Par. 5. Section 54.4980H-5 is amended by: a. Revising paragraph (e)(2) introductory text; b. In paragraph (e)(2)(i): i. Removing “an” and adding in its place “a general” in the heading; and ii. Removing “affordability” and adding in its place “general affordability” in the first sentence; c. Removing “9.5 percent of” and adding in its place “the product of the required contribution percentage (as defined in § 1.36B-2(c)(3)(v)(C)) and” in the first sentence of paragraphs (e)(2)(ii)(A) and (B), the first and second sentences of paragraph (e)(2)(iii), and the first sentence of paragraph (e)(2)(iv); d. In paragraph (e)(2)(v): i. Adding a sentence to the end of the introductory text; and ii. Designating Examples 1 through 6 as paragraphs (e)(2)(v)(A) through (F), respectively; e. In newly designated paragraphs (e)(2)(v)(A) through (F), redesignating the paragraphs in the first column as the paragraphs in the second column: f. Redesignating paragraphs (f) and (g) as paragraphs (g) and (h), respectively; g. Adding a new paragraph (f); and h. Revising newly redesignated paragraph (h). The revisions and additions read as follows:
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(e) * * *
(2) Affordability safe harbors for section 4980H(b) purposes. The affordability safe harbors set forth in paragraphs (e)(2)(ii) through (iv) of this section (general affordability safe harbors) apply solely for purposes of section 4980H(b), so that an applicable large employer member that offers minimum essential coverage providing minimum value will not be subject to an assessable payment under section 4980H(b) with respect to any employee receiving the applicable premium tax credit or cost-sharing reduction for a period for which the coverage is determined to be affordable under the requirements of a general affordability safe harbor. The preceding sentence applies even if the applicable large employer member's offer of coverage that meets the requirements of a general affordability safe harbor is not affordable for a particular employee under section 36B(c)(2)(C)(i) and § 1.36B-2(c)(3)(v) of this chapter, and an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to that employee. The general affordability safe harbors apply with respect to offers of minimum essential coverage other than the offer of an individual coverage HRA, as defined in paragraph (f)(7) of this section. Paragraph (f) of this section sets forth affordability and minimum value safe harbors that apply to the offer of an individual coverage HRA (individual coverage HRA safe harbors).
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(v) * * * For purposes of simplicity, the examples in this paragraph (e)(2)(v) assume 9.5 percent is the required contribution percentage for 2015 and 2016, although the required contribution percentage in 2015 and 2016 was adjusted for those years pursuant to § 1.36B-2(c)(3)(v)(C) of this chapter.
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(f) Affordability and minimum value safe harbors for individual coverage HRAs —(1) In general. Whether an offer of an individual coverage HRA is treated as affordable and providing minimum value, in general, is determined under § 1.36B-2(c)(3)(i)(B), (c)(3)(vi), and (c)(5) of this chapter. This paragraph (f) sets forth safe harbors that an applicable large employer member may use in determining whether an offer of an individual coverage HRA is affordable or provides minimum value for purposes of section 4980H(b), even if the offer of the individual coverage HRA is not affordable or does not provide minimum value under § 1.36B-2(c)(3)(i)(B), (c)(3)(vi), and (c)(5) of this chapter. An applicable large employer member that offers an individual coverage HRA is not subject to an assessable payment under section 4980H(b) with respect to any full-time employee receiving the applicable premium tax credit or cost-sharing reduction for a period for which the individual coverage HRA is determined to be affordable and to provide minimum value applying the safe harbors provided in this paragraph (f). The preceding sentence applies even if the applicable large employer member's offer of an individual coverage HRA that is affordable and provides minimum value applying the safe harbors under this paragraph (f) is not affordable or does not provide minimum value for a particular employee under § 1.36B-2(c)(3)(i)(B), (c)(3)(vi), and (c)(5) of this chapter, and an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to that employee. To the extent not addressed in this paragraph (f), the rules under § 1.36B-2(c)(3)(i)(B), (c)(3)(vi), and (c)(5) of this chapter apply in determining whether an offer of an individual coverage HRA is affordable and provides minimum value for purposes of section 4980H(b). Further, an applicable large employer member may rely on information provided by an Exchange in determining whether the offer of an individual coverage HRA is affordable and provides minimum value. See paragraph (f)(7) of this section for definitions that apply to this paragraph (f), which are in addition to the definitions set forth in § 54.4980H-1(a).
(2) Conditions of using an individual coverage HRA safe harbor. An applicable large employer member may use one or more of the safe harbors described in this paragraph (f) only with respect to the full-time employees and their dependents to whom the applicable large employer member offered the opportunity to enroll in an individual coverage HRA. The safe harbors in this paragraph (f) apply only to the offer of an individual coverage HRA, but to the extent an applicable large employer member offers some full-time employees and their dependents an individual coverage HRA and other full-time employees and their dependents other coverage under an eligible employer-sponsored plan that provides minimum value with respect to the self-only coverage offered to the employee, the applicable large employer member may use the safe harbors under this paragraph (f) for the offers of the individual coverage HRA and the general affordability safe harbors under paragraph (e)(2) of this section for the offers of other coverage. Use of any of the safe harbors in this paragraph (f) is optional for an applicable large employer member, and an applicable large employer member may choose to apply the safe harbors for any class of employees (as defined in paragraph (f)(7) of this section), provided it does so on a uniform and consistent basis for all employees in the class of employees. Each of the safe harbors set forth in this paragraph (f) may be used in combination with the other safe harbors provided in this paragraph (f), subject to the conditions of the safe harbors.
(3) Minimum value. An individual coverage HRA that is affordable for a calendar month under § 1.36B-2(c)(5) of this chapter, taking into account any applicable safe harbors under this paragraph (f), is treated as providing minimum value for the calendar month, for purposes of section 4980H(b).
(4) Look-back month safe harbor —(i) In general. In determining an employee's required HRA contribution for a calendar month, for purposes of section 4980H(b), an applicable large employer member may use the monthly premium for the applicable lowest cost silver plan for the month specified in either paragraph (f)(4)(i)(A) or (B) of this section, as applicable (the look-back month):
(A) Calendar year plan. For an individual coverage HRA with a plan year that is the calendar year, an applicable large employer member may use the monthly premium for the applicable lowest cost silver plan for January of the prior calendar year.
(B) Plan year that is not the calendar year. For an individual coverage HRA with a plan year that is not the calendar year, an applicable large employer member may use the monthly premium for the applicable lowest cost silver plan for January of the current calendar year.
(ii) Application of look-back month safe harbor to employee's current circumstances. In determining the monthly premium for the applicable lowest cost silver plan based on the applicable look-back month, the applicable large employer member must use the employee's applicable age for the current plan year and the employee's applicable location for the current calendar month. In general, the applicable large employer member may use the monthly premium of the applicable lowest cost silver plan for the applicable look-back month for all calendar months of the plan year. However, to the extent the employee's applicable location changes during the plan year, although the applicable large employer member may continue to determine the monthly premium based on the applicable look-back month, the applicable large employer member must use the employee's new applicable location, in accordance with the rules set forth under paragraph (f)(6) of this section if applicable, to determine the applicable lowest cost silver plan used to determine the monthly premium.
(5) Application of the general affordability safe harbors to individual coverage HRAs. The general affordability safe harbors set forth in paragraphs (e)(2)(ii), (iii), and (iv) of this section may apply to an offer of an individual coverage HRA by an applicable large employer member to a full-time employee for purposes of section 4980H(b), subject to the modifications set forth in this paragraph (f)(5).
(i) Form W-2 safe harbor applied to individual coverage HRAs. An applicable large employer member satisfies the Form W-2 safe harbor of paragraph (e)(2)(ii) of this section with respect to an offer of an individual coverage HRA to an employee for a calendar year, or if applicable, part of a calendar year, if the individual coverage HRA is affordable under the Form W-2 safe harbor under paragraph (e)(2)(ii) of this section but substituting “the employee's required HRA contribution, as determined taking into account any other safe harbors in paragraph (f) of this section, if applicable” for each of the following phrases—“that employee's required contribution for the calendar year for the employer's lowest cost self-only coverage that provides minimum value”, “the required employee contribution”, “the employee's required contribution”, and “the employee's required contribution for the employer's lowest cost self-only coverage that provides minimum value.”
(ii) Rate of pay safe harbor applied to individual coverage HRAs. An applicable large employer member satisfies the rate of pay safe harbor of paragraph (e)(2)(iii) of this section with respect to an offer of an individual coverage HRA to an employee for a calendar month if the individual coverage HRA is affordable under the rate of pay safe harbor of paragraph (e)(2)(iii) of this section but substituting “the employee's required HRA contribution, as determined taking into account any other safe harbors in paragraph (f) of this section, if applicable,” for “the employee's required contribution for the calendar month for the applicable large employer member's lowest cost self-only coverage that provides minimum value.”
(iii) Federal poverty line safe harbor applied to individual coverage HRAs. An applicable large employer member satisfies the Federal poverty line safe harbor of paragraph (e)(2)(iv) of this section with respect to an offer of an individual coverage HRA to an employee for a calendar month if the individual coverage HRA is affordable under the federal poverty line safe harbor of paragraph (e)(2)(iv) of this section but substituting “the employee's required HRA contribution, as determined taking into account any other safe harbors in paragraph (f) of this section, if applicable,” for “the employee's required contribution for the calendar month for the applicable large employer member's lowest cost self-only coverage that provides minimum value.”
(6) Location safe harbor —(i) In general. For purposes of section 4980H(b), an applicable large employer member may determine an employee's required HRA contribution for a calendar month based on the cost of the applicable lowest cost silver plan for the location of the employee's primary site of employment.
(ii) Primary site of employment —(A) In general. An employee's primary site of employment generally is the location at which the applicable large employer member reasonably expects the employee to perform services on the first day of the plan year (or on the first day the individual coverage HRA may take effect, for an employee who is not eligible for the individual coverage HRA on the first day of the plan year). However, the employee's primary site of employment is treated as changing if the location at which the employee performs services changes and the employer expects the change to be permanent or indefinite; in that case, in general, the employee's primary site of employment is treated as changing no later than the first day of the second calendar month after the employee has begun performing services at the new location. Nonetheless, if an applicable large employer member is first offering an individual coverage HRA to a class of employees, and the change in location occurs prior to the individual coverage HRA's initial plan year, the employee's primary site of employment is treated as changing no later than the later of the first day of the plan year or the first day of the second calendar month after the employee has begun performing services at the new location.
(B) Remote workers. In the case of an employee who regularly performs services from home or another location that is not on the applicable large employer member's premises, but who may be required by his or her employer to work at, or report to, a particular location, such as a teleworker with an assigned office space or available workspace at a particular location to which he or she may be required to report, the location to which the employee would report to provide services if requested is the primary site of employment. In the case of an employee who works remotely from home or at another location that is not on the premises of the applicable large employer member and who otherwise does not have an assigned office space or a particular location to which to report, the employee's residence is the primary site of employment.
(7) Definitions. The definitions in this paragraph (f)(7) apply for purposes of this paragraph (f).
(i) Applicable age. For an employee who is or will be eligible for an individual coverage HRA on the first day of the plan year, the employee's applicable age for the plan year is the employee's age on the first day of the plan year. For an employee who becomes eligible for an individual coverage HRA during the plan year, the employee's applicable age for the remainder of the plan year is the employee's age on the date the individual coverage HRA can first become effective with respect to the employee.
(ii) Applicable location. An employee's applicable location is where the employee resides for the calendar month, or, if the applicable large employer member is applying the location safe harbor under paragraph (f)(6) of this section, the employee's primary site of employment for the calendar month.
(iii) Applicable lowest cost silver plan —(A) In general. The applicable lowest cost silver plan for an employee for a calendar month generally is the lowest cost silver plan for self-only coverage of the employee offered through the Exchange for the employee's applicable location for the month.
(B) Different lowest cost silver plans in different parts of the same rating area. If there are different lowest cost silver plans in different parts of a rating area, an employee's applicable lowest cost silver plan is the lowest cost silver plan in the part of the rating area in which the employee's applicable location is located.
(C) Lowest cost silver plan identified for use for employees of all ages. The applicable lowest cost silver plan for an employee is the lowest cost silver plan for the lowest age band in the individual market for the employee's applicable location.
(iv) Class of employees. A class of employees means a class of employees as set forth in § 54.9802-4(d)(2).
(v) Individual coverage HRA. An individual coverage HRA means an individual coverage HRA as set forth in § 54.9802-4.
(vi) Required contribution percentage. Required contribution percentage means the required contribution percentage as defined in § 1.36B-2(c)(3)(v)(C) of this chapter.
(vii) Required HRA contribution. In general, the required HRA contribution means the required HRA contribution as defined in § 1.36B-2(c)(5)(ii) of this chapter. However, for purposes of the safe harbors set forth in this paragraph (f), the required HRA contribution is determined based on the applicable lowest cost silver plan as defined in paragraph (f)(7)(iii) of this section and the monthly premium for the applicable lowest cost silver plan is determined based on the employee's applicable age, as defined in paragraph (f)(7)(i) of this section, and the employee's applicable location, as defined in paragraph (f)(7)(ii) of this section.
(8) Examples. The following examples illustrate the application of the safe harbors under this paragraph (f) to applicable large employer members that offer an individual coverage HRA to at least some of their full-time employees.
(i) Example 1 (Location safe harbor and look-back month safe harbor applied to calendar-year individual coverage HRA) —(A) Facts. For 2020, Employer Y offers all full-time employees and their dependents an individual coverage HRA with a calendar-year plan year and makes $6,000 available in the HRA for the 2020 calendar-year plan year to each full-time employee without regard to family size, which means the monthly HRA amount for each full-time employee is $500. All of Employer Y's employees have a primary site of employment in City A. Employer Y chooses to use the location safe harbor and the look-back month safe harbor. Employer Y also chooses to use the rate of pay safe harbor for its full-time employees. Employee M is 40 years old on January 1, 2020, the first day of the plan year. The monthly premium for the applicable lowest cost silver plan for a 40 year old offered through the Exchange in City A for January 2019 is $600. Employee M's required HRA contribution for each month of 2020 is $100 (cost of the applicable lowest cost silver plan determined under the location safe harbor and the look-back month safe harbor ($600) minus the monthly HRA amount ($500)). The monthly amount determined under the rate of pay safe harbor for Employee M is $2,000 for each month in 2020.
(B) Conclusion. Employer Y has made an offer of affordable, minimum value coverage to Employee M for purposes of section 4980H(b) for each month of 2020 because Employee M's required HRA contribution ($100) is less than the amount equal to the required contribution percentage for 2020 multiplied by the monthly amount determined under the rate of pay safe harbor for Employee M (9.78 percent of $2,000 = $196). Employer Y will not be liable for an assessable payment under section 4980H(b) with respect to Employee M for any calendar month in 2020. (Also, Employer Y will not be liable for an assessable payment under section 4980H(a) for any calendar month in 2020 because it offered an individual coverage HRA, an eligible employer-sponsored plan that is minimum essential coverage, to all full-time employees and their dependents for each calendar month in 2020.)
(ii) Example 2 (Location safe harbor and look-back month safe harbor applied to non-calendar year individual coverage HRA) —(A) Facts. Employer Z offers all full-time employees and their dependents an individual coverage HRA with a non-calendar year plan year of July 1, 2020 through June 30, 2021, and makes $6,000 available in the HRA for the plan year to each full-time employee without regard to family size, which means the monthly HRA amount for each full-time employee is $500. All of Employer Z's employees have a primary site of employment in City B. Employer Z chooses to use the location safe harbor and the look-back month safe harbor. Employer Z also chooses to use the rate of pay safe harbor for its full-time employees. Employee N is 40 years old on July 1, 2020, the first day of the plan year. The monthly premium for the applicable lowest cost silver plan for a 40 year old offered through the Exchange in City B for January 2020 is $600. Employee N's required HRA contribution for each month of the plan year beginning July 1, 2020, is $100 (cost of the applicable lowest cost silver plan determined under the location safe harbor and the look-back month safe harbor ($600) minus the monthly HRA amount ($500)). The monthly amount determined under the rate of pay safe harbor for Employee N is $2,000 for each month of the plan year beginning July 1, 2020.
(B) Conclusion. Employer Z has made an offer of affordable, minimum value coverage to Employee N for purposes of section 4980H(b) for each month of the plan year beginning July 1, 2020, because Employee N's required HRA contribution ($100) is less than the amount equal to the required contribution percentage for plan years beginning in 2020 multiplied by the monthly amount determined under the rate of pay safe harbor for Employee N (9.78 percent of $2,000 = $196). Employer Z will not be liable for an assessable payment under section 4980H(b) with respect to Employee N for any calendar month in the plan year beginning July 1, 2020. (Also, Employer Z will not be liable for an assessable payment under section 4980H(a) for any calendar month in the plan year beginning July 1, 2020, because it offered an individual coverage HRA, an eligible employer-sponsored plan that is minimum essential coverage, to all full-time employees and their dependents for each calendar month in that plan year.)
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(h) Applicability date. Paragraphs (a) through (e) and (g) of this section are applicable for periods after December 31, 2014. Paragraph (f) of this section is applicable for periods after December 31, 2019.