Bulletin No. 2013-31July 29, 2013

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

INCOME TAX

Notice 2013–43, page 113.This notice provides: (i) revised timelines for implementation ofthe requirements of sections 1471 through 1474 of the Code,commonly referred to as the Foreign Account Tax ComplianceAct, or FATCA; and (ii) additional guidance concerning the treat-ment of financial institutions located in jurisdictions that havesigned intergovernmental agreements for the implementationof FATCA (IGAs) but have not yet brought those IGAs into force.The Department of the Treasury (Treasury) and the Internal Rev-enue Service (IRS) intend to amend the regulations under sec-tions 1471 through 1474 to adopt these rules. Prior to theeffective date of those amendments, taxpayers may rely onthe provisions of this notice.

Notice 2013–47, page 120.This notice amplifies the relief provided by Notices 2013–39and 2013–40. Those Notices provided temporary relief fromcertain limitations on low-income housing projects financedwith tax-exempt bonds under § 142(d) and LIHTCs under § 42,respectively, to permit such projects to house individuals dis-placed by severe storms and tornadoes occurring in Oklahomabetween May 18 and May 27, 2013. Following the releaseof those Notices, FEMA extended the period during which thedisasters occurred to June 2, 2013, and added flooding tothe list of disasters covered. This Notice makes the samechanges to Notices 2013–39 and 2013–40.

Notice 2013–48, page 120.This notice provides a proposed revenue procedure that wouldestablish a de minimis exception to the wash sale rules of sec-tion 1091 of the Code for certain redemptions of shares ofmoney market funds that, under regulations proposed by theSecurities and Exchange Commission, would no longer main-

tain a constant share price. Comments requested by October28, 2013.

EMPLOYEE PLANS

T.D. 9624, page 86.These final regulations provide guidance on coverage of cer-tain preventive services. They provide an exemption for reli-gious employers from the coverage of contraceptive servicesrequirement under section 2713 of the Public Health ServiceAct, incorporated into the Code by section 9815. The rulesalso establish accommodations for nonprofit organizations thatdo not meet the definition of religious employer but have a re-ligious objection to providing coverage of contraceptive ser-vices.

Notice 2013–46, page 117.This notice contains updates for the corporate bond weightedaverage interest rate for plan years beginning in July 2013; the24-month average segment rates; the funding segment ratesapplicable for July 2013; and the minimum present value ratesfor June 2013. The rates in this notice reflect certain changesimplemented by the Moving Ahead for Progress in the 21stCentury Act, Public Law 112-141 (MAP–21).

(Continued on the next page)

Finding Lists begin on page ii.Index for July begins on page iv.

EXCISE TAX

T.D. 9624, page 86.These final regulations provide guidance on coverage of cer-tain preventive services. They provide an exemption for reli-gious employers from the coverage of contraceptive servicesrequirement under section 2713 of the Public Health ServiceAct, incorporated into the Code by section 9815. The rulesalso establish accommodations for nonprofit organizations thatdo not meet the definition of religious employer but have a re-ligious objection to providing coverage of contraceptive ser-vices.

Notice 2013–45, page 116.This notice provides transition relief for 2014 from the infor-mation reporting requirements under sections 6055 and 6056of the Code and from the employer shared responsibility provi-sions under section 4980H of the Code.

July 29, 2013 2013–31 I.R.B.

The IRS MissionProvide America’s taxpayers top-quality service by helpingthem understand and meet their tax responsibilities and en-

force the law with integrity and fairness to all.

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all sub-stantive rulings necessary to promote a uniform application ofthe tax laws, including all rulings that supersede, revoke, mod-ify, or amend any of those previously published in the Bulletin.All published rulings apply retroactively unless otherwise indi-cated. Procedures relating solely to matters of internal man-agement are not published; however, statements of internalpractices and procedures that affect the rights and duties oftaxpayers are published.

Revenue rulings represent the conclusions of the Service on theapplication of the law to the pivotal facts stated in the revenueruling. In those based on positions taken in rulings to taxpayersor technical advice to Service field offices, identifying detailsand information of a confidential nature are deleted to preventunwarranted invasions of privacy and to comply with statutoryrequirements.

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, the effect of subsequent legislation, regulations,court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautionedagainst reaching the same conclusions in other cases unlessthe facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.This part includes rulings and decisions based on provisions ofthe Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A,Tax Conventions and Other Related Items, and Subpart B, Leg-islation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasury’s Office of the Assistant Secre-tary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative indexfor the matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

2013–31 I.R.B. July 29, 2013

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 9815.—AdditionalMarket Reforms

T.D. 9624

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 54

DEPARTMENT OF LABOREmployee Benefits SecurityAdministration29 CFR Parts 2510 and 2590

DEPARTMENT OF HEALTHAND HUMAN SERVICES45 CFR Parts 147 and 156

Coverage of CertainPreventive Services Under theAffordable Care Act

AGENCIES: Internal Revenue Service,Department of the Treasury; EmployeeBenefits Security Administration, Depart-ment of Labor; Centers for Medicare &Medicaid Services, Department of Healthand Human Services.

ACTION: Final rules.

SUMMARY: This document containsfinal regulations regarding coverage ofcertain preventive services under section2713 of the Public Health Service Act(PHS Act), added by the Patient Protec-tion and Affordable Care Act, as amended,and incorporated into the Employee Re-tirement Income Security Act of 1974 andthe Internal Revenue Code. Section 2713of the PHS Act requires coverage withoutcost sharing of certain preventive healthservices by non-grandfathered grouphealth plans and health insurance cover-age. Among these services are women’spreventive health services, as specifiedin guidelines supported by the HealthResources and Services Administration(HRSA). As authorized by the currentregulations, and consistent with the HRSAguidelines, group health plans established

or maintained by certain religious employ-ers (and group health insurance coverageprovided in connection with such plans)are exempt from the otherwise applicablerequirement to cover certain contraceptiveservices. These final regulations simplifyand clarify the religious employer exemp-tion. These final regulations also establishaccommodations with respect to the con-traceptive coverage requirement for grouphealth plans established or maintained byeligible organizations (and group healthinsurance coverage provided in connec-tion with such plans), as well as studenthealth insurance coverage arranged byeligible organizations that are institutionsof higher education. These regulationsalso finalize related amendments to regu-lations concerning Affordable InsuranceExchanges.

DATES: Effective date: These final regu-lations are effective on August 1, 2013.

Applicability date: With the exceptionof the amendments to the religious em-ployer exemption, which apply to grouphealth plans and health insurance issuersfor plan years beginning on or after Au-gust 1, 2013, these final regulations applyto group health plans and health insuranceissuers for plan years beginning on or afterJanuary 1, 2014.

FOR FURTHER INFORMATIONCONTACT: For inquiries related to thereligious employer exemption and eligi-ble organization accommodations: JacobAckerman, Centers for Medicare & Med-icaid Services (CMS), Department ofHealth and Human Services (HHS), at(410) 786–1565; Amy Turner or BethBaum, Employee Benefits Security Ad-ministration (EBSA), Department of La-bor, at (202) 693–8335; Karen Levin,Internal Revenue Service (IRS), Depart-ment of the Treasury, at (202) 927–9639.

For matters related to the Federally-fa-cilitated Exchange user fee adjustment:Ariel Novick, CMS, HHS, at (301)492–4309. Customer Service Informa-tion: Individuals interested in obtaininginformation from the Department of La-bor concerning employment-based healthcoverage laws may call the EBSA toll-free

hotline at 1–866–444–EBSA (3272) orvisit the Department of Labor’s web site(www.dol.gov/ebsa). Information fromHHS on private health insurance cov-erage can be found on CMS’s web site(www.cms.gov/cciio), and informationon health care reform can be found atwww.HealthCare.gov.

SUPPLEMENTARY INFORMATION:

I. Background

The Patient Protection and AffordableCare Act (Pub. L. 111–148) was enactedon March 23, 2010. The Health Careand Education Reconciliation Act of 2010(Pub. L. 111–152) was enacted on March30, 2010. These statutes are collectivelyknown as the Affordable Care Act. TheAffordable Care Act reorganizes, amends,and adds to the provisions of part A of ti-tle XXVII of the Public Health Service Act(PHS Act) relating to group health plansand health insurance issuers in the groupand individual markets. The AffordableCare Act adds section 715(a)(1) to the Em-ployee Retirement Income Security Act of1974 (ERISA) and section 9815(a)(1) tothe Internal Revenue Code (Code) to in-corporate the provisions of part A of titleXXVII of the PHS Act into ERISA andthe Code, and to make them applicable togroup health plans and health insuranceissuers providing health insurance cover-age in connection with group health plans.The sections of the PHS Act incorporatedinto ERISA and the Code are sections 2701through 2728.

Section 2713(a)(4) of the PHS Act, asadded by the Affordable Care Act andincorporated into ERISA and the Code,requires that non-grandfathered grouphealth plans and health insurance issuersoffering non-grandfathered group or indi-vidual health insurance coverage providebenefits for certain women’s preventivehealth services without cost sharing, asprovided for in comprehensive guidelinessupported by the Health Resources andServices Administration (HRSA). On Au-gust 1, 2011, HRSA adopted and releasedguidelines for women’s preventive healthservices (HRSA Guidelines) based on rec-ommendations of the independent Institute

2013–31 I.R.B. 86 July 29, 2013

of Medicine. As relevant here, the HRSAGuidelines include all Food and DrugAdministration (FDA)-approved contra-ceptive methods, sterilization procedures,and patient education and counselingfor women with reproductive capacity,as prescribed by a health care provider(collectively, contraceptive services).1

Except as discussed later in this section,non-grandfathered group health plans andhealth insurance coverage are requiredto provide coverage consistent with theHRSA Guidelines without cost sharingfor plan years (in the individual market,policy years) beginning on or after August1, 2012.2

Interim final regulations implementingsection 2713 of the PHS Act were pub-lished on July 19, 2010 (75 FR 41726)(2010 interim final regulations). On Au-gust 1, 2011, the Departments of Healthand Human Services (HHS), Labor, andthe Treasury (collectively, the Depart-ments) amended the 2010 interim finalregulations to provide HRSA with author-ity that would effectively exempt grouphealth plans established or maintained bycertain religious employers (and grouphealth insurance coverage provided inconnection with such plans) from the re-quirement to cover contraceptive servicesconsistent with the HRSA Guidelines (76FR 46621) (2011 amended interim fi-nal regulations), and, on the same date,HRSA exercised this authority in theHRSA Guidelines such that group healthplans established or maintained by thesereligious employers (and group healthinsurance coverage provided in connec-tion with such plans) are exempt from therequirement to cover contraceptive ser-vices.3 The 2011 amended interim finalregulations specified that, for purposes ofthis exemption, a religious employer isone that: (1) has the inculcation of reli-gious values as its purpose; (2) primarily

employs persons who share its religioustenets; (3) primarily serves persons whoshare its religious tenets; and (4) is a non-profit organization described in section6033(a)(1) and (a)(3)(A)(i) or (iii) of theCode. Section 6033(a)(3)(A)(i) and (iii)of the Code refers to churches, their in-tegrated auxiliaries, and conventions orassociations of churches, as well as tothe exclusively religious activities of anyreligious order. Final regulations issuedon February 10, 2012, adopted the defi-nition of religious employer in the 2011amended interim final regulations withoutmodification (2012 final regulations).4

Contemporaneous with the issuance ofthe 2012 final regulations, HHS, with theagreement of the Departments of Laborand the Treasury, issued guidance estab-lishing a temporary safe harbor from en-forcement of the contraceptive coveragerequirement by the Departments for grouphealth plans established or maintained bycertain nonprofit organizations with reli-gious objections to contraceptive coverage(and group health insurance coverage pro-vided in connection with such plans).5 Theguidance provided that the temporary en-forcement safe harbor would remain in ef-fect until the first plan year beginning onor after August 1, 2013. The Departmentscommitted to rulemaking during the 1-yearsafe harbor period to ensure more womenbroad access to recommended preventiveservices, including contraceptive services,without cost sharing, while simultaneouslyprotecting certain additional nonprofit re-ligious organizations with religious objec-tions to contraceptive coverage from hav-ing to contract, arrange, pay, or refer forsuch coverage.

On March 21, 2012, the Departmentspublished an advance notice of proposedrulemaking (ANPRM) that describedand solicited comments on possible ap-

proaches to achieve these goals (77 FR16501).

On February 6, 2013, following reviewof the comments on the ANPRM, the De-partments published proposed regulationsat 78 FR 8456 (proposed regulations). Theregulations proposed to simplify and clar-ify the definition of religious employer forpurposes of the religious employer exemp-tion. The regulations also proposed ac-commodations for health coverage estab-lished or maintained or arranged by certainnonprofit religious organizations with re-ligious objections to contraceptive cover-age. These organizations were referred toas eligible organizations.

The regulations proposed that, in thecase of an insured group health plan es-tablished or maintained by an eligibleorganization, the health insurance issuerproviding group health insurance cover-age in connection with the plan wouldbe required to assume sole responsibility,independent of the eligible organizationand its plan, for providing contraceptivecoverage to plan participants and bene-ficiaries without cost sharing, premium,fee, or other charge to plan participants orbeneficiaries or to the eligible organizationor its plan. The Departments proposed acomparable accommodation with respectto insured student health insurance cover-age arranged by eligible organizations thatare institutions of higher education.

In the case of a self-insured grouphealth plan established or maintained byan eligible organization, the proposed reg-ulations presented potential approachesunder which the third party administratorof the plan would arrange for a healthinsurance issuer to provide contraceptivecoverage to plan participants and benefi-ciaries without cost sharing, premium, fee,or other charge to plan participants or ben-eficiaries or to the eligible organization orits plan. An issuer (or its affiliate) would

1 The HRSA Guidelines exclude services relating to a man’s reproductive capacity, such as vasectomies and condoms.

2 Interim final regulations published by the Departments on July 19, 2010, generally provide that plans and issuers must cover a newly recommended preventive service starting with the firstplan year (in the individual market, policy year) that begins on or after the date that is one year after the date on which the new recommendation is issued. 26 CFR 54.9815–2713T(b)(1); 29CFR 2590.715–2713(b)(1); 45 CFR 147.130(b)(1).

3 The 2011 amended interim final regulations were issued and effective on August 1, 2011, and published on August 3, 2011 (76 FR 46621).

4 The 2012 final regulations were published on February 15, 2012 (77 FR 8725).

5 Guidance on the Temporary Enforcement Safe Harbor for Certain Employers, Group Health Plans, and Group Health Insurance Issuers with Respect to the Requirement to Cover Contra-ceptive Services Without Cost Sharing Under Section 2713 of the Public Health Service Act, Section 715(a)(1) of the Employee Retirement Income Security Act, and Section 9815(a)(1)of the Internal Revenue Code, issued on February 10, 2012, and reissued on August 15, 2012. Available at: http://www.cms.gov/CCIIO/Resources/Files/Downloads/prev-services-guid-ance–08152012.pdf. The guidance, as reissued on August 15, 2012, clarifies, among other things, that plans that took some action before February 10, 2012, to try, without success, to excludeor limit contraceptive coverage are not precluded from eligibility for the safe harbor. The temporary enforcement safe harbor is also available to insured student health insurance coveragearranged by nonprofit institutions of higher education with religious objections to contraceptive coverage that meet the conditions set forth in the guidance. See final rule entitled “StudentHealth Insurance Coverage” published March 21, 2012 (77 FR 16457).

July 29, 2013 87 2013–31 I.R.B.

be able to offset the costs incurred by thethird party administrator and the issuer inthe course of arranging and providing suchcoverage by claiming an adjustment in theFederally-facilitated Exchange (FFE) userfee.

The Departments received over400,000 comments (many of them stan-dardized form letters) in response to theproposed regulations. After considerationof the comments, the Departments arepublishing these final regulations. Withthe exception of the amendments to thereligious employer exemption, which ap-ply to group health plans and group healthinsurance issuers for plan years beginningon or after August 1, 2013, these final reg-ulations apply to group health plans andhealth insurance issuers for plan years be-ginning on or after January 1, 2014, whichis when the majority of plan years begin.6, 7

Contemporaneously issued amendmentsto the HRSA Guidelines implementingthe simplified and clarified religious em-ployer exemption authorized by 45 CFR147.131(a) of these final regulations willbe effective on August 1, 2013.

Two additional guidance documentsare being issued contemporaneously withthese final regulations. First, HHS is is-suing guidance extending the temporarysafe harbor from enforcement of the con-traceptive coverage requirement by theDepartments to encompass plan years be-ginning on or after August 1, 2013, andbefore January 1, 2014. This guidancecontinues to include a form to be usedby an organization during this temporaryperiod to self-certify that its plan qualifiesfor the temporary enforcement safe har-bor. Second, as described in more detaillater in this preamble, HHS and DOL arealso issuing a self-certification form to beexecuted by an organization seeking to be

treated as an eligible organization for pur-poses of an accommodation under thesefinal regulations. This self-certificationform is applicable in conjunction with theaccommodations under these final regula-tions (that is, for plan years beginning onor after January 1, 2014), after the expi-ration of the temporary enforcement safeharbor.

II. Overview of the Final Regulations

These final regulations promote twoimportant policy goals. First, the reg-ulations provide women with access tocontraceptive coverage without cost shar-ing, thereby advancing the compellinggovernment interests in safeguarding pub-lic health and ensuring that women haveequal access to health care. Second, theregulations advance these interests in anarrowly tailored fashion that protects cer-tain nonprofit religious organizations withreligious objections to providing contra-ceptive coverage from having to contract,arrange, pay, or refer for such cover-age. The regulations finalize the generalapproach described in the proposed regu-lations, with modifications in response tocomments that are intended primarily tosimplify administration of the policy.

Section 2713 of the PHS Act reflectsa determination by Congress that cover-age of recommended preventive serviceswithout cost sharing by non-grandfatheredgroup health plans and health insurancecoverage is necessary to achieve accessto basic health care for more Americans.Individuals are more likely to use pre-ventive services if they do not have tosatisfy cost-sharing requirements (suchas a copayment, coinsurance, or a de-ductible). Use of preventive services re-sults in a healthier population and reduces

health care costs by helping individualsavoid preventable conditions and receivetreatment earlier.8 Further, Congress, byamending the Affordable Care Act duringSenate consideration of the bill to ensurethat recommended preventive services forwomen would be covered adequately bynon-grandfathered group health plans andhealth insurance coverage, recognized thatwomen have unique health care needs.9

Such needs include contraceptive ser-vices.10

Some commenters asserted that contra-ceptive services should not be consideredpreventive health services, arguing thatthey do not prevent disease and have beenshown by some studies to be harmful towomen’s health. The HRSA Guidelinesare based on recommendations of the in-dependent Institute of Medicine (IOM),which undertook a review of the scien-tific and medical evidence on women’spreventive services. As documented inthe IOM report, “Clinical Preventive Ser-vices for Women: Closing the Gaps,”women experiencing an unintended preg-nancy may not immediately be aware thatthey are pregnant, and thus delay prenatalcare. They also may be less motivated tocease behaviors during pregnancy, suchas smoking and consumption of alcohol,that pose pregnancy-related risks. Studiesshow a greater risk of preterm birth andlow birth weight among unintended preg-nancies.11 In addition, contraceptive usehelps women improve birth spacing andtherefore avoid the increased risk of ad-verse pregnancy outcomes that comes withpregnancies that are too closely spaced.Short interpregnancy intervals in partic-ular have been associated with low birthweight, prematurity, and small-for-ges-

6 Section 2713(b) of the PHS Act and the companion provisions of ERISA and the Code provide that the Secretary shall establish an interval of not less than one year between when newrecommendations or guidelines under PHS Act section 2713(a) are issued and the first plan year (in the individual market, policy year) for which coverage of services addressed in suchrecommendations or guidelines must be in effect. Under the 2010 interim final regulations, the requirement on a non-exempt, non-grandfathered group health plan or group or individualhealth insurance policy to cover a newly recommended preventive service without cost sharing takes effect starting with the first plan year (in the individual market, policy year) that beginson or after the date that is one year after the new recommendation is issued. 26 CFR 54.9815–2713T(b)(1); 29 CFR 2590.715–2713(b)(1); 45 CFR 147.130(b)(1). In the case of contraceptiveservices, this 1-year period ended on August 1, 2012, because the HRSA Guidelines including such services were issued on August 1, 2011. These final regulations do not alter this effectivedate.

7 This estimate is based on the Department of Labor’s analysis of Form 5500 data.

8 Institute of Medicine, Clinical Preventive Services for Women: Closing the Gaps, Washington, DC: National Academy Press, 2011, at p. 16.

9 S.Amdt. 2791 to S.Amdt. 2786 to H.R. 3590 (Service Members Home Ownership Tax Act of 2009), December 3, 2009.

10 Institute of Medicine, Clinical Preventive Services for Women: Closing the Gaps, Washington. DC: National Academy. Press, 2011, at p. 9; see also Sonfield, A., The Case for InsuranceCoverage of Contraceptive Services and Supplies Without Cost Sharing, 14 Guttmacher Policy Review. 10 (2011), available at www.guttmacher.org/pubs/gpr/14/1/gpr140107.html. See alsoCongressional Record, S12025 (Dec. 1, 2009), S12114, S12271, S12277 (December 3, 2009) (statements of Senators B. Boxer, D. Feinstein, A. Franken, and B. Nelson, respectively).

11 Gipson, J.D., et al., The Effects of Unintended Pregnancy on Infant, Child and Parental Health: A Review of the Literature, Studies on Family Planning, 2008, 39(1):18–38.

2013–31 I.R.B. 88 July 29, 2013

tational age births.12 Contraceptives alsohave medical benefits for women who arecontraindicated for pregnancy, and thereare demonstrated preventive health bene-fits from contraceptives relating to condi-tions other than pregnancy (for example,prevention of certain cancers, menstrualdisorders, and acne).13 In addition, byreducing the number of unintended preg-nancies, contraceptives reduce the numberof women seeking abortions.14 It is fora woman and her health care provider ineach particular case to weigh any risksagainst the benefits in deciding whetherto use contraceptive services in general orany particular contraceptive service.

Covering contraceptives also yieldssignificant cost savings. A 2000 studyestimated that it would cost 15 to 17 per-cent more not to provide contraceptivecoverage in employee health plans thanto provide such coverage, after account-ing for both the direct medical costs ofpregnancy and the indirect costs, such asemployee absence.15 Consistent with thisfinding, when contraceptive coverage wasadded to the Federal Employees HealthBenefits Program, premiums did not in-crease because there was no resulting nethealth care cost increase.16 Specific topublic financing of contraceptive services,a 2010 analysis projected that expandingaccess to family planning services un-

der Medicaid saves $4.26 for every $1spent.17 Additional research arrived at asimilar conclusion and found that, in total,services provided at publicly funded fam-ily planning centers saved $5.1 billion in2008.18

Further, the importance of coveringcontraceptive services has been recog-nized by many states, issuers, and employ-ers. Twenty-eight states now have lawsrequiring health insurance issuers to covercontraceptives.19 A 2002 study found thatmore than 89 percent of insured plans cov-ered contraceptives.20 And a 2010 surveyof employers revealed that 85 percent oflarge employers and 62 percent of smallemployers offered coverage of FDA-ap-proved contraceptives, with another 32percent of small employers reporting thatthey did not know whether they did so.21

Furthermore, in directing non-grandfa-thered group health plans and health in-surance coverage to cover preventive ser-vices and screenings for women describedin HRSA Guidelines without cost sharing,the statute acknowledges that both existinghealth coverage and existing preventiveservices recommendations often did notadequately serve the unique health needsof women. This disparity placed women inthe workforce at a disadvantage comparedto their male coworkers. Research showsthat access to contraception improves the

social and economic status of women.22

Research also shows that cost sharing canbe a significant barrier to access to contra-ception.23 As IOM noted, women use pre-ventive services more than men, generat-ing significant out-of-pocket expenses forwomen.24 Thus, eliminating cost sharing isparticularly critical to addressing the gen-der disparity of concern here.

The Departments aim to advance thesecompelling public health and gender eq-uity interests by providing more womenbroad access to recommended preventiveservices, including contraceptive services,without cost sharing, while simultaneouslyprotecting certain nonprofit religious orga-nizations with religious objections to con-traceptive coverage from having to con-tract, arrange, pay, or refer for such cov-erage, as described in these final regula-tions. Moreover, through these final reg-ulations, the Departments seek to achievethese goals in ways that take into accountthe responsibilities imposed on health in-surance issuers and third party administra-tors.

A. Amendments to Coverage ofRecommended Preventive Health Services—26 CFR 54.9815–2713, 29 CFR2590.715–2713, 45 CFR 147.130

These sections of the final regulationsfinalize technical amendments to the ex-

12 Conde-Aguledo, A., et al., Birth Spacing and Risk of Adverse Perinatal Outcomes — A Meta-Analysis, Journal of the American Medical Association, 295(15):1809–1823 (2006); see alsoZhu, B., Effect of Interpregnancy Interval on Birth Outcomes: Findings from Recent U.S. Studies, International Journal of Gynecology & Obstetrics, 89:S25–S33 (2005); Fuentes-Afflick,E., & Hessol, N., Interpregnancy Interval and the Risk of Premature Infants, Obstetrics & Gynecology, 95(3):383–390 (2000).

13 Instute of Medicine, Clinical Preventive Services for Women: Closing the Gaps, Washington, DC: National Academy Press, 2011, at p. 107.

14 Institute of Medicine, Clinical Preventive Services for Women: Closing the Gaps, Washington, DC: National Academy Press, 2011, at p. 105. See also, Peipert, J., et al., PreventingUnintended Pregnancies by Providing No-Cost Contraception, Obstetrics & Gynecology, 120(6): 1291–1297 (2012); see also Bongaarts, J., & Westoff, C., The Potential Role of Contraceptionin Reducing Abortion, Studies in Family Planning, 31(3): 193–202 (2000).

15 Testimony of Guttmacher Inst., submitted to the Comm. on Preventive Servs. for Women, Institute of Medicine, January 12, 2012, p. 11, citing Bonoan, R. & Gonen, J.S., PromotingHealthy Pregnancies: Counseling and Contraception as the First Step, Washington Business Group on Health, Family Health in Brief, Issue No. 3. August 2000; see also Sonfield, A., TheCase for Insurance Coverage of Contraceptive Services and Supplies Without Cost Sharing, 14Guttmacher Pol’y Rev. 10 (2011); Mavranezouli, I., Health Economics of Contraception, 23 Best Practice & Res. Clinical Obstetrics & Gynecology 187–198 (2009); Trussell, J., et al., CostEffectiveness of Contraceptives in the United States, 79 Contraception 5–14 (2009); Trussell, J., The Cost of Unintended Pregnancy in the United States, 75 Contraception 168–170 (2007).

16 Dailard, C., Special Analysis: The Cost of Contraceptive Insurance Coverage, Guttmacher Rep. on Public Policy (March 2003).

17 Sawhill, R., et al., An Ounce of Prevention: Policy Prescriptions to Reduce the Prevalence of Fragile Families, Future of Children, 20(2): 133–155.

18 Frost, J., et al., Contraceptive Needs and Services, National and State Data, 2008 Update, New York: Guttmacher Institute (2010).

19 Sonfield, A., et al., U.S. Insurance Coverage of Contraceptives and the Impact of Contraceptive Coverage Mandates, Perspectives on Sexual and Reproductive Health 36(2):72–79, 2002.

20 Sonfield, A., et al., U.S. Insurance Coverage of Contraceptives and the Impact of Contraceptive Coverage Mandates, Perspectives on Sexual and Reproductive Health 36(2):72–79, 2002.

21 Claxton, G., et al., Employer Health Benefits: 2010 Annual Survey, Menlo Park, Cal.: Kaiser Family Found. & Chicago, Illinois: Health Research & Education Trust, 2010. Whilemany employers included contraceptive coverage in their group health plans prior to the Affordable Care Act, the Departments note that the contraceptive coverage requirement promotes thegovernment’s interests with respect to even these plans’ participants and beneficiaries by ensuring that these plans cover contraceptive services without cost sharing, a significant financialbarrier to such services that was prevalent before the contraceptive coverage requirement. Institute of Medicine, Clinical Preventive Services for Women: Closing the Gaps, Washington, DC:National Academy Press, 2011, at p. 107. See also Postlethwaite, D., et al., A Comparison of Contraceptive Procurement Pre- and Post-Benefit Change, 76 Contraception 360 (2007).

22 Testimony of Guttmacher Institute, submitted to the Comm. on Preventive Services for Women, Institute of Medicine, January 12, 2012, p. 6, citing Goldin, C. & Katz, L., Career andMarriage in the Age of the Pill, American Economic Review, 2000, 90(2):461–465; Goldin, C. & Katz, L.F., The Power of the Pill: Oral Contraceptives and Women’s Career and MarriageDecisions, Journal of Political Economy, 2002, 110(4):730–770; Bailey, M.J., More Power to the Pill: The Impact of Contraceptive Freedom on Women’s Life Cycle Labor Supply, QuarterlyJournal of Economics, 2006, 121(1):289–320.

23 Postlethwaite, D., et al., A Comparison of Contraceptive Procurement Pre- and Post-Benefit Change, 76 Contraception 360 (2007).

24 Institute of Medicine, Clinical Preventive Services for Women: Closing the Gaps, Washington, DC: National Academy Press, 2011, p. 19.

July 29, 2013 89 2013–31 I.R.B.

isting preventive services coverage regu-lations as proposed. The final regulationsamend paragraph (a) of the existing regu-lations so that the general requirement toprovide coverage for recommended pre-ventive services without cost sharing issubject to the religious employer exemp-tion and eligible organization accommoda-tions discussed later in this section.

The regulations also finalize proposedamendments to paragraph (a)(1)(iv) of theexisting regulations. As amended, the au-thorization for HRSA to exempt religiousemployers from the contraceptive cover-age requirement and the definition of re-ligious employer are now located in new45 CFR 147.131(a) of the HHS regulationand incorporated by reference in the reg-ulations of the Departments of Labor andthe Treasury.

There are no other changes to the provi-sions of the 2010 interim final regulationsrelated to providing coverage for recom-mended preventive services without costsharing. Accordingly, consistent with thegeneral rules for the provision of cover-age for recommended preventive serviceswithout cost sharing set forth in the 2010interim final regulations, nothing preventsa plan or issuer from using reasonablemedical management techniques to deter-mine the frequency, method, treatment,or setting for an item or service to theextent not specified in a recommendationor guideline and nothing requires a planor issuer that has a network of health careproviders to provide benefits or eliminatecost sharing for items or services that aredelivered out-of-network.25

B. Religious Employer Exemptionand Accommodations for HealthCoverage Established or Maintained orArranged by Eligible Organizations–26CFR 54.9815–2713A, 29 CFR2590.715–2713A, 45 CFR 147.131

These sections of the final regula-tions simplify and clarify the criteria forthe religious employer exemption fromthe contraceptive coverage requirement.These sections also establish accommo-dations with respect to the contraceptivecoverage requirement for group health

plans established or maintained by eligibleorganizations (and group health insur-ance coverage provided in connectionwith such plans), as well as student healthinsurance coverage arranged by eligibleorganizations that are institutions of highereducation.

1. Religious Employer Exemption

Under the 2012 final regulations,HRSA has the authority to issue guide-lines in a manner that exempts grouphealth plans established or maintained byreligious employers (and group health in-surance coverage provided in connectionwith such plans) from any requirementto cover contraceptive services consistentwith the HRSA Guidelines that would oth-erwise apply. A religious employer wasdefined for this purpose as one that: (1)has the inculcation of religious values asits purpose; (2) primarily employs personswho share its religious tenets; (3) primar-ily serves persons who share its religioustenets; and (4) is a nonprofit organiza-tion described in section 6033(a)(1) and6033(a)(3)(A)(i) or (iii) of the Code. Sec-tion 6033(a)(3)(A)(i) and (iii) of the Coderefers to churches, their integrated aux-iliaries, and conventions or associationsof churches, as well as to the exclusivelyreligious activities of any religious order.

The Departments proposed to simplifyand clarify the definition of religious em-ployer by eliminating the first three prongsand clarifying the fourth prong of the defi-nition. Under this proposal, an employerthat is organized and operates as a non-profit entity and is referred to in section6033(a)(3)(A)(i) or (iii) of the Code wouldbe considered a religious employer for pur-poses of the religious employer exemp-tion. These proposed amendments wereintended to eliminate any question as towhether group health plans of houses ofworship that provide educational, charita-ble, or social services to their communitiesqualify for the exemption. Specifically,they were intended to ensure that an oth-erwise exempt plan is not disqualified be-cause the employer’s purposes extend be-yond the inculcation of religious values orbecause the employer hires or serves peo-

ple of different religious faiths. The De-partments also proposed to clarify that, forpurposes of the religious employer exemp-tion, an employer that is organized andoperates as a nonprofit entity is not lim-ited to any particular form of entity un-der state law. The Departments reiteratethat, under this standard, it is not neces-sary to determine the federal tax-exemptstatus of the nonprofit entity in determin-ing whether the religious employer exemp-tion applies.26

The Departments received numerouscomments addressing the definition ofreligious employer. Some commentersstated that the proposed definition of reli-gious employer was too narrow and shouldbe broadened to include all employers,both nonprofit and for-profit, that have areligious objection to providing contracep-tive coverage in their group health plan.Some commenters requested that the def-inition of religious employer be expandedto exempt not only churches and otherhouses of worship, but also religiouslyaffiliated hospitals and other health careorganizations and other religiously affili-ated ministries using the concepts of Codesection 414(e). Other commenters rec-ommended that the requirement to covercontraceptive services be rescinded alto-gether.

Some commenters stated that the ex-emption for religious employers should beeliminated and that religious employersshould instead be subject to the accom-modations for eligible organizations sothat their employees may also receive al-ternative contraceptive coverage withoutcost sharing. Other commenters opposedeliminating the first three prongs of thedefinition of religious employer, statingthat only churches and other houses ofworship that meet the criteria of all of theprongs should be subject to the exemp-tion. Many commenters agreed with theDepartments that the proposed definitionof religious employer would not mate-rially expand the universe of religiousemployers, but others felt that the pro-posed definition would unduly broaden it.

Based on their review of these com-ments, the Departments are finalizingwithout change the definition of religious

25 See 26 CFR 54.9815–2713T(a)(3) and (4); 29 CFR 2590.715–2713(a)(3) and (4); 45 CFR 147.130(a)(3) and (4). Note, however, if a plan or issuer does not have in its network a providerwho can provide the particular service, then the plan or issuer must cover the item or service when performed by an out-of-network provider and not impose cost sharing with respect to theitem or service. See FAQs About Affordable Care Act Implementation (Part XII), Q3 (February 20, 2013), available at: http://www.dol.gov/ebsa/faqs/faq-aca12.html.

26 Similarly, whether a nonprofit entity is a religious employer is determined under this definition without regard to whether the entity files Form 990 with the IRS.

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employer in the proposed regulations. Asindicated in the preamble to the proposedregulations (78 FR 8461), the simplifiedand clarified definition of religious em-ployer does not expand the universe ofreligious employers that qualify for theexemption beyond that which was in-tended in the 2012 final regulations, butonly eliminates any perceived potentialdisincentive for religious employers toprovide educational, charitable, and so-cial services to their communities. TheDepartments believe that the simplifiedand clarified definition of religious em-ployer continues to respect the religiousinterests of houses of worship and theirintegrated auxiliaries in a way that doesnot undermine the governmental interestsfurthered by the contraceptive coveragerequirement. Houses of worship and theirintegrated auxiliaries that object to con-traceptive coverage on religious groundsare more likely than other employers toemploy people of the same faith whoshare the same objection, and who wouldtherefore be less likely than other peopleto use contraceptive services even if suchservices were covered under their plan.

Contemporaneous with the issuanceof these final regulations, HRSA is is-suing amended guidelines implement-ing the simplified and clarified religiousemployer exemption authorized by 45CFR 147.131(a) of these final regula-tions (and incorporated by reference in 26CFR 54.9815–2713(a)(1)(iv) and 29 CFR2590.715–2713(a)(1)(iv)). The amend-ments to the guidelines will become effec-tive beginning August 1, 2013.

2. Accommodations for Health CoverageEstablished or Maintained or Arrangedby Eligible Organizations

In addition to simplifying and clarify-ing the definition of religious employer,these final regulations establish accommo-dations with respect to the contraceptivecoverage requirement for health coverageestablished or maintained or arranged byeligible organizations, as defined in thesefinal regulations. After meeting a self-cer-tification standard, as described in moredetail in this preamble, nonprofit religiousorganizations that qualify for these accom-modations are not required to contract, ar-

range, pay, or refer for contraceptive cov-erage; however, plan participants and ben-eficiaries (or student enrollees and theircovered dependents) will still benefit fromseparate payments for contraceptive ser-vices without cost sharing or other chargein accordance with section 2713 of thePHS Act and the companion provisions ofERISA and the Code. As discussed laterin this setion, the accommodations estab-lished under these final regulations do notrequire the issuance of a separate exceptedbenefits individual health insurance pol-icy covering contraceptive services, as setforth in the proposed regulations, but in-stead require a simpler method of provid-ing direct payments for contraceptive ser-vices.

a. Definition of Eligible Organization

The final regulations retain the defini-tion of eligible organization set forth in theproposed regulations. Accordingly, underthese final regulations, an eligible organi-zation is an organization that: (1) opposesproviding coverage for some or all of thecontraceptive services required to be cov-ered under section 2713 of the PHS Actand the companion provisions of ERISAand the Code on account of religious ob-jections; (2) is organized and operates as anonprofit entity; (3) holds itself out as a re-ligious organization; and (4) self-certifiesthat it satisfies the first three criteria (asdiscussed in more detail later in this sec-tion).

Some commenters requested that thedefinition of eligible organization bebroadened to include nonprofit secularemployers and for-profit employers withreligious objections to contraceptive cov-erage. Other commenters urged that thedefinition not be extended to for-profitemployers, arguing that for-profit employ-ers should not be accommodated becausetheir purposes are commercial, not reli-gious. Additionally, several commentersrecommended clarifying how an eligibleorganization would show that it holds itselfout as a religious organization. Specif-ically, commenters suggested clarifyingthat only organizations that prominentlyand consistently hold themselves out tothe public as religious organizations mayqualify for an accommodation.

The Departments decline to adopt thesesuggestions. The definition of eligible or-ganization in these final regulations is thesame as that in the proposed regulations,and is intended to allow health coverageestablished or maintained or arranged byvarious types of nonprofit religious orga-nizations with religious objections to con-traceptive coverage to qualify for an ac-commodation. Consistent with religiousaccommodations in related areas of fed-eral law, such as the exemption for reli-gious organizations under Title VII of theCivil Rights Act of 1964, the definition ofeligible organization in these final regula-tions does not extend to for-profit organi-zations. The Departments are unaware ofany court granting a religious exemption toa for-profit organization, and decline to ex-pand the definition of eligible organizationto include for-profit organizations.

b. Self-Certification

Each organization seeking to be treatedas an eligible organization under the finalregulations, to avoid contracting, arrang-ing, paying, or referring for contraceptivecoverage, is required to self-certify, priorto the beginning of the first plan yearto which an accommodation is to apply,that it meets the definition of an eligi-ble organization.27 The self-certification(as described in these final regulations)needs to be executed once. A copy of theself-certification needs to be provided toa new health insurance issuer or a newthird party administrator if the eligibleorganization changes issuers or third partyadministrators. Comments addressingthis topic generally approved of the ap-proach proposed by the Departments, butsome commenters suggested that strongerprotections were needed to promote over-sight, enforcement, and transparency andto prevent abuse. For example, some com-menters recommended requiring eligibleorganizations to file their self-certifica-tions with the Departments and makingsuch records available to the public. Othercommenters argued that the act of self-cer-tification would infringe on the FirstAmendment right of free speech.

The final regulations do not require theself-certification to be submitted to any ofthe Departments. An eligible organization

27 Although not required to do so by these final regulations, nothing in these final regulations prevents a religious employer from drafting and executing a self-certification regarding its statusas a religious employer and sharing the self-certification with issuers, plan service providers, plan participants or beneficiaries, or others.

July 29, 2013 91 2013–31 I.R.B.

must simply maintain the self-certification(executed by an authorized representativeof the organization) in its records, in amanner consistent with the record reten-tion requirements under section 107 ofERISA, and make the self-certificationavailable for examination upon request.The Departments believe that the re-quirement to make the self-certificationavailable for examination upon request ap-propriately balances regulators’, issuers’,third party administrators’, and plan par-ticipants and beneficiaries’ (and studentenrollees and their covered dependents’)interest in verifying compliance and eli-gible organizations’ interest in avoidingundue inquiry into their character, mission,or practices. Further, the Departmentsdo not believe that the self-certificationstandard infringes on freedom of speech.

The proposed regulations provided thatthe self-certification would specify thecontraceptive services for which the or-ganization will not establish, maintain,administer, or fund coverage. The finalregulations eliminate this requirement,pursuant to the standard exclusion policydiscussed later in this section. Further, thefinal regulations provide that, if an organ-ization seeks to be treated as an eligibleorganization under the final regulations,an issuer or third party administrator maynot require any documentation from theorganization beyond its self-certificationas to its status as an eligible organization.The form to be used for the self-certifica-tion is being finalized contemporaneouswith the issuance of these final regulationsthrough the process provided for under thePaperwork Reduction Act of 1995.

As discussed previously, the self-certi-fication form is applicable in conjunctionwith the accommodations under these finalregulations (that is, for plan years begin-ning on or after January 1, 2014), after theexpiration of the temporary enforcementsafe harbor. The self-certification standardreferenced in these final regulations (andthe form to be executed by an eligible or-ganization to make such self-certification,which is being issued contemporaneouslywith these final regulations) are differentfrom the standard (and the form) associ-ated with the guidance regarding the ex-tension of the temporary enforcement safeharbor, which is also being issued contem-poraneously with these final regulations.

c. Separate Payments for ContraceptiveServices for Participants and Beneficiariesin Insured Group Health Plans

The proposed regulations provided, inthe case of an insured group health planestablished or maintained by an eligible or-ganization, that the health insurance issuerproviding group coverage in connectionwith the plan be required to assume soleresponsibility, independent of the eligibleorganization and its plan, for providingseparate individual health insurance poli-cies covering contraceptive services forplan participants and beneficiaries with-out cost sharing, premium, fee, or othercharge to plan participants or beneficia-ries or to the eligible organization or itsplan. Under this proposal, an organiza-tion seeking to be treated as an eligibleorganization would need only to meet theself-certification standard. The issuer,in turn, would automatically enroll planparticipants and beneficiaries in separateindividual health insurance policies thatcover contraceptive services (and notifythem of such enrollment) without the im-position of any cost-sharing requirement(such as a copayment, coinsurance, or adeductible), premium, fee, or other chargeon plan participants or beneficiaries or onthe eligible organization or its plan.

Some commenters stated that the De-partments should not provide a tailored ac-commodation for an eligible organizationthat objects to only some types of contra-ceptive services. These commenters saidthat customizing individual contraceptivepolicies for participants and beneficiaries(or students enrollees and their covered de-pendents) in plans of eligible organizationsbased on the differing religious objectionsto contraceptive coverage of each eligibleorganization would create an administra-tive burden for issuers and confuse planparticipants and beneficiaries (or studentenrollees and their covered dependents).Some commenters also noted that requir-ing coordination of benefits might not befeasible, because many states prohibit co-ordination between individual and grouphealth insurance coverage.

In response to these comments, the finalregulations provide that an issuer provid-ing payments for contraceptive servicesin accordance with these final regulationsmay use a standard exclusion from a grouphealth insurance policy that encompasses

all recommended contraceptive servicesand not violate PHS Act section 2713 andthe companion provisions of ERISA andthe Code with respect to the requirementto cover contraceptive services. While is-suers may, at their option, choose to offercustomized exclusions from group healthinsurance policies based on the differingreligious objections to contraceptive cov-erage of each eligible organization (oroffer several different but standardizedexclusions from group health insurancepolicies from which eligible organizationsmay choose), they are not required to doso under these final regulations. Regard-less of whether an issuer uses a standardor customized exclusion from a grouphealth insurance policy, plan participantsand beneficiaries (and student enrolleesand their covered dependents) are assuredthat the issuer will make payments forany recommended contraceptive servicesexcluded from the group health insurancepolicy (or student health insurance cover-age).

Some commenters noted that the pro-posed individual health insurance policiescovering contraceptive services might notbe viewed as enforceable contracts understate contract law because there wouldbe no premium associated with the cov-erage and no ability for an individual todecline coverage. Commenters suggestedthat states would need to develop newregulatory processes for reviewing formsand rates for such policies, and noted thatthe inability to charge a premium for suchpolicies could raise actuarial soundnessand financial reserve concerns. Com-menters also noted that state laws wouldprevent issuers licensed to issue grouphealth insurance policies in one state fromissuing individual health insurance poli-cies to employees of an eligible organiza-tion residing in other states, and expressedconcern about the cost and administrativecomplexity of issuing and administeringindividual contraceptive coverage poli-cies.

These final regulations achieve thesame end by requiring that a health insur-ance issuer providing group health insur-ance coverage in connection with a grouphealth plan established or maintained by aneligible organization assume sole respon-sibility for providing separate paymentsfor contraceptive services directly for planparticipants and beneficiaries, without

2013–31 I.R.B. 92 July 29, 2013

cost sharing, premium, fee, or other chargeto plan participants or beneficiaries or tothe eligible organization or its plan. Therequirement that, for plan participants andbeneficiaries, issuers provide paymentsfor contraceptive services, in lieu of indi-vidual health insurance policies that covercontraceptive services, represents a sim-pler approach and responds to concernsraised by commenters, while still ensuringthat eligible organizations and their plansdo not contract, arrange, pay, or referfor such coverage, and that contraceptivecoverage is expressly excluded from thegroup health insurance coverage.

Under these final regulations, as underthe proposed regulations, the eligible or-ganization need only meet the self-certifi-cation standard and provide to the issuera copy of its self-certification. The issuerthat receives the copy of the self-certifi-cation from the eligible organization mustexpressly exclude contraceptive coverage-either all contraceptive coverage or cov-erage of specific contraceptive services ifthe issuer chooses to customize the exclu-sion-from the group health insurance cov-erage of the eligible organization. The is-suer must also notify plan participants andbeneficiaries, contemporaneous with (tothe extent possible) but separate from anyapplication materials distributed in con-nection with enrollment (or re-enrollment)in group health coverage that is effectivebeginning on the first day of each appli-cable plan year, that the issuer providespayments for contraceptive services at nocost separate from the group health planfor so long as the participant or benefi-ciary remains enrolled in the plan, as dis-cussed later in this section. Unlike un-der the proposed regulations, the issuer isnot required to issue to plan participantsand beneficiaries individual health insur-ance policies covering contraceptive ser-vices, and, thus, there is no need to con-sider such coverage excepted benefits, asproposed. Instead, under these final reg-ulations, the issuer must, as a federal reg-ulatory requirement, provide payments forcontraceptive services for plan participantsand beneficiaries, separate from the grouphealth plan, without the imposition of cost

sharing, premium, fee, or other charge onplan participants or beneficiaries or on theeligible organization or its plan. Under thissimplified approach, issuers will not in-cur the associated administrative costs ofissuing individual contraceptive coveragepolicies.

This simpler approach to the accom-modation for insured coverage does nottrigger certain aspects of state insurancelaw. As the payments at issue derive solelyfrom a federal regulatory requirement,not a health insurance policy, they do notimplicate issues such as issuer licensingand product approval requirements understate law, and they minimize cost and ad-ministrative complexity for issuers. At thesame time, because the payments for con-traceptive services are not a group healthplan benefit under this approach, this pol-icy ensures that eligible organizations andtheir plans do not contract, arrange, pay,or refer for contraceptive coverage, andthat such coverage is expressly excludedfrom their group health insurance policies.This approach also minimizes barriers inaccess to care because plan participantsand beneficiaries (and their health careproviders) do not have to have two sep-arate health insurance policies (that is,the group health insurance policy and theindividual contraceptive coverage pol-icy). Furthermore, Small Business HealthInsurance Options Programs (SHOPs)(the small group market Exchanges) donot need to make operational changes asa result of the accommodation. Smallemployers that are eligible organizationspurchasing coverage through a SHOP cansimply provide a copy of their self-certi-fication to the issuer (rather than provideit to the SHOP) to ensure that their smallgroup market policy is provided in a man-ner consistent with these final regulations.

Although these payments for contra-ceptive services are not benefits under ahealth insurance policy, to fulfill an is-suer’s responsibilities under section 2713of the PHS Act and the companion pro-visions of ERISA and the Code and con-sistent with the proposed regulations, anissuer must make them available in a waythat meets minimum standards for con-

sumer protection, which would ordinarilyaccompany coverage of recommendedpreventive health services without costsharing under section 2713 of the PHS Actand the companion provisions of ERISAand the Code. Thus, issuers, in order tosatisfy their regulatory obligations underthese final regulations, must make thesepayments for contraceptive services in amanner consistent with the requirementsunder the following provisions of thePHS Act and the companion provisionsof ERISA and the Code (and their imple-menting regulations): PHS Act sections2706 (non-discrimination in health care),2709 (coverage for individuals participat-ing in approved clinical trials), 2711 (nolifetime or annual limits), 2713 (cover-age of preventive health services), 2719(appeals process), and 2719A (patientprotections), as incorporated by referenceinto ERISA section 715 and Code section9815.28 Consistent with these standardsand as described in the 2010 interim finalregulations, an issuer may apply reason-able medical management techniques andmay require that contraceptive servicesbe obtained in-network (if an issuer hasa network of providers) in order for planparticipants and beneficiaries to obtainsuch services without cost sharing.29

Issuers are prohibited from chargingany premium, fee, or other charge to el-igible organizations or their plans, or toplan participants or beneficiaries, for mak-ing payments for contraceptive services,and must segregate the premium revenuecollected from eligible organizations fromthe monies they use to make such pay-ments. In making such payments, theissuer must ensure that it does not use anypremiums collected from eligible organi-zations. Issuers have flexibility in howto structure these payments, provided thatthe payments in no way involve the eligi-ble organization, and provided that issuersare able to account for this segregation offunds in accordance with applicable, gen-erally accepted accounting and auditingstandards.

The Departments stated in the pream-ble of the proposed regulations that issuerswould find that providing contraceptive

28 With respect to the accommodation for self-insured coverage of eligible organizations under these final regulations, a comparable requirement to provide separate payments for contraceptiveservices consistent with these consumer protections is not explicitly placed on the third party administrator. This is because, as the plan administrator for contraceptive coverage, the thirdparty administrator is already required to comply with these consumer protections, as well as all other provisions of ERISA that are applicable to group health plans, including ERISA sections104 and 503, and the requirements of Part 7 of ERISA.

29 See 26 CFR 54.9815–2713T(a)(3) and (4); 29 CFR 2590.715–2713(a)(3) and (4); 45 CFR 147.130(a)(3) and (4).

July 29, 2013 93 2013–31 I.R.B.

coverage is at least cost neutral becausethey would be insuring the same set ofindividuals under both the group healthinsurance policies and the separate in-dividual contraceptive coverage policiesand, as a result, would experience lowercosts from improvements in women’shealth, healthier timing and spacing ofpregnancies, and fewer unplanned preg-nancies. The Departments continue tobelieve, and have evidence to support, that,with respect to the accommodation forinsured coverage established under thesefinal regulations, providing payments forcontraceptive services is cost neutral forissuers. Several studies have estimatedthat the costs of providing contraceptivecoverage are balanced by cost savingsfrom lower pregnancy-related costs andfrom improvements in women’s health.30,31 The Departments are unaware of anystudies to the contrary.32

Some commenters raised specific pre-mium rating and accounting issues relatedto the proposed regulations’ approach tothe cost neutrality of issuers providingcontraceptive coverage. These com-menters generally asserted that the costsavings due to lower pregnancy-relatedcosts and improvements in women’s healthwould flow to employers through reducedpremiums, thereby leaving issuers uncom-pensated for the cost of providing contra-ceptive coverage. Further, commentersstated that, in the case of a group healthinsurance policy in the small group mar-ket, the small employer’s reduced claimsexperience attributable to contraceptivecoverage (not including the issuer’s directcosts of contraceptive coverage) wouldbe spread across the issuer’s single riskpool for the entire small group market ina state and result in a lower index ratefor pricing all of the issuer’s small groupmarket products. Thus, according to these

commenters, in both the large and smallgroup markets, issuers would not reap thecost savings attributable to contraceptivecoverage, and would need to fund the costsof a free-standing contraceptive coveragepolicy from some other source.

One commenter suggested that it wouldbe possible to view the provision of contra-ceptive coverage as cost neutral if an issuerwere to set the premium otherwise chargedto an eligible organization as though planparticipants and beneficiaries did not haveseparate contraceptive coverage. Othercommenters argued that the rationale forproviding Federally-facilitated Exchange(FFE) user fee adjustments in connectionwith the accommodation for self-insuredgroup health plans of eligible organiza-tions was equally applicable in the contextof insured group health plans of eligible or-ganizations and recommended that issuersbe permitted to charge a premium or oth-erwise be compensated for providing con-traceptive coverage.

In response to these comments, the De-partments continue to believe that issuershave various options for achieving costneutrality, notwithstanding that they mustmake payments for contraceptive serviceswithout cost sharing, premium, fee, orother charge to the eligible organization,the group health plan, or plan participantsor beneficiaries.

Issuers of large group insured productshave an option by which they can ensurethat they accrue the cost savings fromreduced pregnancy-related expenses andother health care costs. For large groupmarket products, issuers base premiums onan employer’s prior year claims cost (thatis, experience rating) and other factors.33

Some commenters asserted that this ratingpractice means that any cost savings fromfewer pregnancies and childbirths andimprovements in women’s health will be

passed to the employer in the large groupinsured market. Given that there appearsto be no legal requirement that issuersuse this particular rating practice, and thatthis practice often entails adding costs topremiums that are not based solely onthe experience of the employer’s group,34

issuers reasonably could set the premiumfor an eligible organization’s large grouppolicy as if no payments for contraceptiveservices had been provided to plan partic-ipants and beneficiaries — reflecting theactual terms of the group policy, which ex-pressly excludes contraceptive coverage.This approach would be consistent withpricing methodologies currently used inthe health insurance industry.

Another option is to treat the cost ofpayments for contraceptive services forwomen enrolled in insured group healthplans established or maintained by eligibleorganizations as an administrative costthat is spread across the issuer’s entirerisk pool, excluding plans established ormaintained by eligible organizations giventhat issuers are prohibited from charg-ing any premium, fee, or other chargeto eligible organizations or their plansfor providing payments for contraceptiveservices. In the small group market, is-suers are required beginning in 2014 totreat all of their non-grandfathered busi-ness within a state as a single risk pool,and administrative costs may be spreadevenly across all plans in the single riskpool (although issuers are permitted toapply them on a plan basis). In the largegroup market, while there is no single riskpool requirement, issuers generally spreadadministrative costs across their entirebook of business.35 In 2011, health insur-ance issuers earned approximately $290billion in premiums in the insured small

30 Bertko, J., Glied, S., et al. The Cost of Covering Contraceptives Through Health Insurance (February 9, 2012), http://aspe.hhs.gov/health/reports/2012/contraceptives/ib.shtml; Washing-ton Business Group on Health, Promoting Healthy Pregnancies: Counseling and Contraception as the First Step, Report of a Consultation with Business and Health Leader (September 20,2000), http://www.businessgrouphealth.org/pdfs/healthypregnancy.pdf; Campbell, K.P., Investing in Maternal and Child Health: An Employer’s Toolkit, National Business Group on Healthhttp://www.businessgrouphealth.org/healthtopics/maternalchild/investing/docs/mch_toolkit.pdf; Trussell, J., et al. The Economic Value of Contraception: A Comparison of 15 Methods, Amer-ican Journal Public Health, 1995; 85(4):494–503, Revenues of H.R. 3162, the Children’s Health and Medicare Protection Act, for the Rules Committee (August 1, 2007) http://www.cbo.gov/ft-pdocs/85xx/doc8519/HR3162.pdf.

31 The Departments believe that these same cost savings found by issuers of group health insurance would also be found by issuers of student health insurance coverage.

32 One commenter cited two studies disputing the cost effectiveness of preventive health services, but these studies are not specific to contraceptive services. Further, these studies find thatpreventive care is not cost effective when a large population receives the preventive service but only a small fraction of that population would have developed the condition being prevented,a circumstance not presented here. See Cohen, J., et al., New England Journal of Medicine. 2008, 358:661–663 (February 14, 2008) http://www.nejm.org/toc/nejm/358/7; CBO Letter toCongressman Nathan Deal, (August 7, 2009). http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/104xx/doc10492/08–07-prevention.pdf.

33 http://www.nahu.org/consumer/GroupInsurance.cfm.

34 http://www.actuary.org/files/Draft_Large_Group_Medical_Business_Practice_Note_Jan_2013.pdf.

35 Bluhm, W., ed., Group Insurance, 5th Ed. 2007), 459–460.

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and large group markets.36 If the cost ofproviding payments for contraceptive ser-vices for participants and beneficiaries ininsured group health plans established ormaintained by eligible organizations weretreated as an administrative cost spreadacross an issuer’s entire book of business(excluding plans established or maintainedby eligible organizations), the cost of pro-viding such payments would result in animperceptible increase in administrativeload.37 These changes in premiums wouldbe negligible and effectively cost neutralto issuers, even before considering anyreductions in claims costs that accrue tothe issuer.

Under either option, after meeting theself-certification standard, the eligible or-ganization would not contract, arrange,pay, or refer for contraceptive coverage.

HHS intends to clarify in guidance thatan issuer of group health insurance cov-erage that makes payments for contracep-tive services under these final regulationsmay treat those payments as an adjustmentto claims costs for purposes of medicalloss ratio and risk corridor program cal-culations.38 This adjustment compensatesfor any increase in incurred claims associ-ated with making payments for contracep-tive services.

Several commenters expressed con-cern that participants and beneficiariesin plans of eligible organizations wouldbe automatically enrolled in individualcontraceptive coverage policies and rec-ommended providing an opt-out for planparticipants and beneficiaries who objectto contraceptive coverage on religiousgrounds. Other commenters stated thatallowing participants and beneficiaries toopt out of such contraceptive coveragewould create an administrative burdenon issuers and privacy concerns for indi-viduals because the issuers would knowwhich individuals opted in or opted outof such coverage. The simplified ap-proach described in these final regulationseliminates this issue altogether, becauseissuers are not required to issue individualcontraceptive coverage policies at all.39

Rather, they are required only to provide

payments for contraceptive services forthose plan participants and beneficiarieswho opt to use such services. Nothing inthese final regulations compels any planparticipant or beneficiary to use such ser-vices, and nothing causes participants orbeneficiaries to be automatically enrolledin contraceptive coverage; therefore, theseconcerns are addressed without the needfor an opt-out mechanism. Moreover,nothing in these final regulations precludesemployers or others from expressing anyopposition to the use of contraceptives orrequires health care providers to prescribeor provide contraceptives, if doing so isagainst their religious beliefs.

The Departments explained in the pre-amble of the proposed regulations that ahealth insurance issuer providing grouphealth insurance coverage in connectionwith a group health plan established ormaintained by an eligible organizationwould be held harmless if the issuer reliedin good faith on a representation by theorganization as to its eligibility for theaccommodation and such representationwas later determined to be incorrect. TheDepartments also explained that an eli-gible organization and its plan would beheld harmless if the issuer were to failto comply with the requirement to pro-vide separate payments for contraceptiveservices for plan participants and bene-ficiaries at no cost. Some commentersrequested that the Departments codify thispolicy in regulation text. Accordingly,this policy is now codified in paragraph(e) of 26 CFR 54.9815–2713A, 29 CFR2590.715–2713A, and 45 CFR 147.131 ofthese final regulations.

To summarize, the following are thekey elements of the accommodation that isbeing made for eligible organizations withinsured group health plans:

• An organization seeking to be treatedas an eligible organization needs onlyto self-certify that it is an eligible or-ganization, provide the issuer with acopy of the self-certification, and sat-isfy the recordkeeping and inspectionrequirements of the self-certificationstandard.

• The issuer that receives a self-certifica-tion must then expressly exclude con-traceptive coverage from the eligibleorganization’s group health insurancecoverage.

• The issuer must, contemporaneouswith (to the extent possible), but sep-arate from, any application materialsdistributed in connection with en-rollment (or re-enrollment) in grouphealth coverage that is effective begin-ning on the first day of each applicableplan year, notify plan participants andbeneficiaries that the issuer providesseparate payments for contraceptiveservices at no cost for so long as theparticipant or beneficiary remains en-rolled in the plan.

• The issuer must segregate premiumrevenue collected from the eligibleorganization from the monies used tomake payments for contraceptive ser-vices. When it makes payments forcontraceptive services used by planparticipants and beneficiaries, the is-suer must do so without imposing anypremium, fee, or other charge, or anyportion thereof, directly or indirectly,on the eligible organization, its grouphealth plan, or its plan participants orbeneficiaries. In making such pay-ments, the issuer must ensure that itdoes not use any premiums collectedfrom eligible organizations. Issuershave flexibility in how to structurethese payments, but must be able toaccount for this segregation of funds,subject to applicable, generally ac-cepted accounting and auditing stan-dards. Thus, an eligible organizationneed not contract, arrange, pay or referfor contraceptive coverage.

• Plan participants and beneficiariesmay refuse to use contraceptive ser-vices.

• An eligible organization and its grouphealth plan are considered to com-ply with the contraceptive coveragerequirement even if the issuer failsto comply with the requirement toprovide separate payments for contra-

36 2011 MLR-A data, submitted to CMS in July 2012.

37 Office of Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, “Cost-Neutrality of Contraceptive Coverage.”

38 See 45 CFR Part 158 for standards related to the medical loss ratio and 45 CFR Part 153 Subpart F for standards related to the risk corridor program.

39 The same is true with respect to the accommodation for self-insured coverage of eligible organizations under these final regulations, given that third party administrators similarly are notrequired to arrange for individual contraceptive coverage policies at all.

July 29, 2013 95 2013–31 I.R.B.

ceptive services for plan participantsand beneficiaries at no cost.

d. Separate Payments for ContraceptiveServices for Participants and Beneficiariesin Self-Insured Group Health Plans

Comments varied as to which of thethree proposed approaches to providingseparate contraceptive coverage withoutcost sharing for participants and bene-ficiaries in self-insured plans of eligibleorganizations should be finalized. Somecommenters suggested that none of theproposed approaches would enable ob-jecting employers to separate themselvescompletely from the administration of con-traceptive coverage. These commentersrequested an unqualified exemption fromthe contraceptive coverage requirementfor such employers. Other commentersstated that none of the proposed ap-proaches would sufficiently ensure thatparticipants and beneficiaries in self-in-sured plans of eligible organizations wouldreceive separate contraceptive coveragewithout cost sharing. These commentersrequested that the final regulations requirethat objecting employers retain legal re-sponsibility for any failure on the partof issuers or third party administrators toprovide such coverage.

A number of commenters expressedconcern about the responsibilities thatone or more of the proposed approacheswould impose on third party administra-tors. Some of these commenters suggestedthat the proposed requirement that thirdparty administrators arrange for separatecontraceptive-only coverage through anissuer would convert third party admin-istrators into health insurance brokers.Others suggested that third party admin-istrators would not be willing to assumethe responsibility of arranging for separatecontraceptive-only coverage. These com-menters also suggested that, even if a thirdparty administrator were willing to assumesuch responsibility, it would pass alongthe resultant increase in its administrativecosts to the employer.

Other commenters expressed concernabout an approach that would require thirdparty administrators to become plan ad-ministrators and fiduciaries under section3(16) of ERISA for the sole purpose ofarranging contraceptive coverage. Thesecommenters suggested that requiring thirdparty administrators to serve as fiduciarieswould increase their exposure to legal li-ability and also create conflicts of inter-est with their plan sponsor clients giventhat many agreements between third partyadministrators and plan sponsors prohibitthird party administrators from serving asfiduciaries.

A number of commenters questionedthe Department of Labor’s legal author-ity to designate a third party administra-tor as the plan administrator for contra-ceptive coverage by virtue of the eligibleorganization providing a copy of its self-certification to the third party administra-tor. These commenters suggested that theself-certification of the eligibility of the or-ganization for the accommodation wouldbe insufficient to act as a designation un-der ERISA section 3(16)(A)(i), and ques-tioned whether the self-certification couldbe defined as an instrument under whichthe plan is operated.

After reviewing the comments on thethree proposed approaches, the Depart-ments are finalizing the third approachunder which the third party administratorbecomes an ERISA section 3(16) plan ad-ministrator and claims administrator solelyfor the purpose of providing paymentsfor contraceptive services for participantsand beneficiaries in a self-insured planof an eligible organization at no cost toplan participants or beneficiaries or to theeligible organization. The Departmentshave determined that the ERISA section3(16) approach most effectively enableseligible organizations to avoid contract-ing, arranging, paying, or referring forcontraceptive coverage after meeting theself-certification standard, while also cre-ating the fewest barriers to or delays inplan participants and beneficiaries obtain-ing contraceptive services without costsharing.

Under this approach, as set forth inthese final regulations, with respect tothe contraceptive coverage requirement,an eligible organization is considered tocomply with section 2713 of the PHS Actand the companion provisions in ERISAand the Code if it provides to all thirdparty administrators with which it or itsplan has contracted a copy of its self-certi-fication, consistent with the requirementsof these final regulations.40 The self-cer-tification must: (1) state that the eligibleorganization will not act as the plan ad-ministrator or claims administrator withrespect to contraceptive services or con-tribute to the funding of contraceptiveservices; and (2) cite 29 CFR 2510.3–16and 26 CFR 54.9815–2713A and 29 CFR2590.715–2713A, which explain the obli-gations of the third party administrator.Upon receipt of the copy of the self-certi-fication, the third party administrator maydecide not to enter into, or remain in, acontractual relationship with the eligibleorganization to provide administrative ser-vices for the plan.

As relevant here, a plan administratoris defined in ERISA section 3(16)(A)(i) as“the person specifically so designated bythe terms of the instrument under whichthe plan is operated.” As a document no-tifying the third party administrator(s) thatthe eligible organization will not provide,fund, or administer payments for contra-ceptive services, the self-certification isone of the instruments under which the em-ployer’s plan is operated under ERISA sec-tion 3(16)(A)(i). The self-certification willafford the third party administrator noticeof obligations set forth in these final reg-ulations, and will be treated as a designa-tion of the third party administrator(s) asplan administrator and claims administra-tor for contraceptive benefits pursuant tosection 3(16) of ERISA. Additional condi-tions the eligible organization must meet inorder to be considered to comply with PHSAct section 2713 and the companion provi-sions in ERISA and the Code include pro-hibitions on: (1) directly or indirectly in-terfering with a third party administrator’sefforts to provide or arrange separate pay-

40 Third party administrators are hired by plan sponsors to process claims and administer other administrative aspects of employee benefit plans. In some cases, a plan hires different thirdparty administrator to administer claims for different classifications of benefits. (For example, one plan may contract with a pharmacy benefit manager (PBM) to handle claims administrationfor prescription drugs and another third party administrator to handle claims for inpatient and outpatient medical/surgical benefits.) To the extent the plan hires more than one third partyadministrator, each third party administrator would become the section 3(16) plan administrator with respect to the types of claims it normally processes (that is, the PBM would continueto handle claims for prescription drugs and the other third party administrator would continue to handle claims for inpatient and outpatient medical/surgical benefits); each would do so inaccordance with section 2713 of the PHS Act and the companion provisions of ERISA and the Code (even if plan terms might otherwise provide differently) as plan administration that maybe funded in accordance with 45 CFR 156.50(d).

2013–31 I.R.B. 96 July 29, 2013

ments for contraceptive services for partic-ipants or beneficiaries in the plan and (2)directly or indirectly seeking to influence athird party administrator’s decision to pro-vide or arrange such payments.41

A third party administrator that receivesa copy of the self-certification and thatagrees to enter into or remain in a con-tractual relationship with the eligible or-ganization to provide administrative ser-vices for the plan must provide or arrangeseparate payments for contraceptive ser-vices for participants and beneficiaries inthe plan without cost sharing, premium,fee, or other charge to plan participants orbeneficiaries, or to the eligible organiza-tion or its plan. The third party administra-tor can provide such payments on its own,or it can arrange for an issuer or other en-tity to provide such payments. In eithercase, like the payments for contraceptiveservices under the accommodation for in-sured plans of eligible organizations dis-cussed previously, the payments are nothealth insurance policies. Moreover, in ei-ther case, the third party administrator canmake arrangements with an issuer offeringcoverage through an FFE to obtain reim-bursement for its costs (including an al-lowance for administrative costs and mar-gin). As discussed later in this section, theissuer offering coverage through the FFEcan receive an adjustment to the FFE userfee, and the issuer is required to pass on aportion of that adjustment to the third partyadministrator to account for the costs ofproviding or arranging payments for con-traceptive services. A third party admin-istrator that provides or arranges the pay-ments is entitled to retain reimbursementfor its costs for the period during whichit reasonably and in good faith relied on arepresentation by the eligible organizationthat it was eligible for the accommodation.This is so even if the organization’s repre-sentation was later determined to be incor-rect.

The third party administrator must pro-vide plan participants and beneficiarieswith notice of the availability of the sep-arate payments for contraceptive servicescontemporaneous with (to the extent pos-sible), but separate from, any applicationmaterials distributed in connection withenrollment (or re-enrollment) in coveragethat is effective beginning on the first day

of each applicable plan year (as discussedin more detail later in this section). Thirdparty administrators must also take on thestatutory responsibilities of a plan admin-istrator under ERISA, including setting upand operating a claims procedure underERISA section 503, providing plan partic-ipants and beneficiaries with disclosuresrequired under ERISA section 104, andcomplying with the requirements of Part7 of ERISA. The Departments note thatthere is no obligation for a third partyadministrator to enter into or remain in acontract with the eligible organization if itobjects to any of these responsibilities.

The Departments believe that this ap-proach most successfully addresses boththe desire of some commenters for planparticipants and beneficiaries to receivecontraceptive coverage without cost shar-ing, without delays or other barriers, andthe desire of other commenters for object-ing employers to be separated from con-tracting, arranging, paying, or referring forcontraceptive coverage. The third partyadministrator serving as the plan admin-istrator for contraceptive benefits ensuresthat there is a party with legal authorityto arrange for payments for contraceptiveservices and administer claims in accor-dance with ERISA’s protections for planparticipants and beneficiaries. At the sametime, the approach enables objecting em-ployers, after providing third party admin-istrators with a copy of the self-certifi-cation (as described previously), to sepa-rate themselves from contracting, arrang-ing, paying, or referring for contracep-tive coverage. Additionally, by substi-tuting payments for contraceptive servicesfor health insurance policies, this approachavoids the complications that would bepresented by requiring the creation of acontraceptive-only health insurance prod-uct, and allows third party administratorsto avoid potentially becoming health in-surance brokers. Accordingly, while theDepartments appreciate commenters’ con-cerns about the responsibilities that thirdparty administrators must assume underthis accommodation, they believe that thisapproach best ensures that plan partici-pants and beneficiaries receive contracep-tive coverage without cost sharing, andwithout the objecting employers payingfor or administering such coverage.

Moreover, none of the commentschanged the Department of Labor’s viewthat it has legal authority to require thethird party administrator to become theplan administrator under ERISA section3(16) for the sole purpose of providingpayments for contraceptive services ifthe third party administrator agrees toenter into or remain in a contractual re-lationship with the eligible organizationto provide administrative services forthe plan. The Department of Labor hasbroad rulemaking authority under Title Iof ERISA, which includes the ability tointerpret the definition of plan adminis-trator under ERISA section 3(16)(A)(i).The Department of Labor’s interpretationof the self-certification described hereinas one of the “instruments under whichthe plan is operated” is consistent withthe plain meaning of the term because itidentifies the limited set of plan benefits(that is, contraceptive coverage) that theemployer refuses to provide and that thethird party administrator must thereforeprovide or arrange for an issuer or anotherentity to provide.

e. Self-Insured Group Health PlansWithout Third Party Administrators

Although some commenters addressedthe solicitation for comments on whetherand how to provide an accommodationfor self-insured group health plans estab-lished or maintained by eligible organi-zations that do not use the services of athird party administrator, no comments in-dicated that such plans actually exist. Ac-cordingly, the Departments continue to be-lieve that there are no self-insured grouphealth plans in this circumstance. How-ever, to allow for the possibility that sucha self-insured group health plan does ex-ist, the Departments will provide any suchplan with a safe harbor from enforcementof the contraceptive coverage requirement,contingent on: (1) the plan submitting toHHS information (as described later in thissection) showing that it does not use theservices of a third party administrator; and(2) if HHS agrees that the plan does notuse the services of a third party admin-istrator, the plan providing notice to planparticipants and beneficiaries in any ap-plication materials distributed in connec-

41 Nothing in these final regulations prohibits an eligible organization from expressing its opposition to the use of contraceptives.

July 29, 2013 97 2013–31 I.R.B.

tion with enrollment (or re-enrollment) incoverage that is effective beginning on thefirst day of each applicable plan year, indi-cating that it does not provide benefits forcontraceptive services.

Such plans must submit to HHS at least60 days prior to the first day of the firstapplicable plan year all of the followinginformation:

• Identifying information for the plan,the eligible organization that acts as theplan sponsor, and an authorized rep-resentative of the organization, alongwith the authorized representative’stelephone number and e-mail address.

• A listing of the five most highly com-pensated non-clinical plan serviceproviders (other than employees of theplan or plan sponsor), including con-tact information for each plan serviceprovider, a concise description of thenature of the services provided by eachservice provider to the plan, and theannual amount of compensation paidto each plan service provider (exam-ples of plan services include claimsprocessing and adjudication, appealsmanagement, provider network devel-opment, and pharmacy benefit man-agement).

• An attestation (executed by an autho-rized representative of the organiza-tion) that the plan is established ormaintained by an eligible organization,and is operated in compliance with allapplicable requirements of part A oftitle XXVII of the PHS Act, as incor-porated into ERISA and the Code.

Such information must besubmitted electronically tomarketreform@cms.hhs.gov.

If any such submission demonstratesthat a self-insured group health plan estab-lished or maintained by an eligible organ-ization does not use the services of a thirdparty administrator, the Departments willprovide a safe harbor from enforcementof the contraceptive coverage require-ment while an additional accommodationis considered. If the Departments dis-cover through any such submission that aself-insured group health plan establishedor maintained by an eligible organizationdoes in fact use the services of a third

party administrator, the eligible organi-zation must either follow the proceduresdescribed in these final regulations toobtain an accommodation or otherwisecomply with the contraceptive coveragerequirement.

f. Notice of Availability of SeparatePayments for Contraceptive Services

Consistent with the proposed regula-tions, the final regulations direct that, forany plan year to which an accommoda-tion is to apply, a health insurance issuerproviding separate payments for contra-ceptive services pursuant to the accom-modation, or a third party administratorarranging or providing such payments (orits agent), must provide timely writtennotice about this fact to plan participantsand beneficiaries in insured or self-insuredgroup health plans (or student enrolleesand their covered dependents in studenthealth insurance coverage) of eligible or-ganizations.

Under the proposed regulations, thisnotice would be provided by the issuercontemporaneous with (to the extent pos-sible) but separate from any applicationmaterials distributed in connection withenrollment (or re-enrollment) in healthcoverage established or maintained orarranged by the eligible organization.Commenters noted that employers, not is-suers, typically distribute plan enrollment(or re-enrollment) materials to employeesand that providing this notice contempo-raneous with plan enrollment (or re-en-rollment) materials would not be possiblebecause issuers typically do not receiveenrollee information prior to enrollment.

Consistent with the simplified approachdescribed previously, these final regula-tions provide that this notice must be pro-vided by either the issuer providing sep-arate payments for contraceptive servicesunder the accommodation, or a third partyadministrator arranging or providing suchpayments (or its agent). The notice mustbe provided contemporaneous with (to theextent possible), but separate from, any ap-plication materials distributed in connec-tion with enrollment (or re-enrollment) incoverage that is effective beginning on thefirst day of each plan year to which theaccommodation applies, and it must indi-

cate that the eligible organization does notfund or administer contraceptive benefits,but that the issuer or third party adminis-trator will provide separate payments forcontraceptive services at no cost. The De-partments believe that the direction that thenotice be provided contemporaneous withapplication materials “to the extent possi-ble” provides sufficient flexibility to ad-dress the concerns raised by commentersabout the timing of the notice.

The final regulations continue to pro-vide model language that may be used tosatisfy this notice requirement. Substan-tially similar language may also be used tosatisfy the notice requirement. Some com-menters suggested additions or modifica-tions to the model language. Other com-menters stated that the Departments shouldnot allow the use of substantially similarlanguage. Additionally, some commentersrecommended the Departments set stan-dards to ensure that the notice is accessi-ble to persons with limited English profi-ciency and persons with disabilities. TheDepartments believe that the model lan-guage in the final regulations, along withexisting guidance concerning civil rightsobligations, provide sufficient notice. TheDepartments also believe that the flexi-bility afforded by the final regulations touse substantially similar language is gen-erally consistent with other federal noticerequirements.

The notice must include contact in-formation for the issuer or third partyadministrator in the event plan participantsand beneficiaries (or student enrollees andtheir covered dependents) have questionsor complaints. The Departments notethat issuers and third party administratorsmay find it useful to provide additionalwritten information concerning how toobtain reimbursement for contraceptiveservices, appeals procedures, providerand pharmacy networks, prescription drugformularies, medical management proce-dures, and similar issues.42

g. Student Health Insurance Coverage

Consistent with the HHS proposed reg-ulation, paragraph (f) of the HHS final reg-ulation provides that an accommodationapplies to student health insurance cover-age arranged by an eligible organization

42 Furthermore, as discussed previously, with respect to self-insured coverage, third party administrators that are plan administrators must operate in accordance with Part 1 of ERISA, includingERISA section 104, which generally requires certain disclosures regarding plan benefits and limitations.

2013–31 I.R.B. 98 July 29, 2013

that is an institution of higher education ina manner comparable to that in which itapplies to group health insurance coverageprovided in connection with a group healthplan established or maintained by an eligi-ble organization that is an employer. Forthis purpose, any reference to plan partic-ipants and beneficiaries is a reference tostudent enrollees and their covered depen-dents.

Several commenters supported treat-ing student health insurance like em-ployer-sponsored group health insurancefor purposes of these final regulations.Other commenters suggested that an ac-commodation should not extend to insti-tutions of higher education that arrangestudent health insurance coverage, be-cause student health insurance coverageis considered a type of individual ratherthan group health insurance coverageunder federal law.43 One commenter rec-ommended that issuers offering coveragethrough the Exchanges be required to pro-vide separate contraceptive coverage atno cost to students enrolled in nonprofitreligious institutions of higher educationwith religious objections to contraceptivecoverage (and their dependents).

Student health insurance coverageis administered differently than otherindividual health insurance coverage.Whereas most individual health insur-ance coverage is issued under a contractbetween an individual policyholder anda health insurance issuer, student healthinsurance coverage is available to studentenrollees and their covered dependentspursuant to a written agreement betweenan institution of higher education and ahealth insurance issuer. Some religiouslyaffiliated colleges and universities objectto signing a written agreement or provid-ing financial assistance for student healthinsurance coverage that provides benefitsfor contraceptive services. For these rea-sons, HHS believes that it is appropriateto take into account religious objectionsto contraceptive coverage of eligible or-ganizations that are institutions of highereducation and is finalizing the provisionapplicable to student health insurance cov-erage as proposed. HHS notes that it doesnot have the authority to require issuers of-

fering coverage through the Exchanges toprovide separate contraceptive coverage atno cost to students (and their dependents).

The Departments note that any accom-modation specific to a nonprofit religiousinstitution of higher education is intendedto accommodate the nonprofit religiousinstitution of higher education only withrespect to its arrangement of student healthinsurance coverage for its students andtheir covered dependents. With respectto the establishment or maintenance ofa group health plan by a nonprofit reli-gious institution of higher education forits employees and their dependents, thenonprofit religious institution of highereducation is intended to be accommodatedin the same manner as that in which anyother eligible organization that has estab-lished or maintained a group health planfor its employees and their dependents isto be accommodated.

C. Adjustments of Federally-FacilitatedExchange User Fees–45 CFR 156.50(d)and 156.80(d)

These sections of the final HHS reg-ulation set forth processes and standardsto fund the payments for the contraceptiveservices that are provided for participantsand beneficiaries in self-insured plans ofeligible organizations under the accommo-dation described previously, at no cost toplan participants or beneficiaries, eligibleorganizations, third party administrators,or issuers, through an adjustment in theFFE user fee payable by an issuer partic-ipating in an FFE.44

In response to the proposed regulations,some commenters questioned HHS’s au-thority to establish the FFE user fee ad-justment. Commenters also recommendedthat HHS ensure that the adjustments touser fee collections not undermine FFE op-erations. Commenters stated that the FFEuser fee should not be increased to off-set the user fee adjustment. Commentersfurther stated that the FFE user fee ad-justment must be adequate to provide fi-nancial incentives to ensure that womenin self-insured plans of eligible organiza-tions receive contraceptive coverage at nocost. Commenters suggested that the FFE

user fee adjustment may not be an ade-quate long-term funding source as morestates establish Exchanges over time, re-ducing the number of FFEs and thereforeavailable FFE user fee revenue.

Office of Management and Budget(OMB) Circular No. A–25R establishesfederal policy regarding these types of userfees. Consistent with that Circular, therevised FFE user fee calculation (whichwill result in an adjustment of the FFEuser fee) will facilitate the accommodationof self-insured plans established or main-tained by eligible organizations by ensur-ing that plan participants and beneficiariesare provided contraceptive coverage at nocost so that eligible organizations are notrequired to administer or fund such cover-age. By financing the accommodation forself-insured plans of eligible organizationsthrough the FFE user fee adjustment, par-ticipants and beneficiaries in such planscan retain their existing coverage, whilegaining access to separate payments forcontraceptive services at no cost. HHSdoes not believe that the adjustment toFFE user fee collections, as contemplatedunder this final regulation, will materiallyundermine FFE operations.

HHS notes that it is not raising the FFEuser fee finalized in the 2014 Payment No-tice to offset the FFE user fee adjustments,and estimates that payments for contracep-tive services will represent only a smallportion of total FFE user fees.

The FFE user fee adjustments sup-port many of the goals of the AffordableCare Act, including improving the healthof the population, reducing health carecosts, providing access to health cover-age, encouraging eligible organizationsto continue to offer health coverage, andensuring access to affordable qualifiedhealth plans (QHPs) via efficiently oper-ated Exchanges. Moreover, as describedearlier in these final regulations, thereare significant benefits associated withcontraceptive coverage without cost shar-ing. Such coverage significantly furthersthe governmental interests in promotingpublic health and gender equality, andpromotes the underlying goals of the Ex-changes and the Affordable Care Act moregenerally.

43 45 CFR 147.147 (77 FR 16453).

44 The FFE user fee was established in the March 11, 2013 final rule entitled “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014” (78 FR15410) (2014 Payment Notice).

July 29, 2013 99 2013–31 I.R.B.

In §156.50(d) of the proposed regula-tions, HHS specified that, if an issuer wereto provide contraceptive coverage to par-ticipants and beneficiaries in self-insuredplans of eligible organizations at no cost,and the issuer offers coverage through anFFE, the issuer would be able to seek anadjustment to the FFE user fee for the esti-mated cost of the contraceptive coverage.Moreover, HHS proposed that, if the is-suer providing the contraceptive coveragedid not offer coverage through an FFE —either because it was not a QHP issuer,or because it was a QHP issuer but oper-ated in a state without an FFE — an is-suer in the same issuer group that offeredcoverage through an FFE would have beenable to seek an adjustment to the FFE userfee on behalf of the issuer providing thecontraceptive coverage. HHS proposed touse the definition of issuer group in 45CFR 156.20, that is, all entities treated un-der subsection (a) or (b) of section 52 ofthe Code as a member of the same con-trolled group of corporations as (or undercommon control with) a health insuranceissuer, or issuers affiliated by the com-mon use of a nationally licensed servicemark. Several commenters expressed con-cern that not every issuer seeking to pro-vide contraceptive coverage to participantsand beneficiaries in self-insured plans ofeligible organizations would be in the sameissuer group as an issuer that offers cover-age through an FFE. Commenters furthernoted that, even if the issuer providing thecontraceptive coverage and the issuer of-fering coverage through an FFE were inthe same issuer group, the issuers might in-cur significant administrative costs in es-tablishing the necessary arrangements.

In response to these comments, and toaccount for the payments for contraceptiveservices for participants and beneficiariesin self-insured group health plans of eligi-ble organizations under the accommoda-tion described previously, HHS is finaliz-ing a modification of the proposed policy.In §156.50(d)(1), a participating issuer(defined at 45 CFR 156.50(a)45) offeringa plan through an FFE may qualify for anadjustment to the FFE user fee to the ex-tent that the participating issuer either: (i)made payments for contraceptive serviceson behalf of a third party administrator pur-

suant to 26 CFR 54.9815–2713A(b)(2)(ii)or 29 CFR 2590.715–2713A(b)(2)(ii);or (ii) seeks an adjustment to the FFEuser fee with respect to a third partyadministrator that, following receipt ofa copy of the self-certification refer-enced in 26 CFR 54.9815–2713A(a)(4)or 29 CFR 2590.715–2713A(a)(4), madeor arranged for payments for contra-ceptive services pursuant to 26 CFR54.9815–2713A(b)(2)(i) or (ii) or 29 CFR2590.715–2713A(b)(2)(i) or (ii). Underthe final regulation, neither the third partyadministrator, nor the participating is-suer, nor any entity providing paymentsfor contraceptive services (if neither thethird party administrator nor the partici-pating issuer is providing such payments)is required to be part of the same issuergroup or otherwise affiliated. This mod-ification allows greater flexibility in thearrangements among third party adminis-trators, issuers, and other entities, whilestill ensuring that eligible organizationsare not required to contract, arrange, pay,or refer for contraceptive coverage. Con-sistent with the proposed regulations, anallowance for administrative costs andmargin in the FFE user fee adjustmentaccounts for the costs of arrangementsamong the third party administrator, theparticipating issuer, and any other en-tity providing payments for contraceptiveservices (if neither the third party ad-ministrator nor the participating issuer isproviding such payments).

In §156.50(d)(1) through (4) of the pro-posed regulations, HHS set forth a processthrough which an issuer seeking an FFEuser fee adjustment would submit informa-tion to HHS to demonstrate the provisionof contraceptive coverage and estimate thecost of such coverage. HHS further pro-posed that it would review this informationand provide an adjustment to the issuer’smonthly obligation to pay the FFE user feein an amount equal to the approved esti-mated cost of the contraceptive coverage.HHS suggested that the cost of the contra-ceptive coverage, including administrativecosts and margin, could be estimated ona per capita basis by either the issuer orHHS using either actuarial principles andmethodologies or, for 2016 and beyond,previous experience. The per capita rate

would then be multiplied by the monthlyenrollment in the contraceptive coveragein order to calculate the total FFE user feeadjustment.

HHS sought comments on this pro-posed process for collecting information,calculating the cost of the contraceptivecoverage, and applying the FFE user feeadjustment. HHS received several com-ments suggesting that issuers should berequired to submit information only on anannual basis, rather than a monthly basis,to reduce the administrative burden. Com-menters also noted that it would likelybe difficult to estimate the cost of thecontraceptive coverage accurately, partic-ularly in the initial years, given that theprohibition on cost sharing could affectutilization. In addition, commenters notedthat costs would likely vary considerablybased on differences in utilization patternsand administrative processes.

In response to these comments, HHSis making certain modifications to theprocess described previously. Ratherthan using a monthly process, the finalregulation at §156.50(d)(2) requires a par-ticipating issuer seeking an FFE user feeadjustment to submit to HHS, in the yearfollowing the calendar year in which thecontraceptive services for which paymentswere made under the accommodation de-scribed previously were provided, for eachself-insured plan, the total dollar amountof the payments for contraceptive servicesthat were provided during the applicablecalendar year. The issuer will then receivean adjustment to its obligation to pay theFFE user fee equal to the cost of the contra-ceptive services that were provided duringthe previous year, plus an allowance, asspecified by HHS, for administrative costsand margin. For example, HHS expectsthat issuers seeking an FFE user fee ad-justment for payments for contraceptiveservices that were provided in calendaryear 2014 will be required to submit toHHS by July 15, 2015, the total dollaramount of the payments. This timing willallow adequate time for claims run-out anddata collection. The FFE user fee adjust-ment will be applied starting in October2015. Although this approach delays theapplication of the FFE user fee adjustment,it significantly reduces the administrative

45 Under 45 CFR 156.50(a), a participating issuer includes QHP issuers, issuers of multi-state plans, and issuers of stand-alone dental plans. We note that an issuer of a Consumer Operatedand Oriented Plan (CO-OP) offered on an FFE is also considered to be a participating issuer for the purpose of the FFE user fee adjustment.

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burden on issuers, third party administra-tors, and HHS. HHS believes that tyingthe FFE user fee adjustment to the actualcosts of payments for contraceptive ser-vices, plus an allowance for administrativecosts and margin, will provide reasonableassurance that the adjustment is adequateto cover the full costs of the paymentsfor contraceptive services, furthering thegoal of providing contraceptive coveragewithout cost sharing, as required by PHSAct section 2713 and the companion pro-visions in ERISA and the Code.

As discussed later in this section, HHSis also directing third party administratorsto submit to HHS a notification that thethird party administrator intends for a par-ticipating issuer to seek an FFE user feeadjustment. This notification must be pro-vided by the later of January 1, 2014, orthe 60th calendar day following the dateon which the third party administrator re-ceives a copy of a self-certification froman eligible organization. The notificationmust be provided whether it is intendedthat the participating issuer will providepayments for contraceptive services on be-half of the third party administrator, orwhether it is intended that the participat-ing issuer will seek an adjustment to theFFE user fee with respect to such paymentsmade or arranged for by the third party ad-ministrator. HHS will provide guidance onthe manner of submission of the notifica-tion, as well as guidance on the applicationfor the FFE user fee adjustment, throughthe process provided for under the Paper-work Reduction Act of 1995.

HHS is also modifying the standardsproposed at §156.50(d) to align with thefinal regulations regarding the accommo-dation for self-insured group health plansof eligible organizations. As discussedpreviously, under these final regulations,the third party administrator may make thepayments for contraceptive services itself,or it may arrange for an issuer (includ-ing an issuer that does not offer cover-age through an FFE) or another entity tomake the payments on its behalf. Undereither scenario, a third party administratorthat seeks to offset the costs of such pay-ments through an FFE user fee adjustmentmust enter into an arrangement with a par-ticipating issuer offering coverage throughan FFE. The participating issuer and the

third party administrator must each sub-mit information to HHS, as described in§156.50(d)(2) of the final regulation, toverify that the payments for contraceptiveservices were provided in accordance withthese final regulations.

Specifically, in §156.50(d)(2)(i), HHSfinalizes submission standards for a par-ticipating issuer to receive the FFE userfee adjustment. The participating issuermust submit to HHS, in the manner andtimeframe specified by HHS, in the yearfollowing the calendar year in which thecontraceptive services were provided:(A) identifying information for the par-ticipating issuer and each third partyadministrator that received a copy of theself-certification with respect to which theparticipating issuer seeks an adjustmentin the FFE user fee (whether or not theparticipating issuer was the entity thatmade the payments for contraceptive ser-vices); (B) identifying information foreach self-insured group health plan withrespect to which a copy of the self-cer-tification was received by a third partyadministrator and with respect to whichthe participating issuer seeks an adjust-ment in the FFE user fee; and (C) for eachsuch self-insured group health plan, thetotal dollar amount of the payments forcontraceptive services that were providedduring the applicable calendar year underthe accommodation described previously.If such payments were made by the par-ticipating issuer directly, the total dollaramount should reflect the amount of thepayments made by the participating is-suer; if the third party administrator madeor arranged for such payments, the totaldollar amount should reflect the amountreported to the participating issuer by thethird party administrator. Similarly, in§156.50(d)(2)(ii) and (iii), HHS finalizessubmission standards for the third partyadministrator with respect to which theparticipating issuer seeks an adjustment inthe FFE user fee. In paragraph (d)(2)(ii),HHS finalizes a standard under which thethird party administrator must notify HHS,by the later of January 1, 2014, or the60th calendar day following the date onwhich it receives the applicable copy of theself-certification, that it intends to arrangefor a participating issuer to seek an FFEuser fee adjustment. HHS will provide

guidance on the manner of this submissionthrough the process provided for under thePaperwork Reduction Act of 1995. Thisnotification is necessary to allow HHS tocoordinate the development of the systemsfor administering the FFE user fee adjust-ment. In paragraphs (d)(2)(iii)(A) through(E), HHS specifies several other standardsunder which the third party administratormust submit to HHS, in the year followingthe calendar year in which the contracep-tive services for which payments weremade under the accommodation describedpreviously were provided, the followinginformation: (A) identifying informa-tion for the third party administrator andthe participating issuer; (B) identifyinginformation for each self-insured grouphealth plan with respect to which the par-ticipating issuer seeks an adjustment inthe FFE user fee; (C) the total numberof participants and beneficiaries in eachself-insured group health plan during theapplicable calendar year;46 (D) for eachself-insured group health plan with respectto which the third party administratormade payments for contraceptive services,the total dollar amount of such paymentsthat were provided during the applicablecalendar year under the accommodationdescribed previously (if such paymentswere made by the participating issuerdirectly, the total dollar amount shouldreflect the amount reported to the thirdparty administrator by the participating is-suer; if the third party administrator madeor arranged for such payments, the totaldollar amount should reflect the amountof the payments made by or on behalf ofthe third party administrator); and (E) anattestation that the payments for contra-ceptive services were made in compliancewith 26 CFR 54.9815–2713A(b)(2) or 29CFR 2590.715–2713A(b)(2). If the thirdparty administrator does not meet thesestandards, the participating issuer maynot receive an FFE user fee adjustmentto offset the costs of the payments forcontraceptive services incurred by or onbehalf of the third party administrator.HHS believes that it is necessary to collectthis information directly from the thirdparty administrator that has the duty toensure that the payments for contraceptiveservices are made to ensure the accuracyof the data provided, without requiring the

46 No personally identifiable information will be collected from participating issuers or third party administrators pursuant to §156.50(d)(2).

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participating issuer to attest to informationto which it may not have access or overwhich it has little control.

In §156.50(d)(3), HHS establishes theprocess by which a participating issuer willbe provided a reduction in its obligationto pay the FFE user fee. As long as anauthorizing exception under OMB Circu-lar No. A–25R is in effect, the reductionwill be calculated as the sum of the to-tal dollar amount of the payments for con-traceptive services submitted by the ap-plicable third party administrators, as de-scribed in paragraph (d)(2)(iii)(D), and anallowance, specified by HHS, for admin-istrative costs and margin. In the pro-posed regulations, HHS requested com-ments on the appropriate method for de-termining the administrative costs associ-ated with providing the contraceptive cov-erage, as well as a margin to ensure thatissuers receive appropriate compensationfor providing the contraceptive coverage.Commenters agreed with the proposal toreimburse for administrative costs and toprovide a margin. Commenters noted thatadministrative costs would be incurred be-cause of the complexities inherent in ar-rangements between entities seeking theFFE user fee adjustment and entities pro-viding the contraceptive coverage, partic-ularly when the entities operate in differentstates. In addition, commenters stated thatadministrative costs incurred by the thirdparty administrators could vary because ofvariations in billing processes.

As finalized in this regulation, for theinitial years of this policy, HHS will spec-ify an allowance for administrative costsand margin, which will be incorporatedinto the FFE user fee adjustment, ratherthan request the third party administra-tor or the participating issuer to submit toHHS an estimate of the third party admin-istrator and the participating issuer’s ad-ministrative costs. This approach is con-sistent with the general approach in thesefinal regulations to simplify administrationof the accommodations for eligible organi-zations, while still ensuring that no eligi-ble organization is required to contract, ar-range, pay, or refer for contraceptive cov-erage. HHS notes that it intends to re-view the methodology for determining re-imbursement for administrative costs andmargin in future years to ensure that HHSis accurately capturing these costs. HHSwill establish the allowance as a percent-

age of the cost of the payments for con-traceptive services because HHS believesthat the majority of administrative costswill be related to processing of paymentsto providers for contraceptive services, andbecause HHS believes that it is reasonableto measure margin on this business as apercentage of the cost of the contraceptiveservices. HHS will establish the allowanceat no less than ten percent of such cost, andwill specify the allowance for a particularcalendar year in the annual HHS notice ofbenefit and payment parameters. The spe-cific allowance for the 2014 calendar yearwill be proposed for public comment in theHHS Notice of Payment and Benefit Pa-rameters for 2015 (which is scheduled tobe published in the fall of 2013). This ap-proach will allow HHS to provide for a rea-sonable allowance for administrative ex-penses for the third party administrator, theparticipating issuer, and any other entityproviding the payments for contraceptiveservices on behalf of the third party admin-istrator, as well as a margin for each en-tity. HHS welcomes feedback from thirdparty administrators, participating issuers,and other relevant stakeholders on the al-lowance for administrative costs and mar-gin, including the appropriate percentageand alternative methods for future determi-nation of the allowance for administrativecosts and margin.

Section 156.50(d)(4) is similar to thecorresponding proposed provision, andspecifies that, as long as an exceptionunder OMB Circular No. A–25R is ineffect, if the amount of the reduction un-der paragraph (d)(3) is greater than theamount of the obligation to pay the FFEuser fee in a particular month, the partic-ipating issuer will be provided a credit insucceeding months in the amount of theexcess. HHS notes that the likelihood ofthis occurring will depend on the relativemagnitudes of the cost of payments forcontraceptive services and the FFE userfee, the number of participants and bene-ficiaries in self-insured plans with respectto which the participating issuer seeks anadjustment in the FFE user fee, and thenumber of individuals enrolled in cover-age offered by the issuer through the FFE.HHS also notes that it intends to providea monthly report, for the initial month inwhich the FFE user fee adjustment for aparticular calendar year is applied, and forsucceeding months until the credit is fully

applied, to issuers that receive an FFEuser fee adjustment. HHS contemplatesthat this monthly report will include infor-mation on the issuer’s user fee obligationfor the month, its total adjustment for theapplicable calendar year, the user fee ad-justment applied to date, and the valueof the adjustment to be credited to futuremonths (so long as the exception underOMB Circular No. A–25R is in effect).Additionally, HHS intends to provide amonthly report to each applicable thirdparty administrator detailing any FFE userfee adjustment that will be provided toa participating issuer with respect to thecosts for contraceptive services incurredby or on behalf of the third party adminis-trator, as well as the portion of the user feeadjustment applied to date.

Section 156.50(d)(5) specifies that,within 60 calendar days of receipt of anyadjustment in the FFE user fee, a partic-ipating issuer must pay each third partyadministrator with respect to which it re-ceived any portion of such adjustment anamount no less than the portion of theadjustment attributable to the total dollaramount of the payments for contracep-tive services submitted by the third partyadministrator, as described in paragraph(d)(2)(iii)(D). HHS expects that the partic-ipating issuer will also agree to pay eachthird party administrator a portion of suchallowance (and that the apportionmentwill be negotiated between the entities);HHS does not specify such payment inthis final regulation, as HHS expects theentities to work out an arrangement thatbest fits their situation. Finally, HHS notesthat this provision does not apply if theparticipating issuer made the paymentsfor contraceptive services on behalf of thethird party administrator, as described inparagraph (d)(1)(i), or is in the same issuergroup (as defined in 45 CFR 156.20) asthe third party administrator.

In §156.50(d)(6) and (7), HHS estab-lishes standards relating to documentationand program integrity, similar to thoseproposed in §156.50(d)(5), but modifiedslightly to align with the other changes inthis final regulation. In paragraph (d)(6),HHS specifies that a participating issuerreceiving an adjustment in the FFE userfee under this section for a particular cal-endar year must maintain for 10 yearsfollowing that year, and make availableupon request to HHS, the HHS Office of

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the Inspector General, the ComptrollerGeneral, and their designees, documen-tation demonstrating that it timely paideach third party administrator, with re-spect to which it received such adjustment,any amount required under paragraph(d)(5). In paragraph (d)(7), HHS specifiesdocumentation standards for third partyadministrators with respect to which anFFE user fee adjustment is received underthis section for a particular calendar year.Third party administrators must main-tain for 10 years following the applicablecalendar year, and make available uponrequest to HHS, the HHS Office of the In-spector General, the Comptroller General,and their designees, all of the following:(i) a copy of the self-certification pro-vided by the eligible organization for eachself-insured plan with respect to which anadjustment is received; (ii) documentationdemonstrating that the payments for con-traceptive services were made in compli-ance with 26 CFR 54.9815–2713A(b)(2)or 29 CFR 2590.715–2713A(b)(2); and(iii) documentation supporting the to-tal dollar amount of the payments forcontraceptive services submitted by thethird party administrator, as describedin paragraph (d)(2)(iii)(D). Although acommenter argued that the documentationretention standards should be shortenedfrom 10 years to 6 years, to align withERISA standards, we believe that the fi-nalized standard is appropriate as it alignswith timeframes under the False ClaimsAct, 31 U.S.C. 3729–3733, and stan-dards used for other Exchange programs.HHS notes that a participating issuer or athird party administrator may satisfy thesestandards by archiving these records andensuring that they are accessible if neededin the event of an investigation, audit, orother review.

To summarize, costs of payments madefor contraceptive services for participantsand beneficiaries in self-insured grouphealth plans of eligible organizations underthe accommodation described previouslywill be reimbursed through an adjustmentin FFE user fees as follows:

• The adjustment will be made to theFFE user fees of a participating is-suer, if that participating issuer madethe payments for the contraceptive ser-vices under the accommodation on be-half of the third party administrator, or

if it seeks the adjustment with respectto such payments made or arranged forby the third party administrator.

• A third party administrator must no-tify HHS that it intends for a participat-ing issuer to seek the adjustment by thelater of January 1, 2014, or the 60th cal-endar day following the date on whichit received the copy of the applicableself-certification.

• For the participating issuer to re-ceive the adjustment, the third partyadministrator and the participatingissuer must notify HHS of the totalamount of the payments made forthe contraceptive services under theaccommodation, and provide certainother information and documenta-tion, including an attestation by thethird party administrator that the pay-ments for the contraceptive serviceswere provided in compliance with 26CFR 54.9815–2713A(b)(2) or 29 CFR2590.715–2713A(b)(2), by July 15 ofthe year following the calendar year inwhich the contraceptive services wereprovided.

• If the necessary conditions are met, andif an exception under OMB CircularNo. A–25R is in effect, the participat-ing issuer will receive an adjustment toits FFE user fee obligation equal to thetotal amount of the payments for thecontraceptive services provided underthe accommodation, plus an allowancefor administrative costs and margin. Ifthe adjustment exceeds the FFE userfees owed in the month of the initialadjustment, any excess adjustment willbe carried over to later months, for solong as the exception under OMB Cir-cular No. A–25R is in effect.

• The allowance, which will be at leastten percent of the costs of the paymentsfor the contraceptive services under theaccommodation, will be specified byHHS in the annual HHS notice of ben-efit and payment parameters.

• Within 60 days of receipt of any ad-justment, the participating issuer mustpay the third party administrator theportion of the adjustment attributableto payments for contraceptive servicesmade by the third party administra-tor. No payment is required with re-spect to the allowance for administra-tive costs and margin, although it is ex-pected that the participating issuer will

agree to pay each third party adminis-trator a portion of such allowance. Inaddition, no payment is required if theparticipating issuer made the paymentsfor the contraceptive services under theaccommodation on behalf of the thirdparty administrator, or if the participat-ing issuer and third party administratorare in the same issuer group.

Lastly, in response to comments re-ceived, HHS is finalizing a provisionclarifying that participating issuers mayadd any amounts paid out to a thirdparty administrator or incurred by or forthe participating issuer in contraceptiveclaims costs under the accommodation forself-insured group health plans of eligi-ble organizations provided in these finalregulations, plus the allowance for admin-istrative costs and margin provided under45 CFR 156.50(d)(3)(ii), to their net FFEuser fee paid to HHS, in calculations re-lating to the index rate for the single riskpool under 45 CFR 156.80(d), the medicalloss ratio under 45 CFR part 158, and therisk corridors program under 45 CFR 153subpart F. Several commenters noted thatimproperly incorporating the FFE user feeadjustment provided for under the finalregulation into these calculations couldlead to unintended consequences. Forexample, if a participating issuer wererequired to incorporate the FFE user feeadjustment into the calculation of themedical loss ratio, but not allowed to in-corporate the cost of the accommodationfor self-insured group health plans of eli-gible organizations, the adjustment wouldreduce the amount reported as licensingand regulatory fees (as described in 45CFR 158.161(a)). This would result ina lower medical loss ratio. HHS agreesthat such a result would not accuratelyreflect the ratio of claims to premiums, asestimated by the medical loss ratio, for theparticipating issuer’s insurance business,because the FFE user fee adjustment oc-curs due to activity not directly related tothe participating issuer’s insurance busi-ness. Indeed, under §156.50(d)(5), theparticipating issuer is required in manycircumstances to pay out the greater shareof the FFE user fee adjustments to thirdparty administrators responsible for mak-ing (or arranging for another entity tomake) the payments for contraceptiveservices. Therefore, HHS clarifies that,

July 29, 2013 103 2013–31 I.R.B.

for purposes of the medical loss ratio andthe risk corridors program, participatingissuers should report the sum of: (1) thenet FFE user fee paid to HHS; (2) anyamounts paid out to a third party adminis-trator or incurred by or for the participatingissuer in contraceptive claims costs un-der the accommodation for self-insuredgroup health plans of eligible organiza-tions provided in these final regulations;and (3) the allowance for administrativecosts and margin provided under 45 CFR156.50(d)(3)(ii), as licensing and regula-tory fees referenced in 45 CFR 158.161(a),or taxes and regulatory fees in the caseof the risk corridors program. For similarreasons, HHS is modifying the provisionat 45 CFR 156.80(d) to clarify that, forthe purpose of establishing a single riskpool index rate for a state market, anymarket-wide adjustments to the index ratefor expected Exchange user fees shouldinclude: (1) the expected net FFE userfee to be paid to HHS; (2) any amountspaid out to a third party administrator orincurred by or for the participating issuerin contraceptive claims costs under the ac-commodation for self-insured group healthplans of eligible organizations expected tobe credited against user fees payable forthat state market; and (3) the allowance foradministrative costs and margin providedunder 45 CFR 156.50(d)(3)(ii) expectedto be credited against user fees payable forthat state market.

HHS clarifies that, if an issuer providespayments for contraceptive services on be-half of a third party administrator, suchpayments are not directly linked to any ofthe health insurance coverage provided bythe issuer, and the issuer should not incor-porate the cost of such payments into theircalculations for the numerator with respectto the medical loss ratio or the risk corri-dors program.

D. Treatment of Multiple Employer GroupHealth Plans

In the case of several employers offer-ing coverage through a single group healthplan, the Departments proposed that eachemployer be required to independently

meet the definition of religious employeror eligible organization in order to availitself of the exemption or an accommoda-tion with respect to its employees and theircovered dependents. Several commenterssupported the proposed approach of apply-ing the exemption and the accommodationon an employer-by-employer basis. Othercommenters favored a plan-based ap-proach, allowing any employer offeringcoverage through the same group healthplan as a religious employer or eligible or-ganization to qualify for the exemption orthe accommodation, citing administrativechallenges to an employer-by-employerapproach. A few commenters recom-mended criteria for determining whetheran employer is affiliated with a religiousemployer or eligible organization withwhich it offers coverage through a singlegroup health plan, such as the control stan-dards in Code section 52(a) and (b), andtherefore qualified for the exemption or anaccommodation.47

The final regulations continue to pro-vide that the availability of the exemp-tion or an accommodation be determinedon an employer-by-employer basis, whichthe Departments continue to believe bestbalances the interests of religious employ-ers and eligible organizations and those ofemployees and their dependents. The De-partments are clarifying that, for purposesof these final regulations, any nonprofitorganization with religious objections tocontraceptive coverage that is part of thesame controlled group of corporations orpart of the same group of trades or busi-nesses under common control (each withinthe meaning of section 52(a) or (b) of theCode) with a religious employer and/or aneligible organization, and that offers cov-erage through the same group health planas such religious employer and/or eligibleorganization, is considered to hold itselfout as a religious organization and there-fore qualifies for an accommodation un-der these final regulations. Each such or-ganization must independently satisfy theself-certification standard.

E. Religious Freedom Restoration Act andOther Federal Law

Some commenters expressed concernsabout the proposed accommodations foreligible organizations under the ReligiousFreedom Restoration Act (RFRA) (Pub. L.103–141) 107 Stat. 1488 (1993) (codifiedat 42 U.S.C. 2000bb–1).48 All such con-cerns were considered. But the accom-modations for group health plans estab-lished or maintained by eligible organiza-tions (and group health insurance coverageprovided in connection with such plans),or student health insurance coverage ar-ranged by eligible organizations that areinstitutions of higher education, are not re-quired under RFRA. In addition, the ac-commodations for eligible organizationsunder these final regulations do not vio-late RFRA because they do not substan-tially burden religious exercise, and theyserve compelling government interests andmoreover are the least restrictive means toachieve those interests.

First, some commenters asserted thatthe proposed accommodations would sub-stantially burden their exercise of religionby requiring their involvement in provid-ing coverage of medical services to whichthey object on religious grounds. These fi-nal regulations do not require eligible orga-nizations that provide self-certifications totheir issuers or third party administrators toprovide health coverage that includes ben-efits for contraceptive services, or to con-tract, arrange, pay, or refer for such cov-erage or services. Issuers and third partyadministrators cannot pass along the costsbecause these final regulations specificallyprohibit an issuer or third party adminis-trator from charging any premium or oth-erwise passing on any cost relating to pay-ments for contraceptive services to an eli-gible organization. Thus, there is no bur-den on any religious exercise of the eli-gible organization. And even if the ac-commodations were found to impose someminimal burden on eligible organizations,any such burden would not be substantialfor the purposes of RFRA because a thirdparty pays for the contraceptive servicesand there are multiple degrees of separa-

47 Code section 52(a) generally provides that all employees of all corporations that are members of the same controlled group of corporations, including corporations that are at least 50 percentcontrolled by a common parent corporation, are treated as employed by a single employer. Code section 52(b) generally provides that all employees of trades or businesses (whether or notincorporated) that are under common control are treated as employed by a single employer.

48 RFRA provides that the federal government generally may not “substantially burden a person’s exercise of religion, even if the burden results from a rule of general applicability,” unlessthe burden: “(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest,” 42 U.S.C. 2000bb–1.

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tion between the eligible organization andany individual’s choice to use contracep-tive services.

One commenter contended that themere act of self-certification would facil-itate access to contraception, resulting inviolation of its religious beliefs. But theself-certification under these final regu-lations simply confirms that an eligibleorganization is a nonprofit religious organ-ization with religious objections to contra-ceptive coverage and so informs the issueror third party administrator. Even prior tothe proposed regulations, because contra-ceptive benefits are typically in standardproduct designs, many eligible organi-zations directed their issuers and thirdparty administrators not to make paymentsfor claims for medical services to whichthey object on religious grounds. In anyevent, in order for a burden on religiousexercise to be “substantial” under RFRA,its effects on the objecting person cannotbe as indirect and attenuated as they arehere. Under these final regulations, thirdparties, not eligible organizations, providethe payments for contraceptive services,at no cost to eligible organizations. Andwhether such services will be utilized isthe result of independent choices by em-ployees or students and their dependents,who have distinct interests and may havetheir own religious views that differ fromthose of the eligible organization.

Second, some commenters claimedthat the proposed accommodations wouldforce them to fund or subsidize contra-ceptive coverage because issuers or thirdparty administrators would pass on thecosts of such coverage to eligible orga-nizations. Again, however, these finalregulations specifically prohibit an issueror third party administrator from chargingany premium, or otherwise passing onany cost, to an eligible organization withrespect to the payments for contraceptiveservices.

Third, some commenters asserted thatthe contraceptive coverage requirementfails to serve any compelling government

interest. As noted previously, however, thecontraceptive coverage requirement servestwo compelling governmental interests.The contraceptive coverage requirementfurthers the government’s compelling in-terest in safeguarding public health byexpanding access to and utilization ofrecommended preventive services forwomen. HHS tasked IOM with conduct-ing an independent, science-based reviewof the available literature to determinewhat preventive services are necessary forwomen’s health and well-being. IOM in-cluded in its recommendations for compre-hensive guidelines for women’s preventiveservices all FDA-approved contraceptivemethods, sterilization procedures, and pa-tient education and counseling for womenwith reproductive capacity. IOM deter-mined that lack of access to contraceptiveservices has proven in many cases to haveserious negative health consequences forwomen and newborn children.

The government also has a compellinginterest in assuring that women have equalaccess to health care services. Womenwould be denied the full benefits of pre-ventive care if their unique health careneeds were not considered and addressed.For example, prior to the implementationof the preventive services coverage provi-sion, women of childbearing age spent 68percent more on out-of-pocket health carecosts than men, and these costs resultedin women often forgoing preventive care.The IOM found that this disproportionateburden on women imposed financial bar-riers that prevented women from achiev-ing health outcomes on an equal basis withmen. The contraceptive coverage require-ment helps remedy this problem by help-ing to equalize the provision of preventivehealth care services to women and, as a re-sult, helping women contribute to societyto the same degree as men.

Fourth, some commenters suggestedthat certain provisions of the AffordableCare Act that, in their view, leave somewomen without contraceptive coveragewith no cost sharing demonstrate that the

government interests in providing suchcoverage cannot be truly compelling. Butthese commenters misunderstand the ef-fect of these provisions.49

Nor do the exemption for religiousemployers and the accommodations foreligible organizations undermine the gov-ernment’s compelling interests. Withrespect to the religious employer ex-emption, houses of worship and theirintegrated auxiliaries that object to con-traceptive coverage on religious groundsare more likely than other employers toemploy people who are of the same faithand/or adhere to the same objection, andwho would therefore be less likely thanother people to use contraceptive serviceseven if such services were covered undertheir plan. Under the eligible organiza-tion accommodations, individuals in plansof eligible organizations, who are lesslikely than individuals in plans of reli-gious employers to share their employer’s(or institution of higher education’s) faithand objection to contraceptive coverageon religious grounds, will still benefitfrom payments for contraceptive services,even though such payments will not beprovided, funded, or subsidized by theiremployer (or institution of higher educa-tion).

Fifth, some commenters asserted thatthe contraceptive coverage requirementis not the least restrictive means of ad-vancing these compelling interests, andproposed various alternatives to theseregulations. All of these proposals wereconsidered, and it was determined thatthey were not feasible and/or would notadvance the government’s compelling in-terests as effectively as the mechanismsestablished in these final regulations andthe preventive services coverage regula-tions more generally. For example, somecommenters suggested that the govern-ment could provide contraceptive servicesto all women free of charge (throughMedicaid or another program), establisha government-funded health benefits pro-gram for contraceptive services, or force

49 For example, the Affordable Care Act’s grandfathering provision is only transitional in effect, and it is expected that a majority of plans will lose their grandfathered status by theend of 2013. (75 FR 34552; June 17, 2010); see also Kaiser Family Found. & Health Res. & Ed. Trust, Employer Health Benefits 2012 Annual Survey at 7–8, 190, available athttp://ehbs.kff.org/pdf/2012/8345.pdf. Moreover, small employers that elect to offer non-grandfathered health coverage to their employees are not exempt from the requirement under thepreventive health services coverage regulations to provide coverage for recommended preventive health services, including contraceptive services, without cost sharing (subject to thereligious employer exemption and eligible organization accommodations in these final regulations). While the Affordable Care Act excludes small employers from the possibility of taxliability under the employer shared responsibility provision at Code section 4980H, it encourages such employers to offer health coverage to their employees by establishing new grouphealth insurance options through the SHOPs, as well as new tax incentives to exercise such options. With respect to employees of small employers that do not offer health coverage to theiremployees, the Affordable Care Act establishes new individual health insurance options through the Exchanges, as well as new tax credits to assist the purchase of such insurance; suchinsurance will cover recommended preventive services, including contraceptive services, without cost sharing.

July 29, 2013 105 2013–31 I.R.B.

drug and device manufacturers to providecontraceptive drugs and devices to womenfor free. The Departments lack the statu-tory authority and funding to implementthese proposals. Moreover, the AffordableCare Act contemplates providing cover-age of recommended preventive servicesthrough the existing employer-based sys-tem of health coverage so that womenface minimal logistical and administrativeobstacles. Imposing additional barriers towomen receiving the intended coverage(and its attendant benefits), by requiringthem to take steps to learn about, and tosign up for, a new health benefit, wouldmake that coverage accessible to fewerwomen. The same concern underminesthe effectiveness of other commenters’suggestion that the government require themulti-state plans on the Exchanges to offera stand-alone, contraceptive-only benefitto all women without charge.

For another example, some com-menters suggested that the governmentshould establish tax incentives for womento use contraceptive services. Again, theDepartments lack the statutory authority toimplement such proposal. Reliance onlyon tax incentives would also depart fromthe existing employer-based system ofhealth coverage, would require women topay out of pocket for their care in the firstinstance, and would not benefit womenwho do not have sufficient income to berequired to file a tax return. Such barrierswould make a tax incentive structure lesseffective than the employer-based systemof health coverage in advancing the gov-ernment’s compelling interests.

Finally, some commenters expressedconcern that the final regulations violatethe Religion Clauses of the First Amend-ment or certain federal restrictions relatingto abortion. The regulations do not violatethe Free Exercise Clause because theyare neutral and generally applicable. Theregulations do not target religiously mo-tivated conduct, but rather, are intendedto improve women’s access to preven-tive health care and lessen the disparitybetween men’s and women’s health carecosts. And the regulations are generallyapplicable because they do not pursuetheir purpose only against conduct moti-vated by religious belief. The exemptionand accommodations set forth in the regu-lations serve to accommodate religion, notto disfavor it.

The final regulations also do not violatethe Establishment Clause. The exemptionand accommodations set forth in the regu-lations are not restricted to organizationsof a particular denomination or denomi-nations. Instead, they are available on anequal basis to religious organizations affil-iated with any and all religions.

Finally, the regulations do not violatefederal restrictions relating to abortion be-cause FDA-approved contraceptive meth-ods, including Plan B, Ella, and IUDs,are not abortifacients within the meaningof federal law. (62 FR 8611; February25, 1997) (“Emergency contraceptive pillsare not effective if the woman is preg-nant[.]”); 45 CFR 46.202(f) (“Pregnancyencompasses the period of time from im-plantation until delivery.”). Further, theseregulations do not require nonprofit reli-gious organizations that object to such con-traceptive methods to contract, arrange,pay, or refer for such services.

F. No Effect on Other Law

The religious employer exemption andeligible organization accommodations un-der these final regulations are intended tohave meaning solely with respect to thecontraceptive coverage requirement undersection 2713 of the PHS Act and the com-panion provisions of ERISA and the Code.Whether an employer or organization (in-cluding an institution of higher education)is designated as religious for this purposeis not intended as a judgment about themission, sincerity, or commitment of theemployer or organization (including an in-stitution of higher education), or intendedto differentiate among the religious merits,mission, sincerity, commitment, or pub-lic or private standing of religious enti-ties. The use of such designation is lim-ited solely to defining the class of em-ployers or organizations (including insti-tutions of higher education) that qualifyfor the religious employer exemption andeligible organization accommodations un-der these final regulations. The definitionof religious employer or eligible organiza-tion in these final regulations should notbe construed to apply with respect to, orrelied upon for the interpretation of, anyother provision of the PHS Act, ERISA,the Code, or any other provision of fed-eral law, nor is it intended to set a prece-dent for any other purpose. For example,

nothing in these final regulations should beconstrued as affecting the interpretation offederal or state civil rights statutes, such asTitle VII of the Civil Rights Act of 1964 orTitle IX of the Education Amendments of1972.

Furthermore, nothing in these finalregulations precludes employers or oth-ers from expressing any opposition to theuse of contraceptives; requires anyoneto use contraceptives; or requires healthcare providers to prescribe or providecontraceptives if doing so is against theirreligious beliefs.

The Departments received severalcomments requesting clarification aboutwhether the religious employer exemptionand eligible organization accommodationsin these final regulations supersede statelaws that require health insurance issuersto provide contraceptive coverage. Thepreemption provisions of section 731 ofERISA and section 2724 of the PHS Act(implemented at 29 CFR 2590.731(a) and45 CFR 146.143(a)) apply such that therequirements of part 7 of ERISA and ti-tle XXVII of the PHS Act are not to be“construed to supersede any provision ofstate law which establishes, implements,or continues in effect any standard orrequirement solely relating to health in-surance issuers in connection with groupor individual health insurance coverageexcept to the extent that such standard orrequirement prevents the application of arequirement” of federal law. With respectto issuers subject to state law, insurancelaws that provide greater access to con-traceptive coverage than federal standardsare unlikely to “prevent the applicationof” the preventive services coverage pro-vision, and therefore are unlikely to bepreempted by these final regulations. Onthe other hand, in states with broader re-ligious exemptions and accommodationswith respect to health insurance issuersthan those in the final regulations, theexemptions and accommodations will benarrowed to align with those in the finalregulations. This is consistent with the ap-plication of other federal health insurancestandards.

G. Applicability Dates and TransitionalEnforcement Safe Harbor

These final regulations generally applyto group health plans and health insurance

2013–31 I.R.B. 106 July 29, 2013

issuers for plan years beginning on or afterJanuary 1, 2014, except the amendmentsto the religious employer exemption applyto group health plans and health insuranceissuers for plan years beginning on or afterAugust 1, 2013.

The Departments are extending the cur-rent safe harbor from enforcement of thecontraceptive coverage requirement by theDepartments to encompass plan years be-ginning on or after August 1, 2013, and be-fore January 1, 2014. This transitional en-forcement safe harbor is intended to main-tain the status quo with respect to organiza-tions that qualify for the current safe har-bor during the period that exists betweenthe expiration of the current safe harbor50

and the applicability date of the accommo-dations under these final regulations. Thisperiod is designed to provide issuers andthird party administrators with sufficienttime to prepare to implement the accom-modations under these final regulations.Organizations that qualify under the cur-rent safe harbor are not required to exe-cute another self-certification if one hasalready been executed, but are requiredto provide another notice to plan partici-pants and beneficiaries in connection withplan years beginning on or after August 1,2013, and before January 1, 2014. Theguidance extending the current safe harborcan be found at: www.cms.gov/cciio andwww.dol.gov/healthreform.

IV. Economic Impact and PaperworkBurden

A. Executive Orders 12866 and 13563— Department of Health and HumanServices and Department of Labor

Executive Orders 12866 and 13563direct agencies to assess all costs and ben-efits of available regulatory alternativesand, if regulation is necessary, to selectregulatory approaches that maximize netbenefits (including potential economic,environmental, and public health andsafety effects; distributive impacts; andequity). Executive Order 13563 empha-sizes the importance of quantifying bothcosts and benefits, reducing costs, harmo-nizing rules, and promoting flexibility.

Section 3(f) of Executive Order 12866defines a “significant regulatory action” asan action that is likely to result in a regu-lation: (1) having an annual effect on theeconomy of $100 million or more in anyone year, or adversely and materially af-fecting a sector of the economy, produc-tivity, competition, jobs, the environment,public health or safety, or state, local, ortribal governments or communities (alsoreferred to as “economically significant”);(2) creating a serious inconsistency or oth-erwise interfering with an action taken orplanned by another agency; (3) materiallyaltering the budgetary impacts of entitle-ment grants, user fees, or loan programsor the rights and obligations of recipientsthereof; or (4) raising novel legal or pol-icy issues arising out of legal mandates, thePresident’s priorities, or the principles setforth in the Executive Order.

A regulatory impact analysis must beprepared for major rules with econom-ically significant effects ($100 millionor more in any one year), and an “eco-nomically significant” regulatory actionis subject to review by the Office ofManagement and Budget (OMB). The De-partments have concluded that these finalregulations are not likely to have economicimpacts of $100 million or more in anyone year, and therefore do not meet thedefinition of “economically significant”under Executive Order 12866.

1. Need for Regulatory Action

As stated earlier in this preamble, theDepartments previously issued amendedinterim final regulations authorizing an ex-emption for group health plans establishedor maintained by religious employers (andgroup health insurance coverage providedin connection with such plans) from cer-tain coverage requirements under section2713 of the PHS Act (76 FR 46621, Au-gust 3, 2011). The amended interim fi-nal regulations were finalized on Febru-ary 15, 2012 (77 FR 8725). In these finalregulations, the Departments are amendingthe definition of religious employer in theHHS regulation at 45 CFR 147.131(a) (in-corporated by reference in the regulationsof the Departments of Labor and the Trea-sury) by eliminating the first three prongs

of the definition of religious employer thatwas established in the 2012 final regula-tions and clarifying the fourth prong. Ac-cordingly, an employer that is organizedand operates as a nonprofit entity and is re-ferred to in section 6033(a)(3)(A)(i) or (iii)of the Code is a religious employer, and itsgroup health plan qualifies for the exemp-tion from the requirement to cover con-traceptive services. In addition, the finalregulations establish accommodations thatprovide women with access to such ser-vices, without cost sharing, while simul-taneously protecting certain nonprofit re-ligious organizations with religious objec-tions to contraceptive coverage from hav-ing to contract, arrange, pay, or refer forsuch coverage (as detailed herein).

2. Anticipated Effects

The Departments expect that these fi-nal regulations will not result in any addi-tional significant burden on or costs to theaffected entities.

B. Special Analyses — Department of theTreasury

For purposes of the Department of theTreasury, it has been determined that thisTreasury decision is not a significant reg-ulatory action as defined in Executive Or-der 12866, as amended by Executive Or-der 13563. Therefore, a regulatory assess-ment is not required. It has also been de-termined that section 553(b) of the Admin-istrative Procedure Act (5 U.S.C. chapter5) does not apply to this final regulation.It is hereby certified that the collectionsof information contained in this final reg-ulation do not have a significant impacton a substantial number of small entities.Accordingly, a regulatory flexibility anal-ysis under the Regulatory Flexibility Act(5 U.S.C. chapter 6) is not required.

These final regulations require each or-ganization seeking to be treated as an el-igible organization under the final regula-tions to self-certify that it meets the defi-nition of eligible organization in the finalregulations. The self-certification must beexecuted by an authorized representativeof the organization. The organization mustmaintain the self-certification in its recordsin a manner consistent with ERISA section

50 See Guidance on the Temporary Enforcement Safe Harbor for Certain Employers, Group Health Plans, and Group Health Insurance Issuers with Respect to the Requirement to CoverContraceptive Services Without Cost Sharing Under Section 2713 of the Public Health Service Act, Section 715(a)(1) of the Employee Retirement Income Security Act, and Section 9815(a)(1)of the Internal Revenue Code, issued on February 10, 2012, and reissued on August 15, 2012.

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107 and make it available for examinationupon request. The final regulations also di-rect each eligible organization to provide acopy of its self-certification to the grouphealth insurance issuer or third party ad-ministrator (as applicable) to avail itself ofan accommodation. The Departments areunable to estimate the number of organi-zations that will seek to be treated as eligi-ble organizations. Of the eligible organiza-tions, some will likely be small entities. Itis estimated that each eligible organizationwill need only approximately 50 minutesof labor to prepare and provide the infor-mation in the self-certification. This willnot be a significant economic impact. Forthese reasons, this information collectionrequirement will not have a significant im-pact on a substantial number of small enti-ties.

These final regulations also requirehealth insurance issuers providing pay-ments for contraceptive services, or thirdparty administrators arranging or provid-ing such payments (or their agents), toprovide written notice to plan participantsand beneficiaries regarding the availabilityof such payments. The notice will be pro-vided contemporaneous with (to the extentpossible) but separate from any applicationmaterials distributed in connection withenrollment (or re-enrollment) in healthcoverage established, maintained, or ar-ranged by the eligible organization in anyplan year to which the accommodationis to apply. The final regulations containmodel language for issuers and third partyadministrators to use to satisfy the noticerequirement. It is unknown how manyissuers provide health insurance cover-age in connection with insured plans ofeligible organizations or how many thirdparty administrators provide plan servicesto self-insured plans of eligible organiza-tions. However, the cost of preparationand distribution of the notices will not besignificant. It is estimated that each is-suer or third party administrator will needapproximately 1 hour of clerical labor(at $31.64 per hour) and 15 minutes ofmanagement review (at $55.22 per hour)to prepare the notices for a total cost ofapproximately $44. It is estimated thateach notice will require $0.46 in postageand $0.05 in materials cost (paper and ink)and the total postage and materials cost foreach notice sent via mail will be $0.51. Forthese reasons, these information collection

requirements will not have a significantimpact on a substantial number of smallentities.

Pursuant to section 7805(f) of the Code,the notice of proposed rulemaking preced-ing this final regulation was submitted tothe Chief Counsel for Advocacy of theSmall Business Administration for com-ment on its impact on small businesses.

C. Paperwork Reduction Act —Department of Health and HumanServices

These final regulations contain infor-mation collection requirements (ICRs) thatare subject to review by the Office of Man-agement and Budget (OMB). A descrip-tion of these provisions is given in the fol-lowing paragraphs with an estimate of theannual burden. Average labor costs (in-cluding fringe benefits) used to estimatethe costs are calculated using data avail-able from the Bureau of Labor Statistics.

HHS sought comments in the proposedregulations, but did not receive any in-formation that would allow for an esti-mate of the number of organizations thatwould seek to be treated as eligible or-ganizations, or an estimate of the num-ber of health insurance issuers that wouldprovide separate payments for contracep-tive services. HHS is, nevertheless, seek-ing OMB approval for the following ICRsconsistent with the Paperwork ReductionAct of 1995. The burden estimates will beupdated in the future when more informa-tion is available.

1. Self-Certification (§§147.131(b)(4) and147.131(c)(1))

Each organization seeking to be treatedas an eligible organization under the fi-nal regulations must self-certify that itmeets the definition of an eligible organ-ization. The self-certification must beexecuted by an authorized representativeof the organization. The self-certifi-cation will not be submitted to any ofthe Departments. The form that will beused by organizations for their self-cer-tification was made available duringthe comment period for the proposedregulations at http://www.cms.gov/Reg-ulations-and-Guidance/Legislation/Pa-perworkReductionActof1995/PRA-List-ing.html. HHS is finalizing this formwith updated instructions and notes, and

eliminating the proposed field for listingthe contraceptive services for which theorganization will not establish, maintain,administer, or fund coverage. The organi-zation must maintain the self-certificationin its records in a manner consistent withERISA section 107 and make it availablefor examination upon request. The eligi-ble organization must provide a copy ofits self-certification to a health insuranceissuer for insured group health plans orstudent health insurance coverage.

HHS is unable to estimate the numberof organizations that will seek to be treatedas eligible organizations under the finalregulations. Therefore, the burden for onlyone eligible organization, as opposed toall eligible organizations in total, is esti-mated. It is assumed that, for each eligi-ble organization, clerical staff will gatherand enter the necessary information, sendthe self-certification electronically to theissuer, and retain a copy for record-keep-ing; a manager and legal counsel will re-view it; and a senior executive will executeit. HHS estimates that an organization willneed approximately 50 minutes (30 min-utes of clerical labor at a cost of $30.64per hour, 10 minutes for a manager at acost of $55.22 per hour, 5 minutes for legalcounsel at a cost of $83.10 per hour, and 5minutes for a senior executive at a cost of$112.43 per hour) to execute the self-cer-tification. The certification may be elec-tronically transmitted to the issuer at min-imal cost. Therefore, the total annual bur-den for preparing and providing the infor-mation in the self-certification is estimatedto be approximately $41 for each eligibleorganization.

2. Notice of Availability of SeparatePayments for Contraceptive Services(§147.131(d))

The proposed regulations sought com-ment on a notice of availability of contra-ceptive coverage. The final regulationsinstead direct a health insurance issuerproviding payments for contraceptiveservices for participants and beneficia-ries in insured plans (or student enrolleesand covered dependents in student healthinsurance coverage) of eligible organiza-tions to provide a written notice to suchplan participants and beneficiaries (or suchstudent enrollees and covered dependents)informing them of the availability of such

2013–31 I.R.B. 108 July 29, 2013

payments. The notice must be providedcontemporaneous with (to the extent pos-sible) but separate from any applicationmaterials distributed in connection withenrollment (or re-enrollment) in grouphealth coverage that is effective on thefirst day of each applicable plan year, andmust specify that contraceptive coveragewill not be funded or administered by theeligible organization but that the issuerprovides separate payments for contracep-tive services. The notice must also providecontact information for the issuer for ques-tions and complaints. To satisfy the noticerequirement, issuers may use the modellanguage set forth in the final regulationsor substantially similar language.

It is unknown how many issuers pro-vide health insurance coverage in connec-tion with insured plans of eligible organi-zations. In the proposed regulations, HHSestimated that each issuer would need ap-proximately 1 hour of clerical labor (at$31.64 per hour) and 15 minutes of man-agement review (at $55.22 per hour) toprepare the notices for a total cost of ap-proximately $44. It was estimated thateach notice would require $0.46 in postageand $0.05 in materials cost (paper and ink)and the total postage and materials costfor each notice sent via mail would be$0.51. One commenter stated that the costof preparing and sending these notices maybe greater than estimated, but did not pro-vide an estimate. HHS believes that usingthe model language provided in the finalregulations will help minimize costs anddeclines to revise the estimate.

3. Collections for FFE User FeeAdjustment (§156.50(d))

The final HHS regulation describesinformation collections with respect to theFFE user fee adjustment under §156.50(d).The information collection instrumentsare under development, and HHS willseek public comments and OMB approvalon the instruments at a later date, consis-tent with the Paperwork Reduction Act of1995.

4. Collections for Self-Insured GroupHealth Plans Without Third PartyAdministrators

The final regulations provide that a self-insured group health plan established ormaintained by an eligible organization thatdoes not use the services of a third partyadministrator will be provided a safe har-bor from enforcement of the contracep-tive coverage requirement by the Depart-ments contingent on, among other things:(1) the plan providing certain informationto HHS; and (2) the plan providing partic-ipants and beneficiaries with notice that itdoes not provide benefits for contraceptiveservices. As noted earlier in these finalregulations, the Departments believe thatthere are no self-insured group health plansin this circumstance. Therefore, becausethe number of respondents is likely to befewer than 10, HHS is not seeking OMBapproval for this collection.

D. Paperwork Reduction Act —Department of Labor and Department ofthe Treasury

As noted previously, as under the pro-posed regulations, each organization seek-ing to be treated as an eligible organizationunder the final regulations must self-cer-tify that it meets the definition of an eligi-ble organization. This requirement is setout at 26 CFR 54.9815–2713A(a)(4) and29 CFR 2590.715–2713A(a)(4) of the fi-nal regulations of the Departments of La-bor and the Treasury.

In addition, the final regulations in-clude a notice of availability of separatepayments for contraceptive services. Thisnotice requirement is identical to that setforth in 45 CFR 147.131(d), but it appliesto third party administrators in connec-tion with disclosures to participants andbeneficiaries in self-insured group healthplans of eligible organizations, insteadof applying to health insurance issuers inconnection with disclosures to participantsand beneficiaries in insured group healthplans of eligible organizations. Therefore,we are seeking OMB approval for this no-tice, relying on the same estimates notedpreviously.

V. Unfunded Mandates Reform Act

For purposes of the Unfunded Man-dates Reform Act of 1995 (Pub. L. 104–4),as well as Executive Order 12875, thesefinal regulations do not include any fed-eral mandate that may result in expendi-tures by state, local, or tribal governments,nor do they include any federal mandatesthat may impose an annual burden of $100million, adjusted for inflation, or more onthe private sector.51

VI. Federalism — Department ofHealth and Human Services andDepartment of Labor

Executive Order 13132 outlines fun-damental principles of federalism, andrequires the adherence to specific crite-ria by federal agencies in the process oftheir formulation and implementation ofpolicies that have “substantial direct ef-fects” on states, the relationship betweenthe federal government and states, or thedistribution of power and responsibilitiesamong the various levels of government.Federal agencies promulgating regulationsthat have these federalism implicationsmust consult with state and local officials,and describe the extent of their consulta-tion and the nature of the concerns of stateand local officials in the preamble to theregulation.

In the Departments’ view, these finalregulations have federalism implications,but the federal implications are substan-tially mitigated because, with respect tohealth insurance issuers, 15 states have en-acted specific laws, regulations, or bul-letins that meet or exceed the federal stan-dards requiring coverage of specified pre-ventive services without cost sharing. Theremaining states, which provide oversightfor these federal law requirements, do sousing their general authority to enforcethese federal standards. Therefore, the fi-nal regulations are not likely to requiresubstantial additional oversight of statesby HHS.

In general, section 514 of ERISA pro-vides that state laws are superseded tothe extent that they relate to any coveredemployee benefit plan, and preserves statelaws that regulate insurance, banking, orsecurities. ERISA also prohibits statesfrom regulating a covered plan as an insur-

51 In 2013, that threshold level is approximately $141 million.

July 29, 2013 109 2013–31 I.R.B.

ance or investment company or bank. TheHealth Insurance Portability and Account-ability Act of 1996 (HIPAA) added a newpreemption provision to ERISA (as wellas to the PHS Act) narrowly preemptingstate requirements on group health insur-ance coverage. States may continue toapply state law requirements but not to theextent that such requirements prevent theapplication of the federal requirement thatgroup health insurance coverage providedin connection with group health plansprovide coverage for specified preventiveservices without cost sharing. HIPAA’sConference Report states that the confer-ees intended the narrowest preemption ofstate laws with regard to health insuranceissuers (H.R. Conf. Rep. No. 104–736,104th Cong. 2d Session 205, 1996). Stateinsurance laws that are more stringent thanthe federal requirement are unlikely to“prevent the application of” the preventiveservices coverage provision, and thereforeare unlikely to be preempted. Accord-ingly, states have significant latitude toimpose requirements on health insuranceissuers that are more restrictive than thosein federal law.

Guidance conveying this interpretationwas published in the Federal Register onApril 8, 1997 (62 FR 16904) and Decem-ber 30, 2004 (69 FR 78720), and these finalregulations implement the preventive ser-vices coverage provision’s minimum stan-dards and do not significantly reduce thediscretion given to states under the statu-tory scheme.

The PHS Act provides that states mayenforce the provisions of title XXVII ofthe PHS Act as they pertain to issuers, butthat the Secretary of HHS will enforce anyprovisions that a state does not have au-thority to enforce or that a state has failedto substantially enforce. When exercisingits responsibility to enforce provisions ofthe PHS Act, HHS works cooperativelywith the state to address the state’s con-cerns and avoid conflicts with the state’sexercise of its authority.52 HHS has de-veloped procedures to implement its en-forcement responsibilities, and to affordstates the maximum opportunity to enforcethe PHS Act’s requirements in the first in-stance. In compliance with Executive Or-

der 13132’s requirement that agencies ex-amine closely any policies that may havefederalism implications or limit the poli-cymaking discretion of states, the Depart-ments have engaged in numerous effortsto consult and work cooperatively with af-fected state and local officials.

In conclusion, throughout the processof developing these final regulations, to theextent feasible within the specific preemp-tion provisions of ERISA and the PHS Act,the Departments have attempted to balancestates’ interests in regulating health cover-age and health insurance issuers, and therights of those individuals whom Congressintended to protect in the PHS Act, ERISA,and the Code.

VII. Statutory Authority

The Department of the Treasury regula-tions are adopted pursuant to the authoritycontained in sections 7805 and 9833 of theCode.

The Department of Labor regulationsare adopted pursuant to the authority con-tained in 29 U.S.C. 1002(16), 1027, 1059,1135, 1161–1168, 1169, 1181–1183, 1181note, 1185, 1185a, 1185b, 1185d, 1191,1191a, 1191b, and 1191c; sec. 101(g),Public Law 104–191, 110 Stat. 1936; sec.401(b), Public Law 105–200, 112 Stat.645 (42 U.S.C. 651 note); sec. 512(d),Public Law 110–343, 122 Stat. 3881;sec. 1001, 1201, and 1562(e), Public Law111–148, 124 Stat. 119, as amended byPublic Law 111–152, 124 Stat. 1029; Sec-retary of Labor’s Order 3–2010, 75 FR55354 (September 10, 2010).

The Department of Health and HumanServices regulations are adopted pursuantto the authority contained in sections 2701through 2763, 2791, and 2792 of the PHSAct (42 U.S.C. 300gg through 300gg–63,300gg–91, and 300gg–92), as amended;and Title I of the Affordable Care Act, sec-tions 1301–1304, 1311–1312, 1321–1322,1324, 1334, 1342–1343, 1401–1402, and1412, Pub. L. 111–148, 124 Stat. 119(42 U.S.C. 18021–18024, 18031–18032,18041–18042, 18044, 18054, 18061,18063, 18071, 18082, 26 U.S.C. 36B, and31 U.S.C. 9701).

*****

DEPARTMENT OF THE TREASURYInternal Revenue Service

Accordingly, 26 CFR part 54 isamended as follows:

PART 54—PENSION EXCISE TAXES

Paragraph 1. The authority citationfor part 54 continues to read, in part, asfollows:

Authority: 26 U.S.C. 7805. * * *Par. 2. Section 54.9815–2713 is

amended by revising paragraphs (a)(1)introductory text and (a)(1)(iv) to read asfollows:

§54.9815–2713 Coverage of preventivehealth services.

(a) * * *(1) In general. Beginning at the time

described in paragraph (b) of this sectionand subject to §54.9815–2713A, a grouphealth plan, or a health insurance issueroffering group health insurance cover-age, must provide coverage for all of thefollowing items and services, and maynot impose any cost-sharing requirements(such as a copayment, coinsurance, or adeductible) with respect to those items andservices:

* * * * *(iv) With respect to women, to the ex-

tent not described in paragraph (a)(1)(i)of this section, evidence-informed preven-tive care and screenings provided for inbinding comprehensive health plan cov-erage guidelines supported by the HealthResources and Services Administration, inaccordance with 45 CFR 147.131(a).

* * * * *Par. 3. Section 54.9815–2713A is

added to read as follows:

§54.9815–2713A Accommodations inconnection with coverage of preventivehealth services.

(a) Eligible organizations. An eligibleorganization is an organization that satis-fies all of the following requirements:

(1) The organization opposes providingcoverage for some or all of any contracep-tive services required to be covered under

52 This authority applies to insurance issued with respect to group health plans generally, including plans covering employees of church organizations. Thus, this discussion of federalismapplies to all group health insurance coverage that is subject to the PHS Act, including those church plans that provide coverage through a health insurance issuer (but not to church plans thatdo not provide coverage through a health insurance issuer).

2013–31 I.R.B. 110 July 29, 2013

§54.9815–2713(a)(1)(iv) on account of re-ligious objections.

(2) The organization is organized andoperates as a nonprofit entity.

(3) The organization holds itself out asa religious organization.

(4) The organization self-certifies, in aform and manner specified by the Secre-taries of Health and Human Services andLabor, that it satisfies the criteria in para-graphs (a)(1) through (3) of this section,and makes such self-certification availablefor examination upon request by the firstday of the first plan year to which the ac-commodation in paragraph (b) or (c) ofthis section applies. The self-certificationmust be executed by a person authorizedto make the certification on behalf of theorganization, and must be maintained ina manner consistent with the record re-tention requirements under section 107 ofERISA.

(b) Contraceptive coverage—self-in-sured group health plans—(1) A grouphealth plan established or maintained byan eligible organization that provides ben-efits on a self-insured basis complies forone or more plan years with any require-ment under §54.9815–2713(a)(1)(iv) toprovide contraceptive coverage if all ofthe requirements of this paragraph (b)(1)of this section are satisfied:

(i) The eligible organization or its plancontracts with one or more third party ad-ministrators.

(ii) The eligible organization provideseach third party administrator that willprocess claims for any contraceptiveservices required to be covered under§54.9815–2713(a)(1)(iv) with a copy ofthe self-certification described in para-graph (a)(4) of this section, which shallinclude notice that—

(A) The eligible organization will notact as the plan administrator or claims ad-ministrator with respect to claims for con-traceptive services, or contribute to thefunding of contraceptive services; and

(B) Obligations of the third partyadministrator are set forth in 29 CFR2510.3–16 and 26 CFR 54.9815–2713A.

(iii) The eligible organization must not,directly or indirectly, seek to interfere witha third party administrator’s arrangementsto provide or arrange separate paymentsfor contraceptive services for participantsor beneficiaries, and must not, directly orindirectly, seek to influence the third party

administrator’s decision to make any sucharrangements.

(2) If a third party administrator re-ceives a copy of the self-certification de-scribed in paragraph (a)(4) of this section,and agrees to enter into or remain in a con-tractual relationship with the eligible or-ganization or its plan to provide adminis-trative services for the plan, the third partyadministrator shall provide or arrange pay-ments for contraceptive services using oneof the following methods—

(i) Provide payments for contraceptiveservices for plan participants and bene-ficiaries without imposing any cost-shar-ing requirements (such as a copayment,coinsurance, or a deductible), or imposinga premium, fee, or other charge, or anyportion thereof, directly or indirectly, onthe eligible organization, the group healthplan, or plan participants or beneficiaries;or

(ii) Arrange for an issuer or other entityto provide payments for contraceptive ser-vices for plan participants and beneficia-ries without imposing any cost-sharing re-quirements (such as a copayment, coinsur-ance, or a deductible), or imposing a pre-mium, fee, or other charge, or any portionthereof, directly or indirectly, on the eligi-ble organization, the group health plan, orplan participants or beneficiaries.

(3) If a third party administrator pro-vides or arranges payments for contra-ceptive services in accordance with eitherparagraph (b)(2)(i) or (ii) of this section,the costs of providing or arranging suchpayments may be reimbursed through anadjustment to the Federally-facilitated Ex-change user fee for a participating issuerpursuant to 45 CFR 156.50(d).

(4) A third party administrator may notrequire any documentation other than thecopy of the self-certification from the el-igible organization regarding its status assuch.

(c) Contraceptive coverage—insuredgroup health plans—(1) General rule. Agroup health plan established or main-tained by an eligible organization thatprovides benefits through one or moregroup health insurance issuers compliesfor one or more plan years with any re-quirement under §54.9815–2713(a)(1)(iv)to provide contraceptive coverage if theeligible organization or group health planfurnishes a copy of the self-certificationdescribed in paragraph (a)(4) of this sec-

tion to each issuer that would otherwiseprovide such coverage in connection withthe group health plan. An issuer may notrequire any documentation other than thecopy of the self-certification from the el-igible organization regarding its status assuch.

(2) Payments for contraceptive ser-vices—(i) A group health insurance issuerthat receives a copy of the self-certi-fication described in paragraph (a)(4)of this section with respect to a grouphealth plan established or maintained byan eligible organization in connectionwith which the issuer would otherwiseprovide contraceptive coverage under§54.9815–2713(a)(1)(iv) must—

(A) Expressly exclude contraceptivecoverage from the group health insurancecoverage provided in connection with thegroup health plan; and

(B) Provide separate payments for anycontraceptive services required to be cov-ered under §54.9815–2713(a)(1)(iv) forplan participants and beneficiaries for solong as they remain enrolled in the plan.

(ii) With respect to payments for contra-ceptive services, the issuer may not imposeany cost-sharing requirements (such as acopayment, coinsurance, or a deductible),or impose any premium, fee, or othercharge, or any portion thereof, directly orindirectly, on the eligible organization, thegroup health plan, or plan participants orbeneficiaries. The issuer must segregatepremium revenue collected from the eli-gible organization from the monies usedto provide payments for contraceptive ser-vices. The issuer must provide paymentsfor contraceptive services in a manner thatis consistent with the requirements undersections 2706, 2709, 2711, 2713, 2719,and 2719A of the PHS Act, as incorpo-rated into section 9815. If the group healthplan of the eligible organization providescoverage for some but not all of any con-traceptive services required to be coveredunder §54.9815–2713(a)(1)(iv), the issueris required to provide payments only forthose contraceptive services for which thegroup health plan does not provide cov-erage. However, the issuer may providepayments for all contraceptive services, atthe issuer’s option.

(d) Notice of availability of sepa-rate payments for contraceptive ser-vices—self-insured and insured grouphealth plans. For each plan year to which

July 29, 2013 111 2013–31 I.R.B.

the accommodation in paragraph (b) or(c) of this section is to apply, a third partyadministrator required to provide or ar-range payments for contraceptive servicespursuant to paragraph (b) of this section,and an issuer required to provide pay-ments for contraceptive services pursuantto paragraph (c) of this section, must pro-vide to plan participants and beneficiarieswritten notice of the availability of sepa-rate payments for contraceptive servicescontemporaneous with (to the extent pos-sible), but separate from, any applicationmaterials distributed in connection withenrollment (or re-enrollment) in grouphealth coverage that is effective beginningon the first day of each applicable planyear. The notice must specify that theeligible organization does not administeror fund contraceptive benefits, but thatthe third party administrator or issuer, asapplicable, provides separate paymentsfor contraceptive services, and must pro-vide contact information for questions andcomplaints. The following model lan-guage, or substantially similar language,may be used to satisfy the notice require-

ment of this paragraph (d): “Your em-ployer has certified that your group healthplan qualifies for an accommodation withrespect to the federal requirement to coverall Food and Drug Administration-ap-proved contraceptive services for women,as prescribed by a health care provider,without cost sharing. This means thatyour employer will not contract, arrange,pay, or refer for contraceptive coverage.Instead, [name of third party administra-tor/health insurance issuer] will provideor arrange separate payments for contra-ceptive services that you use, without costsharing and at no other cost, for so long asyou are enrolled in your group health plan.Your employer will not administer or fundthese payments. If you have any questionsabout this notice, contact [contact infor-mation for third party administrator/healthinsurance issuer].”

(e) Reliance—insured group healthplans—(1) If an issuer relies reasonablyand in good faith on a representation bythe eligible organization as to its eligibilityfor the accommodation in paragraph (c)of this section, and the representation is

later determined to be incorrect, the issueris considered to comply with any require-ment under §54.9815–2713(a)(1)(iv) toprovide contraceptive coverage if the is-suer complies with the obligations underthis section applicable to such issuer.

(2) A group health plan is consideredto comply with any requirement under§54.9815–2713(a)(1)(iv) to provide con-traceptive coverage if the plan complieswith its obligations under paragraph (c) ofthis section, without regard to whether theissuer complies with the obligations underthis section applicable to such issuer.

Signed this 27th day of June 2013.

Beth Tucker,Deputy Commissioner

for Operations SupportInternal Revenue Service.

Mark J. Mazur,Assistant Secretary of the

Treasury (Tax Policy).

(Filed by the Office of the Federal Register on June 28, 2013,11:15 a.m., and published in the issue of the Federal Registerfor July 2, 2013, 78 F.R. 39870)

2013–31 I.R.B. 112 July 29, 2013

Part III. Administrative, Procedural, and MiscellaneousRevised Timeline and OtherGuidance Regarding theImplementation of FATCA

Notice 2013–43

I. PURPOSE

This notice provides: (i) revised time-lines for implementation of the require-ments of sections 1471 through 1474 ofthe Internal Revenue Code (Code), com-monly referred to as the Foreign AccountTax Compliance Act, or FATCA; and (ii)additional guidance concerning the treat-ment of financial institutions located injurisdictions that have signed intergovern-mental agreements for the implementationof FATCA (IGAs) but have not yet broughtthose IGAs into force. The Departmentof the Treasury (Treasury) and the In-ternal Revenue Service (IRS) intend toamend the regulations under sections 1471through 1474 to adopt these rules. Priorto the issuance of those amendments, tax-payers may rely on the provisions of thisnotice regarding expected amendments tothe regulations.

II. BACKGROUND

A. FATCA Regulations

On March 18, 2010, the Hiring Incen-tives to Restore Employment Act of 2010,Pub. L. 111–147 (H.R. 2847), added chap-ter 4 (sections 1471 through 1474) to Sub-title A of the Code. Chapter 4 requireswithholding agents to withhold 30 percentof certain payments to a foreign financialinstitution (FFI) unless the FFI has en-tered into an agreement (FFI agreement)with the IRS to, among other things, re-port certain information with respect toU.S. accounts. Chapter 4 also imposeson withholding agents certain withhold-ing, documentation, and reporting require-ments with respect to certain paymentsmade to certain non-financial foreign en-tities (NFFEs).

On February 15, 2012, Treasury andthe IRS published proposed regulationsunder chapter 4 in the Federal Register(REG–121647–10, 77 Fed. Reg. 9022)(proposed regulations). On January 17,2013, Treasury and the IRS published

final regulations under chapter 4 (TD9610, 78 Fed. Reg. 5873) (final regula-tions). The final regulations provided fora phased implementation of the require-ments of FATCA, beginning on January1, 2014, and continuing through 2017.In particular, the final regulations pro-vided that withholding agents (includingparticipating FFIs (PFFIs), qualified inter-mediaries (QIs) that assume withholdingresponsibility, withholding foreign part-nerships (WPs), and withholding foreigntrusts (WTs)) would be required to beginwithholding with respect to withholdablepayments made after December 31, 2013(with an exception for “grandfatheredobligations” outstanding on January 1,2014, and associated collateral). Duediligence for documenting payees and ac-count holders by U.S. withholding agentsand PFFIs would be phased in during 2014and 2015. Annual reporting by PFFIswould be phased in starting in 2015 (withrespect to information related to the 2013and 2014 calendar years), with reportingof the full scope of FATCA informationrequired beginning in 2017.

B. Model IGAs

On July 26, 2012, Treasury released amodel (Model 1) for bilateral agreementswith other jurisdictions (in both reciprocaland nonreciprocal versions) under whichFFIs (reporting Model 1 FFIs) wouldsatisfy their chapter 4 requirements by re-porting information about U.S. accounts totheir respective tax authorities, followedby the automatic exchange of that infor-mation on a government-to-governmentbasis with the United States. On Novem-ber 14, 2012, Treasury released a secondmodel agreement (Model 2), under whichFFIs (reporting Model 2 FFIs) would re-port specified information directly to theIRS in a manner consistent with the finalregulations, supplemented by govern-ment-to-government exchange of informa-tion on request. Treasury has concludeda number of bilateral IGAs based on themodel agreements (Model 1 IGAs andModel 2 IGAs, respectively). Treasury hasperiodically updated the model IGAs sincetheir initial release, including an updateto both model IGAs on May 9, 2013, toincorporate certain modifications arrived

at through intergovernmental discussions,as well as modifications to the due dili-gence procedures to reflect improvementsadopted in the final regulations followingthe initial release of the model IGAs.

The model IGAs outline time frames forFFIs in jurisdictions with IGAs in force(partner jurisdictions) to complete the nec-essary due diligence to identify U.S. ac-counts and to perform reporting on U.S.accounts that are identified. The time-lines and other provisions contained in themodel IGAs interact with the final regula-tions in various ways. The model IGAs,and all IGAs that have been concludedto date, contain a provision, colloquiallyreferred to as the “most-favored nation”provision, providing that, with respect tocertain terms of the IGA, including thedue diligence rules applicable to report-ing Model 1 FFIs and reporting Model 2FFIs, a partner jurisdiction is entitled to thebenefit of any more favorable provisionagreed to in a comparable IGA with an-other partner jurisdiction, subject to certainconditions. Model 1 IGAs and Model 2IGAs also contain a coordination provisionproviding that a partner jurisdiction maypermit its FFIs to use a definition in the rel-evant U.S. Treasury Regulations in lieu ofa corresponding definition in the IGA, pro-vided that such application would not frus-trate the purposes of the IGA. With respectto the due diligence procedures, Model 1IGAs and Model 2 IGAs provide that apartner jurisdiction may permit its FFIsto apply the due diligence procedures de-scribed in the relevant U.S. Treasury Reg-ulations in lieu of the due diligence pro-cedures in the IGA to establish the statusof account holders and payees. In addi-tion, paragraph 6 of Article 4 of the Model1 IGA coordinates the time by which theparties must obtain and exchange informa-tion with the time by which PFFIs must re-port similar information to the IRS underthe relevant U.S. Treasury Regulations.

C. Registration Process

In the preamble to the final regulations,Treasury and the IRS announced their in-tent to create a FATCA registration web-site, which would serve as the primary wayfor FFIs to interact with the IRS to com-plete the required registration, agreements,

July 29, 2013 113 2013–31 I.R.B.

and certifications. The preamble statedthat the FATCA registration website wouldbe accessible to FFIs no later than July 15,2013. After approval of its registration,each PFFI and registered deemed-compli-ant FFI would be assigned a global in-termediary identification number (GIIN),which would be used both for reportingpurposes and to identify the FFI’s statusto withholding agents. The preamble pro-vided that the IRS would electronicallypost the first list of PFFIs and registereddeemed-compliant FFIs (IRS FFI List) onDecember 2, 2013, and would update thelist on a monthly basis. To ensure inclu-sion on the December 2013 IRS FFI List,FFIs would need to register by October 25,2013.

D. Modification of Phased Timeline forImplementation

Comments have indicated that cer-tain elements of the phased timeline forthe implementation of FATCA presentpractical problems for both U.S. with-holding agents and FFIs. In addition,while comments from FFIs overwhelm-ingly supported the development of IGAsas a solution to the legal conflicts thatmight otherwise impede compliance withFATCA and as a more effective and effi-cient way to implement cross-border taxinformation reporting, some commentsnoted that, in the short term, continueduncertainty about whether an IGA will bein effect in a particular jurisdiction hindersthe ability of FFIs and withholding agentsto complete due diligence and other im-plementation procedures. In considerationof these comments, and to allow for amore orderly implementation of FATCA,Treasury and the IRS intend to amendthe final regulations to postpone by sixmonths the start of FATCA withholding,and to make corresponding adjustments tovarious other time frames provided in thefinal regulations, as described in sectionIII below.

In addition, as described in section IVbelow, Treasury and the IRS intend toprovide a list of jurisdictions that will betreated as having in effect an IGA, eventhough that IGA may not have entered intoforce as of July 1, 2014.

Unless otherwise defined, terms used inthis notice have the meanings set forth inthe final regulations.

III. REVISED FATCAIMPLEMENTATION TIMELINE

A. Timeline for Withholding

Withholding agents generally will berequired to begin withholding on with-holdable payments made after June 30,2014, to payees that are FFIs or NFFEswith respect to obligations that are notgrandfathered obligations, unless the pay-ments can be reliably associated withdocumentation on which the withholdingagent can rely to treat the payments asexempt from withholding. The definitionof grandfathered obligation will be revisedto include obligations outstanding on July1, 2014 (and associated collateral). Thisnotice does not affect the timing providedin the final regulations for withholdingon gross proceeds, passthru payments,and payments of U.S. source FDAP withrespect to offshore obligations by personsnot acting in an intermediary capacity.

B. Timeline for Implementing NewAccount Opening Procedures and theDefinition of Preexisting Obligations

Withholding agents generally will berequired to implement new account open-ing procedures by July 1, 2014, or, in thecase of a PFFI, by the later of July 1,2014 or the effective date of its FFI agree-ment. Accordingly, the definition of theterm “preexisting obligation” will be mod-ified to mean:

• With respect to a withholding agentother than a PFFI or a registereddeemed-compliant FFI: any account,instrument, or contract maintained, ex-ecuted, or issued by the withholdingagent that is outstanding on June 30,2014;

• With respect to a PFFI: any account,instrument, or contract maintained, ex-ecuted, or issued by the PFFI that isoutstanding on the effective date of theFFI agreement; and

• With respect to a registered deemed-compliant FFI: any account, instru-ment, or contract maintained, executedor issued by the FFI prior to the laterof July 1, 2014, or the date on whichthe FFI registers as a deemed-compli-ant FFI and receives a GIIN.

Treasury intends to include a similarchange to the definition of the term “Pre-existing Account” in both model IGAs.Thus, it is expected that future IGAs willdefine the term “Preexisting Account” tomean a Financial Account maintained asof June 30, 2014. For IGAs in force thatcontain the previous definition of the term“Preexisting Account,” the partner juris-diction will be permitted under the coor-dination provision of the IGA to permit itsFFIs to substitute the definition of the term“preexisting account” from the amendedfinal regulations for the definition of theterm “Preexisting Account” in the IGA.For IGAs concluded before the coordina-tion provision was added, the coordinationprovision will apply through the operationof the most-favored nation provision oncean IGA containing the coordination provi-sion is in force.

C. Transition Rules for Completing DueDiligence on Preexisting Obligations

The FFI Agreement of a PFFI that reg-isters and receives a GIIN from the IRS onor before June 30, 2014, will have an ef-fective date of June 30, 2014, effectivelyresulting in a six-month postponement ofthe deadlines for completing due diligenceon preexisting obligations. For withhold-ing agents other than PFFIs, the deadlinesfor completing due diligence on preexist-ing obligations will be postponed by sixmonths. Thus, for example, a withholdingagent other than a PFFI will be required todocument payees that are prima facie FFIsby December 31, 2014, instead of by June30, 2014.

Account balance or value will be mea-sured initially as of June 30, 2014, forpurposes of determining whether an ac-count is exempt from review, subject onlyto an electronic search for indicia, orsubject to enhanced review. An accountwith a balance or value that was initially$1,000,000 or below, and with respect towhich there has been no change in circum-stances, will not be subject to enhancedreview unless the account balance or valueexceeds $1,000,000 as of the end of 2015or any subsequent calendar year. Thus, theobligation to monitor the account balanceor value of preexisting accounts to deter-mine whether enhanced review is requiredis deferred by one year.

2013–31 I.R.B. 114 July 29, 2013

Treasury intends to provide for a sim-ilar six-month delay in the due diligenceprocedures included in Annex I of IGAsconcluded after the issuance of this notice,which will generally apply automaticallyto previously-signed IGAs through the op-eration of the most-favored nation provi-sion in those IGAs once those later signedagreements are in force.

D. Due Date for First Report of a PFFIwith respect to U.S. Accounts

The final regulations provide that aPFFI will be required to file informationreports on its U.S. accounts with respectto the 2013 and 2014 calendar years nolater than March 31, 2015. Treasury andthe IRS intend to modify these rules torequire reporting on March 31, 2015, onlywith respect to the 2014 calendar year(for U.S. accounts identified by Decem-ber 31, 2014). Through the operation ofparagraph 6 of Article 4 of the Model 1IGAs, this modification to the requiredreporting will apply automatically in thecontext of Model 1 IGAs as well. ForIGAs concluded before paragraph 6 of Ar-ticle 4 was added, the rules of paragraph 6of Article 4 will apply through the opera-tion of the most-favored nation provisiononce an IGA containing paragraph 6 ofArticle 4 is in force. As a result, once anIGA containing paragraph 6 of Article 4is in force, partner jurisdictions will notbe obligated to obtain and exchange infor-mation with respect to the 2013 calendaryear. Instead, the information exchangedby partner jurisdictions in 2015 will be re-quired to include only information relatedto the 2014 calendar year.

E. Timeline for Registration

The FATCA registration website is pro-jected to be accessible to financial institu-tions on August 19, 2013. Other key datesfor registration, however, will be extendedby six months. Thus, after the FATCA reg-istration website opens, a financial insti-tution will be able to begin the process ofregistering by creating an account and in-putting the required information for itself,for its branch operations, and, if it servesas a “lead” financial institution, for othermembers of its expanded affiliated group.All input information will be saved auto-matically in the registration system and as-

sociated with the financial institution’s ac-count. For the period from the openingof the FATCA registration website throughDecember 31, 2013, a financial institutionwill be able to access its account to mod-ify or add registration information, includ-ing to indicate the appropriate registrationstatus, as such status is established, for ex-ample, by the signing of an IGA. Prior toJanuary 1, 2014, however, any informationentered into the system, even if submittedas final, will not be regarded as a final sub-mission, but will merely be stored until theinformation is submitted as final on or af-ter January 1, 2014. Thus, financial insti-tutions can use the remainder of 2013 toget familiar with the registration process,to input preliminary information, and to re-fine that information. On or after January1, 2014, each financial institution will beexpected to finalize its registration infor-mation by logging into its account on theFATCA registration website, making anynecessary additional changes, and submit-ting the information as final.

Consistent with this 6-month extension,the IRS will not issue any GIINs in 2013.Instead it expects to begin issuing GIINsas registrations are finalized in 2014. TheIRS will electronically post the first IRSFFI List by June 2, 2014, and will updatethe list on a monthly basis thereafter. Toensure inclusion in the June 2014 IRS FFIList, FFIs would need to finalize their reg-istration by April 25, 2014.

As provided in the final regulations,subject to certain exceptions for preex-isting obligations and for offshore obli-gations, a withholding agent generallymay treat a payee as a PFFI or registereddeemed-compliant FFI only if the with-holding agent has a withholding certificateidentifying the payee as a PFFI or regis-tered deemed-compliant FFI and verifiesthe GIIN contained on that withholdingcertificate against the IRS FFI List. Forpayments made prior to January 1, 2015,however, verification of a GIIN is notrequired with respect to payees that are re-porting Model 1 FFIs. This provision willcontinue to apply following the changesdescribed in this notice. As a result, whilereporting Model 1 FFIs will be able toregister and obtain GIINs beginning onJanuary 1, 2014, they will have additionaltime beyond July 1, 2014, to register andobtain a GIIN in order to ensure that they

are included on the IRS FFI list beforeJanuary 1, 2015.

F. Treatment of Expiring Chapter 3Documentation

For purposes of chapter 3 withholding,withholding certificates and documentaryevidence generally expire on the last dayof the third calendar year following theyear in which the withholding certificateis signed or the documentary evidence isprovided to the withholding agent. With-holding certificates and documentary evi-dence that would otherwise expire on De-cember 31, 2013, will expire instead onJune 30, 2014, unless a change in circum-stances occurs that would otherwise renderthe withholding certificate or documentaryevidence incorrect or unreliable.

G. Automatic Extension of Expiring QI,WP, and WT Agreements

All QI, WP, or WT agreements thatwould otherwise expire on December 31,2013, will be automatically extended untilJune 30, 2014.

H. Extension of Foreign-TargetedRegistered Obligation Rules

Notice 2012–20 provided as a limitedtransition rule that a withholding agentpaying interest on an obligation issued inregistered form after March 18, 2012, andbefore January 1, 2014, may apply the for-eign-targeted registered obligation rulesof § 1.871–14(e) if the obligation satisfiesthe requirements of those rules. The endof this transition period was intended tocoincide with the implementation of thechapter 4 rules. As a result, this transitionrule will be extended to obligations issuedin registered form after March 18, 2012and before July 1, 2014.

IV. Treatment of Financial InstitutionsOperating in Jurisdictions ThatHave Signed an IntergovernmentalAgreement to Implement FATCA

A jurisdiction will be treated as havingin effect an IGA if the jurisdiction is listedon the Treasury website as a jurisdictionthat is treated as having an IGA in effect.In general, Treasury and the IRS intend toinclude on this list jurisdictions that havesigned but have not yet brought into force

July 29, 2013 115 2013–31 I.R.B.

an IGA. The list of jurisdictions that aretreated as having an IGA in effect is avail-able at the following address:http://www.treasury.gov/resource-cen-ter/tax-policy/treaties/Pages/FATCA-Archive.aspx.

A financial institution resident in a ju-risdiction that is treated as having an IGAin effect will be permitted to register on theFATCA registration website as a registereddeemed-compliant FFI (which would in-clude all reporting Model 1 FFIs) or PFFI(which would include all reporting Model2 FFIs), as applicable. In addition, a finan-cial institution may designate a branch lo-cated in such jurisdiction as not a limitedbranch. A jurisdiction may be removedfrom the list of jurisdictions that are treatedas having an IGA in effect if the jurisdic-tion fails to perform the steps necessary tobring the IGA into force within a reason-able period of time. If a jurisdiction is re-moved from the list, financial institutionsthat are residents of that jurisdiction, andbranches that are located in that jurisdic-tion, will no longer be entitled to the statusthat would be provided under the IGA, andmust update their status on the FATCA reg-istration website accordingly.

DRAFTING INFORMATION

The principal author of this notice isTara Ferris of the Office of AssociateChief Counsel (International). For furtherinformation regarding this notice, contactJohn Sweeney at (202) 622–3840 (not atoll-free call).

Transition Relief for2014 Under §§ 6055(§ 6055 InformationReporting), 6056 (§ 6056Information Reporting) and4980H (Employer SharedResponsibility Provisions)

Notice 2013–45

I. PURPOSE AND OVERVIEW

This notice provides transition relieffor 2014 from (1) the information report-

ing requirements applicable to insurers,self-insuring employers, and certain otherproviders of minimum essential coverageunder § 6055 of the Internal Revenue Code(Code) (§ 6055 Information Reporting),(2) the information reporting requirementsapplicable to applicable large employ-ers under § 6056 (§ 6056 InformationReporting), and (3) the employer sharedresponsibility provisions under § 4980H(Employer Shared Responsibility Provi-sions). This transition relief will provideadditional time for input from employersand other reporting entities in an effort tosimplify information reporting consistentwith effective implementation of the law.This transition relief also is intended toprovide employers, insurers, and otherproviders of minimum essential cover-age time to adapt their health coverageand reporting systems. Both the informa-tion reporting and the Employer SharedResponsibility Provisions will be fullyeffective for 2015. In preparation for that,once the information reporting rules havebeen issued, employers and other report-ing entities are encouraged to voluntarilycomply with the information reportingprovisions for 2014. This transition reliefthrough 2014 for the information report-ing and Employer Shared ResponsibilityProvisions has no effect on the effectivedate or application of other AffordableCare Act provisions.

II. BACKGROUND

Sections 6055, 6056, and 4980H wereadded to the Code by §§ 1502, 1514, and1513, respectively, of the Patient Pro-tection and Affordable Care Act (ACA),enacted March 23, 2010, Pub. L. No.111–148.1 Section 6055 requires annualinformation reporting by health insuranceissuers, self-insuring employers, gov-ernment agencies, and other providersof health coverage. Section 6056 re-quires annual information reporting byapplicable large employers relating to thehealth insurance that the employer offers(or does not offer) to its full-time em-ployees. Section 4980H(a) imposes anassessable payment on an applicable largeemployer that fails to offer minimum es-

sential coverage to its full-time employees(and their dependents) under an eligibleemployer-sponsored plan if at least onefull-time employee enrolls in a qualifiedhealth plan for which a premium tax creditis allowed or paid. Section 4980H(b)imposes an assessable payment on anapplicable large employer that offers min-imum essential coverage to its full-timeemployees (and their dependents) underan eligible employer-sponsored plan buthas one or more full-time employees whoenroll in a qualified health plan for whicha premium tax credit is allowed or paid(for example, if the coverage offered ei-ther does not provide minimum value or isnot affordable to that full-time employee).

III. TRANSITION RELIEF

Q–1. When will the rules be publishedregarding § 6055 Information Reportingand § 6056 Information Reporting? Howwill these provisions apply for 2014?

A–1. The Affordable Care Act requiresinformation reporting under § 6055 by in-surers, self-insuring employers, govern-ment agencies, and certain other partiesthat provide health coverage and requiresinformation reporting under § 6056 by ap-plicable large employers with respect tothe health coverage offered to their full-time employees. Proposed rules for theinformation reporting provisions are ex-pected to be published this summer. Theproposed rules will reflect the fact thattransition relief will be provided for infor-mation reporting under §§ 6055 and 6056for 2014. This transition relief will provideadditional time for dialogue with stake-holders in an effort to simplify the report-ing requirements consistent with effectiveimplementation of the law. It will alsoprovide employers, insurers, and other re-porting entities additional time to developtheir systems for assembling and report-ing the needed data. Employers, insurers,and other reporting entities are encouragedto voluntarily comply with these informa-tion reporting provisions for 2014 (oncethe information reporting rules have beenissued) in preparation for the full applica-tion of the provisions for 2015. However,information reporting under §§ 6055 and

1 Section 4980H was amended by § 1003 of the Health Care and Education Reconciliation Act of 2010 (HCERA) (enacted March 30, 2010, Pub. L. No. 111–152) and was further amendedby § 1858(b)(4) of the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (enacted April 15, 2011, Pub. L. No. 112–10). Section 6056 was amended by §§ 10106(g)and 10108(j) of the ACA and was further amended by § 1858(b)(5) of the Department of Defense and Full-Year Continuing Appropriations Act, 2011. In this notice, the term Affordable CareAct refers to the ACA and HCERA, collectively.

2013–31 I.R.B. 116 July 29, 2013

6056 will be optional for 2014; accord-ingly, no penalties will be applied for fail-ure to comply with these information re-porting provisions for 2014.

Q–2. What does the 2014 transitionrelief for § 6056 Information Reportingmean for application of the EmployerShared Responsibility Provisions for2014?

A–2. Under the Employer Shared Re-sponsibility Provisions, an applicable largeemployer generally must offer affordable,minimum value health coverage to its full-time employees or a shared responsibil-ity payment may apply if one or more ofits full-time employees receive a premiumtax credit under § 36B. The § 6056 In-formation Reporting is integral to the ad-ministration of the Employer Shared Re-sponsibility Provisions. In particular, be-cause an employer typically will not knowwhether a full-time employee received apremium tax credit, the employer will nothave all of the information needed to de-termine whether it owes a payment under§ 4980H. Accordingly, the employer is notrequired to calculate a payment with re-spect to § 4980H or file returns submit-ting such a payment. Instead, after receiv-ing the information returns filed by appli-cable large employers under § 6056 andthe information about employees claimingthe premium tax credit for any given cal-endar year, the Internal Revenue Service(IRS) will determine whether any of theemployer’s full-time employees receivedthe premium tax credit and, if so, whetheran assessable payment under § 4980H maybe due. If the IRS concludes that an em-ployer may owe such an assessable pay-ment, it will contact the employer, and theemployer will have an opportunity to re-spond to the information the IRS providesbefore a payment is assessed.

For this reason, the transition relieffrom § 6056 Information Reporting for2014 is expected to make it impractical todetermine which employers owe sharedresponsibility payments for 2014 underthe Employer Shared Responsibility Pro-visions. Accordingly, no employer sharedresponsibility payments will be assessedfor 2014. However, in preparation for theapplication of the Employer Shared Re-sponsibility Provisions beginning in 2015,employers and other affected entities areencouraged to voluntarily comply for 2014with the information reporting provisions

(once the information reporting rules havebeen issued) and to maintain or expandhealth coverage in 2014. Real-world test-ing of reporting systems and plan designsthrough voluntary compliance for 2014will contribute to a smoother transition tofull implementation for 2015.

Q–3. Does this affect employees’ ac-cess to the premium tax credit?

A–3. No. Individuals will continue tobe eligible for the premium tax credit byenrolling in a qualified health plan throughthe Affordable Insurance Exchanges (alsocalled Health Insurance Marketplaces) iftheir household income is within a spec-ified range and they are not eligible forother minimum essential coverage, includ-ing an eligible employer-sponsored planthat is affordable and provides minimumvalue.

Q–4. What does this mean for otherprovisions in the Affordable Care Act?

A–4. This transition relief through2014 for § 6055 Information Reporting,§ 6056 Information Reporting, and theEmployer Shared Responsibility Provi-sions has no effect on the effective date orapplication of other Affordable Care Actprovisions, such as the premium tax creditunder § 36B and the individual sharedresponsibility provisions under § 5000A.

IV. DRAFTING INFORMATION

The principal author of this noticeis Kathryn Johnson of the Office ofAssociate Chief Counsel (Tax Exempt& Government Entities). For furtherinformation regarding this notice contactKathryn Johnson at (202) 927–9639 (not atoll-free call).

Update for Weighted AverageInterest Rates, Yield Curves,and Segment Rates

Notice 2013–46

This notice provides guidance on thecorporate bond monthly yield curve (andthe corresponding spot segment rates), andthe 24-month average segment rates under§ 430(h)(2) of the Internal Revenue Code.In addition, this notice provides guidanceas to the interest rate on 30-year Trea-sury securities under § 417(e)(3)(A)(ii)(II)

as in effect for plan years beginning be-fore 2008, the 30-year Treasury weightedaverage rate under § 431(c)(6)(E)(ii)(I),and the minimum present value segmentrates under § 417(e)(3)(D) as in effect forplan years beginning after 2007. Theserates reflect certain changes implementedby the Moving Ahead for Progress in the21st Century Act, Public Law 112–141(MAP–21). MAP–21 provides that forpurposes of § 430(h)(2), the segment ratesare limited by the applicable maximumpercentage or the applicable minimum per-centage based on the average of segmentrates over a 25 year period.

YIELD CURVE AND SEGMENTRATES

Generally, except for certain plansunder sections 104 and 105 of the Pen-sion Protection Act of 2006, § 430 ofthe Code specifies the minimum fundingrequirements that apply to single em-ployer plans pursuant to § 412. Section430(h)(2) specifies the interest rates thatmust be used to determine a plan’s targetnormal cost and funding target. Underthis provision, present value is generallydetermined using three 24-month averageinterest rates (“segment rates”), each ofwhich applies to cash flows during speci-fied periods. To the extent provided under§ 430(h)(2)(C)(iv), these segment rates areadjusted by the applicable percentage ofthe 25-year average segment rates for theperiod ending September 30 of the yearpreceding the calendar year in which theplan year begins. However, an electionmay be made under § 430(h)(2)(D)(ii) touse the monthly yield curve in place of thesegment rates.

Notice 2007–81, 2007–44 I.R.B. 899,provides guidelines for determining themonthly corporate bond yield curve, andthe 24-month average corporate bond seg-ment rates used to compute the target nor-mal cost and the funding target. Pursuantto Notice 2007–81, the monthly corpo-rate bond yield curve derived from June2013 data is in Table I at the end of thisnotice. The spot first, second, and thirdsegment rates for the month of June 2013are, respectively, 1.24, 4.25, and 5.43. Forplan years beginning on or after January 1,2012, the 24-month average segment ratesdetermined under § 430(h)(2)(C)(iv) mustbe adjusted by the applicable percentage

July 29, 2013 117 2013–31 I.R.B.

of the corresponding 25-year average seg-ment rates. The 25-year average segmentrates for plan years beginning in 2012 andfor plan years beginning in 2013 were pub-

lished in Notices 2012–55 and 2013–11,respectively. The three 24-month averagecorporate bond segment rates applicablefor July 2013 without adjustment, and the

adjusted 24-month average segment ratestaking into account the applicable percent-ages of the corresponding 25-year averagesegment rates, are as follows:

24-Month Average Segment RatesNot Adjusted

Adjusted 24-Month Average SegmentRates, Based on Applicable Percentage

of 25-Year Average Rates

For PlanYears

BeginningIn Applicable

MonthFirst

SegmentSecondSegment

ThirdSegment

FirstSegment

SecondSegment

ThirdSegment

2012 July 2013 1.41 4.07 5.11 5.54 6.85 7.52

2013 July 2013 1.41 4.07 5.11 4.94 6.15 6.76

30-YEAR TREASURY SECURITIESINTEREST RATES

Generally for plan years beginningafter 2007, § 431 specifies the mini-mum funding requirements that apply tomultiemployer plans pursuant to § 412.Section 431(c)(6)(B) specifies a minimumamount for the full-funding limitationdescribed in section 431(c)(6)(A), based

on the plan’s current liability. Section431(c)(6)(E)(ii)(I) provides that the inter-est rate used to calculate current liabilityfor this purpose must be no more than 5percent above and no more than 10 percentbelow the weighted average of the ratesof interest on 30-year Treasury securitiesduring the four-year period ending on thelast day before the beginning of the planyear. Notice 88–73, 1988–2 C.B. 383,

provides guidelines for determining theweighted average interest rate. The rateof interest on 30-year Treasury securitiesfor June 2013 is 3.40 percent. The Servicehas determined this rate as the averageof the daily determinations of yield onthe 30-year Treasury bond maturing inMay 2043. The following rates were de-termined for plan years beginning in themonth shown below.

For Plan YearsBeginning in Permissible Range

Month Year

30-YearTreasuryWeightedAverage 90% to 105%

July 2013 3.44 3.09 3.61

MINIMUM PRESENT VALUESEGMENT RATES

In general, the applicable interest ratesunder § 417(e)(3)(D) are segment rates

computed without regard to a 24-monthaverage. Notice 2007–81 provides guide-lines for determining the minimum presentvalue segment rates. Pursuant to that no-tice, the minimum present value segment

rates determined for June 2013 are as fol-lows:

FirstSegment

SecondSegment

ThirdSegment

1.24 4.25 5.43

DRAFTING INFORMATION

The principal author of this notice isTony Montanaro of the Employee Plans,

Tax Exempt and Government EntitiesDivision. Mr. Montanaro may be e-mailedat RetirementPlanQuestions@irs.gov.

2013–31 I.R.B. 118 July 29, 2013

Table I

Monthly Yield Curve for June 2013Derived from June 2013 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

0.5 0.32 20.5 5.13 40.5 5.47 60.5 5.59 80.5 5.65

1.0 0.53 21.0 5.14 41.0 5.47 61.0 5.59 81.0 5.65

1.5 0.74 21.5 5.16 41.5 5.47 61.5 5.59 81.5 5.65

2.0 0.95 22.0 5.17 42.0 5.48 62.0 5.59 82.0 5.65

2.5 1.15 22.5 5.18 42.5 5.48 62.5 5.60 82.5 5.66

3.0 1.34 23.0 5.20 43.0 5.49 63.0 5.60 83.0 5.66

3.5 1.53 23.5 5.21 43.5 5.49 63.5 5.60 83.5 5.66

4.0 1.73 24.0 5.22 44.0 5.50 64.0 5.60 84.0 5.66

4.5 1.93 24.5 5.23 44.5 5.50 64.5 5.60 84.5 5.66

5.0 2.14 25.0 5.24 45.0 5.50 65.0 5.61 85.0 5.66

5.5 2.34 25.5 5.25 45.5 5.51 65.5 5.61 85.5 5.66

6.0 2.55 26.0 5.26 46.0 5.51 66.0 5.61 86.0 5.66

6.5 2.76 26.5 5.27 46.5 5.51 66.5 5.61 86.5 5.66

7.0 2.96 27.0 5.28 47.0 5.52 67.0 5.61 87.0 5.66

7.5 3.15 27.5 5.29 47.5 5.52 67.5 5.61 87.5 5.67

8.0 3.34 28.0 5.30 48.0 5.52 68.0 5.62 88.0 5.67

8.5 3.51 28.5 5.31 48.5 5.53 68.5 5.62 88.5 5.67

9.0 3.68 29.0 5.32 49.0 5.53 69.0 5.62 89.0 5.67

9.5 3.83 29.5 5.33 49.5 5.53 69.5 5.62 89.5 5.67

10.0 3.97 30.0 5.34 50.0 5.54 70.0 5.62 90.0 5.67

10.5 4.10 30.5 5.34 50.5 5.54 70.5 5.62 90.5 5.67

11.0 4.22 31.0 5.35 51.0 5.54 71.0 5.63 91.0 5.67

11.5 4.33 31.5 5.36 51.5 5.55 71.5 5.63 91.5 5.67

12.0 4.43 32.0 5.37 52.0 5.55 72.0 5.63 92.0 5.67

12.5 4.52 32.5 5.37 52.5 5.55 72.5 5.63 92.5 5.67

13.0 4.60 33.0 5.38 53.0 5.55 73.0 5.63 93.0 5.68

13.5 4.67 33.5 5.39 53.5 5.56 73.5 5.63 93.5 5.68

14.0 4.73 34.0 5.39 54.0 5.56 74.0 5.63 94.0 5.68

14.5 4.79 34.5 5.40 54.5 5.56 74.5 5.64 94.5 5.68

15.0 4.83 35.0 5.41 55.0 5.56 75.0 5.64 95.0 5.68

15.5 4.88 35.5 5.41 55.5 5.57 75.5 5.64 95.5 5.68

16.0 4.92 36.0 5.42 56.0 5.57 76.0 5.64 96.0 5.68

16.5 4.95 36.5 5.42 56.5 5.57 76.5 5.64 96.5 5.68

17.0 4.98 37.0 5.43 57.0 5.57 77.0 5.64 97.0 5.68

17.5 5.01 37.5 5.44 57.5 5.58 77.5 5.64 97.5 5.68

18.0 5.03 38.0 5.44 58.0 5.58 78.0 5.64 98.0 5.68

18.5 5.06 38.5 5.45 58.5 5.58 78.5 5.65 98.5 5.68

19.0 5.08 39.0 5.45 59.0 5.58 79.0 5.65 99.0 5.69

19.5 5.10 39.5 5.46 59.5 5.58 79.5 5.65 99.5 5.69

20.0 5.11 40.0 5.46 60.0 5.59 80.0 5.65 100.0 5.69

July 29, 2013 119 2013–31 I.R.B.

Expanded Eligibility forTemporary Housing forIndividuals Displaced bySevere Storms, Flooding, andTornadoes in Oklahoma

Notice 2013–47

This Notice amplifies the relief pro-vided by Notice 2013–39, 2013–25 I.R.B.1252, and Notice 2013–40, 2013–25I.R.B. 1254, to reflect actions by the Fed-eral Emergency Management Agency(FEMA) subsequent to the release of thosenotices.

BACKGROUND

On May 31, 2013, the Internal RevenueService released Notice 2013–39 and No-tice 2013–40, providing emergency hous-ing relief needed as a result of the devasta-tion in Oklahoma caused by severe stormsand tornadoes occurring between May 18,2013, and May 27, 2013. The relief in theNotices covered the time periods and inci-dent types identified in FEMA pronounce-ments through May 27, 2013 (collectivelyreferred to as the FEMA Notice).1 TheFEMA Notice announced that the Presi-dent had issued a major disaster declara-tion for the State of Oklahoma coveringsevere storms and tornadoes beginning onMay 18, 2013, and continuing until May27, 2013. The FEMA Notice also des-ignated certain jurisdictions for Individ-ual Assistance. To be eligible for tempo-rary housing relief, individuals had to havebeen residents of jurisdictions that FEMAdesignated for Individual Assistance, re-gardless of whether the designation oc-curred before or after the release of Notice2013–39 and Notice 2013–40.

Subsequently, on June 11, 2013, andJune 26, 2013, FEMA issued amendmentsto expand the coverage of the FEMA No-tice. In particular, (1) the incident periodfor this disaster was amended to be May18, 2013, through and including June 2,2013; (2) the incident type for the dis-aster was expanded to include flooding;and (3) additional jurisdictions were des-ignated for Individual Assistance. See78 Fed. Reg. 36558 (June 18, 2013);Amendment No. 6 to Notice of a Major

Disaster Declaration, FEMA.gov (June26, 2013), http://www.fema.gov/disas-ter/4117/notices/amendment-no-6. Be-cause the parameters for relief providedfor in Notice 2013–39 and Notice 2013–40are defined by reference to the specificincidents and specific time period set forthin the FEMA Notice, this Notice amplifiesNotice 2013–39 and Notice 2013–40 tocapture the additional incidents and timeperiods that FEMA has designated or willdesignate by amendments to the FEMANotice.

AMPLIFICATION

For purposes of Notice 2013–39 andNotice 2013–40, the definition of the term“Tornadoes” is amplified to include—(1) the entire incident period that FEMAdesignated in the FEMA Notice and allamendments to the FEMA Notice (in-cluding those amendments that FEMAhas made at the time this amplificationis released to the public and those it maymake at a later date), and (2) all incidenttypes covered by the FEMA Notice andall amendments to the FEMA Notice (in-cluding those amendments that FEMA hasmade at the time this amplification is re-leased to the public and those it may makeat a later date).

EFFECTIVE DATE

This Notice is effective May 20, 2013(the effective date of Notices 2013–39 and2013–40).

EFFECT ON OTHER DOCUMENTS

Notice 2013–39 and Notice 2013–40are amplified.

DRAFTING INFORMATION

The principal authors of this No-tice are Spence Hanemann of the Officeof Associate Chief Counsel (FinancialInstitutions & Products) and David Seligof the Office of Associate Chief Counsel(Passthroughs & Special Industries). Forfurther information regarding this Notice,contact Mr. Hanemann at (202) 622–3980(not a toll-free call).

Application of Wash Sale Rulesto Money Market Fund Shares

Notice 2013–48

PURPOSE

This notice proposes a revenue proce-dure describing circumstances in whichthe Internal Revenue Service (IRS) willnot treat a redemption of shares in a moneymarket fund as part of a wash sale under§ 1091 of the Internal Revenue Code. Theproposed revenue procedure provides thatif a taxpayer realizes a loss upon a redemp-tion of certain money market fund sharesand the amount of the loss is not more thana specified percentage of the taxpayer’sbasis in such shares, the IRS will treatsuch loss as not realized in a wash sale.

This proposed guidance is intended tomitigate tax compliance burdens that mayresult from proposed changes in the rulesthat govern the prices at which certainmoney market fund shares are issued andredeemed. The Securities and ExchangeCommission (SEC) has issued proposedregulations to effect these changes. SeeMoney Market Fund Reform, SecuritiesAct Release No. 9408, Investment Advi-sors Act Release No. 3616, InvestmentCompany Act Release No. 30,551, 78 Fed.Reg. 36834 (proposed June 5, 2013). Theproposed revenue procedure is drafted asif the SEC had already adopted final rulesaddressing floating net asset value in sub-stantially the same form as the proposedrules. If those rules are not adopted in sub-stantially the same form as they have beenproposed, the revenue procedure proposedby this notice may not be adopted or maybe adopted in materially modified form.

REQUEST FOR COMMENTS

The Treasury Department and theIRS request comments on all aspects ofthe proposed revenue procedure. Con-sideration will be given to any writtenpublic comments that are submitted onor before October 28, 2013. A signedoriginal and eight (8) copies of publiccomments should be sent by mail to In-ternal Revenue Service, CC:PA:LPD:PR(IRS Notice 2013–48), Room 5203, PO

1 These pronouncements include a May 20, 2013, FEMA Notice (FEMA–4117-DR), 78 Fed. Reg. 36556 (June 18, 2013), and Amendment 2 to that initial notice, 78 Fed. Reg. 34117 (June6, 2013).

2013–31 I.R.B. 120 July 29, 2013

Box 7604, Ben Franklin Station, Wash-ington, DC 20044. Public comments alsomay be hand-delivered Monday throughFriday between the hours of 8 a.m. and4 p.m. to the Courier’s Desk, InternalRevenue Service, 1111 Constitution Av-enue, N.W., Washington, DC 20224, Attn:CC:PA:LPD:PR (IRS Notice 2013–48).Comments also may be transmitted elec-tronically to the following e-mail address:Notice.Comments@irscounsel.treas.gov.Please include “Notice 2013–48” in boththe subject line of the e-mail and the bodyof the comment. All comments will beavailable for public inspection and copy-ing.

DRAFTING INFORMATION

The principal author of this notice isSteven Harrison of the Office of AssociateChief Counsel (Financial Institutions& Products). For further informationregarding this notice, contact Mr. Harrisonat (202) 622–3930 (not a toll-free call).

PROPOSED REVENUE PROCEDURE

SECTION 1. PURPOSE

This revenue procedure describes cir-cumstances in which the Internal RevenueService (IRS) will not treat a redemption ofshares in a money market fund (MMF) aspart of a wash sale for purposes of § 1091of the Internal Revenue Code.

SECTION 2. BACKGROUND

.01 Money Market Funds

(1) An MMF is a type of investmentcompany registered under the InvestmentCompany Act of 1940 (1940 Act) andregulated as a money market fund un-der Rule 2a–7 under the 1940 Act (17C.F.R. § 270.2a–7). Unlike other typesof mutual funds, MMFs have historicallysought to keep stable (typically at $1.00)the prices at which their shares are issuedand redeemed. The types of securitiesthat MMFs are permitted to hold and theshare-pricing and valuation methods spe-cific to MMFs have made stable pricespossible.

(2) To be treated as an MMF, an invest-ment company must meet the requirementsspecified in Rule 2a–7, which, amongother things, establishes limitations as tothe maturity, quality, diversification, andliquidity of an MMF’s investments. Gen-erally, an MMF must hold a diversifiedportfolio of short-term, low-risk securi-ties. The securities that an MMF holdsgenerally result in no more than minimalfluctuations in the MMF’s net asset value.

(3) Previously, an MMF meeting the re-quirements of Rule 2a–7(c) was permittedby that provision to compute its price pershare for purposes of issuance and redemp-tion by using either or both of (a) the amor-tized cost method of valuation and (b) thepenny-rounding method of pricing. Un-der the amortized cost method, an MMF’snet asset value is determined by treatingthe fund’s portfolio securities as having avalue equal not to their then-current fairmarket value but rather to their acquisi-tion cost, adjusted for amortization of pre-mium or accretion of discount. Under thepenny-rounding method, an MMF’s net as-set value per share is rounded to the near-est one percent. These methods generallyenabled MMFs to maintain constant shareprices except in situations in which theamortized cost method or penny-round-ing method resulted in a variation in shareprice that exceeded one-half of one percent(commonly called “breaking the buck”).

(4) The perceived safety and simplicityof MMFs have led to their widespread useas cash management vehicles. It is there-fore common for investors to purchase andredeem MMF shares frequently. An MMFis often used as a sweep account into whichcash is automatically deposited on a dailybasis. MMFs generally declare dividendsdaily and distribute them monthly. MMFshareholders typically reinvest these distri-butions automatically in the MMF.

(5) The Securities and Exchange Com-mission (SEC) has limited the situationsin which an MMF is permitted to use theamortized cost method to those in whichother mutual funds are permitted to usethis method. [Cite final SEC rules.] Inaddition, the SEC has restricted the useof the penny-rounding method to govern-ment MMFs and retail MMFs.1 In the case

of an MMF that is neither a governmentMMF nor a retail MMF, Rule 2a–7 nowrequires the MMF to value its portfolio se-curities using market-based factors and toissue and redeem shares at a price that isrounded to the nearest basis point, or oneone-hundredth of one percent (basis pointrounding).2

(6) An MMF that uses market factorsto value its securities and uses basis pointrounding to price its shares for issuanceand redemption will have a share price thatchanges frequently, or “floats” (a floating-NAV MMF). A floating-NAV MMF willtherefore resemble other mutual funds thatare not MMFs, except for the restrictionson the assets that an MMF is permitted tohold and the unique role that MMFs havehistorically occupied.

(7) Constant share prices have simpli-fied the taxation of MMF share transac-tions because a shareholder does not real-ize gain or loss when a share is redeemedfor an amount equal to its basis. Share-holders will typically realize gain or loss,however, on redemptions of floating-NAVMMF shares. In certain circumstances, aloss realized on the redemption of an MMFshare may implicate the wash sale rules of§ 1091, as discussed in section 2.02 of thisrevenue procedure.

(8) Sections 6045, 6045A, and 6045Bestablish certain reporting requirementsrelating to securities. Each of thosesections has an exception for an MMFthat stabilizes its share price at a constantamount that approximates its issue priceor the price at which it was originally soldto the public. See §§ 1.6045–1(c)(3)(vi),1.6045A–1(a)(1)(v), and 1.6045B–1(a)(5)of the Income Tax Regulations. A float-ing-NAV MMF that does not stabilize itsshare price at a constant amount is not eli-gible for those exceptions. Sections 6045,6045A, and 6045B, however, also containexceptions for certain transactions in-volving exempt recipients, which includesubchapter C corporations and certainother entities. See §§ 1.6045–1(c)(3)(i),1.6045A–1(a)(1)(iii), and 1.6045B–1(a)(4). Most shareholders offloating-NAV MMFs are expected tobe exempt recipients, which will reduce

1 A government MMF is an MMF that maintains at least 80 percent of its assets in cash and certain government securities and repurchase agreements. A retail MMF is an MMF that limitseach shareholder’s redemptions to $1 million per business day.

2 The SEC has also amended Rule 2a–7 to require every MMF to disclose daily the fund’s current net asset value (NAV) per share rounded to the nearest basis point, but government and retailMMFs are not required to use basis point rounding to issue and redeem shares.

July 29, 2013 121 2013–31 I.R.B.

reporting obligations for transactions infloating-NAV MMF shares.

.02 Wash Sale Rules

(1) Section 1091(a) disallows a loss re-alized by a taxpayer on a sale or other dis-position of shares of stock or securities if,within a period beginning 30 days beforeand ending 30 days after the date of suchsale or disposition, the taxpayer acquires(by purchase or by an exchange on whichthe entire amount of gain or loss is recog-nized by law), or enters into a contract oroption to so acquire, substantially identicalstock or securities (unless the taxpayer is adealer in stock or securities and the loss issustained in a transaction made in the ordi-nary course of such business).

(2) Under § 1091(d), a taxpayer’s ba-sis in the property the acquisition of whichresulted in the nondeductibility of a lossunder § 1091(a) equals the basis of thestock or securities disposed of, increasedor decreased to take into account any dif-ference between the price at which the re-placement property was acquired and theprice at which the original stock or securi-ties were disposed of.

(3) A shareholder that redeems sharesin a floating-NAV MMF may realize a losson the redemption. Moreover, becausemany MMF shareholders engage in fre-quent purchases of MMF shares (includ-ing purchases made as a result of sweeparrangements and reinvestments of distri-butions), a shareholder that realizes a losson a redemption of MMF shares will oftenacquire shares in that MMF within 30 daysbefore or after the redemption.

(4) Redemptions of shares of MMFs,which have relatively stable values evenwhen share prices float, do not give rise tothe concern that § 1091 is meant to address.Moreover, given the expected volume oftransactions in MMF shares, tracking washsales of MMF shares will present share-holders of floating-NAV MMFs with sig-nificant practical challenges. Therefore, itis in the interest of sound tax administra-tion to prescribe circumstances in whichthe IRS will not treat a redemption of theseMMF shares as part of a wash sale under§ 1091. Those circumstances are set forthin sections 3 and 4 of this revenue proce-dure.

SECTION 3. SCOPE

This revenue procedure applies to aredemption of one or more shares in aninvestment company registered under the1940 Act if—

.01 The investment company is regu-lated as an MMF under Rule 2a–7 andholds itself out to the public as an MMF;and

.02 At the time of the redemption, theinvestment company is a floating-NAVMMF.

SECTION 4. APPLICATION

.01 If a redemption is within the scopeof section 3 of this revenue procedure andresults in a de minimis loss, the IRS willnot treat such redemption as part of a washsale. Therefore, § 1091(a) will not disal-low the deduction for the resulting de min-imis loss in the year realized and § 1091(d)will not cause the basis of any property tobe determined by reference to the basis ofthe redeemed shares.

.02 Solely for purposes of section 4.01of this revenue procedure, the term de min-imis loss means a loss realized upon a re-demption of a share of stock of an MMFthe amount of which (expressed as a pos-itive number) is not more than one half ofone percent (0.5%) of the taxpayer’s basisin that share.

.03 In determining whether a loss is ade minimis loss within the meaning of sec-tion 4.02 of this revenue procedure, a tax-payer must use the same basis determina-tion method and lot selection method un-der § 1012 and the regulations thereun-der that the taxpayer uses to determine theamount of its gain or loss for purposes ofcalculating taxable income.

EXAMPLES

.01 Example 1. (1) Fund is an MMF that meetsthe requirements of Rule 2a–7 under the 1940 Actand holds itself out to the public as an MMF. Fundis a floating-NAV MMF at all times during year 1.Before September 1 of year 1, Taxpayer, a domesticcorporation that is taxable under subchapter C ofChapter 1 of the Internal Revenue Code, holds noshares of Fund. On September 1 of year 1, Taxpayerinvests $1,000,000.00 in Fund when Fund’s priceper share is $1.0000, receiving in return 1,000,000shares of Fund. On October 1 of year 1, Taxpayerinvests an additional $250,000.00 in Fund whenFund’s price per share is $1.0005, receiving in return249,875.06 shares, which Taxpayer holds in the same

account. On October 15 of year 1, Taxpayer redeems$200,000.00 of Fund shares from the same accountwhen Fund’s price per share is $0.9980. Taxpayerengages in no other transactions in Fund shares orany substantially identical shares or securities duringyear 1. Fund is a regulated investment companywithin the meaning of § 1.1012–1(e)(5) and Taxpayeruses the average basis method to determine the basisof its shares.

(2) Taxpayer’s average basis in each Fund shareincreased to $1.0001 when Taxpayer purchased249,875.06 shares on October 1 ($1,250,000.00 to-tal purchase price divided by 1,249,875.06 shares).Based on Fund’s market NAV on October 15,Taxpayer redeemed 200,400.80 shares to receive$200,000.00 in proceeds. Taxpayer therefore realizesa loss of $420.83 on the October 15 redemption (pro-ceeds of $200,000.00 minus basis of $200,420.83 inredeemed shares), or a loss of $.0021 per share (pro-ceeds of $.9980 per share minus basis of $1.0001 pershare). This loss is a de minimis loss under section4.02 of this revenue procedure because the loss of$.0021 per share is less than $.0050 per share (.5%of $1.0001). Therefore, under section 4.01 of thisrevenue procedure, the IRS will not treat the loss oneach Fund share as subject to current disallowanceunder § 1091.

.02 Example 2. (1) The facts are the same as inExample 1, except that Fund’s price per share at thetime of the October 15 redemption is $0.9940.

(2) As in Example 1, Taxpayer’s average basisin each Fund share is $1.0001 after the second pur-chase. Based on Fund’s market NAV on October15, Taxpayer redeemed 201,207.24 shares to receive$200,000.00 in proceeds. Taxpayer therefore real-izes a loss of $1,227.36 on the October 15 redemption(proceeds of $200,000 minus basis of $201,227.36 inredeemed shares), or a loss of $.0061 per share (pro-ceeds of $.9940 per share minus basis of $1.0001 pershare). Because the loss of $.0061 per share is morethan $.0050 per share (.5% of $1.0001), Taxpayer’sloss is not a de minimis loss under section 4.02 ofthis revenue procedure and is subject to current disal-lowance under § 1091. The entire loss is disallowedunder § 1091(a) because Taxpayer purchased morethan 201,207.24 shares on October 1.

(3) Taxpayer’s basis in its Fund shares afterthe application of § 1091(a) is determined as fol-lows. First, Taxpayer’s basis in 201,207.24 of the249,875.06 shares it purchased on October 1 is in-creased to $202,454.71 (Taxpayer’s $201,227.36basis in the sold shares, increased by $1,227.36,which is the difference between the $201,227.36basis in the replacement shares and the $200,000.00received for the sold shares). Second, the averagebasis of all Fund shares held by Taxpayer is deter-mined by dividing Taxpayer’s total basis in its Fundshares of $1,050,000.00 (the sum of the $202,454.71basis in the replacement shares computed above andthe $847,545.29 basis in the remaining 847,460.58shares) by Taxpayer’s total remaining Fund sharesof 1,048,667.82. Accordingly, Taxpayer’s averagebasis in each Fund share on October 15, year 1 is$1.0013.

SECTION 5. EFFECTIVE DATE

[RESERVED]

2013–31 I.R.B. 122 July 29, 2013

SECTION 6. DRAFTINGINFORMATION

The principal author of this rev-enue procedure is Steven Harrison of

the Office of Associate Chief Counsel(Financial Institutions & Products). Forfurther information regarding this revenueprocedure contact Mr. Harrison at (202)622–3930 (not a toll-free call).

July 29, 2013 123 2013–31 I.R.B.

Definition of TermsRevenue rulings and revenue procedures(hereinafter referred to as “rulings”) thathave an effect on previous rulings use thefollowing defined terms to describe the ef-fect:

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position is be-ing extended to apply to a variation of thefact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds that thesame principle also applies to B, the earlierruling is amplified. (Compare with modi-fied, below).

Clarified is used in those instanceswhere the language in a prior ruling is be-ing made clear because the language hascaused, or may cause, some confusion.It is not used where a position in a priorruling is being changed.

Distinguished describes a situationwhere a ruling mentions a previously pub-lished ruling and points out an essentialdifference between them.

Modified is used where the substanceof a previously published position is beingchanged. Thus, if a prior ruling held that aprinciple applied to A but not to B, and thenew ruling holds that it applies to both A

and B, the prior ruling is modified becauseit corrects a published position. (Comparewith amplified and clarified, above).

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions. This term is most commonly used ina ruling that lists previously published rul-ings that are obsoleted because of changesin laws or regulations. A ruling may alsobe obsoleted because the substance hasbeen included in regulations subsequentlyadopted.

Revoked describes situations where theposition in the previously published rulingis not correct and the correct position isbeing stated in a new ruling.

Superseded describes a situation wherethe new ruling does nothing more than re-state the substance and situation of a previ-ously published ruling (or rulings). Thus,the term is used to republish under the1986 Code and regulations the same po-sition published under the 1939 Code andregulations. The term is also used whenit is desired to republish in a single rul-ing a series of situations, names, etc., thatwere previously published over a period oftime in separate rulings. If the new rul-ing does more than restate the substance

of a prior ruling, a combination of termsis used. For example, modified and su-perseded describes a situation where thesubstance of a previously published rulingis being changed in part and is continuedwithout change in part and it is desired torestate the valid portion of the previouslypublished ruling in a new ruling that is selfcontained. In this case, the previously pub-lished ruling is first modified and then, asmodified, is superseded.

Supplemented is used in situations inwhich a list, such as a list of the names ofcountries, is published in a ruling and thatlist is expanded by adding further names insubsequent rulings. After the original rul-ing has been supplemented several times, anew ruling may be published that includesthe list in the original ruling and the ad-ditions, and supersedes all prior rulings inthe series.

Suspended is used in rare situations toshow that the previous published rulingswill not be applied pending some futureaction such as the issuance of new oramended regulations, the outcome of casesin litigation, or the outcome of a Servicestudy.

AbbreviationsThe following abbreviations in current useand formerly used will appear in materialpublished in the Bulletin.

A—Individual.Acq.—Acquiescence.B—Individual.BE—Beneficiary.BK—Bank.B.T.A.—Board of Tax Appeals.C—Individual.C.B.—Cumulative Bulletin.CFR—Code of Federal Regulations.CI—City.COOP—Cooperative.Ct.D.—Court Decision.CY—County.D—Decedent.DC—Dummy Corporation.DE—Donee.Del. Order—Delegation Order.DISC—Domestic International Sales Corporation.DR—Donor.E—Estate.EE—Employee.E.O.—Executive Order.

ER—Employer.ERISA—Employee Retirement Income Security Act.EX—Executor.F—Fiduciary.FC—Foreign Country.FICA—Federal Insurance Contributions Act.FISC—Foreign International Sales Company.FPH—Foreign Personal Holding Company.F.R.—Federal Register.FUTA—Federal Unemployment Tax Act.FX—Foreign corporation.G.C.M.—Chief Counsel’s Memorandum.GE—Grantee.GP—General Partner.GR—Grantor.IC—Insurance Company.I.R.B.—Internal Revenue Bulletin.LE—Lessee.LP—Limited Partner.LR—Lessor.M—Minor.Nonacq.—Nonacquiescence.O—Organization.P—Parent Corporation.PHC—Personal Holding Company.PO—Possession of the U.S.PR—Partner.

PRS—Partnership.PTE—Prohibited Transaction Exemption.Pub. L.—Public Law.REIT—Real Estate Investment Trust.Rev. Proc.—Revenue Procedure.Rev. Rul.—Revenue Ruling.S—Subsidiary.S.P.R.—Statement of Procedural Rules.Stat.—Statutes at Large.T—Target Corporation.T.C.—Tax Court.T.D. —Treasury Decision.TFE—Transferee.TFR—Transferor.T.I.R.—Technical Information Release.TP—Taxpayer.TR—Trust.TT—Trustee.U.S.C.—United States Code.X—Corporation.Y—Corporation.Z —Corporation.

2013–31 I.R.B. i July 29, 2013

Numerical Finding List1

Bulletins 2013–27 through 2013–31

Announcements:

2013-35, 2013-27 I.R.B. 46

Notices:

2013-41, 2013-29 I.R.B. 60

2013-42, 2013-29 I.R.B. 61

2013-43, 2013-31 I.R.B. 113

2013-44, 2013-29 I.R.B. 62

2013-45, 2013-31 I.R.B. 116

2013-46, 2013-31 I.R.B. 117

2013-47, 2013-31 I.R.B. 120

2013-48, 2013-31 I.R.B. 120

Revenue Procedures:

2013-28, 2013-27 I.R.B. 28

2013-32, 2013-28 I.R.B. 55

Revenue Rulings:

2013-15, 2013-28 I.R.B. 47

Treasury Decisions:

9620, 2013-27 I.R.B. 1

9621, 2013-28 I.R.B. 49

9622, 2013-30 I.R.B. 64

9623, 2013-30 I.R.B. 73

9624, 2013-31 I.R.B. 86

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2013–1 through 2013–26 is in Internal Revenue Bulletin2013–26, dated June 24, 2013.

July 29, 2013 ii 2013–31 I.R.B.

Finding List of Current Actions onPreviously Published Items1

Bulletins 2013–27 through 2013–31

Notices:

2013-39

Amplified by

Notice 2013-47, 2013-31 I.R.B. 120

2013-40

Amplified by

Notice 2013-47, 2013-31 I.R.B. 120

Revenue Procedures:

81-60

Modified by

Rev. Proc. 2013-32, 2013-28 I.R.B. 55

83-59

Modified by

Rev. Proc. 2013-32, 2013-28 I.R.B. 55

86-42

Modified by

Rev. Proc. 2013-32, 2013-28 I.R.B. 55

90-52

Modified by

Rev. Proc. 2013-32, 2013-28 I.R.B. 55

96-30

Modified by

Rev. Proc. 2013-32, 2013-28 I.R.B. 55

2003-48

Obsoleted in part and superseded in part by

Rev. Proc. 2013-32, 2013-28 I.R.B. 55

2009-25

Pilot program discontinued by

Rev. Proc. 2013-32, 2013-28 I.R.B. 55

2012-25

Obsoleted in part by

Rev. Proc. 2013-28, 2013-27 I.R.B. 28

2013-1

Amplified and modified by

Rev. Proc. 2013-32, 2013-28 I.R.B. 55

2013-3

Amplified and modified by

Rev. Proc. 2013-32, 2013-28 I.R.B. 55

Treasury Decisions:

9612

Corrected by

Ann. 2013-35, 2013-27 I.R.B. 46

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2013–1 through 2013–26 is in Internal Revenue Bulletin 2013–26, dated June 24, 2013.

2013–31 I.R.B. iii July 29, 2013

INDEXInternal Revenue Bulletins 27 through 31

The abbreviation and number in parenthesis following the index entryrefer to the specific item; numbers in roman and italic type followingthe parentheses refer to the Internal Revenue Bulletin in which the itemmay be found and the page number on which it appears.

Key to Abbreviations:Ann AnnouncementCD Court DecisionDO Delegation OrderEO Executive OrderPL Public LawPTE Prohibited Transaction ExemptionRP Revenue ProcedureRR Revenue RulingSPR Statement of Procedural RulesTC Tax ConventionTD Treasury DecisionTDO Treasury Department Order

EMPLOYEE PLANSAccommodations for nonprofit organizations with religious ob-

jections to providing contraceptive services (TD 9624) 31, 86Exemption for religious employers from the requirement to pro-

vide coverage for contraceptive services (TD 9624) 31, 86Regulations:

26 CFR 54.9815–2713, added (certain preventive services un-der the ACA) (TD 9624) 31, 86

26 CFR 54.9815–2713A, added (certain preventive servicesunder the ACA) (TD 9624) 31, 86

Weighted average interest rates:Segment rates for:

July 2013 (Notice 46) 31, 117Wellness regulations related to rewards, plan design, and alter-

natives to avoid prohibited discrimination (TD 9620) 27, 1

EXCISE TAXAccommodations for nonprofit organizations with religious ob-

jections to providing contraceptive services (TD 9624) 31, 86Exemption for religious employers from the requirement to pro-

vide coverage for contraceptive services (TD 9624) 31, 86Indoor tanning services; excise taxes (TD 9621) 28, 49Regulations:

26 CFR 40.0–1 (amended); 40.6302(c)–1 (amended) (indoortanning services) (TD 9621) 28, 49

26 CFR 54.9815–2713, added (certain preventive services un-der the ACA) (TD 9624) 31, 86

26 CFR 54.9815–2713A, added (certain preventive servicesunder the ACA) (TD 9624) 31, 86

Transition relief for 2014 under sections 6055, 6056, and 4980H(information reporting and employer shared responsibility pro-visions) (Notice 45) 31, 116

EXCISE TAX—Cont.Wellness regulations related to rewards, plan design, and alter-

natives to avoid prohibited discrimination (TD 9620) 27, 1

INCOME TAXApplication of section 108(i) to partnerships and S corporations

(TD 9623) 30, 73Average area purchase price safe-harbor guidance for 2013 (RP

28) 27, 28Croatian per se entity (Notice 44) 29, 62Deferred discharge of indebtedness income of corporations (TD

9622) 30, 64Deferred original issue discount deductions (TD 9622) 30, 64Interest:

Investment:Federal short-term, mid-term, and long-term rates for:

July 2013 (RR 15) 28, 47Letter rulings that address issues presented in transactions de-

scribed in sections 332, 351, 355, 368, and 1036 (RP 32) 28,55

Low-income housing tax credit (Notice 47) 31, 120Noncompensatory partnership options; correcting TD 9612 (Ann

35) 27, 46Premium tax credit, minimum essential coverage (Notice 41) 29,

60Qualified exempt facility bonds (Notice 47) 31, 120Qualified residential rental projects (Notice 47) 31, 120Regulations:

26 CFR 1.108(i)–0, 26 CFR 1.108(i)–1, and 26 CFR1.108(i)–3 added (deferred discharge of indebtedness in-come of corporations and deferred original issue discountdeductions) (TD 9622) 30, 64

26 CFR 1.108(i)–2, added; 1.108(i)–2T, removed (applicationof section 108(i) to partnerships and S corporations) (TD9623) 30, 73

Section 5000A transition relief for employees eligible to enrollin non-calendar year health plans (Notice 42) 29, 61

Timeline for implementation of the requirements under sections1471–1474, commonly known as FATCA (Notice 43) 31, 113

Wash sales, money market fund shares (Notice 48) 31, 120

July 29, 2013 iv 2013–31 I.R.B.

Internal Revenue ServiceWashington, DC 20224Official BusinessPenalty for Private Use, $300

INTERNAL REVENUE BULLETINThe Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue

Bulletins are available at www.irs.gov/irb/.

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2008–2 edition.

INTERNAL REVENUE BULLETINS ON CD-ROMInternal Revenue Bulletins are available annually as part of Publication 1796 (Tax Products CD-ROM). The CD-ROM can be

purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders)or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.

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