70464 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Rules and Regulations 

Security has authority to regulate the 

boarding of vessels. The Secretary of 

Homeland Security has designated the 

Commissioner of U.S. Customs and 

Border Protection as the signatory on 

this technical amendment. 

List of Subjects in 19 CFR Part 4 

Customs duties and inspection, 

Exports, Freight, Harbors, Maritime 

carriers, Reporting and recordkeeping 

requirements, Vessels. 

Amendments to Regulations 

For the reasons stated in the 

preamble, part 4 of title 19 of the Code 

of Federal Regulations is amended as set 

forth below: 

PART 4—VESSELS IN FOREIGN AND 

DOMESTIC TRADES 

■ 1. The general authority citation for 

part 4 continues and the specific 

authority citation for § 4.1 is revised to 

read as follows: 

Authority: 5 U.S.C. 301; 19 U.S.C. 66, 

1431, 1433, 1434, 1624, 2071 note; 46 U.S.C. 

70105. 

Section 4.1 also issued under 19 U.S.C. 

1581(a); 46 U.S.C. 60101; 46 U.S.C. 70105. 

* * * * * 

■ 2. Section 4.1 is amended as follows: 

■ a. Revise the section heading; 

■ b. Amend paragraphs (a) and (b) by 

removing the word ‘‘Customs’’ and 

adding in its place ‘‘CBP’’, except where 

the word ‘‘Customs’’ is followed by the 

word ‘‘territory’’ or ‘‘formality’’, and 

where the word ‘‘Customs’’ is followed 

by the word ‘‘territory’’ or ‘‘formality’’, 

removing the word ‘‘Customs’’ and 

adding in its place ‘‘customs’’; 

■ c. Revise paragraph (c); and 

■ d. Remove paragraphs (e) and (f). 

The revision reads as follows: 

§ 4.1 Boarding of vessels. 

* * * * * 

(c) Persons seeking to board an 

incoming vessel after it has been 

inspected by the quarantine authorities 

and taken in charge by a CBP officer 

must comply with any applicable Coast 

Guard regulations regarding the 

Transportation Worker Identification 

Credential (TWIC)/personal 

identification requirements as 

prescribed in 33 CFR 101.105 and 

101.514–515. 

* * * * * 

Dated: November 20, 2014. 

R. Gil Kerlikowske, 

Commissioner. 

[FR Doc. 2014–28010 Filed 11–25–14; 8:45 am] 

BILLING CODE 9111–14–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9705] 

RIN 1545–BL91 

Minimum Essential Coverage and 

Other Rules Regarding the Shared 

Responsibility Payment for Individuals 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations relating to the requirement 

to maintain minimum essential coverage 

enacted by the Patient Protection and 

Affordable Care Act and the Health Care 

and Education Reconciliation Act of 

2010, as amended by the TRICARE 

Affirmation Act and Public Law 111– 

173 (collectively, the Affordable Care 

Act). These final regulations provide 

individual taxpayers with guidance 

under section 5000A of the Internal 

Revenue Code on the requirement to 

maintain minimum essential coverage 

and rules governing certain types of 

exemptions from that requirement. 

DATES: Effective Date: These regulations 

are effective on November 26, 2014. 

Applicability Date: For date of 

applicability, see § 1.5000A–5(c). 

FOR FURTHER INFORMATION CONTACT: SueJean Kim or John B. Lovelace at (202) 

317–7006 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains final 

regulations that amend the Income Tax 

Regulations (26 CFR part 1) under 

section 5000A relating to the individual 

shared responsibility provision. Section 

5000A was enacted by the Affordable 

Care Act. Section 5000A generally 

requires individuals to have qualifying 

health care coverage (called minimum 

essential coverage), qualify for a health 

coverage exemption, or make a shared 

responsibility payment when filing a 

Federal income tax return. On January 

27, 2014, a notice of proposed 

rulemaking (REG–141036–13) was 

published in the Federal Register (79 

FR 4302). 

Written comments responding to the 

notice of proposed rulemaking of 

January 27, 2014, were received. The 

comments are available for public 

inspection at www.regulations.gov or on 

request. No public hearing was 

requested or held. After considering all 

the comments, the proposed regulations 

are adopted as revised by this Treasury 

decision. The comments and revisions 

are discussed in the preamble. 

As described in the Summary of 

Comments and Explanation of 

Revisions, in related guidance, Notice 

2014–76, 2014–50 IRB (available at 

www.irs.gov) (see § 601.601(d)), the 

Treasury Department and the IRS 

provide a comprehensive list of the 

hardship exemptions that may be 

claimed for 2014 on a Federal income 

tax return without obtaining a hardship 

exemption certification from a Health 

Insurance Marketplace (Marketplace). 

Summary of Comments and 

Explanation of Revisions 

I. Minimum Essential Coverage 

A. Coverage for the Medically Needy 

The proposed regulations provide that 

certain categories of Medicaid coverage 

authorized under Title XIX of the Social 

Security Act (42 U.S.C. 1396 and 

following sections) that are not required 

to be comprehensive are not generally 

government-sponsored minimum 

essential coverage under section 

5000A(f)(1). Specifically, under the 

proposed regulations, coverage offered 

to individuals with high medical 

expenses who would be eligible for 

Medicaid but for their income level 

(medically needy individuals) (see 

section 1902(a)(10)(C) of the Social 

Security Act (42 U.S.C. 1936a(a)(10)(C))) 

generally is not minimum essential 

coverage. Commenters agreed that 

Medicaid coverage for medically needy 

individuals that is not comprehensive 

should not be minimum essential 

coverage. The final regulations retain 

the rule in proposed regulations that 

Medicaid coverage for medically needy 

individuals is not governmentsponsored minimum essential coverage 

under section 5000A(f)(1)(A). 

The preamble to the proposed 

regulations explains that although 

Medicaid coverage offered to medically 

needy individuals generally is not 

minimum essential coverage, the 

Secretary of Health and Human 

Services, in coordination with the 

Secretary of the Treasury, may in 

appropriate circumstances designate 

certain coverage for medically needy 

individuals as minimum essential 

coverage pursuant to section 

5000A(f)(1)(E). Some commenters 

suggested that the determination of 

whether a particular state’s program for 

medically needy individuals is 

comprehensive, and therefore should be 

recognized as minimum essential 

coverage, should be based on whether 

the program offers the essential health 

benefits required by the Affordable Care 

Act for coverage in the individual and 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Rules and Regulations 70465 

group health insurance markets. The 

determination of whether coverage is 

designated as minimum essential 

coverage under section 5000A(f)(1)(E) is 

under the jurisdiction of the Department 

of Health and Human Services (HHS). 

On November 7, 2014, the HHS 

provided guidance on the 

considerations that it intends to apply 

in recognizing Medicaid coverage for 

medically needy individuals as 

minimum essential coverage. HHS 

Centers for Medicare & Medicaid 

Services, Minimum Essential Coverage 

(SHO #14–002) (Nov. 7, 2014) (available 

at www.medicaid.gov/federal-policyguidance/downloads/sho-14-002.pdf). 

B. Section 1115 Demonstration Projects 

The proposed regulations provide that 

coverage authorized under section 

1115(a)(2) of the Social Security Act (42 

U.S.C. 1315(a)(2)) is generally not 

minimum essential coverage. One 

commenter recommended that the 

citation be changed to refer to section 

1115(a) of the Social Security Act (42 

U.S.C. 1315(a)(1)), because 

demonstration projects authorized 

under section 1115(a)(1) may limit the 

benefits available to individuals whose 

coverage is authorized under the 

approved state plan and limited-benefit 

coverage should not be treated as 

minimum essential coverage. 

A section 1115 demonstration project 

authorized under section 1115(a)(1) of 

the Social Security Act may provide 

only limited benefits. Accordingly, the 

final regulations adopt the commenter’s 

recommendation and provide that 

coverage authorized under section 

1115(a) of the Social Security Act is not 

government-sponsored minimum 

essential coverage under section 

5000A(f)(1)(A). 

The preamble to the proposed 

regulations explains that certain 

coverage under a section 1115 

demonstration project may be 

recognized as minimum essential 

coverage by the Secretary of HHS, in 

coordination with the Secretary of the 

Treasury, under section 5000A(f)(1)(E). 

On November 7, 2014, HHS released 

guidance on the considerations it will 

apply in recognizing a section 1115 

demonstration project as minimum 

essential coverage under section 

5000A(f)(1)(E). HHS Centers for 

Medicare & Medicaid Services, 

Minimum Essential Coverage (SHO 

#14–002) (Nov. 7, 2014) (available at 

www.medicaid.gov/federal-policyguidance/downloads/sho-14-002.pdf). 

II. Exemption for Individuals Who 

Cannot Afford Coverage 

A. Employer Contributions to a 

Cafeteria Plan (Flex Contributions) 

The preamble to the proposed 

regulations requests comments on the 

treatment for purposes of section 5000A 

of employer contributions under a 

section 125 cafeteria plan to the extent 

employees may not opt to receive the 

employer contribution as a taxable 

benefit. Specifically, the preamble to the 

proposed regulations requests 

comments about how these 

contributions should be taken into 

account for purposes of determining the 

affordability of coverage. 

As described in this preamble after 

consideration of the comments received, 

the final regulations provide that, for 

purposes of determining the 

affordability of coverage, the required 

contribution is reduced by any 

contributions made by an employer 

under a section 125 cafeteria plan that 

(1) may not be taken as a taxable benefit, 

(2) may be used to pay for minimum 

essential coverage, and (3) may be used 

only to pay for medical care within the 

meaning of section 213 (such 

contributions are referred to in this 

preamble as health flex contributions). 

One commenter suggested that the 

value of any benefit provided under a 

cafeteria plan should be included in the 

taxpayer’s household income for 

purposes of determining eligibility for 

the exemption for unaffordable 

coverage, regardless of whether the 

benefit is taxable. The commenter noted 

that taxable benefits are included in an 

employee’s household income, thereby 

increasing the likelihood that coverage 

offered by an employer will be 

affordable. Reasoning that a nontaxable 

benefit similarly provides an employee 

with a financial benefit, the 

commentator argued that nontaxable 

contributions should be considered 

available to purchase minimum 

essential coverage to eliminate any 

possible employee incentive under 

section 5000A for choosing a taxable or 

nontaxable benefit. 

The suggestion to include employer 

contributions to a cafeteria plan in an 

employee’s household income is 

inconsistent with the definition of 

household income in section 

5000A(c)(4)(B) and the increase to 

household income for the purposes of 

determining affordability provided in 

section 5000A(e)(1)(A). Household 

income as defined in section 

5000A(c)(4)(B), while specifically 

including certain amounts otherwise 

excluded from gross income such as taxexempt interest, does not include 

amounts excluded from gross income 

under section 125. Section 

5000A(e)(1)(A) provides that, for 

purposes of determining the 

affordability of coverage, household 

income is increased by any portion of 

the required contribution paid through 

a salary reduction arrangement. Health 

flex contributions that can be received 

under a cafeteria plan, however, are not 

made pursuant to a salary reduction 

arrangement. Section 5000A does not 

direct that household income include 

all amounts excluded from gross income 

pursuant to a cafeteria plan. 

Accordingly, the final regulations do not 

incorporate the suggestion to include all 

benefits provided under a cafeteria plan 

in the taxpayer’s household income. 

Another commenter recommended 

that contributions under a cafeteria plan 

should be taken into account in 

determining the employee’s required 

contribution if the contributions could 

be used to purchase minimum essential 

coverage, regardless of whether the 

contributions could be used to purchase 

other benefits. The commenter 

suggested that a contrary rule could 

potentially cause employers to limit 

employee choice by structuring cafeteria 

plans so that contributions can be used 

only to pay for minimum essential 

coverage. 

Section 5000A(e)(1)(B) defines an 

employee’s required contribution by 

reference to the portion of the annual 

premium that would be paid by the 

employee if the employee purchased 

coverage. The statute does not require 

an employee to treat amounts provided 

pursuant to a cafeteria plan as 

reductions to the employee’s required 

contribution. If an employee may use 

nontaxable employer contributions to a 

cafeteria plan to pay for minimum 

essential coverage and only to pay for 

medical expenses, then that represents a 

real reduction in the cost to the 

employee of purchasing minimum 

essential coverage. In such a case, it is 

appropriate to treat the amounts as a 

reduction in the employee’s required 

contribution. However, if an employee’s 

use of nontaxable employer 

contributions to a cafeteria plan is not 

limited to medical expenses, then it 

cannot be assumed that the employee 

will use the contribution for purchasing 

minimum essential coverage. 

Accordingly, the final regulations 

provide that health flex contributions 

made available for the current plan year 

are taken into account for purposes of 

determining an individual’s required 

contribution. As a result, health flex 

contributions reduce an employee’s, or 

related individual’s, required 

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70466 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Rules and Regulations 

contribution for employer-sponsored 

coverage. 

B. Health Reimbursement Arrangements 

The proposed regulations provide that 

amounts newly made available in the 

current plan year under a health 

reimbursement arrangement (HRA) that 

is integrated with an eligible employersponsored plan are taken into account 

in determining the employee’s or related 

individual’s required contribution if an 

employee may use them to pay the 

employee’s share of premiums for 

coverage under the plan. No comments 

were received on this proposed rule. 

However, this preamble addresses 

comments received in response to an 

identical rule provided in proposed 

regulations under section 36B (REG– 

125398–12, 78 FR 25909) (section 36B 

proposed regulations) published on May 

3, 2013. 

Commenters requested guidance on 

the requirements for an HRA to be 

integrated with eligible employersponsored coverage. Notice 2013–54 

(2013–40 IRB 287) (see § 601.601(d)), 

and for this purpose identical guidance 

issued by the Department of Labor and 

with which HHS concurred provides, 

however, that an HRA is integrated with 

another group health plan only if, 

among other things, an employee enrolls 

in the other group health plan. Because 

an employee who enrolls in eligible 

employer-sponsored coverage is not 

eligible for the premium tax credit 

subsidy, whether or not the eligible 

employer-sponsored coverage is 

affordable, requiring an HRA to be 

integrated with a primary group health 

plan for purposes of determining 

affordability would be meaningless. 

Therefore, the final regulations crossreference Notice 2013–54 and clarify 

that amounts newly made available 

under an HRA count toward an 

employee’s required contribution if the 

HRA would have been integrated with 

an eligible employer-sponsored plan if 

the employee had enrolled in the 

primary plan. 

Notice 2013–54 also provides that 

under certain circumstances an HRA 

offered by an employer may be 

integrated with a group health plan 

offered by a different employer, for 

example a plan offered by the employer 

of an employee’s spouse. Notice 2013– 

54 indicated, however, that an HRA 

could not be integrated with a plan 

offered by another employer for 

purposes of determining affordability 

and minimum value under section 36B. 

Accordingly, the final regulations 

provide that, for purposes of 

determining an individual’s required 

contribution, an HRA is taken into 

account only if the HRA and the 

primary eligible employer-sponsored 

coverage are offered by the same 

employer. 

Commenters suggested that HRAs 

should be considered integrated with 

any plan that provides minimum 

essential coverage, whether that plan is 

an employer plan or a plan purchased 

through a Marketplace. As explained in 

Notice 2013–54, the combination of an 

HRA and a plan purchased through a 

Marketplace may raise significant issues 

under the market reforms applicable to 

the group insurance market. For this 

reason, as well as to reduce complexity 

through consistent rules, the Treasury 

Department and the IRS have concluded 

that the rules for determining when an 

HRA is considered integrated with 

another group health plan for purposes 

of section 5000A should be consistent 

with the rules applicable for purposes of 

application of the market reforms, and 

the final regulations, therefore, crossreference Notice 2013–54. The rules 

addressed in Notice 2013–54 are under 

the jurisdiction of the Departments of 

Labor and HHS as well as the Treasury 

Department and the IRS and are, 

therefore, outside the scope of these 

regulations. 

Under the section 36B proposed 

regulations, HRA amounts that may be 

used to pay premiums or to pay both 

premiums and cost-sharing are counted 

toward affordability. A commenter 

suggested that HRA amounts should not 

count toward affordability unless the 

amounts may be used only for 

premiums. The commenter observed 

that counting HRA amounts that may be 

used either for premiums or cost-sharing 

in determining affordability could lead 

to double counting for affordability and 

minimum value purposes under section 

36B. 

The final regulations clarify that, in 

general, HRA contributions count 

toward affordability, and not minimum 

value, if an employee may use the HRA 

contributions to pay premiums for the 

primary plan only, or to pay costsharing or benefits not covered by the 

primary plan in addition to premiums. 

Under the section 36B proposed 

regulations, HRA amounts that may be 

used only for cost-sharing are counted 

for purposes of minimum value and not 

for affordability. Accordingly, HRA 

contributions that can be used only to 

pay for cost-sharing do not count toward 

affordability. The Treasury Department 

and the IRS anticipate that the section 

36B proposed regulations addressing 

HRA contributions and minimum value 

will be adopted in section 36B final 

regulations and, thus, HRA 

contributions that can be used for 

premiums and cost-sharing will only 

count for affordability and there will be 

no double counting of these 

contributions. 

Commenters suggested that employers 

should be permitted to treat HRA 

contributions as made in particular 

months during a year, which could 

affect their potential liability under the 

employer shared responsibility 

requirement of section 4980H. 

Employees who enroll in eligible 

employer-sponsored coverage may not 

claim the premium tax credit for their 

coverage in a qualified health plan and 

must be able to determine the amount 

of their annual required contribution 

before deciding whether to enroll in 

eligible employer-sponsored coverage. 

Accordingly, the final regulations clarify 

that employer contributions to an HRA 

count towards an employee’s required 

contribution only to the extent the 

amount of the annual contribution is 

required under the terms of the plan or 

is otherwise determinable within a 

reasonable time before the employee 

must decide whether to enroll. The 

Treasury Department and the IRS 

anticipate adopting the same rule when 

the section 36B proposed regulations are 

finalized. 

A commenter argued that health 

insurance issuers should not be required 

to determine if employers are making 

contributions to an HRA or HSA or 

otherwise determine limitations 

employers place on the use of funds in 

an HRA or HSA. Neither the proposed 

regulations under sections 36B or 5000A 

nor the final regulations impose these 

requirements on health insurance 

issuers. 

A commenter stated that stand-alone 

HRAs for pre-Medicare eligible retirees 

should not be considered minimum 

essential coverage under certain 

circumstances. The final regulations do 

not address this issue, which is outside 

the scope of the regulations. 

C. Wellness Program Incentives 

The proposed regulations provide 

that, in determining whether coverage 

under an eligible employer-sponsored 

plan is affordable for purposes of the 

affordability exemption in section 

5000A(e)(1), nondiscriminatory 

wellness program incentives are treated 

as earned only if the incentives relate to 

tobacco use. For this purpose, a 

nondiscriminatory wellness program is 

a wellness program that does not violate 

the wellness plan regulations whether 

the program is participatory or outcome 

based. See § 54.9802–1(f), 29 CFR 

2590.702(f), and 45 CFR 146.121(f) for 

regulations governing wellness program 

incentives issued by the Departments of 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Rules and Regulations 70467 

Labor and HHS, and the Treasury 

Department and the IRS (tri-agency 

regulations). The section 36B proposed 

regulations include an identical rule for 

counting wellness program incentives in 

determining an individual’s required 

contribution. Comments were received 

on both the rule in the proposed 

regulations and the identical rule in the 

section 36B proposed regulations. Both 

sets of comments were considered in the 

development of these final regulations. 

The proposed regulations provide that 

the affordability of eligible employersponsored coverage is determined by 

assuming that each employee fails to 

satisfy the requirements of a wellness 

program, except the requirements of a 

nondiscriminatory wellness program 

related to tobacco use. Thus, the 

affordability of coverage that requires a 

higher initial premium for tobacco users 

is determined based on the premium 

that is charged to non-tobacco users or 

to tobacco users who complete the 

related wellness program, such as 

attending smoking cessation classes. 

Some commenters requested that all 

wellness incentives, including those 

related to tobacco use, be treated as 

unearned when determining the 

affordability and minimum value of an 

offer of eligible employer-sponsored 

coverage. These commenters asserted 

that wellness incentives could be used 

to discriminate based on health status or 

that certain individuals would be 

unable to complete the wellness 

program and earn the wellness 

incentives. 

Other commenters requested that all 

wellness incentives, including those 

related to tobacco use, be treated as 

earned when determining the 

affordability and minimum value of an 

offer of eligible employer-sponsored 

coverage. These commenters asserted 

that wellness incentives are an effective 

way of encouraging healthy lifestyle 

adjustments and reducing health costs 

and that the consumer protections in the 

tri-agency regulations that were 

finalized on June 3, 2013 (TD 9620, 78 

FR 33158), ensure that wellness 

incentives will not be used to 

discriminate based on health status or 

burdens to employees. Some of these 

commenters advised, however, that if 

the final regulations do not treat all 

wellness incentives as unearned, they 

favor the proposed rule as a reasonable 

alternative. 

After consideration of these 

comments, the final regulations retain 

the rules in the proposed regulations 

that wellness incentives unrelated to 

tobacco use are treated as unearned and 

wellness incentives related to tobacco 

use are treated as earned in determining 

affordability. These rules are consistent 

with policies related to tobacco use 

reflected in the Affordable Care Act, 

such as allowing issuers to charge 

higher premiums based on tobacco use. 

The Treasury Department and the IRS 

anticipate adopting the same rules when 

the section 36B proposed regulations are 

finalized. 

Commenters requested guidance on 

whether a wellness incentive is treated 

as earned or unearned when an 

employee must complete a wellness 

program related to tobacco use and a 

program unrelated to tobacco use to 

receive an incentive. The final 

regulations clarify that a wellness 

incentive that includes any component 

unrelated to tobacco use is treated as 

unearned. If, however, there is an 

incentive for completing a program 

unrelated to tobacco use and a separate 

incentive for completing a program 

related to tobacco use, then the 

incentive related to tobacco use may be 

treated as earned. 

A commenter requested clarification 

that programs that provide a discount or 

rebate and programs that impose a 

surcharge both provide wellness 

program incentives under the final 

regulations. Another commenter asked 

that the final regulations clarify that 

nondiscriminatory wellness programs 

include both participatory and healthcontingent wellness programs. The final 

regulations clarify that the term wellness 

program incentives has the same 

meaning as the term reward in the triagency regulations. Thus, programs that 

provide a discount or rebate, programs 

that impose a surcharge, and 

participatory and health-contingent 

wellness programs are wellness program 

incentives under the final regulations. 

III. Hardship Exemptions 

Under section 5000A(e)(5), an 

individual is exempt from section 

5000A if the individual has an 

exemption certification issued by the 

Marketplace stating that HHS has 

determined that the individual suffered 

a hardship with respect to the ability to 

obtain minimum essential coverage. The 

proposed regulations provide that, 

under certain circumstances, a taxpayer 

may claim a hardship exemption on a 

Federal income tax return without first 

obtaining a hardship exemption 

certification from a Marketplace. 

Specifically, the proposed regulations 

provide that an individual may claim a 

hardship exemption on the Federal 

income tax return if they are specifically 

described in 45 CFR 155.605(g)(3) 

(relating to individuals with gross 

income below the filing threshold) or 45 

CFR 155.605(g)(5) (relating to employed 

and related individuals whose 

combined cost of employer-sponsored 

coverage exceeds the required 

contribution percentage), or if the 

individual is described HHS guidance 

released on October 28, 2013 (relating to 

individuals who enrolled in a plan 

through a Marketplace before the close 

of the open enrollment period in 2014 

but had a gap in coverage before the 

coverage was effective). 

Finally, the proposed regulations 

provide that a taxpayer may claim a 

hardship exemption on a Federal 

income tax return in any situation that 

is (1) described in published guidance 

issued by HHS permitting an individual 

to claim the exemption on a Federal 

income tax return, and (2) described in 

published guidance issued by the IRS 

that allows an individual to claim the 

exemption on a Federal income tax 

return without obtaining a hardship 

exemption certification. 

Commenters requested that taxpayers 

be allowed to claim other hardship 

exemptions without obtaining hardship 

exemption certifications. Specifically, 

commenters requested that taxpayers 

eligible for the hardship exemption 

described in 45 CFR 155.605(g)(6), for 

an Indian eligible for services through 

Indian Health Service (IHS) or through 

an Indian health care provider, be 

allowed to claim the exemption without 

obtaining a hardship exemption 

certification from a Marketplace. HHS 

issued guidance on September 18, 2014, 

that addresses this comment. In 

particular, the HHS guidance identified 

the hardship situation described in 45 

CFR 155.605(g)(6) and indicated that an 

exemption for that hardship may be 

claimed on a Federal income tax return 

pursuant to guidance issued by the 

Treasury Department and the IRS. See 

HHS Centers for Medicare & Medicaid 

Services, Shared Responsibility 

Guidance—Exemption for Individuals 

Eligible for Services through an Indian 

Health Care Provider (Sept. 18, 2014) 

(available at http://www.cms.gov/CCIIO/ 

Resources/Fact-Sheets-and-FAQs/

Downloads/guidance-exemptioncertain-AIAN.pdf). 

Commenters also requested that a 

taxpayer be allowed to claim a hardship 

exemption without obtaining a hardship 

exemption certification if he or she is 

eligible for the hardship exemption 

described in 45 CFR 155.605(g)(4), 

which applies to an individual who is 

determined ineligible for Medicaid for 

one or more months during a benefit 

year solely because the individual 

resides in a state that has not expanded 

Medicaid under section 2001(a) of the 

Affordable Care Act. HHS issued 

guidance on November 21, 2014, 

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70468 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Rules and Regulations 

addressing this comment. In particular, 

the HHS guidance provides that an 

individual is eligible for a hardship 

exemption for the taxable year if at any 

time during 2014 the individual resided 

in a state that did not expand Medicaid 

coverage and the individual’s household 

income, within the meaning of section 

36B, is below 138 percent of the 

applicable federal poverty level for the 

individual’s family size. See HHS 

Centers for Medicare & Medicaid 

Services, Guidance on Hardship 

Exemptions for Persons Meeting Certain 

Criteria (Nov. 21, 2014) (available at 

www.cms.gov). 

To consolidate the list of 

circumstances described in the 

proposed regulations with any 

additional circumstances that have been 

or will be identified, § 1.5000A– 

3(h)(3)(i) of the final regulations 

removes the references to specific 

hardship circumstances and instead 

provides that a taxpayer may claim a 

hardship exemption on a Federal 

income tax return without obtaining an 

exemption certification for any month 

that includes a day on which the 

taxpayer satisfies the requirements of a 

hardship for which HHS, and the 

Treasury Department and the IRS, issue 

published guidance. Notice 2014–76, 

2014–50 IRB (available at www.irs.gov) 

(see § 601.601(d)), released concurrently 

with these regulations, provides a 

comprehensive list of all hardship 

exemptions that may be claimed on a 

Federal income tax return without 

obtaining a hardship exemption 

certification. The list of hardship 

exemptions that may be claimed on a 

Federal income tax return without 

obtaining a hardship exemption 

certification includes the following: (a) 

The hardship exemptions described in 

45 CFR 155.605(g)(3) and (g)(5); (b) the 

hardship exemption described in HHS 

guidance issued October 28, 2013, 

relating to individuals enrolled in 

Marketplace coverage on or before 

March 31, 2014; (c) the hardship 

exemption described in HHS guidance 

released on March 26, 2014, relating to 

individuals ‘‘in line’’ to enroll in 

coverage through the Marketplace on 

March 31, 2013; (d) the hardship 

exemption described in HHS guidance 

released on March 31, 2014, relating to 

individuals who applied for CHIP 

during the 2014 open enrollment period 

and were found eligible; (e) the 

hardship exemption described in HHS 

guidance released on May 2, 2014, 

relating to individuals who enrolled 

outside the Marketplace in minimum 

essential coverage that is effective on or 

before May 1, 2014; (f) the hardship 

exemption described in HHS guidance 

issued September 18, 2014, relating to 

individuals eligible for services through 

an Indian health care provider; and (g) 

the hardship exemption described in 

HHS guidance issued November 21, 

2014, relating to individuals with 

specified household incomes who 

reside in a state that did not expand 

Medicaid. 

Commenters requested that the IRS, in 

conjunction with HHS, adopt additional 

hardship exemptions to address specific 

situations. Other commenters requested 

that the transition relief provided in 

Notice 2014–10, 2014–9 IRB 605, for 

individuals enrolled in limited benefit 

Medicaid programs that are not 

minimum essential coverage be 

extended to 2015. Some commenters 

specifically requested that no additional 

transition relief be provided. 

Authority to define circumstances 

giving rise to a hardship exemption, as 

well as authority to grant hardship 

exemptions in individual cases, resides 

with HHS. In guidance released on 

November 7, 2014, HHS described 

additional circumstances that 

Marketplaces may use when 

determining what constitutes a hardship 

effective January 1, 2015. HHS Centers 

for Medicare & Medicaid Services, 

Minimum Essential Coverage (SHO 

#14–002) (Nov. 7, 2014) (available at 

www.medicaid.gov/federal-policyguidance/downloads/sho-14-002.pdf). 

The additional circumstances include 

enrollment in Medicaid coverage for 

pregnant women and for medically 

needy individuals that is not minimum 

essential coverage. HHS provides 

additional guidance on the hardship 

exemption in regulations. See Patient 

Protection and Affordable Care Act: 

Exchange Functions: Eligibility for 

Exemptions; Miscellaneous Minimum 

Essential Coverage Provisions, 78 FR 

39494 (codified at 45 CFR part 155). 

Special Analyses 

It has been determined that this 

Treasury decision 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. Section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations, and, because the 

regulations do not impose a collection 

of information requirement on small 

entities, the Regulatory Flexibility Act 

(5 U.S.C. chapter 6) does not apply. 

Pursuant to section 7805(f), the notice of 

proposed rulemaking that preceded 

these final regulations was submitted to 

the Chief Counsel for Advocacy of the 

Small Business Administration for 

comment on its impact on small 

business, and no comments were 

received. 

Drafting Information 

The principal authors of these final 

regulations are Sue-Jean Kim and John 

B. Lovelace of the Office of Associate 

Chief Counsel (Income Tax and 

Accounting). Other personnel from the 

Treasury Department and the IRS 

participated in their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Adoption of Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

amended as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

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

■ Par 2. An undesignated center 

heading is added immediately following 

§ 1.1563–4 to read as follows: 

Individual Shared Responsibility 

Payment for Not Maintaining Minimum 

Essential Coverage 

■ Par. 3. Section 1.5000A–0 is amended 

by: 

■ 1. Revising the entry for § 1.5000A– 

2(b)(2). 

■ 2. Removing the entries for 

§ 1.5000A–2(b)(2)(i), (b)(2)(ii), and 

(b)(2)(iii). 

■ 3. Revising the entries for § 1.5000A– 

3(e)(4)(ii)(C) and (e)(4)(ii)(D). 

■ 4. Adding a new entry for § 1.5000A– 

3(e)(4)(ii)(E). 

■ 5. Revising the entry for § 1.5000A– 

3(h)(3). 

The revisions and addition read as 

follows. 

§ 1.5000A–0 Table of contents. 

* * * * * 

§ 1.5000A–2 Minimum essential coverage. 

* * * * * 

(b) * * * 

(2) Certain health care coverage not 

minimum essential coverage under a 

government-sponsored program. 

* * * * * 

§ 1.5000A–3 Exempt individuals. 

* * * * * 

(e) * * * 

(4) * * * 

(ii) * * * 

(C) Wellness program incentives. 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Rules and Regulations 70469 

(D) Credit allowable under section 

36B. 

(E) Required contribution for part-year 

period. 

* * * * * 

(h) * * * 

(3) Hardship exemption without 

hardship exemption certification. 

* * * * * 

■ Par. 4. Section 1.5000A–2 is amended 

by: 

■ 1. Revising paragraphs (b)(1)(ii) and 

(b)(2). 

■ 2. Removing the language ‘‘health 

insurance’’ in paragraph (g). 

The revisions read as follows: 

§ 1.5000A–2 Minimum essential coverage. 

* * * * * 

(b) * * * 

(1) * * * 

(ii) Medicaid. The Medicaid program 

under Title XIX of the Social Security 

Act (42 U.S.C. 1396 and following 

sections); 

* * * * * 

(2) Certain health care coverage not 

minimum essential coverage under a 

government-sponsored program. 

Government-sponsored program does 

not mean any of the following: 

(i) Optional coverage of family 

planning services under section 

1902(a)(10)(A)(ii)(XXI) of the Social 

Security Act (42 U.S.C. 

1396a(a)(10)(A)(ii)(XXI)); 

(ii) Optional coverage of tuberculosisrelated services under section 

1902(a)(10)(A)(ii)(XII) of the Social 

Security Act (42 U.S.C. 

1396a(a)(10)(A)(ii)(XII)); 

(iii) Coverage of pregnancy-related 

services under section 

1902(a)(10)(A)(i)(IV) and 

(a)(10)(A)(ii)(IX) of the Social Security 

Act (42 U.S.C. 1396a(a)(10)(A)(i)(IV), 

(a)(10)(A)(ii)(IX)); 

(iv) Coverage limited to treatment of 

emergency medical conditions in 

accordance with 8 U.S.C. 1611(b)(1)(A), 

as authorized by section 1903(v) of the 

Social Security Act (42 U.S.C. 1396b(v)); 

(v) Coverage for medically needy 

individuals under section 1902(a)(10)(C) 

of the Social Security Act (42 U.S.C. 

1396a(a)(10)(C)) and 42 CFR 435.300 

and following sections; 

(vi) Coverage authorized under 

section 1115(a) of the Social Security 

Act (42 U.S.C. 1315(a)); 

(vii) Coverage under section 1079(a), 

1086(c)(1), or 1086(d)(1) of title 10, 

U.S.C., that is solely limited to space 

available care in a facility of the 

uniformed services for individuals 

excluded from TRICARE coverage for 

care from private sector providers; and 

(viii) Coverage under sections 1074a 

and 1074b of title 10, U.S.C., for an 

injury, illness, or disease incurred or 

aggravated in the line of duty for 

individuals who are not on active duty. 

* * * * * 

■ Par. 5. Section 1.5000A–3 is amended 

by: 

■ 1. Revising paragraph (e)(3)(ii)(D). 

■ 2. Redesignating paragraph (e)(3)(ii)(E) 

as (e)(3)(ii)(F), revising newly 

redesignated paragraph (e)(3)(ii)(F), and 

adding a new paragraph (e)(3)(ii)(E). 

■ 3. Redesignating paragraphs 

(e)(4)(ii)(C) and (e)(4)(ii)(D) as 

(e)(4)(ii)(D) and (e)(4)(ii)(E), 

respectively, and adding and reserving a 

new paragraph (e)(4)(ii)(C). 

■ 4. Revising paragraphs (h)(1) and 

(h)(3). 

The revisions and additions read as 

follows: 

§ 1.5000A–3 Exempt individuals. 

* * * * * 

(e) * * * 

(3) * * * 

(ii) * * * 

(D) Employer contributions to health 

reimbursement arrangements. Amounts 

newly made available for the current 

plan year under a health reimbursement 

arrangement that an employee may use 

to pay premiums, or may use to pay 

cost-sharing or benefits not covered by 

the primary plan in addition to 

premiums, are counted toward the 

employee’s required contribution if the 

health reimbursement arrangement 

would be integrated, as that term is used 

in Notice 2013–54 (2013–40 IRB 287) or 

in any successor published guidance 

(see § 601.601(d) of this chapter), with 

an eligible employer-sponsored plan for 

an employee enrolled in the plan. The 

eligible employer-sponsored plan and 

the health reimbursement arrangement 

must be offered by the same employer. 

Employer contributions to a health 

reimbursement arrangement count 

toward an employee’s required 

contribution only to the extent the 

amount of the annual contribution is 

required under the terms of the plan or 

otherwise determinable within a 

reasonable time before the employee 

must decide whether to enroll in the 

eligible employer-sponsored plan. 

(E) Employer contributions to 

cafeteria plans. Amounts made 

available for the current plan year under 

a cafeteria plan, within the meaning of 

section 125, are taken into account in 

determining an employee’s or a related 

individual’s required contribution if: 

(1) The employee may not opt to 

receive the amount as a taxable benefit; 

(2) The employee may use the amount 

to pay for minimum essential coverage; 

and 

(3) The employee may use the amount 

exclusively to pay for medical care, 

within the meaning of section 213. 

(F) Wellness program incentives. 

Nondiscriminatory wellness program 

incentives, within the meaning of 

§ 54.9802–1(f) of this chapter, offered by 

an eligible employer-sponsored plan 

that affect premiums are treated as 

earned in determining an employee’s 

required contribution for purposes of 

affordability of an eligible employersponsored plan to the extent the 

incentives relate exclusively to tobacco 

use. Wellness program incentives that 

do not relate to tobacco use or that 

include a component unrelated to 

tobacco use are treated as not earned for 

this purpose. For purposes of this 

section, the term wellness program 

incentive has the same meaning as the 

term reward in § 54.9802–1(f)(1)(i) of 

this chapter. 

* * * * * 

(4) * * * 

(ii) * * * 

(C) Wellness programs incentives. 

[Reserved] 

* * * * * 

(h) Individuals with hardship 

exemption certification—(1) In general. 

Except as provided in paragraph (h)(3) 

of this section, an individual is an 

exempt individual for a month that 

includes a day on which the individual 

has in effect a hardship exemption 

certification described in paragraph 

(h)(2) of this section. 

* * * * * 

(3) Hardship exemption without 

hardship exemption certification. An 

individual may claim an exemption 

without obtaining a hardship exemption 

certification described in paragraph 

(h)(2) of this section for any month that 

includes a day on which the individual 

meets the requirements of any hardship 

for which: 

(i) The Secretary of HHS issues 

guidance of general applicability 

describing the hardship and indicating 

that an exemption for such hardship can 

be claimed on a Federal income tax 

return pursuant to guidance published 

by the Secretary; and 

(ii) The Secretary issues published 

guidance of general applicability, see 

§ 601.601(d)(2) of this chapter, allowing 

an individual to claim the hardship 

exemption on a return without 

obtaining a hardship exemption from an 

Exchange. 

* * * * * 

■ Par. 6. Section 1.5000A–4 is amended 

by revising paragraph (a) introductory 

text and paragraph (a)(1) to read as 

follows: 

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70470 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Rules and Regulations 

§ 1.5000A–4 Computation of shared 

responsibility payment. 

(a) In general. For each taxable year, 

the shared responsibility payment 

imposed on a taxpayer in accordance 

with § 1.5000A–1(c) is the lesser of— 

(1) The sum of the monthly penalty 

amounts; or 

* * * * * 

John Dalrymple, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: November 20, 2014. 

Mark J. Mazur, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2014–27998 Filed 11–21–14; 4:15 pm] 

BILLING CODE 4830–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R03–OAR–2014–0475; FRL–9919–66– 

Region 3] 

Approval and Promulgation of Air 

Quality Implementation Plans; 

Pennsylvania; Allegheny County’s 

Adoption of Control Techniques 

Guidelines for Four Industry 

Categories for Control of Volatile 

Organic Compound Emissions 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Final rule. 

SUMMARY: The Environmental Protection 

Agency (EPA) is conditionally 

approving a State Implementation Plan 

(SIP) revision submitted by the 

Commonwealth of Pennsylvania on 

behalf of the Allegheny County Health 

Department (ACHD). This SIP revision 

includes amendments to the ACHD 

Rules and Regulations, Article XXI, Air 

Pollution Control, and meets the 

requirement to adopt Reasonably 

Available Control Technology (RACT) 

for sources covered by EPA’s Control 

Techniques Guidelines (CTG) standards 

for the following categories: 

Miscellaneous metal and/or plastic parts 

surface coating processes, automobile 

and light-duty truck assembly coatings, 

miscellaneous industrial adhesives, and 

fiberglass boat manufacturing materials. 

Upon review of the submittal, EPA 

found that the average monomer volatile 

organic compound (VOC) content limits 

were referenced but not included in the 

regulation for fiberglass boat 

manufacturing materials. ACHD has 

committed to revising the regulation 

and submitting the table of VOC content 

limits for fiberglass boat manufacturing 

materials to EPA in order to address 

specific RACT requirements for 

Allegheny County. EPA is, therefore, 

conditionally approving this revision to 

the Pennsylvania SIP in accordance 

with the requirements of the Clean Air 

Act (CAA). 

DATES: This final rule is effective on 

December 26, 2014. 

ADDRESSES: EPA has established a 

docket for this action under Docket ID 

Number EPA–R03–OAR–2014–0475. All 

documents in the docket are listed in 

the www.regulations.gov Web site. 

Although listed in the electronic docket, 

some information is not publicly 

available, i.e., confidential business 

information (CBI) or other information 

whose disclosure is restricted by statute. 

Certain other material, such as 

copyrighted material, is not placed on 

the Internet and will be publicly 

available only in hard copy form. 

Publicly available docket materials are 

available either electronically through 

www.regulations.gov or in hard copy for 

public inspection during normal 

business hours at the Air Protection 

Division, U.S. Environmental Protection 

Agency, Region III, 1650 Arch Street, 

Philadelphia, Pennsylvania 19103. 

Copies of the state submittal are 

available at the Allegheny County 

Health Department, Bureau of 

Environmental Quality, Division of Air 

Quality, 301 39th Street, Pittsburgh, 

Pennsylvania 15201 and at the 

Pennsylvania Department of 

Environmental Protection, Bureau of Air 

Quality Control, P.O. Box 8468, 400 

Market Street, Harrisburg, Pennsylvania 

17105. 

FOR FURTHER INFORMATION CONTACT: 

Irene Shandruk, (215) 814–2166, or by 

email at shandruk.irene@epa.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 172(c)(1) of the CAA provides 

that SIPs for nonattainment areas must 

include reasonably available control 

measures (RACM), including RACT, for 

sources of emissions. Section 

182(b)(2)(A) provides that for certain 

nonattainment areas, states must revise 

their SIP to include RACT for sources of 

VOC emissions covered by a CTG 

document issued after November 15, 

1990 and prior to the area’s date of 

attainment. In 2008, EPA developed 

new CTGs for miscellaneous metal and 

plastic parts coatings, automobile and 

light-duty assembly coatings, 

miscellaneous industrial adhesives, and 

fiberglass boat manufacturing materials. 

II. Summary of SIP Revision 

On November 15, 2013, the 

Pennsylvania Department of 

Environmental Protection (PADEP) 

submitted to EPA on behalf of ACHD a 

SIP revision concerning the adoption of 

the EPA CTGs for miscellaneous metal 

and/or plastic parts surface coating 

processes, automobile and light-duty 

truck assembly coatings, miscellaneous 

industrial adhesives, and fiberglass boat 

manufacturing materials in Allegheny 

County. These regulations are contained 

in the ACHD Rules and Regulations, 

Article XXI, Air Pollution Control 

sections 2105.83, 2105.84, 2105.85, and 

2105.86 to: (1) Establish applicability for 

miscellaneous metal and/or plastic parts 

surface coating processes, automobile 

and light-duty truck assembly coatings, 

miscellaneous industrial adhesives, and 

fiberglass boat manufacturing materials; 

(2) establish exemptions; (3) establish 

record-keeping and work practice 

requirements; and (4) establish emission 

limitations. Upon review of the 

November 15, 2013 submittal, EPA 

found that a table of average monomer 

VOC content limits for fiberglass boat 

manufacturing materials was referenced, 

however, the table was erroneously not 

included in the regulation. Pursuant to 

section 110(k)(4) of the CAA, PADEP 

submitted on behalf of ACHD a letter 

dated July 16, 2014 committing to 

submit a SIP revision to EPA addressing 

this error. Other specific requirements 

and the rationale for EPA’s proposed 

rulemaking action are explained in the 

NPR and will not be restated here. No 

public comments were received on the 

NPR. 

III. Final Action 

In this rulemaking action, EPA is 

conditionally approving the 

Commonwealth of Pennsylvania SIP 

revision submitted on November 15, 

2013, which consists of amendments to 

the ACHD Rules and Regulations, 

Article XXI, Air Pollution Control for 

adopting RACT for sources covered by 

EPA’s CTG standards for the following 

categories: Miscellaneous metal and/or 

plastic parts surface coating processes, 

automobile and light-duty truck 

assembly coatings, miscellaneous 

industrial adhesives, and fiberglass boat 

manufacturing materials. Pursuant to 

section 110(k)(4) of the CAA, this 

conditional approval is based upon a 

letter from PADEP on behalf of ACHD 

dated July 16, 2014 committing to 

submit to EPA, no later than twelve 

months from EPA’s final conditional 

approval of ACHD’s adoption of CTGs 

for miscellaneous metal and/or plastic 

parts surface coating processes, 

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