[Federal Register Volume 87, Number 67 (Thursday, April 7, 2022)]
[Proposed Rules]
[Pages 20354-20364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07158]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-114339-21]
RIN 1545-BQ16


Affordability of Employer Coverage for Family Members of 
Employees

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking; withdrawal of a notice of 
proposed rulemaking; notification of hearing.

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SUMMARY: This document contains proposed regulations under section 36B 
of the Internal Revenue Code (the ``Code'') that would amend the 
existing regulations regarding eligibility for the premium tax credit 
(``PTC'') to provide that affordability of employer-sponsored minimum 
essential coverage (employer coverage) for family members of an 
employee is determined based on the employee's share of the cost of 
covering the employee and those family members, not the cost of 
covering only the employee. The proposed regulations also would add a 
minimum value rule for family members of employees based on the 
benefits provided to the family members. The proposed regulations would 
affect taxpayers who enroll, or enroll a family member, in individual 
health insurance coverage through a Health Insurance Exchange 
(``Exchange'') and who may be allowed a PTC for the coverage. This 
document also provides a notice of a public hearing on these proposed 
regulations.

DATES: Written or electronic comments must be received by June 6, 2022. 
As of April 7, 2022, the notice of proposed rulemaking published in the 
Federal Register on September 1, 2015 (80 FR 52678), is withdrawn. A 
public hearing has been scheduled for Monday, June 27, 2022, at 10:00 
a.m. EDT. The IRS must receive speakers' outlines of topics to be 
discussed at the public hearing by Monday, June 13, 2022. If no 
outlines are received by Monday, June 13, 2022, the public hearing will 
be cancelled.

ADDRESSES: Commenters are strongly encouraged to submit public comments 
electronically. Submit electronic submissions via the Federal 
eRulemaking Portal at www.regulations.gov (indicate IRS and REG-114339-
21) by following the online instructions for submitting comments. Once 
submitted to the Federal eRulemaking Portal, comments cannot be edited 
or withdrawn. The IRS expects to have limited personnel

[[Page 20355]]

available to process public comments that are submitted on paper 
through mail. Until further notice, any comments submitted on paper 
will be considered to the extent practicable. The Department of the 
Treasury (``Treasury Department'') and the IRS will publish for public 
availability any comment submitted electronically, and, to the extent 
practicable any paper comments submitted, to its public docket. Send 
paper submissions to: CC:PA:LPD:PR (REG-114339-21), Room 5203, Internal 
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 
20044.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Clara Raymond at (202) 317-4718; concerning submission of comments or 
outlines, the hearing, or any questions to attend the hearing by 
teleconferencing, Regina Johnson at (202) 317-5177 (not toll-free 
numbers) or preferably by email to <a href="/cdn-cgi/l/email-protection#58282d3a34313b303d392a31363f2b18312a2b763f372e"><span class="__cf_email__" data-cfemail="58282d3a34313b303d392a31363f2b18312a2b763f372e">[email protected]</span></a>. If emailing, 
please include the following information in the subject line: Attend, 
Testify, or Question and REG-114339-21.

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR part 1) under section 36B of the Code.
    Section 36B provides a PTC for applicable taxpayers who meet 
certain eligibility requirements, including that a member of the 
taxpayer's family enrolls in a qualified health plan (``QHP'') through 
an Exchange for one or more ``coverage months.'' Under Sec.  1.36B-1(d) 
of the Income Tax Regulations, a taxpayer's family consists of the 
taxpayer, the taxpayer's spouse if filing jointly, and any dependents 
of the taxpayer.
    Section 1.36B-3(d)(1) provides that the PTC for a coverage month is 
the lesser of: (i) The premiums for the month, reduced by any amounts 
that were refunded, for one or more QHPs in which a taxpayer or a 
member of the taxpayer's family enrolls (``enrollment premiums''); or 
(ii) the excess of the adjusted monthly premium for the applicable 
benchmark plan over 1/12 of the product of a taxpayer's household 
income and the applicable percentage for the taxable year (``taxpayer's 
contribution amount'').
    Under section 36B(c)(2)(B) and Sec.  1.36B-3(c), a month is a 
coverage month for an individual only if the individual is not eligible 
for minimum essential coverage (``MEC'') for that month (other than 
coverage under a health care plan offered in the individual market 
within a state). Under section 5000A(f)(1)(B) of the Code, the term MEC 
includes employer coverage. If an individual is eligible for employer 
coverage for a given month, no PTC is allowed for the individual for 
that month.
    Section 36B(c)(2)(C) generally provides that an individual is not 
eligible for employer coverage if the coverage offered is unaffordable 
or does not provide minimum value. However, if the individual enrolls 
in employer coverage, the individual is eligible for MEC, irrespective 
of whether the employer coverage is affordable or provides minimum 
value. See section 36B(c)(2)(C)(iii) and Sec.  1.36B-2(c)(3)(vii).
    Section 36B(c)(2)(C)(i)(II) and Sec.  1.36B-2(c)(3)(v)(A)(1) 
generally provide that employer coverage is unaffordable for an 
employee if the share of the annual premium the employee must pay for 
self-only coverage is more than the required contribution percentage of 
household income. The required contribution percentage is 9.5 percent 
and is indexed annually under section 36B(c)(2)(C)(iv).\1\ Likewise, 
Sec.  1.36B-2(c)(3)(v)(A)(2) generally provides that employer coverage 
is unaffordable for individuals eligible to enroll in employer coverage 
because of their relationship to the employee (related individuals) if 
the share of the annual premium the employee must pay for self-only 
coverage is more than the required contribution percentage of household 
income. Thus, the employee's share of the premium for family coverage, 
as defined in Sec.  1.36B-1(m), is not considered in determining 
whether employer coverage is affordable for related individuals.
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    \1\ As adjusted, the required contribution percentage is 9.61 
percent for 2022. See Rev. Proc. 2021-36, 2021-35 I.R.B. 357. For 
simplicity, this preamble refers to 9.5 percent as the required 
contribution percentage.
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    Under section 36B(c)(2)(C)(ii) and Sec.  1.36B-6(a)(1), an eligible 
employer-sponsored plan provides minimum value only if the plan's share 
of the total allowed costs of benefits provided to an employee is at 
least 60 percent. On November 4, 2014, the IRS released Notice 2014-69, 
2014-48 I.R.B. 903, which advised taxpayers of the intent to propose 
regulations providing that plans that fail to provide substantial 
coverage for inpatient hospitalization or physician services also do 
not provide minimum value. Notice 2014-69 noted that the Department of 
Health and Human Services (HHS) was concurrently issuing parallel 
guidance and also provided that, pending issuance of final Treasury 
regulations, an employee will not be required to treat a non-hospital/
non-physician services plan as providing minimum value for purposes of 
an employee's eligibility for a PTC.
    On November 26, 2014, HHS issued proposed regulations providing 
that an eligible employer-sponsored plan provides minimum value only 
if, in addition to covering at least 60 percent of the total allowed 
costs of benefits provided under the plan, the plan benefits include 
substantial coverage of inpatient hospital services and physician 
services. See 79 FR 70674. On February 27, 2015, HHS finalized this 
minimum value rule at 45 CFR 156.145(a). See 80 FR 10750, 10872. On 
September 1, 2015, the Treasury Department and the IRS issued proposed 
regulations under section 36B (REG-143800-14, 80 FR 52678) (2015 
proposed regulations) incorporating the substance of the minimum value 
rule in the HHS final regulations. The rule in the 2015 proposed 
regulations issued by the Treasury Department and the IRS relating to 
substantial coverage of inpatient hospital services and physician 
services has not been finalized.
    On January 28, 2021, President Biden issued Executive Order (E.O.) 
14009, Strengthening Medicaid and the Affordable Care Act (ACA). 
Section 3(a) of E.O. 14009 directs the Secretary of the Treasury to 
review, as soon as practicable, all existing regulations and other 
agency actions to determine whether the actions are inconsistent with 
the policy to protect and strengthen the ACA. Section 3(a)(v) of E.O. 
14009 also directs the Secretary of the Treasury, as part of this 
review, to examine policies or practices that may reduce the 
affordability of coverage or financial assistance for coverage, 
including for dependents. Consequently, the Treasury Department and the 
IRS have reviewed the regulations under section 36B, including Sec.  
1.36B-2(c)(3)(v)(A)(2), which provides that the affordability of 
employer coverage for related individuals is based on the employee's 
share of the annual premium for self-only coverage, not the cost of 
family coverage. The Treasury Department and the IRS have tentatively 
determined that the rule in Sec.  1.36B-2(c)(3)(v)(A)(2) is not 
required by the relevant statutes and is inconsistent with the overall 
purpose of the ACA to expand access to affordable health care coverage.

[[Page 20356]]

Explanation of Provisions

I. Reasons for Regulatory Changes to Affordability Rule

    As explained in the Background section of this preamble, 
individuals generally are not allowed a PTC if they are eligible for 
non-individual market MEC, including employer coverage. However, 
individuals are not eligible for employer coverage if the coverage is 
unaffordable or does not provide minimum value, unless they enroll in 
the coverage. Coverage is not affordable for an employee if the portion 
of the premiums required to be paid by the employee for self-only 
coverage exceeds 9.5 percent of household income. The current 
regulations under section 36B provide that if self-only employer 
coverage is affordable for an employee, then the coverage is also 
affordable for a spouse with whom the employee is filing a joint return 
and any dependents of the employee who may be eligible to enroll in the 
employer coverage, regardless of the amount the employee must pay to 
cover the spouse and dependents. See Sec.  1.36B-2(c)(3)(v)(A)(2).
    Section 1.36B-2(c)(3)(v)(A)(2) was promulgated as a final 
regulation in 2013. See TD 9611 (78 FR 7264). The Treasury Department 
and the IRS explained in the preamble to the 2013 final regulation that 
the language of section 36B, through the cross-reference to section 
5000A(e)(1)(B),\2\ specifies that the affordability test for related 
individuals is based on the cost of self-only coverage. However, the 
approach in the current regulations has potentially impacted millions 
of Americans. Among those impacted are families with children, some of 
whom have suffered economic hardship. In addition, the current approach 
has undermined access to more affordable health care coverage by 
preventing access to lower-premium subsidized Exchange plans. Under the 
current regulations, a PTC is not allowed for children and other family 
members who have been offered employer coverage if the cost of the 
employee's self-only coverage is affordable, regardless of the 
employee's cost to cover those family members. Many of these families 
purchase health insurance, either through a family member's job or an 
Exchange, but pay high portions of their income towards premiums. Other 
families forgo coverage altogether due to the high premium costs. 
Several studies have analyzed this problem.\3\
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    \2\ Section 5000A provides rules regarding the individual shared 
responsibility payment, including an exemption from the payment for 
individuals who have an offer of employer coverage that is 
unaffordable.
    \3\ For example, see https://www.healthaffairs.org/do/10.1377/hblog20210520.564880/full/.
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    Pursuant to E.O. 14009, the Treasury Department and the IRS have 
reexamined the current interpretation of section 36B(c)(2)(C)(i) in 
Sec.  1.36B-2(c)(3)(v)(A)(2). The Treasury Department and the IRS have 
preliminarily determined that section 36B(c)(2)(C)(i) does not compel 
the result that if self-only employer coverage is affordable for an 
employee, then the coverage also is affordable for a spouse and any 
dependents. To the contrary, the Treasury Department and the IRS 
believe that the statute is better read to require a separate 
affordability determination for employees and for family members. 
Further, the Treasury Department and the IRS are now of the view that 
the interpretation in the current regulations unduly weakens the ACA by 
basing affordability solely on the premium cost for the employee's 
self-only coverage and, therefore, the interpretation in the current 
regulations is contrary to the policy of the ACA to expand access to 
affordable health care coverage.
    As discussed more fully in part II of this Explanation of 
Provisions, the Treasury Department and the IRS believe that section 
36B(c)(2)(C)(i) is best interpreted in a manner that requires 
consideration of the premium cost to the employee to cover not just the 
employee, but also other members of the employee's family who may 
enroll in the employer coverage. This interpretation would create 
consistency across parallel provisions of the Code enacted by the ACA, 
specifically with regard to the affordability tests in sections 36B and 
5000A. Consequently, the Treasury Department and the IRS propose to 
exercise the regulatory authority granted in section 36B(h) to adopt an 
alternative reading of section 36B(c)(2)(C)(i). Under this alternative 
reading, affordability of employer coverage for related individuals in 
the employee's family is determined based on the cost of covering the 
employee and those related individuals.

II. Affordability Rule for Related Individuals

A. Approach in Current Regulations

    When the Treasury Department and the IRS promulgated Sec.  1.36B-
2(c)(3)(v)(A)(2) as a final regulation in 2013, it was after 
considerable deliberation regarding the affordability rule for related 
individuals. The Treasury Department and the IRS first issued proposed 
regulations under section 36B in August 2011. See REG-131491-10 (76 FR 
50931). In addition to proposing general rules on all aspects of the 
PTC, the 2011 proposed regulations provided that affordability for 
related individuals was based on the amount an employee must pay for 
self-only coverage. In response to the 2011 proposed regulations, the 
Treasury Department and the IRS received a significant number of 
comments on the proposed affordability rule for related individuals. To 
fully consider those comments and ensure a comprehensive analysis of 
the issue, the Treasury Department and the IRS promulgated final 
regulations in May 2012 that reserved with respect to the affordability 
rule for related individuals and stated that future regulations would 
address the issue. See TD 9590 (77 FR 30377). In February 2013, the 
Treasury Department and the IRS finalized the affordability rule for 
related individuals as initially proposed in 2011. See TD 9611 (78 FR 
7264). In finalizing the rule as initially proposed in 2011--that is, 
providing that affordability for related individuals was based on the 
amount an employee must pay for self-only coverage--the Treasury 
Department and the IRS focused on the relevant statutory provisions in 
sections 36B(c)(2)(C)(i)(II), 5000A(e)(1)(B), and 5000A(e)(1)(C).
    Under section 36B(c)(2)(C)(i)(II), an employee who does not enroll 
in employer coverage is not considered eligible for the coverage if 
``the employee's required contribution (within the meaning of section 
5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of the 
applicable taxpayer's household income.'' The flush language following 
this provision provides that ``[t]his clause shall also apply to an 
individual who is eligible to enroll in the plan by reason of a 
relationship the individual bears to the employee.'' This flush 
language does not specify how the language in section 
36B(c)(2)(C)(i)(II) is intended to apply with respect to related 
individuals or how the cross-reference to section 5000A(e)(1)(B) is to 
be understood with regard to coverage of related individuals.
    Section 5000A(e)(1)(B)(i) \4\ provides that, for an employee 
eligible to purchase employer coverage, the term ``required 
contribution'' means ``the portion of the annual premium which

[[Page 20357]]

would be paid by the individual . . . for self-only coverage.'' For 
related individuals, the definition of ``required contribution'' in 
section 5000A(e)(1)(B)(i) is modified by a ``special rule'' in section 
5000A(e)(1)(C). Section 5000A(e)(1)(C) provides that ``[f]or purposes 
of [section 5000A(e)(1)](B)(i), if an . . . individual is eligible for 
minimum essential coverage through an employer by reason of a 
relationship to an employee, the determination under subparagraph (A) 
shall be made by reference to the required contribution of the 
employee.'' The regulations under section 5000A interpret section 
5000A(e)(1)(C) as modifying the required contribution rule in section 
5000A(e)(1)(B)(i) with regard to coverage for related individuals to 
take into account the cost of covering the employee and the related 
individuals, not just the employee. Specifically, with respect to 
related individuals, Sec.  1.5000A-3(e)(3)(ii)(B) provides that the 
required contribution for related individuals is the amount an employee 
must pay to cover the employee and the related individuals. The 
affordability rule for related individuals in Sec.  1.5000A-
3(e)(3)(ii)(B) was proposed on the same day that the affordability rule 
for related individuals in Sec.  1.36B-2(c)(3)(v)(A)(2) was finalized 
in TD 9611.
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    \4\ Section 5000A(e)(1) provides an exemption from the 
requirement to maintain MEC for individuals who are eligible only 
for coverage that is unaffordable. Under section 5000A(e)(1)(A), 
coverage is unaffordable for an individual if the individual's 
required contribution exceeds a certain percentage of the 
individual's household income for the taxable year.
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    When Sec.  1.36B-2(c)(3)(v)(A)(2) was promulgated as a final 
regulation in 2013, the Treasury Department and the IRS considered the 
statutory language of section 36B(c)(2)(C)(i)(II) and its cross-
reference to section 5000A(e)(1)(B), as well as the statutory language 
of section 5000A(e)(1)(B) and the cross-reference in section 
5000A(e)(1)(C) to section 5000A(e)(1)(B). Under one reading of section 
36B(c)(2)(C)(i)(II), the affordability rule for related individuals is 
determined solely by reference to section 5000A(e)(1)(B), without the 
modification to that section for related individuals provided by 
section 5000A(e)(1)(C). This reading results in affordability being 
determined based on the cost of self-only coverage to the employee. 
Under an alternative reading, the affordability rule for related 
individuals is determined by reference to section 5000A(e)(1)(B) taking 
into account the modification by section 5000A(e)(1)(C). With the 
issuance of current Sec.  1.36B-2(c)(3)(v)(A)(2), the Treasury 
Department and the IRS adopted the interpretation that affordability of 
employer coverage for related individuals is based on the cost of self-
only coverage to the employee.

B. Approach in Proposed Regulations

    The Treasury Department and the IRS recognize that the statutory 
language in section 36B(c)(2)(C)(i)(II) supports two different 
readings. Under one reading, reflected in current Sec.  1.36B-
2(c)(3)(v)(A)(2), the affordability rule for related individuals is 
determined solely by reference to section 5000A(e)(1)(B), without the 
modification to that section for related individuals provided by 
section 5000A(e)(1)(C). This reading results in affordability being 
determined based on the cost of self-only coverage to the employee. 
Under an alternative reading, however, the affordability rule for 
related individuals is determined by reference to section 
5000A(e)(1)(B), but also encompasses the modification of 5000A(e)(1)(B) 
by section 5000A(e)(1)(C), which provides a special rule for related 
individuals.
    These proposed regulations would adopt the alternative reading, 
which the Treasury Department and the IRS have now preliminarily 
concluded is the better reading of these provisions. Under this 
interpretation, because section 5000A(e)(1)(C) begins with the language 
``[f]or purposes of [section 5000A(e)(1)](B)(i),'' the parenthetical 
cross reference in section 36B(c)(2)(C)(i)(II) to section 
5000A(e)(1)(B)(i) is understood to incorporate the special rule in 
section 5000A(e)(1)(C) that modifies the required contribution rule in 
section 5000A(e)(1)(B)(i) when the coverage in question is for related 
individuals. Under this interpretation, a specific reference in the 
flush language of section 36B(c)(2)(C)(i) to section 5000A(e)(1)(C) is 
not necessary to require the consideration of section 5000A(e)(1)(C) in 
determining affordability for related individuals for section 36B 
purposes.\5\
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    \5\ In Joint Committee on Taxation, Technical Explanation of the 
Revenue Provisions of the ''Reconciliation Act of 2010,'' as 
amended, in combination with the ``Patient Protection and Affordable 
Care Act,'' (JCX-18-10), March 21, 2010 (the JCT report), the Joint 
Committee staff initially explained that ``[u]naffordable is defined 
as coverage with a premium required to be paid by the employee that 
is 9.5 percent or more of the employee's household income, based on 
the type of coverage applicable (e.g., individual or family 
coverage).'' The quoted language was later revised to state that 
``[u]naffordable is defined as coverage with a premium required to 
be paid by the employee that is 9.5 percent or more of the 
employee's household income, based on self-only coverage.'' See 
ERRATA for JCX-18-10, (JCX-27-10), May 4, 2010. Although the JCT 
report does not compel any particular reading of section 
36B(c)(2)(C)(i)(II) as it relates to family coverage, these 
differing interpretations by the Joint Committee staff further 
demonstrate the statutory ambiguity that renders either 
interpretation available under the ACA.
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    This proposed amendment to the affordability rule for related 
individuals would create greater consistency between the affordability 
rules in section 36B(c)(2)(C)(i) and the affordability rules in section 
5000A(e)(1). The proposed amendment would also promote consistency 
between the affordability rules in these provisions and 42 U.S.C. 
18081(b)(4)(C), which requires Exchange applicants to separately 
provide the required contributions of employees and of related 
individuals in order to determine PTC eligibility; in the Treasury 
Department's and the IRS's view, the requirement to provide this 
information would make little sense if PTC eligibility depended only on 
the cost to the employee for self-only coverage. In addition, the 
proposed amendment would also support efforts to achieve the goal of 
the ACA to provide affordable, quality health care for all Americans. 
See H.R. Rep. No. 111-243 (2009).
    The proposed regulations would provide that an eligible employer-
sponsored plan is affordable for related individuals if the portion of 
the annual premium the employee must pay for family coverage, that is, 
the employee's required contribution, does not exceed 9.5 percent of 
household income. For this purpose, family coverage means all employer 
plans that cover any related individual other than the employee, 
including a self plus-one plan for an employee enrolling one other 
family member in the coverage. An employee's required contribution for 
family coverage is the portion of the annual premium the employee must 
pay for coverage of the employee and all other individuals included in 
the employee's family who are offered the coverage.
    Some individuals who are not part of the tax family might 
nonetheless be offered the employer coverage. For example, children up 
to age 26 might be offered coverage by the taxpayer's employer, but 
those adult children might not be reported on the employee's tax return 
because they do not qualify as dependents of the employee. The cost of 
covering individuals who are offered the coverage but are not in the 
employee's family is not considered in determining whether the 
employee's family members have an offer of affordable employer 
coverage, regardless of whether the non-family member enrolls in the 
coverage. That is because, under Sec.  1.36B-2(c)(4)(i), a related 
individual who is not a spouse filing jointly with the employee or a 
dependent of the employee, such as a child of the employee who is no 
longer the employee's dependent, is treated as

[[Page 20358]]

eligible for the employer coverage only if he or she is enrolled in the 
coverage. Consequently, a related individual who is not a spouse filing 
jointly with the employee or a dependent of the employee does not need 
a determination of unaffordable coverage to be eligible for the PTC. As 
a result, the cost of covering that individual should not be considered 
in determining whether other related individuals have an offer of 
affordable employer coverage.
    The proposed regulations would make changes only to the 
affordability rule for related individuals; they would make no changes 
to the affordability rule for employees. As required by statute, 
employees continue to have an offer of affordable employer coverage if 
the employee's required contribution for self-only coverage of the 
employee does not exceed the required contribution percentage of 
household income. Accordingly, under the proposed regulations, a spouse 
or dependent of an employee may have an offer of employer coverage that 
is unaffordable even though the employee has an affordable offer of 
self-only coverage.
    The proposed regulations also address situations in which an 
individual has offers of coverage from multiple employers. Under the 
proposed regulations, an individual with offers of coverage from 
multiple employers, either as an employee or a related individual, has 
an offer of affordable coverage if at least one of the offers is 
affordable.\6\ Thus, for example, assume X is married and files a joint 
return with X's spouse, Y. If X has offers of coverage from X's 
employer and Y's employer, X has an offer of affordable coverage if the 
self-only cost of X's employer coverage is affordable or if the family 
cost of Y's employer coverage is affordable. This rule regarding 
multiple offers of coverage is consistent with section 36B(c)(2)(B), 
under which a month is not a coverage month for an individual if the 
individual is eligible for MEC for the month, including employer 
coverage that is affordable and provides minimum value. In this 
example, X is eligible for affordable employer coverage if one or both 
of the offers of coverage to X is affordable.
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    \6\ The proposed rule for offers from multiple employers is 
consistent with the treatment under Sec.  1.36B-2(c)(3)(i) for 
situations in which an employee or family member may choose from 
multiple plans offered by an employer. In those situations, an 
individual has an offer of affordable coverage if at least one of 
the plans offered by the employer is affordable.
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    The proposed change to the affordability rule for related 
individuals in Sec.  1.36B-2(c)(3)(v)(A)(2) requires a conforming 
change to Sec.  1.36B-2(c)(3)(v)(B), which provides that the 
affordability of employer coverage for an employment period that is 
less than a full calendar year is based on the employee's required 
contribution for self-only coverage (``part-year period rule''). The 
proposed regulations would amend Sec.  1.36B-2(c)(3)(v)(B) to provide a 
part-year period rule for employees that is based on the employee's 
required contribution for self-only coverage and a part-year period 
rule for related individuals that is based on the employee's required 
contribution for family coverage. Changes to other existing rules such 
as Sec.  1.36B-2(c)(3)(v)(A)(4) (wellness incentive programs) and (5) 
(employer contributions to health reimbursement arrangements integrated 
with eligible employer-sponsored plans) are not necessary because those 
paragraphs refer to an ``employee's required contribution,'' which, 
under the proposed regulations, would cover both the required 
contribution for self-only coverage and the required contribution for 
family coverage.

III. Minimum Value

A. Minimum Value Cost of Benefits Rule for Related Individuals

    Section 1.36B-6(a)(1) provides that an eligible employer-sponsored 
plan provides minimum value if the plan's share of the total allowed 
cost of benefits provided to an employee is at least 60 percent. The 
proposed regulations would expand Sec.  1.36B-6(a) to provide a similar 
minimum value rule for related individuals that is based on the level 
of coverage provided to related individuals under an employer-sponsored 
plan.
    Section 36B(c)(2)(C)(ii) provides that an employee is not eligible 
for employer coverage when the employer-sponsored plan does not provide 
minimum value. Section 36B(c)(2)(C)(ii) does not specifically mention 
related individuals. Section 36B(c)(2)(C)(ii) could be interpreted to 
mean that there is no minimum value requirement for related individuals 
so that a related individual is eligible for employer coverage as long 
as the coverage is affordable, regardless of whether the employer 
coverage provides minimum value. Under such an interpretation, if an 
employer offers coverage to an employee and related individuals that is 
affordable, but does not provide minimum value for the employee, an 
employee who does not enroll in the coverage would not be eligible for 
the coverage, but related individuals offered the coverage would be 
eligible because section 36B does not have a minimum value requirement 
for related individuals.
    That approach, however, was not adopted with the issuance of Sec.  
1.36B-2(c)(3)(i)(A), which was promulgated in final regulations in 
2012. See TD 9590 (77 FR 30377). Section 1.36B-2(c)(3)(i)(A) clarifies 
that there is a minimum value requirement for both employees and 
related individuals, stating that ``an employee who may enroll in an 
eligible employer-sponsored plan . . . that is minimum essential 
coverage, and . . . a related individual, are eligible for minimum 
essential coverage under the plan for any month only if the plan is 
affordable and provides minimum value.'' Under this long-standing rule, 
a related individual who receives an offer of employer-sponsored 
coverage that does not provide minimum value is ineligible for the 
coverage, provided that the related individual does not enroll in the 
coverage.
    Section 1.36B-2(c)(3)(i)(A) clarifies that there is a minimum value 
requirement for related individuals; however, Sec.  1.36B-6(a) provides 
the rule for determining whether an eligible employer-sponsored plan 
provides minimum value to related individuals. As explained in the 
Background section of this preamble, under Sec.  1.36B-6(a)(1), an 
eligible employer-sponsored plan provides minimum value if the plan's 
share of the total allowed cost of benefits provided to an employee is 
at least 60 percent, regardless of the total allowed costs of benefits 
provided to the related individual. Thus, under this rule, if the 
plan's share of the total allowed cost of benefits provided to an 
employee is below 60 percent, the plan does not provide minimum value 
to employees nor to any related individuals offered the coverage. 
Without a separate minimum value rule for related individuals based on 
the costs of benefits provided to related individuals, a PTC would not 
be allowed for a related individual offered coverage under a plan that 
was affordable but that provided minimum value to employees and not to 
related individuals. This outcome would undermine the benefit a related 
individual would derive from the proposed amendment of the 
affordability rule for related individuals. That is, the affordability 
of employer coverage for related individuals would be based on the 
employee's cost of covering the related individuals, but there would be 
no assurance that affordable coverage offered to the related 
individuals provided a minimum value of benefits to the related 
individuals.

[[Page 20359]]

    The lack of a separate minimum value rule for related individuals 
also would be inconsistent with the overall goal of the ACA in 
providing comprehensive, affordable health coverage, as well as the 
goal of improving access to quality and affordable health care. 
Therefore, these proposed regulations provide in Sec.  1.36B-6(a)(2)(i) 
that an eligible employer-sponsored plan satisfies the minimum value 
requirement only if the plan's share of the total allowed costs of 
benefits provided to related individuals is at least 60 percent, 
similar to the existing rule in Sec.  1.36B-6(a)(1) for employees. 
Further, to be considered to provide minimum value under Sec.  1.36B-
6(a)(2)(ii) of these proposed regulations, an eligible-employer 
sponsored plan would have to include substantial coverage of inpatient 
hospital services and physician services, as discussed in more detail 
in section III.B. of this preamble.

B. Minimum Value Rule Regarding Inpatient Hospitalization and Physician 
Services

    As noted earlier in the Background section of this preamble, the 
Treasury Department and the IRS issued proposed regulations in 
September 2015 incorporating the substance of the minimum value rule 
that was finalized by HHS in February 2015. The HHS final regulations 
and Sec.  1.36B-6(a)(2) of the 2015 proposed regulations provide that 
an eligible employer-sponsored plan provides minimum value only if, in 
addition to covering at least 60 percent of the total allowed costs of 
benefits provided to an employee under the plan, the plan benefits 
include substantial coverage of inpatient hospital services and 
physician services. The Treasury Department and the IRS have not 
finalized these regulations. The Treasury Department and the IRS are 
withdrawing the 2015 proposed regulations and reproposing in Sec.  
1.36B-6(a)(1)(ii) without substantive change the minimum value rule 
regarding inpatient hospital services and physician services for 
employees. Pending issuance of final Treasury regulations, an employee 
will not be required to treat a non-hospital/non-physician services 
plan as providing minimum value for purposes of an employee's 
eligibility for a PTC. See Notice 2014-69.
    In addition, the Treasury Department and the IRS are proposing in 
this document to expand the minimum value rule in Sec.  1.36B-6(a)(2) 
of the 2015 proposed regulations to apply to related individuals. Thus, 
Sec.  1.36B-6(a)(2)(ii) of the proposed regulations would provide that 
an eligible employer-sponsored plan provides minimum value to a related 
individual only if, in addition to covering at least 60 percent of the 
total allowed costs of benefits provided to the related individual, the 
plan benefits include substantial coverage of inpatient hospital 
services and physician services.

IV. Premium Refunds Affecting the PTC Computation

    Section 1.36B-3(d)(1)(i) provides that, in determining a taxpayer's 
premium assistance amount \7\ for a coverage month, the taxpayer's 
enrollment premiums for the month are the premiums for the month, 
reduced by any amounts that were refunded, for one or more QHPs in 
which a taxpayer or a member of the taxpayer's family enrolls. 
Questions have arisen concerning refunds paid to a taxpayer in a 
taxable year that is after the taxable year the premium is paid and 
whether those refunds should be considered in determining the 
taxpayer's premium assistance amount for the month to which the refund 
relates. A medical loss ratio rebate under section 2718 of the Public 
Health Service Act is an example of a premium refund that may be paid 
to a taxpayer in a taxable year that is after the taxable year the 
taxpayer paid the premium.
---------------------------------------------------------------------------

    \7\ The terms ``premium assistance amount'' and ``premium tax 
credit'' (or PTC) have the same meaning.
---------------------------------------------------------------------------

    Tax liability for a taxable year generally is determined based on 
events occurring in that taxable year (the current taxable year). 
Events occurring in a later taxable year, such as a refund of a 
deductible amount paid in the current taxable year, generally don't 
affect the tax liability of the current taxable year. Thus, a 
taxpayer's premium assistance amount for a month in the current taxable 
year should not be affected by a premium refund that was paid in a 
later taxable year.
    Consequently, the proposed regulations would clarify that, in 
computing the premium assistance amount for a coverage month, a 
taxpayer's enrollment premiums for the month are the premiums for the 
month, reduced by any amounts that were refunded in the same taxable 
year the taxpayer incurred the premium liability.

V. Severability

    If any provision in this rulemaking is held to be invalid or 
unenforceable facially, or as applied to any person or circumstance, it 
shall be severable from the remainder of this rulemaking, and shall not 
affect the remainder thereof, or the application of the provision to 
other persons not similarly situated or to other dissimilar 
circumstances.

Statement of Availability of IRS Documents

    Guidance cited in this preamble is published in the Internal 
Revenue Bulletin and is available from the Superintendent of Documents, 
U.S. Government Publishing Office, Washington, DC 20402, or by visiting 
the IRS website at https://www.irs.gov.

Proposed Applicability Dates

    The proposed regulations under Sec. Sec.  1.36B-2, 1.36B-3, and 
1.36B-6(a)(2) are proposed to apply for taxable years beginning after 
the date these regulations are published as final regulations in the 
Federal Register. As of the publication date of these proposed 
regulations, the proposed regulations are expected to be finalized no 
later than the end of this year. The Treasury Department and the IRS 
have been working closely with HHS to ensure that the federally-
facilitated Exchange would be ready to implement the proposed changes 
before the open enrollment for 2023 coverage. HHS, in coordination with 
the Treasury Department and the IRS, intends to take all necessary 
steps to support efforts by state-based Exchanges to implement any 
changes before the open enrollment for 2023 coverage.
    The proposed regulations under Sec.  1.36B-6(a)(1)(i) are proposed 
to apply for taxable years ending after December 31, 2013.
    The proposed regulations under Sec.  1.36B-6(a)(1)(ii) are proposed 
to apply for plan years beginning after November 3, 2014.

Special Analyses

I. Regulatory Planning and Review--Economic Analysis

    E.O.s 12866 and 13563 direct agencies to assess costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity). E.O. 13563 emphasizes the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility.
    These proposed regulations have been designated as subject to 
review under E.O. 12866 pursuant to the Memorandum of Agreement (April 
11, 2018) (MOA) between the Treasury Department and the Office of 
Management and Budget (OMB) regarding review of tax regulations.

[[Page 20360]]

A. Background

1. Affordability of Employer Coverage for Family Members of an Employee
    As noted earlier in this preamble, section 36B provides a PTC for 
applicable taxpayers who meet certain eligibility requirements, 
including that the taxpayer or one or more family members is enrolled 
in a QHP through an Exchange (Exchange coverage) for one or more months 
in which they are not eligible for other MEC. However, an individual 
who is eligible to enroll in employer coverage, but chooses not to, is 
not considered eligible for the employer coverage if it is 
``unaffordable.'' Section 36B defines employer coverage as unaffordable 
for an employee if the employee's share of the self-only premium is 
more than 9.5 percent of the employee's household income.
    Section 1.36B-2(c)(3)(v)(A)(2) provides that affordability of 
employer coverage for each related individual of the employee is 
determined by the cost of self-only coverage. Thus, the employee and 
any related individuals included in the employee's family, within the 
meaning of Sec.  1.36B-1(d), are eligible for MEC and are ineligible 
for the PTC if (1) the plan provides minimum value and (2) the 
employee's share of the self-only coverage is not more than 9.5 percent 
of household income (that is, the self-only coverage for the employee 
is ``affordable'').
2. Description of the Proposed Regulations
    The proposed regulations would revise Sec.  1.36B-2(c)(3)(v)(A)(2) 
to provide a separate affordability test for related individuals based 
on the cost to the employee of family coverage. The proposed 
regulations do not change the affordability test for the employee. As a 
result, whenever a family applies for Exchange coverage and one or more 
family members has an offer of employer coverage, the Exchange will 
perform the following affordability determinations: One determination 
for the employee based on the cost of self-only coverage, one 
determination for the related individuals based on the cost of family 
coverage, and additional determinations for any related individuals who 
have an offer of coverage from another employer. It is therefore 
possible that family members would be eligible for PTC but the employee 
would not. In this case, if the entire family chooses to enroll in 
Exchange coverage with advance payments of the premium tax credit 
(APTC), the APTC would be paid only for coverage of the employee's 
family members but would not be paid for coverage of the employee.

B. Baseline

    The Treasury Department and the IRS have assessed the benefits and 
costs of the proposed regulations relative to a no-action baseline 
reflecting anticipated Federal income tax-related behavior in the 
absence of these regulations.

C. Affected Entities

    Some families with an offer of employer coverage to the employee 
and at least one other family member would be newly eligible for a PTC 
for the Exchange coverage of the non-employee family members. The 
proposed regulations would have no effect on families for whom self-
only employer coverage costs more than 9.5 percent of household 
income--given that family coverage is more expensive than self-only 
coverage--because the affordability status of their employer coverage 
is unchanged. Similarly, the proposed regulations would not affect 
families for whom the cost of family employer coverage does not exceed 
9.5 percent of household income because their coverage is determined to 
be affordable either way. In contrast, the proposed regulations would 
affect only family members--other than the employee--for whom the 
employee's cost for the available employer coverage does not exceed 9.5 
percent of household income for a self-only plan but exceeds 9.5 
percent of household income for a family plan or for whom the offer of 
the family plan is affordable but doesn't provide minimum value. The 
Treasury Department and the IRS are unable to estimate the size of the 
population affected by the proposed regulations because contribution 
amounts for family coverage are not observed in the tax data.
    Employers may see a shift for some of their employees from family 
coverage to self-only coverage when family members newly qualify for 
PTC. The cost per enrollee could increase or decrease depending on the 
characteristics of those that remain covered. However, this shift would 
likely lead to a decrease in the total amount employers are spending on 
health insurance as the Federal government increases spending on PTC 
for the non-employee family members.

D. Economic Analysis of the Proposed Regulations

1. Overview
    For some families, the proposed regulations would lower the premium 
contributions required to purchase coverage for all family members by 
allowing family members other than the employee to qualify for a PTC. 
For some families with offers of employer coverage who will be newly 
eligible for the PTC, the combined cost of split coverage (self-only 
employer coverage for the employee plus PTC-subsidized Exchange 
coverage for related individuals) would be lower than what they pay for 
family coverage through the employer. Some low-income families with 
uninsured individuals where the employee is offered low-cost, self-only 
employer coverage and relatively high-cost family employer coverage 
would gain access to a lower-cost option through eligibility for the 
PTC on behalf of one or more related individuals.
    However, the cost for families to purchase Exchange coverage with 
APTC is determined in part by the applicable percentage and household 
income, which are the same regardless of the number of individuals 
actually covered. Therefore, if the number of individuals needing 
Exchange coverage is small--such as when some family members have 
access to other MEC--the cost of Exchange coverage per enrollee is 
relatively high when added to the cost of the employee share of self-
only employer coverage. Furthermore, split coverage also means multiple 
deductibles and maximum out-of-pocket limits for the family, which 
potentially increases out-of-pocket costs for families. As a result of 
these features, many families with offers of employer coverage who 
would be newly eligible for the PTC under the proposed regulations--
including families with some uninsured individuals--would not see any 
savings in the combined cost of out-of-pocket premiums and cost 
sharing. Lastly, many families may prefer the benefits and provider 
networks of employer coverage, compared to Exchange coverage. Taking 
all these factors into account, the Treasury Department and the IRS 
have determined that new take-up of Exchange coverage may be modest for 
eligible families because many would either still prefer employer 
coverage or prefer to purchase other goods and services, or save or 
invest, rather than insure all family members.
2. Benefits
    Gain of health insurance coverage. For those individuals who are 
uninsured because the premiums for family coverage through a family 
member's employer are unaffordable, gaining access to PTC for the 
purchase of Exchange coverage may be more affordable and prompt some of 
them to take up coverage.

[[Page 20361]]

    Additional health insurance option. For those individuals who are 
covered by family coverage through a family member's employer that 
costs more than 9.5 percent of their household income, the proposed 
regulations would, by providing access to a PTC, give them an 
additional option that could provide coverage at a lower cost or with 
more comprehensive benefits.
    The Treasury Department and the IRS are unable to estimate the size 
of the benefits of the proposed regulations because contribution 
amounts for family coverage are not observed in the tax data. The 
Treasury Department and the IRS request comments that provide data, 
other evidence, or models that provide insight on this issue.
3. Costs
    Administrative costs. Adding this new option for eligibility for 
PTC increases the cost to the IRS to evaluate PTC claims. The IRS's PTC 
infrastructure will require one-time changes to certain processes, 
forms, and instructions to be implemented in time for the 2023 tax 
year, and the cost of these changes is expected to be negligible. The 
Centers for Medicare & Medicaid Services (``CMS''), as the 
administrator of the Federally-facilitated Exchanges and the federal 
Exchange eligibility and enrollment platform, and the State-based 
Exchanges that operate their own Exchange eligibility and enrollment 
platforms will also incur administrative costs as the Exchanges will 
have primary responsibility for implementing the rule as part of the 
eligibility and enrollment process when families are applying for 
Exchange coverage with APTC. Exchanges will incur one-time costs to 
update Exchange eligibility systems to account for the new treatment of 
family contribution amounts for employer coverage for purposes of 
determining eligibility for APTC, and CMS, State-based Exchanges, State 
Medicaid Agencies, and CMS-approved Enhanced Direct Enrollment partners 
will incur administrative costs to make conforming updates to their 
respective consumer applications and consumer-facing affordability 
tools. The Treasury Department and the IRS anticipate total 
administrative costs to CMS, Exchanges, State Medicaid Agencies, and 
Enhanced Direct Enrollment partners associated with the proposed 
regulation to be modest, and request comments from impacted 
stakeholders to inform administrative cost estimates.
4. Transfers
    Increased PTC costs for new Exchange enrollees. Because some 
individuals may be newly eligible for PTC, some individuals may move 
from employer coverage or uninsured status to Exchange coverage. Thus, 
the proposed regulations may increase the amount of PTC being paid by 
the government and reduce employer contributions.
    Decreased employer exclusion for people who drop employer coverage. 
If individuals drop their employer coverage, or do not enroll when they 
otherwise would have, to take up Exchange coverage, the amount of money 
that was going toward their employer coverage, which provides tax-
preferred health benefits, will go into the employee's wages, other 
employees' wages, and employer profits and will no longer be tax 
exempt. Thus, the proposed regulations may increase the amount of tax 
revenue received from income and payroll taxes.
    The Treasury Department and the IRS are unable to estimate the size 
of the population affected by the proposed regulations because 
contribution amounts for family coverage are not observed in the tax 
data. The Treasury Department and the IRS request comments that provide 
data, other evidence, or models that provide insight on this issue.
5. Impact on Small Entities
    When an agency issues a proposed rulemaking, the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) (the ``Act'') requires the agency 
to ``prepare and make available for public comment an initial 
regulatory flexibility analysis'' that ``describe[s] the impact of the 
proposed rule on small entities.'' See 5 U.S.C. 603(a). The term 
``small entities'' is defined in 5 U.S.C. 601 to mean ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction,'' which are also defined in 5 U.S.C. 601. Small business 
size standards define whether a business is ``small'' and have been 
established for types of economic activities, or industry, generally 
under the North American Industry Classification System (NAICS). See 
title 13, part 121 of the Code of Federal Regulations (titled ``Small 
Business Size Regulations''). The size standards look at various 
factors, including annual receipts, number of employees, and amount of 
assets, to determine whether the business is small. See title 13, Sec.  
121.201 of the Code of Federal Regulations for the Small Business Size 
Standards by NAICS Industry.
    Section 605 of the Act provides an exception to the requirement to 
prepare an initial regulatory flexibility analysis if the agency 
certifies that the proposed rulemaking will not have a significant 
economic impact on a substantial number of small entities. The Treasury 
Department and the IRS hereby certify that these proposed regulations 
will not have a significant economic impact on a substantial number of 
small entities. This certification is based on the fact that the 
majority of the effect of the proposed regulations falls on individual 
taxpayers, and entities will experience only small changes.
6. Impact on Small Business
    Pursuant to section 7805(f) of the Code, these proposed regulations 
have been submitted to the Chief Counsel for the Office of Advocacy of 
the Small Business Administration for comment on their impact on small 
business.

II. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (``UMRA'') 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a final rule that includes any 
Federal mandate that may result in expenditures in any one year by a 
state, local, or tribal government, in the aggregate, or by the private 
sector, of $100 million (updated annually for inflation). This proposed 
rule does not include any Federal mandate that may result in 
expenditures by state, local, or tribal governments, or by the private 
sector in excess of that threshold.

III. Executive Order 13132: Federalism

    E.O. 13132 (titled ``Federalism'') prohibits an agency from 
publishing any rule that has federalism implications if the rule either 
imposes substantial, direct compliance costs on state and local 
governments, and is not required by statute, or preempts state law, 
unless the agency meets the consultation and funding requirements of 
section 6 of the E.O. This proposed rule does not have federalism 
implications and does not impose substantial direct compliance costs on 
state and local governments or preempt state law within the meaning of 
the E.O.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to comments that are submitted timely to 
the IRS as prescribed in this preamble in the ADDRESSES section. The 
Treasury Department and the IRS request comments on all aspects of the 
proposed regulations, including the economic impact of the proposed 
regulations. Any electronic comments submitted, and to the extent 
practicable any paper comments submitted, will be made

[[Page 20362]]

available at www.regulations.gov or upon request.
    A public hearing has been scheduled for June 27, 2022, beginning at 
10:00 a.m. EDT. Announcement 2020-4, 2020-17 IRB 1, provides that until 
further notice, public hearings conducted by the IRS will be held 
telephonically.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Individuals 
who wish to testify (by telephone) at the public hearing must send an 
email to <a href="/cdn-cgi/l/email-protection#14646176787d777c7175667d7a7367547d66673a737b62"><span class="__cf_email__" data-cfemail="adddd8cfc1c4cec5c8ccdfc4c3cadeedc4dfde83cac2db">[email protected]</span></a> to receive the telephone number and 
access code for the hearing. The subject line of the email must contain 
the regulation number (REG-114339-21) for the hearing and the word 
TESTIFY. For example, the subject line may say: Request to TESTIFY at 
Hearing for REG-114339-21. The email should also include a copy of the 
speaker's outline of topics. The email requesting to speak must be 
received by June 13, 2022. Speakers will have up to ten minutes to 
testify and may be asked questions by the panel.
    Individuals who want to attend the public hearing by telephone must 
also send an email to <a href="/cdn-cgi/l/email-protection#6c1c190e00050f04090d1e05020b1f2c051e1f420b031a"><span class="__cf_email__" data-cfemail="44343126282d272c2125362d2a2337042d36376a232b32">[email protected]</span></a> to receive the telephone 
number and access code for the hearing. The subject line of the email 
must contain the regulation number (REG-114339-21) and the word ATTEND. 
For example, the subject line may say: Request to ATTEND Hearing for 
REG-114339-21. Email requests to attend the public hearing must be 
received by 5:00 p.m. EDT on June 23, 2022.
    The telephonic hearing will be made accessible to people with 
disabilities. To request special assistance during the telephonic 
hearing, please contact the Publications and Regulations Branch of the 
Office of Associate Chief Counsel (Procedure and Administration) by 
sending an email to <a href="/cdn-cgi/l/email-protection#18686d7a74717b707d796a71767f6b58716a6b367f776e"><span class="__cf_email__" data-cfemail="ee9e9b8c82878d868b8f9c8780899dae879c9dc0898198">[email protected]</span></a> (preferred) or by telephone 
at (202) 317-5177 (not a toll-free number) by June 22, 2022. Any 
questions regarding speaking at or attending the public hearing may 
also be emailed to <a href="/cdn-cgi/l/email-protection#463633242a2f252e2327342f282135062f343568212930"><span class="__cf_email__" data-cfemail="0e7e7b6c62676d666b6f7c6760697d4e677c7d20696178">[email protected]</span></a>.

Drafting Information

    The principal author of these proposed regulations is Suzanne R. 
Sinno of the Office of Associate Chief Counsel (Income Tax and 
Accounting). However, other personnel from the Treasury Department and 
the IRS participated in the development of the regulations.

Withdrawal of Notice of Proposed Rulemaking

    Accordingly, under the authority of 26 U.S.C. 7805, the notice of 
proposed rulemaking (REG-143800-14) that was published in the Federal 
Register on September 1, 2015 (80 FR 52678), is withdrawn.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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

    Par. 2. Section 1.36B-2 is amended by:
0
1. Revising the first sentence and adding a sentence following the 
first sentence of paragraph (c)(3)(v)(A)(2).
0
2. Adding paragraph (c)(3)(v)(A)(8).
0
3. Revising the second sentence of paragraph (c)(3)(v)(B).
0
4. In paragraph (c)(3)(v)(D), Examples 1 through 9 are designated as 
paragraphs (c)(3)(v)(D)(1) through (9), respectively.
0
5. In newly designated paragraphs (c)(3)(v)(D)(3), (5), (6), (7), and 
(9), redesignating the paragraphs in the first column as the paragraphs 
in the second column:

------------------------------------------------------------------------
              Old paragraphs                       New paragraphs
------------------------------------------------------------------------
(c)(3)(v)(D)(3)(i) through (ii)...........  (c)(3)(v)(D)(3)(i) through
                                             (ii).
(c)(3)(v)(D)(5)(i) through (ii)...........  (c)(3)(v)(D)(5)(i) through
                                             (ii).
(c)(3)(v)(D)(6)(i) through (ii)...........  (c)(3)(v)(D)(6)(i) through
                                             (ii).
(c)(3)(v)(D)(7)(i) through (iv)...........  (c)(3)(v)(D)(7)(i) through
                                             (iv).
(c)(3)(v)(D)(9)(i) through (ii)...........  (c)(3)(v)(D)(9)(i) through
                                             (ii).
------------------------------------------------------------------------

0
6. Revising newly designated paragraphs (c)(3)(v)(D)(1) and (2).
0
7. Redesignating paragraphs (c)(3)(v)(D)(3) through (9) as paragraphs 
(c)(3)(v)(D)(7) through (13), respectively.
0
8. Adding new paragraphs (c)(3)(v)(D)(3) through (6);
0
9. Revising the heading for newly redesignated paragraph 
(c)(3)(v)(D)(7), the heading and first sentence of newly redesignated 
paragraph (c)(3)(v)(D)(8), the heading of newly redesignated paragraph 
(c)(3)(v)(D)(9), and the first sentence of newly redesignated paragraph 
(c)(3)(v)(D)(9)(i).
0
10. In the headings for newly redesignated paragraphs (c)(3)(v)(D)(10) 
through (13), removing the first period and adding a colon in its 
place.
0
11. Revising paragraph (e)(1).
0
12. Adding paragraph (e)(5).
    The revisions and additions read as follows:


Sec.  1.36B-2  Eligibility for premium tax credit.

* * * * *
    (c) * * *
    (3) * * *
    (v) * * *
    (A) * * *
    (2) * * * Except as provided in paragraph (c)(3)(v)(A)(3) of this 
section, an eligible employer-sponsored plan is affordable for a 
related individual if the employee's required contribution for family 
coverage under the plan does not exceed the required contribution 
percentage, as defined in paragraph (c)(3)(v)(C) of this section, of 
the applicable taxpayer's household income for the taxable year. For 
purposes of this paragraph (c)(3)(v)(A)(2), an employee's required 
contribution for family coverage is the portion of the annual premium 
the employee must pay for coverage of the employee and all other 
individuals included in the employee's family, as defined in Sec.  
1.36B-1(d), who are offered coverage under the eligible employer-
sponsored plan. * * *
* * * * *
    (8) Multiple offers of coverage. An individual who has offers of 
coverage under eligible employer-sponsored plans from multiple 
employers, either as an employee or a related individual, has an offer 
of affordable coverage if at least one of the offers of coverage is 
affordable under paragraph (c)(3)(v)(A)(1) or (2) of this section.
    (B) * * * Coverage under an eligible employer-sponsored plan is 
affordable for a part-year period if the annualized required 
contribution for self-only coverage, in the case of an employee, or 
family coverage, in the case of a related individual, under the plan 
for the part-year period does not exceed the required contribution 
percentage of the applicable taxpayer's household income for the 
taxable year. * * *
* * * * *
    (D) * * *
    (1) Example 1: Basic determination of affordability. For all of 
2023, taxpayer C works for an employer, X, that offers its employees 
and their spouses a health insurance plan under which, to enroll in 
self-only coverage, C must contribute an amount for 2023 that does not 
exceed the required contribution percentage of C's 2023 household 
income. Because C's required contribution for self-only

[[Page 20363]]

coverage does not exceed the required contribution percentage of C's 
household income, under paragraph (c)(3)(v)(A)(1) of this section, X's 
plan is affordable for C, and C is eligible for minimum essential 
coverage for all months in 2023.
    (2) Example 2: Basic determination of affordability for a related 
individual. (i) The facts are the same as in paragraph (c)(3)(v)(D)(1) 
of this section (Example 1), except that C is married to J, they file a 
joint return, and to enroll C and J, X's plan requires C to contribute 
an amount for coverage for C and J for 2023 that exceeds the required 
contribution percentage of C's and J's household income. J does not 
work for an employer that offers employer-sponsored coverage.
    (ii) J is a member of C's family as defined in Sec.  1.36B-1(d). 
Because C's required contribution for coverage of C and J exceeds the 
required contribution percentage of C's and J's household income, under 
paragraph (c)(3)(v)(A)(2) of this section, X's plan is unaffordable for 
J. Accordingly, J is not eligible for minimum essential coverage for 
2023. However, under paragraph (c)(3)(v)(A)(1) of this section, X's 
plan is affordable for C, and C is eligible for minimum essential 
coverage for all months in 2023.
    (3) Example 3: Multiple offers of coverage. The facts are the same 
as in paragraph (c)(3)(v)(D)(2) of this section (Example 2), except 
that J works all year for an employer that offers employer-sponsored 
coverage to employees. J's required contribution for the cost of self-
only coverage from J's employer does not exceed the required 
contribution percentage of C's and J's household income. Although the 
coverage offered by C's employer for C and J is unaffordable for J, the 
coverage offered by J's employer is affordable for J. Consequently, 
under paragraphs (c)(3)(v)(A)(1) and (8) of this section, J is eligible 
for minimum essential coverage for all months in 2023.
    (4) Example 4: Cost of covering individuals not part of taxpayer's 
family. (i) D and E are married, file a joint return, and have two 
children, F and G, under age 26. F is a dependent of D and E, but G is 
not. D works all year for an employer that offers employer-sponsored 
coverage to employees, their spouses, and their children under age 26. 
E, F, and G do not work for employers offering coverage. D's required 
contribution for self-only coverage under D's employer's coverage does 
not exceed the required contribution percentage of D's and E's 
household income. D's required contribution for coverage of D, E, F, 
and G exceeds the required contribution percentage of D's and E's 
household income, but D's required contribution for coverage of D, E, 
and F does not exceed the required contribution percentage of the 
household income.
    (ii) E and F are members of D's family as defined in Sec.  1.36B-
1(d). G is not a member of D's family under Sec.  1.36B-1(d), because G 
is not D's dependent. Under paragraph (c)(3)(v)(A)(1) of this section, 
D's employer's coverage is affordable for D because D's required 
contribution for self-only coverage does not exceed the required 
contribution percentage of D's and E's household income. D's employer's 
coverage also is affordable for E and F, because, under paragraph 
(c)(3)(v)(A)(2) of this section, D's required contribution for coverage 
of D, E, and F does not exceed the required contribution percentage of 
D's and E's household income. Although D's cost to cover D, E, F, and G 
exceeds the required contribution percentage of D's and E's household 
income, under paragraph (c)(3)(v)(A)(2) of this section, the cost to 
cover G is not considered in determining whether D's employer's 
coverage is affordable for E and F, regardless of whether G actually 
enrolls in the plan, because G is not in D's family. D, E, and F are 
eligible for minimum essential coverage for all months in 2023. Under 
paragraph (c)(4)(i) of this section, G is considered eligible for the 
coverage offered by D's employer only if G enrolls in the coverage.
    (5) Example 5: More than one family member with an employer 
offering coverage. (i) K and L are married, file a joint return, and 
have one dependent child, M. K works all year for an employer that 
offers coverage to employees, spouses, and children under age 26. L 
works all year for an employer that offers coverage to employees only. 
K's required contribution for self-only coverage under K's employer's 
coverage does not exceed the required contribution percentage of K's 
and L's household income. Likewise, L's required contribution for self-
only coverage under L's employer's coverage does not exceed the 
required contribution percentage of K's and L's household income. 
However, K's required contribution for coverage of K, L, and M exceeds 
the required contribution percentage of K's and L's household income.
    (ii) L and M are members of K's family as defined in Sec.  1.36B-
1(d). Under paragraph (c)(3)(v)(A)(1) of this section, K's employer's 
coverage is affordable for K because K's required contribution for 
self-only coverage does not exceed the required contribution percentage 
of K's and L's household income. Similarly, L's employer's coverage is 
affordable for L, because L's required contribution for self-only 
coverage does not exceed the required contribution percentage of K's 
and L's household income. Thus, K and L are eligible for minimum 
essential coverage for all months in 2023. However, under paragraph 
(c)(3)(v)(A)(2) of this section, K's employer's coverage is 
unaffordable for M, because K's required contribution for coverage of 
K, L, and M exceeds the required contribution percentage of K's and L's 
household income. Accordingly, M is not eligible for minimum essential 
coverage for 2023.
    (6) Example 6: Multiple offers of coverage for a related 
individual. (i) The facts are the same as in paragraph (c)(3)(v)(D)(5) 
of this section (Example 5), except that L works all year for an 
employer that offers coverage to employees, spouses, and children under 
age 26. L's required contribution for coverage of K, L, and M does not 
exceed the required contribution percentage of K's and L's household 
income.
    (ii) Although M is not eligible for affordable employer coverage 
under K's employer's coverage, paragraph (c)(3)(v)(A)(8) of this 
section dictates that L's employer coverage must be evaluated to 
determine whether L's employer coverage is affordable for M. Under 
paragraph (c)(3)(v)(A)(2) of this section, L's employer's coverage is 
affordable for M, because L's required contribution for K, L, and M 
does not exceed the required contribution percentage of K's and L's 
household income. Accordingly, M is eligible for minimum essential 
coverage for all months in 2023.
    (7) Example 7: Determination of unaffordability at enrollment. * * 
*
    (8) Example 8: Determination of unaffordability for plan year. The 
facts are the same as in paragraph (c)(3)(v)(D)(7) of this section 
(Example 7), except that X's employee health insurance plan year is 
September 1 to August 31. * * *
    (9) Example 9: No affordability information affirmatively provided 
for annual redetermination. (i) The facts are the same as in paragraph 
(c)(3)(v)(D)(7) of this section (Example 7), except the Exchange 
redetermines D's eligibility for advance credit payments for 2015. * * 
*
* * * * *
    (e) * * *
    (1) Except as provided in paragraphs (e)(2) through (5) of this 
section, this section applies to taxable years ending after December 
31, 2013.
* * * * *

[[Page 20364]]

    (5) The first two sentences of paragraph (c)(3)(v)(A)(2), paragraph 
(c)(3)(v)(A)(8), the second sentence of paragraph (c)(3)(v)(B), 
paragraphs (c)(3)(v)(D)(1) through (6), and the first sentences of 
paragraphs (c)(3)(v)(D)(8) and (9) of this section apply to taxable 
years beginning after [date final regulations are published in the 
Federal Register].
0
Par. 3. Section 1.36B-3 is amended by revising paragraphs (d)(1)(i) and 
(n)(1) and adding paragraph (n)(3) to read as follows:


Sec.  1.36B-3   Computing the premium assistance credit amount.

* * * * *
    (d) * * *
    (1) * * *
    (i) The premiums for the month, reduced by any amounts that were 
refunded in the same taxable year as the premium liability is incurred, 
for one or more qualified health plans in which a taxpayer or a member 
of the taxpayer's family enrolls (enrollment premiums); or
* * * * *
    (n) * * * (1) Except as provided in paragraphs (n)(2) and (3) of 
this section, this section applies to taxable years ending after 
December 31, 2013.
* * * * *
    (3) Paragraph (d)(1)(i) of this section applies to taxable years 
beginning after [the date final regulations are published in the 
Federal Register].
0
Par. 4. Section 1.36B-6 is amended by revising paragraphs (a) and 
(g)(2) to read as follows:


Sec.  1.36B-6  Minimum value.

    (a) In general--(1) Employees. An eligible employer-sponsored plan 
provides minimum value (MV) for an employee of the employer offering 
the coverage only if--
    (i) The plan's MV percentage, as defined in paragraph (c) of this 
section, is at least 60 percent based on the plan's share of the total 
allowed costs of benefits provided to the employee; and
    (ii) The plan provides substantial coverage of inpatient hospital 
services and physician services.
    (2) Related individuals. An eligible employer-sponsored plan 
provides MV for an individual who may enroll in the plan because of a 
relationship to an employee of the employer offering the coverage (a 
related individual) only if--
    (i) The plan's MV percentage, as defined in paragraph (c) of this 
section, is at least 60 percent based on the plan's share of the total 
allowed costs of benefits provided to the related individual; and
    (ii) The plan provides substantial coverage of inpatient hospital 
services and physician services.
* * * * *
    (g) * * *
    (2) Exceptions. (i) Paragraph (a)(1)(ii) of this section applies 
for plan years beginning after November 3, 2014; and
    (ii) Paragraph (a)(2) of this section applies to taxable years 
beginning after [date final regulations are published in the Federal 
Register].

Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2022-07158 Filed 4-5-22; 8:45 am]
BILLING CODE 4830-01-P


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