INCOME TAX EXCISE TAX - IRS tax forms

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 2016–66, page 745.This notice identifies certain “micro-captive transactions” andsubstantially similar transactions as transactions of interest forpurposes of § 1.6011–4(b)(6) of the Income Tax Regulationsand §§ 6111 and 6112 of the Internal Revenue Code. Thisnotice also alerts persons involved in such transactions tocertain responsibilities and penalties that may arise from theirinvolvement with these transactions.

EMPLOYEE PLANS

Notice 2016–67, page 748.The notice addresses the application of the market rate ofreturn limitation of §411(b)(5)(B)(i) and §1.411(b)(5)–1(d) to apension equity plan (PEP) that provides for implicit interest. Inaddition, this notice requests comments on potential proposedregulations that would subject implicit interest PEPs to themarket rate of return limitation.

T.D. 9791, page 734.This document contains final regulations regarding the defini-tion of short-term, limited-duration insurance for purposes ofthe exclusion from the definition of individual health insurancecoverage, and standards for travel insurance and supplementalhealth insurance coverage to be considered excepted benefits.This document also amends a reference in the final regulationsrelating to the prohibition on lifetime and annual dollar limits.

EXCISE TAX

T.D. 9791, page 734.This document contains final regulations regarding the defini-tion of short-term, limited-duration insurance for purposes ofthe exclusion from the definition of individual health insurancecoverage, and standards for travel insurance and supplementalhealth insurance coverage to be considered excepted benefits.This document also amends a reference in the final regulationsrelating to the prohibition on lifetime and annual dollar limits.

Finding Lists begin on page ii.

Bulletin No. 2016–47November 21, 2016

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 allsubstantive rulings necessary to promote a uniform applicationof the tax laws, including all rulings that supersede, revoke,modify, or amend any of those previously published in theBulletin. All published rulings apply retroactively unless other-wise indicated. Procedures relating solely to matters of internalmanagement are not published; however, statements of inter-nal practices and procedures that affect the rights and dutiesof taxpayers are published.

Revenue rulings represent the conclusions of the Service onthe application of the law to the pivotal facts stated in therevenue ruling. In those based on positions taken in rulings totaxpayers or technical advice to Service field offices, identify-ing details and information of a confidential nature are deletedto prevent unwarranted invasions of privacy and to comply withstatutory requirements.

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 cautioned

against 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, TaxConventions and Other Related Items, and Subpart B, Legisla-tion 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 Sec-retary (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 index forthe 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.

November 21, 2016 Bulletin No. 2016–47

Part I. Rulings and Decisions Under the Internal Revenue Codeof 198626 CFR 54.9801–2 Definitions/54.9815–2711 Nolifetime or annual limits/54.9831–1 Special rulesrelating to group health plans/54.9833–1 EffectiveDate (All 26)

T.D. 9791

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 54

DEPARTMENT OF LABOREmployee Benefits SecurityAdministration29 CFR Part 2590

DEPARTMENT OF HEALTHAND HUMAN SERVICES45 CFR Parts 144, 146, 147,and 148CMS–9932–F

Excepted Benefits; Lifetimeand Annual Limits; and Short-Term, Limited-DurationInsurance

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 contains fi-nal regulations regarding the definition ofshort-term, limited-duration insurance forpurposes of the exclusion from the defini-tion of individual health insurance cover-age, and standards for travel insurance and

supplemental health insurance coverage tobe considered excepted benefits. This doc-ument also amends a reference in the finalregulations relating to the prohibition onlifetime and annual dollar limits.

DATES: Effective date. These final regu-lations are effective on December 30,2016.Applicability date. These final regulationsapply to group health plans and healthinsurance issuers beginning on the firstday of the first plan year (or, in the indi-vidual market, the first day of the firstpolicy year) beginning on or after January1, 2017.

FOR FURTHER INFORMATIONCONTACT: Elizabeth Schumacher orMatthew Litton of the Department of La-bor, at 202-693-8335, Karen Levin, Inter-nal Revenue Service, Department of theTreasury, at (202) 317-5500, DavidMlawsky or Cam Clemmons, Centers forMedicare & Medicaid Services, Depart-ment of Health and Human Services, at410-786-1565.Customer Service Information: Individu-als interested in obtaining informationfrom the Department of Labor concerningemployment–based health coverage lawsmay call the Employee Benefits SecurityAdministration (EBSA) Toll-Free Hot-line, at 1-866-444-EBSA (3272) or visitthe Department of Labor’s website (http://www.dol.gov/ebsa). In addition, informa-tion from the Department of Health andHuman Services (HHS) on privatehealth insurance for consumers can befound on the Centers for Medicare &Medicaid Services (CMS) website(www.cms.gov/cciio) and information

on health reform can be found atwww.HealthCare.gov.

SUPPLEMENTARY INFORMATION:

I. Background

The Health Insurance Portability andAccountability Act of 1996 (HIPAA),Public Law 104–191 (110 Stat. 1936),added title XXVII of the Public HealthService Act (PHS Act), part 7 of the Em-ployee Retirement Income Security Act of1974 (ERISA), and Chapter 100 of theInternal Revenue Code (the Code), pro-viding portability and nondiscriminationrules with respect to health coverage.These provisions of the PHS Act, ERISA,and the Code were later augmented byother consumer protection laws, includingthe Mental Health Parity Act of 1996,1 thePaul Wellstone and Pete Domenici MentalHealth Parity and Addiction Equity Act of2008,2 the Newborns’ and Mothers’Health Protection Act,3 the Women’sHealth and Cancer Rights Act,4 the Ge-netic Information Nondiscrimination Actof 2008,5 the Children’s Health InsuranceProgram Reauthorization Act of 2009,6

Michelle’s Law,7 and the Patient Protec-tion and Affordable Care Act, as amendedby the Health Care and Education Recon-ciliation Act of 2010 (Affordable CareAct).8

The Affordable Care Act reorganizes,amends, and adds to the provisions of partA of title XXVII of the PHS Act relatingto group health plans and health insuranceissuers in the group and individual mar-kets. For this purpose, the term “grouphealth plan” includes both insured and

1Public Law 104–204, 110 Stat. 2944 (September 26, 1996).

2Public Law 110–343, 122 Stat. 3881 (October 3, 2008).

3Public Law 104–204, 110 Stat. 2935 (September 26, 1996).

4Public Law 105–277, 112 Stat. 2681–436 (October 21, 1998).

5Public Law 110–233, 122 Stat. 881 (May 21, 2008).

6Public Law 111–3, 123 Stat. 65 (February 4, 2009).

7Public Law 110–381, 122 Stat. 4081 (October 9, 2008).

8The Patient Protection and Affordable Care Act, Public Law 111–148, was enacted on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010, Public Law 111–152,was enacted on March 30, 2010. (These statutes are collectively known as the “Affordable Care Act”.)


self–insured group health plans.9 The Af-fordable Care Act added section 715(a)(1)of ERISA and section 9815(a)(1) of theCode to incorporate the provisions of partA of title XXVII of the PHS Act (gener-ally, sections 2701 through 2728 of thePHS Act) into ERISA and the Code tomake them applicable to group healthplans and health insurance issuers provid-ing health insurance coverage in connec-tion with group health plans.

II. Overview of the Final Regulations

On June 10, 2016, the Departments ofLabor, Health and Human Services andthe Treasury (the Departments10) issuedproposed regulations with respect to ex-patriate health plans, expatriate healthplan issuers, and qualified expatriates; re-quirements for travel insurance, similarsupplemental coverage, and hospital in-demnity or other fixed indemnity insur-ance to be excepted benefits; the prohibi-tion on lifetime and annual limits; andshort-term, limited-duration insurance.11

After consideration of comments on theproposed regulations, the Departments arepublishing final regulations regardingshort-term, limited duration insurance,travel insurance, similar supplementalcoverage, and lifetime and annual limits.The Departments intend to address hospi-tal indemnity or other fixed indemnity in-surance and expatriate health plans in fu-ture rulemaking, taking into accountcomments received on these issues.12

On July 20, 2015, the Internal RevenueService published Notice 2015–43, 2015–29IRB 73, to provide interim guidance withrespect to the treatment of expatriatehealth plans, expatriate health plan issu-ers, and employers in their capacity asplan sponsors of expatriate health plans,as defined in the Expatriate HealthCoverage Clarification Act of 2014

(EHCCA).13 The interim guidance in No-tice 2015–43 generally allows a taxpayerto apply the requirements of the EHCCAusing a reasonable good faith interpreta-tion of the EHCCA until further guidanceis issued, except as otherwise specificallyprovided with respect to the health insur-ance providers fee under section 9010 ofthe Affordable Care Act. Notice 2015–29provided interim guidance pertaining tothe fee under section 9010 for calendaryears 2014 and 2015, and Notice 2016–14provided guidance pertaining to the feefor calendar year 2016. Additionally, thepreamble to the Departments’ proposedregulations provides that issuers, employ-ers, administrators, and individuals arepermitted to rely on the proposed regula-tions pending the applicability date of fi-nal regulations in the Federal Register.14

Until final regulations are issued and ef-fective, this reliance rule as well as theinterim guidance in Notice 2015–43 re-main in effect.

A. Short-Term, Limited-DurationInsurance

Short-term, limited-duration insuranceis a type of health insurance coverage thatis designed to fill temporary gaps in cov-erage when an individual is transitioningfrom one plan or coverage to another planor coverage. Although short-term,limited-duration insurance is not an ex-cepted benefit, it is similarly exempt fromPHS Act requirements because it is notindividual health insurance coverage. Sec-tion 2791(b)(5) of the PHS Act providesthat the term “individual health insurancecoverage” means health insurance cover-age offered to individuals in the individualmarket, but does not include short-term,limited-duration insurance. The PHS Actdoes not define short-term, limited-

duration insurance. Under current regula-tions, short-term, limited-duration insur-ance means “health insurance coverageprovided pursuant to a contract with anissuer that has an expiration date specifiedin the contract (taking into account anyextensions that may be elected by the pol-icyholder without the issuer’s consent)that is less than 12 months after the orig-inal effective date of the contract.”15

Before enactment of the AffordableCare Act, short-term, limited-duration in-surance was an important means for indi-viduals to obtain health coverage whentransitioning from one job to another (andfrom one group health plan to another) orwhen faced with other similar situations.However, with guaranteed availability ofcoverage and special enrollment periodrequirements in the individual health in-surance market under the Affordable CareAct, individuals can purchase coveragewith the protections of the AffordableCare Act to fill in the gaps in coverage.

The Departments have become awarethat short-term, limited-duration insur-ance is being sold in situations other thanthose that the exception from the defini-tion of individual health insurance cover-age was initially intended to address.16 Insome instances, individuals are purchas-ing this coverage as their primary form ofhealth coverage and, contrary to the intentof the 12-month coverage limitation in thecurrent definition of short-term, limited-duration insurance, some issuers are pro-viding renewals of the coverage that ex-tend the duration beyond 12 months.Because short-term, limited-duration in-surance is exempt from certain consumerprotections, the Departments are con-cerned that these policies may have sig-nificant limitations, such as lifetime andannual dollar limits on essential healthbenefits (EHB) and pre-existing condition

9The term “group health plan” is used in title XXVII of the PHS Act, part 7 of ERISA, and Chapter 100 of the Code, and is distinct from the term “health plan,” as used in other provisionsof title I of the Affordable Care Act. The term “health plan” as used in other provisions of title I of the Affordable Care Act does not include self–insured group health plans.

10Note, however, that in sections under headings listing only two of the three Departments, the term “Departments” generally refers only to the two Departments listed in the heading.

1181 FR 38019 (June 10, 2016).

12The preamble to the proposed regulations also invited public comment on insurance coverage of specified diseases or illnesses as excepted benefits. While not addressed in this rulemaking,the Departments may address this issue in future regulations or guidance.

13Division M of the Consolidated and Further Continuing Appropriations Act, 2015, Public Law 113–235.

1481 FR 38019, 38033 (June 10, 2016).

1526 CFR 54.9801–2, 29 CFR 2590.701–2, 45 CFR 144.103.

16See e.g., Mathews, Anna W. “Sales of Short–Term Health Policies Surge,” The Wall Street Journal April 10, 2016, available at http://www.wsj.com/articles/sales-of-short-term-health-policies-surge-1460328539.

Bulletin No. 2016–47 November 21, 2016735

exclusions, and therefore may not providemeaningful health coverage. Further, be-cause these policies can be medically un-derwritten based on health status, health-ier individuals may be targeted for thistype of coverage, thus adversely impact-ing the risk pool for Affordable Care Act–compliant coverage.

To address the issue of short-term,limited-duration insurance being sold as atype of primary coverage, the Depart-ments proposed regulations to revise thedefinition of short-term, limited-durationinsurance so that the coverage must beless than three months in duration, includ-ing any period for which the policy maybe renewed. The proposed regulationsalso included a requirement that a noticemust be prominently displayed in thecontract and in any application materialsprovided in connection with enrollmentin such coverage with the following lan-guage: THIS IS NOT QUALIFYINGHEALTH COVERAGE (“MINIMUMESSENTIAL COVERAGE”) THATSATISFIES THE HEALTH COVER-AGE REQUIREMENT OF THE AF-FORDABLE CARE ACT. IF YOUDON’T HAVE MINIMUM ESSEN-TIAL COVERAGE, YOU MAY OWEAN ADDITIONAL PAYMENT WITHYOUR TAXES.

In addition to proposing to reduce thelength of short-term, limited-duration in-surance to less than three months, the pro-posed regulations modified the permittedcoverage period to take into account ex-tensions made by the policyholder “withor without the issuer’s consent.” Thismodification was intended to address theDepartments’ concern that some issuersare taking liberty with the current defini-tion of short-term, limited-duration insur-ance—either by automatically renewingsuch policies or having a simplified reap-plication process with the result being thatsuch coverage, which does not contain theimportant protections of the AffordableCare Act, lasts longer than 12 months and

serves as an individual’s primary healthcoverage.

The Departments received a number ofcomments relating to the treatment ofshort-term, limited-duration insurance.Several commenters supported the pro-posed rules and the reasoning behindthem, noting that short-term, limited-duration insurance is not subject to thesame consumer protections as major med-ical coverage and can discriminate basedon health status by recruiting healthierconsumers to the exclusion of sicker con-sumers. These commenters suggested theproposed rules would limit the number ofconsumers relying on short-term, limited–duration insurance as their primary formof coverage and improve the AffordableCare Act’s single risk pool.

Some commenters requested that theDepartments go further and prohibit issu-ers from offering short-term, limited-duration insurance to consumers whohave previously purchased this type ofcoverage to prevent consumers fromstringing together coverage under policiesoffered by the same or different issuers.However, in the Departments’ view, sucha restriction is not warranted. The individ-ual shared responsibility provision of theCode17, which generally requires individ-uals to obtain minimum essential cover-age in order to avoid an additional pay-ment with their taxes, provides sufficientincentive to discourage consumers frompurchasing multiple successive short-term, limited-duration insurance policies.The added notice requirement ensures thatindividuals purchasing such policies areaware of the individual shared responsi-bility requirement and its potential impli-cations. Furthermore, such a prohibitionwould be difficult for State regulators toenforce, since prior coverage of a con-sumer would have to be tracked.

Other commenters expressed generalopposition to the proposed rules or re-quested that short-term, limited-durationinsurance be allowed to provide coveragefor a longer period. Several commenters

stated that some individuals who lose theiremployer–sponsored coverage may not beable to obtain COBRA continuation cov-erage18 and that a job search can oftentake longer than three months. One com-menter suggested alignment of short-term,limited-duration insurance with the em-ployer waiting period rules by permittinga coverage period of up to four months.19

Another commenter asked that issuers beallowed to renew coverage beyond thethree-month period in certain situations,such as when an individual experiences atriggering event for a special enrollmentperiod.20 The Departments decline toadopt these suggestions. Short-term,limited-duration insurance allows for cov-erage to fill temporary coverage gapswhen an individual transitions betweensources of primary coverage. As ex-plained above, for longer gaps in cover-age, guaranteed availability of coverageand special enrollment period require-ments in the individual health insurancemarket under the Affordable Care Act en-sure that individuals can purchase individ-ual market coverage through or outside ofthe Exchange that is minimum essentialcoverage and includes the consumer pro-tections of the Affordable Care Act. Fur-ther, limiting the coverage of short-term,limited-duration insurance to less thanthree months is consistent with the ex-emption from the individual shared re-sponsibility provision for gaps in cover-age of less than three months (the shortcoverage gap exemption).21 Under currentlaw, an individual who is not enrolled inminimum essential coverage (whether en-rolled in short-term, limited-duration cov-erage or otherwise) for a period of threemonths or more generally cannot claimthe short coverage gap exemption for anyof those months. The final regulationshelp ensure that individuals who purchasea short-term, limited-duration insurancepolicy will be eligible for the short cover-age gap exemption (assuming other re-quirements are met) during the temporarycoverage period.

17See Code section 5000A.

18COBRA continuation coverage means coverage that satisfies an applicable COBRA continuation provision. These provisions are sections 601–608 of ERISA, section 4980B of the Code(other than paragraph (f)(1) of such section 4980B insofar as it relates to pediatric vaccines), or Title XXII of the PHS Act.

19See 26 CFR 54.9815–2708; 29 CFR 2590.715–2708; 45 CFR 147.116.

20See 26 CFR 54.9801–6; 29 CFR 2590.701–6; 45 CFR 146.117 and 147.104.

2126 CFR 1.5000A–3(j).


After consideration of the commentsand feedback received from stakeholders,the Departments are finalizing the pro-posed regulations without change.

The revised definition of short-term,limited-duration insurance applies for pol-icy years beginning on or after January 1,2017. The Departments recognize, how-ever, that State regulators may have ap-proved short-term, limited-duration insur-ance products for sale in 2017 that met thedefinition in effect prior to January 1,2017. Accordingly, the Department ofHealth and Human Services (HHS) willnot take enforcement action against anissuer with respect to the issuer’s sale of ashort-term, limited-duration insuranceproduct before April 1, 2017 on theground that the coverage period is threemonths or more, provided that the cover-age ends on or before December 31, 2017and otherwise complies with the definitionof short-term, limited-duration insurancein effect under the regulations.22 Statesmay also elect not to take enforcementactions against issuers with respect tosuch coverage sold before April 1, 2017.

B. Excepted Benefits

Sections 2722 and 2763 of the PHSAct, section 732 of ERISA, and section9831 of the Code provide that the respec-tive requirements of title XXVII of thePHS Act, part 7 of ERISA, and Chapter100 of the Code generally do not apply tothe provision of certain types of benefits,known as “excepted benefits.” Exceptedbenefits are described in section 2791(c)of the PHS Act, section 733(c) of ERISA,and section 9832(c) of the Code.

The parallel statutory provisions estab-lish four categories of excepted benefits.The first category, under section 2791(c)(1)of the PHS Act, section 733(c)(1) of ERISAand section 9832(c)(1) of the Code, includesbenefits that are generally not health cover-age (such as automobile insurance, liabilityinsurance, workers compensation, and acci-

dental death and dismemberment coverage).The benefits in this category are excepted inall circumstances. In contrast, the benefits inthe second, third, and fourth categories aretypes of health coverage that are exceptedonly if certain conditions are met.

The second category of excepted benefitsis limited excepted benefits, which may in-clude limited scope vision or dental benefits,and benefits for long–term care, nursinghome care, home health care, or communi-ty–based care. Section 2791(c)(2)(C) of thePHS Act, section 733(c)(2)(C) of ERISA,and section 9832(c)(2)(C) of the Code au-thorize the Secretaries of HHS, Labor, andthe Treasury (collectively, the Secretaries)to issue regulations establishing other, sim-ilar limited benefits as excepted benefits.The Secretaries exercised this authority pre-viously with respect to certain health flexi-ble spending arrangements.23 To be ex-cepted under this second category, thebenefits must either: (1) be provided under aseparate policy, certificate, or contract ofinsurance; or (2) otherwise not be an inte-gral part of a group health plan, whetherinsured or self–insured.24

The third category of excepted bene-fits, referred to as “noncoordinated ex-cepted benefits,” includes both coveragefor only a specified disease or illness(such as cancer-only policies), and hospi-tal indemnity or other fixed indemnity in-surance. These benefits are excepted un-der section 2722(c)(2) of the PHS Act,section 732(c)(2) of ERISA, and section9831(c)(2) of the Code only if all of thefollowing conditions are met: (1) the ben-efits are provided under a separate policy,certificate, or contract of insurance; (2)there is no coordination between the pro-vision of such benefits and any exclusionof benefits under any group health planmaintained by the same plan sponsor; and(3) the benefits are paid with respect toany event without regard to whether ben-efits are provided under any group healthplan maintained by the same plan sponsor.

The fourth category, under section2791(c)(4) of the PHS Act, section733(c)(4) of ERISA, and section 9832(c)(4)of the Code, is supplemental excepted ben-efits. These benefits are excepted only ifthey are provided under a separate policy,certificate, or contract of insurance and areMedicare supplemental health insurance(also known as Medigap), TRICARE sup-plemental programs, or “similar supplemen-tal coverage provided to coverage under agroup health plan.” The phrase “similar sup-plemental coverage provided to coverageunder a group health plan” is not defined inthe statute or regulations. However, the De-partments issued regulations clarifying thatone requirement to be similar supplementalcoverage is that the coverage “must be spe-cifically designed to fill gaps in primarycoverage, such as coinsurance or deduct-ibles.”25

In 2007 and 2008, the Departments is-sued guidance on the circumstances underwhich supplemental health insurancewould be considered excepted benefits un-der section 2791(c)(4) of the PHS Act(and the parallel provisions of ERISA andthe Code).26 The guidance identifies sev-eral factors the Departments will applywhen evaluating whether supplementalhealth insurance will be considered to be“similar supplemental coverage providedto coverage under a group health plan.”The guidance provides a safe harbor thatsupplemental health insurance will beconsidered an excepted benefit if it is pro-vided through a policy, certificate, or con-tract of insurance separate from the pri-mary coverage under the plan and meetsall of the following requirements: (1) thesupplemental policy, certificate, or con-tract of insurance is issued by an entitythat does not provide the primary cover-age under the plan; (2) the supplementalpolicy, certificate, or contract of insuranceis specifically designed to fill gaps in pri-mary coverage, such as coinsurance ordeductibles, but does not become second-ary or supplemental only under a coordi-

22This non–enforcement policy is limited to the requirement that short–term, limited–duration insurance must be less than three months. It does not relieve issuers of short–term,limited–duration insurance of the notice requirement, which applies for policy years beginning on or after January 1, 2017.

2326 CFR 54.9831–1(c)(3)(v), 29 CFR 2590.732(c)(3)(v), 45 CFR 146.145(b)(3)(v).

24PHS Act section 2722(c)(1), ERISA section 732(c)(1), Code section 9831(c)(1).

2526 CFR 54.9831–1(c)(5)(i)(C), 29 CFR 2590.732(c)(5)(i)(C), and 45 CFR 146.145(b)(5)(i)(C).

26See EBSA Field Assistance Bulletin No. 2007–04 (available at http://www.dol.gov/ebsa/regs/fab2007-4.html); CMS Insurance Standards Bulletin 08–01 (available at http://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf); and IRS Notice 2008–23 (available at http://www.irs.gov/irb/2008-07_IRB/ar09.html).


nation of benefits provision; (3) the cost ofthe supplemental coverage is 15 percentor less of the cost of primary coverage(determined in the same manner as theapplicable premium is calculated under aCOBRA continuation provision); and (4)the supplemental coverage sold in thegroup health insurance market does notdifferentiate among individuals in eligibil-ity, benefits, or premiums based upon anyhealth factor of the individual (or any de-pendents of the individual).

On February 13, 2015, the Depart-ments issued Affordable Care Act Imple-mentation FAQs Part XXIII, providingadditional guidance on the circumstancesunder which health insurance coveragethat supplements group health plan cover-age may be considered supplemental ex-cepted benefits.27 The FAQ states that theDepartments intend to propose regulationsclarifying the circumstances under whichsupplemental insurance products that donot fill in cost-sharing gaps under the pri-mary plan are considered to be specifi-cally designed to fill gaps in primary cov-erage. Specifically, the FAQ provides thathealth insurance coverage that supple-ments group health coverage by providingcoverage of additional categories of ben-efits (as opposed to filling in cost–sharinggaps under the primary plan) would beconsidered to be designed to “fill in thegaps” of the primary coverage only if thebenefits covered by the supplemental in-surance product are not EHB, as definedunder section 1302(b) of the AffordableCare Act, in the State in which the productis being marketed. The FAQ further statesthat, until regulations are issued and ef-fective, the Departments will not take en-forcement action against an issuer ofgroup or individual market coverage thatotherwise meets the conditions to be sup-plemental excepted benefits that does notfill cost-sharing gaps in the group healthplan and only provides coverage of addi-tional categories of benefits that are notcovered by the group health plan and arenot EHB in the applicable State. Stateswere encouraged to exercise similar en-forcement discretion.

1. Similar Supplemental Coverage

The proposed regulations incorporatedguidance from the Affordable Care ActImplementation FAQs Part XXIII ad-dressing supplemental health insuranceproducts that provide categories of bene-fits in addition to those in the primarycoverage. Under the proposed regulations,if group or individual supplemental healthinsurance covers items and services notincluded in the primary coverage (referredto as providing “additional categories ofbenefits”), the coverage will be consideredto be designed “to fill gaps in primarycoverage,” for purposes of being supple-mental excepted benefits if none of thebenefits provided by the supplementalpolicy are an EHB, as defined under sec-tion 1302(b) of the Affordable Care Act,in the State in which the coverage is is-sued.28 Thus, if any benefit provided bythe supplemental policy is either includedin the primary coverage or is an EHB inthe State where the coverage is issued, theinsurance coverage would not be supple-mental excepted benefits under the pro-posed regulations. Furthermore, supple-mental health insurance products that bothfill in cost sharing in the primary cover-age, such as coinsurance or deductibles,and cover additional categories of benefitsthat are not EHB, would be consideredsupplemental excepted benefits under theproposed regulations provided all othercriteria are met.

The Departments received severalcomments in support of the proposed reg-ulations. One commenter expressed sup-port but requested that the Departmentsprovide additional examples in the regu-lations. Another commenter requestedclarification regarding the application ofthe standards for similar supplementalcoverage that provides benefits outside ofthe United States, noting that no State’sEHB rules require coverage for servicesoutside of the United States. If any benefitprovided by the supplemental policy is atype of service that is an EHB in the Statewhere the coverage is issued, the coveragewould not be supplemental excepted ben-

efits under the final regulations, even if thesupplemental coverage was limited tocovering the benefit in a location or set-ting where it would not be covered as anEHB.

After consideration of the comments,the Departments are finalizing the pro-posed regulations on similar supplementalcoverage without substantive change. Forpurposes of consistency and clarity, HHSis also including a cross reference in theindividual market excepted benefits regu-lations at 45 CFR 148.220 to reflect thestandard for similar supplemental cover-age under the group market regulations at45 CFR 146.145(b)(5)(i)(C). The Depart-ments may provide additional guidance onsimilar supplemental coverage that meetsthe criteria to be excepted benefits in thefuture.

2. Travel Insurance

The Departments are aware that certaintravel insurance products may includelimited health benefits. However, theseproducts typically are not designed as ma-jor medical coverage. Instead, the risksbeing insured relate primarily to: (1) theinterruption or cancellation of a trip; (2)the loss of baggage or personal effects; (3)damages to accommodations or rental ve-hicles; or (4) sickness, accident, disability,or death occurring during travel, with anyhealth benefits usually incidental to othercoverage.

Section 2791(c)(1)(H) of the PHS Act,section 733(c)(1)(H) of ERISA, and sec-tion 9832(c)(1)(H) of the Code providethat the Departments may, in regulations,designate as excepted benefits “benefitsfor medical care [that] are secondary orincidental to other insurance benefits.”Pursuant to this authority, and to clarifywhich types of travel-related insuranceproducts are excepted benefits under thePHS Act, ERISA, and the Code, the De-partments’ proposed regulations identifiedtravel insurance as an excepted benefitunder the first category of excepted bene-fits and proposed a definition of travelinsurance consistent with the definition of

27Frequently Asked Questions about Affordable Care Act Implementation (Part XXIII), available at http://www.dol.gov/ebsa/pdf/faq-Affordable Care Act23.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Supplmental-FAQ_2-13-15-final.pdf.

28For this purpose, a supplemental plan would determine what benefits are EHB based on the EHB–benchmark plan applicable in the State, along with any additional benefits that areconsidered EHB consistent with 45 CFR 155.170(a)(2).


travel insurance under final regulations is-sued by the Treasury Department and theIRS for the health insurance providers feeimposed by section 9010 of the Afford-able Care Act,29 which uses a modifiedversion of the National Association ofInsurance Commissioners definition oftravel insurance.

The proposed regulations defined theterm “travel insurance” as insurancecoverage for personal risks incident toplanned travel, which may include, butare not limited to, interruption or can-cellation of a trip or event, loss of bag-gage or personal effects, damages to ac-commodations or rental vehicles, andsickness, accident, disability, or deathoccurring during travel, provided thatthe health benefits are not offered on astand–alone basis and are incidental toother coverage. For this purpose, travelinsurance does not include major medi-cal plans that provide comprehensivemedical protection for travelers withtrips lasting six months or longer, in-cluding, for example, those workingoverseas as an expatriate or military per-sonnel being deployed.

The Departments received a number ofcomments in favor of the treatment oftravel insurance as an excepted benefit, aswell as the proposed definition of travelinsurance. Several comments expressedsupport for the proposed definition’s con-sistency with regulations governing thehealth insurance providers fee. One com-menter requested clarification that the re-quirement that health benefits are inciden-tal to other coverage be determined basedsolely on coverage under the travel insur-ance policy, without regard to other cov-erage provided by an employer or plansponsor; the Departments agree that this iscorrect. The Departments are finalizingwithout change the proposed regulationsdefining travel insurance and treating suchcoverage as an excepted benefit.

C. Definition of EHB for Purposes ofthe Prohibition on Lifetime and AnnualLimits

Section 2711 of the PHS Act, as addedby the Affordable Care Act, generally pro-hibits group health plans and health insur-ance issuers offering group or individualhealth insurance coverage from imposinglifetime and annual dollar limits on EHB,as defined under section 1302(b) of theAffordable Care Act. These prohibitionsapply to both grandfathered and non-grandfathered health plans, except the an-nual limits prohibition does not apply tograndfathered individual health insurancecoverage.

Under the Affordable Care Act, self-insured group health plans, large groupmarket health plans, and grandfatheredhealth plans are not required to offer EHB,but they generally cannot place lifetime orannual dollar limits on services they coverthat are considered EHB. On November18, 2015, the Departments issued finalregulations implementing section 2711 ofthe PHS Act.30 The final regulations pro-vide that, for plan years (in the individualmarket, policy years) beginning on or af-ter January 1, 2017, a plan or issuer that isnot required to provide EHB must defineEHB, for purposes of the prohibition onlifetime and annual dollar limits, in a man-ner consistent with any of the 51 EHBbase–benchmark plans applicable in aState or the District of Columbia, or oneof the three Federal Employees HealthBenefits Program (FEHBP) EHB base-benchmark plans, as specified under 45CFR 156.100.31

The final regulations under section2711 of the PHS Act include a referenceto selecting a “base-benchmark” plan, asspecified under 45 CFR 156.100, for pur-poses of determining which benefits can-not be subject to lifetime or annual dollarlimits. The base-benchmark plan selectedby a State or applied by default under 45CFR 156.100, however, may not reflect

the complete definition of EHB in theapplicable State. For that reason, theDepartments are amending the regula-tions at 26 CFR 54.9815–2711(c), 29CFR 2590.715–2711(c), and 45 CFR147.126(c) to refer to the provisions thatcapture the complete definition of EHBin a State.

Specifically, in these final regulations,the Departments replace the phrase “in amanner consistent with one of the threeFederal Employees Health Benefit Pro-gram (FEHBP) options as defined by 45CFR 156.100(a)(3) or one of the base-benchmark plans selected by a State orapplied by default pursuant to 45 CFR156.100” in each of the regulations withthe following: “in a manner that is consis-tent with (1) one of the EHB-benchmarkplans applicable in a State under 45 CFR156.110, and includes coverage of anyadditional required benefits that are con-sidered EHB consistent with 45 CFR155.170(a)(2); or (2) one of the three Fed-eral Employees Health Benefit Program(FEHBP) plan options as defined by 45CFR 156.100(a)(3), supplemented, asnecessary, to meet the standards in 45CFR 156.110.” This change reflects thepossibility that base–benchmark plans, in-cluding the FEHBP plan options, couldrequire supplementation under 45 CFR156.110, and ensures the inclusion ofState–required benefit mandates enactedon or before December 31, 2011 in accor-dance with 45 CFR 155.170, which whencoupled with a State’s EHB–benchmarkplan, establish the definition of EHB inthat State under regulations implementingsection 1302(b) of the Affordable CareAct.32

Some commenters requested clarifica-tion that self–insured group health plans,large group market health plans andgrandfathered plans are not required toinclude as covered benefits any specificitems and services covered by the State–EHB benchmark plan, including any ad-ditional State–required benefits consid-

2926 CFR 57.2(h)(4).

3080 FR 72192.

3126 CFR 54.9815–2711(c), 29 CFR 2590.715–2711(c), 45 CFR 147.126(c).

32In the HHS Notice of Benefit and Payment Parameters for 2016 published February 27, 2015 (80 FR 10750), HHS instructed States to select a new base–benchmark plan to take effectbeginning with plan or policy years beginning in 2017. The new final EHB base–benchmark plans selected as a result of this process are publicly available at downloads.cms.gov/cciio/Final%20List%20of%20BMPs_15_10_21.pdf. Additional information about the new base–benchmark plans, including plan documents and summaries of benefits, is available atwww.cms.gov/CCIIO/Resources/Data-Resources/ehb.html. The definition of EHB in each of the 50 states and the District of Columbia is based on the base–benchmark plan, and takes intoaccount any additions to the base–benchmark plan, such as supplementation under 45 CFR 156.110, and State–required benefit mandates in accordance with 45 CFR 155.170.


ered EHB under 45 CFR 155.170(a)(2).The requirement in section 2707(a) of thePHS Act to provide the EHB packagerequired under section 1302(a) of the Af-fordable Care Act applies only to non-grandfathered health insurance coveragein the individual and small group markets.Self–insured group health plans, largegroup market health plans and grandfa-thered health plans are not required toinclude coverage of EHB, but cannotplace lifetime or annual dollar limits onany EHB covered by these plans.33 Theseplans are permitted to impose limits otherthan dollar limits on EHB, as long as theycomply with other applicable statutoryprovisions. In addition, these plans cancontinue to impose annual and lifetimedollar limits on benefits that do not fallwithin the definition of EHB.

One commenter urged the Departmentsto eliminate the option for large groupmarket health plans to define EHB basedon one of the three largest nationallyavailable FEHBP benchmark plan optionsto ensure consistency with the definitionof EHB in the individual and small groupmarkets. However, these FEHBP plan op-tions34 are unique among benchmarkplans in that they are available nationally,and thus can more appropriately be uti-lized to determine what benefits would becategorized as EHB for those employersthat provide health coverage to employeesthroughout the United States and are notsituated only in a single State. The De-partments are finalizing the proposed clar-ification to the lifetime and annual limitregulations without change.

D. Applicability Date

These final regulations are applicablefor plan years (or, in the individual mar-ket, policy years) beginning on or afterJanuary 1, 2017. The HHS final regula-tions specify the applicability dates in thegroup market regulations at 45 CFR146.125 and in the individual market reg-ulations at 45 CFR 148.102.

III. Economic Impact and PaperworkBurden

A. Summary — Department of Laborand Department of Health and HumanServices

These final regulations specify the con-ditions for similar supplemental coverageproducts that are designed to fill gaps inprimary coverage by providing coverageof additional categories of benefits (as op-posed to filling in gaps in cost sharing) toconstitute supplemental excepted benefits,and clarify that certain travel-related in-surance products that provide only inci-dental health benefits constitute exceptedbenefits.

These final regulations also revise thedefinition of short-term, limited-durationinsurance so that the coverage (includingrenewals) has to be less than three monthsin total duration (as opposed to the currentdefinition of less than 12 months in dura-tion), and provide that a notice must beprominently displayed in the contract andin any application materials provided inconnection with enrollment in the cover-age indicating that such coverage is notminimum essential coverage.

Finally, the regulations amend the def-inition of “essential health benefits” forpurposes of the prohibition on lifetimeand annual dollar limits with respect togroup health plans and health insuranceissuers that are not required to provideessential health benefits, including self–insured group health plans, large groupmarket health plans, and grandfatheredhealth plans.

The Departments are publishing thesefinal regulations to implement the protec-tions intended by the Congress in the mosteconomically efficient manner possible.The Departments have examined the ef-fects of this rule as required by ExecutiveOrder 13563 (76 FR 3821, January 21,2011), Executive Order 12866 (58 FR51735, September 1993, Regulatory Plan-ning and Review), the Regulatory Flexi-bility Act (September 19, 1980, Pub. L.96–354), the Unfunded Mandates ReformAct of 1995 (Pub. L. 104–4), Executive

Order 13132 on Federalism, and the Con-gressional Review Act (5 U.S.C. 804(2)).

B. Executive Orders 12866 and13563— Department of Labor andDepartment of Health and HumanServices

Executive Order 12866 (58 FR 51735)directs agencies to assess all costs andbenefits of available regulatory alterna-tives and, if regulation is necessary, toselect regulatory approaches that maxi-mize net benefits (including potential eco-nomic, environmental, public health andsafety effects; distributive impacts; andequity). Executive Order 13563 (76 FR3821, January 21, 2011) is supplementalto and reaffirms the principles, structures,and definitions governing regulatory re-view as established in Executive Order12866.

Section 3(f) of Executive Order 12866defines a “significant regulatory action” asan action that is likely to result in a finalrule – (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 policyissues arising out of legal mandates, thePresident’s priorities, or the principles setforth in the Executive Order.

A regulatory impact analysis must beprepared for rules with economically sig-nificant effects (for example, $100 millionor more in any 1 year), and a “significant”regulatory action is subject to review bythe Office of Management and Budget.The Departments have determined thatthis regulatory action is not likely to haveeconomic impacts of $100 million ormore in any one year, and is not signifi-cant within the meaning of Executive Or-

33The annual limits prohibition does not apply to grandfathered individual market coverage.

34The three largest nationally available FEHBP plan options are available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Top3ListFinal-5-19-2015.pdf.


der 12866. However, the Departments arenonetheless providing a discussion of thebenefits and costs that might stem fromthese final regulations in the Summary ofImpacts section below.

1. Need for Regulatory Action

These final regulations clarify the con-ditions for similar supplemental coverageand travel insurance to be recognized asexcepted benefits. These clarifications arenecessary to provide health insurance is-suers offering supplemental coverage andtravel insurance products with a clearerunderstanding of the Federal standardsthat apply to these types of coverage.These final regulations also amend thedefinition of short-term, limited-durationinsurance for purposes of the exclusionfrom the definition of individual healthinsurance coverage and impose a new no-tice requirement in response to reportsthat short-term, limited-duration insur-ance coverage is being sold to individualsas primary coverage.

2. Summary of Impacts

The final regulations outline the condi-tions for travel insurance and similar sup-plemental health insurance coverage to beconsidered excepted benefits, and revisethe definition of short-term, limited-duration insurance.

The Departments received commentssuggesting that the majority of travel in-surance policies are issued for trips ofshort duration, with the average policylength being approximately three months,and these policies generally provide lim-ited medical coverage and property andcasualty coverage to protect against risksrelated to travel. The Departments believethat the designation of certain travel insur-ance products (as defined by the regula-tions) as excepted benefits is consistentwith prevailing industry practices, andtherefore, will not result in significant costto issuers of these products or consumerswho purchase them.

Short-term, limited-duration policiesrepresent a very small fraction of thehealth insurance market, though their use

is increasing. In 2015, total premiumsearned for short-term, limited-duration in-surance was approximately $160 millionfor approximately 1,517,000 membermonths and with approximately 148,000covered lives at the end of the year,35

while in 2013, total premiums were ap-proximately $98 million for 1,031,000member months with approximately80,400 covered lives at the end of theyear.36

The Departments received commentsindicating that a large majority of theshort-term, limited-duration insuranceplans are sold as transitional coverage,particularly for individuals seeking tocover periods of unemployment or gapsbetween employer-sponsored coverage,and typically provide coverage for lessthan three months. Therefore, the Depart-ments believe that the final regulationswill have no effect on the majority ofconsumers who purchase such coverageand issuers of those policies. The smallfraction of consumers who purchase suchpolicies for longer periods and who mayhave to transition to individual marketcoverage will benefit from the protectionsafforded by the Affordable Care Act, suchas no preexisting condition exclusions, es-sential health benefits without annual orlifetime dollar limits, and guaranteed re-newability. While some of these consum-ers may experience an increase in costsdue to higher premiums compared withshort-term, limited-duration coverage,they will also avoid potential tax liabilityby having minimum essential coverage.Some consumers may also be eligible forpremium tax credits and cost-sharing re-ductions for coverage offered through theExchanges. Finally, inclusion of these in-dividuals, often relatively healthier indi-viduals, in the individual market will helpstrengthen the individual market’s singlerisk pool. The notice requirement willhelp ensure that consumers do not inad-vertently purchase these products expect-ing them to be minimum essential cover-age. Further, the Departments believe thatany costs incurred by issuers of short–term, limited–duration insurance to in-clude the required notice in application orenrollment materials will be negligible

since the Departments have provided theexact text for the notice.

As a result, the Departments have con-cluded that the impacts of these final reg-ulations are not economically significant.

C. Paperwork Reduction Act –Department of Health and HumanServices

The final regulations provide that to beconsidered short-term, limited-durationinsurance for policy years beginning on orafter January 1, 2017, a notice must beprominently displayed in the contract andin any application materials, stating thatthe coverage is not minimum essentialcoverage and that failure to have mini-mum essential coverage may result in anadditional tax payment. The Departmentshave provided the exact text for these no-tice requirements and the language willnot need to be customized. The burdenassociated with these notices is not subjectto the Paperwork Reduction Act of 1995in accordance with 5 CFR 1320.3(c)(2)because they do not contain a “collectionof information” as defined in 44 U.S.C.3502(3).

D. Regulatory Flexibility Act

The Regulatory Flexibility Act (5U.S.C. 601 et seq.) (RFA) imposes certainrequirements with respect to Federal rulesthat are subject to the notice and commentrequirements of section 553(b) of the Ad-ministrative Procedure Act (5 U.S.C. 551et seq.) and that are likely to have a sig-nificant economic impact on a substantialnumber of small entities. Unless anagency certifies that a proposed rule is notlikely to have a significant economic im-pact on a substantial number of small en-tities, section 603 of RFA requires that theagency present an initial regulatory flexi-bility analysis at the time of the publica-tion of the notice of proposed rulemakingdescribing the impact of the rule on smallentities and seeking public comment onsuch impact. Small entities include smallbusinesses, organizations and governmen-tal jurisdictions.

35National Association of Insurance Commissioners, 2015 Accident and Health Policy Experience Report, 2016, available at http://naic.org/prod_serv/AHP-LR-16.pdf.

36National Association of Insurance Commissioners, 2013 Accident and Health Policy Experience Report, 2014, available at http://naic.org/prod_serv/AHP-LR-14.pdf.


The RFA generally defines a “small en-tity” as (1) a proprietary firm meeting thesize standards of the Small Business Ad-ministration (13 CFR 121.201); (2) a non-profit organization that is not dominant in itsfield; or (3) a small government jurisdictionwith a population of less than 50,000.(States and individuals are not included inthe definition of “small entity.”) The De-partments use as their measure of significanteconomic impact on a substantial number ofsmall entities a change in revenues of morethan 3 to 5 percent.

The Departments expect the impact ofthese final regulations to be limited be-cause the provisions are generally consis-tent with current industry practices andimpact only a small fraction of the healthinsurance market. Therefore, the Depart-ments certify that the final regulations willnot have a significant impact on a substan-tial number of small entities. In addition,section 1102(b) of the Social Security Actrequires agencies to prepare a regulatoryimpact analysis if a rule may have a sig-nificant economic impact on the opera-tions of a substantial number of smallrural hospitals. This analysis must con-form to the provisions of section 604 ofthe RFA. These final regulations will notaffect small rural hospitals. Therefore, theDepartments have determined that thesefinal regulations will not have a significantimpact on the operations of a substantialnumber of small rural hospitals.

E. Special Analysis – Department ofthe Treasury

Certain IRS regulations, including thisone, are exempt from the requirements ofExecutive Order 12866, as supplementedand reaffirmed by Executive Order 13563.Therefore, a regulatory impact assessmentis not required. For applicability of RFA,see paragraph D of this section III.

Pursuant to section 7805(f) of theCode, these regulations have been sub-mitted to the Chief Counsel for Advo-cacy of the Small Business Administra-tion for comment on their impact onsmall business.

F. Unfunded Mandates Reform Act

For purposes of the Unfunded Man-dates Reform Act of 1995 (2 U.S.C. 1501

et seq.), as well as Executive Order 12875,these final regulations do not include anyFederal mandate that may result in expen-ditures by State, local, or tribal govern-ments, or the private sector, which mayimpose an annual burden of $146 millionadjusted for inflation since 1995.

G. Federalism – Department of Laborand Department of Health and HumanServices

Executive Order 13132 outlines fun-damental principles of federalism. It re-quires adherence to specific criteria byFederal agencies in formulating andimplementing policies that have “sub-stantial direct effects” on the States, therelationship between the nationalgovernment and States, or on the distri-bution of power and responsibilitiesamong the various levels of government.Federal agencies promulgating regula-tions that have these federalism impli-cations must consult with State and lo-cal officials, and describe the extent oftheir consultation and the nature of theconcerns of State and local officials inthe preamble to the final regulation.

In the Departments’ view, these finalregulations have federalism implicationsbecause they would have direct effects onthe States, the relationship between thenational government and the States, or onthe distribution of power and responsibil-ities among various levels of government.Under these final regulations, health insur-ance issuers offering short-term, limited-duration insurance, travel insurance andsimilar supplemental coverage will be re-quired to follow the minimum Federalstandards to not be subject to the marketreform provisions under the PHS Act,ERISA and the Code. However, in theDepartments’ view, the federalism impli-cations of these final regulations are sub-stantially mitigated because, with respectto health insurance issuers, the Depart-ments expect that the majority of Stateswill enact laws or take other appropriateaction resulting in their meeting or ex-ceeding the Federal standards.

In general, through section 514,ERISA supersedes State laws to the ex-tent that they relate to any covered em-ployee benefit plan, and preserves Statelaws that regulate insurance, banking, or

securities. While ERISA prohibits Statesfrom regulating an employee benefit planas an insurance or investment company orbank, the preemption provisions of section731 of ERISA and section 2724 of thePHS Act (implemented in 29 CFR2590.731(a) and 45 CFR 146.143(a) and148.210(b)) apply so that the requirementsin title XXVII of the PHS Act (includingthose added by the Affordable Care Act)are not to be construed to supersede anyprovision of State law which establishes,implements, or continues in effect anystandard or requirement solely relating tohealth insurance issuers in connectionwith individual or group health insurancecoverage except to the extent that suchstandard or requirement prevents the ap-plication of a Federal requirement. Theconference report accompanying HIPAAindicates that this is intended to be the“narrowest” preemption of State laws(See House Conf. Rep. No. 104–736, at205, reprinted in 1996 U.S. Code Cong. &Admin. News 2018).

States may continue to apply State lawrequirements except to the extent thatsuch requirements prevent the applicationof the market reform requirements that arethe subject of this rulemaking. Accord-ingly, States have significant latitude toimpose requirements on health insuranceissuers that are more restrictive than theFederal law.

In compliance with the requirementof Executive Order 13132 that agenciesexamine closely any policies that mayhave federalism implications or limit thepolicy making discretion of the States,the Departments have engaged in effortsto consult with and work cooperativelywith affected States, including consult-ing with, and attending conferences of,the National Association of InsuranceCommissioners and consulting withState insurance officials on an individ-ual basis. It is expected that the Depart-ments will act in a similar fashion inenforcing the market reform provisionsof the Affordable Care Act.

Throughout the process of develop-ing these final regulations, to the extentfeasible within the applicable preemp-tion provisions, the Departments haveattempted to balance the States’ inter-ests in regulating health insurance issu-ers, and Congress’ intent to provide uni-


form minimum protections to consumersin every State. By doing so, it is theDepartments’ view that they have com-plied with the requirements of ExecutiveOrder 13132.

Pursuant to the requirements set forthin section 8(a) of Executive Order 13132,and by the signatures affixed to this finalrule, the Departments certify that the Em-ployee Benefits Security Administrationand the Centers for Medicare & MedicaidServices have complied with the require-ments of Executive Order 13132 for theattached final rules in a meaningful andtimely manner.

H. Congressional Review Act

These final regulations are subject tothe Congressional Review Act provisionsof the Small Business Regulatory En-forcement Fairness Act of 1996 (5 U.S.C.801 et seq.) and will be transmitted to theCongress and to the Comptroller Generalfor review in accordance with such provi-sions.

I. Statement of Availability of IRSDocuments

IRS Revenue Procedures, RevenueRulings notices, and other guidance citedin this document are published in the In-ternal Revenue Bulletin (or CumulativeBulletin) and are available from the Su-perintendent of Documents, U.S. Govern-ment Printing Office, Washington, DC20402, or by visiting the IRS website athttp://www.irs.gov.

IV. Statutory Authority

The Department of the Treasury regu-lations are adopted pursuant to the author-ity contained in sections 7805 and 9833 ofthe Code.

The Department of Labor regulationsare adopted pursuant to the authority con-tained in 29 U.S.C. 1135 and 1191c; andSecretary of Labor’s Order 1–2011, 77 FR1088 (Jan. 9, 2012).

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.* * * * *

John DalrympleDeputy Commissioner for Services andEnforcement, Internal Revenue Service.

Approved: October 25, 2016.

Mark J. MazurAssistant Secretary of the Treasury

(Tax Policy)

Phyllis C. Borzi,Assistant Secretary

Employee Benefits SecurityAdministration

Department of Labor

Dated: October 24, 2016.

Andrew M. Slavitt,Acting Administrator

Centers for Medicare & MedicaidServices

Dated: October 25, 2016.

Sylvia M. Burwell,Secretary

Department of Health and HumanServices

(Filed by the Office of the Federal Register on [DATE&TIME., and published in the issue of the Federal Register forOctober 31, 2016, 81 F.R. 75316)

DEPARTMENT OF THETREASURYInternal Revenue Service

26 CFR Chapter I

Accordingly, 26 CFR part 54 isamended as follows:

PART 54–PENSION AND EXCISETAXES.

Par. 1. The authority citation for part54 continues to read in part as follows:

Authority: 26 U.S.C. 7805* * *Par. 2. Section 54.9801–2 is amended

by revising the definition of “short–term,limited–duration insurance”, and adding adefinition of “travel insurance” in alpha-

betical order. The revision and additionread as follows:

§ 54.9801–2 Definitions.

* * * * *Short-term, limited-duration insurance

means health insurance coverage providedpursuant to a contract with an issuer that:

(1) Has an expiration date specified inthe contract (taking into account any ex-tensions that may be elected by the poli-cyholder with or without the issuer’s con-sent) that is less than 3 months after theoriginal effective date of the contract; and

(2) Displays prominently in the contractand in any application materials providedin connection with enrollment in suchcoverage in at least 14 point type thefollowing: “THIS IS NOT QUALIFYINGHEALTH COVERAGE (“MINIMUMESSENTIAL COVERAGE”) THATSATISFIES THE HEALTH COVERAGEREQUIREMENT OF THE AFFORD-ABLE CARE ACT. IF YOU DON’THAVE MINIMUM ESSENTIAL COV-ERAGE, YOU MAY OWE AN ADDI-TIONAL PAYMENT WITH YOURTAXES.”

* * * * *Travel insurance means insurance cov-

erage for personal risks incident toplanned travel, which may include, but isnot limited to, interruption or cancellationof trip or event, loss of baggage or per-sonal effects, damages to accommoda-tions or rental vehicles, and sickness, ac-cident, disability, or death occurringduring travel, provided that the healthbenefits are not offered on a stand–alonebasis and are incidental to other coverage.For this purpose, the term travel insurancedoes not include major medical plans thatprovide comprehensive medical protec-tion for travelers with trips lasting 6months or longer, including, for example,those working overseas as an expatriate ormilitary personnel being deployed.

* * * * *Par. 3. Section 54.9815–2711 is

amended by revising paragraph (c) to readas follows:

§ 54.9815–2711 No lifetime or annuallimits.

* * * * *


(c) Definition of essential health bene-fits. The term “essential health benefits”means essential health benefits under sec-tion 1302(b) of the Patient Protection andAffordable Care Act and applicable regu-lations. For this purpose, a group healthplan or a health insurance issuer that is notrequired to provide essential health bene-fits under section 1302(b) must define “es-sential health benefits” in a manner that isconsistent with–

(1) One of the EHB–benchmark plansapplicable in a State under 45 CFR156.110, and includes coverage of anyadditional required benefits that are con-sidered essential health benefits consistentwith 45 CFR 155.170(a)(2); or

(2) One of the three Federal EmployeesHealth Benefits Program (FEHBP) planoptions as defined by 45 CFR156.100(a)(3), supplemented, as neces-sary, to meet the standards in 45 CFR156.110.

* * * * *Par. 4. Section 54.9831–1 is amended:

a. In paragraph (b)(1) by removing thereference “54.9812–1T” and adding in itsplace the reference “54.9812–1, 54.9815–1251 through 54.9815–2719A,” and inparagraph (c)(1) by removing the refer-

ence “54.9811–1T, 54.9812–1T” andadding in its place the phrase“54.9811–1, 54.9812–1, 54.9815–1251through 54.9815–2719A”;

b. In paragraph (c)(2)(vii) by removing‘‘and’’ at the end;

c. In paragraph (c)(2)(viii) by removingthe period and adding ‘‘; and’’ at the end;

d. Adding paragraph (c)(2)(ix); ande. Revising paragraph (c)(5)(i)(C).The revisions and additions are as fol-

lows:

§ 54.9831–1 Special rules relating togroup health plans.

* * * * *(c) * * *(2) * * *(ix) Travel insurance, within the mean-

ing of § 54.9801–2.* * * * *(5) * * *(i) * * *(C) Similar supplemental coverage

provided to coverage under a grouphealth plan. To be similar supplementalcoverage, the coverage must be specifi-cally designed to fill gaps in the primarycoverage. The preceding sentence is sat-isfied if the coverage is designed to fill

gaps in cost sharing in the primary cover-age, such as coinsurance or deductibles, orthe coverage is designed to provide bene-fits for items and services not covered bythe primary coverage and that are not es-sential health benefits (as defined undersection 1302(b) of the Patient Protectionand Affordable Care Act) in the Statewhere the coverage is issued, or the cov-erage is designed to both fill such gaps incost sharing under, and cover such bene-fits not covered by, the primary coverage.Similar supplemental coverage does notinclude coverage that becomes secondaryor supplemental only under acoordination-of-benefits provision.* * * * *

Par. 5. Section 54.9833–1 is amendedby adding a sentence at the end to read asfollows:

§ 54.9833–1 Effective dates.

* * * Notwithstanding the previous sen-tence, the definition of “short–term, limited–duration insurance” in § 54.9801–2 andparagraph (c)(5)(i)(C) of § 54.9831–1 applyfor plan years beginning on or after January1, 2017.


Part III. Administrative, Procedural, and MiscellaneousTransaction of Interest —Section 831(b) Micro–Captive Transactions

Notice 2016–66

The Department of the Treasury(“Treasury Department”) and the InternalRevenue Service (the “IRS”) are aware ofa type of transaction, described below, inwhich a taxpayer attempts to reduce theaggregate taxable income of the taxpayer,related persons, or both, using contractsthat the parties treat as insurance contractsand a related company that the partiestreat as a captive insurance company.Each entity that the parties treat as aninsured entity under the contracts claimsdeductions for premiums for insurancecoverage. The related company that theparties treat as a captive insurance com-pany elects under § 831(b) of the InternalRevenue Code (the “Code”) to be taxedonly on investment income and thereforeexcludes the payments directly or indi-rectly received under the contracts fromits taxable income. The manner in whichthe contracts are interpreted, adminis-tered, and applied is inconsistent witharm’s length transactions and sound busi-ness practices.

The Treasury Department and the IRSbelieve this transaction (“micro–captivetransaction”) has a potential for tax avoid-ance or evasion. See IR-2016–25 (dis-cussing characteristics of an abusivemicro–captive insurance structure). How-ever, the Treasury Department and theIRS lack sufficient information to identifywhich § 831(b) arrangements should beidentified specifically as a tax avoidancetransaction and may lack sufficient infor-mation to define the characteristics thatdistinguish the tax avoidance transactionsfrom other § 831(b) related–party transac-tions. This notice identifies the transactiondescribed in section 2.01 of this notice andsubstantially similar transactions as trans-actions of interest for purposes of§ 1.6011–4(b)(6) of the Income Tax Reg-ulations and §§ 6111 and 6112 of theCode. This notice also alerts persons in-volved in such transactions to certain re-sponsibilities and penalties that may arise

from their involvement with these trans-actions.

SECTION 1. BACKGROUND

.01 Overview of Transaction

In the micro–captive transaction, A, aperson, directly or indirectly owns an in-terest in an entity (or entities) (“Insured”)conducting a trade or business. A, personsrelated to A, or both, also directly or indi-rectly own another entity (or entities)(“Captive”).

In some cases, Captive enters into acontract (or contracts) (the “Contract”)with Insured as discussed below in section1.02 of this notice. In these cases, Captivemay enter into a reinsurance or poolingagreement under which a portion of therisks covered under the Contract aretreated as pooled with risks of other enti-ties, and Captive assumes risks from otherentities as also discussed below in section1.02 of this notice.

In other cases, Captive indirectly entersinto the Contract by reinsuring risks thatInsured has initially insured with an inter-mediary, Company C, as discussed belowin section 1.03 of this notice.

.02 Cases in Which Captive Entersinto the Contract with Insured

(a) In general. In cases in which Cap-tive enters into the Contract with Insured,Captive and Insured treat the Contract asan insurance contract for federal incometax purposes. Captive provides coveragefor Insured.

Captive may offer coverage only topersons related to or affiliated with In-sured. If Captive also offers coverage topersons that are not related to or affiliatedwith Insured, Captive typically offers cov-erage only to other entities represented bya person who promotes the micro–captivetransaction. Captive may enter into a re-insurance or pooling agreement underwhich a portion of the risks covered underthe Contract are treated as pooled withrisks of other entities and Captive assumesrisks from other entities. Typically, theother entities participating in the reinsur-ance or pooling agreement are also repre-

sented by a person who promotes the mi-cro–captive transaction.

Insured makes payments to Captiveunder the Contract, treats the payments asinsurance premiums that are within thescope of § 1.162–1(a), and deducts thepayments as ordinary and necessary busi-ness expenses under § 162. Captive treatsthe payments received from Insured underthe Contract as premiums for insurancecoverage. If Captive is not a domesticcorporation, Captive makes an electionunder § 953(d) to be treated as a domesticcorporation. The micro–captive transac-tion is structured so that Captive has nomore than $1,200,000 in net premiumswritten (or, if greater, direct premiumswritten) for each taxable year ($2,200,000for taxable years beginning after Decem-ber 31, 2016) in which the transaction is ineffect. Captive makes an election under§ 831(b) to be taxed only on taxable in-vestment income and excludes the premi-ums from taxable income.

(b) Promoter. A promoter (“Pro-moter”) typically markets the micro–cap-tive transaction structure to A. Promoter,persons related to Promoter, or both, typ-ically provide continuing services to Cap-tive, including:

(1) providing the forms used for theContract;

(2) management of Captive; and(3) administrative, accounting, or legal

services, including the filing of tax forms.(c) Contract coverage. The coverage

provided by Captive under the Contracthas one or more of the following charac-teristics:

(1) the coverage involves an implausiblerisk;

(2) the coverage does not match a busi-ness need or risk of Insured;

(3) the description of the scope of thecoverage in the Contract is vague, ambig-uous, or illusory; or

(4) the coverage duplicates coverageprovided to Insured by an unrelated, com-mercial insurance company, and the pol-icy with the commercial insurer often hasa far smaller premium.

(d) Amounts paid to Captive. The pay-ments made by Insured to Captive underthe Contract have one or more of thefollowing characteristics:


(1) the amounts of Insured’s paymentsunder the Contract are designed to provideInsured with a deduction under § 162 of aparticular amount;

(2) the payments are determined withoutan underwriting or actuarial analysis thatconforms to insurance industry standards;

(3) the payments are not made consis-tently with the schedule in the Contract;

(4) the payments are agreed to by In-sured and Captive without comparing theamounts of the payments to payments thatwould be made under alternative insur-ance arrangements providing the same orsimilar coverage;

(5) the payments significantly exceedthe premium prevailing for coverage of-fered by unrelated, commercial insurancecompanies for risks with similar loss pro-files; or

(6) if Insured includes multiple entities,the allocation of amounts paid to Captiveamong the insured entities does not reflectthe actuarial or economic measure of therisk of each entity.

(e) Claims procedures and manage-ment of Captive. Captive, Insured, or bothdoes one or more of the following:

(1) Captive fails to comply with some orall of the laws or regulations applicable toinsurance companies in the jurisdiction inwhich Captive is chartered, the jurisdic-tion(s) in which Captive is subject to reg-ulation because of the nature of its busi-ness, or both;

(2) Captive does not issue policies orbinders in a timely manner consistent withindustry standards;

(3) Captive does not have definedclaims administration procedures thatare consistent with insurance industrystandards; or

(4) Insured does not file claims for eachloss event covered by the Contract.

(f) Captive’s capital. Captive’s capitalhas one or more of the following charac-teristics:

(1) Captive does not have capital ade-quate to assume the risks that the Contracttransfers from Insured;

(2) Captive invests its capital in illiquidor speculative assets usually not held byinsurance companies; or

(3) Captive loans or otherwise transfersits capital to Insured, entities affiliatedwith Insured, A, or persons related to A.

.03 Cases in Which Insured andCaptive Use an Intermediary Company

In certain cases, Captive indirectlyenters into the Contract by reinsuringrisks that Insured has initially insuredwith an intermediary, Company C. Inthese cases, Insured enters into a con-tract with Company C that the partiestreat as an insurance contract. CompanyC also enters into a reinsurance contractwith Captive to reinsure risks under thecontract between Insured and CompanyC. In cases in which Captive reinsuresrisks that Insured has initially insuredwith an intermediary, Company C, thereinsurance agreement between Com-pany C and Captive is the Contract forpurposes of this notice and the disclo-sures required in section 3.05 of thisnotice.

In these cases, the coverage providedby Captive under the Contract, the pay-ments made to Captive by Company C,and Captive’s capital each has one ormore of the characteristics described insection 1.02(c), (d) or (f) of this notice, asapplicable; also, Captive, Insured or bothdo one or more of the items described insection 1.02(e) of this notice. In addition,a Promoter typically markets the transac-tion to A.

Moreover, in these cases, Company Cis unrelated to A or Insured but may berelated to Promoter. Company C entersinto similar arrangements with other enti-ties, which usually are also represented byPromoter. Company C reinsures withCaptive a portion of the risks, commonlyin layers. For example, the first layermight cover losses from $1 up to $10,000;the second layer might cover lossesgreater than $10,000, but not more than$100,000; and the third layer might coverlosses greater than $100,000. Captivemight assume from Company C 100 per-cent of one layer of Insured’s risks andin another layer a proportionate share ofthe aggregate risk of Insured and otherentities. The allocation among the layersof amounts paid to Captive as premiumstypically does not reflect the actuarial oreconomic measures of the risks associ-ated with the particular layers. In addi-tion, any claims filed generally fallwithin the layer or layers that only coverrisks of Insured.

.04 Claimed Tax Treatment andBenefits

In the micro– captive transaction, In-sured, Captive, and, if applicable, Com-pany C, treat the Contract as an insur-ance contract for federal income taxpurposes. Insured claims a deduction forthe premiums paid under § 162. Captiveexcludes the premium income from itstaxable income by electing under§ 831(b) to be taxed only on its invest-ment income. Captive uses the premiumincome for purposes other than admin-istering and paying claims under theContract, generally benefitting Insuredor a party related to Insured. For in-stance, Captive may use premium in-come to provide a loan to Insured.

However, if the transaction does notconstitute insurance, Insured is not enti-tled to deduct the amount of that paymentunder § 162 as an insurance premium. Inaddition, if Captive does not provide in-surance, Captive does not qualify as aninsurance company and Captive’s elec-tions to be taxed only on its investmentincome under § 831(b) and to be treatedas a domestic insurance company under§ 953(d) are invalid.

The Treasury Department and theIRS recognize that related parties mayuse captive insurance companies thatmake elections under § 831(b) for riskmanagement purposes that do not in-volve tax avoidance, but believe thatthere are cases in which the use of sucharrangements to claim the tax benefits oftreating the Contract as an insurancecontract is improper. Therefore, theTreasury Department and the IRS areidentifying transactions described insection 2.01 of this notice (and transac-tions substantially similar to such trans-actions) as transactions of interest forpurposes of § 1.6011–4(b)(6) and §§ 6111and 6112 of the Code.

SECTION 2. TRANSACTIONS OFINTEREST

.01 Transactions Identified asTransactions of Interest

The following transaction is identifiedas a transaction of interest under this no-tice:


(a) A, a person, directly or indirectlyowns an interest in an entity (or entities)(“Insured”) conducting a trade or busi-ness;

(b) an entity (or entities) directly orindirectly owned by A, Insured, or personsrelated to A or Insured (“Captive”) entersinto a contract (or contracts) (the “Con-tracts”) with Insured that Captive and In-sured treat as insurance, or reinsures risksthat Insured has initially insured with anintermediary, Company C;

(c) Captive makes an election under§ 831(b) to be taxed only on taxable in-vestment income;

(d) A, Insured, or one or more personsrelated (within the meaning of § 267(b) or707(b)) to A or Insured directly or indi-rectly own at least 20 percent of the votingpower or value of the outstanding stock ofCaptive; and

(e) one or both of the following apply:(1) the amount of the liabilities in-

curred by Captive for insured losses andclaim administration expenses during theComputation Period (defined in section2.02 of this notice) is less than 70 percentof the following:

(A) premiums earned by Captive dur-ing the Computation Period, less

(B) policyholder dividends paid byCaptive during the Computation Period;or

(2) Captive has at any time during theComputation Period directly or indirectlymade available as financing or otherwiseconveyed or agreed to make available orconvey to A, Insured, or a person related(within the meaning of § 267(b) or707(b)) to A or Insured (collectively, the“Recipient”) in a transaction that did notresult in taxable income or gain to Recip-ient, any portion of the payments underthe Contract, such as through a guarantee,a loan, or other transfer of Captive’s cap-ital.

A transaction described in this section2.01 is identified as a transaction of inter-est regardless of whether the transactionhas the characteristics described in section1 of this notice.

.02 The Computation Period

The Computation Period is (a) the mostrecent five taxable years of Captive or (b)if Captive has been in existence for lessthan five taxable years, the entire period of

Captive’s existence. For purposes of thepreceding sentence, if Captive has been inexistence for less than five taxable yearsand Captive is a successor to one or moreCaptives created or availed of in connec-tion with a transaction described in thisnotice, taxable years of such predecessorentities are treated as taxable years ofCaptive. For purposes of this section 2.02,a short taxable year is treated as a taxableyear.

.03 Exception for CompensatoryArrangements with ProhibitedTransaction Exemption

There may be limited circumstances inwhich a captive insurance company ar-rangement that provides insurance for em-ployee compensation or benefits is de-scribed in this section and accordingly isidentified as a transaction of interest underthis notice. However, if such an arrange-ment is one for which the Employee Ben-efits Security Administration of the U.S.Department of Labor has issued a Prohib-ited Transaction Exemption, it is nottreated as an arrangement identified as atransaction of interest under this notice.

SECTION 3. RULES OFAPPLICATION

.01 Effective Date

Transactions that are the same as, orsubstantially similar to, the transaction de-scribed in section 2.01 of this notice areidentified as “transactions of interest” forpurposes of § 1.6011–4(b)(6) and §§ 6111and 6112 effective November 1, 2016.Persons entering into these transactions onor after November 2, 2006, must disclosethe transaction as described in § 1.6011–4.Material advisors who make a tax state-ment on or after November 2, 2006, withrespect to transactions entered into on orafter November 2, 2006, have disclosureand list maintenance obligations under§§ 6111 and 6112. See § 1.6011–4(h) and§ 301.6111–3(i) and § 301.6112–1(g) ofthe Procedure and Administration Regu-lations.

Independent of their classification astransactions of interest, transactions thatare the same as, or substantially similar to,the transaction described in section 2.01of this notice may already be subject tothe requirements of §§ 6011, 6111, or

6112, or the regulations thereunder. Whenthe Treasury Department and the IRShave gathered enough information regard-ing potentially abusive § 831(b) arrange-ments, the IRS and the Treasury Depart-ment may take one or more actions,including removing the transaction fromthe transactions of interest category inpublished guidance, designating the trans-action as a listed transaction, or providinga new category of reportable transaction.In the interim, the IRS may challenge aposition taken as part of a transaction thatis the same as, or substantially similar to,the transaction described in section 2.01of this notice under other provisions of theCode or judicial doctrines such as shamtransaction, substance over form, or eco-nomic substance.

.02 Participation

Under § 1.6011–4(c)(3)(i)(E), A, In-sured, Captive, and, if applicable, Com-pany C are participants in a transaction foreach year in which their respective taxreturns reflect tax consequences or a taxstrategy of a transaction of interest de-scribed in section 2.01 of this notice.

.03 Time for Disclosure

For rules regarding the time for provid-ing disclosure of a transaction describedin section 2.01 of this notice, see§ 1.6011–4(e) and § 301.6111–3(e).However, if, under § 1.6011–4(e), a tax-payer is required to file a disclosure state-ment with respect to a transaction de-scribed in section 2.01 of this notice afterNovember 1, 2016, and prior to January30, 2017, that disclosure statement will beconsidered to be timely filed if the tax-payer alternatively files the disclosurewith the Office of Tax Shelter Analysis byJanuary 30, 2017.

.04 Material Advisor ThresholdAmount

The threshold amounts are the sameas those for listed transactions. See§ 301.6111–3(b)(3)(i)(B).

.05 Disclosure

(a) General rule. Under § 1.6011–4(d)and the Instructions to Form 8886, Re-portable Transaction Disclosure State-


ment, the required disclosure must iden-tify and describe the transaction insufficient detail for the IRS to be able tounderstand the tax structure of the report-able transaction and the identity of allparties involved in the transaction.

(b) Information required of all partic-ipants. For all participants, describing thetransaction in sufficient detail includes,but is not limited to, describing on Form8886 when and how the taxpayer becameaware of the transaction.

(c) Information required of Captive.For Captive, describing the transaction insufficient detail includes, but is not limitedto, describing the following on Form8886:

(1) whether Captive is reporting because(i) the amount of the liabilities incurred byCaptive for insured losses and claim ad-ministration expenses during the Compu-tation Period is less than 70 percent of theamount specified in section 2.01(e)(1) ofthis notice; (ii) Captive has at any timeduring the Computation Period madeavailable as financing or otherwise con-veyed or agreed to make available or con-vey any portion of the payments under theContract to A, Insured, or a person related(within the meaning of § 267(b) or707(b)) to A or Insured through a separatetransaction, such as a guarantee, a loan, orother transfer; or (iii) both (i) and (ii);

(2) under what authority Captive ischartered;

(3) a description of all the type(s) ofcoverage provided by Captive during theyear or years of participation (if disclosurepertains to multiple years);

(4) a description of how the amountstreated as premiums for coverage pro-vided by Captive during the year or yearsof participation (if disclosure pertains tomultiple years) were determined, includ-ing the name and contact information ofany actuary or underwriter who assisted inthese determinations;

(5) a description of any claims paid byCaptive during the year or years of partic-ipation (if disclosure pertains to multipleyears), and of the amount of, and reasonfor, any reserves reported by Captive onthe annual statement; and

(6) a description of the assets held byCaptive during the year or years of partic-ipation (if disclosure pertains to multipleyears); that is, the use Captive has made of

its premium and investment income, in-cluding but not limited to, securities(whether or not registered), loans, real es-tate, or partnerships or other joint ven-tures, and an identification of the relatedparties involved in any transactions withrespect to those assets.

.06 Penalties

Persons required to disclose thesetransactions under § 1.6011–4 who fail todo so may be subject to the penalty under§ 6707A. Persons required to disclosethese transactions under § 6111 who failto do so may be subject to the penaltyunder § 6707(a). Persons required tomaintain lists of advisees under § 6112who fail to do so (or who fail to providesuch lists when requested by the IRS) maybe subject to the penalty under § 6708(a).In addition, the IRS may impose otherpenalties on parties involved in thesetransactions, including the accuracy–re-lated penalty under § 6662 or § 6662A.

SECTION 4. REQUEST FORCOMMENTS

The Treasury Department and the IRSrequest comments on how the transactionmight be addressed in published guidance.

Comments should be submitted inwriting on or before January 30, 2017.Send submissions to CC:PA:LPD:PR(Notice 2016–66), Room 5203, InternalRevenue Service, P.O. Box 7604, BenFranklin Station, Washington, DC 20044.Submissions may be hand–deliveredMonday through Friday between thehours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (Notice 2016–66), Courier’sDesk, Internal Revenue Service, 1111Constitution Avenue, NW, Washington, DC20224. Comments may also be sent elec-tronically, via the following e-mail address:[email protected] include “Notice 2016–66” in thesubject line of any electronic communica-tions. All comments submitted will be avail-able for public inspection and copying.

SECTION 5. DRAFTINGINFORMATION

The principal author of this notice isJohn E. Glover of the Office of AssociateChief Counsel (Financial Institutions &Products). For further information regard-

ing this notice contact Mr. Glover at (202)317–6995 (not a toll-free number).

Notice 2016–67

I. PURPOSE

This notice describes the applicability ofthe market rate of return limitation rules of§ 411(b)(5)(B)(i) and § 1.411(b)(5)–1(d) toa defined benefit plan that expresses a par-ticipant’s accumulated benefit as the currentvalue of an accumulated percentage of theparticipant’s final average compensation,highest average compensation, or highestaverage compensation during a limited pe-riod of years (a type of plan often referred toas a “pension equity plan” or “PEP”). Inparticular, this notice addresses the applica-bility of the market rate of return limitationrules to a type of PEP that applies a deferredannuity factor to the participant’s accumu-lated benefit in order to determine deferredbenefits (a type of PEP often referred to asan “implicit interest PEP”). In addition, thisnotice requests comments on potential pro-posed regulations that would subject im-plicit interest PEPs to the market rate ofreturn limitation.

II. BACKGROUND

Section 411(a) provides that, in order tobe a qualified plan, a defined benefit planmust satisfy the benefit accrual requirementsof § 411(b). Under § 411(b)(1)(H), a definedbenefit plan fails to comply with § 411(b) if,under the plan, an employee’s benefit ac-crual ceases, or the employee’s rate of ben-efit accrual is reduced, because of the attain-ment of any age.

Section 411(b)(5) contains a number ofspecial rules that apply to an applicabledefined benefit plan for purposes of section411(b)(1)(H). The term “applicable definedbenefit plan” is defined in § 411(a)(13)(C)and includes a cash balance plan, a PEP,or another plan that has been designated inregulations as an applicable defined ben-efit plan because it has a similar effect toa cash balance plan or PEP. Final regula-tions under §§ 411(a)(13) and 411(b)(5)relating to applicable defined benefit planswere published in the Federal Register onOctober 19, 2010 (75 FR 64123) and onSeptember 19, 2014 (79 FR 56442). Theseregulations are referred to in this notice as


“the hybrid plan regulations.” The hybridplan regulations refer to cash balanceplans, PEPs, and other applicable definedbenefit plans under § 411(a)(13)(C) as“statutory hybrid plans.”

Section 411(b)(5)(B) states that an ap-plicable defined benefit plan is treated asfailing to meet § 411(b)(1)(H) unless cer-tain requirements are satisfied. Amongthese requirements is § 411(b)(5)(B)(i),which provides that an applicable definedbenefit plan is treated as failing to meetthe age discrimination requirements of§ 411(b)(1)(H) if the terms of the planprovide for any interest credit (or equiva-lent amount) for any plan year at a ratethat is greater than a market rate of return.

Under § 1.411(b)(5)–1(d)(1)(ii)(A), aninterest credit generally means any of thefollowing adjustments to a participant’saccumulated benefit under a statutory hy-brid benefit formula, to the extent not con-ditioned on current service and not madeon account of imputed service: “(1) [a]nyincrease or decrease for a period, underthe terms of the plan at the beginning ofthe period, that is calculated by applying arate of interest or rate of return (includinga rate of increase or decrease under anindex) to the participant’s accumulatedbenefit (or portion thereof) as of the be-ginning of the period; and (2) [a]ny otherincrease for a period, under the terms ofthe plan at the beginning of the period.”

Under § 1.411(b)(5)–1(d)(1)(ii)(D), aprincipal credit means any increase to aparticipant’s accumulated benefit undera statutory hybrid benefit formula that isnot an interest credit. Thus, for example,an increase in the accumulated benefit un-der a PEP formula that is made on accountof current service (including an increaseon account of higher average compensa-tion) constitutes a principal credit.

Additional final regulations amend-ing the hybrid plan regulations under§§ 411(a)(13) and 411(b)(5) were pub-lished in the Federal Register on November16, 2015 (80 FR 70680). These regulations(referred to in this notice as the “transitionregulations”) provide an exception from therequirements of § 411(d)(6) to permit a planto reduce, with respect to benefits thathave already accrued, its interest crediting

rate from a rate that is impermissible un-der the hybrid plan regulations to a per-missible rate. In addition, the transitionregulations delay the applicability date ofcertain provisions under §§ 411(a)(13)and 411(b)(5) in the final hybrid plan reg-ulations that were scheduled to becomeeffective for plan years beginning on orafter January 1, 2016. Under the transitionregulations, those provisions generally arefirst effective for plan years beginning onor after January 1, 2017. This delay ineffective date applies to the provisions in§ 1.411(b)(5)–1(d) that set forth the list ofinterest crediting rates and combinationsof rates that satisfy the requirement of§ 411(b)(5)(B)(i) that a plan not providean effective rate of return in excess of amarket rate of return. See § 1.411(b)(5)–1(f)(2)(i)(B)(1).

III. PEP DESIGNS –DETERMINATION OF BENEFITPAYABLE AT ANNUITYSTARTING DATE

PEPs typically are designed to providea single–sum distribution equal to the ac-cumulated benefit (that is, the currentvalue of an accumulated percentage of theparticipant’s average compensation) at thetime principal credits cease. In addition,for annuity starting dates after principalcredits cease, PEPs often provide for in-creases in the amount of benefits that arepayable in order to reflect the time valueof money. Some PEPs provide for thisincrease by explicitly crediting interest onthe accumulated benefit after principalcredits cease. In the case of such a PEP(“an explicit interest PEP”), a participantis entitled to benefits at an annuity startingdate based on the participant’s accumu-lated benefit as of the date principal cred-its cease, increased by interest creditsthrough the annuity starting date.

Other PEPs provide for increases inannuity benefits for annuity starting datesafter principal credits cease by applying adeferred annuity factor to the participant’saccumulated benefit as of the date princi-pal credits cease. Such a PEP is oftenreferred to as an “implicit interest PEP”because preretirement interest is implic-itly reflected in the deferred annuity fac-

tor. One example of an implicit interestPEP is a PEP that defines the accruedbenefit (that is, the annual benefit payableat a participant’s normal retirement age)as the actuarial equivalent of the accumu-lated benefit determined as of the dateprincipal credits cease (or the current date,if principal credits have not yet ceased),and determines actuarial equivalence us-ing a deferred annuity factor that reflectspreretirement interest.1

IV. APPLICATION OF EXISTINGREGULATIONS

Under an explicit interest PEP, becausethe accumulated benefit is adjusted withinterest credits to determine the benefitpayable at annuity starting dates afterprincipal credits cease, those interest cred-its are subject to the market rate of returnlimitation rules of § 411(b)(5)(B)(i) and§ 1.411(b)(5)–1(d). Thus, any amend-ments necessary to bring the interest cred-iting rate into compliance with the marketrate of return limitation rules under thehybrid plan regulations must be made bythe applicable deadline in § 1.411(b)(5)–1(e)(3)(vi)(B)(3) of the transition regula-tions (generally before the beginning ofthe first plan year that begins on or afterJanuary 1, 2017) in order for the amend-ments to be eligible for the exception from§ 411(d)(6) provided by the transition reg-ulations.

By contrast, under an implicit interestPEP, the preretirement interest that is im-plicit in applying a deferred annuity factorto the accumulated benefit is not includedin the definition of an interest credit under§ 1.411(b)(5)–1(d)(1)(ii)(A). This is be-cause the accumulated benefit remains aconstant percentage of average compensa-tion and is not adjusted with interest creditsafter principal credits cease. Thus, under thehybrid plan regulations, no amendment isrequired to the deferred annuity factors un-der an implicit interest PEP in order to re-duce the preretirement interest that is im-plicit in those factors to a rate that does notexceed a market rate of return and the ex-ception from § 411(d)(6) under the transi-tion regulations does not apply to such anamendment.

1The deferred annuity factor applied under an implicit interest PEP may also reflect preretirement mortality. For purposes of sections IV and V of this notice, references to preretirementinterest include any adjustments for preretirement mortality reflected in a deferred annuity factor.


Stakeholders have expressed uncertaintyas to whether the market rate of return lim-itation rules under § 1.411(b)(5)–1(d) of thefinal hybrid plan regulations apply to im-plicit interest PEPs. Due to this uncertainty,some plan sponsors of implicit interest PEPsmight have believed that the preretirementinterest that is implicit in a deferred annuityfactor was subject to the market rate ofreturn limitation rules under § 1.411(b)(5)–1(d). As a result, some plan sponsors mighthave already adopted plan amendments toreduce that interest in accordance with therules under the transition regulations thatapply to amendments reducing interest cred-iting rates that exceed a market rate of re-turn. For a discussion of the consequencesof such a change and the impact of potentialfuture regulations, see section V of this no-tice.

V. POTENTIAL FUTUREAMENDMENTS TO THEREGULATIONS

Even though the preretirement interestthat is implicit in a deferred annuity factorunder an implicit interest PEP is not sub-ject to the market rate of return limitationrules in the final hybrid plan regulations,the Treasury Department and the IRS areconsidering whether to propose amend-ments to those regulations that would sub-ject implicit preretirement interest to themarket rate of return limitation. Com-ments are requested as to whether such arule should be proposed. Commentsshould take into account the statutory in-tent of § 411(b)(5) to subject interest cred-its and equivalent amounts to a marketrate of return limitation, as well as the

difference between interest credits and theinterest that is implicit in deferred annuityfactors.

If final regulations are ultimately ad-opted to subject the preretirement inter-est that is implicit in a deferred annuityfactor under an implicit interest PEP tothe market rate of return limitation, it isexpected that plan sponsors will begiven an adequate period of time, afterpublication of those regulations and be-fore the regulations become applicable,to amend plans to comply with the ruleand that in no event will the final ruleapply earlier than for plan years thatbegin on or after January 1, 2018. Inaddition, it is expected that, if such afinal rule is ultimately adopted, the ex-ception to § 411(d)(6) provided in thetransition regulations will be expandedto cover required changes in the de-ferred annuity factor made during theperiod covered by the existing transitionregulations and after that period endsbut prior to the applicability date of thenew final rule. Thus, if such a rule isadopted and a plan sponsor has alreadyreduced the implicit interest rate in aPEP to a market rate of return under anamendment that would satisfy the exist-ing transition regulations, no further ac-tion would be necessary.

However, if no such final rule is ad-opted to subject the preretirement inter-est that is implicit in deferred annuityfactors to the market rate of return lim-itation, then any amendment that hasalready been adopted to change a plan’sdeferred annuity factors in order toreduce the interest implicit in those fac-

tors to a market rate of return would notbe eligible for the exception from§ 411(d)(6) under the transition regula-tions. In such a case, a correction wouldbe needed to the extent that the prioramendment violates § 411(d)(6), andguidance relating to permissible correc-tions would be provided. The TreasuryDepartment and the IRS request com-ments as to corrections that would ap-propriately restore benefits that havebeen reduced by such an amendment butthat would not be overly burdensome.

Comments may be submitted in writing onor before February 21, 2017. Commentsshould be mailed to Internal Revenue Service,CC:PA:LPD:PR (Notice 2016–67), Room5203, P.O. Box 7604, Ben Franklin Station,Washington, D.C. 20044, or sent electroni-cally to [email protected]. Please include “Notice 2016–67” in thesubject line of any electronic communications.Alternatively, comments may be hand deliv-ered Monday through Friday between thehours of 8:00 a.m. and 4:00 p.m. to CC:PA:LPD:PR (Notice 2016–67), Courier’s Desk,Internal Revenue Service, 1111 ConstitutionAve., NW, Washington, D.C. All commentswill be available for public inspection andcopying.

VI. DRAFTING INFORMATION

The principal author of this notice isNeil Sandhu of the Office of AssociateChief Counsel (Tax Exempt and Govern-ment Entities). For further information re-garding this notice, contact Neil Sandhu at(202) 317-6700 (not a toll-free number).


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

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position isbeing extended to apply to a variation ofthe fact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds thatthe same principle also applies to B, theearlier ruling is amplified. (Compare withmodified, below).

Clarified is used in those instanceswhere the language in a prior ruling isbeing made clear because the languagehas caused, or may cause, some confu-sion. It is not used where a position in aprior ruling 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 thanrestate the substance and situation of apreviously published ruling (or rulings).Thus, the term is used to republish underthe 1986 Code and regulations the sameposition published under the 1939 Codeand regulations. The term is also usedwhen it is desired to republish in a singleruling a series of situations, names, etc.,that were previously published over a pe-riod of time in separate rulings. If the newruling does more than restate the sub-

stance of a prior ruling, a combination ofterms is used. For example, modified andsuperseded 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 isself contained. In this case, the previouslypublished ruling is first modified and then,as modified, 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 namesin subsequent rulings. After the originalruling has been supplemented severaltimes, a new ruling may be published thatincludes the list in the original ruling andthe additions, and supersedes all prior rul-ings in the 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 ofcases in litigation, or the outcome of aService study.

AbbreviationsThe following abbreviations in currentuse and formerly used will appear in ma-terial published 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.

Bulletin No. 2016–47 November 21, 2016i

Numerical Finding List1

Bulletin 2016–27 through 2016–47

Action on Decision:

2016-01, 2016-16 I.R.B. 5802016-02, 2016-31 I.R.B. 1932016-03, 2016-40 I.R.B. 424

Announcements:

2016-21, 2016-27 I.R.B. 82016-23, 2016-27 I.R.B. 102016-24, 2016-30 I.R.B. 1702016-25, 2016-31 I.R.B. 2052016-26, 2016-38 I.R.B. 3892016-27, 2016-33 I.R.B. 2382016-28, 2016-34 I.R.B. 2722016-29, 2016-34 I.R.B. 2722016-30, 2016-37 I.R.B. 3552016-31, 2016-38 I.R.B. 3922016-32, 2016-40 I.R.B. 4342016-33, 2016-39 I.R.B. 4222016-34, 2016-39 I.R.B. 4222016-35, 2016-39 I.R.B. 4232016-36, 2016-39 I.R.B. 4232016-37, 2016-39 I.R.B. 4232016-38, 2016-43 I.R.B. 5232016-39, 2016-45 I.R.B. 720

Notices:

2016-40, 2016-27 I.R.B. 42016-41, 2016-27 I.R.B. 52016-42, 2016-29 I.R.B. 672016-43, 2016-29 I.R.B. 1322016-44, 2016-29 I.R.B. 1322016-45, 2016-29 I.R.B. 1352016-46, 2016-31 I.R.B. 2022016-47, 2016-35 I.R.B. 2762016-48, 2016-33 I.R.B. 2352016-49, 2016-34 I.R.B. 2652016-50, 2016-38 I.R.B. 3842016-51, 2016-37 I.R.B. 3442016-52, 2016-40 I.R.B. 4252016-53, 2016-39 I.R.B. 4212016-54, 2016-40 I.R.B. 4292016-55, 2016-40 I.R.B. 4322016-57, 2016-40 I.R.B. 4322016-58, 2016-41 I.R.B. 4382016-59, 2016-42 I.R.B. 4572016-60, 2016-42 I.R.B. 4582016-61, 2016-46 I.R.B. 7222016-62, 2016-46 I.R.B. 7252016-63, 2016-45 I.R.B. 6832016-64, 2016-46 I.R.B. 7262016-66, 2016-47 I.R.B. 7452016-67, 2016-47 I.R.B. 748

Proposed Regulations:

REG-163113-02, 2016-36 I.R.B. 329REG-147196-07, 2016-29 I.R.B. 32REG-123854-12, 2016-28 I.R.B. 15REG-150992-13, 2016-44 I.R.B. 537REG-131418-14, 2016-33 I.R.B. 248REG-102516-15, 2016-32 I.R.B. 231REG-109086-15, 2016-30 I.R.B. 171REG-134016-15, 2016-31 I.R.B. 205REG-134122-15, 2016-46 I.R.B. 728REG-101689-16, 2016-30 I.R.B. 170REG-103058-16, 2016-33 I.R.B. 238REG-105005-16, 2016-38 I.R.B. 380REG-108792-16, 2016-36 I.R.B. 320REG-108934-16, 2016-44 I.R.B. 532REG-123600-16, 2016-43 I.R.B. 523REG-130314-16, 2016-45 I.R.B. 718

Revenue Procedures:

2016-37, 2016-29 I.R.B. 1362016-39, 2016-30 I.R.B. 1642016-40, 2016-32 I.R.B. 2282016-41, 2016-30 I.R.B. 1652016-42, 2016-34 I.R.B. 2692016-43, 2016-36 I.R.B. 3162016-44, 2016-36 I.R.B. 3162016-45, 2016-37 I.R.B. 3442016-46, 2016-37 I.R.B. 3452016-47, 2016-37 I.R.B. 3462016-48, 2016-37 I.R.B. 3482016-49, 2016-42 I.R.B. 4622016-50, 2016-43 I.R.B. 5222016-51, 2016-42 I.R.B. 4652016-52, 2016-42 I.R.B. 5202016-53, 2016-44 I.R.B. 5302016-54, 2016-45 I.R.B. 6852016-55, 2016-45 I.R.B. 707

Revenue Rulings:

2016-17, 2016-27 I.R.B. 12016-18, 2016-31 I.R.B. 1942016-19, 2016-35 I.R.B. 2732016-20, 2016-36 I.R.B. 2792016-23, 2016-39 I.R.B. 3822016-24, 2016-39 I.R.B. 3952016-25, 2016-41 I.R.B. 4352016-26, 2016-45 I.R.B. 538

Treasury Decisions:

9773, 2016-29 I.R.B. 569774, 2016-30 I.R.B. 1519775, 2016-30 I.R.B. 1599776, 2016-32 I.R.B. 2229777, 2016-36 I.R.B. 2829778, 2016-31 I.R.B. 1969779, 2016-33 I.R.B. 2339781, 2016-35 I.R.B. 274

Treasury Decisions:—Continued

9782, 2016-36 I.R.B. 3019783, 2016-39 I.R.B. 3969784, 2016-39 I.R.B. 4029785, 2016-38 I.R.B. 3759786, 2016-42 I.R.B. 4429790, 2016-45 I.R.B. 5409791, 2016-47 I.R.B. 734

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016–01 through 2016–26 is in Internal Revenue Bulletin2016–26, dated June 27, 2016.

November 21, 2016 Bulletin No. 2016–47ii

Finding List of Current Actions onPreviously Published Items1

Bulletin 2016–27 through 2016–47

Notices:

2009-89Modified byNotice 2016-51, 2016-37 I.R.B. 344

2012-54Obsoleted byNotice 2016-51, 2016-37 I.R.B. 344


2013-1Superseded byNotice 2016-41, 2016-27 I.R.B. 5


2015-63Superseded byNotice 2016-58, 2016-41 I.R.B. 438

Revenue Procedures:

2003-16Modified byRev. Proc. 2016-47, 2016-37 I.R.B. 346

2007-44Clarified byRev. Proc. 2016-37, 2016-29 I.R.B. 136


2007-44Superseded byRev. Proc. 2016-37, 2016-29 I.R.B. 136




Revenue Procedures:—Continued


2016-3Supplemented byRev. Proc. 2016-50, 2016-43 I.R.B. 522


Treasury Decisions:

2000-44Superseded byT.D. 9787 2016-47 I.R.B. xxx

2013-17Obsoleted byT.D. 9785 2016-38 I.R.B. 375

2014-12Modified byT.D. 9776 2016-32 I.R.B. 222

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016–01 through 2016–26 is in Internal Revenue Bulletin2016–26, dated June 27, 2016.

Bulletin No. 2016–47 November 21, 2016iii

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/.

We Welcome Comments About the Internal Revenue BulletinIf you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we

would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.NW, IR-6230 Washington, DC 20224.

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