Federal Register / Vol. 77, No. 74 / Tuesday, April 17, 2012 / Proposed Rules 22691 

will facilitate the VEUs’ ability to 

comply with the specific conditions 

placed on their qualifications as VEUs 

and distinguish those conditions from 

conditions placed on items received 

under other authorizations. This will 

enhance accountability and ensuring 

effective control of items shipped under 

Authorization VEU and other 

authorizations. 

In addition, this action is likely to 

enhance the attractiveness of shipping 

‘‘Eligible Items’’ under Authorization 

VEU for exporters and reexporters, or 

persons making in-country transfers. 

This potential benefit outweighs any 

perceived inconvenience to exporters 

and reexporters, or persons making incountry transfers, who ship under 

Authorization VEU, as they retain the 

option to ship under an individual 

validated license. 

In this rule, BIS also proposes to 

amend section 748.15—Authorization 

Validated End-User—by adding 

paragraph (h)—Termination of 

Conditions on VEU Authorizations. This 

proposed amendment would clarify that 

VEUs who are subject to item-specific 

conditions and have received items 

subject to such conditions under 

Authorization VEU would no longer be 

bound by the conditions associated with 

the items if the items no longer require 

a license for export or reexport to the 

PRC or India (depending on the VEU’s 

location) or become eligible for 

shipment under a license exception to 

the destination. This proposed 

amendment would be the same, in 

effect, as existing section 750.7(i) 

(Terminating license conditions), which 

generally applies to exporters and 

reexporters who have shipped under 

license. 

For the reasons stated, the Chief 

Counsel for Regulation of the 

Department of Commerce has certified 

to the Chief Counsel for Advocacy of the 

Small Business Administration that this 

proposed rule, if adopted in final form, 

would not have a significant economic 

impact on a substantial number of small 

entities. 

List of Subjects in 15 CFR Part 748 

Administrative practice and 

procedure, Exports, Reporting and 

recordkeeping requirements. 

Accordingly, part 748 of the Export 

Administration Regulations (15 CFR 

parts 730–774) is proposed to be 

amended as follows: 

PART 748—[AMENDED] 

1. The authority citation for 15 CFR 

part 748 continues to read as follows: 

Authority: 50 U.S.C. app. 2401 et seq; 50 

U.S.C. 1701 et seq.; E.O. 13026, 61 FR 58767, 

3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 

FR 44025, 3 CFR, 2001 Comp., p. 783; Notice 

of August 12, 2011 (76 FR 50661 (August 16, 

2011)). 

2. Section 748.15 is amended by 

adding paragraphs (g), (h) and (i) to read 

as follows: 

§ 748.15 Authorization Validated End-User 

(VEU). 

* * * * * 

(g) Notification requirement. 

Exporters and reexporters shipping 

under Authorization VEU and persons 

transferring (in-country) under 

Authorization VEU are required to 

provide the validated end-users to 

whom they are shipping notice of the 

shipment. Such notification must be 

conveyed to the VEU in writing and 

must include a list of the contents of the 

shipment and a list of the ECCNs under 

which the items in the shipment are 

classified, as well as a statement that the 

shipment is, will be, or was made 

pursuant to Authorization VEU. 

Notification must be made within seven 

calendar days of the export, reexport or 

transfer (in-country) to the VEU. 

Exporters, reexporters and VEUs are 

required to maintain the notifications 

they receive in accordance with their 

recordkeeping requirements. 

(h) Termination of Conditions on VEU 

Authorizations. VEUs that are subject to 

item-specific conditions and have 

received items subject to such 

conditions under Authorization VEU are 

no longer bound by the conditions 

associated with the items if the items no 

longer require a license for export or 

reexport to the PRC or India, as 

applicable, or become eligible for 

shipment under a license exception to 

the destination. Termination of VEU 

conditions does not relieve a validated 

end-user of its responsibility for 

violations that occurred prior to the 

availability of a license exception or 

prior to the removal of license 

requirements. 

(i) Records. Records of items that were 

shipped under Authorization VEU prior 

to the removal of a license requirement 

or the availability of a license exception 

remain subject to the review 

requirements of paragraph (f)(2) of this 

section on and after the date that the 

license requirement was removed or the 

license exception became applicable. 

Dated: April 10, 2012. 

Kevin J. Wolf, 

Assistant Secretary for Export 

Administration. 

[FR Doc. 2012–9237 Filed 4–16–12; 8:45 am] 

BILLING CODE 3510–33–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 40 and 46 

[REG–136008–11] 

RIN 1545–BK59 

Fees on Health Insurance Policies and 

Self-Insured Plans for the PatientCentered Outcomes Research Trust 

Fund 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations that implement 

and provide guidance on the fees 

imposed by the Patient Protection and 

Affordable Care Act on issuers of certain 

health insurance policies and plan 

sponsors of certain self-insured health 

plans to fund the Patient-Centered 

Outcomes Research Trust Fund. These 

proposed regulations affect the issuers 

and plan sponsors that are directed to 

pay those fees. This document also 

contains a request for comments and 

provides notice of public hearing on 

these proposed regulations. 

DATES: Written or electronic comments 

must be received by July 16, 2012. 

Requests to speak and outlines of topics 

to be discussed at the public hearing 

scheduled for Wednesday, August 8, 

2012, at 10 a.m., must be received by 

July 30, 2012. 

ADDRESSES: Send submissions to 

CC:PA:LPD:PR (REG–136008–11), 

Internal Revenue Service, P.O. Box 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be handdelivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC:PA:LPD:PR (REG–136008–11), 

Courier’s Desk Internal Revenue 

Service, 1111 Constitution Avenue NW., 

Washington, DC, or sent electronically 

via the IRS Internet site via the Federal 

eRulemaking Portal at 

www.regulations.gov (IRS REG–136008– 

11). The public hearing will be held in 

the IRS Auditorium at the Internal 

Revenue Building, 1111 Constitution 

Avenue NW., Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Rebecca L. Baxter at (202) 622–3970 

(regarding health insurance policies) or 

R. Lisa Mojiri-Azad at (202) 622–6080 

(regarding self-insured health 

arrangements); concerning the 

submission of comments or the public 

hearing, Oluwafunmilayo (Funmi) 


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Taylor at (202) 622–7180 (not toll-free 

numbers). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

The collection of information 

contained in this notice of proposed 

rulemaking has been submitted to the 

Office of Management and Budget in 

accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

3507(d)). Comments on the collection of 

information should be sent to the Office 

of Management and Budget, Attn: Desk 

Officer for the Department of the 

Treasury, Office of Information and 

Regulatory Affairs, Washington, DC 

20503, with copies to the Internal 

Revenue Service, Attn: IRS Reports 

Clearance Officer, 

SE:W:CAR:MP:T:T:SP, Washington, DC 

20224. Comments on the collection of 

information should be received by July 

16, 2012. Comments are specifically 

requested concerning: 

Whether the proposed collection of 

information is necessary for the proper 

performance of the functions of the IRS, 

including whether the information will 

have practical utility; 

How the quality, utility, and clarity of 

the information to be collected may be 

enhanced; 

How the burden of complying with 

the proposed collection of information 

may be minimized, including through 

the application of automated collection 

techniques or other forms of information 

technology; and 

Estimates of capital or start-up costs 

and costs of operation, maintenance, 

and purchase of services to provide 

information. 

The collections of information in 

these proposed regulations are in 

§ 46.4375–1(c)(2)(v) (use of National 

Association of Insurance Commissioners 

(NAIC) Supplemental Health Care 

Exhibit to calculate the fee under 

section 4375); § 46.4375–1(c)(2)(vi) (use 

of certain state forms to calculate the fee 

under section 4375); § 46.4376– 

1(b)(2)(G) (identification or designation 

of a plan sponsor under the governing 

plan document for certain applicable 

self-insured health plans); and 

§ 46.4376–1(c)(2)(v) (use of the Form 

5500, ‘‘Annual Return/Report of 

Employee Benefit Plan,’’ to calculate the 

fee under section 4376). 

The collections of information under 

§ 46.4375–1(c)(2)(v), § 46.4375– 

1(c)(2)(vi), and § 46.4376–1(c)(2)(v) are 

intended to lower the burden on issuers 

and plan sponsors of calculating the 

average number of lives covered for the 

applicable policy year or plan year. The 

burden for the collection of information 

contained in these provisions will be 

reflected in the burden on the Form 720 

‘‘Quarterly Federal Excise Tax Return’’ 

after it is revised to include the 

reporting and payment of the fee 

imposed by sections 4375 and 4376. 

The collection of information 

contained in § 46.4376–1(b)(2)(G) is 

necessary to provide certain entities that 

establish or maintain an applicable selfinsured health plan the flexibility to 

designate the person that will be 

responsible for reporting and paying the 

fee imposed by section 4376. The likely 

respondents are employers, employee 

organizations, or persons that establish 

or maintain an applicable self-insured 

health plan and are entitled to make an 

election under § 46.4376–1(b)(2)(G). 

Estimated number of respondents is 

10,000. 

Estimated average annual burden per 

respondent is 5 minutes. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a valid control 

number assigned by the Office of 

Management and Budget. 

Books or records relating to a 

collection of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by 26 

U.S.C. 6103. 

Background 

This document contains proposed 

amendments to 26 CFR part 40 (Excise 

Tax Procedural Regulations) and 26 CFR 

part 46 (relating to excise taxes imposed 

on policies issued by foreign insurers 

and obligations not in registered form) 

to implement the requirements under 

sections 4375 through 4377 of the 

Internal Revenue Code (Code). Sections 

4375 and 4376 of the Code impose fees 

on issuers of specified health insurance 

policies and plan sponsors of applicable 

self-insured health plans, and section 

4377 contains special rules that apply to 

these issuers and plan sponsors with 

respect to these fees. Sections 4375, 

4376, and 4377 were added to the Code 

by section 6301 of the Patient Protection 

and Affordable Care Act (Affordable 

Care Act), Public Law 111–148 (124 

Stat. 119 (2010)). 

The Affordable Care Act includes 

provisions that promote research to 

evaluate and compare health outcomes 

and the clinical effectiveness, risks, and 

benefits of medical treatments, services, 

procedures, drugs, and other strategies 

or items that treat, manage, diagnose, or 

prevent illness or injury. One such 

provision relates to the establishment of 

the private, nonprofit corporation, the 

Patient-Centered Outcomes Research 

Institute (the ‘‘Institute’’). The Institute 

will assist, through research, patients, 

clinicians, purchasers, and policymakers in making informed health 

decisions by advancing the quality and 

relevance of evidence-based medicine 

through the synthesis and dissemination 

of comparative clinical effectiveness 

research findings. The statute 

specifically prohibits the Secretary of 

Health and Human Services (HHS) from 

using the evidence or findings of the 

research conducted in determining 

coverage, reimbursement, or incentive 

programs unless it is through an 

iterative and transparent process which 

includes public comment and considers 

the effect on subpopulations. Nothing 

under this provision allows the 

Secretary of HHS to deny coverage of 

items or services solely on the basis of 

comparative clinical effectiveness 

research. The statute provides that the 

Institute will not develop a dollars-perquality-life-year estimate as a threshold 

to establish effective or recommended 

care. Section 6301 of the Affordable 

Care Act amended the Code by adding 

new section 9511 to establish the 

Patient-Centered Outcomes Research 

Trust Fund (the ‘‘Trust Fund’’), which is 

the funding source for the Institute. 

Section 6301 of the Affordable Care Act 

also added new Code sections 4375, 

4376, and 4377 to provide a funding 

source for the Trust Fund that is to be 

financed, in part, by fees to be paid by 

issuers of specified health insurance 

policies and sponsors of applicable selfinsured health plans. 

Statutory Provisions 

Section 4375(a) imposes a fee on an 

issuer of a specified health insurance 

policy for each policy year ending on or 

after October 1, 2012, and before 

October 1, 2019. Under section 4375(a), 

the fee is two dollars (one dollar in the 

case of policy years ending before 

October 1, 2013) multiplied by the 

average number of lives covered under 

the policy. Under section 4375(d), for 

policy years ending on or after October 

1, 2014, the fee is increased based on 

increases in the projected per capita 

amount of National Health 

Expenditures. Section 4375(b) provides 

that the fee imposed by section 4375(a) 

shall be paid by the issuer of the policy. 

Section 4375(c) defines specified 

health insurance policy as any accident 

or health insurance policy (including a 

policy under a group health plan) issued 

with respect to individuals residing in 

the United States. Section 4375(c)(2) 

excludes from a specified health 

insurance policy any insurance if 


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substantially all of its coverage is of 

excepted benefits described in section 

9832(c). Section 4375(c)(3) provides that 

a specified health insurance policy 

includes any prepaid health coverage 

arrangement described in section 

4375(c)(3)(B). An arrangement is 

described in section 4375(c)(3)(B) if, 

under the arrangement, fixed payments 

or premiums are received as 

consideration for a person’s agreement 

to provide or arrange for the provision 

of accident or health coverage to 

residents of the United States, regardless 

of how the coverage is provided or 

arranged to be provided. 

Section 4376 imposes a fee on a plan 

sponsor of an applicable self-insured 

health plan for each plan year ending on 

or after October 1, 2012, and before 

October 1, 2019. Under section 4376(a), 

the fee is two dollars (one dollar for 

plan years ending before October 1, 

2013) multiplied by the average number 

of lives covered under the plan for the 

plan year. Under section 4376(d), for 

plan years ending on or after October 1, 

2014, the fee is increased based on 

increases in the projected per capita 

amount of National Health 

Expenditures. Section 4376(b)(1) 

provides that the fee imposed by section 

4376(a) shall be paid by the plan 

sponsor. 

Section 4376(b)(2) defines plan 

sponsor as the employer in the case of 

a plan established or maintained by a 

single employer, or the employee 

organization in the case of a plan 

established or maintained by an 

employee organization. Section 

4376(b)(2) also provides that, in the case 

of (1) a plan established or maintained 

by two or more employers or jointly by 

one or more employers and one or more 

employee organizations, (2) a multiple 

employer welfare arrangement, or (3) a 

voluntary employees’ beneficiary 

association described in section 

501(c)(9), the plan sponsor is the 

association, committee, joint board of 

trustees, or other similar group of 

representatives of the parties who 

establish or maintain the plan. Section 

4376(b)(2) further provides that in the 

case of a plan established or maintained 

by a rural electric cooperative (as 

defined in section 3(40)(B)(iv) of the 

Employee Retirement Income Security 

Act of 1974 (ERISA)) or rural telephone 

cooperative association (as defined in 

section 3(40)(B)(v) of ERISA), the plan 

sponsor is the cooperative or association 

that established or maintained the plan. 

Section 4376(c) defines applicable 

self-insured health plan as any plan for 

providing accident or health coverage if 

any portion of the coverage is provided 

other than through an insurance policy, 

and the plan is established or 

maintained: (1) By one or more 

employers for the benefit of their 

employees or former employees, (2) by 

one or more employee organizations for 

the benefit of their members or former 

members, (3) jointly by one or more 

employers and one or more employee 

organizations for the benefit of 

employees or former employees, (4) by 

a voluntary employees’ beneficiary 

association described in section 

501(c)(9), (5) by any organization 

described in section 501(c)(6), or (6) if 

not previously described, by a multiple 

employer welfare arrangement (as 

defined in section 3(40) of ERISA), a 

rural electric cooperative (as defined in 

section 3(40)(B)(iv) of ERISA), or a rural 

telephone cooperative association (as 

defined in section 3(40)(B)(v) of ERISA). 

Section 4377 includes definitions and 

special rules that apply for purposes of 

sections 4375 and 4376. Section 

4377(a)(1) defines accident and health 

coverage as any coverage that, if 

provided by an insurance policy, would 

cause the policy to be a specified health 

insurance policy (as defined in section 

4375(c)). 

Section 4377(b)(1)(B) provides that 

‘‘[n]otwithstanding any other law or rule 

of law, governmental entities shall not 

be exempt from’’ the fee imposed by 

sections 4375 and 4376 unless the 

policy or plan is an exempt 

governmental program. Section 

4377(b)(3) defines exempt governmental 

program as (1) any insurance program 

established under title XVIII of the 

Social Security Act (42 U.S.C. 1395 et 

seq.) (Medicare), (2) the medical 

assistance program established by title 

XIX (42 U.S.C. 1396 et seq.) (Medicaid) 

or title XXI of the Social Security Act 

(42 U.S.C. 1397aa et seq.) (Children’s 

Health Insurance Program), (3) any 

program established by Federal law for 

providing medical care (other than 

through insurance policies) to 

individuals (or the spouses and 

dependents thereof) by reason of such 

individuals being members of the 

Armed Forces of the United States or 

veterans, and (4) any program 

established by Federal law for providing 

medical care (other than through 

insurance policies) to members of 

Indian tribes (as defined in section 4(d) 

of the Indian Health Care Improvement 

Act, 25 U.S.C. 1603). Under these 

special rules, a governmental entity 

(including a federally recognized Indian 

tribal government) that is the plan 

sponsor of an applicable self-insured 

health plan that does not meet the 

definition of an exempt governmental 

program must pay the fee imposed by 

section 4376. 

Section 4377(c) provides that the fees 

imposed by sections 4375 and 4376 are 

treated as taxes for purposes of subtitle 

F of the Code. 

Notice 2011–35 

On June 8, 2011, the IRS released 

Notice 2011–35 (2011–25 IRB 879), 

which requested comments on how the 

fees imposed under sections 4375 and 

4376 should be calculated and paid, 

including possible rules and safe 

harbors. The Treasury Department and 

the IRS received numerous comments in 

response to Notice 2011–35 and have 

considered all comments in drafting 

these proposed regulations. The relevant 

portions of Notice 2011–35 and 

comments are discussed in more detail 

in this preamble. See § 601.601(d)(2). 

Explanation of Provisions 

Specified Health Insurance Policies 

Subject to the Fee Under Section 4375 

The fee under section 4375 is 

imposed on the issuer of a specified 

health insurance policy. Under the 

proposed regulations, the fee must be 

calculated using the applicable dollar 

amount in effect for the policy year (for 

example, $1 for policy years ending on 

or after October 1, 2012, and before 

October 1, 2013) and one of the 

permitted methods for determining the 

average number of lives covered under 

the policy during the policy year. 

The term specified health insurance 

policy includes only accident and 

health insurance policies that are issued 

with respect to an individual residing in 

the United States. The proposed 

regulations clarify that for purposes of 

this fee, ‘‘an individual residing in the 

United States’’ means an individual 

who has a place of abode in the United 

States. The United States, for this 

purpose, includes American Samoa, 

Guam, the Northern Mariana Islands, 

Puerto Rico, the Virgin Islands, and any 

other possession of the United States. 

Commentators requested a bright-line 

rule for determining whether an 

individual covered by a policy is 

residing in the United States. Many 

commentators suggested that issuers 

should be able to rely on the address on 

file for the primary insured to determine 

whether individuals covered by the 

policy are residing in the United States. 

The Treasury Department and the IRS 

recognize that the address on file for the 

primary insured may be the only 

information the insurer has with respect 

to the residence of the individuals 

covered under the policy, and also that 

the address on file is likely the place of 

abode for most, if not all, of the covered 

individuals. Accordingly, the proposed 


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1Sections 4375 and 4376 may apply to a retireeonly plan because, although section 9832 excludes 

group health plans that have less than two 

participants who are current employees (such as 

retiree-only plans) from the requirements of chapter 

100 (which includes a number of requirements 

added by the Affordable Care Act), this exclusion 

does not apply to sections 4375 and 4376 because 

these sections are in chapter 34. In addition, section 

4376(c)(2)(A) indicates explicitly that an applicable 

self-insured health plan includes a plan established 

or maintained by one or more employers for the 

benefit of their employees or former employees. 

2Archer Medical Savings Accounts (Archer 

MSAs) under section 220(d) and Health Savings 

Accounts (HSAs) under section 223(d) are taxfavored trusts for the purpose of paying the 

qualified medical expenses of the account 

beneficiary. Archer MSAs and HSAs are generally 

neither health insurance policies nor self-insured 

health plans and thus are not subject to the taxes 

under sections 4375 and 4376. 

regulations provide that if the address 

on file with the issuer or plan sponsor 

for the primary insured is outside of the 

United States, the issuer or plan sponsor 

may treat the primary insured and the 

primary insured’s spouse, dependents, 

or other beneficiaries covered under the 

policy as having the same place of 

abode and not residing in the United 

States. For this purpose, the term 

‘‘primary insured’’ refers to the 

individual eligible for coverage other 

than due to his or her status as a spouse, 

dependent, or other beneficiary of 

another insured individual (for 

example, in the case of a group health 

plan for employees, the individual 

eligible for coverage due to his or her 

status as an employee). 

Several commentators also suggested 

that expatriate policies not be 

considered specified health insurance 

policies for purposes of the fee because 

the policies are issued principally to 

cover employees who do not reside in 

the United States. Commentators argued 

that expatriate policies are 

predominantly group health insurance 

policies sold to employers for a unique 

subset of their employees, the 

substantial majority of whom are living 

outside the United States while working 

for the employer. According to these 

commentators, only a small minority of 

the individuals covered under these 

expatriate policies may be foreign 

nationals working for the employer in 

the United States. For these reasons, the 

proposed regulations provide that the 

term ‘‘specified health insurance 

policy’’ does not include any group 

policy issued to an employer if the facts 

and circumstances show that the group 

policy was designed and issued 

specifically to cover primarily 

employees who are working and 

residing outside of the United States. 

Commentators requested that the 

regulations provide that stop loss and 

indemnity reinsurance policies not be 

considered specified health insurance 

policies. Commentators argued that stop 

loss and indemnity reinsurance policies 

are not providing coverage for lives 

covered; rather, these types of policies 

are intended to limit the original 

obligor’s financial exposure. Section 

4375 imposes a fee based on the average 

number of lives covered. Because stop 

loss and indemnity reinsurance policies 

generally do not provide coverage based 

upon the number of lives covered, the 

proposed regulations provide that for 

purposes of section 4375, these policies 

are not specified health insurance 

policies subject to the fee under section 

4375. No inference is intended as to 

whether stop loss or indemnity 

reinsurance policies may constitute 

health insurance policies for other 

purposes. 

Commentators raised questions about 

the description of prepaid health 

coverage arrangements in section 

4375(c)(3)(B) and requested that the 

regulations clarify which types of 

arrangements are covered by that 

section. One commentator suggested 

that the language in section 

4375(c)(3)(B) is intended to describe 

health maintenance organizations and 

similar arrangements, noting that the 

definition of ‘‘health insurance,’’ which 

was added to ERISA, the Public Health 

Service Act, and the Code by the Health 

Insurance Portability and 

Accountability Act of 1996, Public Law 

104–191 (110 Stat. 1936 (1996)), was 

specifically drafted to include health 

maintenance organizations and similar 

arrangements. The Treasury Department 

and the IRS agree that the language in 

section 4375(c)(3)(B) describes health 

maintenance organizations and similar 

organizations; therefore, the proposed 

regulations clarify that the description 

in section 4375(c)(3)(B) covers any 

hospital or medical service policy or 

certificate, hospital or medical service 

plan contract, or health maintenance 

organization contract. 

Self-insured Health Plans and Plan 

Sponsors Subject to the Fee Under 

Section 4376 

The fee under section 4376 is 

imposed on the plan sponsor of an 

applicable self-insured health plan. 

Under the statute and these proposed 

regulations, the fee must be calculated 

using the applicable dollar amount in 

effect for the plan year (for example, $1 

for plan years ending on or after October 

1, 2012, and before October 1, 2013) and 

one of the permitted methods for 

determining the average number of lives 

covered under the plan during the plan 

year. 

These proposed regulations provide 

that an applicable self-insured health 

plan is a plan that is established or 

maintained by a plan sponsor for the 

benefit of employees, former employees, 

members, former members, or other 

eligible individuals to provide accident 

and health coverage (within the 

meaning of § 46.4377–1(a)(1) of these 

proposed regulations), any portion of 

which is provided other than through an 

insurance policy and that meets certain 

other conditions. The proposed 

regulations provide that an applicable 

self-insured health plan does not 

include an exempt governmental 

program (as defined in section 

4377(c)(3)) but does include a plan that 

is established or maintained solely for 

the benefit of former employees 

(commonly referred to as a retiree-only 

plan).1 A self-insured health plan that 

does not provide coverage described in 

section 4376(c) is not an applicable selfinsured health plan. For example, a selfinsured group health plan of a Federally 

recognized Indian tribal government 

that provides coverage only to tribal 

members that are not employees of the 

Indian tribal government would not be 

an applicable self-insured health plan, 

unless it otherwise falls within one of 

the statutory definitions of an applicable 

self-insured health plan (for example, 

the plan is established or maintained by 

a section 501(c)(6) organization). 

Notice 2011–35 (2011–25 IRB 879) 

invited comments on the type or types 

of health flexible spending 

arrangements (as described in section 

106(c)(2)) (health FSAs) and health 

reimbursement arrangements (as 

described in Notice 2002–45 (2002–2 CB 

93)) (HRAs) that would be excluded 

from the definition of an applicable selfinsured health plan because they 

provide the kind of coverage that, if 

provided by an insurance policy, would 

not cause the policy to be treated as a 

specified health insurance policy, as 

defined in section 4375(c). Health FSAs 

and HRAs are both self-insured health 

plans.2 See § 601.601(d)(2). 

Commentators generally requested 

that all health FSAs and HRAs be 

excluded from the definition of 

applicable self-insured health plan 

under section 4376. Commentators also 

suggested that because the majority of 

health FSAs or HRAs are provided in 

connection with a major medical plan, 

they should be excluded from the fee 

imposed by section 4376 to avoid the 

fee from being imposed twice with 

respect to the same individual. Some of 

the commentators also observed that 

there would be challenges arising from 

the possibility that an employer may 

lack information on the number of 

dependents whose medical expenses are 


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eligible for reimbursement from an 

employee’s health FSA or HRA. 

Some commentators requested that if 

HRAs were not excluded from the 

definition of applicable self-insured 

health plan, the guidance limit the fee 

under section 4376 to HRAs that are not 

offered in connection with a major 

medical plan or permit treatment of an 

HRA that is offered in connection with 

a major medical plan as a single 

applicable self-insured health plan to 

avoid the fee applying twice with 

respect to individuals covered by a 

major medical plan and a related HRA. 

The proposed regulations do not 

exclude all health FSAs and HRAs from 

the definition of an applicable selfinsured health plan under section 4376. 

In response to comments, however, 

these proposed regulations provide that 

multiple self-insured arrangements 

established and maintained by the same 

plan sponsor and with the same plan 

year are subject to a single fee. 

Accordingly, an HRA is not subject to a 

separate fee under section 4376 if the 

HRA is integrated with another 

applicable self-insured health plan that 

provides major medical coverage, 

provided that the HRA and the other 

plan are established or maintained by 

the same plan sponsor. However, 

section 4375 imposes a separate fee on 

the issuer of a specified health 

insurance policy. Consistent with the 

statutory structure which separates the 

fee with respect to health insurance 

policies from the fee with respect to 

self-insured plans, the proposed 

regulations provide that an HRA that is 

integrated with an insured group health 

plan is treated as an ‘‘applicable selfinsured health plan’’ the plan sponsor of 

which is subject to the fee under section 

4376, while the issuer of the group 

insurance policy for the insured group 

health plan is subject to the fee under 

section 4375, even though the HRA and 

the insured group health plan are 

maintained by the same plan sponsor. 

These proposed regulations reflect the 

special rule in section 4375(c)(2), which 

is carried over to self-insured 

arrangements through the definition of 

‘‘accident and health coverage’’ in 

section 4377(a)(1), that a specified 

health insurance policy does not 

include any insurance if substantially 

all of its coverage is of excepted benefits 

described in section 9832(c). The 

proposed regulations provide that a 

health FSA that satisfies the 

requirements of an excepted benefit 

under section 9832(c) is excluded from 

the definition of an ‘‘applicable selfinsured health plan’’ and therefore is 

not subject to the fee imposed by section 

4376. (See § 54.9831–1(c)(3)(v), relating 

to additional rules on health FSAs that 

are excepted benefits.) A health FSA 

that does not satisfy the requirements to 

be treated as an excepted benefit is an 

applicable self-insured health plan 

subject to the fee imposed by section 

4376 (and, for purposes of the rules in 

the preceding paragraph, is treated the 

same as an integrated HRA). 

In addition, to address the concerns 

raised about the availability of 

information on the lives covered under 

an HRA or health FSA, the proposed 

regulations contain a special rule 

permitting the plan sponsor to assume 

one covered life for each employee with 

an HRA and for each employee with a 

health FSA that is not an excepted 

benefit. 

Commentators also requested that an 

employee assistance program (EAP) or 

wellness arrangement be exempt from 

the fee. Commentators argued that 

generally, under an EAP or wellness 

arrangement, benefits for medical care 

are secondary or incidental to nonmedical benefits. In response, these 

proposed regulations exclude from the 

definition of applicable self-insured 

health plan an EAP, disease 

management program, or wellness 

program, if the program does not 

provide significant benefits in the 

nature of medical care or treatment. 

For each type of applicable selfinsured health plan identified in section 

4376(c), the plan sponsor is the person 

responsible for the payment of the fee. 

Section 4376(b)(2) provides that in the 

case of a plan established or maintained 

by a single employer, the plan sponsor 

is the employer, and in the case of a 

plan established or maintained by a 

single employee organization, the plan 

sponsor is the employee organization. 

Section 4376 does not contain rules that 

would treat related entities as a single 

entity. Accordingly, for example, under 

these proposed regulations, a plan that 

is maintained by multiple related 

employers is not a plan that is 

established or maintained by a single 

employer, but, for section 4376 

purposes, is considered a plan that is 

established or maintained by two or 

more employers. 

In the case of a plan maintained by 

two or more employers, the proposed 

regulations provide that the plan 

sponsor is the person identified as the 

plan sponsor by the terms of the 

document under which the plan is 

operated, or the employer designated as 

the plan sponsor for purposes of section 

4376 by the terms of the document 

under which the plan is operated 

(provided that such designation is 

made, and that employer has consented 

to the designation, by no later than the 

due date of the return under section 

4376 for that plan year is required to be 

filed, after which date such designation 

for that plan year may not be changed 

or revoked, and provided further that an 

employer may be designated as the plan 

sponsor only if that employer is one of 

the employers maintaining the plan). In 

the absence of the identification or 

designation of a plan sponsor by the 

terms of the document under which the 

plan is operated, the proposed 

regulations provide that the plan 

sponsor is each employer that maintains 

the plan (with respect to employees of 

that employer). Because the plan 

sponsor may be designated on or before 

the due date for filing the Form 720, 

‘‘Quarterly Federal Excise Tax Return,’’ 

for the plan year, and under these 

proposed regulations the first potential 

due date for filing the Form 720 is July 

31, 2013, this rule provides related 

employers that provide coverage for 

their employees under a single plan 

ample time to designate a plan sponsor 

if the employers wish to consolidate the 

filing and the payment of the fee under 

section 4376. In the absence of 

designation of a plan sponsor in the 

governing plan document, the proposed 

regulations provide that the plan 

sponsor is each employer that maintains 

the plan (with respect to employees of 

that employer), and therefore each 

employer would be required to file its 

own Form 720, reflecting the section 

4376 fee applicable to that employer as 

a plan sponsor with respect to its 

employees. 

As discussed in Notice 2011–35 and 

earlier in the section of this preamble 

entitled ‘‘Statutory Provisions,’’ section 

4377(b) provides that the fee imposed 

by section 4376 applies to a 

governmental entity that establishes or 

maintains an applicable self-insured 

health plan (other than a plan that 

qualifies as an exempt governmental 

program) for its employees. These 

proposed regulations provide that a 

governmental entity that establishes or 

maintains an applicable self-insured 

health plan for its current or former 

employees is the plan sponsor for 

purposes of the fee imposed by section 

4376. Thus, these proposed regulations 

require that a governmental entity 

(including a Federally recognized 

Indian tribal government) that 

establishes or maintains an applicable 

self-insured health plan (other than a 

plan that qualifies as an exempt 

governmental program) must calculate, 

report, and pay the fee under section 

4376 in accordance with the guidance in 

these proposed regulations. 

Several commentators requested that 

the guidance clarify that, in the case of 


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an applicable self-insured health plan 

that is established or maintained by a 

board of trustees, plan assets (for 

example, amounts held in a trust) or the 

employer contributions to the plan 

could be used to pay the fee under 

section 4376. Because the use of plan 

assets to pay the fee under section 4376 

may have implications under various 

state and Federal laws (including, for 

example, ERISA’s fiduciary provisions), 

the question of what the permissible 

sources of funds are for paying the fee 

under section 4376 is an issue that is 

outside the scope of these proposed 

regulations. The Treasury Department 

and the IRS have consulted the 

Department of Labor concerning 

comments on the appropriate sources to 

pay the fee under section 4376. The 

Department of Labor has advised the 

Treasury Department and the IRS that it 

is considering permissible funding 

sources for these fee payments by plan 

sponsors that are subject to ERISA’s 

fiduciary provisions. 

Calculation of the Fee Under Section 

4375 

The fee imposed on an issuer of a 

specified health insurance policy under 

section 4375 is based on the average 

number of lives covered under the 

policy. Notice 2011–35 invited 

comments on reasonable methods an 

issuer may use to determine the average 

number of lives covered under a policy. 

Notice 2011–35 also invited comments 

on whether guidance should provide a 

safe harbor for issuers that are required 

to file the National Association of 

Insurance Commissioners (NAIC) 

Supplemental Health Care Exhibit 

(Exhibit). In particular, the Treasury 

Department and the IRS outlined a 

potential safe harbor based on the 

number of lives reported on the most 

recently filed Exhibit or based on the 

average of the covered lives reported on 

the most recently filed Exhibit and the 

immediately preceding Exhibit. 

Commentators generally favored a 

safe harbor that allows issuers to 

calculate the average number of lives 

covered under the policy based on data 

reported on the Exhibit but expressed 

concerns with exclusive reliance upon 

covered lives data on the Exhibit. 

According to the instructions to the 

Exhibit, the term ‘‘covered lives’’ means 

the total number of lives insured, 

including dependents, at any time 

during the reporting period, which 

means the Exhibit captures all lives 

covered without regard to how long the 

coverage lasted. Several commentators 

recommended that the regulations allow 

issuers to use member months data 

reported in the Exhibit. The Exhibit 

defines the term ‘‘member months,’’ as 

the sum of the number of lives covered 

on a single day in every month. 

Commentators argued that dividing the 

member months data by 12 (the number 

of months in a reporting period) is a 

more accurate measure of the average 

number of lives covered because it 

better reflects that some individuals 

may only be insured for part of the year. 

Commentators noted that some 

entities are not required to file the 

Exhibit, but must provide comparable 

forms to their applicable state 

regulators. Commentators recommended 

that the proposed regulations permit 

issuers to use information included in 

any other report filed with a state 

government. 

Some commentators suggested that 

the regulations allow issuers to 

determine the average number of lives 

covered by counting the actual number 

of lives covered during the policy year. 

Other commentators requested that the 

regulations allow the use of any 

reasonable formula or other method to 

determine the average number of lives 

covered, including a formula or method 

that historically has been used by the 

issuer for other business purposes. 

The proposed regulations provide 

issuers the choice of using any of four 

alternative methods to determine the 

average number of lives covered under 

policies that it issues for purposes of the 

fee imposed by section 4375. First, an 

issuer may determine the average 

number of lives covered under a policy 

for a policy year by calculating the sum 

of lives covered for each day of the 

policy year and dividing that sum by the 

number of days in the policy year (the 

actual count method). Second, an issuer 

may determine the average number of 

lives covered under a policy for a policy 

year by adding the total number of lives 

covered on one date in each quarter of 

the policy year, or an equal number of 

dates for each quarter, and dividing the 

total by the number of dates on which 

a count was made (the snapshot 

method). Third, as an alternative to 

determining the average number of lives 

covered under each individual policy 

for its respective policy year, an issuer 

may determine the average number of 

lives covered under all policies in effect 

for a calendar year based on the 

‘‘member months’’ reported on the 

Exhibit divided by 12 (the member 

months method). Fourth, an issuer that 

is not required to file the Exhibit may 

determine the average number of lives 

covered under all of its policies in effect 

for a calendar year using data in any 

form that is equivalent to the Exhibit 

that is filed with the state of domicile 

if the state form reports lives covered in 

the same manner as member months is 

reported on the Exhibit (the state form 

method). For this purpose, an 

equivalent form includes only a form 

that reports all the lives covered under 

the policy (including, for example, 

spouses, dependents, and other 

beneficiaries, as applicable). 

The proposed regulations direct an 

issuer to apply a single method in 

determining the average number of lives 

covered under the policy for the year. In 

addition, issuers must use the same 

method of counting lives for all policies 

reported on a single return. Issuers 

using the actual count or snapshot 

method may change to the snapshot or 

actual count method from one policy 

year to the next. For example, an issuer 

with a policy that has a policy year that 

ends on June 30, Policy A, may 

determine lives covered under Policy A 

for July 1, 2013 to June 30, 2014, using 

the actual count method if the issuer 

uses the actual count method for all 

policies for which a liability will be 

reported on the Form 720, ‘‘Quarterly 

Federal Excise Tax Return,’’ due by July 

31, 2015 (the due date for the return that 

will include the July 2013 to June 2014 

policy year for Policy A, as discussed in 

the section of this preamble entitled 

‘‘Application of Excise Tax Procedural 

Rules (Filing of Returns and Payment of 

Fees’’)). The issuer may change its 

method for determining lives covered 

under Policy A to the snapshot method 

for the July 1, 2014, to June 30, 2015 

policy year, provided that the snapshot 

method is used for all policies for which 

a liability will be reported on the return 

due by July 31, 2016 (the due date for 

the return that will include the July 

2014 to June 2015 policy year for Policy 

A). 

While the actual count and snapshot 

methods count lives covered on a 

policy-by-policy basis for each policy 

having a policy year that ends in the 

reporting period (which is based on the 

calendar year), the member months and 

state form methods count all lives 

covered during the calendar year for all 

policies in effect during the calendar 

year irrespective of when actual policy 

years end. For example, for a policy 

with a policy year that ends on June 30, 

member months will include lives 

covered under that policy from January 

1 to December 31 and aggregate those 

lives covered with all other lives 

covered for the calendar year under all 

policies in effect during the calendar 

year. To convert the lives covered from 

the member months to the total lives 

covered under a particular policy for a 

policy year is administratively 

burdensome. Accordingly, the proposed 

regulations provide that an issuer using 


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3The 2.35 dependency factor reflects that all 

participants with coverage other than self-only have 

coverage for themselves and some number of 

dependents. The Treasury Department and the IRS 

developed the factor, and other similar factors used 

in the regulations, in consultation with Treasury 

Department economists and in consultation with 

plan sponsors regarding the procedures they 

currently use for estimating the number of covered 

individuals. 

the member months or state form 

method must use that method for all 

policies for all years for which the fee 

applies. The Treasury Department and 

the IRS solicit comments on whether 

there should be an exception to this rule 

for issuers of calendar-year only policies 

who want to switch from the member 

months or state form method to the 

actual count or snapshot method and, if 

so, how to address the transition in 

methods for the 2012 and 2019 calendar 

years. 

Commentators noted that for 2012 and 

2019 a partial year adjustment will be 

needed because the member months 

data, which uses the calendar year for 

all policies, will include in the member 

months for 2012 and 2019 lives covered 

under policies with a policy year that 

ends before October 1, 2012, or after 

September 30, 2019, which are policies 

to which the fee under section 4375 

does not apply. The Treasury 

Department and the IRS also understand 

that the data reported on state forms is 

generally also based on the calendar 

year. To adjust for 2012 and 2019, the 

proposed regulations adopt a pro rata 

approach for calculating the average 

number of lives covered using the 

member months method or the state 

form method for 2012 and 2019. For 

example, the member months number 

for 2012 is divided by 12 and the 

resulting number is multiplied by onequarter to arrive at the average number 

of lives covered for October through 

December 2012. The proposed 

regulations further treat the amount 

calculated under this pro rata approach 

as the average number of lives covered 

for policies with policy years that end 

on or after October 1, 2012, and before 

January 1, 2013. Similar rules are 

provided for 2019. 

The Treasury Department and the IRS 

understand that these proposed 

regulations are being issued after the 

beginning of some policy years to which 

the fee under section 4375 will apply. 

Because issuers that do not use the 

member months method or state form 

method may not have started counting 

lives covered for policy years that end 

on or after October 1, 2012, but that 

began before May 14, 2012, issuers 

using the actual count method may 

begin counting lives covered under a 

policy as of May 14, 2012 rather than 

the first day of the policy year, and 

divide by the appropriate number of 

days remaining in the policy year. 

Similarly, for policy years that end on 

or after October 1, 2012, but that began 

before May 14, 2012, issuers using the 

snapshot method may use counts from 

quarters beginning on or after May 14, 

2012 to determine the average number 

of lives covered under the policy. The 

Treasury Department and the IRS intend 

for these rules to facilitate compliance 

for the initial policy years covered by 

section 4375. Comments are requested 

as to whether any additional transition 

rules under section 4375 are needed for 

this purpose. 

Calculation of the Fee Under Section 

4376 

The fee imposed on a plan sponsor of 

an applicable self-insured health plan 

under section 4376 is based on the 

average number of lives covered under 

the plan. Notice 2011–35 invited 

comments on reasonable methods that 

could reduce administrative burdens on 

plan sponsors that must compute the 

average number of lives covered under 

an applicable self-insured health plan. 

Notice 2011–35 also invited comments 

on safe harbors that would permit a plan 

sponsor to determine the average 

number of covered lives under the plan 

using a formula based on the number of 

participants and one or more additional 

factors that account for the number of 

dependents without requiring that every 

actual dependent covered under the 

plan be counted. 

Commentators generally favored using 

reasonable simplifying methods and 

safe harbors to determine the average 

number of lives covered under the plan. 

Some commentators suggested that the 

guidance permit the use of snapshot 

data to determine the number of lives 

taken into account for calculating the 

average number of lives covered during 

the plan year. Commentators also 

suggested that plan sponsors be 

permitted to determine the average 

number of lives covered during the year 

based on information reported on the 

plan’s Form 5500, ‘‘Annual Return/ 

Report of Employee Benefit Plan.’’ 

Commentators generally recognized 

that a method that is based on Form 

5500 reporting will have limited 

application because the requirement to 

file a Form 5500 does not apply to all 

plan sponsors that are subject to the fee 

under section 4376. These 

commentators also noted that the Form 

5500 does not include information on 

the number of lives (participants and 

dependents) covered under the plan 

during the plan year, but rather includes 

information only on the number of 

participants on the first day and last day 

of the plan year. Accordingly, the 

information reported on the Form 5500 

would need to be converted to a number 

that accurately represents the average 

number of covered lives under the plan 

for the plan year. 

To make it easier for plan sponsors to 

determine the average number of lives 

covered under the plan for the plan 

year, these proposed regulations provide 

plan sponsors a choice to use any of 

three alternative methods. First, a plan 

sponsor may determine the average 

number of lives covered under the plan 

for the plan year by calculating the sum 

of the lives covered for each day of the 

plan year and dividing that sum by the 

number of days in the plan year (the 

actual count method). Second, a plan 

sponsor may determine the average 

number of lives covered under the plan 

for the plan year by adding the totals of 

lives covered on one date in each 

quarter, or an equal number of dates for 

each quarter, and dividing the total by 

the number of dates on which a count 

was made (the snapshot method). For 

this purpose, the number of lives 

covered on a date may be determined as 

equal to either the sum of the actual 

number of lives covered on the dates 

(the snapshot count method) or the sum 

of (1) the number of participants with 

self-only coverage on that date, plus (2) 

the product of the number of 

participants with coverage other than 

self-only coverage on the date and 2.35 

(the snapshot factor method).3 The 

Treasury Department and the IRS 

request comments on additional sources 

of data that could be used to calculate 

a more accurate conversion factor. 

Third, a plan sponsor may determine 

the average number of lives covered 

under the plan for the plan year based 

on a formula that includes the number 

of participants actually reported on the 

Form 5500 for the applicable selfinsured health plan for the plan year 

(the Form 5500 method). For a plan 

providing only self-only coverage, under 

the Form 5500 method the plan sponsor 

may treat the average number of covered 

lives under the plan for a plan year as 

the sum of the total participants at the 

beginning and the end of the plan year, 

in each case as reported on the Form 

5500, divided by two. 

For plans providing coverage that is 

not limited to the self-only coverage, the 

Form 5500 does not identify whether 

the coverage is self-only or family (or 

some other non-self-only coverage). 

Therefore, the number of participants 

reported on the Form 5500 generally is 

converted to covered lives by 

multiplying the number of participants 

on each date by a factor of 2.0. (This 


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factor is lower than the 2.35 factor used 

in the snapshot factor method because 

this factor takes into account 

participants with self-only coverage that 

covers one life, as well as participants 

with other coverage that covers two or 

more lives.) Accordingly, under the 

Form 5500 method for plans that 

provide coverage not limited to self-only 

coverage, a plan sponsor may simply 

add the number of participants reported 

for the beginning of the plan year to the 

number reported for the end of the plan 

year to determine the average number of 

covered lives for the plan year. The 

Treasury Department and the IRS 

request comments on additional sources 

of data that could be used to calculate 

a more accurate conversion factor. 

The proposed regulations direct a 

plan sponsor to apply a single method 

in determining the average number of 

lives covered under the plan for the 

entire plan year. However, a plan 

sponsor is not required to use the same 

method from one plan year to the next. 

The Treasury Department and the IRS 

understand that these proposed 

regulations are being issued after the 

beginning of some plan years to which 

the fee under section 4376 will apply. 

Therefore, these proposed regulations 

include a special rule for the fee under 

section 4376 applicable for a plan year 

that ends on or after October 1, 2012, 

and began before July 11, 2012. Because 

self-insured plans generally are not 

required to complete the Exhibit or 

determine the number of covered lives 

for other regulatory purposes, under this 

special rule, a plan sponsor may use any 

reasonable method to determine the 

average number of lives covered under 

the plan for purposes of calculating the 

fee under section 4376 for those plan 

years. For more information about the 

return filing requirements and payment 

of the fees, see the section in this 

preamble entitled ‘‘Application of 

Excise Tax Procedural Rules (Filing of 

Returns and Payment of Fees).’’ 

Application of Subtitle F 

In accordance with section 4377(c), 

references in subtitle F (section 6001– 

7874) to ‘‘taxes imposed by this title,’’ 

‘‘internal revenue tax,’’ and similar 

references apply to the fees imposed by 

sections 4375 and 4376. For example, 

the fees imposed by sections 4375 and 

4376 are assessed pursuant to section 

6201, collected pursuant to sections 

6301, 6321, and 6331, enforced 

pursuant to section 7602, subject to 

examination and summons pursuant to 

section 7602, and subject to 

confidentiality rules pursuant to section 

6103, in the same manner as other taxes 

imposed by the Code. 

Sections 4375 and 4376 are in chapter 

34 of the Code (Taxes on Certain 

Insurance Policies). The deficiency 

procedures of sections 6211–6216 apply 

only to income, estate, and gift taxes 

imposed by subtitle A (Income Taxes) 

and B (Estate and Gift Taxes) and the 

excise taxes imposed by chapters 41–44. 

Because sections 4375 and 4376 are in 

chapter 34, the deficiency procedures 

do not apply to the fee. Thus, the IRS 

may assess and collect the fees using the 

procedures in subtitle F without regard 

to the restrictions on assessment in 

section 6213 (relating to petitions to the 

Tax Court). 

Application of Excise Tax Procedural 

Rules (Filing of Returns and Payment of 

Fees) 

The Excise Tax Procedural 

Regulations in 26 CFR part 40 contain 

rules for depositing, paying, and return 

filing for a number of excise taxes, 

including the excise taxes in chapter 34. 

Under existing rules for chapter 34 

excise taxes, taxpayers pay and report 

these taxes quarterly on Form 720, 

‘‘Quarterly Federal Excise Tax Return,’’ 

by the last day of the first calendar 

month following the calendar quarter 

for which it is filed. The proposed 

regulations amend this rule so that 

issuers and plan sponsors will report 

and pay the section 4375 and 4376 fees 

only once a year on Form 720, which 

will be due by July 31 of each year. A 

person that files a Form 720 only to 

report liability imposed by section 4375 

or 4376 is not required to file a Form 

720 at other times during the year. A 

return will generally cover policy years 

(section 4375) and plan years (section 

4376) that end during the preceding 

calendar year, or in the case of an issuer 

that determines the average number of 

lives covered for purposes of section 

4375 using the member months method 

or the state form method, the return is 

for all policies in effect during the 

previous calendar year. The instructions 

for Form 720 inform filers how and 

when to file and pay. These instructions 

require that the filer (the issuer or plan 

sponsor, as applicable) have an 

Employer Identification Number (EIN) 

to use in filing the Form 720. 

Most excise taxes reported on Form 

720 are required to be deposited 

semimonthly. However, these proposed 

regulations do not require semimonthly 

deposits of the fee imposed by section 

4375 or 4376; rather, full payment of the 

fee is due annually by the July 31 due 

date of Form 720. 

Any claim for a refund of the section 

4375 or 4376 fees must be filed on Form 

8849, ‘‘Claim for Refund of Excise 

Taxes,’’ or Form 720X, ‘‘Amended 

Quarterly Federal Excise Tax Return,’’ 

in accordance with the instructions for 

those forms. 

These proposed regulations do not 

impose any specific recordkeeping 

requirements for calculating the fees 

under sections 4375 and 4376. However, 

see the instructions for Form 720 for 

general information on recordkeeping 

requirements. 

The IRS will revise the current Form 

720 to reflect these fees. 

Electronic Filing of Returns 

Form 720 may be filed electronically. 

For more information on e-file, see 

www.irs.gov/efile. Although electronic 

filing of the Form 720, ‘‘Quarterly 

Federal Excise Tax Return,’’ is not 

required, the IRS encourages taxpayers 

to file the Form 720 electronically. 

Electronic filing of Form 720 is quick 

and easy, and it will allow the IRS to 

provide expedited and improved service 

and reliability to taxpayers while 

reducing processing time and errors. 

Forms 720 can be submitted on-line. A 

taxpayer wishing to file the Form 720 

electronically must submit it through an 

approved transmitter software 

developer. The IRS has posted on its 

Web site contact information for all 

approved Form 720 e-file transmitters at 

http://www.irs.gov/efile/lists/ 

0,,id=176152,00.html. To electronically 

file the Form 720, taxpayers will incur 

the cost of the provider’s required 

service fee for online submission. 

Third-Party Reporting and Payments 

Notice 2011–35 requested comments 

on the ability of third parties to act on 

behalf of a plan sponsor in complying 

with the requirements of the fee under 

section 4376. A number of 

commentators suggested that guidance 

should permit third parties to act on 

behalf of a plan sponsor in reporting 

and paying the fee. Most of these 

commentators requested that the 

Treasury Department and the IRS 

establish a special reporting and filing 

regime for third parties that is different 

than the regime for plan sponsors. 

Although the IRS has established 

limited third-party reporting and 

payment regimes in certain instances 

(see for example, Rev. Proc. 2007–38 

(2007–1 CB 1442)) the IRS does not 

intend to adopt such a program for the 

fee under section 4375 or the fee under 

section 4376 because the benefits of 

such a program would be outweighed by 

the administrative burdens, particularly 

given the limited period over which the 

fee will apply. See § 601.601(d)(2). 


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Proposed Effective Date 

These regulations are proposed to 

apply to policy and plan years ending 

on or after October 1, 2012, and before 

October 1, 2019. Issuers and plan 

sponsors may rely on these proposed 

regulations for guidance pending the 

issuance of final regulations. Final 

regulations will be effective as of the 

date these proposed regulations are 

published in the Federal Register. If and 

to the extent future guidance is more 

restrictive than the guidance in these 

proposed regulations, the future 

guidance will be applied without 

retroactive effect. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866, as 

supplemented by Executive Order 

13653. Therefore, a regulatory 

assessment is not required. It is hereby 

certified that these proposed regulations 

will not have a significant economic 

impact on a substantial number of small 

entities. This certification is based on 

the fact that small businesses generally 

do not have self-insured health plans 

and that these regulations will therefore 

primarily affect large corporations. 

Therefore, a Regulatory Flexibility 

Analysis under the Regulatory 

Flexibility Act (5 U.S.C. chapter 6) is 

not required. The Treasury Department 

and the IRS specifically solicit 

comments from any party, particularly 

affected small entities, on the accuracy 

of this certification. Pursuant to section 

7805(f) of the Code, this notice of 

proposed rulemaking has been 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comments on its 

impact on small business. 

Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written or electronic comments that are 

submitted timely to the IRS. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed rules. All comments will be 

available for public inspection and 

copying. 

A public hearing has been scheduled 

for August 8, 2012, beginning at 10 a.m. 

in room the auditorium of the Internal 

Revenue Building, 1111 Constitution 

Avenue NW., Washington, DC. Due to 

building security procedures, visitors 

must enter at the Constitution Avenue 

entrance. In addition, all visitors must 

present photo identification to enter the 

building. Because of access restrictions, 

visitors will not be admitted beyond the 

immediate entrance more than 15 

minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to present oral comments at the hearing 

must submit written or electronic 

comments and an outline of the topics 

to be discussed and the time to be 

devoted to each topic by July 30, 2012. 

A period of 10 minutes will be allotted 

to each person for making comments. 

An agenda showing the scheduling of 

the speakers will be prepared after the 

deadline for receiving outlines has 

passed. Copies of the agenda will be 

available free of charge at the hearing. 

Drafting Information 

The principal authors of these 

regulations are Rebecca L. Baxter, Office 

of Associate Chief Counsel (Financial 

Institutions & Products), and R. Lisa 

Mojiri-Azad, Office of Division Counsel/ 

Associate Chief Counsel (Tax Exempt 

and Government Entities). However, 

other personnel from the Treasury 

Department and the IRS participated in 

their development. 

List of Subjects 

26 CFR Part 40 

Excise taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 46 

Excise taxes, Insurance, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR parts 40 and 46 

are proposed to be amended as follows: 

PART 40—EXCISE TAX PROCEDURAL 

REGULATIONS 

Paragraph 1. The authority citation 

for part 40 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

Par. 2. Section 40.0–1 is amended as 

follows: 

1. Paragraph (a) is amended by 

removing from the third sentence the 

language ‘‘chapter 34 to taxes imposed 

on policies issued by foreign insurers’’ 

and adding ‘‘chapter 34 to taxes 

imposed on certain insurance policies’’ 

in its place, and adding a new sentence 

after the third sentence to read as 

follows: 

§ 40.0–1 Introduction. 

(a) * * * References in this part to 

‘‘taxes’’ also include references to the 

fees imposed by sections 4375 and 4376. 

* * * 

* * * * * 

Par. 3. Section 40.6011(a)–1 is 

amended by: 

1. In paragraph (a)(2)(i), first sentence, 

the language ‘‘paragraph (b) of this 

section’’ is removed and the language 

‘‘paragraphs (b) and (c) of this section’’ 

is added in its place. 

2. Paragraph (c) is added. 

The addition reads as follows: 

§ 40.6011(a)–1 Returns. 

* * * * * 

(c) Fees on health insurance policies 

and self-insured health plans—(1) In 

general. A return that reports liability 

imposed by section 4375 or 4376 is a 

return for policies or plans with policy 

or plan years ending in the previous 

calendar year, or for issuers that 

determine the average number of lives 

covered under a policy for purposes of 

section 4375 using the member months 

method under § 46.4375–1(c)(2)(v) of 

this chapter or the state form method 

under § 46.4375–1(c)(2)(vi) of this 

chapter, the return is for all policies in 

effect during the previous calendar year. 

The second sentence of paragraph 

(a)(2)(i) of this section (relating to filing 

quarterly returns regardless of whether 

liability is incurred) does not apply to 

a person that files a Form 720, 

‘‘Quarterly Federal Excise Tax Return,’’ 

only to report liability imposed by 

section 4375 or 4376. 

(2) Effective/applicability date. This 

paragraph (c) is applicable on April 17, 

2012. This paragraph (c) applies to 

returns that report liability imposed by 

section 4375 or 4376 for all policies and 

plans to which section 4375 or 4376 

applies. 

Par. 4. Section 40.6071(a)–1 is 

amended as follows: 

1. Paragraph (c) is revised. 

2. Paragraph (d) is added. 

The revision and addition read as 

follows: 

§ 40.6071(a)–1 Time for filing returns. 

* * * * * 

(c) Fees on health insurance policies 

and self-insured health plans. A return 

that reports liability for the fee imposed 

by section 4375 must be filed by July 31 

of the calendar year immediately 

following the last day of the policy year. 

For issuers that determine the average 

number of lives covered under the 

policy for section 4375 using the 

member months method under 

§ 46.4375–1(c)(2)(v) of this chapter or 

the state form method under § 46.4375– 


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1(c)(2)(vi) of this chapter, the return 

must be filed by July 31 of the 

immediately following calendar year. A 

return that reports liability for the fee 

imposed by section 4376 for a plan year 

must be filed by July 31 of the calendar 

year immediately following the last day 

of the plan year. Thus, for example, a 

return that reports liability for the fee 

imposed by section 4375 for the year 

ending on December 31, 2012, must be 

filed by July 31, 2013. As another 

example, a return that reports liability 

for the fee imposed by section 4376 for 

the plan year ending on January 31, 

2013, must be filed by July 31, 2014. 

(d) Effective/applicability date. 

Paragraph (c) of this section is 

applicable on April 17, 2012. 

Paragraphs (a) and (b) of this section 

apply to returns for calendar quarters 

beginning on or after October 1, 2001, 

and paragraph (c) of this section applies 

to returns that report liability imposed 

by section 4375 or 4376 for all policies 

and plans to which section 4375 or 4376 

applies. 

§ 40.6091–1 [Amended] 

Par. 5. Section 40.6091–1(a) is 

amended by removing the language 

‘‘paragraph (b) of this section, quarterly 

returns’’ and by adding the language 

‘‘paragraphs (b) and (c) of this section, 

returns’’ in its place. 

Par. 6. Section 40.6302(c)–1 is 

amended by revising the section 

heading and paragraph (e)(1)(iv) to read 

as follows: 

§ 40.6302(c)–1 Use of Government 

depositaries. 

* * * * * 

(e) * * * 

(1) * * * 

(iv) Sections 4375 and 4376 (relating 

to fees on health insurance policies and 

self-insured health plans). 

* * * * * 

PART 46—EXCISE TAX ON CERTAIN 

INSURANCE POLICIES AND 

OBLIGATIONS NOT IN REGISTERED 

FORM 

Par. 7. The authority citation for part 

46 continues to read in part as follows: 

Authority: 26 U.S.C. 7805. * * * 

Par. 8. In Part 46, the heading is 

revised to read as set forth above. 

§ 46.0–1 [Amended] 

Par. 9. In § 46.0–1, first sentence, the 

language ‘‘policies issued by foreign 

insurers’’ is removed and the language 

‘‘certain insurance policies’’ is added in 

its place. 

§ 46.0–2 [Removed] 

Par. 10. Section 46.0–2 is removed. 

Par. 11. In Part 46, subpart C is 

redesignated as subpart D and a new 

subpart C is added to read as follows: 

Subpart C—Fees on Insured and SelfInsured Health Plans 

Sec 

46.4375–1 Fee on issuers of specified health 

insurance policies. 

46.4376–1 Fee on sponsors of self-insured 

health plans. 

46.4377–1 Definitions and special rules. 

Subpart C—Fees on Insured and SelfInsured Health Plans 

§ 46.4375–1 Fee on issuers of specified 

health insurance policies. 

(a) In general. An issuer of a specified 

health insurance policy is liable for a fee 

imposed by section 4375 for policy 

years ending on or after October 1, 2012, 

and before October 1, 2019. Paragraph 

(b) of this section provides definitions 

that apply for purposes of section 4375 

and this section. Paragraph (c) of this 

section provides rules for calculating 

the fee under section 4375. Paragraph 

(d) of this section provides the effective/ 

applicability date. For rules relating to 

filing the required return and paying the 

fee, see §§ 40.6011(a)–1 and 40.6151(a)– 

1 of this chapter. 

(b) Definitions. The following 

definitions apply for purposes of section 

4375 and this section. See also 

§ 46.4377–1 for additional definitions. 

(1) Specified health insurance 

policy—(i) In general. Except as 

provided in paragraph (b)(1)(ii) of this 

section and § 46.4377–1, specified 

health insurance policy means any 

accident or health insurance policy 

(including a policy under a group health 

plan) issued with respect to individuals 

residing in the United States (as defined 

in § 46.4377–1(a)(2)), including certain 

prepaid health coverage arrangements as 

described in paragraph (b)(2) of this 

section. 

(ii) Exceptions. The term specified 

health insurance policy does not 

include— 

(A) Any insurance policy if 

substantially all of its coverage is of 

excepted benefits described in section 

9832(c); 

(B) Any group policy issued to an 

employer where the facts and 

circumstances show that the group 

policy was designed and issued 

specifically to cover primarily 

employees who are working and 

residing outside of the United States 

(see § 46.4377–1(a)(3)); or 

(C) Any stop loss or indemnity 

reinsurance policy. 

(iii) Stop loss policy. For purposes of 

paragraph (b)(1)(ii) of this section, stop 

loss policy means an insurance policy in 

which— 

(A) The insurer that issues the policy 

to a person establishing or maintaining 

a self-insured health plan becomes 

liable for all, or an agreed upon portion 

of, losses that person incurs in covering 

the applicable lives in excess of a 

specified amount; and 

(B) The person establishing or 

maintaining the self-insured health plan 

retains its liability to, and its contractual 

relationship with, the applicable lives 

covered. 

(iv) Indemnity reinsurance policy. For 

purposes of paragraph (b)(1)(ii) of this 

section, indemnity reinsurance policy 

means an agreement between two or 

more insurance companies under 

which— 

(A) The reinsuring company agrees to 

accept and to indemnify the issuing 

company for all or part of the risk of loss 

under policies specified in the 

agreement; and 

(B) The issuing company retains its 

liability to, and its contractual 

relationship with, the applicable lives 

covered. 

(2) Prepaid health coverage 

arrangement. The term prepaid health 

coverage arrangement means an 

arrangement under which fixed 

payments or premiums are received as 

consideration for a person’s agreement 

to provide or arrange for the provision 

of accident or health coverage to 

individuals residing in the United 

States, regardless of how such coverage 

is provided or arranged to be provided. 

For example, any hospital or medical 

service policy or certificate, hospital or 

medical service plan contract, or health 

maintenance organization contract is a 

specified health insurance policy. 

(c) Calculation of fee—(1) In general. 

The amount of the fee for a policy for 

a policy year is equal to the product of 

the average number of lives covered 

under the policy for the policy year 

(determined in accordance with 

paragraphs (c)(2) and (c)(3) of this 

section) and the applicable dollar 

amount (determined in accordance with 

paragraph (c)(4) of this section). For 

purposes of computing the fee under 

this paragraph (c), in the case of an 

issuer that determines the average 

number of lives covered for all policies 

in effect during a calendar year using 

the member months method under 

paragraph (c)(2)(v) of this section or the 

state form method under paragraph 

(c)(2)(vi) of this section, the applicable 

dollar amount with respect to such 

issuer’s policies for such calendar year 

is the applicable dollar amount for 

policy years ending on December 31 of 

such calendar year (determined in 

accordance with paragraph (c)(4) of this 

section), except that the applicable 


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dollar amount with respect to such an 

issuer’s policies for calendar year 2019 

shall be the applicable dollar amount for 

policy years ending on September 30, 

2019. For more information, see the 

examples in paragraphs (c)(2)(iii)(B), 

(c)(2)(iv)(B), (c)(2)(v)(B), and (c)(2)(vi)(B) 

of this section. 

(2) Determination of the average 

number of lives covered under a 

policy—(i) In general. To determine the 

average number of lives covered under 

a specified health insurance policy 

during a policy year, an issuer must use 

one of the following methods— 

(A) The actual count method 

(described in paragraph (c)(2)(iii) of this 

section); 

(B) The snapshot method (described 

in paragraph (c)(2)(iv) of this section); 

(C) The member months method 

(described in paragraph (c)(2)(v) of this 

section); or 

(D) The state form method (described 

in paragraph (c)(2)(vi) of this section). 

(ii) Consistency requirements. An 

issuer must use the same method of 

calculating the average number of lives 

covered under a policy consistently for 

the duration of the year. In addition, for 

all policies for which a liability is 

reported on a Form 720, ‘‘Quarterly 

Federal Excise Tax Return,’’ for a 

particular year, the issuer must use the 

same method of computing lives 

covered. An issuer that determines the 

average number of lives covered by 

using the actual count method described 

in paragraph (c)(2)(iii) of this section or 

the snapshot method described in 

paragraph (c)(2)(iv) of this section may 

change its method of computing the 

average lives covered to the snapshot 

method or actual count method, 

provided that the issuer uses the same 

method for computing the average lives 

covered for all policies for which a 

liability is reported on the Form 720 for 

that year. For example, an issuer with a 

policy having a policy year that ends on 

June 30, Policy A, may determine the 

average number of lives covered under 

Policy A for July 1, 2013, to June 30, 

2014, using the actual count method if 

the issuer uses the actual count method 

for all policies for which a liability will 

be reported on the Form 720 due by July 

31, 2015 (the due date for return that 

will include the liability for the July 

2013 to June 2014 policy year for Policy 

A). The issuer may change its method 

for determining the average number of 

lives covered under Policy A to the 

snapshot method for the July 1, 2014, to 

June 30, 2015, policy year, provided that 

the snapshot method is used for all 

policies for which a liability will be 

reported on the Form 720 due by July 

31, 2016 (the due date for return that 

will include the liability for the July 

2014 to June 2015 policy year for Policy 

A). An issuer that determines the 

average number of lives covered by 

using the member months method 

under paragraph (c)(2)(v) of this section 

or the state form method under 

paragraph (c)(2)(vi) of this section must 

use the same method for calculating 

lives covered for all policy years for 

which the fee applies. 

(iii) Actual count method—(A) 

Calculation method. An issuer may 

determine the average number of lives 

covered under a policy for a policy year 

by adding the total number of lives 

covered for each day of the policy year 

and dividing that total by the number of 

days in the policy year. 

(B) Example. The following example 

illustrates the principles of paragraphs 

(c)(1) and (c)(2)(iii)(A) of this section: 

Example. Insurance Company A issues 

three policies that are in effect during 2014, 

Group Health Insurance Policy A, which has 

a policy year from December 1 to November 

30, Group Health Insurance Policy B, which 

has a policy year from March 1 to February 

28, and Group Health Insurance Policy C, 

which has a policy year from January 1 to 

December 31. To calculate the average 

number of lives covered for 2014, Insurance 

Company A must calculate the average 

number of lives covered for each of its three 

policies for the policy year that ends in 2014. 

Insurance Company A chooses to use the 

actual count method under paragraph 

(c)(2)(iii)(A) of this section to determine 

average lives covered for policies having a 

policy year that ends in 2014. Insurance 

Company A calculates the sum of lives 

covered under Policy A for each day of the 

policy year ending November 30, 2014, as 

3,285,000. The average number of lives 

covered under Policy A for the policy year 

ending November 30, 2014, is 3,285,000 

divided by 365, or 9,000. Insurance Company 

A calculates the sum of lives covered under 

Policy B for each day of the policy year 

ending February 28, 2014, as 547,500. The 

average number of lives covered under Policy 

B for the policy year ending on February 28, 

2014, is 547,500 divided by 365, or 1,500. 

Insurance Company A calculates the sum of 

lives covered under Policy C for each day of 

the policy year ending December 31, 2014, as 

4,380,000. The average number of lives 

covered under Policy C for the policy year 

ending December 31, 2014, is 4,380,000 

divided by 365, or 12,000. To calculate the 

section 4375 fee under paragraph (c)(1) of 

this section for calendar year 2014, Insurance 

Company A must first determine the 

applicable dollar amount for each policy 

under paragraph (c)(4) of this section and 

multiply that amount by the average number 

of lives covered for that policy. Insurance 

Company A then adds the total fees for all 

three policies to determine the total fee under 

section 4375 that it must pay for calendar 

year 2014. 

(iv) Snapshot method—(A) 

Calculation method. An issuer may 

determine the average number of lives 

covered under a policy for a policy year 

by adding the totals of lives covered on 

one date in each quarter of the policy 

year, or more dates if an equal number 

of dates is used for each quarter, and 

dividing that total by the number of 

dates on which a count was made. For 

this purpose, the date or dates for each 

quarter must be the same (for example, 

the first day of the quarter, the last day 

of the quarter, or the first day of each 

month). 

(B) Example. The following example 

illustrates the principles of paragraphs 

(c)(1) and (c)(2)(iv)(A) of this section: 

Example. Insurance Company B issues 

three policies that are in effect during 2014, 

Group Health Insurance Policy A, which has 

a policy year from December 1 to November 

30, Group Health Insurance Policy B, which 

has a policy year from March 1 to February 

28, and Group Health Insurance Policy C, 

which has a policy year from January 1 to 

December 31. To calculate the average 

number of lives covered for 2014, Company 

A must calculate the average number of lives 

covered for each of its three policies for the 

policy year that ends in 2014. Insurance 

Company B chooses to determine its average 

lives covered using the snapshot method for 

all policies that have a policy year that ends 

in 2014 and chooses to count lives covered 

on the first day of each quarter of the policy 

years. On December 1, 2013, Policy A covers 

8,900 lives covered, on March 1, 2014, 9,100 

lives covered, on June 1, 2014, 9,050 lives 

covered, and on September 1, 2014, 9,050 

lives covered. Insurance Company B treats 

the average number of lives covered under 

Policy A for the policy year ending 

November 30, 2014, as 36,100 (8,900 + 9,100 

+ 9,050 + 9,050) divided by 4, or 9,025. On 

March 1, 2013, Policy B covers 1,500 lives 

covered, on June 1, 2013, 1,350 lives covered, 

on September 1, 2013, 1,400 lives covered, 

and on December 1, 2013, 1,550 lives 

covered. Insurance Company B treats the 

average number of lives covered under Policy 

B for the policy year ending February 28, 

2014, as 5,800 (1,500 + 1,350 + 1,400 + 1,550) 

divided by 4, or 1,450. On January 1, 2014, 

Policy C covers 12,500 lives covered, on 

April 1, 2014, 12,250 lives covered, on July 

1, 2014, 12,000 lives covered, and on October 

1, 2014, 11,250 lives covered. Insurance 

Company B treats the average number of lives 

covered under Policy C for the policy year 

ending December 31, 2014, as 47,750 (12,500 

+ 12,250 + 12,000 + 11,250) divided by 4, or 

12,000. To calculate the section 4375 fee 

under paragraph (c)(1) of this section for 

calendar year 2014, Insurance Company B 

must first determine the applicable dollar 

amount for each policy under paragraph 

(c)(4) of this section and multiply that 

amount by the number of average lives 

covered for that policy. Insurance Company 

B then adds the total fees for all three 

policies to determine the total fee under 

section 4375 that it must pay for calendar 

year 2014. 

(v) Member months method—(A) 

Calculation method. An issuer may 


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determine the average number of lives 

covered under all policies in effect for 

a calendar year based on the member 

months (an amount that equals the sum 

of the totals of lives covered on prespecified days in each month of the 

reporting period) reported on the 

National Association of Insurance 

Commissioners (NAIC) Supplemental 

Health Care Exhibit filed for that 

calendar year. Under this method, the 

average number of lives covered under 

the policies in effect for the calendar 

year equals the member months divided 

by 12. 

(B) Example. The following example 

illustrates the principles of paragraphs 

(c)(1) and (c)(2)(v)(A) of this section: 

Example. Insurance Company C chooses to 

determine the average number of lives 

covered for all years to which the section 

4375 fee applies using the member months 

method of paragraph (c)(2)(v)(A) of this 

section. Insurance Company C reports 

12,000,000 as its member months on the 

NAIC Supplemental Health Care Exhibit filed 

for calendar year 2013. Under the member 

months method, Insurance Company C 

calculates the average number of lives 

covered for all its specified health insurance 

policies in force during calendar year 2013 

by dividing 12,000,000 (member months) by 

12 (number of months in the reporting 

period), which equals 1,000,000. To 

determine the section 4375 fee it must pay 

for calendar year 2013, Insurance Company 

C multiplies 1,000,000 by the applicable 

dollar amount that is in effect at the end of 

the calendar year under paragraph (c)(4) of 

this section. 

(vi) State form method—(A) 

Calculation method. An issuer that is 

not required to file NAIC annual 

financial statements may determine the 

number of lives covered under all 

policies in effect for the calendar year 

using a form that is filed with the 

issuer’s state of domicile and a method 

similar to that described in paragraph 

(c)(2)(v) of this section, if the form 

reports the number of lives covered in 

the same manner as member months are 

reported on the NAIC Supplemental 

Health Care Exhibit. 

(B) Example. The following example 

illustrates the principles of paragraphs 

(c)(1) and (c)(2)(vi)(A) of this section: 

Example. Insurance Company D is not 

required to file the NAIC Supplemental 

Health Care Exhibit, but files a form with its 

state of domicile. Insurance Company D 

chooses to determine the average number of 

lives covered for all years to which the 

section 4375 fee applies using the state form 

method of paragraph (c)(2)(vi)(A) of this 

section. The state form reports the number of 

lives covered in the same manner as member 

months is reported on the NAIC 

Supplemental Health Care Exhibit. For 

calendar year 2013, Insurance Company D 

reports 12,000,000 as its equivalent member 

months on the state form. Under the state 

form method, Insurance Company D 

calculates the average number of lives 

covered for all of its specified health 

insurance policies in force during calendar 

year 2013 by dividing 12,000,000 (equivalent 

member months) by 12 (number of months in 

the reporting period), which equals 

1,000,000. To determine the section 4375 fee 

it must pay for calendar year 2013, Insurance 

Company D multiplies 1,000,000 by the 

applicable dollar amount that is in effect at 

the end of the calendar year under paragraph 

(c)(4) of this section. 

(3) Special rules for the first year and 

the last year the fee is in effect—(i) 

Calculation of the average number of 

lives covered under the policy for the 

first year the fee is in effect. For issuers 

that determine the average number of 

lives covered using data reported on the 

2012 NAIC Supplemental Health Care 

Exhibit or a permitted state form that 

covers the 2012 calendar year, the 

average number of lives covered under 

all policies in effect for the 2012 

calendar year equals the average number 

of lives covered for that year (as 

determined under paragraph (c)(2)(v) or 

(vi) of this section) multiplied by 1⁄4. 

The resulting number is deemed to be 

the average number of lives covered for 

policies with policy years ending on or 

after October 1, 2012, and before 

January 1, 2013. For policy years 

beginning before May 14, 2012 and 

ending on or after October 1, 2012, 

issuers that determine the average 

number of lives covered using the actual 

count method under paragraph (c)(2)(iii) 

of this section may calculate the average 

number of lives covered using data from 

the period beginning May 14, 2012 

through the end of the policy year. For 

policy years beginning before May 14, 

2012 and ending on or after October 1, 

2012, issuers that determine the average 

number of lives covered using the 

snapshot method under paragraph 

(c)(2)(iv) of this section may calculate 

the average number of lives covered 

using dates from the quarters remaining 

in the policy year starting on or after 

May 14, 2012. If an abbreviated year is 

used, the issuer will divide the number 

of lives covered by the number of days 

from May 14, 2012 through the end of 

the policy year (for the actual count 

method) or the number of days on 

which a count was made (for the 

snapshot method). 

(ii) Calculation of the average number 

of lives covered under the policy for the 

last year the fee is in effect. For issuers 

that determine the average number of 

lives covered using data reported on the 

2019 NAIC Supplemental Health Care 

Exhibit or a permitted state form that 

covers the 2019 calendar year, the 

average number of lives covered for all 

policies in effect during the 2019 

calendar year equals the average number 

of lives covered for that year (as 

determined under paragraph (c)(2)(v) or 

(vi) of this section) multiplied by 3⁄4. 

The resulting number is deemed to be 

the average number of lives covered for 

policies with policy years ending on or 

after January 1, 2019, and before 

October 1, 2019. 

(iii) Example. The following examples 

illustrate the principles of paragraph 

(c)(3) of this section: 

Example 1. Insurance Company E issues 

Group Health Insurance Policy C, which has 

a policy year that ends on November 30, 

2012. Insurance Company E determines the 

average number of lives covered under a 

policy by using the actual count method. 

Under that method, for that policy year, 

Insurance Company E calculates the sum of 

lives covered under Policy C for each day 

between May 14, 2012 and November 30, 

2012 as 10,000. The average number of lives 

covered under Policy C for that policy year 

is 10,000 divided by the number of days from 

May 14, 2012 through November 30, 2012. 

Alternatively, Insurance Company E could 

have counted the number of lives covered for 

the entire policy year and divided the sum 

by 365. 

Example 2. Insurance Company F reports 

12,000,000 as its member months on its NAIC 

Supplemental Health Care Exhibit filed for 

calendar year 2012. Under the member 

months method, Insurance Company F 

calculates the average number of lives 

covered for 2012 by dividing 12,000,000 

(member months) by 12 (number of months 

in the reporting period), and then 

multiplying the result (1,000,000) by 1⁄4, 

which equals 250,000. Accordingly, the 

average number of lives covered for policies 

with policy years ending on or after October 

1, 2012, and before January 1, 2013, is 

250,000. 

(4) Applicable dollar amount. For 

policy years ending on or after October 

1, 2012, and before October 1, 2013, the 

applicable dollar amount is $1. For 

policy years ending on or after October 

1, 2013, and before October 1, 2014, the 

applicable dollar amount is $2. For any 

policy years ending in any fiscal year 

beginning on or after October 1, 2014, 

the applicable dollar amount is the sum 

of— 

(i) The applicable dollar amount for 

the policy year ending in the previous 

fiscal year; plus 

(ii) The amount equal to the product 

of— 

(A) The applicable dollar amount for 

the policy year ending in the previous 

fiscal year; and 

(B) The percentage increase in the 

projected per capita amount of the 

National Health Expenditures most 

recently released by the Department of 

Health and Human Services before the 

beginning of the fiscal year. 


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(d) Effective/applicability date. This 

section is effective on April 17, 2012. 

This section applies for policies with 

policy years ending on or after October 

1, 2012, and before October 1, 2019. 

§ 46.4376–1 Fee on sponsors of selfinsured health plans. 

(a) In general. A plan sponsor of an 

applicable self-insured health plan is 

liable for a fee imposed by section 4376 

for plans with plan years ending on or 

after October 1, 2012, and before 

October 1, 2019. Paragraph (b) of this 

section provides the definitions that 

apply for purposes of section 4376 and 

this section. Paragraph (c) of this section 

provides the requirements for 

calculating the fee imposed by section 

4376. Paragraph (d) of this section 

provides the effective/applicability date. 

For rules relating to filing the required 

return and paying the fee, see 

§§ 40.6011(a)–1 and 40.6151(a)–1 of this 

chapter. 

(b) Definitions. The following 

definitions apply for purposes of section 

4376 and this section. See § 46.4377–1 

for additional definitions. 

(1) Applicable self-insured health 

plan—(i) In general. Except as provided 

in paragraph (b)(1)(ii) of this section and 

§ 46.4377–1, applicable self-insured 

health plan means a plan that provides 

for accident or health coverage (within 

the meaning of § 46.4377–1(a)) if any 

portion of the coverage is provided 

other than through an insurance policy 

and the plan is established or 

maintained— 

(A) By one or more employers for the 

benefit of their employees or former 

employees; 

(B) By one or more employee 

organizations for the benefit of their 

members or former members; 

(C) Jointly by one or more employers 

and one or more employee organizations 

for the benefit of employees or former 

employees; 

(D) By a voluntary employees’ 

beneficiary association, as described in 

section 501(c)(9); 

(E) By an organization described in 

section 501(c)(6); or 

(F) By a multiple employer welfare 

arrangement (as defined in section 3(40) 

of the Employee Retirement Income 

Security Act of 1974 (ERISA)), a rural 

electric cooperative (as defined in 

section 3(40)(B)(iv) of ERISA), or a rural 

cooperative association (as defined in 

section 3(40)(B)(v) of ERISA). 

(ii) Exceptions. The term applicable 

self-insured health plan does not 

include any of the following: 

(A) A plan that provides benefits 

substantially all of which are excepted 

benefits, as defined in section 9832(c). 

For example, a health flexible spending 

arrangement (health FSA) (as described 

in section 106(c)(2)) that satisfies the 

requirements to be treated as an 

excepted benefit under section 9832(c) 

(see also § 54.9831–1(c)(3)(v) of this 

chapter) is not an applicable selfinsured health plan. A health FSA that 

is not treated as an excepted benefit 

under section 9832(c) is an applicable 

self-insured health plan. 

(B) An employee assistance program, 

disease management program, or 

wellness program if the program does 

not provide significant benefits in the 

nature of medical care or treatment. 

(iii) Multiple self-insured 

arrangements established or maintained 

by the same plan sponsor. For purposes 

of section 4376, two or more 

arrangements established or maintained 

by the same plan sponsor that provides 

for accident and health coverage (within 

the meaning of § 46.4377–1(a)) other 

than through an insurance policy and 

that have the same plan year may be 

treated as a single applicable selfinsured health plan for purposes of 

calculating the fee imposed by section 

4376. For example, if a plan sponsor 

establishes or maintains a self-insured 

arrangement providing major medical 

benefits, and a separate self-insured 

arrangement with the same plan year 

providing prescription drug benefits, the 

two arrangements may be treated as one 

applicable self-insured health plan so 

that the same life covered under each 

arrangement would count as only one 

covered life under the plan. Similarly, if 

a plan sponsor provides a Health 

Reimbursement Arrangement (HRA) 

that is integrated with another 

applicable self-insured health plan that 

provides major medical coverage, the 

HRA and the major medical plan may be 

treated as one applicable self-insured 

health plan. 

(2) Plan sponsor—(i) In general. The 

term plan sponsor means— 

(A) The employer, in the case of an 

applicable self-insured health plan 

established or maintained by a single 

employer; 

(B) The employee organization, in the 

case of an applicable self-insured health 

plan established or maintained by an 

employee organization; 

(C) The joint board of trustees, in the 

case of a multiemployer plan (as defined 

in section 414(f)); 

(D) The committee, in the case of a 

multiple employer welfare arrangement; 

(E) The cooperative or association that 

establishes or maintains an applicable 

self-insured health plan established or 

maintained by a rural electric 

cooperative (as defined in section 

3(40)(B)(iv) of ERISA) or rural 

cooperative association (as defined in 

section 3(40)(B)(v) of ERISA); 

(F) The trustee, in the case of an 

applicable self-insured health plan 

established or maintained by a 

voluntary employees’ beneficiary 

association (meaning that the voluntary 

employees’ beneficiary association is 

not merely serving as a funding vehicle 

for a plan that is established or 

maintained by an employer or other 

person); or 

(G) In the case of an applicable selfinsured health plan the plan sponsor of 

which is not described in paragraphs 

(b)(2)(i)(A) through (F) of this section, 

the person identified by the terms of the 

document under which the plan is 

operated as the plan sponsor, or the 

person designated by terms of the 

document under which the plan is 

operated as the plan sponsor for section 

4376 purposes, provided that 

designation is made, and that person 

has consented to the designation, by no 

later than the date by which the return 

paying the fee under section 4376 for 

that plan year is required to be filed, 

after which date that designation for 

that plan year may not be changed or 

revoked, and provided further that a 

person may be designated as the plan 

sponsor only if the person is one of the 

persons maintaining the plan (for 

example, one of the employers that is 

maintaining the plan with one or more 

other employers or employee 

organizations). 

(H) In the case of an applicable selfinsured health plan the sponsor of 

which is not described in paragraphs 

(b)(2)(i)(A) through (F) of this section, 

and for which no identification or 

designation of a plan sponsor has been 

made pursuant to paragraph (b)(2)(i)(G) 

of this section, each employer that 

maintains the plan (with respect to 

employees of that employer), each 

employee organization that maintains 

the plan (with respect to members of 

that employee organization), and each 

board of trustees, cooperative or 

association that maintains the plan, 

meaning that each plan sponsor must 

file a separate Form 720, ‘‘Quarterly 

Federal Excise Tax Return,’’ reflecting 

its separate liability under section 4376. 

(ii) Example. The following examples 

illustrate the principles of paragraph 

(b)(2) of this section: 

Example 1. Employer XYZ is a holding 

company with no employees that owns all 

the issued and outstanding shares of 

Employer X, Employer Y, and Employer Z. 

Employer X, Employer Y, and Employer Z 

have established the XYZ Group Health Plan 

to provide accident and health coverage, 

provided other than through an insurance 

policy, for the benefit of their employees. The 


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XYZ Group Health Plan has a calendar year 

plan year. In addition, there is no plan 

sponsor identified or designated in the plan 

document. As a self-insured health plan for 

employees of two or more employers, the 

XYZ Group Health Plan is an applicable selfinsured health plan under section 

4376(c)(2)(A) and paragraph (b)(1)(i)(A) of 

this section. However, a plan sponsor is not 

identified or designated in the governing 

plan document. Accordingly, the plan 

sponsor for purposes of section 4376 is 

identified under paragraph (b)(2)(i)(H) of this 

section as Employer X, Employer Y, and 

Employer Z, each with respect to its own 

employees covered under the plan. 

Accordingly, Employer X, Employer Y, and 

Employer Z each must file a Form 720 

reflecting their separate liabilities under 

section 4376, calculated based upon lives 

covered that are employees of that employer, 

or spouses, dependents, or other beneficiaries 

of employees of that employer and the 

applicable dollar amount in effect for the 

plan year. 

Example 2. The same facts as Example 1, 

except that the governing plan document 

designates Employer X as the plan sponsor of 

the XYZ Group Health Plan for purposes of 

the fee under section 4376. Accordingly, the 

plan sponsor for purposes of section 4376 is 

identified under paragraph (b)(2)(i)(G) of this 

section as Employer X. Employer X must file 

a Form 720 reflecting liabilities under section 

4376, calculated based upon lives covered 

that are employees of Employer X, Employer 

Y, or Employer Z, or spouses, dependents, or 

other beneficiaries of employees of those 

employers and the applicable dollar amount 

in effect for the plan year. 

(c) Calculation of fee—(1) In general. 

The amount of the fee for a plan year is 

equal to the product of the average 

number of lives covered under the plan 

for the plan year (determined in 

accordance with paragraph (c)(2) of this 

section) and the applicable dollar 

amount (determined in accordance with 

paragraph (c)(3) of this section). For 

more information, see the examples in 

paragraphs (c)(2)(iii)(B), (c)(2)(iv)(D), 

and (c)(2)(v)(B) of this section. 

(2) Determination of the average 

number of covered lives under the 

plan—(i) In general. To determine the 

average number of lives covered under 

an applicable self-insured health plan 

during a plan year, a plan sponsor must 

use one of the following— 

(A) The actual count method 

(described in paragraph (c)(2)(iii) of this 

section); 

(B) The snapshot dates method 

(described in paragraph (c)(2)(iv) of this 

section); or 

(C) The Form 5500 method (described 

in paragraph (c)(2)(v) of this section). 

(ii) Consistency within plan year. A 

plan sponsor must use the same method 

of calculating the average number of 

lives covered under the plan 

consistently for the duration of the plan 

year. However, a plan sponsor may use 

a different method from one plan year 

to the next. 

(iii) Actual count method—(A) 

Calculation method. A plan sponsor 

may determine the average number of 

lives covered under a plan for a plan 

year by adding the totals of lives 

covered for each day of the plan year 

and dividing that total by the number of 

days in the plan year. 

(B) Example. The following example 

illustrates the principles of paragraphs 

(c)(1) and (c)(2)(iii)(A) of this section: 

Example. Employer A is the plan sponsor 

of the Employer A Self-Insured Health Plan, 

which has a calendar year plan year. 

Employer A calculates the sum of covered 

lives under the plan for each day of the plan 

year ending December 31, 2013 as 3,285,000. 

The average number of covered lives under 

the plan for the plan year ending December 

31, 2013 is 3,285,000 divided by 365, or 

9,000. To calculate the section 4376 fee for 

the plan under paragraph (c)(1) of this 

section for the plan year ending December 

31, 2013, Employer A must determine the 

applicable dollar amount under paragraph 

(c)(3) of this section and multiply that 

amount by the average number of lives 

covered under the plan. 

(iv) Snapshot methods—(A) In 

general. A plan sponsor may determine 

the average number of lives covered 

under a plan for a plan year by adding 

the totals of lives covered on one date 

in each quarter, or more dates if an 

equal number of dates are used for each 

quarter, and dividing that total by the 

number of dates on which a count was 

made. For this purpose, the date or 

dates for each quarter must be the same 

(for example, the first day of the quarter, 

the last day of the quarter, the first day 

of each month, etc.). For purposes of 

this paragraph (c)(2)(iv), the number of 

lives covered on a designated date may 

be determined using either the snapshot 

factor method described in paragraph 

(c)(2)(iv)(B) of this section or the 

snapshot count method described in 

paragraph (c)(2)(iv)(C) of this section. 

(B) Snapshot factor method. Under 

the snapshot factor method, the number 

of lives covered on a date is equal to the 

sum of the number of participants with 

self-only coverage on that date, plus the 

product of the number of participants 

with coverage other than self-only 

coverage on the date and 2.35. 

(C) Snapshot count method. Under 

the snapshot count method, the number 

of lives covered on a date equals the 

actual number of lives covered on the 

designated date. 

(D) Examples. The following 

examples illustrate the principles of 

paragraphs (c)(1) and (c)(2)(iv) of this 

section: 

Example 1. Employer B is the plan 

sponsor of the Employer B Self-Insured 

Health Plan, which has a calendar year plan 

year. Employer B has designated the first day 

of each quarter of the plan year as the date 

that Employer B counts the covered lives 

under the Employer B Self-Insured Health 

Plan. On January 1, 2013, Employer B SelfInsured Health Plan covers 2,000 covered 

lives, on April 1, 2013, 2,100 covered lives, 

on July 1, 2013, 2,050 covered lives, and on 

October 1, 2013, 2,050 covered lives. Under 

the snapshot count method, Employer B must 

determine the average number of covered 

lives under the Employer B Self-Insured 

Health Plan for the plan year ending 

December 31, 2013 as 8,200 (2,000 + 2,100 

+ 2,050 + 2,050) divided by 4, or 2,050. To 

calculate the section 4376 fee under 

paragraph (c)(1) of this section for the plan 

year ending December 31, 2013, Employer B 

must determine the applicable dollar amount 

under paragraph (c)(3) of this section and 

multiply that amount by the average number 

of lives covered under the plan. 

Example 2. Same facts as Example 1, 

except Employer B determines the number of 

covered lives not covered by self-only 

coverage based on the number of participants 

with coverage other than self-only multiplied 

by 2.35 (the factor set forth in (c)(2)(iv) of this 

section). On January 1, 2013, Employer B 

Self-Insured Health Plan provides self-only 

coverage to 600 employees and other than 

self-only coverage to 800 employees. On 

April 1, 2013, Employer B Self-Insured 

Health Plan provides self-only coverage to 

608 employees and other than self-only 

coverage to 800 employees. On July 1, 2013 

and October 1, 2013, Employer B SelfInsured Health Plan provides self-only 

coverage to 610 employees and other than 

self-only coverage to 809 employees. Under 

the snapshot factor method, Employer B must 

determine the average number of covered 

lives under the Employer B Self-Insured 

Health Plan for the plan year ending 

December 31, 2013 as 9,988 [(600+(800 x 

2.35)) + (608 + (800 x 2.35)) + (610 + (809 

x 2.35)) + (610 + (809 x 2.35))] divided by 4, 

or 2,497. To calculate the section 4376 fee 

under paragraph (c)(1) of this section for the 

plan year ending December 31, 2013, 

Employer B must determine the applicable 

dollar amount under paragraph (c)(3) of this 

section and multiply that amount by the 

average number of lives covered under the 

plan. 

(v) Form 5500 method—(A) 

Calculation method. A plan sponsor 

may determine the average number of 

lives covered under a plan for a plan 

year based on the number of reportable 

participants for the Form 5500, ‘‘Annual 

Return/Report of Employee Benefit 

Plan,’’ that is filed for the applicable 

self-insured health plan for that plan 

year. For purposes of this paragraph 

(c)(2)(v), the average number of lives 

covered under the plan for the plan year 

for a plan offering only self-only 

coverage equals the sum of total 

participants covered at the beginning 

and the end of the plan year, as reported 


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on the Form 5500 filed for the 

applicable self-insured health plan, 

divided by 2. For purposes of this 

paragraph (c)(2)(v), the average number 

of lives covered under the plan for the 

plan year for a plan offering self-only 

coverage and coverage other than selfonly coverage equals the sum of total 

participants covered at the beginning 

and the end of the plan year, as reported 

on the Form 5500 filed for the 

applicable self-insured health plan. 

(B) Examples. The following 

examples illustrate the principles of 

paragraphs (c)(1) and (c)(2)(v)(A) of this 

section: 

Example 1. Employer C is the plan 

sponsor of the Employer C Self-Insured 

Health Plan, which has a fiscal year plan year 

ending on July 31, 2013 and offers only selfonly coverage. Employer C files a Form 5500 

for the Employer C Self-Insured Health Plan 

for the plan year ending July 31, 2013 

reflecting 4,000 plan participants on the first 

day of the plan year and 4,200 plan 

participants on the last day of the plan year. 

For purposes of calculating the fee under 

section 4376 using the Form 5500 method, 

Employer C must treat the number of covered 

lives for the plan year ending July 31, 2013 

as equal to the sum of 4,000 and 4,200 or 

8,200, divided by 2, or 4,100. To calculate the 

section 4376 fee under paragraph (c)(1) of 

this section for the plan year ending July 31, 

2013, Employer C must determine the 

applicable dollar amount under paragraph 

(c)(3) of this section and multiply that 

amount by the average number of lives 

covered under the plan. 

Example 2. Same facts as Example 1, 

except that the Employer C Self-Insured 

Health plan offers self-only coverage and 

family coverage. For purposes of calculating 

the fee under section 4376 using the Form 

5500 method, Employer C must treat the 

number of covered lives for the plan year 

ending July 31, 2013 as equal to the sum of 

4,000 and 4,200, or 8,200. To calculate the 

section 4376 fee under paragraph (c)(1) of 

this section for the plan year ending July 31, 

2013, Employer C must determine the 

applicable dollar amount under paragraph 

(c)(3) of this section and multiply that 

amount by the average number of lives 

covered under the plan. 

(vi) Special rule for health FSAs and 

HRAs. For purposes of this section, if a 

plan sponsor does not maintain an 

applicable self-insured health plan other 

than a health flexible spending 

arrangement (health FSA) (as described 

in section 106(c)(2)) or a health 

reimbursement arrangement (as 

described in Notice 2002–45 (2002–2 CB 

93)) (HRA), the plan sponsor may treat 

each participant’s health FSA or HRA as 

covering a single covered life (and 

therefore the plan sponsor is not 

required to include as covered lives any 

spouse, dependent, or other beneficiary 

of the individual participant in the 

health FSA or HRA, as applicable). If a 

health FSA or HRA that is an applicable 

self-insured health plan has the same 

plan sponsor as another applicable selfinsured health plan other than a health 

FSA or HRA, the two arrangements may 

be treated as a single plan under 

paragraph (b)(1)(iii) of this section. 

However, the special counting rule in 

this paragraph applies only for purposes 

of the health FSA or HRA and, 

therefore, applies only for purposes of 

the participants in the health FSA or 

HRA that do not participate in the other 

applicable self-insured health plan. (The 

participants in the health FSA or HRA 

that participate in the other applicable 

self-insured health plan will be counted 

in accordance with the method applied 

for counting lives under that other plan 

as described in paragraph (b)(2)(i) of this 

section.) See § 601.601(d)(2) of this 

chapter. 

(vii) Special rule for the first year the 

fee is in effect. Notwithstanding 

paragraph (c)(2)(i) of this section, for 

plan years beginning before July 11, 

2012 and ending on or after October 1, 

2012, a plan sponsor may determine the 

average number of lives covered under 

the plan for the plan year using any 

reasonable method. 

(3) Applicable dollar amount. For 

plan years ending on or after October 1, 

2012, and before October 1, 2013, the 

applicable dollar amount is $1. For plan 

years ending on or after October 1, 2013, 

and before October 1, 2014, the 

applicable dollar amount is $2. For any 

plan year ending in any fiscal year 

beginning on or after October 1, 2014, 

the applicable dollar amount is equal to 

the sum of— 

(i) The applicable dollar amount for 

plan years ending in the previous fiscal 

year; plus 

(ii) The amount equal to the product 

of— 

(A) The applicable dollar amount for 

plan years ending in the previous fiscal 

year; and 

(B) The percentage increase in the 

projected per capita amount of the 

National Health Expenditures most 

recently released by the Department of 

Health and Human Services before the 

beginning of the fiscal year. 

(d) Effective/applicability date. This 

section is effective on April 17, 2012. 

This section applies for plan years that 

end on or after October 1, 2012, and 

before October 1, 2019. 

§ 46.4377–1 Definitions and special rules. 

(a) Definitions. The following 

definitions apply for purposes of 

sections 4375 and 4376 and §§ 46.4375– 

1 and 46.4376–1. 

(1) Accident and health coverage. The 

term accident and health coverage 

means any coverage that, if provided by 

an insurance policy, would cause such 

policy to be a specified health policy (as 

defined in section 4375(c)). 

(2) Individual residing in the United 

States—(i) The term individual residing 

in the United States means an 

individual with a place of abode in the 

United States. 

(ii) Determination of place of abode. 

For purposes of paragraph (a)(2) of this 

section, an issuer or a plan sponsor may 

rely on the most recent address on file 

with the issuer or plan sponsor and may 

treat the primary insured and the 

primary insured’s spouse, dependents, 

or other beneficiaries covered by the 

policy, as having the same place of 

abode. For this purpose, the primary 

insured is the individual covered by the 

policy other than due to that 

individual’s status as the spouse, 

dependent, or other beneficiary of 

another covered individual. 

(3) United States. The term United 

States includes American Samoa, Guam, 

the Northern Mariana Islands, Puerto 

Rico, the Virgin Islands, and any other 

possession of the United States. 

(4) Fiscal year. The term fiscal year 

means the year beginning on October 1 

and ending on the following September 

30. 

(b) Treatment of exempt governmental 

programs—(1) In general. The fees 

imposed by sections 4375 and 4376 do 

not apply to any covered life under an 

exempt governmental program as 

defined in paragraph (b)(2) of this 

section. 

(2) Exempt governmental program. 

For purposes of this section, exempt 

governmental program means any— 

(i) Insurance program established 

under title XVIII of the Social Security 

Act; 

(ii) Medical assistance program 

established by title XIX or XXI of the 

Social Security Act; 

(iii) Program established by Federal 

law for providing medical care (other 

than through insurance policies) to 

individuals (or their spouses and 

dependents) by reason of such 

individuals being (or having been) 

members of the Armed Forces of the 

United States; and 

(iv) Program established by Federal 

law for providing medical care (other 

than through insurance policies) to 

members of Indian tribes (as defined in 

section 4(d) of the Indian Health Care 

Improvement Act). 

(c) Effective/applicability date. This 

section is effective on April 17, 2012. 

This section applies to all policies and 


wreier-aviles on DSK5TPTVN1PROD with PROPOSALS
22706 Federal Register / Vol. 77, No. 74 / Tuesday, April 17, 2012 / Proposed Rules 

plans to which section 4375 or 4376 

applies. 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2012–9173 Filed 4–12–12; 4:15 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Parts 100 and 165 

[Docket No. USCG–2011–0551] 

Special Local Regulation and Safety 

Zone; America’s Cup Sailing Events, 

San Francisco, CA 

AGENCY: Coast Guard, DHS. 

ACTION: Proposed rule; notice of 

availability and request for comments. 

SUMMARY: The Coast Guard announces 

the availability of a draft environmental 

assessment of the temporary special 

local regulation and temporary safety 

zone proposed for those portions of the 

‘‘America’s Cup World Series,’’ the 

‘‘Louis Vuitton Cup’’ challenger 

selection series, and the ‘‘America’s Cup 

Finals Match’’ sailing regattas that may 

be conducted in the waters of San 

Francisco Bay adjacent to the City of 

San Francisco waterfront in the vicinity 

of the Golden Gate Bridge and Alcatraz 

Island between August and September 

2012 and between July and September 

2013. We request your comments on 

this draft environmental assessment. 

DATES: Comments and related material 

must be submitted to our online docket 

via http://www.regulations.gov on or 

before April 30, 2012, or reach the 

Docket Management Facility by that 

date. 

ADDRESSES: You may submit comments 

identified by docket number USCG– 

2011–0551 using any one of the 

following methods: 

(1) Federal eRulemaking Portal: 

http://www.regulations.gov. 

(2) Fax: 202–493–2251. 

(3) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue SE., Washington, DC 20590– 

0001. 

(4) Hand delivery: Same as mail 

address above, between 9 a.m. and 

5 p.m., Monday through Friday, except 

Federal holidays. The telephone number 

is 202–366–9329. 

To avoid duplication, please use only 

one of these four methods. See the 

‘‘Public Participation and Request for 

Comments’’ portion of the 

SUPPLEMENTARY INFORMATION section 

below for instructions on submitting 

comments. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this notice, call 

or email LCDR Aaron Lubrano, Coast 

Guard Sector San Francisco, U.S. Coast 

Guard; telephone (415) 399–3446, email 

Aaron.C.Lubrano@uscg.mil. If you have 

questions on viewing or submitting 

material to the docket, call Renee V. 

Wright, Program Manager, Docket 

Operations, telephone (202) 366–9826. 

SUPPLEMENTARY INFORMATION: 

Public Participation and Request for 

Comments 

We encourage you to submit 

comments and related material on the 

draft environmental assessment. All 

comments received will be posted, 

without change, to http:// 

www.regulations.gov and will include 

any personal information you have 

provided. 

Submitting comments: If you submit a 

comment, please include the docket 

number for this notice (USCG–2011– 

0551) and provide a reason for each 

suggestion or recommendation. You 

may submit your comments and 

material online, or by fax, mail or hand 

delivery, but please use only one of 

these means. We recommend that you 

include your name and a mailing 

address, an email address, or a 

telephone number in the body of your 

document so that we can contact you if 

we have questions regarding your 

submission. 

To submit your comment online, go to 

http://www.regulations.gov, type 

‘‘USCG–2011–0551’’ and click 

‘‘Search.’’ Then click ‘‘Submit a 

Comment’’ in the ‘‘Actions’’ column. If 

you submit your comments by mail or 

hand delivery, submit them in an 

unbound format, no larger than 81⁄2 by 

11 inches, suitable for copying and 

electronic filing. If you submit them by 

mail and would like to know that they 

reached the Facility, please enclose a 

stamped, self-addressed postcard or 

envelope. We will consider all 

comments and material received during 

the comment period. 

Viewing the comments and draft 

environmental assessment: To view the 

comments and draft environmental 

assessment, go to http:// 

www.regulations.gov, type ‘‘USCG– 

2011–0551’’ and click ‘‘Search.’’ Then 

click the ‘‘Open Docket Folder’’ in the 

‘‘Actions’’ column. If you do not have 

access to the Internet, you may view the 

docket online by visiting the Docket 

Management Facility in Room W12–140 

on the ground floor of the Department 

of Transportation West Building, 1200 

New Jersey Avenue SE., Washington, 

DC 20590, between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. We have an agreement with 

the Department of Transportation to use 

the Docket Management Facility. 

Privacy Act: Anyone can search the 

electronic form of comments received 

into any of our dockets by the name of 

the individual submitting the comment 

(or signing the comment, if submitted 

on behalf of an association, business, 

labor union, etc.). You may review a 

Privacy Act, system of records notice 

regarding our public dockets in the 

January 17, 2008, issue of the Federal 

Register (73 FR 3316). 

Background and Purpose 

The America’s Cup Race Management 

has applied for a Marine Event Permit 

to hold the 34th America’s Cup races on 

the waters of San Francisco Bay in 

California. The Coast Guard has not 

approved the Marine Event Permit and 

is still evaluating the application, 

including the potential environmental 

impact of the requested permit. If the 

permit is approved, however, we 

anticipate that a special local regulation 

may be necessary to ensure public safety 

during the races. To provide adequate 

time for public input, we proposed a 

special local regulation and safety zone 

on January 30, 2012 (77 FR 4501). 

In the January 2012 notice of 

proposed rulemaking, the Coast Guard 

proposed regulations for the 2012 and 

2013 races. These include proposed 

regulated areas surrounding the primary 

and contingent race areas; a designated 

area for recreational swimmers, rowers, 

and kayakers; a transit zone for using 

during the 2013 races; restrictions on 

vessel traffic and the use of Anchorage 

No. 7; and a safety zone around racing 

vessels. These proposed rules are 

temporary and would be enforced only 

on race days. The public comment 

period on these proposed rules remains 

open through April 30, 2012. If the 

Marine Event Permit is not approved, 

we will withdraw the proposed rules. 

Draft Environmental Assessment 

In accordance with the National 

Environmental Policy Act of 1969 

(NEPA) (42 U.S.C. 4321–4370f), 

Department of Homeland Security 

Management Directive 023–01, and 

Commandant Instruction M16475.lD, 

we have prepared a draft environmental 

assessment (EA) of the proposed special 

local regulation and safety zone 

described above. The draft EA, which is 

available in the docket, identifies and 


wreier-aviles on DSK5TPTVN1PROD with PROPOSALS