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Guidance on the Application of Code § 4980D to Certain Types of Health
Coverage Reimbursement Arrangements
Notice 2015-17
I. PURPOSE AND OVERVIEW
This notice reiterates the conclusion in previous guidance addressing employer
payment plans, including Notice 2013-54, 2013-40 I.R.B. 287,
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that employer payment
plans are group health plans that will fail to comply with the market reforms that apply to
group health plans under the Affordable Care Act (ACA).
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For this purpose, an
employer payment plan as described in Notice 2013-54 refers to a group health plan
under which an employer reimburses an employee for some or all of the premium
expenses incurred for an individual health insurance policy or directly pays a premium
for an individual health insurance policy covering the employee, such as arrangements
described in Revenue Ruling 61-146, 1961-2 C.B. 25. This notice also provides
transition relief from the assessment of excise tax under Internal Revenue Code (Code)
§ 4980D for failure to satisfy market reforms in certain circumstances. The transition
relief applies
to employer healthcare arrangements that constitute (1) employer payment
plans, as described in Notice 2013-54, if the plan is sponsored by an employer that is
not an Applicable Large Employer (ALE) under Code § 4980H(c)(2) and §§54.4980H-
1(a)(4) and -2; (2) S corporation healthcare arrangements for 2-percent shareholder-
employees;
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(3) Medicare premium reimbursement arrangements; and (4) TRICARE-
related health reimbursement arrangements (HRAs). This notice also provides
additional guidance on the tax treatment of employer payment plans. This notice
supplements and clarifies the guidance provided in Notice 2013-54 and other guidance
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There have been four prior issuances on the topics addressed in this notice: (1) FAQs About Affordable
Care Act Implementation (Part XI), issued on January 24, 2013 by DOL
(http://www.dol.gov/ebsa/faqs/faq-aca11.html) and HHS (http://www.cms.gov/CCIIO/Resources/Fact-
Sheets-and-FAQs/aca_implementation_faqs11.html); (2) IRS Notice 2013-54 and DOL Technical
Release 2013-03, issued on September 13, 2013; (3) IRS FAQ on Employer Healthcare Arrangements
(http://www.irs.gov/Affordable-Care-Act/Employer-Health-Care-Arrangements); and (4) FAQs About
Affordable Care Act Implementation (Part XXII), issued on November 6, 2014 by DOL
(http://www.dol.gov/ebsa/faqs/faq-aca22.html) and HHS (http://www.cms.gov/CCIIO/Resources/Fact-
Sheets-and-FAQs/Downloads/FAQs-Part-XXII-FINAL.pdf).
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The “Affordable Care Act” or “ACA” refers to the Patient Protection and Affordable Care Act (enacted
March 23, 2010, Pub. L. No. 111-148), as amended by the Health Care and Education Reconciliation Act
of 2010 (enacted March 30, 2010, Pub. L. No. 111-152), and as further amended by the Department of
Defense and Full-Year Continuing Appropriations Act, 2011 (enacted April 15, 2011, Pub. L. No. 112-10),
Section 1001 of the ACA added new Public Health Service Act (PHS Act) §§ 2711-2719. Section 1563 of
the ACA (as amended by ACA § 10107(b)) added Code § 9815(a) and Employee Retirement Income
Security Act (ERISA) § 715(a) to incorporate the provisions of part A of title XXVII of the PHS Act into the
Code and ERISA, and to make them applicable to group health plans and health insurance issuers
providing health insurance coverage in connection with group health plans. The PHS Act sections
incorporated by these references are §§ 2701 through 2728. Accordingly, these referenced PHS Act
sections (i.e., the market reforms) are subject to shared interpretive jurisdiction by the Departments.
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For purposes of S corporations, 2-percent shareholder generally means any person who owns more
than 2 percent of the stock of the S corporation. See Code §1372(b)(2).