Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 76931 

Implementation of Address Quality 

Assessment Fee 

The Postal Service plans to 

implement the Address Quality 

Assessment Fee during the calendar 

year of 2015, after appropriate 

regulatory approvals. 

Notice about changes regarding the 

extension of free address correction 

service and any withdrawal of the 

requirement for the payment of manual 

address correction notices for 

Periodicals will be provided at a later 

date. 

The Postal Service invites all 

comments and feedback. 

List of Subjects in 39 CFR Part 111 

Administrative practice and 

procedure, Postal Service. 

Although we are exempt from the 

notice and comment requirements of the 

Administrative Procedure Act (5 U.S.C. 

553(b), (c)) regarding proposed 

rulemaking by 39 U.S.C. 410(a), we 

invite public comments on the 

following proposed revisions to Mailing 

Standards of the United States Postal 

Service, Domestic Mail Manual (DMM), 

incorporated by reference in the Code of 

Federal Regulations. See 39 CFR 111.1. 

Accordingly, 39 CFR part 111 is 

proposed to be amended as follows: 

PART 111—[AMENDED] 

■ 1. The authority citation for 39 CFR 

part 111 continues to read as follows: 

Authority: 5 U.S.C. 552(a); 13 U.S.C. 301– 

307; 18 U.S.C. 1692–1737; 39 U.S.C. 101, 

401, 403, 404, 414, 416, 3001–3011, 3201– 

3219, 3403–3406, 3621, 3622, 3626, 3632, 

3633, and 5001. 

■ 2. Revise the following sections of 

Mailing Standards of the United States 

Postal Service, Domestic Mail Manual 

(DMM), as follows: 

Mailing Standards of the United States 

Postal Service, Domestic Mail Manual 

(DMM) 

* * * * * 

600 Basic Mailing Standards for All 

Mailing Services 

* * * * * 

602 Addressing 

* * * * * 

[Revise the title of 602.5.0 as follows:] 

5.0 Move Update and Address Quality 

Standards 

5.1 Basic Standards for Move Update 

[Revise the introductory paragraph 

only of 602.5.1 as follows:] 

The Move Update standard requires 

the periodic matching of a mailer’s 

address records with customer-filed 

change-of-address orders maintained by 

USPS. Each address, except for mail 

bearing an alternative address format 

(under 3.0) or meeting the Address 

Quality Measurement and Assessment 

Standards (under 5.4), in a mailing at 

commercial First-Class Mail presorted 

or automation prices, First-Class 

Package Service presorted parcel prices, 

Standard Mail, or Parcel Select 

Lightweight prices is subject to the 

Move Update standard and must meet 

these requirements: * * * 

* * * * * 

5.3 Basis for Move Update Assessment 

Charges 

[Revise 602.5.3b as follows:] 

b. Each of the assessed pieces is 

subject to the per piece assessment 

charge. See Notice 123—Price List. 

* * * * * 

[Revise 602.5.4 and rename as 602.5.6 

and add entirely new 602.5.4 as 

follows:] 

5.4 Basic Standards for Address 

Quality Measurement and Assessment 

Mailings that meet these requirements 

will not be subject to the Move Update 

standards in 1.0 to 4.0. Mailers of 

mailings that meet the Address Quality 

Measurement Standards will receive 

access to data showing the metrics on 

the currency of address updating. 

Mailings with sufficient errors to meet 

the criteria under 5.5 will be subject to 

the Address Quality Assessment Fee. 

The following mailings are subject to 

Address Quality Measurement if they: 

a. Use a Basic or full-service IMb on 

their mailpieces, 

b. Use eDoc to submit mailing 

information, and 

c. Qualify at least 75 percent or more 

of their mailpieces per calendar month 

as full-service. 

[Add new 602.5.5 as follows:] 

5.5 Basis for Address Quality 

Assessment Fee 

Mailings that meet the standards in 

5.4 are subject to an Address Quality 

Assessment Fee if more than [a 

specified percentage] of the mail has 

change of address (COA) errors, as 

determined by an analysis of the data 

captured during mail processing. 

Specifically, the mailpieces with 

addresses containing COA errors in 

excess of the error threshold will pay a 

per piece charge as follows: 

a. The mailpiece’s processing 

indicates that it contains a COA’s old 

address and the COA ‘‘Move Effective 

Date’’ or ‘‘Filed Date,’’ whichever is 

later, is between 95 days and up to 18 

months of the postage statement 

finalization date. This is called a Change 

of Address error. 

b. If the percentage of mailpieces with 

COA errors in a calendar month is 

greater than the address quality error 

threshold for all qualifying pieces 

mailed in a calendar month, any pieces 

above the threshold are subject to an 

assessment. 

c. Each of the assessed pieces is 

subject to an Address Quality 

Assessment Fee. 

d. Mail pieces sent to an address 

determined to be associated with a 

change of address that is temporary, 

foreign, Moved, Left No Address 

(MLNA), or Box Closed No Order 

(BCNO) will not be included in 

determining the assessment. 

* * * * * 

We will publish an appropriate 

amendment to 39 CFR part 111 to reflect 

these changes, if our proposal is 

adopted. 

Stanley F. Mires, 

Attorney, Federal Requirements. 

[FR Doc. 2014–29943 Filed 12–22–14; 8:45 am] 

BILLING CODE 7710–12–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 54 

[REG–132751–14] 

RIN 1545–BM44 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB70 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 146 

[CMS–9946–P2] 

RIN 0938–AS52 

Amendments to Excepted Benefits 

AGENCIES: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services. 

ACTION: Proposed rules. 

SUMMARY: This document contains 

proposed rules that would amend the 


tkelley on DSK3SPTVN1PROD with PROPOSALS
76932 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

1Public Law 104–204, 110 Stat. 2944 (September 

26, 1996). 

2Public Law 110–343, 122 Stat. 3881 (October 3, 

2008). 

3Public Law 104–204, 110 Stat. 2935 (September 

26, 1996). 

4Public Law 105–277, 112 Stat. 2681–436 

(October 21, 1998). 

5Public Law 110–233, 122 Stat. 881 (May 21, 

2008). 

6Public Law 111–3, 123 Stat. 65 (February 4, 

2009). 

7Public Law 110–381, 122 Stat. 4081 (October 9, 

2008). 

8The Patient Protection and Affordable Care Act, 

Public Law 111–148, was enacted on March 23, 

2010, and the Health Care and Education 

Reconciliation Act, Public Law 111–152, was 

enacted on March 30, 2010. (These statutes are 

collectively known as the ‘‘Affordable Care Act’’.) 

9The term ‘‘group health plan’’ is used in title 

XXVII of the PHS Act, part 7 of ERISA, and chapter 

100 of the Code, and is distinct from the term 

‘‘health plan,’’ as used in other provisions of title 

I of the Affordable Care Act. The term ‘‘health plan’’ 

does not include self-insured group health plans. 

10See 62 FR 16894, 16903 (Apr. 8, 1997), which 

states that these benefits are generally not health 

insurance coverage). 

11 26 CFR 54.9831–1(c)(3)(v); 29 CFR 

2590.732(c)(3)(v); 45 CFR 146.145(b)(3)(v). 

regulations regarding excepted benefits 

under the Employee Retirement Income 

Security Act of 1974, the Internal 

Revenue Code (the Code), and the 

Public Health Service Act related to 

limited wraparound coverage. Excepted 

benefits are generally exempt from the 

requirements that were added to those 

laws by the Health Insurance Portability 

and Accountability Act and the Patient 

Protection and Affordable Care Act. 

DATES: Comments are due on or before 

January 22, 2015. 

ADDRESSES: Written comments may be 

submitted to the Department of Labor as 

specified below. Any comment that is 

submitted will be shared with the other 

Departments and will also be made 

available to the public. Warning: Do not 

include any personally identifiable 

information (such as name, address, or 

other contact information) or 

confidential business information that 

you do not want publicly disclosed. All 

comments may be posted on the Internet 

and can be retrieved by most Internet 

search engines. No deletions, 

modifications, or redactions will be 

made to the comments received, as they 

are public records. Comments may be 

submitted anonymously. 

Comments, identified by ‘‘Excepted 

Benefits,’’ may be submitted by one of 

the following methods: 

Federal eRulemaking Portal: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

Mail or Hand Delivery: Office of 

Health Plan Standards and Compliance 

Assistance, Employee Benefits Security 

Administration, Room N–5653, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, 

Attention: Excepted Benefits. 

Comments received will be posted 

without change to www.regulations.gov 

and available for public inspection at 

the Public Disclosure Room, N–1513, 

Employee Benefits Security 

Administration, 200 Constitution 

Avenue NW., Washington, DC 20210, 

including any personal information 

provided. 

FOR FURTHER INFORMATION CONTACT: 

Amy Turner or Beth Baum, Employee 

Benefits Security Administration, 

Department of Labor, at (202) 693–8335; 

Karen Levin, Internal Revenue Service, 

Department of the Treasury, at (202) 

317–5500; Jacob Ackerman, Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, at (410) 786–1565. 

Customer Service Information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws, may call the EBSA 

Toll-Free Hotline at 1–866–444–EBSA 

(3272) or visit the Department of Labor’s 

Web site (http://www.dol.gov/ebsa). In 

addition, information from HHS on 

private health insurance for consumers 

can be found on the Centers for 

Medicare & Medicaid Services (CMS) 

Web site (www.cms.gov/cciio) and 

information on health reform can be 

found at www.HealthCare.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Health Insurance Portability and 

Accountability Act of 1996 (HIPAA), 

Public Law 104–191, 110 Stat. 1936 

added title XXVII of the Public Health 

Service Act (PHS Act), part 7 of the 

Employee Retirement Income Security 

Act of 1974 (ERISA), and chapter 100 of 

the Internal Revenue Code (the Code), 

providing portability and 

nondiscrimination provisions with 

respect to health coverage. These 

provisions of the PHS Act, ERISA, and 

the Code were later augmented by other 

consumer protection laws, including the 

Mental Health Parity Act of 1996,1 the 

Mental Health Parity and Addiction 

Equity Act of 2008,2 the Newborns’ and 

Mothers’ Health Protection Act,3 the 

Women’s Health and Cancer Rights 

Act,4 the Genetic Information 

Nondiscrimination Act of 2008,5 the 

Children’s Health Insurance Program 

Reauthorization Act of 2009,6 Michelle’s 

Law,7 and the Affordable Care Act.8

The Affordable Care Act reorganizes, 

amends, and adds to the provisions of 

part A of title XXVII of the PHS Act 

relating to group health plans and 

health insurance issuers in the group 

and individual markets. The term 

‘‘group health plan’’ includes both 

insured and self-insured group health 

plans.9 Section 715(a)(1) of ERISA and 

section 9815(a)(1) of the Code, as added 

by the Affordable Care Act, incorporate 

the provisions of part A of title XXVII 

of the PHS Act into ERISA and the Code 

to make them applicable to group health 

plans and health insurance issuers 

providing health insurance coverage in 

connection with group health plans. 

The PHS Act sections incorporated by 

these references are sections 2701 

through 2728. 

Sections 2722 and 2763 of the PHS 

Act, section 732 of ERISA, and section 

9831 of the Code provide that the 

requirements of title XXVII of the PHS 

Act, part 7 of ERISA, and chapter 100 

of the Code, respectively, generally do 

not apply to excepted benefits. Excepted 

benefits are described in section 2791 of 

the PHS Act, section 733 of ERISA, and 

section 9832 of the Code. 

The parallel statutory provisions 

establish four categories of excepted 

benefits. The first category includes 

benefits that are generally not health 

coverage 10 (such as automobile 

insurance, liability insurance, workers 

compensation, and accidental death and 

dismemberment coverage). The benefits 

in this category are excepted in all 

circumstances. In contrast, the benefits 

in the second, third, and fourth 

categories are types of health coverage 

but are excepted only if certain 

conditions are met. 

The second category of excepted 

benefits is limited excepted benefits, 

which may include limited scope vision 

or dental benefits, and benefits for longterm care, nursing home care, home 

health care, or community based care. 

Section 2791(c)(2)(C) of the PHS Act, 

section 733(c)(2)(C) of ERISA, and 

section 9832(c)(2)(C) of the Code 

authorize the Secretaries of Health and 

Human Services (HHS), Labor, and the 

Treasury (collectively, the Secretaries) 

to issue regulations establishing other, 

similar limited benefits as excepted 

benefits. The Secretaries exercised this 

authority previously with respect to 

certain health flexible spending 

arrangements (health FSAs).11 To be 

excepted under this second category, 

the statute (specifically, ERISA section 

732(c)(1), PHS Act section 2722(c)(1), 

and section 9831(c)(1) of the Code) 

provides that limited benefits must 

either: (1) Be provided under a separate 

policy, certificate, or contract of 

insurance; or (2) otherwise not be an 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 76933 

12See the discussion in the 2014 final regulations 

concerning the application of these requirements to 

benefits such as limited-scope dental and vision 

benefits and employee assistance programs at 79 FR 

59131 (Oct. 1, 2014). 

13 26 CFR 54.9831–1(c)(4); 29 CFR 2590.732(c)(4); 

45 CFR 146.145(b)(4). See also Q7 in Affordable 

Care Act Implementation FAQs Part XI, available at 

http://www.dol.gov/ebsa/faqs/faq-aca11.html. 

14 26 CFR 54.9831–1(c)(5); 29 CFR 2590.732(c)(5); 

45 CFR 146.145(b)(5). The Departments issued 

additional guidance regarding supplemental health 

insurance coverage as excepted benefits. See EBSA 

Field Assistance Bulletin No. 2007–04 (available at 

http://www.dol.gov/ebsa/pdf/fab2007-4.pdf); CMS 

Insurance Standards Bulletin 08–01 (available at 

http://www.cms.gov/CCIIO/Resources/Files/

Downloads/hipaa_08_01_508.pdf); and IRS Notice 

2008–23 (available at http://www.irs.gov/irb/2008- 

07_IRB/ar09.html). 

15 69 FR 78720 (Dec. 30, 2004). 

16 78 FR 77632. 

17 79 FR 59131 (Oct. 1, 2014). 

18The 2014 final regulations do not include the 

requirement set forth in the 2013 proposed 

regulations that EAP benefits cannot be financed by 

another group health plan in order to qualify as 

excepted benefits. See 79 FR 59134. 

19 79 FR 59131. 

20A group health plan may be sponsored by an 

employer, an employee organization, or both. For 

simplicity, this preamble generally refers to 

employer-sponsored coverage. However, these 

proposed regulations would be equally applicable 

to group health plans sponsored by employee 

organizations, or jointly by employers and 

employee organizations. 

21See Congressional Budget Office, CBO and JCT 

Estimates of the Effects of the Affordable Care Act 

on the Number of People Obtaining EmployerBased Insurance, March 2012, at Table 2, available 

at http://www.cbo.gov/sites/default/files/cbofiles/

attachments/03-15-ACA_and_Insurance_2.pdf. See 

also Carter C. Price & Evan Saltzman, Delaying the 

Employer Mandate, July 2013, available at http://

www.rand.org/pubs/research_reports/RR411.html.. 

integral part of a group health plan, 

whether insured or self-insured.12

The third category of excepted 

benefits, referred to as ‘‘noncoordinated 

excepted benefits,’’ includes both 

coverage for only a specified disease or 

illness (such as cancer-only policies), 

and hospital indemnity or other fixed 

indemnity insurance. In the group 

market, these benefits are excepted only 

if all of the following conditions are 

met: (1) The benefits are provided under 

a separate policy, certificate, or contract 

of insurance; (2) there is no 

coordination between the provision of 

such benefits and any exclusion of 

benefits under any group health plan 

maintained by the same plan sponsor; 

and (3) the benefits are paid with 

respect to any event without regard to 

whether benefits are provided under 

any group health plan maintained by 

the same plan sponsor.13

The fourth category of excepted 

benefits is supplemental excepted 

benefits. Such benefits must be: (1) 

Coverage supplemental to Medicare, 

coverage supplemental to the Civilian 

Health and Medical Program of the 

Department of Veterans Affairs 

(CHAMPVA) or to Tricare, or similar 

coverage that is supplemental to 

coverage provided under a group health 

plan; and (2) provided under a separate 

policy, certificate, or contract of 

insurance.14

In 2004, the Departments of the 

Treasury, Labor, and HHS published 

final regulations with respect to 

excepted benefits (the HIPAA 

regulations).15 (Subsequent references to 

the ‘‘Departments’’ include all three 

Departments, unless the headings or 

context indicate otherwise.) 

On December 24, 2013, the 

Departments issued additional proposed 

regulations with respect to the second 

category of excepted benefits, limited 

excepted benefits (2013 proposed 

regulations).16 These regulations 

proposed to: (1) Eliminate the 

requirement that participants in selfinsured plans pay an additional 

premium or contribution for limitedscope vision or dental benefits to qualify 

as benefits that are not an integral part 

of the plan; (2) set forth the criteria 

under which employee assistance 

programs (EAPs) that do not provide 

significant benefits in the nature of 

medical care constitute excepted 

benefits; and (3) allow plan sponsors in 

limited circumstances to offer, as 

excepted benefits, coverage that wraps 

around certain individual health 

insurance coverage in certain 

circumstances. 

After consideration of comments 

received on the 2013 proposed 

regulations, the Departments published 

final regulations regarding dental and 

vision benefits and EAP benefits on 

October 1, 2014 (2014 final 

regulations).17 Consistent with the 2013 

proposed regulations, the 2014 final 

regulations eliminated the requirement 

under the HIPAA regulations that 

participants pay an additional premium 

or contribution for limited-scope vision 

or dental benefits to qualify as excepted 

benefits. With respect to EAPs, the 

Departments finalized the proposal with 

one modification related to financing.18

In the 2014 final regulations, the 

Departments also stated their intent to 

publish regulations that addressed 

limited wraparound coverage in the 

future, taking into account the extensive 

comments received on this issue.19

As explained in the preamble to the 

2013 proposed regulations, some group 

health plan sponsors have asked 

whether certain limited benefits that 

‘‘wrap around’’ employer-sponsored 

group health plan coverage 20 could be 

considered an excepted benefit if such 

benefits are provided to employees for 

whom the employer’s group health plan 

coverage that is otherwise offered to 

them (‘‘primary’’ coverage) is 

unaffordable, and who instead obtain 

major medical coverage through the 

individual market, including through 

the Affordable Insurance Exchange, or 

‘‘Exchange’’ (also called a Health 

Insurance Marketplace, or Marketplace). 

Specifically, the preamble to the 2013 

proposed regulations noted that experts 

suggest that most workers who are 

offered minimum value coverage under 

their employer’s primary group health 

plan will not meet the criteria for that 

coverage to be considered 

‘‘unaffordable’’ within the meaning of 

the statute and thus will not qualify for 

the premium tax credit for enrolling in 

individual health coverage through an 

Exchange.21 However, the preamble 

went on to note that coverage under 

such a primary group health plan may 

be unaffordable for some employees, 

who might instead purchase individual 

health coverage through an Exchange 

with a premium tax credit. While such 

individuals might pay lower premiums 

for such individual health coverage 

through an Exchange than they would 

pay for major medical coverage offered 

through their employer’s group health 

plan, the individual coverage in the 

Exchange might also provide less 

generous coverage in terms of benefits 

or a different provider network than the 

coverage provided under their 

employer’s group health plan. The 2013 

proposed regulations intended to permit 

employers to provide such employees 

with overall coverage that is comparable 

to the employer’s group health plan by 

providing them with limited employersponsored coverage that would add to 

and wrap around the individual market 

coverage that the employee purchases 

through the Exchange. If the employer 

chose to provide such limited employersponsored wraparound coverage, that 

coverage would qualify as an excepted 

benefit and therefore would not 

preclude the employee from obtaining a 

premium tax credit to assist in 

purchasing the individual coverage 

through the Exchange if the employee 

was otherwise eligible for a premium 

tax credit. 

The 2013 proposed regulations 

outlined requirements under which 

certain employer-sponsored 

wraparound coverage provided under a 

group health plan would be treated as 

excepted benefits when offered to 

individuals who could have received 

the benefits provided in the wraparound 

coverage through their employer’s 

primary group health plan, however the 

primary plan is unaffordable and they 


tkelley on DSK3SPTVN1PROD with PROPOSALS
76934 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

22 If an employer provides more than one primary 

plan option (for example, a health maintenance 

organization option and a preferred provider 

organization option), and one primary plan does not 

satisfy the 15 percent standard but another plan 

does, the Departments stated in the preamble to the 

2013 proposed regulations that they would consider 

the 15 percent standard to be met if the average 

value of the primary plan options meets the 15 

percent standard. 

23Under the COBRA rules, plans are generally 

permitted to charge up to 102 percent of the 

applicable premium. See § 4980B(f)(2)(C)(i) of the 

Code. The cost of coverage for purposes of these 

proposed regulations is 100 percent of the 

applicable premium, not 102 percent of the 

applicable premium that the plan is generally 

permitted to charge under the COBRA rules. 

‘‘Applicable premium’’ is defined at § 4980B(f)(4) of 

the Code. 

24The Departments issued parallel guidance 

regarding supplemental health insurance coverage 

as excepted benefits under HIPAA and related 

legislation. See EBSA Field Assistance Bulletin No. 

2007–04 (available at http://www.dol.gov/ebsa/pdf/ 

fab2007-4.pdf); CMS Insurance Standards Bulletin 

08–01 (available at http://www.cms.gov/CCIIO/

Resources/Files/Downloads/hipaa_08_01_508.pdf); 

and IRS Notice 2008–23 (available at http://

www.irs.gov/irb/2008-07_IRB/ar09.html). 

25 75 FR 77636. 

26Section 2716 of the PHS Act (as incorporated 

into ERISA and the Code) generally applies to 

insured coverage and section 105(h) of the Code 

and its implementing regulations generally apply to 

self-insured coverage. 

27 78 FR at 77636. 

do not enroll in that primary plan. The 

2013 proposed regulations were 

intended to allow a plan sponsor to 

pursue equity in coverage by 

maintaining a comparable level of 

benefits for all potential enrollees, 

including not only higher-income 

workers enrolled in the employer’s 

primary group health plan but also 

lower-income workers, enrolled in nongrandfathered individual market 

coverage. Under the 2013 proposed 

regulations, employer-provided 

wraparound coverage would constitute 

excepted benefits (limited wraparound 

coverage) and therefore would not 

disqualify an employee from eligibility 

for the premium tax credit and costsharing reductions, if five conditions 

were met. 

First, under the 2013 proposed 

regulations, the coverage could wrap 

around only certain coverage provided 

through the individual market. 

Specifically, the individual health 

insurance coverage would have to be 

non-grandfathered and could not consist 

solely of excepted benefits. In States 

that elect to establish a Basic Health 

Program (BHP), certain low-income 

individuals (for example, those with 

household income between 133% and 

200% of the Federal poverty level) who 

would otherwise qualify for a tax credit 

to obtain a qualified health plan through 

an Exchange would instead be enrolled 

in coverage through the BHP. The 

Departments invited comments on how 

an employer might make wraparound 

coverage available to BHP enrollees. 

Second, the 2013 proposed 

regulations would have required that 

limited wraparound coverage be 

specifically designed to provide benefits 

beyond those offered by the individual 

health insurance coverage. Specifically, 

the limited wraparound coverage would 

have been required to provide either 

benefits that are in addition to essential 

health benefits (EHBs), or reimburse the 

costs of items and services provided by 

health care providers considered out-ofnetwork under the individual health 

insurance coverage, or both. 

Additionally, the 2013 proposed 

regulations stated that the limited 

wraparound coverage could, but would 

not be required to, provide benefits to 

reimburse for participants’ otherwise 

applicable cost sharing under the 

individual health insurance policy. 

Reimbursement for participants’ 

otherwise applicable cost sharing could 

not be its primary purpose since 

Affordable Care Act-compliant 

individual health insurance policies 

already offer lower cost sharing at 

higher metal tiers (gold and platinum). 

For the benefits to be considered 

specifically designed to wrap around 

the individual health insurance 

coverage, they would have to provide 

additional benefits; the coverage could 

not, under the proposed regulations, 

provide benefits solely pursuant to a 

coordination-of-benefits provision that 

simply pays benefits whenever the 

individual health insurance policy does 

not cover all or part of a medical 

expense. 

The third condition of the 2013 

proposed regulations would have 

required the plan sponsor offering the 

limited wraparound coverage to sponsor 

another group health plan providing 

minimum value (as defined under 

section 36B(c)(2)(C)(ii) of the Code) for 

the plan year, referred to as the 

‘‘primary plan.’’ This primary plan 

would have to be affordable for a 

majority of the employees eligible for 

the primary plan, and only individuals 

eligible for this primary plan could be 

eligible for the limited wraparound 

coverage. 

Under the fourth condition set forth 

in the 2013 proposed regulations, the 

total cost of the employer’s limited 

wraparound coverage would have to be 

limited, so as not to exceed 15 percent 

of the cost of coverage under the 

employer’s primary plan offered to 

employees eligible for the wraparound 

coverage.22 For this purpose, the cost of 

coverage would include both employer 

and employee contributions towards 

coverage and would be determined in 

the same manner as that in which the 

applicable premium is calculated under 

a Consolidated Omnibus Reconciliation 

Act of 1985 (COBRA) continuation 

provision.23 This is similar to the 

standard in the 2007 enforcement safe 

harbor for treating supplemental health 

insurance coverage as excepted benefits, 

under which the cost of coverage under 

the supplemental policy, certificate, or 

contract of insurance must not exceed 

15 percent of the cost of primary 

coverage.24

The fifth and final condition for the 

limited wraparound coverage to qualify 

as excepted benefits under the 2013 

proposed regulations relates to 

nondiscrimination. The limited 

wraparound coverage could not 

discriminate against individuals in 

eligibility, benefits, or premiums based 

on any health factor of an individual (or 

any dependent of the individual), 

consistent with the requirements of 

section 2705 of the PHS Act 

(incorporated by reference into ERISA 

section 715 and Code section 9815) and 

its implementing regulations. As 

explained in the preamble to the 2013 

proposed regulations, this condition is 

similar to the standard in the 2007 

enforcement safe harbor treating 

supplemental health insurance coverage 

as excepted benefits and rules for 

Medicare supplemental coverage.25

To satisfy the fifth condition under 

the 2013 proposed regulations, the 

limited wraparound coverage also could 

not impose any preexisting condition 

exclusion, consistent with the 

requirements of section 2704 of the PHS 

Act (as incorporated into ERISA section 

715 and Code section 9815) and its 

implementing regulations. Finally, both 

the primary coverage and the limited 

wraparound coverage could not 

discriminate in favor of highly 

compensated individuals, consistent 

with the provisions of section 2716 of 

the PHS Act (also incorporated by 

reference into ERISA section 715 and 

Code section 9815) and section 105(h) of 

the Code, and its implementing 

regulations at 26 CFR 1.105–11, as 

applicable.26 The preamble to the 2013 

proposed regulations clarified that these 

limitations were intended to ensure the 

coverage is available regardless of health 

status and to prevent employers from 

shifting employees with high medical 

costs to an Exchange.27 Conditioning 

excepted benefit status on meeting 

standards consistent with the 

compensation-based nondiscrimination 

rules, in combination with the 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 76935 

28 Id. 29The Departments note that the exception for 

supplemental excepted benefits is for coverage that 

is supplemental to coverage provided under 

Medicare or Tricare, or similar supplemental 

coverage provided to coverage under a group health 

plan. None of these circumstances apply here. That 

is, the limited wraparound coverage that is the 

subject of these proposed regulations is 

supplemental to individual insurance. 

30See section 1251 of the Affordable Care Act, 29 

CFR 2590.715–1251, and 45 CFR 147.140. 

31As described in CMS Insurance Standards 

Bulletin (March 5, 2014) available at: http://

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/transition-to-compliantpolicies-03-06-2015.pdf. 

32 In States that elect to establish a Basic Health 

Program (BHP), certain low-income individuals (for 

example, those with household income between 

133% and 200% of the Federal poverty level) who 

would otherwise qualify for a tax credit to obtain 

a qualified health plan through an Exchange will 

instead be enrolled in coverage through the BHP. 

Therefore, the Departments invite comments on 

how an employer might make wraparound coverage 

available to BHP enrollees. 

requirement that the primary plan be 

affordable for a majority of the 

employees who are eligible for it, was 

intended to help ensure that employers 

would not be able to use wraparound 

coverage to send excessive numbers of 

low wage workers to the Exchanges.28

After consideration of comments on 

the 2013 proposed regulations, the 

Departments are publishing these 

proposed regulations to address limited 

wraparound coverage and solicit 

comment before promulgation of final 

regulations on limited wraparound 

benefits. 

II. Overview of These Proposed 

Regulations 

The Departments received general 

comments on the 2013 proposed 

regulations, as well as on the five 

conditions for wraparound coverage to 

qualify as excepted benefits. Many 

commenters suggested that limited 

wraparound coverage should be 

considered supplemental excepted 

benefits instead of limited excepted 

benefits, which would eliminate the 

need for the wraparound coverage to not 

be an integral part of a group health 

plan.29 Some commenters suggested a 

more simplified approach to 

wraparound coverage rather than the 

five conditions outlined in the proposed 

regulations, such as adopting a more 

subjective test so that reasonable efforts 

to comply with the conditions to be 

excepted benefits will not cause a plan 

to fail to qualify as such. Others 

requested that the standards for limited 

wraparound coverage to qualify as 

excepted benefits track the same 

standards and safe harbors for 

applicable large employers under 

section 4980H of the Code and its 

implementing regulations, for ease of 

administration and consistency. 

Many commenters suggested 

modifications to the second condition of 

the 2013 proposed regulations, requiring 

that limited wraparound coverage be 

specifically designed to provide benefits 

beyond those offered by the individual 

health insurance coverage. Some 

suggested that the goal of limited 

wraparound coverage should be to fill 

gaps in cost sharing, as the individual 

health insurance policy would provide 

coverage of EHB. Others disagreed, 

requesting that this condition be 

changed so that cost sharing would not 

be the primary purpose of the 

wraparound coverage, because 

individuals who wish to reduce their 

cost sharing can do so by purchasing a 

higher ‘‘metal level’’ of coverage. 

Additionally, commenters questioned 

how to choose which benefits to offer in 

addition to what is covered under the 

individual health insurance policy 

without knowing what benefits each 

employee will receive under their 

individual health insurance coverage. 

Some commenters suggested that 

benefits provided under the wraparound 

coverage mirror the benefits offered 

under the employer’s primary plan. 

Commenters also recommended 

changes to the third condition, that the 

plan sponsor offer another, primary 

group health plan that provides 

minimum value and is affordable for a 

majority of the employees eligible for 

the primary plan. Some asked that this 

requirement be deleted altogether. 

Others stated that the ‘‘majority’’ test 

conflicts with the 95% test under 

section 4980H(a) of the Code, and that 

this difference would introduce 

complexity and confusion, and 

suggested that Form W–2 employee 

wages and other safe harbor rules under 

section 4980H of the Code and the 

accompanying regulations be used to 

compute affordability. Some 

commenters requested that the 

eligibility test exclude part-time 

employees, Medicaid-eligible 

employees, and retirees. Other 

commenters asked that wraparound 

coverage be considered to meet this 

standard if the primary plan is 

affordable to the majority of employees 

enrolled in the primary plan (as 

opposed to the majority eligible for the 

primary plan). 

Additionally, commenters addressed 

the limit that the total cost of coverage 

under the wraparound coverage not 

exceed 15 percent of the cost of 

coverage under the primary plan. Some 

commenters suggested increasing this 

percentage, stating that the 15 percent 

benchmark was based on rough 

Medicare estimates for supplemental 

coverage and is too low to wrap around 

a bronze or silver plan. Others asked 

that the limit be a simple dollar amount, 

similar to limits on health savings 

accounts or health FSAs. Additional 

commenters pointed out that as 

minimum value increases, so does the 

total cost of the wraparound coverage 

(and vice versa), and that wrapping 

around individual coverage makes these 

calculations confusing and uncertain. 

After consideration of comments on 

the 2013 proposed regulations, the 

Departments are publishing these new 

proposed regulations with respect to 

limited wraparound coverage. These 

proposed regulations seek comment on 

two options for limited wraparound 

coverage to be considered an excepted 

benefit. The Departments intend that, 

after notice and comment, one or both 

options could be finalized. (That is, they 

are not necessarily alternatives and, 

therefore, could be implemented side by 

side). 

The regulations include a sunset date 

and, therefore, would operate as a pilot 

program. While some elements of this 

proposal are the same as those in the 

previous proposal, this new proposal 

contains changes in response to 

suggestions and adds new elements for 

reporting and data collection to gather 

information to inform future 

rulemaking. 

A. Requirements of These New Proposed 

Regulations 

These proposed regulations set forth 

five requirements under which limited 

benefits provided through a group 

health plan that wrap around either 

eligible individual insurance or 

coverage under a Multi-State Plan 

(limited wraparound coverage) 

constitute excepted benefits. For this 

purpose, ‘‘eligible individual health 

insurance’’ is individual health 

insurance coverage that is not a 

grandfathered health plan,30 not a 

transitional individual health insurance 

market plan,31 and does not consist 

solely of excepted benefits. 

1. Covers Additional Benefits 

The limited wraparound coverage 

would have to be specifically designed 

to wrap around eligible individual 

health insurance.32 That is, the limited 

wraparound coverage would have to 

provide meaningful benefits beyond 

coverage of cost sharing under the 

eligible individual health insurance. For 

example, the limited wraparound 

coverage could provide coverage for 

expanded in-network medical clinics or 

providers, or provide benefits that are 

not EHB and that are not covered under 


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33 29 CFR 2590.715–2704 and 45 CFR 147.108. 

See also Q2 in Affordable Care Act Implementation 

FAQs Part XXII, available at http://www.dol.gov/

ebsa/faqs/faq-aca22.html regarding the prohibition 

against offering employees with high claims risk a 

choice between enrollment in its standard group 

health plan or cash. 

34 26 CFR 54.9802–1, 29 CFR 2590.702, and 45 

CFR 146.121. 

35See 26 CFR 54.9831–1(c)(3)(v); 29 CFR 

2590.732(c)(3)(v); 45 CFR 146.145(b)(3)(v). 

the eligible individual health insurance. 

The limited wraparound coverage 

would not be permitted to provide 

benefits solely under a coordination-ofbenefits provision and could not be 

solely an account-based reimbursement 

arrangement. Limited wraparound 

coverage that covers solely cost sharing 

is not permissible because reduced cost 

sharing can be obtained by choosing an 

individual health insurance policy with 

a higher actuarial value (for example, a 

platinum plan with a 90 percent 

actuarial value). Because the proposed 

regulations would permit certain 

eligible individuals to select any eligible 

individual health insurance (that is, 

individual health insurance coverage 

that is not a grandfathered health plan, 

not a transitional individual health 

insurance market plan, and does not 

consist solely of excepted benefits), and 

recognizing the complications some 

plan sponsors might encounter in 

determining what benefits or providers 

are not covered under that individual 

policy, the Departments invite comment 

on safe harbors standardizing the 

benefits in the limited wraparound 

coverage that could be established 

under this second proposed 

requirement. 

2. Limited in Amount 

The second requirement is that the 

limited wraparound coverage be limited 

in amount. For this purpose, the annual 

cost of coverage per employee (and any 

covered dependents) under the limited 

wraparound coverage could not exceed 

the maximum annual contribution for 

health FSAs which is $2,500 in 2014, 

indexed in the manner prescribed under 

section 125(i)(2) of the Code, and the 

cost of coverage would include both 

employer and employee contributions 

towards coverage and be determined in 

the same manner as the applicable 

premium is calculated under a COBRA 

continuation provision. The bright-line 

$2,500 limitation is intended to be 

simpler to administer than the 15 

percent cap set forth in the 2013 

proposed regulations. 

3. Nondiscrimination 

The limited wraparound coverage 

must meet three requirements relating to 

nondiscrimination in order to qualify as 

excepted benefits. First, the wraparound 

coverage could not impose any 

preexisting condition exclusion, 

consistent with the requirements of 

section 2704 of the PHS Act (as 

incorporated into section 715 of ERISA 

and section 9815 of the Code) and 

implementing regulations.33 Second, the 

wraparound coverage could not 

discriminate against individuals in 

eligibility, benefits, or premiums based 

on any health factor of an individual (or 

any dependent of the individual), 

consistent with the requirements of 

section 702 of ERISA, section 9802 of 

the Code, and section 2705 of the PHS 

Act (as incorporated into section 715 of 

ERISA and section 9815 of the Code) 

and implementing regulations.34

Finally, neither the primary group 

health plan coverage nor the limited 

wraparound coverage could fail to 

comply with section 2716 of the PHS 

Act (as incorporated into section 715 of 

ERISA and section 9815 of the Code) or 

fail to be excludible from income with 

respect to any individual due to the 

application of section 105(h) of the Code 

(as applicable). 

4. Plan Eligibility Requirements 

The fourth requirement to qualify as 

excepted benefits would be that 

individuals eligible for the limited 

wraparound coverage cannot be 

enrolled in excepted benefit coverage 

that is a health FSA. In addition, plans 

must comply with one of two alternative 

sets of standards relating to eligibility 

and benefits. One set of plan eligibility 

requirements applies to wraparound 

benefits offered in conjunction with 

eligible individual health insurance for 

persons who are not full-time 

employees. A separate set of standards 

applies to coverage that wraps around 

certain Multi-State Plan coverage. 

a. Eligible individual health insurance 

for individuals who are not full-time 

employees 

Limited coverage that wraps around 

eligible individual health insurance for 

an individual who is not a full-time 

employee must satisfy three standards 

relating to plan eligibility. First, for each 

year that wraparound coverage is 

offered, the employer that is the sponsor 

of the plan offering wraparound 

coverage, or the employer participating 

in a plan offering wraparound coverage, 

must offer to its full-time employees 

coverage that: (1) Is substantially similar 

to coverage that the employer would 

need to offer to its full-time employees 

in order not to be subject to a potential 

assessable payment under the employer 

shared responsibility provisions of 

section 4980H(a) of the Code, if such 

provisions were applicable (that is, 

substantially similar to an offer of 

minimum essential coverage (as defined 

in section 5000A(f) to at least 95 percent 

of its full-time employees (or to all but 

five of its full-time employees, if five is 

greater than five percent of its full-time 

employees)); (2) provides minimum 

value (as defined in section 

36B(c)(2)(C)(ii) of the Code); and (3) is 

reasonably expected to be affordable 

(applying the safe harbor rules for 

determining affordability set forth in 26 

CFR 54.4980H–5(e)(2)). If a plan or 

issuer providing limited wraparound 

coverage takes reasonable steps to 

ensure that employers disclose 

necessary information regarding their 

coverage offered and affordability 

information to the plan or issuer, the 

plan or issuer may rely on reasonable 

representations by employers regarding 

this information, unless the plan or 

issuer has specific knowledge to the 

contrary. Second, eligibility for the 

limited wraparound coverage must be 

limited to employees who are not fulltime employees (and their dependents), 

or who are retirees (and their 

dependents). For this purpose, the 

Departments propose that ‘‘full-time 

employees’’ would be employees who 

are reasonably expected to work at least 

an average of 30 hours per week. The 

Departments proposal would not require 

plans and issuers to define ‘‘full-time 

employees’’ strictly in accordance with 

the rules of section 4980H of the Code. 

Because this proposal is for part-time 

employees, some employers who wish 

to take advantage of this excepted 

benefits option may be exempt from 

Code 4980H and may not already be 

operating under that detailed set of 

rules. The Departments intend that 

employers could rely on the 4980H 

definition, or any reasonable 

interpretation of who is reasonably 

expected to work an average of 30 hours 

a week, for purposes of this provision 

affecting part-time employees and invite 

comment on this approach. 

Third, other group health plan 

coverage, not limited to excepted 

benefits, must be offered to the 

individuals eligible for the wraparound 

coverage. Only individuals eligible for 

other group health plan coverage may be 

eligible for the wraparound coverage. 

This third requirement is consistent 

with the requirement for a health FSA 

to qualify as excepted benefits under the 

Departments’ excepted benefits 

regulations.35

b. Multi-State Plan coverage 


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For Multi-State Plan coverage limited 

wraparound coverage, four requirements 

must be satisfied. The first of the four 

standards requires that the limited 

wraparound coverage be specifically 

designed and approved by the Office of 

Personnel Management (OPM) to 

provide benefits in conjunction with 

coverage under a Multi-State Plan 

authorized under section 1334 of the 

Affordable Care Act. The Departments 

anticipate that health insurance issuers 

with whom OPM contracts to offer 

Multi-State Plans will be in the best 

position to offer this type of limited 

wraparound coverage. OPM may revoke 

approval if it determines that continued 

approval is inconsistent with the 

reporting and evaluation criteria in the 

proposed regulations. Second, the 

employer must have offered coverage in 

the plan year that begins in 2014 that is 

substantially similar to coverage that the 

employer would need to have offered to 

its full-time employees in order to not 

be subject to an assessable payment 

under the employer shared 

responsibility provisions of section 

4980H(a) of the Code, if such provisions 

had been applicable (that is, 

substantially similar to an offer of 

minimum essential coverage (as defined 

in section 5000A(f) of the Code) to at 

least 95 percent of its full-time 

employees (or to all but five of its fulltime employees, if five is greater than 

five percent of its full-time employees). 

Third, in the plan year that begins in 

2014, the employer must have offered 

coverage to a substantial portion of fulltime employees that provided minimum 

value (as defined in section 

36B(c)(2)(C)(ii) of the Code) and was 

affordable (applying the safe harbor 

rules for determining affordability set 

forth in 26 CFR 54.4980H–5(e)(2)). 

Fourth, for the duration of the pilot 

program, the employer’s annual 

aggregate contributions for both primary 

and limited wraparound coverage must 

be substantially the same as the 

employer’s aggregate contributions for 

coverage offered to full-time employees 

in 2014. The Departments are 

considering interpreting this 

‘‘substantially the same’’ condition as a 

percentage (e.g., 80 or 90 percent) and 

potentially applying it on a per-worker 

basis to allow for fluctuations in an 

employer’s workforce. The Departments 

seek comment on such an 

interpretation, as well as on all aspects 

of this maintenance of effort condition. 

For purposes of administering this 

provision, with respect to limited 

wraparound coverage offered in 

conjunction with Multi-State Plan 

coverage, the Departments propose that 

the term ‘‘full-time employee’’ means a 

‘‘full-time employee’’ as defined in 26 

CFR 54.4980H–1(a)(21) who is not in a 

limited non-assessment period for 

certain employees (as defined in 26 CFR 

54.4980H–1(a)(26)). Moreover, if a plan 

or issuer providing limited wraparound 

coverage takes reasonable steps to 

ensure that employers disclose 

necessary information regarding their 

coverage offered and contribution levels 

for 2014 to the plan or issuer, the plan 

or issuer may rely on reasonable 

representations by employers regarding 

this information, unless the plan or 

issuer has specific knowledge to the 

contrary. Consistent with the reporting 

and evaluation criteria described later in 

this preamble, OPM may verify that 

plans and issuers have reasonable 

mechanisms in place to ensure that 

contributing employers meet these 

standards. 

5. Reporting 

The fifth and final requirement for 

limited wraparound coverage to qualify 

as excepted benefits is a reporting 

requirement, for group health plans and 

group health insurance issuers, as well 

as group health plan sponsors. 

A self-insured group health plan, or a 

health insurance issuer offering or 

proposing to offer Multi-State Plan 

wraparound coverage, reports to OPM, 

in a form and manner specified in OPM 

guidance, information OPM reasonably 

requires to determine whether the plan 

or issuer qualifies to offer such coverage 

or complies with the applicable 

requirements of this section. 

In addition, the plan sponsor of any 

group health plan offering either limited 

wraparound coverage that wraps around 

eligible individual health insurance or 

Multi-State Plan coverage must report to 

HHS, in a form and manner specified in 

guidance, information HHS reasonably 

requires to determine whether the 

exception for limited wraparound 

coverage under these proposed 

regulations is allowing plan sponsors to 

provide workers with comparable 

benefits whether enrolled in minimum 

essential coverage under a group health 

plan offered by the plan sponsor, or a 

qualified health plan with additional 

limited wraparound coverage offered by 

the plan sponsor, without causing an 

erosion of coverage. 

B. Pilot Program With Sunset Date 

Under these proposed regulations, 

limited wraparound coverage would be 

permitted under a pilot program for a 

limited time. Specifically, this type of 

wraparound coverage could be offered 

as excepted benefits to coverage that is 

first offered no later than December 31, 

2017 and that ends on the later of: (1) 

The date that is three years after the date 

wraparound coverage is first offered; or 

(2) the date on which the last collective 

bargaining agreement relating to the 

plan terminates after the date 

wraparound coverage is first offered 

(determined without regard to any 

extension agreed to after the date the 

wraparound coverage is first offered). 

The Departments invite comments on 

this time frame for applicability, 

including whether the Departments 

should have the option to provide for an 

earlier termination date. 

C. Comment Solicitation 

The Departments invite comments on 

these proposed regulations generally, 

and on the specific issues identified 

earlier in this preamble. The 

Departments also seek comments on the 

special circumstances of small 

businesses that are not subject to section 

4980H of the Code. Small employers 

may qualify to purchase coverage 

through the Small-Business Health 

Options Program (SHOP) in their State, 

or they may elect to buy coverage in 

their state’s small group market outside 

of the SHOP. Small businesses, like 

other employers, can also contribute 

towards a health savings account (HSA) 

under section 223 of the Code, which 

may be used in combination with a high 

deductible health plan (HDHP). In 

addition, the Departments invite 

comments on whether modifications to 

health FSAs or other existing policies 

tailored to the needs of small businesses 

may also be beneficial to employers and 

employees. 

III. Economic Impact and Paperwork 

Burden 

A. Summary 

As discussed in detail above, these 

proposed regulations would amend the 

definition of ‘‘limited excepted 

benefits’’ to provide plan sponsors with 

two mutually exclusive options to offer 

limited wraparound coverage to certain 

individuals. Under the first option, plan 

sponsors could offer limited benefits 

provided through a group health plan 

that wraps around eligible individual 

health insurance to employees who are 

not full-time employees (and their 

dependents), or who are retirees (and 

their dependents). For this purpose, 

full-time employees are employees who 

are reasonably expected to work at least 

an average of 30 hours per week. Under 

the second option, the limited 

wraparound coverage that satisfies the 

requirements outlined in the regulations 

must be approved by OPM and be 

offered in conjunction with Multi-State 


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36As with other group health coverage, employer 

contributions to the limited wraparound coverage 

would be excluded from employee income for tax 

purposes. Similar to the cost of the proposal, the 

budget implications of adding limited wraparound 

coverage as a form of excepted benefits depends on 

the number of employers that elect either option 

and the number of employees that in turn receive 

it. 

37As described earlier in this preamble, ‘‘eligible 

individual health insurance’’ is individual health 

insurance coverage is not a grandfathered health 

plan, not a transitional individual health insurance 

market plan, and does not consist solely of excepted 

benefits. 

38For example, the wraparound coverage may 

provide coverage for expanded in-network medical 

clinics or providers, or provide benefits that are not 

essential health benefits that are not covered under 

the Multi-State Plan. 

39The substantial level was proposed to help 

minimize the implications for the primary plan’s 

risk pool by preventing a large number of low-wage 

workers from leaving the primary plan for 

Marketplace coverage. 

Plan coverage authorized under section 

1334 of the Affordable Care Act. 

B. Executive Orders 12866 and 13563— 

Departments of Labor and HHS 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, and public health and 

safety effects; distributive impacts; and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. 

Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

regulation: (1) Having an annual effect 

on the economy of $100 million or more 

in any one year, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local, or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. OMB has determined that the 

action is significant within the meaning 

of section 3(f)(4) of Executive Order 

12866, and the Departments accordingly 

provide the following assessment of its 

potential benefits and costs. 

The Departments recognize that many 

plan sponsors provide comprehensive 

health benefits to their workers. One 

objective of the Affordable Care Act is 

to allow individuals with 

comprehensive health insurance plans 

to maintain their current level of 

benefits. Some employers are interested 

in offering wraparound coverage to 

employees who are enrolled in a MultiState Plan authorized under section 

1334 of the Affordable Care Act or to 

part-time, seasonal, or part-year 

employees. These proposed regulations 

provide two options to employers that 

clarify the circumstances under which 

plan sponsors can provide such limited 

wraparound coverage to their 

employees. 

The cost (and Federal budget 

impact 36) of this proposal is difficult to 

quantify, because it is unclear how 

many plan sponsors will be eligible to 

offer and how many employees will be 

covered by limited wraparound benefits. 

It is important to note that the cost of 

the proposed limited wraparound 

coverage is limited by the proposed 

conditions on its availability. 

For example, in order to qualify as 

limited excepted benefits under the 

individual coverage option, limited 

wraparound coverage can be offered 

only to individuals who are not fulltime employees (and their dependents) 

or who are retirees (and their 

dependents), and can only wrap around 

eligible individual health insurance.37

The limited wraparound coverage must 

provide meaningful benefits beyond 

coverage of cost sharing under the 

individual health insurance coverage. 

Plan designs will be limited by 

nondiscrimination rules aimed at 

preventing plan sponsors from 

discriminating in favor of highly 

compensated employees or offering 

different benefits for workers along 

certain other dimensions such as health 

status. The total cost of the wraparound 

coverage per employee (and any covered 

dependents) under both options is 

limited to $2,500 indexed in the manner 

prescribed under section 125(i)(2) of the 

Code. 

Under the Multi-State Plan 

wraparound option, the limited 

wraparound coverage that satisfies the 

requirements outlined in the regulations 

must be approved by OPM and be 

offered in conjunction with Multi-State 

Plan coverage authorized under section 

1334 of the Affordable Care Act. As part 

of the approval process, OPM will 

require the wraparound coverage to 

provide meaningful benefits other than 

coverage of cost sharing under the 

Multi-State Plan.38

Coverage under both options applies 

to limited wraparound coverage that is 

first offered no later than December 31, 

2017, and that ends on the later of: (1) 

the date that is three years after the date 

wraparound coverage is first offered, or 

(2) the date on which the last collective 

bargaining agreement relating to the 

plan terminates after the date the 

wraparound coverage is first offered. 

Both options are designed so that 

wraparound coverage could not replace 

employer-sponsored primary group 

coverage. Under the individual coverage 

option, the employer also must offer 

other group health coverage that is not 

limited to excepted benefits and 

provides minimum value to the class of 

participants offered the wraparound 

coverage by reason of their employment. 

Only individuals who are not full-time 

workers and who are eligible for other 

group health plan coverage may be 

eligible for the wraparound coverage. 

Also, the employer coverage must 

substantially satisfy the employer 

responsibility provisions of section 

4980H(a) of the Code (whether 

applicable or not), and the coverage 

would have to be affordable for at least 

95% of full-time employees. 

Under the Multi-State Plan option, the 

employer would have to offer coverage 

in the plan year beginning in 2014 that 

would have substantially satisfied the 

employer responsibility provisions of 

section 4980H(a) of the Code if the 

provision had been applicable, provided 

minimum value, and been affordable for 

a substantial portion of its full-time 

employees.39 The employer’s annual 

contributions for both its primary and 

wraparound coverage must be 

substantial (e.g., at least 80% or 90% of 

the employer’s total contributions for 

coverage offered to full-time employees 

in 2014). 

Another factor in assessing the 

proposal’s cost is that the decision to 

offer the limited wraparound coverage is 

optional. There is greater administrative 

complexity associated with the 

wraparound coverage than primary 

coverage alone or primary coverage plus 

a health FSA which offers similar 

benefits. Given a choice, some plan 

sponsors may choose to increase the 

affordability of their primary coverage 

rather than offer limited wraparound 

coverage. Some plan sponsors may not 

have that choice: the employers may not 

be in a financial position to make their 

primary health plans affordable to more 

workers, let alone contribute to 

wraparound coverage. Employers may 

also continue to simply not provide 


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employees with affordable, minimum 

value coverage, allowing their workers 

to purchase coverage and potentially 

qualify for premium tax credits in the 

Marketplace with no additional 

wraparound benefit, and these 

employers would continue to pay any 

shared responsibility payments as 

applicable, resulting in no additional 

cost to the employer or the Federal 

government. 

This proposed regulation would not 

encumber any currently existing means 

by which employers can provide 

comprehensive health insurance 

coverage to their employees in 

compliance with the Affordable Care 

Act. Rather, it would clarify two 

additional, alternative means of doing 

so. In light of this, the Departments 

invite comment on to what degree, if 

any, might this regulation increase 

employers’ propensity to provide health 

insurance. Existing rules against 

discrimination in favor of highly 

compensated employees would limit 

employer’s decisions. The Departments 

invite comment on to what extent, if 

any, this proposed regulation could 

affect plan sponsors’ decision making. 

Employers’ (and their employees’) 

economic incentive, if any, to pursue a 

program of wrap coverage will depend 

importantly on the demographics of 

each employer’s work force—that is, the 

distribution of their employees by parttime, seasonal, and temporary 

employment status, and by pay and 

income. In light of this, the Departments 

invite comment on whether there are 

particular sectors of the economy in 

which employers will be more or less 

inclined to pursue wraparound coverage 

programs. 

The Departments seek comment on 

the other effects of the proposal. 

Specifically, the Departments request 

detailed data that would inform the 

following questions: What will be the 

impact of limiting the cost of the 

wraparound coverage to $2,500 per 

employee (and any covered 

dependents)? How many employers 

offer coverage that provides minimum 

value and is affordable for a substantial 

portion (under the first option) or 95 

percent (under the second option) of 

employees who are eligible for 

coverage? To what extent would 

premiums for comprehensive health 

coverage change in the presence and 

absence of this rule? 

C. Paperwork Reduction Act— 

Department of Labor and Department of 

the Treasury 

The proposed rule is not subject to the 

requirements of the Paperwork 

Reduction Act of 1995 (PRA 95) (44 

U.S.C. 3501 et seq.), because it does not 

contain a collection of information as 

defined in 44 U.S.C. 3502(3). 

D. Paperwork Reduction Act— 

Department of HHS 

The proposed rule is not subject to the 

requirements of the Paperwork 

Reduction Act of 1995 (PRA 95) (44 

U.S.C. 3501 et seq.), because it does not 

contain a collection of information as 

defined in 44 U.S.C. 3502(3). An 

analysis under the PRA will be 

conducted for any guidance establishing 

a collection of information related to the 

rule. 

E. Regulatory Flexibility Act— 

Departments of Labor and HHS 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

that are likely to have a significant 

economic impact on a substantial 

number of small entities. Unless an 

agency certifies that a proposed rule is 

not likely to have a significant economic 

impact on a substantial number of small 

entities, section 603 of RFA requires 

that the agency present an initial 

regulatory flexibility analysis at the time 

of the publication of the notice of 

proposed rulemaking describing the 

impact of the rule on small entities and 

seeking public comment on such 

impact. Small entities include small 

businesses, organizations and 

governmental jurisdictions. 

For purposes of the RFA, the 

Departments continue to consider a 

‘‘small entity’’ to be an employee benefit 

plan with fewer than 100 participants. 

The basis for this definition is found in 

section 104(a)(2) of the act, which 

permits the Secretary of Labor to 

prescribe simplified annual reports for 

pension plans that cover fewer than 100 

participants. Pursuant to the authority 

of section 104(a)(3), the Department has 

previously issued at 29 CFR 2520.104– 

20, 2520.104–21, 2520.104–41, 

2520.104–46 and 2520.104b–10 certain 

simplified reporting provisions and 

limited exemptions from reporting and 

disclosure requirements for small plans, 

including unfunded or insured welfare 

plans covering fewer than 100 

participants and satisfying certain other 

requirements. 

Further, while some large employers 

may have small plans, in general small 

employers maintain most small plans. 

Thus, the Departments believe that 

assessing the impact of this proposed 

rule on small plans is an appropriate 

substitute for evaluating the effect on 

small entities. The definition of small 

entity considered appropriate for this 

purpose differs, however, from a 

definition of small business that is 

based on size standards promulgated by 

the Small Business Administration (13 

CFR 121.201) pursuant to the Small 

Business Act (15 U.S.C. 631 et seq.). The 

Departments therefore request 

comments on the appropriateness of the 

size standard used in evaluating the 

impact of this proposed rule on small 

entities. 

Because the proposed rule would 

impose no additional costs on 

employers or plans, the Departments 

believe that it would not have a 

significant economic impact on a 

substantial number of small entities. 

Accordingly, pursuant to section 605(b) 

of the RFA, the Departments hereby 

certify that the proposed rule, if 

promulgated, would not have a 

significant economic impact on a 

substantial number of small entities. 

F. Special Analyses—Department of the 

Treasury 

For purposes of the Department of the 

Treasury it has been determined that 

this notice of proposed rulemaking is 

not a significant regulatory action as 

defined in Executive Order 12866, as 

supplemented by Executive Order 

13563. Therefore, a regulatory 

assessment is not required. It has also 

been determined that section 553(b) of 

the Administrative Procedure Act (5 

U.S.C. chapter 5) does not apply to these 

proposed regulations, and, because 

these proposed regulations do not 

impose a collection of information on 

small entities, an analysis under the 

RFA is not required. Pursuant to section 

7805(f) of the Code, this notice of 

proposed rulemaking has been 

submitted to the Small Business 

Administration for comment on its 

impact on small business. 

G. Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995 (2 U.S.C. 

1501 et seq.), as well as Executive Order 

12875, these proposed rules do not 

include any federal mandate that may 

result in expenditures by State, local, or 

tribal governments, or the private sector, 

which may impose an annual burden of 

$100 million adjusted for inflation since 

1995. 

H. Federalism 

Executive Order 13132 outlines 

fundamental principles of federalism. It 

requires adherence to specific criteria by 

federal agencies in formulating and 

implementing policies that have 


tkelley on DSK3SPTVN1PROD with PROPOSALS
76940 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

‘‘substantial direct effects’’ on the states, 

the relationship between the national 

government and states, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

these federalism implications must 

consult with state and local officials, 

and describe the extent of their 

consultation and the nature of the 

concerns of state and local officials in 

the preamble to the final regulation. 

In the Departments’ view, the 

proposed regulations, by clarifying 

policy regarding certain expected 

benefits options that can be designed by 

employers to support their employees, 

would provide more certainty to 

employers and others in the regulated 

community as well as states and 

political subdivisions regarding the 

treatment of such arrangements under 

ERISA. Accordingly, the Departments 

will affirmatively engage in outreach 

with officials of state and political 

subdivisions regarding the proposed 

rule and seek their input on the 

proposed rules and any federalism 

implications that they believe may be 

presented by it. 

I. Congressional Review Act 

This proposed rule is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.), which specifies that, 

before a rule can take effect, the Federal 

agency promulgating the rule shall 

submit to each House of the Congress 

and to the Comptroller General a report 

containing a copy of the rule along with 

other specified information, and has 

been transmitted to Congress and the 

Comptroller General for review. 

IV. Statutory Authority 

The Department of the Treasury 

regulations are proposed to be adopted 

pursuant to the authority contained in 

sections 7805 and 9833 of the Code. 

The Department of Labor regulations 

are proposed to be adopted pursuant to 

the authority contained in 29 U.S.C. 

1027, 1059, 1135, 1161–1168, 1169, 

1181–1183, 1181 note, 1185, 1185a, 

1185b, 1191, 1191a, 1191b, and 1191c; 

sec. 101(g), Public Law 104–191, 110 

Stat. 1936; sec. 401(b), Public Law 105– 

200, 112 Stat. 645 (42 U.S.C. 651 note); 

sec. 512(d), Public Law 110–343, 122 

Stat. 3765; Public Law 110–460, 122 

Stat. 5123; Secretary of Labor’s Order 1– 

2011, 77 FR 1088 (January 9, 2012). 

The Department of Health and Human 

Services regulations are proposed to be 

adopted pursuant to the authority 

contained in sections 2701 through 

2763, 2791, and 2792 of the PHS Act (42 

U.S.C. 300gg through 300gg–63, 300gg– 

91, and 300gg–92), as amended. 

List of Subjects 

26 CFR Part 54 

Excise taxes, Health care, Health 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Part 146 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 

Signed this 17th day of December, 2014. 

John M. Dalrymple, 

Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service. 

Signed this 18th day of December 2014. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Dated: December 17, 2014. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: December 17, 2014. 

Sylvia Burwell, 

Secretary, Department of Health and Human 

Services. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Chapter I 

Accordingly, 26 CFR part 54 is 

proposed to be amended as follows: 

■ Paragraph 1. The authority citation 

for part 54 continues to read in part as 

follows: 

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

* * * 

Section 54.9831–1 also issued under 26 

U.S.C. 9833. 

■ Paragraph 2. Section 54.9831–1 is 

amended by adding paragraph (c)(3)(vii) 

to read as follows: 

§ 54.9831–1 Special rules relating to group 

health plans. 

* * * * * 

(c) * * * 

(3) * * * 

(vii) Limited wraparound coverage. 

Limited benefits provided through a 

group health plan that wrap around 

either ‘‘eligible individual health 

insurance’’ or coverage under a MultiState Plan (limited wraparound 

coverage) are excepted benefits if all of 

the following conditions are satisfied. 

For this purpose, ‘‘eligible individual 

health insurance’’ is individual health 

insurance coverage that is not a 

grandfathered health plan (as described 

in section 1251 of the Patient Protection 

and Affordable Care Act and § 54.9815– 

1251), not a transitional individual 

health insurance market plan (as 

described in the March 5, 2014 

Insurance Standards Bulletin Series— 

Extension of Transitional Policy through 

October 1, 2016), and does not consist 

solely of excepted benefits (as defined 

in paragraph (c) of this section). 

(A) Covers additional benefits. The 

limited wraparound coverage provides 

meaningful benefits beyond coverage of 

cost sharing under either the eligible 

individual health insurance or MultiState Plan coverage. The wraparound 

coverage must not provide benefits only 

under a coordination-of-benefits 

provision and must not merely be an 

account-based reimbursement 

arrangement. 

(B) Limited in amount. The annual 

cost of coverage per employee (and any 

covered dependents) under the limited 

wraparound coverage does not exceed 

the maximum annual salary reduction 

contributions toward health flexible 

spending arrangements, which is $2,500 

for 2014, indexed in the manner 

prescribed under section 125(i)(2). For 

this purpose, the cost of coverage 

includes both employer and employee 

contributions towards coverage and is 

determined in the same manner as the 

applicable premium is calculated under 

a COBRA continuation provision. 

(C) Nondiscrimination. All of the 

conditions of this paragraph 

(c)(3)(vii)(C) are satisfied. 

(1) No preexisting condition 

exclusion. The limited wraparound 

coverage does not impose any 

preexisting condition exclusion, 

consistent with the requirements of 

section 2704 of the PHS Act 

(incorporated by reference into section 

9815) and 29 CFR 2590.715–2704. 

(2) No discrimination based on health 

status. The limited wraparound 

coverage does not discriminate against 

individuals in eligibility, benefits, or 

premiums based on any health factor of 

an individual (or any dependent of the 

individual), consistent with the 

requirements of section 9802 and 

§ 54.9802–1, and section 2705 of the 

PHS Act (incorporated by reference into 

section 9815) and § 54.9815–2705. 

(3) No discrimination in favor of 

highly compensated individuals. 

Neither the limited wraparound 

coverage, nor any other group health 


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plan coverage offered by the plan 

sponsor, fails to comply with section 

2716 of the PHS Act (incorporated by 

reference into section 9815) or fails to be 

excludible from income for any 

individual due to the application of 

section 105(h) (as applicable). 

(D) Plan eligibility requirements. 

Individuals eligible for the wraparound 

coverage are not enrolled in excepted 

benefit coverage under paragraph 

(c)(3)(v) of this section (relating to 

health FSAs). In addition, the 

conditions set forth in either paragraph 

(c)(3)(vii)(D)(1) or (2) of this section are 

met. 

(1) Limited wraparound coverage 

offered in conjunction with individual 

insurance for persons who are not fulltime employees. Wraparound benefits 

offered in conjunction with eligible 

individual health insurance satisfies all 

of the following requirements— 

(i) For each year for which 

wraparound coverage is offered, the 

employer that is the sponsor of the plan 

offering wraparound coverage, or the 

employer participating in a plan offering 

wraparound coverage, offers to its fulltime employees coverage that is 

substantially similar to coverage that the 

employer would need to offer to its fulltime employees in order not to be 

subject to a potential assessable 

payment under the employer shared 

responsibility provisions of section 

4980H(a), if such provisions were 

applicable; provides minimum value (as 

defined in section 36B(c)(2)(C)(ii)); and 

is reasonably expected to be affordable 

(applying the safe harbor rules for 

determining affordability set forth in 

54.4980H–5(e)(2)). If a plan or issuer 

providing limited wraparound coverage 

takes reasonable steps to ensure that 

employers disclose to the plan or issuer 

necessary information regarding their 

coverage offered and affordability 

information, the plan or issuer is 

permitted to rely on reasonable 

representations by employers regarding 

this information, unless the plan or 

issuer has specific knowledge to the 

contrary. 

(ii) Eligibility for the wraparound 

coverage is limited to employees who 

are not full-time employees (and their 

dependents), or who are retirees (and 

their dependents). For this purpose, 

full-time employees are employees who 

are reasonably expected to work at least 

an average of 30 hours per week. 

(iii) Other group health plan coverage, 

not limited to excepted benefits, is 

offered to the individuals eligible for the 

wraparound coverage. Only individuals 

eligible for the other group health plan 

coverage are eligible for the wraparound 

coverage. 

(2) Limited wraparound coverage 

offered in conjunction with Multi-State 

Plan coverage. Limited wraparound 

coverage offered in conjunction with 

Multi-State Plan coverage satisfies all of 

the conditions of this paragraph 

(c)(3)(vii)(D)(2). For this purpose, the 

term ‘‘full-time employee’’ means a 

‘‘full-time employee’’ as defined in 

§ 54.4980H–1(a)(21) who is not in a 

limited non-assessment period for 

certain employees (as defined in 

§ 54.4980H–1(a)(26)). Moreover, if a 

plan or issuer providing limited 

wraparound coverage takes reasonable 

steps to ensure that employers disclose 

to the plan or issuer necessary 

information regarding their coverage 

offered and contribution levels for 2014 

and for any year in which limited 

wraparound coverage is offered, the 

plan or issuer is permitted to rely on 

reasonable representations by employers 

regarding this information, unless the 

plan or issuer has specific knowledge to 

the contrary. Consistent with the 

reporting and evaluation criteria of 

paragraph (c)(3)(vii)(E) of this section, 

the Office of Personnel Management 

may verify that plans and issuers have 

reasonable mechanisms in place to 

ensure that contributing employers meet 

these standards. 

(i) The limited wraparound coverage 

is specifically designed, and approved 

by the Office of Personnel Management, 

consistent with the reporting and 

evaluation criteria of paragraph 

(c)(3)(vii)(E) of this section, to provide 

benefits in conjunction with coverage 

under a Multi-State Plan authorized 

under section 1334 of the Patient 

Protection and Affordable Care Act. The 

Office of Personnel Management may 

revoke approval if it determines that 

continued approval is inconsistent with 

the reporting and evaluation criteria of 

paragraph (c)(3)(vii)(E) of this section. 

(ii) The employer has offered coverage 

in the plan year that begins in 2014 that 

is substantially similar to coverage that 

the employer would need to have 

offered to its full-time employees in 

order to not be subject to an assessable 

payment under the employer shared 

responsibility provisions of section 

4980H(a), if such provisions had been 

applicable. 

(iii) In the plan year that begins in 

2014, the employer has offered coverage 

to a substantial portion of full-time 

employees that provided minimum 

value (as defined in section 

36B(c)(2)(C)(ii)) and was affordable 

(applying the safe harbor rules for 

determining affordability set forth in 

§ 54.4980H–5(e)(2)). 

(iv) For the duration of the pilot 

program, as described in paragraph 

(c)(3)(vii)(F) of this section, the 

employer’s annual aggregate 

contributions for both primary and 

wraparound coverage are substantially 

the same as the employer’s total 

contributions for coverage offered to 

full-time employees in 2014. 

(E) Reporting—(1) Reporting by group 

health plans and group health 

insurance issuers. A self-insured plan, 

or a health insurance issuer, offering or 

proposing to offer Multi-State Plan 

wraparound coverage pursuant to 

paragraph (c)(3)(vii)(D)(2) of this section 

reports to the Office of Personnel 

Management (OPM), in a form and 

manner specified in guidance, 

information OPM reasonably requires to 

determine whether the plan or issuer 

qualifies to offer such coverage or 

complies with the applicable 

requirements of this section. 

(2) Reporting by group health plan 

sponsors. The plan sponsor of a group 

health plan offering wraparound 

coverage under paragraph (c)(3)(vii) of 

this section, must report to the 

Department of Health and Human 

Services (HHS), in a form and manner 

specified in guidance, information HHS 

reasonably requires. 

(F) Pilot program with sunset—The 

provisions of paragraph (c)(3)(vii) of this 

section apply to limited wraparound 

coverage that is first offered no later 

than December 31, 2017 and that ends 

on the later of: 

(1) The date that is three years after 

the date wraparound coverage is first 

offered; or 

(2) The date on which the last 

collective bargaining agreement relating 

to the plan terminates after the date 

wraparound coverage is first offered 

(determined without regard to any 

extension agreed to after the date 

wraparound coverage is first offered). 

* * * * * 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

For the reasons stated in the 

preamble, the Department of Labor 

proposes to amend 29 CFR part 2590 as 

follows: 

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

■ 1. The authority citation for Part 2590 

continues to read as follows: 

Authority: 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1185c, 1185d, 1191, 

1191a, 1191b, and 1191c; sec. 101(g), Pub. 


tkelley on DSK3SPTVN1PROD with PROPOSALS
76942 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

L.104–191, 110 Stat. 1936; sec. 401(b), Pub. 

L. 105–200, 112 Stat. 645 (42 U.S.C. 651 

note); sec. 512(d), Pub. L. 110–343, 122 Stat. 

3765; Pub. L. 110–460, 122 Stat. 5123; 

Secretary of Labor’s Order 1–2011, 77 FR 

1088 (January 9, 2012). 

■ 2. Section 2590.732 is amended by 

adding paragraph (c)(3)(vii) to read as 

follows: 

§ 2590.732 Special rules relating to group 

health plans. 

* * * * * 

(c) * * * 

(3) * * * 

(vii) Limited wraparound coverage. 

Limited benefits provided through a 

group health plan that wrap around 

either ‘‘eligible individual health 

insurance’’ or coverage under a MultiState Plan (limited wraparound 

coverage) are excepted benefits if all of 

the following conditions are satisfied. 

For this purpose, ‘‘eligible individual 

health insurance’’ is individual health 

insurance coverage that is not a 

grandfathered health plan (as described 

in section 1251 of the Patient Protection 

and Affordable Care Act and 

§ 2590.715–1251), not a transitional 

individual health insurance market plan 

(as described in the March 5, 2014 

Insurance Standards Bulletin Series— 

Extension of Transitional Policy through 

October 1, 2016), and does not consist 

solely of excepted benefits (as defined 

in paragraph (c) of this section). 

(A) Covers additional benefits. The 

limited wraparound coverage provides 

meaningful benefits beyond coverage of 

cost sharing under either the eligible 

individual health insurance or MultiState Plan coverage. The wraparound 

coverage must not provide benefits only 

under a coordination-of-benefits 

provision and must not merely be an 

account-based reimbursement 

arrangement. 

(B) Limited in amount. The annual 

cost of coverage per employee (and any 

covered dependents) under the limited 

wraparound coverage does not exceed 

the maximum annual salary reduction 

contributions toward health flexible 

spending arrangements, which is $2,500 

for 2014, indexed in the manner 

prescribed under section 125(i)(2) of the 

Code. For this purpose, the cost of 

coverage includes both employer and 

employee contributions towards 

coverage and is determined in the same 

manner as the applicable premium is 

calculated under a COBRA continuation 

provision. 

(C) Nondiscrimination. All of the 

conditions of this paragraph 

(c)(3)(vii)(C) are satisfied. 

(1) No preexisting condition 

exclusion. The limited wraparound 

coverage does not impose any 

preexisting condition exclusion, 

consistent with the requirements of 

section 2704 of the PHS Act 

(incorporated by reference into section 

715 of ERISA) and § 2590.715–2704. 

(2) No discrimination based on health 

status. The limited wraparound 

coverage does not discriminate against 

individuals in eligibility, benefits, or 

premiums based on any health factor of 

an individual (or any dependent of the 

individual), consistent with the 

requirements of section 702 of ERISA 

and § 2590.715–702, and section 2705 of 

the PHS Act (incorporated by reference 

into section 715 of ERISA) and 

§ 2590.715–2705. 

(3) No discrimination in favor of 

highly compensated individuals. 

Neither the limited wraparound 

coverage, nor any other group health 

plan coverage offered by the plan 

sponsor, fails to comply with section 

2716 of the PHS Act (incorporated by 

reference into section 715 of ERISA) or 

fails to be excludible from income for 

any individual due to the application of 

section 105(h) of the Code (as 

applicable). 

(D) Plan eligibility requirements. 

Individuals eligible for the wraparound 

coverage are not enrolled in excepted 

benefit coverage under paragraph 

(c)(3)(v) of this section (relating to 

health FSAs). In addition, the 

conditions set forth in either paragraph 

(c)(3)(vii)(D)(1) or (2) of this section are 

met. 

(1) Limited wraparound coverage 

offered in conjunction with individual 

insurance for persons who are not fulltime employees. Wraparound benefits 

offered in conjunction with eligible 

individual health insurance satisfies all 

of the following requirements— 

(i) For each year for which 

wraparound coverage is offered, the 

employer that is the sponsor of the plan 

offering wraparound coverage, or the 

employer participating in a plan offering 

wraparound coverage, offers to its fulltime employees coverage that is 

substantially similar to coverage that the 

employer would need to offer to its fulltime employees in order not to be 

subject to a potential assessable 

payment under the employer shared 

responsibility provisions of section 

4980H(a) of the Code, if such provisions 

were applicable; provides minimum 

value (as defined in section 

36B(c)(2)(C)(ii) of the Code); and is 

reasonably expected to be affordable 

(applying the safe harbor rules for 

determining affordability set forth in 26 

CFR 54.4980H–5(e)(2)). If a plan or 

issuer providing limited wraparound 

coverage takes reasonable steps to 

ensure that employers disclose to the 

plan or issuer necessary information 

regarding their coverage offered and 

affordability information, the plan or 

issuer is permitted to rely on reasonable 

representations by employers regarding 

this information, unless the plan or 

issuer has specific knowledge to the 

contrary. 

(ii) Eligibility for the wraparound 

coverage is limited to employees who 

are not full-time employees (and their 

dependents), or who are retirees (and 

their dependents). For this purpose, 

full-time employees are employees who 

are reasonably expected to work at least 

an average of 30 hours per week. 

(iii) Other group health plan coverage, 

not limited to excepted benefits, is 

offered to the individuals eligible for the 

wraparound coverage. Only individuals 

eligible for the other group health plan 

coverage are eligible for the wraparound 

coverage. 

(2) Limited wraparound coverage 

offered in conjunction with Multi-State 

Plan coverage. Limited wraparound 

coverage offered in conjunction with 

Multi-State Plan coverage satisfies all of 

the conditions of this paragraph 

(c)(3)(vii)(D)(2). For this purpose, the 

term ‘‘full-time employee’’ means a 

‘‘full-time employee’’ as defined in 26 

CFR 54.4980H–1(a)(21) who is not in a 

limited non-assessment period for 

certain employees (as defined in 26 CFR 

54.4980H–1(a)(26)). Moreover, if a plan 

or issuer providing limited wraparound 

coverage takes reasonable steps to 

ensure that employers disclose to the 

plan or issuer necessary information 

regarding their coverage offered and 

contribution levels for 2014 and for any 

year in which limited wraparound 

coverage is offered, the plan or issuer is 

permitted to rely on reasonable 

representations by employers regarding 

this information, unless the plan or 

issuer has specific knowledge to the 

contrary. Consistent with the reporting 

and evaluation criteria of paragraph 

(c)(3)(vii)(E) of this section, the Office of 

Personnel Management may verify that 

plans and issuers have reasonable 

mechanisms in place to ensure that 

contributing employers meet these 

standards. 

(i) The limited wraparound coverage 

is specifically designed, and approved 

by the Office of Personnel Management, 

consistent with the reporting and 

evaluation criteria of paragraph 

(c)(3)(vii)(E) of this section, to provide 

benefits in conjunction with coverage 

under a Multi-State Plan authorized 

under section 1334 of the Patient 

Protection and Affordable Care Act. The 

Office of Personnel Management may 

revoke approval if it determines that 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 76943 

continued approval is inconsistent with 

the reporting and evaluation criteria of 

paragraph (c)(3)(vii)(E) of this section. 

(ii) The employer has offered coverage 

in the plan year that begins in 2014 that 

is substantially similar to coverage that 

the employer would need to have 

offered to its full-time employees in 

order to not be subject to an assessable 

payment under the employer shared 

responsibility provisions of section 

4980H(a) of the Code, if such provisions 

had been applicable. 

(iii) In the plan year that begins in 

2014, the employer has offered coverage 

to a substantial portion of full-time 

employees that provided minimum 

value (as defined in section 

36B(c)(2)(C)(ii) of the Code) and was 

affordable (applying the safe harbor 

rules for determining affordability set 

forth in 26 CFR 54.4980H–5(e)(2)). 

(iv) For the duration of the pilot 

program, as described in paragraph 

(c)(3)(vii)(F) of this section, the 

employer’s annual aggregate 

contributions for both primary and 

wraparound coverage are substantially 

the same as the employer’s total 

contributions for coverage offered to 

full-time employees in 2014. 

(E) Reporting—(1) Reporting by group 

health plans and group health 

insurance issuers. A self-insured plan, 

or a health insurance issuer, offering or 

proposing to offer Multi-State Plan 

wraparound coverage pursuant to 

paragraph (c)(3)(vii)(D)(2) of this section 

reports to the Office of Personnel 

Management (OPM), in a form and 

manner specified in guidance, 

information OPM reasonably requires to 

determine whether the plan or issuer 

qualifies to offer such coverage or 

complies with the applicable 

requirements of this section. 

(2) Reporting by group health plan 

sponsors. The plan sponsor of a group 

health plan offering wraparound 

coverage under paragraph (c)(3)(vii) of 

this section, must report to the 

Department of Health and Human 

Services (HHS), in a form and manner 

specified in guidance, information HHS 

reasonably requires. 

(F) Pilot program with sunset—The 

provisions of paragraph (c)(3)(vii) of this 

section apply to limited wraparound 

coverage that is first offered no later 

than December 31, 2017 and that ends 

on the later of: 

(1) The date that is three years after 

the date wraparound coverage is first 

offered; or 

(2) The date on which the last 

collective bargaining agreement relating 

to the plan terminates after the date 

wraparound coverage is first offered 

(determined without regard to any 

extension agreed to after the date 

wraparound coverage is first offered). 

* * * * * 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Subtitle A 

For the reasons stated in the 

preamble, the Department of Health and 

Human Services proposes to amend 45 

CFR part 146 as follows: 

PART 146 —REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

■ 1. The authority citation for Part 146 

continues to read as follows: 

Authority: Secs. 2702 through 2705, 2711 

through 2723, 2791, and 2792 of the PHS Act 

(42 U.S.C. 300gg–1 through 300gg–5, 300gg– 

11 through 300gg–23, 300gg–91, and 300gg– 

92). 

■ 2. Section 146.145 is amended by 

adding paragraph (b)(3)(vii) to read as 

follows: 

§ 146.145 Special rules relating to group 

health plans. 

* * * * * 

(b) * * * 

(3) * * * 

(vii) Limited wraparound coverage. 

Limited benefits provided through a 

group health plan that wrap around 

either ‘‘eligible individual health 

insurance’’ or coverage under a MultiState Plan (limited wraparound 

coverage) are excepted benefits if all of 

the following conditions are satisfied. 

For this purpose, ‘‘eligible individual 

health insurance’’ is individual health 

insurance coverage that is not a 

grandfathered health plan (as described 

in section 1251 of the Patient Protection 

and Affordable Care Act and § 147.140 

of this subchapter), not a transitional 

individual health insurance market plan 

(as described in the March 5, 2014 

Insurance Standards Bulletin Series— 

Extension of Transitional Policy through 

October 1, 2016), and does not consist 

solely of excepted benefits (as defined 

in paragraph (b) of this section). 

(A) Covers additional benefits. The 

limited wraparound coverage provides 

meaningful benefits beyond coverage of 

cost sharing under either the eligible 

individual health insurance or MultiState Plan coverage. The wraparound 

coverage must not provide benefits only 

under a coordination-of-benefits 

provision and must not merely be an 

account-based reimbursement 

arrangement. 

(B) Limited in amount. The annual 

cost of coverage per employee (and any 

covered dependents) under the limited 

wraparound coverage does not exceed 

the maximum annual salary reduction 

contributions toward health flexible 

spending arrangements, which is $2,500 

for 2014, indexed in the manner 

prescribed under section 125(i)(2) of the 

Code. For this purpose, the cost of 

coverage includes both employer and 

employee contributions towards 

coverage and is determined in the same 

manner as the applicable premium is 

calculated under a COBRA continuation 

provision. 

(C) Nondiscrimination. All of the 

conditions of this paragraph 

(b)(3)(vii)(C) are satisfied. 

(1) No preexisting condition 

exclusion. The limited wraparound 

coverage does not impose any 

preexisting condition exclusion, 

consistent with the requirements of 

section 2704 of the PHS Act and 

§ 147.108 of this subchapter. 

(2) No discrimination based on health 

status. The limited wraparound 

coverage does not discriminate against 

individuals in eligibility, benefits, or 

premiums based on any health factor of 

an individual (or any dependent of the 

individual), consistent with the 

requirements section 2705 of the PHS 

Act and § 146.121. 

(3) No discrimination in favor of 

highly compensated individuals. 

Neither the limited wraparound 

coverage, nor any other group health 

plan coverage offered by the plan 

sponsor, fails to comply with section 

2716 of the PHS Act or fails to be 

excludible from income for any 

individual due to the application of 

section 105(h) of the Code (as 

applicable). 

(D) Plan eligibility requirements. 

Individuals eligible for the wraparound 

coverage are not enrolled in excepted 

benefit coverage under paragraph 

(b)(3)(v) of this section (relating to 

health FSAs). In addition, the 

conditions set forth in either paragraph 

(b)(3)(vii)(D)(1) or (2) of this section are 

met. 

(1) Limited wraparound coverage 

offered in conjunction with individual 

insurance for persons who are not fulltime employees. Wraparound benefits 

offered in conjunction with eligible 

individual health insurance satisfies all 

of the following requirements— 

(i) For each year for which 

wraparound coverage is offered, the 

employer that is the sponsor of the plan 

offering wraparound coverage, or the 

employer participating in a plan offering 

wraparound coverage, offers to its fulltime employees coverage that is 

substantially similar to coverage that the 

employer would need to offer to its fulltime employees in order not to be 

subject to a potential assessable 


tkelley on DSK3SPTVN1PROD with PROPOSALS
76944 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

payment under the employer shared 

responsibility provisions of section 

4980H(a) of the Code, if such provisions 

were applicable; provides minimum 

value (as defined in section 

36B(c)(2)(C)(ii) of the Code); and is 

reasonably expected to be affordable 

(applying the safe harbor rules for 

determining affordability set forth in 26 

CFR 54.4980H–5(e)(2)). If a plan or 

issuer providing limited wraparound 

coverage takes reasonable steps to 

ensure that employers disclose to the 

plan or issuer necessary information 

regarding their coverage offered and 

affordability information, the plan or 

issuer is permitted to rely on reasonable 

representations by employers regarding 

this information, unless the plan or 

issuer has specific knowledge to the 

contrary. 

(ii) Eligibility for the wraparound 

coverage is limited to employees who 

are not full-time employees (and their 

dependents), or who are retirees (and 

their dependents). For this purpose, 

full-time employees are employees who 

are reasonably expected to work at least 

an average of 30 hours per week. 

(iii) Other group health plan coverage, 

not limited to excepted benefits, is 

offered to the individuals eligible for the 

wraparound coverage. Only individuals 

eligible for the other group health plan 

coverage are eligible for the wraparound 

coverage. 

(2) Limited wraparound coverage 

offered in conjunction with Multi-State 

Plan coverage. Limited wraparound 

coverage offered in conjunction with 

Multi-State Plan coverage satisfies all of 

the conditions of this paragraph 

(b)(3)(vii)(D)(2). For this purpose, the 

term ‘‘full-time employee’’ means a 

‘‘full-time employee’’ as defined in 26 

CFR 54.4980H–1(a)(21) who is not in a 

limited non-assessment period for 

certain employees (as defined in 26 CFR 

54.4980H–1(a)(26)). Moreover, if a plan 

or issuer providing limited wraparound 

coverage takes reasonable steps to 

ensure that employers disclose to the 

plan or issuer necessary information 

regarding their coverage offered and 

contribution levels for 2014 and for any 

year in which limited wraparound 

coverage is offered, the plan or issuer is 

permitted to rely on reasonable 

representations by employers regarding 

this information, unless the plan or 

issuer has specific knowledge to the 

contrary. Consistent with the reporting 

and evaluation criteria of paragraph 

(b)(3)(vii)(E) of this section, the Office of 

Personnel Management may verify that 

plans and issuers have reasonable 

mechanisms in place to ensure that 

contributing employers meet these 

standards. 

(i) The limited wraparound coverage 

is specifically designed, and approved 

by the Office of Personnel Management, 

consistent with the reporting and 

evaluation criteria of paragraph 

(b)(3)(vii)(E) of this section, to provide 

benefits in conjunction with coverage 

under a Multi-State Plan authorized 

under section 1334 of the Patient 

Protection and Affordable Care Act. The 

Office of Personnel Management may 

revoke approval if it determines that 

continued approval is inconsistent with 

the reporting and evaluation criteria of 

paragraph (b)(3)(vii)(E) of this section. 

(ii) The employer has offered coverage 

in the plan year that begins in 2014 that 

is substantially similar to coverage that 

the employer would need to have 

offered to its full-time employees in 

order to not be subject to an assessable 

payment under the employer shared 

responsibility provisions of section 

4980H(a) of the Code, if such provisions 

had been applicable. 

(iii) In the plan year that begins in 

2014, the employer has offered coverage 

to a substantial portion of full-time 

employees that provided minimum 

value (as defined in section 

36B(c)(2)(C)(ii) of the Code) and was 

affordable (applying the safe harbor 

rules for determining affordability set 

forth in 26 CFR 54.4980H–5(e)(2)). 

(iv) For the duration of the pilot 

program, as described in paragraph 

(b)(3)(vii)(F) of this section, the 

employer’s annual aggregate 

contributions for both primary and 

wraparound coverage are substantially 

the same as the employer’s total 

contributions for coverage offered to 

full-time employees in 2014. 

(E) Reporting—(1) Reporting by group 

health plans and group health 

insurance issuers. A self-insured plan, 

or a health insurance issuer, offering or 

proposing to offer Multi-State Plan 

wraparound coverage pursuant to 

paragraph (b)(3)(vii)(D)(2) of this section 

reports to the Office of Personnel 

Management (OPM), in a form and 

manner specified in guidance, 

information OPM reasonably requires to 

determine whether the plan or issuer 

qualifies to offer such coverage or 

complies with the applicable 

requirements of this section. 

(2) Reporting by group health plan 

sponsors. The plan sponsor of a group 

health plan offering wraparound 

coverage under paragraph (b)(3)(vii) of 

this section, must report to the 

Department of Health and Human 

Services (HHS), in a form and manner 

specified in guidance, information HHS 

reasonably requires to determine 

whether the exception for limited 

wraparound coverage under this 

paragraph (b)(3)(vii) is allowing plan 

sponsors to provide workers with 

comparable benefits whether enrolled in 

minimum essential coverage under a 

group health plan offered by the plan 

sponsor, or a qualified health plan with 

additional limited wraparound coverage 

offered by the plan sponsor, without the 

causing an erosion of coverage. 

(F) Pilot program with sunset—The 

provisions of paragraph (b)(3)(vii) of this 

section apply to limited wraparound 

coverage that is first offered no later 

than December 31, 2017 and that ends 

on the later of: 

(1) The date that is three years after 

the date wraparound coverage is first 

offered; or 

(2) The date on which the last 

collective bargaining agreement relating 

to the plan terminates after the date 

wraparound coverage is first offered 

(determined without regard to any 

extension agreed to after the date 

wraparound coverage is first offered). 

* * * * * 

[FR Doc. 2014–30010 Filed 12–19–14; 11:15 am] 

BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 20 

[WT Docket Nos. 07–250, 10–254: DA 14– 

1688] 

Request for Updated Information and 

Comment on Wireless Hearing Aid 

Compatibility Regulations 

ACTION: Proposed rule. 

SUMMARY: In this document, the 

Wireless Telecommunications Bureau 

and the Consumer and Governmental 

Affairs Bureau seek updated input to 

better understand the current consumer 

experience, to explore technical or other 

barriers to the provision of hearing aid 

compatible devices on new wireless 

technologies, and to consider changes to 

its rules that may be necessary to ensure 

that wireless handsets used with 

advanced communications services are 

accessible in light of directives 

contained in the Twenty-First Century 

Communications and Video 

Accessibility Act (CVAA). 

DATES: Effective 30 days from 

publication in the Federal Register. 

Reply Comments 45 days from 

publication in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Eli 

Johnson, Wireless Telecommunications 

Bureau, (202) 418–1395, email 

Eli.Johnson@fcc.gov. Bob Aldrich, 

Consumer and Governmental Affairs 


tkelley on DSK3SPTVN1PROD with PROPOSALS