No specific data were received in
response to this solicitation, although
several commented that limited
conditions under which wraparound
coverage could be offered were overly
restrictive and made it of limited use.
Others commented that the uncertainty
of the life span of a time-limited pilot
program would minimize uptake of the
offering of limited wraparound
coverage.
These final regulations generally
implement the 2014 proposed
regulations with marginal change, as
discussed above. Both options are
designed so that wraparound coverage
could not replace employer-sponsored
primary group coverage. Under the
individual health insurance wraparound
option, the employer also must offer
other group health coverage that is not
limited to excepted benefits and
provides minimum value to the class of
participants offered the wraparound
coverage by reason of their employment.
30 As with other group health coverage, employer
contributions to the limited wraparound coverage
would be excluded from employee income for tax
purposes. Similar to the cost of the proposal, the
budget implications of adding limited wraparound
coverage as a form of excepted benefits depends on
the number of employers that elect either option
and the number of employees that in turn receive
it.
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Only individuals who are not full-time
employees and who are eligible for
other group health plan coverage may be
eligible for the wraparound coverage.
Also, the employer coverage must
substantially satisfy the employer
shared responsibility provisions of Code
section 4980H(a), and the coverage
would have to be affordable for at least
95 percent of full-time employees.
Under the Multi-State Plan
wraparound option, the employer
would have to offer coverage in the plan
year beginning in 2013 or 2014 that
would have substantially satisfied the
employer shared responsibility
provisions of Code section 4980H(a) if
the provision had been applicable,
provided minimum value, and been
affordable for a substantial portion of its
full-time employees.31 The employer’s
annual contributions for both its
primary and wraparound coverage must
be substantial.
The final regulations permit limited
wraparound coverage to be excepted
benefits if initially offered between
January 1, 2016 and December 31, 2018,
and continuing for the longer of three
years or the date on which the last
collective bargaining agreement relating
to the group health plan terminates. In
addition, the maximum benefit cannot
exceed the greater of the annual health
FSA contribution limit ($2,550 for
2015), indexed; or 15 percent of the
firm’s primary plan cost. In the 2014
proposed regulations the maximum
benefit was the annual health FSA
contribution limits ($2,550 for 2015),
indexed.
As with the 2014 proposed
regulations, the decision to offer the
limited wraparound coverage remains
optional. There is greater administrative
complexity associated with the
wraparound coverage than primary
coverage alone or primary coverage plus
a health FSA which offers similar
benefits. Given a choice, some plan
sponsors may choose to increase the
affordability of their primary coverage
rather than offer limited wraparound
coverage. Some plan sponsors may not
have that choice: The employers may
not be in a financial position to make
their primary health plans affordable to
more workers, let alone contribute to
wraparound coverage. Employers may
also continue to simply not provide
employees with affordable, minimum
value coverage, allowing their workers
to purchase coverage and potentially
qualify for premium tax credits through
31 The substantial level was included to help
minimize the implications for the primary plan’s
risk pool by preventing a large number of low-wage
workers from leaving the primary plan for Exchange
coverage.
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an Exchange with no additional
wraparound benefit, and these
employers would continue to make any
employer shared responsibility
payments as applicable, resulting in no
additional cost to the employer or the
Federal government.
The option to offer limited
wraparound coverage would not
encumber any currently existing means
by which employers can provide
comprehensive health insurance
coverage to their employees in
compliance with the Affordable Care
Act. Rather, it would clarify two
additional, alternative means of doing
so.
For the foregoing reasons, the
Departments have reached the
conclusion that the impact of the
benefits, costs, and transfers will be
limited. The Departments do not expect
many plans to offer limited wraparound
coverage, and will monitor usage and
impact during the pilot program through
reporting, as discussed above.
C. Paperwork Reduction Act—
Department of Labor and Department of
the Treasury
These final regulations are not subject
to the requirements of the Paperwork
Reduction Act of 1995 (PRA 95) (44
U.S.C. 3501 et seq.), because it does not
contain a collection of information as
defined in 44 U.S.C. 3502(3).
D. Paperwork Reduction Act—
Department of HHS
The final rule is not subject to the
requirements of the Paperwork
Reduction Act of 1995 (PRA 95) (44
U.S.C. 3501 et seq.), because it does not
contain a collection of information as
defined in 44 U.S.C. 3502(3). An
analysis under the PRA will be
conducted in the future for any future
guidance establishing a collection of
information related to the rule.
E. Regulatory Flexibility Act—
Departments of Labor and HHS
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (5 U.S.C. 551 et seq.) and
that are likely to have a significant
economic impact on a substantial
number of small entities. Unless an
agency certifies that a proposed rule is
not likely to have a significant economic
impact on a substantial number of small
entities, section 603 of RFA requires
that the agency present an initial
regulatory flexibility analysis at the time
of the publication of the notice of
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proposed rulemaking describing the
impact of the rule on small entities and
seeking public comment on such
impact. Small entities include small
businesses, organizations and
governmental jurisdictions.
For purposes of the RFA, the
Departments continue to consider a
‘‘small entity’’ to be an employee benefit
plan with fewer than 100 participants.
The basis for this definition is found in
section 104(a)(2) of the act, which
permits the Secretary of Labor to
prescribe simplified annual reports for
pension plans that cover fewer than 100
participants. Pursuant to the authority
of section 104(a)(3), the Department has
previously issued at 29 CFR 2520.104–
20, 2520.104–21, 2520.104–41,
2520.104–46 and 2520.104b–10 certain
simplified reporting provisions and
limited exemptions from reporting and
disclosure requirements for small plans,
including unfunded or insured welfare
plans covering fewer than 100
participants and satisfying certain other
requirements.
Further, while some large employers
may have small plans, in general small
employers maintain most small plans.
Thus, the Departments believe that
assessing the impact of these final
regulations on small plans is an
appropriate substitute for evaluating the
effect on small entities. The definition
of small entity considered appropriate
for this purpose differs, however, from
a definition of small business that is
based on size standards promulgated by
the Small Business Administration (13
CFR 121.201) pursuant to the Small
Business Act (15 U.S.C. 631 et seq.). The
Departments requested comment on the
appropriateness of the size standard at
the proposed rule phase and received no
responses.
Because these final regulations
impose no additional costs on
employers or plans, the Departments
believe that they do not have a
significant economic impact on a
substantial number of small entities.
Accordingly, pursuant to section 605(b)
of the RFA, the Departments hereby
certify that these final regulations will
not have a significant economic impact
on a substantial number of small
entities.
F. Special Analyses—Department of the
Treasury
For purposes of the Department of the
Treasury it has been determined that
this final rule is not a significant
regulatory action as defined in
Executive Order 12866, as
supplemented by Executive Order
13563. Therefore, a regulatory
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assessment is not required. It has also
been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
final regulations, and, because these
final regulations do not impose a
collection of information on small
entities, an analysis under the RFA is
not required. Pursuant to section 7805(f)
of the Code, the notice of proposed
rulemaking preceding these final
regulations was submitted to the Small
Business Administration for comment
on its impact on small business.
G. Unfunded Mandates Reform Act
For purposes of the Unfunded
Mandates Reform Act of 1995 (2 U.S.C.
1501 et seq.), as well as Executive Order
12875, these final regulations do not
include any federal mandate that may
result in expenditures by State, local, or
tribal governments, or the private sector,
which may impose an annual burden of
$100 million adjusted for inflation since
1995.
H. Federalism
Executive Order 13132 outlines
fundamental principles of federalism. It
requires adherence to specific criteria by
federal agencies in formulating and
implementing policies that have
‘‘substantial direct effects’’ on the states,
the relationship between the national
government and states, or on the
distribution of power and
responsibilities among the various
levels of government. Federal agencies
promulgating regulations that have
these federalism implications must
consult with state and local officials,
and describe the extent of their
consultation and the nature of the
concerns of state and local officials in
the preamble to the final regulation.
In the Departments’ view, the final
regulations, by clarifying policy
regarding certain expected benefits
options that can be designed by
employers to support their employees,
will provide more certainty to
employers and others in the regulated
community as well as states and
political subdivisions regarding the
treatment of such arrangements under
ERISA. Accordingly, the Departments
will continue to affirmatively engage in
outreach with officials of state and
political subdivisions regarding
excepted benefits and seek their input
on any federalism implications that they
believe may be presented.
I. Congressional Review Act
These final regulations are subject to
the Congressional Review Act
provisions of the Small Business
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14003
Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.), which
specifies that, before a rule can take
effect, the Federal agency promulgating
the rule shall submit to each House of
the Congress and to the Comptroller
General a report containing a copy of
the rule along with other specified
information. These final regulations are
being transmitted to Congress and the
Comptroller General for review.
IV. Statutory Authority
The Department of the Treasury
regulations are adopted pursuant to the
authority contained in sections 7805
and 9833 of the Code.
The Department of Labor regulations
are adopted pursuant to the authority
contained in 29 U.S.C. 1027, 1059, 1135,
1161–1168, 1169, 1181–1183, 1181 note,
1185, 1185a, 1185b, 1191, 1191a, 1191b,
and 1191c; sec. 101(g), Public Law 104–
191, 110 Stat. 1936; sec. 401(b), Public
Law 105–200, 112 Stat. 645 (42 U.S.C.
651 note); sec. 512(d), Public Law 110–
343, 122 Stat. 3765; Public Law 110–
460, 122 Stat. 5123; Secretary of Labor’s
Order 1–2011, 77 FR 1088 (January 9,
2012).
The Department of Health and Human
Services regulations are adopted
pursuant to the authority contained in
sections 2701 through 2763, 2791, and
2792 of the PHS Act (42 U.S.C. 300gg
through 300gg–63, 300gg–91, and
300gg–92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health
insurance, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure,
Employee benefit plans, Group health
plans, Health care, Health insurance,
Medical child support, Reporting and
recordkeeping requirements.
45 CFR Part 146
Health care, Health insurance,
Reporting and recordkeeping
requirements, and State regulation of
health insurance.
John M. Dalrymple,
Deputy Commissioner for Services and
Enforcement, Internal Revenue Service.
Approved: March 11, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
Signed this 11th day of March, 2015.
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Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
Dated: March 11, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Dated: March 11, 2015.
Sylvia Burwell,
Secretary, Department of Health and Human
Services
Department of the Treasury
Internal Revenue Service
26 CFR Chapter I
Accordingly, 26 CFR part 54 is
amended as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation
for part 54 continues to read in part as
follows:
■
Authority: Authority: 26 U.S.C. 7805.
* * *
Section 54.9831–1 also issued under 26
U.S.C. 9833; * * *
Par 2. Section 54.9831–1 is amended
by adding paragraph (c)(3)(vii) to read as
follows:
■
§ 54.9831–1 Special rules relating to group
health plans.
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*
*
*
*
*
(c) * * *
(3) * * *
(vii) Limited wraparound coverage.
Limited benefits provided through a
group health plan that wrap around
eligible individual health insurance (or
Basic Health Plan coverage described in
section 1331 of the Patient Protection
and Affordable Care Act); or that wrap
around coverage under a Multi-State
Plan described in section 1334 of the
Patient Protection and Affordable Care
Act, collectively referred to as ‘‘limited
wraparound coverage,’’ are excepted
benefits if all of the following
conditions are satisfied. For this
purpose, eligible individual health
insurance is individual health insurance
coverage that is not a grandfathered
health plan (as described in section
1251 of the Patient Protection and
Affordable Care Act and 29 CFR
2590.715–1251), not a transitional
individual health insurance plan (as
described in the March 5, 2014
Insurance Standards Bulletin Series—
Extension of Transitional Policy through
October 1, 2016), and does not consist
solely of excepted benefits (as defined
in paragraph (c) of this section).
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(A) Covers additional benefits. The
limited wraparound coverage provides
meaningful benefits beyond coverage of
cost sharing under either the eligible
individual health insurance, Basic
Health Program coverage, or Multi-State
Plan coverage. The limited wraparound
coverage must not provide benefits only
under a coordination-of-benefits
provision and must not consist of an
account-based reimbursement
arrangement.
(B) Limited in amount. The annual
cost of coverage per employee (and any
covered dependents, as defined in
§ 54.9801–2) under the limited
wraparound coverage does not exceed
the greater of the amount determined
under either paragraph (c)(3)(vii)(B)(1)
or (2) of this section. Making a
determination regarding the annual cost
of coverage per employee must occur on
an aggregate basis relying on sound
actuarial principles.
(1) The maximum permitted annual
salary reduction contribution toward
health flexible spending arrangements,
indexed in the manner prescribed under
section 125(i)(2). For this purpose, the
cost of coverage under the limited
wraparound includes both employer
and employee contributions towards
coverage and is determined in the same
manner as the applicable premium is
calculated under a COBRA continuation
provision.
(2) Fifteen percent of the cost of
coverage under the primary plan. For
this purpose, the cost of coverage under
the primary plan and under the limited
wraparound coverage includes both
employer and employee contributions
towards the coverage and each is
determined in the same manner as the
applicable premium is calculated under
a COBRA continuation provision.
(C) Nondiscrimination. All of the
conditions of this paragraph
(c)(3)(vii)(C) are satisfied.
(1) No preexisting condition
exclusion. The limited wraparound
coverage does not impose any
preexisting condition exclusion,
consistent with the requirements of
section 2704 of the PHS Act
(incorporated by reference into section
9815) and 29 CFR 2590.715–2704.
(2) No discrimination based on health
status. The limited wraparound
coverage does not discriminate against
individuals in eligibility, benefits, or
premiums based on any health factor of
an individual (or any dependent of the
individual, as defined in § 54.9801–2),
consistent with the requirements of
section 9802 and section 2705 of the
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PHS Act (incorporated by reference into
section 9815).
(3) No discrimination in favor of
highly compensated individuals.
Neither the limited wraparound
coverage, nor any other group health
plan coverage offered by the plan
sponsor, fails to comply with section
2716 of the PHS Act (incorporated by
reference into section 9815) or fails to be
excludible from income for any
individual due to the application of
section 105(h) (as applicable).
(D) Plan eligibility requirements.
Individuals eligible for the wraparound
coverage are not enrolled in excepted
benefit coverage under paragraph
(c)(3)(v) of this section (relating to
health FSAs). In addition, the
conditions set forth in either paragraph
(c)(3)(vii)(D)(1) or (2) of this section are
met.
(1) Limited wraparound coverage that
wraps around eligible individual
insurance for persons who are not fulltime employees. Coverage that wraps
around eligible individual health
insurance (or that wraps around Basic
Health Plan coverage) must satisfy all of
the conditions of this paragraph
(c)(3)(vii)(D)(1).
(i) For each year for which limited
wraparound coverage is offered, the
employer that is the sponsor of the plan
offering limited wraparound coverage,
or the employer participating in a plan
offering limited wraparound coverage,
offers to its full-time employees
coverage that is substantially similar to
coverage that the employer would need
to offer to its full-time employees in
order not to be subject to a potential
assessable payment under the employer
shared responsibility provisions of
section 4980H(a), if such provisions
were applicable; provides minimum
value (as defined in section
36B(c)(2)(C)(ii)); and is reasonably
expected to be affordable (applying the
safe harbor rules for determining
affordability set forth in § 54.4980H–
5(e)(2)). If a plan or issuer providing
limited wraparound coverage takes
reasonable steps to ensure that
employers disclose to the plan or issuer
necessary information regarding their
coverage offered and affordability
information, the plan or issuer is
permitted to rely on reasonable
representations by employers regarding
this information, unless the plan or
issuer has specific knowledge to the
contrary. In the event that the employer
that is the sponsor of the plan offering
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wraparound coverage, or the employer
participating in a plan offering
wraparound coverage, has no full-time
employees for any plan year limited
wraparound coverage is offered, the
requirement of this paragraph
(c)(3)(vii)(D)(1)(i) is considered satisfied.
(ii) Eligibility for the limited
wraparound coverage is limited to
employees who are reasonably
determined at the time of enrollment to
not be full-time employees (and their
dependents, as defined in § 54.9801–2),
or who are retirees (and their
dependents, as defined in § 54.9801–2).
For this purpose, full-time employees
are employees who are reasonably
expected to work at least an average of
30 hours per week.
(iii) Other group health plan coverage,
not limited to excepted benefits, is
offered to the individuals eligible for the
limited wraparound coverage. Only
individuals eligible for the other group
health plan coverage are eligible for the
limited wraparound coverage.
(2) Limited coverage that wraps
around Multi-State Plan coverage.
Coverage that wraps around Multi-State
Plan coverage must satisfy all of the
conditions of this paragraph
(c)(3)(vii)(D)(2). For this purpose, the
term ‘‘full-time employee’’ means a
‘‘full-time employee’’ as defined in
§ 54.4980H–1(a)(21) who is not in a
limited non-assessment period for
certain employees (as defined in
§ 54.4980H–1(a)(26)). Moreover, if a
plan or issuer providing limited
wraparound coverage takes reasonable
steps to ensure that employers disclose
to the plan or issuer necessary
information regarding their coverage
offered and contribution levels for 2013
or 2014 (as applicable), and for any year
in which limited wraparound coverage
is offered, the plan or issuer is permitted
to rely on reasonable representations by
employers regarding this information,
unless the plan or issuer has specific
knowledge to the contrary. Consistent
with the reporting and evaluation
criteria of paragraph (c)(3)(vii)(E) of this
section, the Office of Personnel
Management may verify that plans and
issuers have reasonable mechanisms in
place to ensure that contributing
employers meet these standards.
(i) The limited wraparound coverage
is reviewed and approved by the Office
of Personnel Management, consistent
with the reporting and evaluation
criteria of paragraph (c)(3)(vii)(E) of this
section, to provide benefits in
conjunction with coverage under a
Multi-State Plan authorized under
section 1334 of the Patient Protection
and Affordable Care Act. The Office of
Personnel Management may revoke
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approval if it determines that continued
approval is inconsistent with the
reporting and evaluation criteria of
paragraph (c)(3)(vii)(E) of this section.
(ii) The employer offered coverage in
the plan year that began in either 2013
or 2014 that is substantially similar to
coverage that the employer would need
to have offered to its full-time
employees in order to not be subject to
an assessable payment under the
employer shared responsibility
provisions of section 4980H(a), if such
provisions had been applicable. In the
event that a plan that offered coverage
in 2013 or 2014 has no full-time
employees for any plan year limited
wraparound coverage is offered, the
requirement of this paragraph
(c)(3)(vii)(D)(2)(ii) is considered
satisfied.
(iii) In the plan year that began in
either 2013 or 2014, the employer
offered coverage to a substantial portion
of full-time employees that provided
minimum value (as defined in section
36B(c)(2)(C)(ii)) and was affordable
(applying the safe harbor rules for
determining affordability set forth in
§ 54.4980H–5(e)(2)). In the event that
the plan that offered coverage in 2013 or
2014 has no full-time employees for any
plan year limited wraparound coverage
is offered, the requirement of this
paragraph (c)(3)(vii)(D)(2)(iii) is
considered satisfied.
(iv) For the duration of the pilot
program, as described in paragraph
(c)(3)(vii)(F) of this section, the
employer’s annual aggregate
contributions for both primary and
limited wraparound coverage are
substantially the same as the employer’s
total contributions for coverage offered
to full-time employees in 2013 or 2014.
(E) Reporting—(1) Reporting by group
health plans and group health
insurance issuers. A self-insured group
health plan, or a health insurance
issuer, offering or proposing to offer
limited wraparound coverage in
connection with Multi-State Plan
coverage pursuant to paragraph
(c)(3)(vii)(D)(2) of this section reports to
the Office of Personnel Management
(OPM), in a form and manner specified
in guidance, information OPM
reasonably requires to determine
whether the plan or issuer qualifies to
offer such coverage or complies with the
applicable requirements of this section.
(2) Reporting by group health plan
sponsors. The plan sponsor of a group
health plan offering limited wraparound
coverage under paragraph (c)(3)(vii) of
this section, must report to the
Department of Health and Human
Services (HHS), in a form and manner
PO 00000
Frm 00011
Fmt 4700
Sfmt 4700
14005
specified in guidance, information HHS
reasonably requires.
(F) Pilot program with sunset. The
provisions of paragraph (c)(3)(vii) of this
section apply to limited wraparound
coverage that is first offered no earlier
than January 1, 2016 and no later than
December 31, 2018 and that ends no
later than on the later of:
(1) The date that is three years after
the date limited wraparound coverage is
first offered; or
(2) The date on which the last
collective bargaining agreement relating
to the plan terminates after the date
limited wraparound coverage is first
offered (determined without regard to
any extension agreed to after the date
limited wraparound coverage is first
offered).
*
*
*
*
*
Department of Labor
Employee Benefits Security
Administration
29 CFR Chapter XXV
For the reasons stated in the
preamble, the Department of Labor
amends 29 CFR part 2590 as follows:
PART 2590—RULES AND
REGULATIONS FOR GROUP HEALTH
PLANS
3. The authority citation for Part 2590
continues to read as follows:
■
Authority: 29 U.S.C. 1027, 1059, 1135,
1161–1168, 1169, 1181–1183, 1181 note,
1185, 1185a, 1185b, 1185c, 1185d, 1191,
1191a, 1191b, and 1191c; sec. 101(g), Pub. L.
104–191, 110 Stat. 1936; sec. 401(b), Pub. L.
105–200, 112 Stat. 645 (42 U.S.C. 651 note);
sec. 512(d), Pub. L. 110–343, 122 Stat. 3765;
Pub. L. 110–460, 122 Stat. 5123; Secretary of
Labor’s Order 1–2011, 77 FR 1088 (January
9, 2012).
4. Section 2590.732 is amended by
adding paragraph (c)(3)(vii) to read as
follows:
■
§ 2590.732 Special rules relating to group
health plans.
*
*
*
*
*
(c) * * *
(3) * * *
(vii) Limited wraparound coverage.
Limited benefits provided through a
group health plan that wrap around
eligible individual health insurance (or
Basic Health Plan coverage described in
section 1331 of the Patient Protection
and Affordable Care Act); or that wrap
around coverage under a Multi-State
Plan described in section 1334 of the
Patient Protection and Affordable Care
Act, collectively referred to as ‘‘limited
wraparound coverage,’’ are excepted
benefits if all of the following
conditions are satisfied. For this
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purpose, eligible individual health
insurance is individual health insurance
coverage that is not a grandfathered
health plan (as described in section
1251 of the Patient Protection and
Affordable Care Act and § 2590.715–
1251), not a transitional individual
health insurance plan (as described in
the March 5, 2014 Insurance Standards
Bulletin Series—Extension of
Transitional Policy through October 1,
2016), and does not consist solely of
excepted benefits (as defined in
paragraph (c) of this section).
(A) Covers additional benefits. The
limited wraparound coverage provides
meaningful benefits beyond coverage of
cost sharing under either the eligible
individual health insurance, Basic
Health Program coverage, or Multi-State
Plan coverage. The limited wraparound
coverage must not provide benefits only
under a coordination-of-benefits
provision and must not consist of an
account-based reimbursement
arrangement.
(B) Limited in amount. The annual
cost of coverage per employee (and any
covered dependents, as defined in
§ 2590.701–2) under the limited
wraparound coverage does not exceed
the greater of the amount determined
under either paragraph (c)(3)(vii)(B)(1)
or (2) of this section. Making a
determination regarding the annual cost
of coverage per employee must occur on
an aggregate basis relying on sound
actuarial principles.
(1) The maximum permitted annual
salary reduction contribution toward
health flexible spending arrangements,
indexed in the manner prescribed under
section 125(i)(2) of the Code. For this
purpose, the cost of coverage under the
limited wraparound includes both
employer and employee contributions
towards coverage and is determined in
the same manner as the applicable
premium is calculated under a COBRA
continuation provision.
(2) Fifteen percent of the cost of
coverage under the primary plan. For
this purpose, the cost of coverage under
the primary plan and under the limited
wraparound coverage includes both
employer and employee contributions
towards the coverage and each is
determined in the same manner as the
applicable premium is calculated under
a COBRA continuation provision.
(C) Nondiscrimination. All of the
conditions of this paragraph
(c)(3)(vii)(C) are satisfied.
(1) No preexisting condition
exclusion. The limited wraparound
coverage does not impose any
preexisting condition exclusion,
consistent with the requirements of
section 2704 of the PHS Act
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Jkt 235001
(incorporated by reference into section
715 of ERISA) and § 2590.715–2704.
(2) No discrimination based on health
status. The limited wraparound
coverage does not discriminate against
individuals in eligibility, benefits, or
premiums based on any health factor of
an individual (or any dependent of the
individual, as defined in § 2590.701–2),
consistent with the requirements of
section 702 of ERISA and section 2705
of the PHS Act (incorporated by
reference into section 715 of ERISA).
(3) No discrimination in favor of
highly compensated individuals.
Neither the limited wraparound
coverage, nor any other group health
plan coverage offered by the plan
sponsor, fails to comply with section
2716 of the PHS Act (incorporated by
reference into section 715 of ERISA) or
fails to be excludible from income for
any individual due to the application of
section 105(h) of the Code (as
applicable).
(D) Plan eligibility requirements.
Individuals eligible for the wraparound
coverage are not enrolled in excepted
benefit coverage under paragraph
(c)(3)(v) of this section (relating to
health FSAs). In addition, the
conditions set forth in either paragraph
(c)(3)(vii)(D)(1) or (2) of this section are
met.
(1) Limited wraparound coverage that
wraps around eligible individual
insurance for persons who are not fulltime employees. Coverage that wraps
around eligible individual health
insurance (or that wraps around Basic
Health Plan coverage) must satisfy all of
the conditions of this paragraph
(c)(3)(vii)(D)(1).
(i) For each year for which limited
wraparound coverage is offered, the
employer that is the sponsor of the plan
offering limited wraparound coverage,
or the employer participating in a plan
offering limited wraparound coverage,
offers to its full-time employees
coverage that is substantially similar to
coverage that the employer would need
to offer to its full-time employees in
order not to be subject to a potential
assessable payment under the employer
shared responsibility provisions of
section 4980H(a) of the Code, if such
provisions were applicable; provides
minimum value (as defined in section
36B(c)(2)(C)(ii) of the Code); and is
reasonably expected to be affordable
(applying the safe harbor rules for
determining affordability set forth in 26
CFR 54.4980H–5(e)(2)). If a plan or
issuer providing limited wraparound
coverage takes reasonable steps to
ensure that employers disclose to the
plan or issuer necessary information
regarding their coverage offered and
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Fmt 4700
Sfmt 4700
affordability information, the plan or
issuer is permitted to rely on reasonable
representations by employers regarding
this information, unless the plan or
issuer has specific knowledge to the
contrary. In the event that the employer
that is the sponsor of the plan offering
wraparound coverage, or the employer
participating in a plan offering
wraparound coverage, has no full-time
employees for any plan year limited
wraparound coverage is offered, the
requirement of this paragraph
(c)(3)(vii)(D)(1)(i) is considered satisfied.
(ii) Eligibility for the limited
wraparound coverage is limited to
employees who are reasonably
determined at the time of enrollment to
not be full-time employees (and their
dependents, as defined in § 2590.701–
2), or who are retirees (and their
dependents, as defined in § 2590.701–
2). For this purpose, full-time
employees are employees who are
reasonably expected to work at least an
average of 30 hours per week.
(iii) Other group health plan coverage,
not limited to excepted benefits, is
offered to the individuals eligible for the
limited wraparound coverage. Only
individuals eligible for the other group
health plan coverage are eligible for the
limited wraparound coverage.
(2) Limited coverage that wraps
around Multi-State Plan coverage.
Coverage that wraps around Multi-State
Plan coverage must satisfy all of the
conditions of this paragraph
(c)(3)(vii)(D)(2). For this purpose, the
term ‘‘full-time employee’’ means a
‘‘full-time employee’’ as defined in 26
CFR 54.4980H–1(a)(21) who is not in a
limited non-assessment period for
certain employees (as defined in 26 CFR
54.4980H–1(a)(26)). Moreover, if a plan
or issuer providing limited wraparound
coverage takes reasonable steps to
ensure that employers disclose to the
plan or issuer necessary information
regarding their coverage offered and
contribution levels for 2013 or 2014 (as
applicable), and for any year in which
limited wraparound coverage is offered,
the plan or issuer is permitted to rely on
reasonable representations by employers
regarding this information, unless the
plan or issuer has specific knowledge to
the contrary. Consistent with the
reporting and evaluation criteria of
paragraph (c)(3)(vii)(E) of this section,
the Office of Personnel Management
may verify that plans and issuers have
reasonable mechanisms in place to
ensure that contributing employers meet
these standards.
(i) The limited wraparound coverage
is reviewed and approved by the Office
of Personnel Management, consistent
with the reporting and evaluation
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criteria of paragraph (c)(3)(vii)(E) of this
section, to provide benefits in
conjunction with coverage under a
Multi-State Plan authorized under
section 1334 of the Patient Protection
and Affordable Care Act. The Office of
Personnel Management may revoke
approval if it determines that continued
approval is inconsistent with the
reporting and evaluation criteria of
paragraph (c)(3)(vii)(E) of this section.
(ii) The employer offered coverage in
the plan year that began in either 2013
or 2014 that is substantially similar to
coverage that the employer would need
to have offered to its full-time
employees in order to not be subject to
an assessable payment under the
employer shared responsibility
provisions of section 4980H(a) of the
Code, if such provisions had been
applicable. In the event that a plan that
offered coverage in 2013 or 2014 has no
full-time employees for any plan year
limited wraparound coverage is offered,
the requirement of this paragraph
(c)(3)(vii)(D)(2)(ii) is considered
satisfied.
(iii) In the plan year that began in
either 2013 or 2014, the employer
offered coverage to a substantial portion
of full-time employees that provided
minimum value (as defined in section
36B(c)(2)(C)(ii) of the Code) and was
affordable (applying the safe harbor
rules for determining affordability set
forth in 26 CFR 54.4980H–5(e)(2)). In
the event that the plan that offered
coverage in 2013 or 2014 has no fulltime employees for any plan year
limited wraparound coverage is offered,
the requirement of this paragraph
(c)(3)(vii)(D)(2)(iii) is considered
satisfied.
(iv) For the duration of the pilot
program, as described in paragraph
(c)(3)(vii)(F) of this section, the
employer’s annual aggregate
contributions for both primary and
limited wraparound coverage are
substantially the same as the employer’s
total contributions for coverage offered
to full-time employees in 2013 or 2014.
(E) Reporting—(1) Reporting by group
health plans and group health
insurance issuers. A self-insured group
health plan, or a health insurance
issuer, offering or proposing to offer
limited wraparound coverage in
connection with Multi-State Plan
coverage pursuant to paragraph
(c)(3)(vii)(D)(2) of this section reports to
the Office of Personnel Management
(OPM), in a form and manner specified
in guidance, information OPM
reasonably requires to determine
whether the plan or issuer qualifies to
offer such coverage or complies with the
applicable requirements of this section.
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14:58 Mar 17, 2015
Jkt 235001
(2) Reporting by group health plan
sponsors. The plan sponsor of a group
health plan offering limited wraparound
coverage under paragraph (c)(3)(vii) of
this section, must report to the
Department of Health and Human
Services (HHS), in a form and manner
specified in guidance, information HHS
reasonably requires.
(F) Pilot program with sunset—The
provisions of paragraph (c)(3)(vii) of this
section apply to limited wraparound
coverage that is first offered no earlier
than January 1, 2016 and no later than
December 31, 2018 and that ends no
later than on the later of:
(1) The date that is three years after
the date limited wraparound coverage is
first offered; or
(2) The date on which the last
collective bargaining agreement relating
to the plan terminates after the date
limited wraparound coverage is first
offered (determined without regard to
any extension agreed to after the date
limited wraparound coverage is first
offered).
*
*
*
*
*
Department of Health and Human
Services
45 CFR Subtitle A
For the reasons stated in the
preamble, the Department of Health and
Human Services amends 45 CFR part
146 as set forth below:
PART 146—REQUIREMENTS FOR THE
GROUP HEALTH INSURANCE
MARKET
5. The authority citation for part 146
continues to read as follows:
■
Authority: Secs. 2702 through 2705, 2711
through 2723, 2791, and 2792 of the PHS Act
(42 U.S.C. 300gg–1 through 300gg–5, 300gg–
11 through 300gg–23, 300gg–91, and 300gg–
92).
6. Section 146.145 is amended by
adding paragraph (b)(3)(vii) to read as
follows:
■
§ 146.145 Special rules relating to group
health plans.
*
*
*
*
*
(b) * * *
(3) * * *
(vii) Limited wraparound coverage.
Limited benefits provided through a
group health plan that wrap around
eligible individual health insurance (or
Basic Health Plan coverage described in
section 1331 of the Patient Protection
and Affordable Care Act); or that wrap
around coverage under a Multi-State
Plan described in section 1334 of the
Patient Protection and Affordable Care
Act, collectively referred to as ‘‘limited
wraparound coverage,’’ are excepted
PO 00000
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14007
benefits if all of the following
conditions are satisfied. For this
purpose, eligible individual health
insurance is individual health insurance
coverage that is not a grandfathered
health plan (as described in section
1251 of the Patient Protection and
Affordable Care Act and § 147.140 of
this subchapter), not a transitional
individual health insurance plan (as
described in the March 5, 2014
Insurance Standards Bulletin Series—
Extension of Transitional Policy through
October 1, 2016), and does not consist
solely of excepted benefits (as defined
in paragraph (b) of this section).
(A) Covers additional benefits. The
limited wraparound coverage provides
meaningful benefits beyond coverage of
cost sharing under either the eligible
individual health insurance, Basic
Health Program coverage, or Multi-State
Plan coverage. The limited wraparound
coverage must not provide benefits only
under a coordination-of-benefits
provision and must not consist of an
account-based reimbursement
arrangement.
(B) Limited in amount. The annual
cost of coverage per employee (and any
covered dependents, as defined in
§ 144.103 of this subchapter) under the
limited wraparound coverage does not
exceed the greater of the amount
determined under either paragraph
(b)(3)(vii)(B)(1) or (2) of this section.
Making a determination regarding the
annual cost of coverage per employee
must occur on an aggregate basis relying
on sound actuarial principles.
(1) The maximum permitted annual
salary reduction contribution toward
health flexible spending arrangements,
indexed in the manner prescribed under
section 125(i)(2) of the Internal Revenue
Code. For this purpose, the cost of
coverage under the limited wraparound
includes both employer and employee
contributions towards coverage and is
determined in the same manner as the
applicable premium is calculated under
a COBRA continuation provision.
(2) Fifteen percent of the cost of
coverage under the primary plan. For
this purpose, the cost of coverage under
the primary plan and under the limited
wraparound coverage includes both
employer and employee contributions
towards the coverage and each is
determined in the same manner as the
applicable premium is calculated under
a COBRA continuation provision.
(C) Nondiscrimination. All of the
conditions of this paragraph
(b)(3)(vii)(C) are satisfied.
(1) No preexisting condition
exclusion. The limited wraparound
coverage does not impose any
preexisting condition exclusion,
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consistent with the requirements of
section 2704 of the PHS Act and
§ 147.108 of this subchapter.
(2) No discrimination based on health
status. The limited wraparound
coverage does not discriminate against
individuals in eligibility, benefits, or
premiums based on any health factor of
an individual (or any dependent of the
individual, as defined in § 144.103 of
this subchapter), consistent with the
requirements of section 2705 of the PHS
Act.
(3) No discrimination in favor of
highly compensated individuals.
Neither the limited wraparound
coverage, nor any other group health
plan coverage offered by the plan
sponsor, fails to comply with section
2716 of the PHS Act or fails to be
excludible from income for any
individual due to the application of
section 105(h) of the Internal Revenue
Code (as applicable).
(D) Plan eligibility requirements.
Individuals eligible for the wraparound
coverage are not enrolled in excepted
benefit coverage under paragraph
(b)(3)(v) of this section (relating to
health FSAs). In addition, the
conditions set forth in either paragraph
(b)(3)(vii)(D)(1) or (2) of this section are
met.
(1) Limited wraparound coverage that
wraps around eligible individual
insurance for persons who are not fulltime employees. Coverage that wraps
around eligible individual health
insurance (or that wraps around Basic
Health Plan coverage) must satisfy all of
the conditions of this paragraph
(b)(3)(vii)(D)(1).
(i) For each year for which limited
wraparound coverage is offered, the
employer that is the sponsor of the plan
offering limited wraparound coverage,
or the employer participating in a plan
offering limited wraparound coverage,
offers to its full-time employees
coverage that is substantially similar to
coverage that the employer would need
to offer to its full-time employees in
order not to be subject to a potential
assessable payment under the employer
shared responsibility provisions of
section 4980H(a) of the Internal
Revenue Code, if such provisions were
applicable; provides minimum value (as
defined in section 36B(c)(2)(C)(ii) of the
Internal Revenue Code); and is
reasonably expected to be affordable
(applying the safe harbor rules for
determining affordability set forth in 26
CFR 54.4980H–5(e)(2)). If a plan or
issuer providing limited wraparound
coverage takes reasonable steps to
ensure that employers disclose to the
plan or issuer necessary information
regarding their coverage offered and
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14:58 Mar 17, 2015
Jkt 235001
affordability information, the plan or
issuer is permitted to rely on reasonable
representations by employers regarding
this information, unless the plan or
issuer has specific knowledge to the
contrary. In the event that the employer
that is the sponsor of the plan offering
wraparound coverage, or the employer
participating in a plan offering
wraparound coverage, has no full-time
employees for any plan year limited
wraparound coverage is offered, the
requirement of this paragraph
(b)(3)(vii)(D)(1)(i) is considered
satisfied.
(ii) Eligibility for the limited
wraparound coverage is limited to
employees who are reasonably
determined at the time of enrollment to
not be full-time employees (and their
dependents, as defined in § 144.103 of
this subchapter), or who are retirees
(and their dependents, as defined in
§ 144.103 of this subchapter). For this
purpose, full-time employees are
employees who are reasonably expected
to work at least an average of 30 hours
per week.
(iii) Other group health plan coverage,
not limited to excepted benefits, is
offered to the individuals eligible for the
limited wraparound coverage. Only
individuals eligible for the other group
health plan coverage are eligible for the
limited wraparound coverage.
(2) Limited coverage that wraps
around Multi-State Plan coverage.
Coverage that wraps around Multi-State
Plan coverage must satisfy all of the
conditions of this paragraph
(b)(3)(vii)(D)(2). For this purpose, the
term ‘‘full-time employee’’ means a
‘‘full-time employee’’ as defined in 26
CFR 54.4980H–1(a)(21) who is not in a
limited non-assessment period for
certain employees (as defined in 26 CFR
54.4980H–1(a)(26)). Moreover, if a plan
or issuer providing limited wraparound
coverage takes reasonable steps to
ensure that employers disclose to the
plan or issuer necessary information
regarding their coverage offered and
contribution levels for 2013 or 2014 (as
applicable), and for any year in which
limited wraparound coverage is offered,
the plan or issuer is permitted to rely on
reasonable representations by employers
regarding this information, unless the
plan or issuer has specific knowledge to
the contrary. Consistent with the
reporting and evaluation criteria of
paragraph (b)(3)(vii)(E) of this section,
the Office of Personnel Management
may verify that plans and issuers have
reasonable mechanisms in place to
ensure that contributing employers meet
these standards.
(i) The limited wraparound coverage
is reviewed and approved by the Office
PO 00000
Frm 00014
Fmt 4700
Sfmt 4700
of Personnel Management, consistent
with the reporting and evaluation
criteria of paragraph (b)(3)(vii)(E) of this
section, to provide benefits in
conjunction with coverage under a
Multi-State Plan authorized under
section 1334 of the Patient Protection
and Affordable Care Act. The Office of
Personnel Management may revoke
approval if it determines that continued
approval is inconsistent with the
reporting and evaluation criteria of
paragraph (b)(3)(vii)(E) of this section.
(ii) The employer offered coverage in
the plan year that began in either 2013
or 2014 that is substantially similar to
coverage that the employer would need
to have offered to its full-time
employees in order to not be subject to
an assessable payment under the
employer shared responsibility
provisions of section 4980H(a) of the
Internal Revenue Code, if such
provisions had been applicable. In the
event that a plan that offered coverage
in 2013 or 2014 has no full-time
employees for any plan year limited
wraparound coverage is offered, the
requirement of this paragraph
(b)(3)(vii)(D)(2)(ii) is considered
satisfied.
(iii) In the plan year that began in
either 2013 or 2014, the employer
offered coverage to a substantial portion
of full-time employees that provided
minimum value (as defined in section
36B(c)(2)(C)(ii) of the Internal Revenue
Code) and was affordable (applying the
safe harbor rules for determining
affordability set forth in 26 CFR
54.4980H–5(e)(2)). In the event that the
plan that offered coverage in 2013 or
2014 has no full-time employees for any
plan year limited wraparound coverage
is offered, the requirement of this
paragraph (b)(3)(vii)(D)(2)(iii) is
considered satisfied.
(iv) For the duration of the pilot
program, as described in paragraph
(b)(3)(vii)(F) of this section, the
employer’s annual aggregate
contributions for both primary and
limited wraparound coverage are
substantially the same as the employer’s
total contributions for coverage offered
to full-time employees in 2013 or 2014.
(E) Reporting—(1) Reporting by group
health plans and group health
insurance issuers. A self-insured group
health plan, or a health insurance
issuer, offering or proposing to offer
limited wraparound coverage in
connection with Multi-State Plan
coverage pursuant to paragraph
(b)(3)(vii)(D)(2) of this section reports to
the Office of Personnel Management
(OPM), in a form and manner specified
in guidance, information OPM
reasonably requires to determine
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Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Rules and Regulations
whether the plan or issuer qualifies to
offer such coverage or complies with the
applicable requirements of this section.
(2) Reporting by group health plan
sponsors. The plan sponsor of a group
health plan offering limited wraparound
coverage under paragraph (b)(3)(vii) of
this section, must report to the
Department of Health and Human
Services (HHS), in a form and manner
specified in guidance, information HHS
reasonably requires.
(F) Pilot program with sunset—The
provisions of paragraph (b)(3)(vii) of this
section apply to limited wraparound
coverage that is first offered no earlier
than January 1, 2016 and no later than
December 31, 2018 and that ends no
later than on the later of:
(1) The date that is three years after
the date limited wraparound coverage is
first offered; or
(2) The date on which the last
collective bargaining agreement relating
to the plan terminates after the date
limited wraparound coverage is first
offered (determined without regard to
any extension agreed to after the date
limited wraparound coverage is first
offered).
*
*
*
*
*
[FR Doc. 2015–06066 Filed 3–16–15; 11:15 am]
Guard; telephone 270–442–1621, email
daniel.j.mcquate@uscg.mil. If you have
questions on viewing or submitting
material to the docket, call Cheryl F.
Collins, Program Manager, Docket
Operations, telephone (202) 366–9826.
SUPPLEMENTARY INFORMATION: The Coast
Guard published a document in the
Federal Register of March 5, 2015
making an interim rule final as
published. The citation to the interim
rule was published incorrectly. This
correction removes the incorrect citation
and amendatory instruction for 33 CFR
part 165.
In rule FR Doc. 2015–03331 published
on March 5, 2015 (80 FR 11885), make
the following correction. On page
11887, in the third column, correct the
last full paragraph of the document to
read as follows: Accordingly, the
interim rule amending 33 CFR part 165
that published at 79 FR 66622 on
November 10, 2014, is adopted as a final
rule without change.
Dated: March 12, 2015.
Katia Cervoni,
Chief, Office of Regulations and
Administrative Law, U.S. Coast Guard.
[FR Doc. 2015–06174 Filed 3–17–15; 8:45 am]
BILLING CODE 9110–04–P
BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P
ENVIRONMENTAL PROTECTION
AGENCY
DEPARTMENT OF HOMELAND
SECURITY
40 CFR Part 180
Coast Guard
[EPA–HQ–OPP–2013–0797; FRL–9921–01]
33 CFR Part 165
Boscalid; Pesticide Tolerances
Environmental Protection
Agency (EPA).
ACTION: Final rule.
AGENCY:
[Docket Number USCG–2013–0907]
RIN 1625–AA00
Safety Zones; Upper Mississippi River
Between Mile 38.0 and 46.0, Thebes, IL;
and Between Mile 78.0 and 81.0, Grand
Tower, IL.
Coast Guard, DHS.
Final rule; correction.
AGENCY:
ACTION:
The Coast Guard published in
the Federal Register of March 5, 2015,
a final rule document making final an
interim rule previously published at 79
FR 66622 on November 10, 2014. The
March 5 final rule incorrectly cited the
interim rule as published at 77 FR
75850 on December 26, 2012. This
document corrects the citation and date
in that final rule to correctly reflect the
proper interim rule citation and
effective date.
DATES: Effective on March 18, 2015.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this rule, call or
email LT Dan McQuate, U.S. Coast
wreier-aviles on DSK5TPTVN1PROD with RULES
SUMMARY:
VerDate Sep<11>2014
21:57 Mar 17, 2015
Jkt 235001
This regulation establishes
tolerances for residues of boscalid in or
on dill seed, the herb subgroup 19A, the
stone fruit group 12–12, and the tree nut
group 14–12. Interregional Research
Project Number 4 (IR–4) requested these
tolerances under the Federal Food,
Drug, and Cosmetic Act (FFDCA). In
addition, this regulation removes
established tolerances for certain
commodities/groups superseded by this
action, and corrects the spelling of
papaya.
DATES: This regulation is effective
March 18, 2015. Objections and requests
for hearings must be received on or
before May 18, 2015, and must be filed
in accordance with the instructions
provided in 40 CFR part 178 (see also
Unit I.C. of the SUPPLEMENTARY
INFORMATION).
ADDRESSES: The docket for this action,
identified by docket identification (ID)
SUMMARY:
PO 00000
Frm 00015
Fmt 4700
Sfmt 4700
14009
number EPA–HQ–OPP–2013–0797, is
available at https://www.regulations.gov
or at the Office of Pesticide Programs
Regulatory Public Docket (OPP Docket)
in the Environmental Protection Agency
Docket Center (EPA/DC), West William
Jefferson Clinton Bldg., Rm. 3334, 1301
Constitution Ave. NW., Washington, DC
20460–0001. The Public Reading Room
is open from 8:30 a.m. to 4:30 p.m.,
Monday through Friday, excluding legal
holidays. The telephone number for the
Public Reading Room is (202) 566–1744,
and the telephone number for the OPP
Docket is (703) 305–5805. Please review
the visitor instructions and additional
information about the docket available
at https://www.epa.gov/dockets.
FOR FURTHER INFORMATION CONTACT:
Susan Lewis, Registration Division
(7505P), Office of Pesticide Programs,
Environmental Protection Agency, 1200
Pennsylvania Ave. NW., Washington,
DC 20460–0001; main telephone
number: (703) 305–7090; email address:
RDFRNotices@epa.gov.
SUPPLEMENTARY INFORMATION:
I. General Information
A. Does this action apply to me?
You may be potentially affected by
this action if you are an agricultural
producer, food manufacturer, or
pesticide manufacturer. The following
list of North American Industrial
Classification System (NAICS) codes is
not intended to be exhaustive, but rather
provides a guide to help readers
determine whether this document
applies to them. Potentially affected
entities may include:
• Crop production (NAICS code 111).
• Animal production (NAICS code
112).
• Food manufacturing (NAICS code
311).
• Pesticide manufacturing (NAICS
code 32532).
B. How can I get electronic access to
other related information?
You may access a frequently updated
electronic version of EPA’s tolerance
regulations at 40 CFR part 180 through
the Government Publishing Office’s eCFR site at https://www.ecfr.gov/cgi-bin/
text-idx?&c=ecfr&tpl=/ecfrbrowse/
Title40/40tab_02.tpl.
C. How can I file an objection or hearing
request?
Under FFDCA section 408(g), 21
U.S.C. 346a, any person may file an
objection to any aspect of this regulation
and may also request a hearing on those
objections. You must file your objection
or request a hearing on this regulation
in accordance with the instructions
E:\FR\FM\18MRR1.SGM
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]]>Agencies
[Federal Register Volume 80, Number 52 (Wednesday, March 18, 2015)]
[Rules and Regulations]
[Pages 13995-14009]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06066]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 /
Rules and Regulations
[[Page 13995]]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9714]
RIN 1545-BM44
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB70
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Part 146
[CMS-9946-F2]
RIN 0938-AS52
Amendments to Excepted Benefits
AGENCY: Internal Revenue Service, Department of the Treasury; Employee
Benefits Security Administration, Department of Labor; Centers for
Medicare & Medicaid Services, Department of Health and Human Services.
ACTION: Final rules.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations that amend the
regulations regarding excepted benefits under the Employee Retirement
Income Security Act of 1974, the Internal Revenue Code, and the Public
Health Service Act to specify requirements for limited wraparound
coverage to qualify as an excepted benefit. Excepted benefits are
generally exempt from the requirements that were added to those laws by
the Health Insurance Portability and Accountability Act and the
Affordable Care Act.
DATES: These final regulations are effective on May 18, 2015.
FOR FURTHER INFORMATION CONTACT: Amy Turner or Elizabeth Schumacher,
Employee Benefits Security Administration, Department of Labor, at
(202) 693-8335; Karen Levin, Internal Revenue Service, Department of
the Treasury, at (202) 317-5500; Jacob Ackerman, Centers for Medicare &
Medicaid Services, Department of Health and Human Services, at (410)
786-1565.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws, may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (https://www.dol.gov/ebsa). In addition, information from HHS on private health
insurance for consumers can be found on the Centers for Medicare &
Medicaid Services (CMS) Web site (www.cms.gov/cciio) and information on
health reform can be found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Health Insurance Portability and Accountability Act of 1996
(HIPAA), Public Law 104-191, 110 Stat. 1936 added title XXVII of the
Public Health Service Act (PHS Act), part 7 of the Employee Retirement
Income Security Act of 1974 (ERISA), and chapter 100 of the Internal
Revenue Code (the Code), providing portability and nondiscrimination
provisions with respect to health coverage. These provisions of the PHS
Act, ERISA, and the Code were later augmented by other consumer
protection laws, including the Mental Health Parity Act of 1996,\1\ the
Mental Health Parity and Addiction Equity Act of 2008,\2\ the Newborns'
and Mothers' Health Protection Act,\3\ the Women's Health and Cancer
Rights Act,\4\ the Genetic Information Nondiscrimination Act of
2008,\5\ the Children's Health Insurance Program Reauthorization Act of
2009,\6\ Michelle's Law,\7\ and the Affordable Care Act.\8\
---------------------------------------------------------------------------
\1\ Public Law 104-204, 110 Stat. 2944 (September 26, 1996).
\2\ Public Law 110-343, 122 Stat. 3881 (October 3, 2008).
\3\ Public Law 104-204, 110 Stat. 2935 (September 26, 1996).
\4\ Public Law 105-277, 112 Stat. 2681-436 (October 21, 1998).
\5\ Public Law 110-233, 122 Stat. 881 (May 21, 2008).
\6\ Public Law 111-3, 123 Stat. 65 (February 4, 2009).
\7\ Public Law 110-381, 122 Stat. 4081 (October 9, 2008).
\8\ The Patient Protection and Affordable Care Act, Public Law
111-148, was enacted on March 23, 2010, and the Health Care and
Education Reconciliation Act, Public Law 111-152, was enacted on
March 30, 2010. (These statutes are collectively known as the
``Affordable Care Act''.)
---------------------------------------------------------------------------
The Affordable Care Act reorganizes, amends, and adds to the
provisions of part A of title XXVII of the PHS Act relating to group
health plans and health insurance issuers in the group and individual
markets. The term ``group health plan'' includes both insured and self-
insured group health plans.\9\ Section 715(a)(1) of ERISA and section
9815(a)(1) of the Code, as added by the Affordable Care Act,
incorporate the provisions of part A of title XXVII of the PHS Act into
ERISA and the Code to make them applicable to group health plans and
health insurance issuers providing health insurance coverage in
connection with group health plans. The PHS Act sections incorporated
by these references are sections 2701 through 2728.
---------------------------------------------------------------------------
\9\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is
distinct from the term ``health plan,'' as used in other provisions
of title I of the Affordable Care Act. The term ``health plan'' does
not include self-insured group health plans.
---------------------------------------------------------------------------
Sections 2722 and 2763 of the PHS Act, section 732 of ERISA, and
section 9831 of the Code provide that the requirements of title XXVII
of the PHS Act, part 7 of ERISA, and chapter 100 of the Code,
respectively, generally do not apply to excepted benefits. Excepted
benefits are described in section 2791 of the PHS Act, section 733 of
ERISA, and section 9832 of the Code.
The parallel statutory provisions establish four categories of
excepted benefits. The first category includes benefits that are
generally not health coverage \10\ (such as automobile insurance,
liability insurance, workers compensation, and accidental death and
dismemberment coverage). The benefits in this category are excepted in
all circumstances. In contrast, the benefits in the second, third, and
fourth categories are types of health coverage
[[Page 13996]]
but are excepted only if certain conditions are met.
---------------------------------------------------------------------------
\10\ See 62 FR 16894, 16903 (Apr. 8, 1997), which states that
these benefits are generally not health insurance coverage.
---------------------------------------------------------------------------
The second category of excepted benefits is limited excepted
benefits, which may include limited scope vision or dental benefits,
and benefits for long-term care, nursing home care, home health care,
or community based care. Section 2791(c)(2)(C) of the PHS Act, section
733(c)(2)(C) of ERISA, and section 9832(c)(2)(C) of the Code authorize
the Secretaries of Health and Human Services (HHS), Labor, and the
Treasury (collectively, the Secretaries) to issue regulations
establishing other, similar limited benefits as excepted benefits. The
Secretaries exercised this authority previously with respect to certain
health flexible spending arrangements (health FSAs).\11\ To be excepted
under this second category, the statute (specifically, ERISA section
732(c)(1), PHS Act section 2722(c)(1), and Code section 9831(c)(1))
provides that limited benefits must either: (1) Be provided under a
separate policy, certificate, or contract of insurance; or (2)
otherwise not be an integral part of a group health plan, whether
insured or self-insured.\12\
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\11\ 26 CFR 54.9831-1(c)(3)(v); 29 CFR 2590.732(c)(3)(v); 45 CFR
146.145(b)(3)(v).
\12\ See the discussion in the 2014 final regulations concerning
the application of these requirements to benefits such as limited-
scope dental and vision benefits and employee assistance programs at
79 FR 59131 (Oct. 1, 2014).
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The third category of excepted benefits, referred to as
``noncoordinated excepted benefits,'' includes both coverage for only a
specified disease or illness (such as cancer-only policies), and
hospital indemnity or other fixed indemnity insurance. In the group
market, these benefits are excepted only if all of the following
conditions are met: (1) The benefits are provided under a separate
policy, certificate, or contract of insurance; (2) there is no
coordination between the provision of such benefits and any exclusion
of benefits under any group health plan maintained by the same plan
sponsor; and (3) the benefits are paid with respect to any event
without regard to whether benefits are provided under any group health
plan maintained by the same plan sponsor.\13\
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\13\ 26 CFR 54.9831-1(c)(4); 29 CFR 2590.732(c)(4); 45 CFR
146.145(b)(4). See also Q7 in Affordable Care Act Implementation
FAQs Part XI, available at https://www.dol.gov/ebsa/faqs/faq-aca11.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.html.
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The fourth category of excepted benefits is supplemental excepted
benefits.\14\ Such benefits must be: (1) Coverage supplemental to
Medicare, coverage supplemental to the Civilian Health and Medical
Program of the Department of Veterans Affairs (CHAMPVA) or to Tricare,
or similar coverage that is supplemental to coverage provided under a
group health plan; and (2) provided under a separate policy,
certificate, or contract of insurance.\15\
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\14\ On February 13, 2015, the Departments issued guidance to
clarify whether insurance coverage that supplements group health
coverage by providing additional categories of benefits (and does
not also fill gaps in group health plan coverage for cost-sharing
obligations, such as coinsurance or deductibles) can be
characterized as an excepted benefit. See Affordable Care Act
Implementation FAQs Part XXIII, available at https://www.dol.gov/ebsa/faqs/faq-aca23.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Supplmental-FAQ_2-13-15-final.pdf.
\15\ 26 CFR 54.9831-1(c)(5); 29 CFR 2590.732(c)(5); 45 CFR
146.145(b)(5). The Departments issued additional guidance regarding
supplemental health insurance coverage as excepted benefits. See
EBSA Field Assistance Bulletin No. 2007-04 (available at https://www.dol.gov/ebsa/pdf/fab2007-4.pdf); CMS Insurance Standards
Bulletin 08-01 (available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf); and IRS Notice 2008-23
(available at https://www.irs.gov/irb/2008-07_IRB/ar09.html).
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In 2004, the Departments of the Treasury, Labor, and HHS published
final regulations with respect to excepted benefits (the HIPAA
regulations).\16\ (Subsequent references to the ``Departments'' include
all three Departments, unless the headings or context indicate
otherwise.)
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\16\ 69 FR 78720 (Dec. 30, 2004).
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On December 24, 2013, the Departments published additional proposed
regulations with respect to the second category of excepted benefits,
limited excepted benefits (2013 proposed regulations).\17\ The 2013
proposed regulations proposed to: (1) Eliminate the requirement that
participants in self-insured plans pay an additional premium or
contribution for limited-scope vision or dental benefits to qualify as
benefits that are not an integral part of the plan; (2) set forth the
criteria under which employee assistance programs (EAPs) that do not
provide significant benefits in the nature of medical care constitute
excepted benefits; and (3) allow plan sponsors in certain limited
circumstances to offer, as excepted benefits, coverage that wraps
around certain individual health insurance coverage. The intent of
limited wraparound coverage is to permit employers to provide certain
employees, dependents, and retirees who are enrolled in some type of
individual market coverage with overall coverage that is generally
comparable to the coverage provided under the employers' group health
plan, without eroding employer-sponsored coverage.
---------------------------------------------------------------------------
\17\ 78 FR 77632.(Dec. 23, 2014).
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After consideration of comments received on the 2013 proposed
regulations, the Departments published final regulations regarding
dental and vision benefits and EAP benefits on October 1, 2014 (2014
final regulations).\18\ In the 2014 final regulations, the Departments
also stated their intent to publish regulations that addressed limited
wraparound coverage in the future, taking into account the extensive
comments received on this issue.\19\ After consideration of comments on
the 2013 proposed regulations, on December 23, 2014, the Departments
published new proposed regulations with respect to limited wraparound
coverage (2014 proposed regulations), which set forth five requirements
under which limited benefits provided through a group health plan that
wrap around either eligible individual insurance or coverage under a
Multi-State Plan would constitute excepted benefits.\20\ A description
of the 2014 proposed regulations is set forth below, together with a
summary of the comments received on the 2014 proposed regulations and
an overview of these final regulations.
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\18\ 79 FR 59131 (Oct. 1, 2014).
\19\ 79 FR 59131 (Oct. 1, 2014).
\20\ 79 FR 76931 (Dec. 23, 2014).
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II. Overview of the Final Regulations
Under the 2014 proposed regulations, limited benefits provided
through a group health plan that wrap around either (1) eligible
individual health insurance, or (2) coverage under a Multi-State Plan
(collectively referred to as ``limited wraparound coverage'') could
constitute excepted benefits, if five requirements were met. For this
purpose, the 2014 proposed regulations defined ``eligible individual
health insurance'' as individual health insurance coverage that is not
a grandfathered health plan,\21\ not a transitional individual health
insurance market plan,\22\ and does not consist solely of excepted
benefits. The preamble to the 2014 proposed regulations acknowledged
that, in States that elect to establish a Basic Health Program (BHP),
certain low-income individuals (for example, those with household
income between 133 percent and 200 percent of the Federal poverty
[[Page 13997]]
level) who would otherwise qualify for a tax credit to obtain a
qualified health plan through an Exchange would instead be enrolled in
coverage through the BHP. The Departments invited comments on how an
employer might make wraparound coverage available to BHP enrollees.\23\
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\21\ See section 1251 of the Affordable Care Act, 29 CFR
2590.715-1251, and 45 CFR 147.140.
\22\ As described in CMS Insurance Standards Bulletin (March 5,
2014) available at: https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/transition-to-compliant-policies-03-06-2015.pdf.
\23\ 79 FR 76935, footnote 32.
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Comments addressing the BHP all supported permitting wraparound of
BHP coverage. The Departments agree and, therefore, these final
regulations permit limited wraparound coverage of BHP coverage in the
same manner as limited wraparound coverage of eligible individual
health insurance.
A. Covers Additional Benefits
The 2014 proposed regulations stated that limited wraparound
coverage would have to be specifically designed to wrap around eligible
individual health insurance or Multi-State Plan coverage. That is, the
limited wraparound coverage would have to provide meaningful benefits
beyond coverage of cost sharing under the eligible individual health
insurance or Multi-State Plan coverage. The preamble to the 2014
proposed regulations provided examples, such as that limited wraparound
coverage could provide coverage for expanded in-network medical clinics
or providers, or provide benefits that are not essential health
benefits (EHBs) and that are not covered under the eligible individual
health insurance.\24\ The preamble to the 2014 proposed regulations
also provided that limited wraparound coverage would not be permitted
to provide benefits solely under a coordination-of-benefits provision
and could not be an account-based reimbursement arrangement.\25\
Limited wraparound coverage that covers solely cost sharing would not
be permissible, as stated in the preamble to the 2014 proposed
regulations, because reduced cost sharing can be obtained by choosing
an individual health insurance policy with a higher actuarial value
(for example, a platinum plan with a 90 percent actuarial value).\26\
The Departments invited comment on safe harbors standardizing the
benefits in the limited wraparound coverage that could be established.
---------------------------------------------------------------------------
\24\ 79 FR 76935
\25\ 79 FR 76936
\26\ Id.
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Many commenters requested additional clarity on the type of
benefits that could be offered as meaningful benefits in limited
wraparound coverage. Suggestions included reimbursement for the full
cost of primary care, the cost of prescription drugs not on the
formulary of the primary plan, ten physician visits per year, services
considered to be provided out-of-network by the primary plan, access to
onsite clinics or specific health facilities at no cost, or benefits
targeted to a specific population (such as coverage for certain
orthopedic injuries), home health coverage, or coverage of other
benefits that are not covered EHBs under the primary plan. The
Departments consider all of these examples to qualify as additional,
meaningful benefits under this first requirement to be limited
wraparound coverage that qualifies as excepted benefits. As discussed
further below, the Departments reiterate that limited wraparound
coverage that is an excepted benefit cannot be an account-based
mechanism and instead must be a risk-sharing product that covers a
defined package of services.
B. Limited in Amount
For the second requirement to be limited wraparound coverage that
qualifies as excepted benefits, the Departments proposed that the
limited wraparound coverage be limited in amount. Specifically, the
2014 proposed regulations provided that the annual cost of coverage per
employee (and any covered dependents) under the limited wraparound
coverage could not exceed the maximum annual contribution for health
FSAs (which was $2,500 in 2014), indexed in the manner prescribed under
Code section 125(i)(2) (which amounts to $2,550 for 2015), and the cost
of coverage would include both employer and employee contributions
towards coverage and be determined in the same manner as the applicable
premium is calculated under a COBRA continuation provision. The
preamble to the 2014 proposed regulations stated that the bright-line
limitation was intended to be simpler to administer than a cap of 15
percent of the cost of the plan sponsor's primary coverage as set forth
in the 2013 proposed regulations.
Many comments stated that the limits on the amount should be higher
so that individuals eligible for the limited wraparound coverage would
not experience gaps in coverage. Some commenters suggested that the
Departments consider an alternative, referencing the higher health
savings account (HSA) limits, which are $3,350 for individual coverage
and $6,650 for families in 2015, indexed annually. Others suggested the
Departments set the limit as the greater of: The maximum permitted
annual salary reduction towards a health FSA (as was set forth in the
2014 proposed regulations), or a percentage of the cost of coverage
under the primary plan (as was set forth in the 2013 proposed
regulations).
These final regulations adopt the last suggestion. Either the
dollar or percent limitation would satisfy the Departments' objective
of ensuring that the limited wraparound coverage provides a limited
benefit, as required by the statute, and be similar to other limited
excepted benefits (that is, dental benefits, vision benefits, long term
care, nursing home care, home health care, community-based care, or
health FSAs as described in 26 CFR 54.9831-1(c)(3); 29 CFR
2590.732(c)(3); 45 CFR 146.145(b)(3)). The percentage, as in the 2013
proposed regulations, is 15 percent of the cost of coverage under the
primary plan.
The final regulations do not adopt the suggestion to use much
higher limits on the cost of coverage (for example, the HSA limits).
Too large a benefit that is not limited in scope (c.f., limited-scope
dental and vision excepted benefits) would not constitute a ``similar,
limited benefit'' under ERISA section 733(c)(2), PHS Act section
2791(c)(2), or Code section 9832(c)(2).
The Departments also received requests for clarification regarding
the administration of the second requirement (that is, that the limited
wraparound coverage be limited in amount). Some comments requested that
the determination of the cost of coverage be permitted to be made on an
aggregate basis in advance of each plan year by an actuary, and not
based on actual experience of the group or any individual during the
plan year. This approach is precisely the approach that was intended by
the Departments. As stated earlier, to qualify as excepted benefits,
the limited wraparound coverage could not be an account-based
reimbursement arrangement. That is, the coverage must include a risk-
sharing element. As such, making a determination regarding the cost of
coverage must occur on an aggregate basis. Moreover, to the extent this
determination for a given plan year is made on sound actuarial
principles that are appropriately documented, the actual experience of
the group or any individual during the plan year would not be a factor
in determining the cost of coverage for that plan year (although it
could impact future years by providing additional information on which
the actuarial estimate of the cost of coverage for future years would
be based). The final regulations include this clarification.
[[Page 13998]]
C. Nondiscrimination
Under the 2014 proposed regulations, the third requirement for
limited wraparound coverage to qualify as excepted benefits related to
nondiscrimination. Specifically, the Departments proposed three sub-
requirements relating to nondiscrimination. First, the wraparound
coverage could not impose any preexisting condition exclusion,
consistent with the requirements of section 2704 of the PHS Act (as
incorporated into section 715 of ERISA and section 9815 of the Code)
and implementing regulations.\27\ Second, the wraparound coverage could
not discriminate against individuals in eligibility, benefits, or
premiums based on any health factor of an individual (or any dependent
of the individual), consistent with the requirements of section 702 of
ERISA, section 9802 of the Code, and section 2705 of the PHS Act (as
incorporated into section 715 of ERISA and section 9815 of the Code)
and implementing regulations.\28\ Finally, neither the primary group
health plan coverage nor the limited wraparound coverage could fail to
comply with section 2716 of the PHS Act (as incorporated into section
715 of ERISA and section 9815 of the Code) or fail to be excludible
from income with respect to any individual due to the application of
section 105(h) of the Code (as applicable). These final regulations
adopt the approach outlined in the 2014 proposed regulations.
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\27\ 29 CFR 2590.715-2704 and 45 CFR 147.108. See also Q2 in
Affordable Care Act Implementation FAQs Part XXII, available at
https://www.dol.gov/ebsa/faqs/faq-aca22.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-XXII-FINAL.pdf regarding the prohibition against offering employees with
high claims risk a choice between enrollment in its standard group
health plan or cash.
\28\ 26 CFR 54.9802-1, 29 CFR 2590.702, and 45 CFR 146.121.
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The Departments received two comments on this third requirement.
One commenter inquired as to the potential interaction between excepted
benefits and the excise tax on high cost employer-sponsored health
coverage under Code section 4980I. The Treasury and the IRS issued
Notice 2015-16 on February 23, 2015 describing potential approaches
with regard to a number of issues under Code section 4980I and inviting
comments by May 15, 2015. Issues relating to Code section 4980I will be
addressed as part of that rulemaking. Another commenter requested that
the Departments consider ``modernizing'' the nondiscrimination
provisions under Code section 105(h) and section 2716 of the PHS Act
relating to prohibiting discrimination in favor of highly compensated
employees. The Departments are considering this suggestion and other
comments previously received for purposes of future guidance relating
to these provisions.
D. Plan Eligibility Requirements
The fourth requirement to qualify as excepted benefits concerned
plan eligibility requirements. First, under the 2014 proposed
regulations, individuals eligible for the limited wraparound coverage
could not be enrolled in excepted benefit coverage that is a health
FSA. One commenter suggested permitting dual enrollment in limited
wraparound coverage and health FSA coverage. However, as described
earlier, the Departments are using their discretion under ERISA section
733(c)(2), PHS Act section 2791(c)(2), and Code section 9832(c)(2) to
define ``other similar, limited benefits'' as excepted benefits and do
not adopt this suggestion. To ensure that wraparound coverage is a
limited benefit, like health FSAs, the Departments do not intend to
allow plan sponsors to combine multiple excepted benefits into an
arrangement that functions as a material substitute for primary group
health plan coverage and still be exempt from the health market
reforms.
Under the 2014 proposed regulations, as part of the fourth
requirement for limited wraparound coverage to constitute excepted
benefits, coverage would be required to comply with one of two
alternative sets of standards relating to eligibility and benefits: one
set of plan eligibility requirements for wraparound benefits offered in
conjunction with eligible individual health insurance (or BHP coverage)
for persons who are not full-time employees, and a separate set of
standards for coverage that wraps around certain Multi-State Plan
coverage. As described further below, limited wraparound coverage for
persons who are not full-time employees is intended for employers that
are generally offering affordable, minimum value coverage to their
full-time workers but want to offer an additional limited benefit to
their part-time workers. Limited wraparound coverage offered in
conjunction with a Multi-State Plan is intended for employers that were
offering reasonably comprehensive coverage prior to the promulgation of
these final rules, and wish to offer limited wraparound coverage while
still contributing roughly the same total amount toward their
employees' health benefits.
1. Limited Wraparound Coverage Offered in Conjunction With Eligible
Individual Health Insurance (or BHP Coverage) for Persons Who Are Not
Full-Time Employees
As under the 2014 proposed regulations, limited coverage that wraps
around eligible individual health insurance (or BHP coverage) for an
individual who is not a full-time employee is required to satisfy three
standards relating to plan eligibility.
i. Employer Obligations With Respect to Full-Time Employees
First, for each year that wraparound coverage is offered, the
employer that is the sponsor of the plan offering wraparound coverage,
or the employer participating in a plan offering wraparound coverage,
must offer to its full-time employees coverage that: (1) Is
substantially similar to coverage that the employer would need to offer
to its full-time employees in order not to be subject to a potential
assessable payment under the employer shared responsibility provisions
of section 4980H(a) of the Code, if such provisions were applicable
(that is, substantially similar to an offer of minimum essential
coverage (as defined in Code section 5000A(f)) to at least 95 percent
of its full-time employees (or to all but five of its full-time
employees, if five is greater than five percent of its full-time
employees)); (2) provides minimum value (as defined in section
36B(c)(2)(C)(ii) of the Code); and (3) is reasonably expected to be
affordable (permitting use of the safe harbor rules for determining
affordability set forth in 26 CFR 54.4980H-5(e)(2)). The preamble to
the 2014 proposed regulations stated that, if a plan or issuer
providing limited wraparound coverage takes reasonable steps to ensure
that employers disclose necessary information regarding their coverage
offered and affordability information to the plan or issuer, the plan
or issuer could rely on reasonable representations by employers
regarding this information, unless the plan or issuer has specific
knowledge to the contrary.
Several commenters requested that, in the context of small
employers and multiemployer plans, there be an exemption from the
requirement that, to be considered excepted benefits, the employer
offer to its full-time employees coverage that is substantially similar
to coverage that the employer would need to offer pursuant to Code
section 4980H(a). However, these final excepted benefits regulations
are designed to allow plan sponsors an
[[Page 13999]]
option to offer additional workers health coverage comparable to that
which they already offer, rather than to serve as a substitute for
primary coverage.
Other commenters asked the Departments to clarify that any Code
section 4980H-related requirements are met in instances in which the
employer has no full-time employees. These final regulations clarify
that, in the event that the employer has no full-time employees, but
the plan covers retirees (and their dependents), or covers part-time
employees (and their dependents), the requirements to provide coverage
that is substantially similar to coverage that the employer would need
to offer to its full-time employees in order not to be subject to a
potential assessable payment section 4980H(a) of the Code, that
provides minimum value, and that is reasonably expected to be
affordable, are all considered satisfied.
ii. Limited Eligibility
Second, eligibility for the limited wraparound coverage must be
limited to employees who are not full-time employees (and their
dependents), or who are retirees (and their dependents). In the
preamble to the 2014 proposed regulations, the Departments stated that
``full-time employees'' would be employees who are reasonably expected
to work at least an average of 30 hours per week. Plans and issuers
would not be required to define ``full-time employees'' strictly in
accordance with the rules of Code section 4980H, but employers could
rely on the Code section 4980H definition, or any reasonable
interpretation of who is reasonably expected to work an average of 30
hours a week, for purposes of this provision. The Departments invited
comment on this approach.
Some commenters argued that plan sponsors should be able to offer
limited coverage that wraps around eligible individual health insurance
to full-time employees. The Departments do not adopt this change. A
rationale for treating the wraparound coverage as an excepted benefit
is that recipients will be able to use this limited type of coverage in
conjunction with individual coverage purchased through an Exchange
without being disqualified from claiming the premium tax credit. This
may be attractive to employers as a means of providing some health
coverage to employees who may not otherwise have been offered coverage,
such as part-time employees or retirees. However, this is not intended
to incentivize or permit employers to fail to offer minimum essential
coverage to full-time employees, a population to whom employers have
typically offered coverage.
One commenter sought clarification that plan sponsors offering
limited wraparound coverage may rely on a determination of full-time
employee status at the time of enrollment. The Departments agree that
employers offering limited wraparound coverage will make determinations
based on the expected status of an employee in the future as a part-
time employee versus full-time employee. Accordingly, the final
regulations include a clarification that this standard is met if it is
reasonably determined at the time of enrollment that the employee will
on average work fewer than 30 hours per week during the plan year.
Moreover, for purposes of administering the premium tax credit under
section 36B of the Code, if it is reasonably determined at the time of
enrollment that the employee will on average work fewer than 30 hours
per week during the plan year and therefore the employee is offered
limited coverage that wraps around eligible individual health
insurance, but the employee later during the coverage period meets the
definition of a full-time employee, the coverage will not fail to be
excepted benefits and the employee will not become ineligible for
premium tax credits for the remainder of the plan year solely because
the original reasonable determination proves incorrect. Whether, to be
reasonable, that determination would need to be changed for future plan
years will depend on all the facts and circumstances.
Several commenters sought clarification regarding the definition of
``dependent.'' Specifically, commenters asked whether the term
``dependent'' includes ``spouses'' (as the term is defined under 26 CFR
54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103 for purposes of
chapter 100 of the Code, part 7 of ERISA, and title XXVII of the PHS
Act), or whether it is limited to ``dependent children'' (as the term
is defined under Code section 4980H and its implementing regulations).
These final regulations clarify that, for purposes of excepted
benefits, the term ``dependent'' is defined by reference to the
definitions section governing the market reforms (that is, 26 CFR
54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103) and not the employer
shared responsibility provisions under Code section 4980H and its
implementing regulations. Accordingly, spouses may qualify as
dependents to the extent they are eligible for coverage under the terms
of the limited wraparound coverage. Moreover, some commenters sought
clarification as to whether a plan could permit enrollment of a spouse
beneficiary without enrollment of an employee participant. While
nothing in these final regulations, nor any other provision of ERISA,
the Code, or the PHS Act requires plans to enroll spouse beneficiaries
for coverage (other than COBRA coverage) if the participant does not
enroll, nothing in these provisions prohibits plans from enrolling such
a spouse if plans choose to do so.\29\
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\29\ See ERISA section 601, Code section 4980B and PHS Act
section 2201, which requires enrollment of qualified beneficiaries
(including spouses) after a loss of coverage in connection with a
qualifying event.
---------------------------------------------------------------------------
iii. Offer of Other Group Health Plan Coverage
Third, under the 2014 proposed regulations, other group health plan
coverage, not limited to excepted benefits, would be required to be
offered to the individuals eligible for the wraparound coverage. Only
individuals eligible for other group health plan coverage could be
eligible for the wraparound coverage.
Some commenters contended that plan sponsors should not be required
to offer other group health plan coverage to individuals who are not
full-time employees. This provision does not require employers to offer
group health plan coverage to workers who are not full-time employees
but it does limit the ability to offer the wrap-around coverage only to
workers otherwise eligible for other group health plan coverage. That
is because this provision is not intended to create an opportunity or
incentive for employers to discontinue providing group health plan
coverage and to encourage its employees to obtain coverage through the
Exchange subsidized through the premium tax credit while still
receiving meaningful employer-provided health benefits. Further, the
same standard is applied in order for a health FSA to be an excepted
benefit, and this provision in the final regulation is intended to
allow employers to offer a limited benefit, similar to a health FSA.
2. Limited Wraparound Coverage Offered in Conjunction With Multi-State
Plan Coverage
For limited coverage that wraps around Multi-State Plan coverage,
four requirements would be required to be met under the 2014 proposed
regulations.
i. OPM Review and Approval
The first of the four standards would require that the limited
wraparound
[[Page 14000]]
coverage be specifically designed and approved by the Office of
Personnel Management (OPM) to provide benefits in conjunction with
coverage under a Multi-State Plan authorized under section 1334 of the
Affordable Care Act. Several comments sought clarification as to
whether OPM would be designing limited wraparound coverage, or whether
that would more appropriately be the role of the plan sponsor or health
insurance issuer. These final rules include a modification to clarify
that OPM would not design limited wraparound coverage. Instead, OPM's
role would be to review and approve such coverage. Moreover, as
indicated in the preamble to the 2014 proposed regulations, with
respect to the maintenance of effort standard (discussed below), OPM's
role is to ensure that group health plans and health insurance issuers
offering Multi-State Plan wraparound coverage have a reasonable process
in place for assuring employers meet the criteria set forth in these
regulations for excepted benefits.
ii. Maintenance of Effort
The 2014 proposed regulations provided that the employer would have
had to offer coverage in the plan year that began in 2014 that is
substantially similar to coverage that the employer would need to have
offered to its full-time employees in order to not be subject to an
assessable payment under the employer shared responsibility provisions
of section 4980H(a) of the Code, if such provisions had been
applicable. In addition, in the plan year that began in 2014, the
employer would have had to have offered coverage to a substantial
portion of full-time employees that provided ``minimum value'' (as
defined in section 36B(c)(2)(C)(ii) of the Code) and was affordable
(applying the safe harbor rules for determining affordability set forth
in 26 CFR 54.4980H-5(e)(2)). Finally, for the duration of the pilot
program (described later in this preamble), the employer's annual
aggregate contributions for both primary and limited wraparound
coverage must be substantially the same as the employer's aggregate
contributions for coverage offered to full-time employees in 2014. The
Departments stated in the preamble that they were considering
interpreting this ``substantially the same'' condition as a percentage
(for example, 80 or 90 percent) and potentially applying it on a per-
worker basis to allow for fluctuations in an employer's workforce.
Citing that some employers may have made changes to their coverage
in 2014 because Exchange coverage was first available in 2014, several
commenters requested that plan sponsors be permitted to use either 2013
or 2014 as the base year for this maintenance of effort requirement set
forth in these second and third requirements for limited coverage that
wraps around Multi-State Plan coverage. These final regulations adopt
this suggestion.
Other comments stated that an employer's annual aggregate
contribution toward primary and limited wraparound coverage should
include any assessable payments under Code section 4980H owed by the
employer. An applicable large employer may become subject to an
assessable payment if it fails to offer minimum essential coverage to
its full-time employees and one or more of those employees obtains a
premium tax credit, or it fails to provide a full-time employee minimum
essential coverage that provides minimum value and is affordable for
that employee and that employee obtains a premium tax credit. In
neither case does the payment of an assessable payment provide coverage
to the employee or otherwise assist that employee in obtaining
coverage. Nor does the fact that the failure to provide coverage may
permit the employee to obtain the premium tax credit mean that the
resulting fee is contributing toward that employee's health coverage.
The final regulations, therefore, do not make this change.
Some comments sought clarification regarding whether the employer's
annual aggregate contributions for both primary and limited wraparound
coverage must be substantially the same as the employer's aggregate
contributions for coverage offered to full-time employees in 2013 or
2014. Some requested OPM be given discretion to determine whether the
maintenance of effort standard has been met by each employer. Others
requested a threshold of 60 percent in determining whether this
standard has been met. Many factors, including fluctuations in
workforce size, cost of coverage, and employer contributions towards
other fringe benefits may affect employer contributions from year to
year. The final regulations retain the standard set forth in the 2014
proposed regulations that the employer's annual aggregate contributions
for both primary and limited wraparound coverage must be substantially
the same as the employer's aggregate contributions for coverage offered
to full-time employees in 2014 (or 2013). For this purpose, the
Departments consider this ``substantially the same'' condition to be
met if contributions were at least 80 percent of contributions made in
2013 or 2014, applied on an average, full-time worker basis (to allow
for fluctuations in an employer's workforce). OPM may make a finding,
based on all the facts and circumstances, that other employer
contribution arrangements also meet this standard. OPM may provide
additional guidance (such as examples and safe harbors) in the future.
As with coverage that wraps around eligible individual health
insurance (or that wraps around Basic Health Plan coverage), commenters
asked the Departments to clarify that any Code section 4980H-related
requirements are met in instances in which the employer has no full-
time employees. These final regulations adopt a parallel clarification
for coverage that wraps around Multi-State Plan coverage as for
coverage that wraps around eligible individual health insurance (or
that wraps around Basic Health Plan coverage). That is, while these
final regulations do not permit new employers to provide wraparound
coverage as an excepted benefit, these final regulations clarify that,
in the event that the employer has no full-time employees, but the plan
covers retirees (and their dependents), or covers part-time employees
(and their dependents), the requirements that, in the plan year that
began in 2013 or 2014, the employer would have had to have offered
coverage to a substantial portion of full-time employees that provided
minimum value and was affordable is met, as is the requirement that,
for the duration of the pilot program, the employer's annual aggregate
contributions for both primary and limited wraparound coverage must be
substantially the same as the employer's aggregate contributions for
coverage offered to full-time employees in 2013 or 2014.
For purposes of administering this provision with respect to
limited wraparound coverage offered in conjunction with Multi-State
Plan coverage, the Departments had proposed that the term ``full-time
employee'' means a ``full-time employee'' as defined in 26 CFR
54.4980H-1(a)(21) who is not in a limited non-assessment period for
certain employees (as defined in 26 CFR 54.4980H-1(a)(26)). Moreover,
if a plan or issuer providing limited wraparound coverage takes
reasonable steps to ensure that employers disclose necessary
information regarding their coverage offered and contribution levels
for 2013 or 2014 to the plan or issuer, the plan or issuer may rely on
reasonable representations by employers regarding this information,
unless the plan or issuer has specific knowledge to the contrary.
Consistent with the reporting
[[Page 14001]]
and evaluation criteria described later in this preamble, the
Departments stated that OPM may verify that plans and issuers have
reasonable mechanisms in place to ensure that contributing employers
meet these standards.
E. Reporting
The fifth and final requirement for limited wraparound coverage to
qualify as excepted benefits under the 2014 proposed regulations is a
reporting requirement, for group health plans and group health
insurance issuers, as well as group health plan sponsors. The final
regulations adopt the approach outlined in the 2014 proposed
regulations.
A self-insured group health plan, or a health insurance issuer
offering or proposing to offer Multi-State Plan wraparound coverage,
would report to OPM, in a form and manner specified in OPM guidance,
information OPM reasonably requires to determine whether the plan or
issuer qualifies to offer such coverage or complies with the applicable
requirements of this section.
In addition, the plan sponsor of any group health plan offering any
type of limited wraparound coverage would report to HHS, in a form and
manner specified in guidance, information HHS reasonably requires to
determine whether the exception for limited wraparound coverage is
allowing plan sponsors to provide workers with comparable benefits
whether enrolled in minimum essential coverage under a group health
plan offered by the plan sponsor, or enrolled in eligible individual
health insurance, BHP coverage, or Multi-State Plan coverage, with
additional limited wraparound coverage offered by the plan sponsor,
without causing an erosion of coverage.
Commenters requested that there be coordination of any reporting
requirements with existing reporting requirements and some made
specific suggestions regarding data elements that should be required
for reporting. The Departments agree with the principle of non-
duplication and will seek comment on any new reporting requirements
through the process established by Paperwork Reduction Act of 1995.
F. Pilot Program With Sunset Date
Under the 2014 proposed regulations, limited wraparound coverage
would be permitted under a pilot program for a limited time.
Specifically, this type of wraparound coverage could be offered as
excepted benefits if it is first offered no later than December 31,
2017, and ends on the later of: (1) The date that is three years after
the date wraparound coverage is first offered; or (2) the date on which
the last collective bargaining agreement relating to the plan
terminates after the date wraparound coverage is first offered
(determined without regard to any extension agreed to after the date
the wraparound coverage is first offered). The 2014 proposed
regulations invited comments on this time frame for applicability,
including whether the Departments should have the option to provide for
an earlier termination date.
Many commenters cited uncertainty and the lack of lead time as
negatively impacting full utilization of the pilot program and
requested a longer implementation period. The Departments agree that
the timing for publication of these final rules makes 2015 plan year
implementation impossible or impracticable for most plans. Accordingly,
these final rules specify that wraparound coverage could be offered as
excepted benefits if the coverage is first offered no earlier than
January 1, 2016 and no later than December 31, 2018. The end date is
unchanged from the proposal, that is the later of: (1) The date that is
three years after the date wraparound coverage is first offered; or (2)
the date on which the last collective bargaining agreement relating to
the plan terminates after the date wraparound coverage is first offered
(determined without regard to any extension agreed to after the date
the wraparound coverage is first offered).
III. Economic Impact and Paperwork Burden
A. Summary
As discussed in detail above, these regulations amend the
definition of ``limited excepted benefits'' in the group market to
provide plan sponsors with two options to offer limited wraparound
coverage to certain individuals. Under the first option, a plan sponsor
could offer limited benefits provided through a group health plan that
wraps around eligible individual health insurance to employees who are
not full-time employees (and their dependents), or who are retirees
(and their dependents). For this purpose, full-time employees are
employees who are reasonably expected to work at least an average of 30
hours per week. Under the second option, the limited wraparound
coverage that satisfies the requirements outlined in the regulations
must be approved by OPM and be offered in conjunction with Multi-State
Plan coverage authorized under section 1334 of the Affordable Care Act.
Under the first option, the limited benefits would also be permitted to
wrap around the Basic Health Program authorized under section 1331 of
the Affordable Care Act.
B. Executive Orders 12866 and 13563--Departments of Labor and HHS
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, and public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a
regulation: (1) Having an annual effect on the economy of $100 million
or more in any one year, or adversely and materially affecting a sector
of the economy, productivity, competition, jobs, the environment,
public health or safety, or state, local, or tribal governments or
communities (also referred to as ``economically significant''); (2)
creating a serious inconsistency or otherwise interfering with an
action taken or planned by another agency; (3) materially altering the
budgetary impacts of entitlement grants, user fees, or loan programs or
the rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order. OMB has
determined that the action is significant within the meaning of section
3(f)(4) of Executive Order 12866, and the Departments accordingly
provide the following assessment of its potential benefits and costs.
The Departments recognize that many plan sponsors provide
comprehensive health benefits to their workers. One objective of the
Affordable Care Act is to allow individuals with comprehensive health
insurance plans to maintain their current level of benefits. Some
employers are interested in offering wraparound coverage to employees
who are enrolled in a Multi-State Plan authorized under section 1334 of
the Affordable Care Act or to part-time employees. These regulations
provide two options to employers that clarify the circumstances under
which plan sponsors can provide to their employees such limited
wraparound coverage that qualifies as an excepted benefit.
[[Page 14002]]
The cost (and Federal budget impact \30\) of these final
regulations is difficult to quantify. The Departments solicited
comments in the regulatory impact analysis section of the preamble to
the 2014 proposed regulations. Comments were invited generally and on
specific questions, including: To what degree, if any, might this
regulation increase employers' propensity to provide health insurance?
To what extent, if any, this proposed regulation could affect plan
sponsors' decision making? Are there any particular sectors of the
economy in which employers will be more or less inclined to pursue
wraparound coverage programs?
---------------------------------------------------------------------------
\30\ As with other group health coverage, employer contributions
to the limited wraparound coverage would be excluded from employee
income for tax purposes. Similar to the cost of the proposal, the
budget implications of adding limited wraparound coverage as a form
of excepted benefits depends on the number of employers that elect
either option and the number of employees that in turn receive it.
---------------------------------------------------------------------------
Comments were also invited on the effects of the proposal and the
Departments requested detailed data that would inform the following
questions: What will be the impact of limiting the cost of the
wraparound coverage to $2,500 per employee (and any covered
dependents)? How many employers offer coverage that provides minimum
value and is affordable for a substantial portion (under the first
option) or 95 percent (under the second option) of employees who are
eligible for coverage? To what extent would premiums for comprehensive
health coverage change in the presence and absence of this rule?
No specific data were received in response to this solicitation,
although several commented that limited conditions under which
wraparound coverage could be offered were overly restrictive and made
it of limited use. Others commented that the uncertainty of the life
span of a time-limited pilot program would minimize uptake of the
offering of limited wraparound coverage.
These final regulations generally implement the 2014 proposed
regulations with marginal change, as discussed above. Both options are
designed so that wraparound coverage could not replace employer-
sponsored primary group coverage. Under the individual health insurance
wraparound option, the employer also must offer other group health
coverage that is not limited to excepted benefits and provides minimum
value to the class of participants offered the wraparound coverage by
reason of their employment. Only individuals who are not full-time
employees and who are eligible for other group health plan coverage may
be eligible for the wraparound coverage. Also, the employer coverage
must substantially satisfy the employer shared responsibility
provisions of Code section 4980H(a), and the coverage would have to be
affordable for at least 95 percent of full-time employees.
Under the Multi-State Plan wraparound option, the employer would
have to offer coverage in the plan year beginning in 2013 or 2014 that
would have substantially satisfied the employer shared responsibility
provisions of Code section 4980H(a) if the provision had been
applicable, provided minimum value, and been affordable for a
substantial portion of its full-time employees.\31\ The employer's
annual contributions for both its primary and wraparound coverage must
be substantial.
---------------------------------------------------------------------------
\31\ The substantial level was included to help minimize the
implications for the primary plan's risk pool by preventing a large
number of low-wage workers from leaving the primary plan for
Exchange coverage.
---------------------------------------------------------------------------
The final regulations permit limited wraparound coverage to be
excepted benefits if initially offered between January 1, 2016 and
December 31, 2018, and continuing for the longer of three years or the
date on which the last collective bargaining agreement relating to the
group health plan terminates. In addition, the maximum benefit cannot
exceed the greater of the annual health FSA contribution limit ($2,550
for 2015), indexed; or 15 percent of the firm's primary plan cost. In
the 2014 proposed regulations the maximum benefit was the annual health
FSA contribution limits ($2,550 for 2015), indexed.
As with the 2014 proposed regulations, the decision to offer the
limited wraparound coverage remains optional. There is greater
administrative complexity associated with the wraparound coverage than
primary coverage alone or primary coverage plus a health FSA which
offers similar benefits. Given a choice, some plan sponsors may choose
to increase the affordability of their primary coverage rather than
offer limited wraparound coverage. Some plan sponsors may not have that
choice: The employers may not be in a financial position to make their
primary health plans affordable to more workers, let alone contribute
to wraparound coverage. Employers may also continue to simply not
provide employees with affordable, minimum value coverage, allowing
their workers to purchase coverage and potentially qualify for premium
tax credits through an Exchange with no additional wraparound benefit,
and these employers would continue to make any employer shared
responsibility payments as applicable, resulting in no additional cost
to the employer or the Federal government.
The option to offer limited wraparound coverage would not encumber
any currently existing means by which employers can provide
comprehensive health insurance coverage to their employees in
compliance with the Affordable Care Act. Rather, it would clarify two
additional, alternative means of doing so.
For the foregoing reasons, the Departments have reached the
conclusion that the impact of the benefits, costs, and transfers will
be limited. The Departments do not expect many plans to offer limited
wraparound coverage, and will monitor usage and impact during the pilot
program through reporting, as discussed above.
C. Paperwork Reduction Act--Department of Labor and Department of the
Treasury
These final regulations are not subject to the requirements of the
Paperwork Reduction Act of 1995 (PRA 95) (44 U.S.C. 3501 et seq.),
because it does not contain a collection of information as defined in
44 U.S.C. 3502(3).
D. Paperwork Reduction Act--Department of HHS
The final rule is not subject to the requirements of the Paperwork
Reduction Act of 1995 (PRA 95) (44 U.S.C. 3501 et seq.), because it
does not contain a collection of information as defined in 44 U.S.C.
3502(3). An analysis under the PRA will be conducted in the future for
any future guidance establishing a collection of information related to
the rule.
E. Regulatory Flexibility Act--Departments of Labor and HHS
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely
to have a significant economic impact on a substantial number of small
entities. Unless an agency certifies that a proposed rule is not likely
to have a significant economic impact on a substantial number of small
entities, section 603 of RFA requires that the agency present an
initial regulatory flexibility analysis at the time of the publication
of the notice of
[[Page 14003]]
proposed rulemaking describing the impact of the rule on small entities
and seeking public comment on such impact. Small entities include small
businesses, organizations and governmental jurisdictions.
For purposes of the RFA, the Departments continue to consider a
``small entity'' to be an employee benefit plan with fewer than 100
participants. The basis for this definition is found in section
104(a)(2) of the act, which permits the Secretary of Labor to prescribe
simplified annual reports for pension plans that cover fewer than 100
participants. Pursuant to the authority of section 104(a)(3), the
Department has previously issued at 29 CFR 2520.104-20, 2520.104-21,
2520.104-41, 2520.104-46 and 2520.104b-10 certain simplified reporting
provisions and limited exemptions from reporting and disclosure
requirements for small plans, including unfunded or insured welfare
plans covering fewer than 100 participants and satisfying certain other
requirements.
Further, while some large employers may have small plans, in
general small employers maintain most small plans. Thus, the
Departments believe that assessing the impact of these final
regulations on small plans is an appropriate substitute for evaluating
the effect on small entities. The definition of small entity considered
appropriate for this purpose differs, however, from a definition of
small business that is based on size standards promulgated by the Small
Business Administration (13 CFR 121.201) pursuant to the Small Business
Act (15 U.S.C. 631 et seq.). The Departments requested comment on the
appropriateness of the size standard at the proposed rule phase and
received no responses.
Because these final regulations impose no additional costs on
employers or plans, the Departments believe that they do not have a
significant economic impact on a substantial number of small entities.
Accordingly, pursuant to section 605(b) of the RFA, the Departments
hereby certify that these final regulations will not have a significant
economic impact on a substantial number of small entities.
F. Special Analyses--Department of the Treasury
For purposes of the Department of the Treasury it has been
determined that this final rule 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 has also
been determined that section 553(b) of the Administrative Procedure Act
(5 U.S.C. chapter 5) does not apply to these final regulations, and,
because these final regulations do not impose a collection of
information on small entities, an analysis under the RFA is not
required. Pursuant to section 7805(f) of the Code, the notice of
proposed rulemaking preceding these final regulations was submitted to
the Small Business Administration for comment on its impact on small
business.
G. Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1501 et seq.), as well as Executive Order 12875, these final
regulations do not include any federal mandate that may result in
expenditures by State, local, or tribal governments, or the private
sector, which may impose an annual burden of $100 million adjusted for
inflation since 1995.
H. Federalism
Executive Order 13132 outlines fundamental principles of
federalism. It requires adherence to specific criteria by federal
agencies in formulating and implementing policies that have
``substantial direct effects'' on the states, the relationship between
the national government and states, or on the distribution of power and
responsibilities among the various levels of government. Federal
agencies promulgating regulations that have these federalism
implications must consult with state and local officials, and describe
the extent of their consultation and the nature of the concerns of
state and local officials in the preamble to the final regulation.
In the Departments' view, the final regulations, by clarifying
policy regarding certain expected benefits options that can be designed
by employers to support their employees, will provide more certainty to
employers and others in the regulated community as well as states and
political subdivisions regarding the treatment of such arrangements
under ERISA. Accordingly, the Departments will continue to
affirmatively engage in outreach with officials of state and political
subdivisions regarding excepted benefits and seek their input on any
federalism implications that they believe may be presented.
I. Congressional Review Act
These final regulations are subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.), which specifies that, before a rule can
take effect, the Federal agency promulgating the rule shall submit to
each House of the Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information.
These final regulations are being transmitted to Congress and the
Comptroller General for review.
IV. Statutory Authority
The Department of the Treasury regulations are adopted pursuant to
the authority contained in sections 7805 and 9833 of the Code.
The Department of Labor regulations are adopted pursuant to the
authority contained in 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169,
1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and
1191c; sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec. 401(b),
Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d),
Public Law 110-343, 122 Stat. 3765; Public Law 110-460, 122 Stat. 5123;
Secretary of Labor's Order 1-2011, 77 FR 1088 (January 9, 2012).
The Department of Health and Human Services regulations are adopted
pursuant to the authority contained in sections 2701 through 2763,
2791, and 2792 of the PHS Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Part 146
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
John M. Dalrymple,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Approved: March 11, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
Signed this 11th day of March, 2015.
[[Page 14004]]
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: March 11, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
Dated: March 11, 2015.
Sylvia Burwell,
Secretary, Department of Health and Human Services
Department of the Treasury
Internal Revenue Service
26 CFR Chapter I
Accordingly, 26 CFR part 54 is amended as follows:
PART 54--PENSION EXCISE TAXES
0
Paragraph 1. The authority citation for part 54 continues to read in
part as follows:
Authority: Authority: 26 U.S.C. 7805. * * *
Section 54.9831-1 also issued under 26 U.S.C. 9833; * * *
0
Par 2. Section 54.9831-1 is amended by adding paragraph (c)(3)(vii) to
read as follows:
Sec. 54.9831-1 Special rules relating to group health plans.
* * * * *
(c) * * *
(3) * * *
(vii) Limited wraparound coverage. Limited benefits provided
through a group health plan that wrap around eligible individual health
insurance (or Basic Health Plan coverage described in section 1331 of
the Patient Protection and Affordable Care Act); or that wrap around
coverage under a Multi-State Plan described in section 1334 of the
Patient Protection and Affordable Care Act, collectively referred to as
``limited wraparound coverage,'' are excepted benefits if all of the
following conditions are satisfied. For this purpose, eligible
individual health insurance is individual health insurance coverage
that is not a grandfathered health plan (as described in section 1251
of the Patient Protection and Affordable Care Act and 29 CFR 2590.715-
1251), not a transitional individual health insurance plan (as
described in the March 5, 2014 Insurance Standards Bulletin Series--
Extension of Transitional Policy through October 1, 2016), and does not
consist solely of excepted benefits (as defined in paragraph (c) of
this section).
(A) Covers additional benefits. The limited wraparound coverage
provides meaningful benefits beyond coverage of cost sharing under
either the eligible individual health insurance, Basic Health Program
coverage, or Multi-State Plan coverage. The limited wraparound coverage
must not provide benefits only under a coordination-of-benefits
provision and must not consist of an account-based reimbursement
arrangement.
(B) Limited in amount. The annual cost of coverage per employee
(and any covered dependents, as defined in Sec. 54.9801-2) under the
limited wraparound coverage does not exceed the greater of the amount
determined under either paragraph (c)(3)(vii)(B)(1) or (2) of this
section. Making a determination regarding the annual cost of coverage
per employee must occur on an aggregate basis relying on sound
actuarial principles.
(1) The maximum permitted annual salary reduction contribution
toward health flexible spending arrangements, indexed in the manner
prescribed under section 125(i)(2). For this purpose, the cost of
coverage under the limited wraparound includes both employer and
employee contributions towards coverage and is determined in the same
manner as the applicable premium is calculated under a COBRA
continuation provision.
(2) Fifteen percent of the cost of coverage under the primary plan.
For this purpose, the cost of coverage under the primary plan and under
the limited wraparound coverage includes both employer and employee
contributions towards the coverage and each is determined in the same
manner as the applicable premium is calculated under a COBRA
continuation provision.
(C) Nondiscrimination. All of the conditions of this paragraph
(c)(3)(vii)(C) are satisfied.
(1) No preexisting condition exclusion. The limited wraparound
coverage does not impose any preexisting condition exclusion,
consistent with the requirements of section 2704 of the PHS Act
(incorporated by reference into section 9815) and 29 CFR 2590.715-2704.
(2) No discrimination based on health status. The limited
wraparound coverage does not discriminate against individuals in
eligibility, benefits, or premiums based on any health factor of an
individual (or any dependent of the individual, as defined in Sec.
54.9801-2), consistent with the requirements of section 9802 and
section 2705 of the PHS Act (incorporated by reference into section
9815).
(3) No discrimination in favor of highly compensated individuals.
Neither the limited wraparound coverage, nor any other group health
plan coverage offered by the plan sponsor, fails to comply with section
2716 of the PHS Act (incorporated by reference into section 9815) or
fails to be excludible from income for any individual due to the
application of section 105(h) (as applicable).
(D) Plan eligibility requirements. Individuals eligible for the
wraparound coverage are not enrolled in excepted benefit coverage under
paragraph (c)(3)(v) of this section (relating to health FSAs). In
addition, the conditions set forth in either paragraph
(c)(3)(vii)(D)(1) or (2) of this section are met.
(1) Limited wraparound coverage that wraps around eligible
individual insurance for persons who are not full-time employees.
Coverage that wraps around eligible individual health insurance (or
that wraps around Basic Health Plan coverage) must satisfy all of the
conditions of this paragraph (c)(3)(vii)(D)(1).
(i) For each year for which limited wraparound coverage is offered,
the employer that is the sponsor of the plan offering limited
wraparound coverage, or the employer participating in a plan offering
limited wraparound coverage, offers to its full-time employees coverage
that is substantially similar to coverage that the employer would need
to offer to its full-time employees in order not to be subject to a
potential assessable payment under the employer shared responsibility
provisions of section 4980H(a), if such provisions were applicable;
provides minimum value (as defined in section 36B(c)(2)(C)(ii)); and is
reasonably expected to be affordable (applying the safe harbor rules
for determining affordability set forth in Sec. 54.4980H-5(e)(2)). If
a plan or issuer providing limited wraparound coverage takes reasonable
steps to ensure that employers disclose to the plan or issuer necessary
information regarding their coverage offered and affordability
information, the plan or issuer is permitted to rely on reasonable
representations by employers regarding this information, unless the
plan or issuer has specific knowledge to the contrary. In the event
that the employer that is the sponsor of the plan offering
[[Page 14005]]
wraparound coverage, or the employer participating in a plan offering
wraparound coverage, has no full-time employees for any plan year
limited wraparound coverage is offered, the requirement of this
paragraph (c)(3)(vii)(D)(1)(i) is considered satisfied.
(ii) Eligibility for the limited wraparound coverage is limited to
employees who are reasonably determined at the time of enrollment to
not be full-time employees (and their dependents, as defined in Sec.
54.9801-2), or who are retirees (and their dependents, as defined in
Sec. 54.9801-2). For this purpose, full-time employees are employees
who are reasonably expected to work at least an average of 30 hours per
week.
(iii) Other group health plan coverage, not limited to excepted
benefits, is offered to the individuals eligible for the limited
wraparound coverage. Only individuals eligible for the other group
health plan coverage are eligible for the limited wraparound coverage.
(2) Limited coverage that wraps around Multi-State Plan coverage.
Coverage that wraps around Multi-State Plan coverage must satisfy all
of the conditions of this paragraph (c)(3)(vii)(D)(2). For this
purpose, the term ``full-time employee'' means a ``full-time employee''
as defined in Sec. 54.4980H-1(a)(21) who is not in a limited non-
assessment period for certain employees (as defined in Sec. 54.4980H-
1(a)(26)). Moreover, if a plan or issuer providing limited wraparound
coverage takes reasonable steps to ensure that employers disclose to
the plan or issuer necessary information regarding their coverage
offered and contribution levels for 2013 or 2014 (as applicable), and
for any year in which limited wraparound coverage is offered, the plan
or issuer is permitted to rely on reasonable representations by
employers regarding this information, unless the plan or issuer has
specific knowledge to the contrary. Consistent with the reporting and
evaluation criteria of paragraph (c)(3)(vii)(E) of this section, the
Office of Personnel Management may verify that plans and issuers have
reasonable mechanisms in place to ensure that contributing employers
meet these standards.
(i) The limited wraparound coverage is reviewed and approved by the
Office of Personnel Management, consistent with the reporting and
evaluation criteria of paragraph (c)(3)(vii)(E) of this section, to
provide benefits in conjunction with coverage under a Multi-State Plan
authorized under section 1334 of the Patient Protection and Affordable
Care Act. The Office of Personnel Management may revoke approval if it
determines that continued approval is inconsistent with the reporting
and evaluation criteria of paragraph (c)(3)(vii)(E) of this section.
(ii) The employer offered coverage in the plan year that began in
either 2013 or 2014 that is substantially similar to coverage that the
employer would need to have offered to its full-time employees in order
to not be subject to an assessable payment under the employer shared
responsibility provisions of section 4980H(a), if such provisions had
been applicable. In the event that a plan that offered coverage in 2013
or 2014 has no full-time employees for any plan year limited wraparound
coverage is offered, the requirement of this paragraph
(c)(3)(vii)(D)(2)(ii) is considered satisfied.
(iii) In the plan year that began in either 2013 or 2014, the
employer offered coverage to a substantial portion of full-time
employees that provided minimum value (as defined in section
36B(c)(2)(C)(ii)) and was affordable (applying the safe harbor rules
for determining affordability set forth in Sec. 54.4980H-5(e)(2)). In
the event that the plan that offered coverage in 2013 or 2014 has no
full-time employees for any plan year limited wraparound coverage is
offered, the requirement of this paragraph (c)(3)(vii)(D)(2)(iii) is
considered satisfied.
(iv) For the duration of the pilot program, as described in
paragraph (c)(3)(vii)(F) of this section, the employer's annual
aggregate contributions for both primary and limited wraparound
coverage are substantially the same as the employer's total
contributions for coverage offered to full-time employees in 2013 or
2014.
(E) Reporting--(1) Reporting by group health plans and group health
insurance issuers. A self-insured group health plan, or a health
insurance issuer, offering or proposing to offer limited wraparound
coverage in connection with Multi-State Plan coverage pursuant to
paragraph (c)(3)(vii)(D)(2) of this section reports to the Office of
Personnel Management (OPM), in a form and manner specified in guidance,
information OPM reasonably requires to determine whether the plan or
issuer qualifies to offer such coverage or complies with the applicable
requirements of this section.
(2) Reporting by group health plan sponsors. The plan sponsor of a
group health plan offering limited wraparound coverage under paragraph
(c)(3)(vii) of this section, must report to the Department of Health
and Human Services (HHS), in a form and manner specified in guidance,
information HHS reasonably requires.
(F) Pilot program with sunset. The provisions of paragraph
(c)(3)(vii) of this section apply to limited wraparound coverage that
is first offered no earlier than January 1, 2016 and no later than
December 31, 2018 and that ends no later than on the later of:
(1) The date that is three years after the date limited wraparound
coverage is first offered; or
(2) The date on which the last collective bargaining agreement
relating to the plan terminates after the date limited wraparound
coverage is first offered (determined without regard to any extension
agreed to after the date limited wraparound coverage is first offered).
* * * * *
Department of Labor
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons stated in the preamble, the Department of Labor
amends 29 CFR part 2590 as follows:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
3. The authority citation for Part 2590 continues to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1185c, 1185d, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec.
401(b), Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec.
512(d), Pub. L. 110-343, 122 Stat. 3765; Pub. L. 110-460, 122 Stat.
5123; Secretary of Labor's Order 1-2011, 77 FR 1088 (January 9,
2012).
0
4. Section 2590.732 is amended by adding paragraph (c)(3)(vii) to read
as follows:
Sec. 2590.732 Special rules relating to group health plans.
* * * * *
(c) * * *
(3) * * *
(vii) Limited wraparound coverage. Limited benefits provided
through a group health plan that wrap around eligible individual health
insurance (or Basic Health Plan coverage described in section 1331 of
the Patient Protection and Affordable Care Act); or that wrap around
coverage under a Multi-State Plan described in section 1334 of the
Patient Protection and Affordable Care Act, collectively referred to as
``limited wraparound coverage,'' are excepted benefits if all of the
following conditions are satisfied. For this
[[Page 14006]]
purpose, eligible individual health insurance is individual health
insurance coverage that is not a grandfathered health plan (as
described in section 1251 of the Patient Protection and Affordable Care
Act and Sec. 2590.715-1251), not a transitional individual health
insurance plan (as described in the March 5, 2014 Insurance Standards
Bulletin Series--Extension of Transitional Policy through October 1,
2016), and does not consist solely of excepted benefits (as defined in
paragraph (c) of this section).
(A) Covers additional benefits. The limited wraparound coverage
provides meaningful benefits beyond coverage of cost sharing under
either the eligible individual health insurance, Basic Health Program
coverage, or Multi-State Plan coverage. The limited wraparound coverage
must not provide benefits only under a coordination-of-benefits
provision and must not consist of an account-based reimbursement
arrangement.
(B) Limited in amount. The annual cost of coverage per employee
(and any covered dependents, as defined in Sec. 2590.701-2) under the
limited wraparound coverage does not exceed the greater of the amount
determined under either paragraph (c)(3)(vii)(B)(1) or (2) of this
section. Making a determination regarding the annual cost of coverage
per employee must occur on an aggregate basis relying on sound
actuarial principles.
(1) The maximum permitted annual salary reduction contribution
toward health flexible spending arrangements, indexed in the manner
prescribed under section 125(i)(2) of the Code. For this purpose, the
cost of coverage under the limited wraparound includes both employer
and employee contributions towards coverage and is determined in the
same manner as the applicable premium is calculated under a COBRA
continuation provision.
(2) Fifteen percent of the cost of coverage under the primary plan.
For this purpose, the cost of coverage under the primary plan and under
the limited wraparound coverage includes both employer and employee
contributions towards the coverage and each is determined in the same
manner as the applicable premium is calculated under a COBRA
continuation provision.
(C) Nondiscrimination. All of the conditions of this paragraph
(c)(3)(vii)(C) are satisfied.
(1) No preexisting condition exclusion. The limited wraparound
coverage does not impose any preexisting condition exclusion,
consistent with the requirements of section 2704 of the PHS Act
(incorporated by reference into section 715 of ERISA) and Sec.
2590.715-2704.
(2) No discrimination based on health status. The limited
wraparound coverage does not discriminate against individuals in
eligibility, benefits, or premiums based on any health factor of an
individual (or any dependent of the individual, as defined in Sec.
2590.701-2), consistent with the requirements of section 702 of ERISA
and section 2705 of the PHS Act (incorporated by reference into section
715 of ERISA).
(3) No discrimination in favor of highly compensated individuals.
Neither the limited wraparound coverage, nor any other group health
plan coverage offered by the plan sponsor, fails to comply with section
2716 of the PHS Act (incorporated by reference into section 715 of
ERISA) or fails to be excludible from income for any individual due to
the application of section 105(h) of the Code (as applicable).
(D) Plan eligibility requirements. Individuals eligible for the
wraparound coverage are not enrolled in excepted benefit coverage under
paragraph (c)(3)(v) of this section (relating to health FSAs). In
addition, the conditions set forth in either paragraph
(c)(3)(vii)(D)(1) or (2) of this section are met.
(1) Limited wraparound coverage that wraps around eligible
individual insurance for persons who are not full-time employees.
Coverage that wraps around eligible individual health insurance (or
that wraps around Basic Health Plan coverage) must satisfy all of the
conditions of this paragraph (c)(3)(vii)(D)(1).
(i) For each year for which limited wraparound coverage is offered,
the employer that is the sponsor of the plan offering limited
wraparound coverage, or the employer participating in a plan offering
limited wraparound coverage, offers to its full-time employees coverage
that is substantially similar to coverage that the employer would need
to offer to its full-time employees in order not to be subject to a
potential assessable payment under the employer shared responsibility
provisions of section 4980H(a) of the Code, if such provisions were
applicable; provides minimum value (as defined in section
36B(c)(2)(C)(ii) of the Code); and is reasonably expected to be
affordable (applying the safe harbor rules for determining
affordability set forth in 26 CFR 54.4980H-5(e)(2)). If a plan or
issuer providing limited wraparound coverage takes reasonable steps to
ensure that employers disclose to the plan or issuer necessary
information regarding their coverage offered and affordability
information, the plan or issuer is permitted to rely on reasonable
representations by employers regarding this information, unless the
plan or issuer has specific knowledge to the contrary. In the event
that the employer that is the sponsor of the plan offering wraparound
coverage, or the employer participating in a plan offering wraparound
coverage, has no full-time employees for any plan year limited
wraparound coverage is offered, the requirement of this paragraph
(c)(3)(vii)(D)(1)(i) is considered satisfied.
(ii) Eligibility for the limited wraparound coverage is limited to
employees who are reasonably determined at the time of enrollment to
not be full-time employees (and their dependents, as defined in Sec.
2590.701-2), or who are retirees (and their dependents, as defined in
Sec. 2590.701-2). For this purpose, full-time employees are employees
who are reasonably expected to work at least an average of 30 hours per
week.
(iii) Other group health plan coverage, not limited to excepted
benefits, is offered to the individuals eligible for the limited
wraparound coverage. Only individuals eligible for the other group
health plan coverage are eligible for the limited wraparound coverage.
(2) Limited coverage that wraps around Multi-State Plan coverage.
Coverage that wraps around Multi-State Plan coverage must satisfy all
of the conditions of this paragraph (c)(3)(vii)(D)(2). For this
purpose, the term ``full-time employee'' means a ``full-time employee''
as defined in 26 CFR 54.4980H-1(a)(21) who is not in a limited non-
assessment period for certain employees (as defined in 26 CFR 54.4980H-
1(a)(26)). Moreover, if a plan or issuer providing limited wraparound
coverage takes reasonable steps to ensure that employers disclose to
the plan or issuer necessary information regarding their coverage
offered and contribution levels for 2013 or 2014 (as applicable), and
for any year in which limited wraparound coverage is offered, the plan
or issuer is permitted to rely on reasonable representations by
employers regarding this information, unless the plan or issuer has
specific knowledge to the contrary. Consistent with the reporting and
evaluation criteria of paragraph (c)(3)(vii)(E) of this section, the
Office of Personnel Management may verify that plans and issuers have
reasonable mechanisms in place to ensure that contributing employers
meet these standards.
(i) The limited wraparound coverage is reviewed and approved by the
Office of Personnel Management, consistent with the reporting and
evaluation
[[Page 14007]]
criteria of paragraph (c)(3)(vii)(E) of this section, to provide
benefits in conjunction with coverage under a Multi-State Plan
authorized under section 1334 of the Patient Protection and Affordable
Care Act. The Office of Personnel Management may revoke approval if it
determines that continued approval is inconsistent with the reporting
and evaluation criteria of paragraph (c)(3)(vii)(E) of this section.
(ii) The employer offered coverage in the plan year that began in
either 2013 or 2014 that is substantially similar to coverage that the
employer would need to have offered to its full-time employees in order
to not be subject to an assessable payment under the employer shared
responsibility provisions of section 4980H(a) of the Code, if such
provisions had been applicable. In the event that a plan that offered
coverage in 2013 or 2014 has no full-time employees for any plan year
limited wraparound coverage is offered, the requirement of this
paragraph (c)(3)(vii)(D)(2)(ii) is considered satisfied.
(iii) In the plan year that began in either 2013 or 2014, the
employer offered coverage to a substantial portion of full-time
employees that provided minimum value (as defined in section
36B(c)(2)(C)(ii) of the Code) and was affordable (applying the safe
harbor rules for determining affordability set forth in 26 CFR
54.4980H-5(e)(2)). In the event that the plan that offered coverage in
2013 or 2014 has no full-time employees for any plan year limited
wraparound coverage is offered, the requirement of this paragraph
(c)(3)(vii)(D)(2)(iii) is considered satisfied.
(iv) For the duration of the pilot program, as described in
paragraph (c)(3)(vii)(F) of this section, the employer's annual
aggregate contributions for both primary and limited wraparound
coverage are substantially the same as the employer's total
contributions for coverage offered to full-time employees in 2013 or
2014.
(E) Reporting--(1) Reporting by group health plans and group health
insurance issuers. A self-insured group health plan, or a health
insurance issuer, offering or proposing to offer limited wraparound
coverage in connection with Multi-State Plan coverage pursuant to
paragraph (c)(3)(vii)(D)(2) of this section reports to the Office of
Personnel Management (OPM), in a form and manner specified in guidance,
information OPM reasonably requires to determine whether the plan or
issuer qualifies to offer such coverage or complies with the applicable
requirements of this section.
(2) Reporting by group health plan sponsors. The plan sponsor of a
group health plan offering limited wraparound coverage under paragraph
(c)(3)(vii) of this section, must report to the Department of Health
and Human Services (HHS), in a form and manner specified in guidance,
information HHS reasonably requires.
(F) Pilot program with sunset--The provisions of paragraph
(c)(3)(vii) of this section apply to limited wraparound coverage that
is first offered no earlier than January 1, 2016 and no later than
December 31, 2018 and that ends no later than on the later of:
(1) The date that is three years after the date limited wraparound
coverage is first offered; or
(2) The date on which the last collective bargaining agreement
relating to the plan terminates after the date limited wraparound
coverage is first offered (determined without regard to any extension
agreed to after the date limited wraparound coverage is first offered).
* * * * *
Department of Health and Human Services
45 CFR Subtitle A
For the reasons stated in the preamble, the Department of Health
and Human Services amends 45 CFR part 146 as set forth below:
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
5. The authority citation for part 146 continues to read as follows:
Authority: Secs. 2702 through 2705, 2711 through 2723, 2791,
and 2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11
through 300gg-23, 300gg-91, and 300gg-92).
0
6. Section 146.145 is amended by adding paragraph (b)(3)(vii) to read
as follows:
Sec. 146.145 Special rules relating to group health plans.
* * * * *
(b) * * *
(3) * * *
(vii) Limited wraparound coverage. Limited benefits provided
through a group health plan that wrap around eligible individual health
insurance (or Basic Health Plan coverage described in section 1331 of
the Patient Protection and Affordable Care Act); or that wrap around
coverage under a Multi-State Plan described in section 1334 of the
Patient Protection and Affordable Care Act, collectively referred to as
``limited wraparound coverage,'' are excepted benefits if all of the
following conditions are satisfied. For this purpose, eligible
individual health insurance is individual health insurance coverage
that is not a grandfathered health plan (as described in section 1251
of the Patient Protection and Affordable Care Act and Sec. 147.140 of
this subchapter), not a transitional individual health insurance plan
(as described in the March 5, 2014 Insurance Standards Bulletin
Series--Extension of Transitional Policy through October 1, 2016), and
does not consist solely of excepted benefits (as defined in paragraph
(b) of this section).
(A) Covers additional benefits. The limited wraparound coverage
provides meaningful benefits beyond coverage of cost sharing under
either the eligible individual health insurance, Basic Health Program
coverage, or Multi-State Plan coverage. The limited wraparound coverage
must not provide benefits only under a coordination-of-benefits
provision and must not consist of an account-based reimbursement
arrangement.
(B) Limited in amount. The annual cost of coverage per employee
(and any covered dependents, as defined in Sec. 144.103 of this
subchapter) under the limited wraparound coverage does not exceed the
greater of the amount determined under either paragraph
(b)(3)(vii)(B)(1) or (2) of this section. Making a determination
regarding the annual cost of coverage per employee must occur on an
aggregate basis relying on sound actuarial principles.
(1) The maximum permitted annual salary reduction contribution
toward health flexible spending arrangements, indexed in the manner
prescribed under section 125(i)(2) of the Internal Revenue Code. For
this purpose, the cost of coverage under the limited wraparound
includes both employer and employee contributions towards coverage and
is determined in the same manner as the applicable premium is
calculated under a COBRA continuation provision.
(2) Fifteen percent of the cost of coverage under the primary plan.
For this purpose, the cost of coverage under the primary plan and under
the limited wraparound coverage includes both employer and employee
contributions towards the coverage and each is determined in the same
manner as the applicable premium is calculated under a COBRA
continuation provision.
(C) Nondiscrimination. All of the conditions of this paragraph
(b)(3)(vii)(C) are satisfied.
(1) No preexisting condition exclusion. The limited wraparound
coverage does not impose any preexisting condition exclusion,
[[Page 14008]]
consistent with the requirements of section 2704 of the PHS Act and
Sec. 147.108 of this subchapter.
(2) No discrimination based on health status. The limited
wraparound coverage does not discriminate against individuals in
eligibility, benefits, or premiums based on any health factor of an
individual (or any dependent of the individual, as defined in Sec.
144.103 of this subchapter), consistent with the requirements of
section 2705 of the PHS Act.
(3) No discrimination in favor of highly compensated individuals.
Neither the limited wraparound coverage, nor any other group health
plan coverage offered by the plan sponsor, fails to comply with section
2716 of the PHS Act or fails to be excludible from income for any
individual due to the application of section 105(h) of the Internal
Revenue Code (as applicable).
(D) Plan eligibility requirements. Individuals eligible for the
wraparound coverage are not enrolled in excepted benefit coverage under
paragraph (b)(3)(v) of this section (relating to health FSAs). In
addition, the conditions set forth in either paragraph
(b)(3)(vii)(D)(1) or (2) of this section are met.
(1) Limited wraparound coverage that wraps around eligible
individual insurance for persons who are not full-time employees.
Coverage that wraps around eligible individual health insurance (or
that wraps around Basic Health Plan coverage) must satisfy all of the
conditions of this paragraph (b)(3)(vii)(D)(1).
(i) For each year for which limited wraparound coverage is offered,
the employer that is the sponsor of the plan offering limited
wraparound coverage, or the employer participating in a plan offering
limited wraparound coverage, offers to its full-time employees coverage
that is substantially similar to coverage that the employer would need
to offer to its full-time employees in order not to be subject to a
potential assessable payment under the employer shared responsibility
provisions of section 4980H(a) of the Internal Revenue Code, if such
provisions were applicable; provides minimum value (as defined in
section 36B(c)(2)(C)(ii) of the Internal Revenue Code); and is
reasonably expected to be affordable (applying the safe harbor rules
for determining affordability set forth in 26 CFR 54.4980H-5(e)(2)). If
a plan or issuer providing limited wraparound coverage takes reasonable
steps to ensure that employers disclose to the plan or issuer necessary
information regarding their coverage offered and affordability
information, the plan or issuer is permitted to rely on reasonable
representations by employers regarding this information, unless the
plan or issuer has specific knowledge to the contrary. In the event
that the employer that is the sponsor of the plan offering wraparound
coverage, or the employer participating in a plan offering wraparound
coverage, has no full-time employees for any plan year limited
wraparound coverage is offered, the requirement of this paragraph
(b)(3)(vii)(D)(1)(i) is considered satisfied.
(ii) Eligibility for the limited wraparound coverage is limited to
employees who are reasonably determined at the time of enrollment to
not be full-time employees (and their dependents, as defined in Sec.
144.103 of this subchapter), or who are retirees (and their dependents,
as defined in Sec. 144.103 of this subchapter). For this purpose,
full-time employees are employees who are reasonably expected to work
at least an average of 30 hours per week.
(iii) Other group health plan coverage, not limited to excepted
benefits, is offered to the individuals eligible for the limited
wraparound coverage. Only individuals eligible for the other group
health plan coverage are eligible for the limited wraparound coverage.
(2) Limited coverage that wraps around Multi-State Plan coverage.
Coverage that wraps around Multi-State Plan coverage must satisfy all
of the conditions of this paragraph (b)(3)(vii)(D)(2). For this
purpose, the term ``full-time employee'' means a ``full-time employee''
as defined in 26 CFR 54.4980H-1(a)(21) who is not in a limited non-
assessment period for certain employees (as defined in 26 CFR 54.4980H-
1(a)(26)). Moreover, if a plan or issuer providing limited wraparound
coverage takes reasonable steps to ensure that employers disclose to
the plan or issuer necessary information regarding their coverage
offered and contribution levels for 2013 or 2014 (as applicable), and
for any year in which limited wraparound coverage is offered, the plan
or issuer is permitted to rely on reasonable representations by
employers regarding this information, unless the plan or issuer has
specific knowledge to the contrary. Consistent with the reporting and
evaluation criteria of paragraph (b)(3)(vii)(E) of this section, the
Office of Personnel Management may verify that plans and issuers have
reasonable mechanisms in place to ensure that contributing employers
meet these standards.
(i) The limited wraparound coverage is reviewed and approved by the
Office of Personnel Management, consistent with the reporting and
evaluation criteria of paragraph (b)(3)(vii)(E) of this section, to
provide benefits in conjunction with coverage under a Multi-State Plan
authorized under section 1334 of the Patient Protection and Affordable
Care Act. The Office of Personnel Management may revoke approval if it
determines that continued approval is inconsistent with the reporting
and evaluation criteria of paragraph (b)(3)(vii)(E) of this section.
(ii) The employer offered coverage in the plan year that began in
either 2013 or 2014 that is substantially similar to coverage that the
employer would need to have offered to its full-time employees in order
to not be subject to an assessable payment under the employer shared
responsibility provisions of section 4980H(a) of the Internal Revenue
Code, if such provisions had been applicable. In the event that a plan
that offered coverage in 2013 or 2014 has no full-time employees for
any plan year limited wraparound coverage is offered, the requirement
of this paragraph (b)(3)(vii)(D)(2)(ii) is considered satisfied.
(iii) In the plan year that began in either 2013 or 2014, the
employer offered coverage to a substantial portion of full-time
employees that provided minimum value (as defined in section
36B(c)(2)(C)(ii) of the Internal Revenue Code) and was affordable
(applying the safe harbor rules for determining affordability set forth
in 26 CFR 54.4980H-5(e)(2)). In the event that the plan that offered
coverage in 2013 or 2014 has no full-time employees for any plan year
limited wraparound coverage is offered, the requirement of this
paragraph (b)(3)(vii)(D)(2)(iii) is considered satisfied.
(iv) For the duration of the pilot program, as described in
paragraph (b)(3)(vii)(F) of this section, the employer's annual
aggregate contributions for both primary and limited wraparound
coverage are substantially the same as the employer's total
contributions for coverage offered to full-time employees in 2013 or
2014.
(E) Reporting--(1) Reporting by group health plans and group health
insurance issuers. A self-insured group health plan, or a health
insurance issuer, offering or proposing to offer limited wraparound
coverage in connection with Multi-State Plan coverage pursuant to
paragraph (b)(3)(vii)(D)(2) of this section reports to the Office of
Personnel Management (OPM), in a form and manner specified in guidance,
information OPM reasonably requires to determine
[[Page 14009]]
whether the plan or issuer qualifies to offer such coverage or complies
with the applicable requirements of this section.
(2) Reporting by group health plan sponsors. The plan sponsor of a
group health plan offering limited wraparound coverage under paragraph
(b)(3)(vii) of this section, must report to the Department of Health
and Human Services (HHS), in a form and manner specified in guidance,
information HHS reasonably requires.
(F) Pilot program with sunset--The provisions of paragraph
(b)(3)(vii) of this section apply to limited wraparound coverage that
is first offered no earlier than January 1, 2016 and no later than
December 31, 2018 and that ends no later than on the later of:
(1) The date that is three years after the date limited wraparound
coverage is first offered; or
(2) The date on which the last collective bargaining agreement
relating to the plan terminates after the date limited wraparound
coverage is first offered (determined without regard to any extension
agreed to after the date limited wraparound coverage is first offered).
* * * * *
[FR Doc. 2015-06066 Filed 3-16-15; 11:15 am]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P
