Internal Revenue Bulletin 2020-32 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2020–32
August 3, 2020
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
Announcement 2020-8, page 244.
Announcement 2020-8 amends Revenue Procedure 2020-
35 to show correct information.
1. In Section 2.1.1, Online Fillable Forms, under the heading
Specifications. Delete Form 1099-NEC from the first para-
graph.
2. In Section 4.5.3, Perforations, under the heading Miscel-
laneous Instructions for Copies B, C, D, E, 1, and 2. Indi-
cate that instructions for perforation can be found in Section
2.1.9.
Announcement 2020-9, page 244.
The Office of Professional Responsibility (OPR) announces re-
cent disciplinary sanctions involving attorneys, certified pub-
lic accountants, enrolled agents, enrolled actuaries, enrolled
retirement plan agents, and appraisers. These individuals are
subject to the regulations governing practice before the Inter-
nal Revenue Service (IRS), which are set out in Title 31, Code
of Federal Regulations, Part 10, and which are published in
pamphlet form as Treasury Department Circular No. 230.
The regulations prescribe the duties and restrictions relating
to such practice and prescribe the disciplinary sanctions for
violating the regulations.
T.D. 9903, page 235.
The guidance contains final regulations relating to the imposi-
tion of certain user fees on tax return preparers. Pursuant to
the guidelines in OMB Circular A-25, the IRS has recalculated
its cost of providing PTINs and has determined that the full
cost of administering the PTIN program going forward has
been reduced. Therefore, the final regulations reduce the
amount of the user fee to obtain or renew a PTIN from $33 to
$21, plus $14.95 payable directly to a third-party contractor.
EMPLOYEE PLANS
Notice 2020-57, page 240.
This notice sets forth updates on the corporate bond month-
ly yield curve, the corresponding spot segment rates for July
2020 used under § 417(e)(3)(D), the 24-month average seg-
ment rates applicable for July 2020, and the 30-year Trea-
sury rates, as reflected by the application of § 430(h)(2)(C)
(iv).
REG-130081-19, page 246.
These proposed rules would amend the 2015 regulations
under Treas. Reg. § 54.9815-1251 to provide additional flex-
ibility for grandfathered group health plans and issuers of
grandfathered group health plans to make certain changes
without losing their grandfathered status under the regula-
tions.
EXEMPT ORGANIZATIONS
Notice 2020-56, page 239.
This notice amplifies the relief provided in Notice 2020-23,
202-18 IRB 742, for hospital organizations that are required
to meet the community health needs assessment (CHNA)
requirements under section 501(r)(3) of the Code. Notice
2020-23 postponed until July 15, 2020, the deadline for per-
forming any CHNA requirement that is due to be completed
on or after April 1, 2020, and before July 15, 2020. This
notice provides a further postponement, until December 31,
2020, of the deadline for performing any CHNA requirement
due to be completed on or after April 1, 2020, and before
December 31, 2020. However, the due date for any CHNA
requirement originally due to be completed after December
31, 2020, is not extended by this notice.
Finding Lists begin on page ii.

INCOME TAX
Rev. Proc. 2020-36, page 243.
This Revenue Procedure updates the applicable percentage
table in § 36B(b)(3)(A)(i) (Applicable Percentage Table) for cal-
endar year 2021, which is used to calculate an individual’s
premium tax credit. The revenue procedure also updates the
required contribution percentage in § 36B(c)(2)(C)(i)(II) for
plan years beginning after calendar year 2020 (Section 36B
Required Contribution Percentage). This percentage is used
to determine whether an individual is eligible for affordable
employer-sponsored minimum essential coverage under §
36B.
Rev. Rul. 2020-15, page 233.
Federal rates; adjusted federal rates; adjusted federal long-
term rate, the long-term exempt rate, and the blended annual
rate. For purposes of sections 382, 1274, 1288, 7872 and
other sections of the Code, tables set forth the rates for
August 2020.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, 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 unless
the 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
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (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
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published 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.
August 3, 2020 Bulletin No. 2020–32

Part I
Section 1274.—
Determination of Issue
Price in the Case of Certain
Debt Instruments Issued for
Property
(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7872.)
Rev. Rul. 2020-15
This revenue ruling provides various
prescribed rates for federal income tax
purposes for August 2020 (the current
month). Table 1 contains the short-
term, mid-term, and long-term applica-
ble federal rates (AFR) for the current
month for purposes of section 1274(d)
of the Internal Revenue Code. Table 2
contains the short-term, mid-term, and
long-term adjusted applicable federal
rates (adjusted AFR) for the current
month for purposes of section 1288(b).
Table 3 sets forth the adjusted feder-
al long-term rate and the long-term
tax-exempt rate described in section
382(f). Table 4 contains the appropri-
ate percentages for determining the
low-income housing credit described in
section 42(b)(1) for buildings placed in
service during the current month. How-
ever, under section 42(b)(2), the appli-
cable percentage for non-federally sub-
sidized new buildings placed in service
after July 30, 2008, shall not be less
than 9%. Finally, Table 5 contains the
federal rate for determining the present
value of an annuity, an interest for life
or for a term of years, or a remainder or
a reversionary interest for purposes of
section 7520.
REV. RUL. 2020-15 TABLE 1
Applicable Federal Rates (AFR) for August 2020
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR0.17%0.17%0.17%0.17%
110% AFR0.19%0.19%0.19%0.19%
120% AFR0.20%0.20%0.20%0.20%
130% AFR0.22%0.22%0.22%0.22%
Mid-term
AFR0.41%0.41%0.41%0.41%
110% AFR 0.45%0.45%0.45%0.45%
120% AFR0.49%0.49%0.49%0.49%
130% AFR0.53%0.53%0.53%0.53%
150% AFR0.62%0.62%0.62%0.62%
175% AFR0.72%0.72%0.72%0.72%
Long-term
AFR1.12%1.12%1.12%1.12%
110% AFR1.23%1.23%1.23%1.23%
120% AFR1.34%1.34%1.34%1.34%
130% AFR1.47%1.46%1.46%1.46%
REV. RUL. 2020-15 TABLE 2
Adjusted AFR for August 2020
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted AFR0.13%0.13%0.13%0.13%
Mid-term adjusted AFR0.31%0.31%0.31%0.31%
Long-term adjusted AFR0.85%0.85%0.85%0.85%
Bulletin No. 2020–32 233 August 3, 2020

REV. RUL. 2020-15 TABLE 3
Rates Under Section 382 for August 2020
Adjusted federal long-term rate for the current month.85%
Long-term tax-exempt rate for ownership changes during the current month (the highest of
the adjusted federal long-term rates for the current month and the prior two months.)
.89%
REV. RUL. 2020-15 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for August 2020
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit7.17%
Appropriate percentage for the 30% present value low-income housing credit 3.07%
REV. RUL. 2020-15 TABLE 5
Rate Under Section 7520 for August 2020
Applicable federal rate for determining the present value of an annuity, an interest for life or
a term of years, or a remainder or reversionary interest
.4%
Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2020. See Rev. Rul. 2020-15, page 233.
Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2020. See Rev. Rul. 2020-15, page 233.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and
Certain Built-In Losses
Following Ownership
Change
The adjusted applicable federal long-term rate
is set forth for the month of August 2020. See Rev.
Rul. 2020-15, page 233.
Section 467.—Certain
Payments for the Use of
Property or Services
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2020. See Rev. Rul. 2020-15, page 233.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The applicable federal short-term rates are set
forth for the month of August 2020. See Rev. Rul.
2020-15, page 233.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2020. See Rev. Rul. 2020-15, page 233.

Section 483.—Interest on
Certain Deferred Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2020. See Rev. Rul. 2020-15, page 233.
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
August 2020. See Rev. Rul. 2020-15, page 233.
Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of August 2020. See Rev. Rul.
2020-15, page 233.
Section 7872.—Treatment
of Loans With Below-
Market Interest Rates
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2020. See Rev. Rul. 2020-15, page 233.

August 3, 2020 234 Bulletin No. 2020–32

Bulletin No. 2020–32 235 August 3, 2020
26 CFR 300.13
T.D. 9903
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 300
Preparer Tax Identification Number
(PTIN) User Fee Update
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: These final regulations
amend existing regulations relating to
the imposition of certain user fees on
tax return preparers. The final regula-
tions reduce the amount of the user fee
to apply for or renew a preparer tax iden-
tification number (PTIN) and affect indi-
viduals who apply for or renew a PTIN.
The Independent Offices Appropriations
Act of 1952 authorizes the charging of
user fees.
DATES: Effective date: These regulations
are effective August 17, 2020.
Applicability Date: For the date of appli-
cability, see §300.13(d).
FOR FURTHER INFORMATION CON-
TACT: Michael Franklin at (202) 317-
6844 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to 26 CFR part 300 regarding user fees.
On April 16, 2020, a notice of proposed
rulemaking (REG-117138-17) proposing
to amend the regulations relating to im-
posing a user fee to apply for or renew a
PTIN was published in the Federal Reg-
ister (85 FR 21126). The notice proposed
decreasing the amount of the user fee to
apply for or renew a PTIN from $33, plus
$17 payable to a third-party contractor, to
$21, plus $14.95 payable to a third-party
contractor. The notice contains a detailed
explanation regarding the amendments to
these regulations.
Eighteen comments responding to
the notice and two requests for a public
hearing were received. A public hearing
on the notice was held on May 26, 2020.
Two commenters testified at the public
hearing. After consideration of the written
comments and testimony, the Department
of the Treasury (Treasury Department)
and the IRS have decided to adopt without
modification the regulations proposed by
the notice.
Summary of Comments
The eighteen comments submitted
in response to the notice of proposed
rulemaking are available at www.regula-
tions.gov or upon request.
Some of the comments that were sub-
mitted did not seek modification or clari-
fication of the user fee as set forth in the
proposed regulations. Two made no refer-
ence to the proposed regulations and their
content was unrelated to a PTIN user fee.
Another comment supported a fee but
encouraged the IRS to take enforcement
actions against return preparers who do
not comply with PTIN requirements. The
summary of comments below addresses
those comments that seek modification or
clarification of the user fee as set forth in
the proposed regulations.
A. Charging a User Fee and the Amount
of the User Fee
Some commenters objected to the IRS
imposing a user fee at all or in the amount
charged by the IRS. Some supported the
imposition of a fee, while others stated
that the user fee was too high or too low.
The IRS also received comments that re-
quested lower user fees for certain classes
of return preparers. Two comments stated
that individuals with credentials should
pay a reduced fee for obtaining or renew-
ing a PTIN and two comments stated that
low-volume return preparers should pay
a reduced fee or no fee for obtaining or
renewing a PTIN. Similarly, some com-
menters requested the renewal fee be
lower than the amount of the initial appli-
cation fee or that the IRS adopt a longer
renewal period. One commenter suggest-
ed that certain return preparers with exist-
ing PTINs should not be charged for PTIN
renewal.
The United States Court of Appeals
for the District of Columbia Circuit has
ruled that the IRS is authorized to charge
a PTIN user fee because providing a
PTIN (and the “associated functions”) is
a service that provides a specific benefit to
identifiable recipients. Montrois v. United
States, 916 F.3d 1056 (D.C. Cir. 2019).
Under Office of Management and Bud-
get (OMB) Circular A-25, 58 FR 38142
(July 15, 1993) (OMB Circular A-25),
Federal agencies that provide services that
confer benefits on identifiable recipients
are to establish user fees that recover for
the government the full cost of providing
the service. An agency that seeks to im-
pose a user fee for government-provided
services must calculate the full cost of
providing those services. Under OMB
Circular A-25, a user fee should be set
at an amount that recovers the full cost
of providing a service, unless the OMB
grants an exception. The full cost of pro-
viding a service includes both the direct
and indirect costs of providing the service.
As required by OMB Circular A-25,
the IRS conducted a biennial review of
the PTIN user fee and determined that
the full cost to the IRS to administer the
PTIN program going forward was reduced
to $21 per application or renewal. These
costs include all costs related to adminis-
tering the PTIN program, including costs
relating to PTIN misuse and maintaining
the integrity of the PTIN program. A de-
scription of the categories of activities in-
cluded in the PTIN user fee and specific
examples of the activities included with-
in those categories is discussed below in
section E. Costing Methodology. The user
fee to apply for or renew a PTIN does not
recover costs associated with other pro-
grams.
The IRS does not incur lower costs to
provide PTINs to credentialed preparers
or low-volume preparers than it incurs
to provide PTINs to uncredentialed pre-
parers or high-volume preparers. Sim-
ilarly, the costs to the IRS to renew a
PTIN are the same as the costs to issue
a new PTIN. Accordingly, the amount of
the user fee should be the same regard-
less of the return preparer’s status and
regardless of whether the application is

August 3, 2020 236 Bulletin No. 2020–32
an original or a renewal. The Treasury
Department and the IRS have determined
that the annual renewal of a PTIN is the
most effective renewal period. An annual
renewal period ensures the IRS has up-
to-date identifying information about
each return preparer, which benefits re-
turn preparers, their clients, and the IRS
in ensuring the timely communication of
important information. Further, the annu-
al renewal period allows the IRS to better
administer the PTIN program, effectively
identify and contact return preparers, and
prevent the unauthorized use of PTINs,
thereby benefiting return preparers and
protecting taxpayers.
B. Use of a Third-Party Contractor
Several commenters objected to paying
a separate fee to the third-party contractor,
and some objected to the amount of the
fee paid to the third-party contractor.
The third-party contractor was chosen
through a competitive bidding process,
and the amount of the third-party con-
tractor’s fee is reviewed and approved
by the IRS. The third-party contractor’s
costs include more than the discrete costs
of generating a number and are separate
from the costs to the IRS for adminis-
tering the PTIN application and renewal
program. The two portions of the fee pay
for different aspects of administering the
PTIN program, each of which is essen-
tial to providing PTINs to tax return pre-
parers. As discussed in the preamble to
the proposed regulations, the third-party
contractor performs a number of valu-
able functions, including processing
applications to obtain or renew a PTIN
and operating a call center. The IRS has
determined that it is appropriate to use a
third-party contractor to perform these
functions.
C. Re-instituting User Fee During Steele
Litigation
Three commenters objected to re-insti-
tuting the PTIN user fee during the pen-
dency of the Steele v. United States litiga-
tion in the United States District Court for
the District of Columbia.
In Steele v. United States, 260 F. Supp.
3d 52 (D.D.C. 2017), the United States
District Court for the District of Colum-
bia concluded that the Treasury Depart-
ment and the IRS lacked the statutory
authority to charge a PTIN user fee and
enjoined the IRS from charging a PTIN
user fee. On March 1, 2019, the United
States Court of Appeals for the District
of Columbia Circuit reversed the district
court’s decision and lifted the injunction
against charging the PTIN user fee. See
Montrois v. United States, 916 F.3d 1056
(D.C. Cir. 2019) (holding that a PTIN
provides tax return preparers a specific
benefit by allowing them to provide an
identifying number that is not a social
security number on returns they prepare
and stating that the permissible amount
of the fee would be the same regardless
of whether the specific benefit was in-
stead the ability to prepare tax returns
for compensation). In accordance with
the opinion of the United States Court
of Appeals for the District of Columbia
Circuit, the IRS is authorized to charge
a PTIN user fee for the service of pro-
viding return preparers a PTIN. Despite
the ongoing litigation with respect to the
amount of the user fee, the IRS is autho-
rized to resume charging a fee because
the district court’s injunction was vacat-
ed. After the injunction was lifted, and
in accordance with the biennial review
requirement in OMB Circular A-25, the
IRS has re-determined costs that the gov-
ernment continues to incur for providing
PTINs and administering the PTIN pro-
gram and re-calculated the amount of the
user fee. OMB Circular A-25 states that
user fees should be collected in advance
of or simultaneously with the provision
of a service. The PTIN user fee is col-
lected when return preparers apply for or
renew their PTINs during the application
season, which begins annually in Octo-
ber.
D. COVID-19 Pandemic
Two commenters objected to re-in-
stituting the fee during the COVID-19
pandemic. The demand and need for tax
return preparation services should contin-
ue despite the pandemic. As return pre-
parers continue to prepare returns, they
must continue to use current PTINs to do
so, and the government continues to incur
costs for providing PTINs and administer-
ing the PTIN program, which should be
recovered by charging a fee. In the ab-
sence of charging a fee to return preparers,
taxpayers would bear the costs the IRS
incurs of providing PTINs and associated
functions.
E. Costing Methodology
One commenter made a number of
other objections broadly relating to the
IRS’s costing methodology detailed in
the proposed regulations. The same com-
menter and one other commenter ques-
tioned the direct costs incurred by the
IRS in administering the PTIN program.
The IRS properly follows generally ac-
cepted accounting principles (GAAP) in
calculating the full cost of administering
the PTIN program in accordance with
Statement of Federal Financial Account-
ing Standards (SFFAS) No. 4, which es-
tablishes internal costing standards to
accurately measure and manage the full
cost of Federal programs. The preamble
to the proposed regulations provides the
methodology by which the IRS deter-
mined the full cost of the PTIN program.
It details the use of cost centers, which
are the lowest organizational unit in the
IRS’s cost-accounting system, the imple-
mentation of various cost-measurement
techniques to estimate the direct costs
attributable to the PTIN program, and
overhead allocation.
As described in the preamble to the
proposed regulations, the IRS uses various
cost-measurement techniques to estimate
the direct costs attributable to the program.
These techniques include using various
timekeeping systems to measure the time
required to accomplish activities, or using
information provided by subject-matter
experts on the time devoted to a program.
To determine the labor and benefits cost
incurred to administer the PTIN program,
the IRS estimated the number of full-time
employees required to conduct activities
related to the PTIN program. The number
of full-time employees is based on both
current employment numbers and future
hiring estimates. Other direct costs associ-
ated with administering the PTIN program
include contract costs and travel, training,
supplies, printing, and other miscella-
neous costs.
The preamble to the proposed regula-
tions also describes the staffing and other

Bulletin No. 2020–32 237 August 3, 2020
costs incurred in administering the PTIN
program. Staffing costs are incurred by
the Return Preparer Office (RPO) in the
IRS and relate to conducting certain suit-
ability checks, foreign preparer process-
ing, handling compliance and complaint
activities, information technology and
contract-related support, communica-
tions, budgeting and finance, and pro-
gram oversight and support. Examples
of the specific activities that are included
within those categories include, but are
not limited to, the following activities.
Suitability checks include work involv-
ing specially designated nationals,
1
in-
carcerated return preparers, enjoined
return preparers, and professional des-
ignation checks on certain individuals.
Foreign preparer processing includes
the IRS processing of PTIN applications
for foreign persons who are not eligible
to obtain a social security number and
have a permanent non-U.S. address.
Compliance and complaint activities
include work involving compromised
and misused PTINs and identity theft
related PTINs, expired PTINs, legacy
PTINs, ghost return preparers (returns
prepared without a PTIN), processing
complaints, and penalty referrals. In-
formation technology and contract-re-
lated support activities include contract
oversight, background investigations
and training for contractor personnel,
contractor performance reviews, records
management, peak season planning and
implementation, off-season system en-
hancements, program metrics report-
ing and data extracts, managing system
changes, addressing system defects and
data anomalies, system training materi-
als, cloud service provider hosting, cus-
tomer contact center hosting, system ca-
pacity monitoring and performance, IT
coordination and remote server platform
issues for e-authentication, registration
system and database refinements, enter-
prise life cycle documentation, site visits
and contractor assessments, specialized
IT security training, identity theft pro-
tection, and work related to the PTIN
call center. Communications activities
include correspondence with return pre-
parers, including renewal notifications,
development of system generated mes-
saging, website messaging, FOIA post-
ing of PTIN holder list, and stakeholder
communications. Budget and finance
activities include user fee review and
cost modeling, payment tracking and
accountability, requisitions and obliga-
tions of funds, operational budgeting and
funding based on actual and projected
PTIN user fee receipts, third-party con-
tacts related to PTIN matters (requests
from Congress, Treasury Inspector Gen-
eral for Tax Administration, and Govern-
ment Accountability Office), developing
and updating Internal Revenue Manual
content, and certain human resources ac-
tivities. Program oversight and support
includes oversight and support in the
RPO over these PTIN functions.
OMB Circular A-25 does not require
the IRS to account for and describe ac-
tivities unrelated to providing PTINs and
administering the PTIN program that are
not included in the costs recovered in the
PTIN user fee. The IRS has accounted
for all activities properly included in the
PTIN user fee.
The preamble to the proposed regula-
tions also describes how the IRS calculat-
ed the overhead rate and overhead costs.
Overhead is an indirect cost of operating
an organization that is not specifically
identifiable with an activity. Overhead in-
cludes costs of resources that are jointly
or commonly consumed by one or more
organizational unit’s activities but are not
specifically identifiable to a single activ-
ity.
Accordingly, the proposed regulations
are adopted without change.
Special Analyses
The OMB’s Office of Information and
Regulatory Analysis has determined that
these regulations are significant and sub-
ject to review under section 6(b) of Exec-
utive Order 12866.
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby cer-
tified that these final regulations will not
have a significant economic impact on a
substantial number of small entities. The
final regulations affect all individuals
who prepare or assist in preparing all or
substantially all of a tax return or claim
for refund for compensation. Only indi-
viduals, not businesses, can have a PTIN.
Thus, the economic impact of these reg-
ulations on any small entity generally
will be a result of an individual tax return
preparer who is required to have a PTIN
owning a small business or a small busi-
ness otherwise employing an individual
tax return preparer who is required to
have a PTIN. The Treasury Department
and the IRS estimate that approximately
800,000 individuals will apply annually
for an initial or renewal PTIN. Although
the final regulations will likely affect a
substantial number of small entities, the
economic impact on those entities is not
significant. The final regulations will es-
tablish a $21 fee per application or re-
newal (plus $14.95 payable to the con-
tractor), which is a reduction from the
previously established fee of $33 (plus
$17 payable to the contractor) per appli-
cation or renewal and will not have a sig-
nificant economic impact on a small en-
tity. Accordingly, the Secretary certifies
that the rule will not have a significant
economic impact on a substantial number
of small entities.
Pursuant to section 7805(f), the notice
of proposed rulemaking was submitted to
the Chief Counsel for the Office of Advo-
cacy of the Small Business Administra-
tion for comment on its impact on small
business (85 FR 21126). No comments on
the notice were received from the Chief
Counsel for the Office of Advocacy of the
Small Business Administration.
Drafting Information
The principal author of these regula-
tions is Michael A. Franklin, Office of the
Associate Chief Counsel (Procedure and
Administration). Other personnel from the
Treasury Department and the IRS partic-
ipated in the development of the regula-
tions.
List of Subjects in 26 CFR Part 300
Reporting and recordkeeping require-
ments, User fees.
1
https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx

August 3, 2020 238 Bulletin No. 2020–32
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 300 is
amended as follows:
PART 300 – USER FEES
Paragraph 1. The authority citation for
part 300 continues to read as follows:
Authority: 31 U.S.C. 9701.
Par. 2. Section 300.12 is amended by
revising paragraphs (b) and (d) to read as
follows:
§300.13 Fee for obtaining a preparer
tax identification number.
* * * * *
(b) Fee. The fee to apply for or renew
a preparer tax identification number is
$21 per year and is in addition to the fee
charged by the contractor.
* * * * *
(d) Applicability date. This section ap-
plies to applications for or renewal of a
preparer tax identification number filed on
or after August 17, 2020.
Sunita Lough,
Deputy Commissioner for Services
and Enforcement.
Approved: July 2, 2020.
David J. Kautter,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on July
15, 2020, 4:15 p.m., and published in the issue of the
Federal Register for July 17, 2020, 85 F.R. 43433)

Bulletin No. 2020–32 239 August 3, 2020
Part III
Additional Relief with
Respect to Deadlines
under Section 501(r)(3)
Applicable to Hospital
Organizations Affected by
the Ongoing Coronavirus
Disease 2019 Pandemic
Notice 2020-56
SECTION 1. PURPOSE
In response to the ongoing Coronavirus
Disease 2019 (COVID-19) pandemic, this
notice amplifies the relief provided in No-
tice 2020-23, 2020-18 IRB 742, for hospi-
tal organizations that are required to meet
the community health needs assessment
(CHNA) requirements under section 501(r)
(3) of the Code. Notice 2020-23 postponed
until July 15, 2020, the deadline for per-
forming any CHNA requirement that is
due to be completed on or after April 1,
2020, and before July 15, 2020. This no-
tice provides a further postponement, un-
til December 31, 2020, of the deadline for
performing any CHNA requirement due to
be completed on or after April 1, 2020, and
before December 31, 2020.
SECTION 2. BACKGROUND
A. CHNA Requirements for Hospital
Organizations
Section 501(r)(1) states that an orga-
nization described in section 501(r)(2) (a
hospital organization) will not be treated
as described in section 501(c)(3) unless
the organization meets the requirements
described in section 501(r)(3) through
501(r)(6). Section 501(r)(2) specifies that
a hospital organization must meet the sec-
tion 501(r) requirements, including the
requirements of section 501(r)(3), sepa-
rately with respect to each hospital facility
it operates.
Section 501(r)(3) requires a hospital
organization to conduct a CHNA at least
once every three years and adopt an im-
plementation strategy to meet the com-
munity health needs identified through
the CHNA (collectively, CHNA require-
ments). The CHNA must take into account
input from persons who represent the
broad interests of the community served
by the hospital facility, including those
with special knowledge of or expertise in
public health. In addition, the CHNA must
be made widely available to the public.
The CHNA must be conducted by the
end of the third taxable year (or in either of
the two taxable years immediately preced-
ing such taxable year). The implementation
strategy must be adopted on or before the
15th day of the fifth month after the end of
the taxable year in which the hospital facil-
ity completes the final step for the CHNA.
Section 4959 imposes a $50,000 excise
tax on a hospital organization that fails to
meet either or both of the section 501(r)(3)
CHNA requirements with respect to any
hospital facility for any taxable year.
B. COVID-19 Disaster Relief – Prior
Postponement of Certain Deadlines
and Other Requirements Pursuant to
Section 7508A
On March 13, 2020, the President of
the United States issued an emergency
declaration under the Robert T. Stafford
Disaster Relief and Emergency Assistance
Act, 42 U.S.C. 5121 et seq., in response
to the ongoing COVID-19 pandemic
(Emergency Declaration). The Emergen-
cy Declaration instructed the Secretary of
the Treasury “to provide relief from tax
deadlines to Americans who have been
adversely affected by the COVID-19
emergency, as appropriate, pursuant to 26
U.S.C. 7508A(a).”
Section 7508A provides the Secretary
of the Treasury or his delegate (Secretary)
with the authority to postpone the time
for performing certain acts under the in-
ternal revenue laws for a taxpayer deter-
mined by the Secretary to be affected by
a federally declared disaster as defined in
section 165(i)(5)(A). Pursuant to section
7508A(a), a period of up to one year may
be disregarded in determining whether the
performance of certain acts is timely un-
der the internal revenue laws.
On April 9, 2020, the Department of
the Treasury and the Internal Revenue
Service issued Notice 2020-23, which
provides relief under section 7508A(a)
of the Code for certain persons that the
Secretary determined to be affected by
the COVID-19 emergency. Notice 2020-
23 provides, among other things, that the
term Affected Taxpayer includes any per-
son who performs a time-sensitive action
listed in Rev. Proc. 2018-58, 2018-50 IRB
990, due to be performed (originally or
pursuant to a valid extension) on or after
April 1, 2020, and before July 15, 2020.
The time-sensitive actions listed in Rev.
Proc. 2018-58 include the requirement un-
der section 501(r)(3) to conduct a CHNA
in the taxable year or in either of the two
taxable years immediately preceding the
taxable year and to adopt an implementa-
tion strategy to meet the community health
needs identified through the CHNA. See
Rev. Proc. 2018-58, section 10, 2018–50
IRB at 1005. Accordingly, Notice 2020-23
postponed until July 15, 2020, the dead-
line for any CHNA due to be conducted
and for any implementation strategy due
to be adopted on or after April 1, 2020,
and before July 15, 2020.
SECTION 3. GRANT of RELIEF
Any hospital organization that is re-
quired to meet either of the CHNA re-
quirements under section 501(r)(3) of the
Code on or after April 1, 2020, and before
December 31, 2020 (Specified Time-Sen-
sitive Action), is determined to be affected
by the COVID-19 emergency for purpos-
es of the relief described in this section 3
(Affected Taxpayer).
For an Affected Taxpayer, the due date
for any CHNA due to be conducted and
for any implementation strategy due to be
adopted on or after April 1, 2020, and be-
fore December 31, 2020, is postponed to
December 31, 2020. Even though the due
date for a CHNA to be conducted on or af-
ter April 1, 2020, and before December 31,
2020, is postponed to December 31, 2020,
by this notice, for purposes of applying
§ 1.501(r)-3(c)(5) of the Income Tax Regu-
lations to determine the deadline for adop-
tion of the implementation strategy, the
hospital facility is not considered to have
completed the final step for the CHNA in
a later taxable year. Thus, for example, if
an Affected Taxpayer was required to con-

August 3, 2020 240 Bulletin No. 2020–32
duct a CHNA by April 30, 2020 (the end of
the third taxable year) and was required to
adopt an implementation strategy by Sep-
tember 15, 2020, the Affected Taxpayer
now has an extension until December 31,
2020, to complete both steps.
SECTION 4. EFFECT ON OTHER
DOCUMENTS
Notice 2020-23 is amplified.
SECTION 5. DRAFTING
INFORMATION
The principal author of this notice is
Ingrid M. Vatamanu of the Office of the
Associate Chief Counsel (Employee Ben-
efits, Exempt Organizations, and Em-
ployment Taxes). For further information
regarding this notice contact Ingrid M.
Vatamanu on (202) 317-4541 (not a toll-
free number).
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2020-57
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used
under § 417(e)(3), and the 24-month aver-
age segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest
rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II) as in effect for plan
years beginning before 2008 and the 30-
year Treasury weighted average rate under
§ 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Section 430 specifies the minimum
funding requirements that apply to sin-
gle-employer plans (except for CSEC
plans under § 414(y)) pursuant to § 412.
Section 430(h)(2) specifies the inter-
est rates that must be used to determine
a plan’s target normal cost and funding
target. Under this provision, present val-
ue is generally determined using three
24-month average interest rates (“segment
rates”), each of which applies to cash
flows during specified periods. To the ex-
tent provided under § 430(h)(2)(C)(iv),
these segment rates are adjusted by the ap-
plicable percentage of the 25-year average
segment rates for the period ending Sep-
tember 30 of the year preceding the cal-
endar year in which the plan year begins.
1

However, an election may be made under
§ 430(h)(2)(D)(ii) to use the monthly yield
curve in place of the segment rates.
Notice 2007-81, 2007-44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond
segment rates used to compute the tar-
get normal cost and the funding target.
Consistent with the methodology spec-
ified in Notice 2007-81, the monthly
corporate bond yield curve derived from
June 2020 data is in Table 2020-6 at the
end of this notice. The spot first, second,
and third segment rates for the month of
June 2020 are, respectively, 0.74, 2.57,
and 3.32.
The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the appli-
cable minimum and maximum percentag-
es of the corresponding 25-year average
segment rates. For plan years beginning
before 2021, the applicable minimum per-
centage is 90% and the applicable maxi-
mum percentage is 110%. The 25-year
average segment rates for plan years be-
ginning in 2019 and 2020 were published
in Notice 2018-73, 2018-40 I.R.B. 526,
and Notice 2019-51, 2019-41 I.R.B. 866,
respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corpo-
rate bond segment rates applicable for
July 2020 without adjustment for the 25-
year average segment rate limits are as
follows:
24-Month Average Segment Rates Without 25-Year Average Adjustment
Applicable Month First Segment Second Segment Third Segment
July 2020 2.44 3.54 4.04
Based on § 430(h)(2)(C)(iv), the
24-month averages applicable for July
2020, adjusted to be within the applicable
minimum and maximum percentages of
the corresponding 25-year average seg-
ment rates, are as follows:
Adjusted 24-Month Average Segment Rates
For Plan Years
Beginning In
Applicable
Month
First
Segment
Second
Segment
Third
Segment
2019July 20203.745.356.11
2020July 20203.645.215.94
1
Pursuant to § 433(h)(3)(A), the 3
rd
segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).

Bulletin No. 2020–32 241 August 3, 2020
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 431 specifies the minimum
funding requirements that apply to multi-
employer plans pursuant to § 412. Section
431(c)(6)(B) specifies a minimum amount
for the full-funding limitation described in
§ 431(c)(6)(A), based on the plan’s current
liability. Section 431(c)(6)(E)(ii)(I) pro-
vides that the interest rate used to calculate
current liability for this purpose must be
no more than 5 percent above and no more
than 10 percent below the weighted aver-
age of the rates of interest on 30-year Trea-
sury securities during the four-year period
ending on the last day before the beginning
of the plan year. Notice 88-73, 1988-2 C.B.
383, provides guidelines for determining
the weighted average interest rate. The rate
of interest on 30-year Treasury securities
for June 2020 is 1.49 percent. The Service
determined this rate as the average of the
daily determinations of yield on the 30-
year Treasury bond maturing in May 2050.
For plan years beginning in July 2020, the
weighted average of the rates of interest on
30-year Treasury securities and the permis-
sible range of rates used to calculate current
liability are as follows:
Treasury Weighted Average Rates
For Plan Years
Beginning In
30-Year Treasury
Weighted Average
Permissible Range
90% to 105%
July 20202.552.30 to 2.68
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Notice 2007-81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-
ment rates determined for June 2020 are
as follows:
Minimum Present Value Segment Rates
Month First Segment Second Segment Third Segment
June 2020 0.74 2.57 3.32
DRAFTING INFORMATION
The principal author of this notice is
Tom Morgan of the Office of the Asso-
ciate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development
of this guidance. For further information
regarding this notice, contact Mr. Morgan
at 202-317-6700 or Paul Stern at 202-317-
8702 (not toll-free numbers).

August 3, 2020 242 Bulletin No. 2020–32
Table 2020-6
Monthly Yield Curve for June 2020
Derived from June 2020 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
0.50.3620.53.1940.53.3460.53.4080.53.43
1.00.4921.03.2041.03.3461.03.4081.03.43
1.50.6021.53.2041.53.3461.53.4081.53.43
2.00.6922.03.2142.03.3462.03.4082.03.43
2.50.7422.53.2142.53.3562.53.4082.53.43
3.00.7923.03.2243.03.3563.03.4083.03.43
3.50.8323.53.2243.53.3563.53.4083.53.43
4.00.8924.03.2244.03.3564.03.4084.03.43
4.50.9724.53.2344.53.3564.53.4084.53.43
5.01.0625.03.2345.03.3665.03.4185.03.43
5.51.1725.53.2445.53.3665.53.4185.53.43
6.01.3026.03.2446.03.3666.03.4186.03.43
6.51.4326.53.2446.53.3666.53.4186.53.43
7.01.5827.03.2547.03.3667.03.4187.03.43
7.51.7227.53.2547.53.3667.53.4187.53.43
8.01.8628.03.2648.03.3768.03.4188.03.44
8.52.0028.53.2648.53.3768.53.4188.53.44
9.02.1329.03.2749.03.3769.03.4189.03.44
9.52.2529.53.2749.53.3769.53.4189.53.44
10.02.3630.03.2750.03.3770.03.4190.03.44
10.52.4730.53.2850.53.3770.53.4190.53.44
11.02.5731.03.2851.03.3771.03.4291.03.44
11.52.6531.53.2951.53.3871.53.4291.53.44
12.02.7332.03.2952.03.3872.03.4292.03.44
12.52.8032.53.2952.53.3872.53.4292.53.44
13.02.8633.03.3053.03.3873.03.4293.03.44
13.52.9133.53.3053.53.3873.53.4293.53.44
14.02.9634.03.3054.03.3874.03.4294.03.44
14.53.0034.53.3154.53.3874.53.4294.53.44
15.03.0335.03.3155.03.3975.03.4295.03.44
15.53.0635.53.3155.53.3975.53.4295.53.44
16.03.0836.03.3156.03.3976.03.4296.03.44
16.53.1036.53.3256.53.3976.53.4296.53.44
17.03.1237.03.3257.03.3977.03.4297.03.44
17.53.1437.53.3257.53.3977.53.4297.53.44
18.03.1538.03.3358.03.3978.03.4298.03.44
18.53.1638.53.3358.53.3978.53.4398.53.44
19.03.1739.03.3359.03.3979.03.4399.03.44
19.53.1839.53.3359.53.4079.53.4399.53.44
20.03.1840.03.3460.03.4080.03.43100.03.45

Bulletin No. 2020–32 243 August 3, 2020
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also §§ 36B, 1.36B-2, 1.36B-3.)
Rev. Proc. 2020-36
SECTION 1. PURPOSE
This revenue procedure provides in-
dexing adjustments for certain provisions
under § 36B of the Internal Revenue
Code. In particular, it updates the appli-
cable percentage table in § 36B(b)(3)(A)
(i) (Applicable Percentage Table) for cal-
endar year 2021. This table is used to cal-
culate an individual’s premium tax cred-
it. The revenue procedure also updates
the required contribution percentage in
§ 36B(c)(2)(C)(i)(II) for plan years be-
ginning after calendar year 2020 (Section
36B Required Contribution Percentage).
This percentage is used to determine
whether an individual is eligible for af-
fordable employer-sponsored minimum
essential coverage under § 36B. The rev-
enue procedure uses the methodology de-
scribed in Section 4 of Rev. Proc. 2014-
37, 2014-2 C.B. 363, and the Department
of Health and Human Services (HHS)
Notice of Benefit and Payment Parame-
ters for 2020, 84 Fed. Reg. 17454 (April
25, 2019) (2020 Benefit and Payment
Notice), to index the Applicable Percent-
age Table and the Section 36B Required
Contribution Percentage.
In addition to the adjustments described
in Rev. Proc. 2014-37 for adjusting the
Applicable Percentage Table, § 36B(b)(3)
(A)(ii)(II) provides that, except as provid-
ed in § 36B(b)(3)(A)(ii)(III), an addition-
al adjustment must be made for calendar
years after 2018 to reflect the rates of pre-
mium growth relative to the growth in the
consumer price index. The Department of
the Treasury (Treasury Department) and
the Internal Revenue Service (IRS) have
determined that the failsafe exception de-
scribed in § 36B(b)(3)(A)(ii)(III) applies
for calendar year 2021 and no additional
adjustment under § 36B(b)(3)(A)(ii)(II) is
required for calendar year 2021.
SECTION 2. ADJUSTED ITEMS
.01 Applicable Percentage Table for
2021. For taxable years beginning in cal-
endar year 2021, the Applicable Percent-
age Table for purposes of § 36B(b)(3)(A)
(i) and § 1.36B-3(g) is:
Household income percentage of Federal poverty line:Initial percentageFinal percentage
Less than 133%2.07%2.07%
At least 133% but less than 150%3.10%4.14%
At least 150% but less than 200%4.14%6.52%
At least 200% but less than 250%6.52%8.33%
At least 250% but less than 300%8.33%9.83%
At least 300% but not more than 400%9.83%9.83%
.02 Section 36B Required Contribution
Percentage for 2021. For plan years begin-
ning in calendar year 2021, the required
contribution percentage for purposes of
§ 36B(c)(2)(C)(i)(II) and § 1.36B-2(c)(3)
(v)(C) is 9.83%.
SECTION 3. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2014-37 is supplemented.
SECTION 4. EFFECTIVE DATE
This revenue procedure is effective for
taxable years and plan years beginning af-
ter December 31, 2020.
SECTION 5. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Bill Ruane of the Office of
Associate Chief Counsel (Income Tax and
Accounting). For further information re-
garding this revenue procedure, contact
Mr. Ruane at (202) 317-4718 (not a toll-
free number).

August 3, 2020 244 Bulletin No. 2020–32
Part IV
Announcement 2020-8
Correction to Revenue
Procedure 2020-35, IRB
2015-29
SUMMARY: This document contains cor-
rections to Revenue Procedure 2020-35,
published in Internal Revenue Bulletin
2020-29 on Monday, July 13, 2020. The
purpose of this revenue procedure is to
set forth the 2020 requirements for using
official Internal Revenue Service (IRS)
forms to file information returns with the
IRS, preparing acceptable substitutes of
the official IRS forms to file information
returns with the IRS, and using official or
acceptable substitute forms to furnish in-
formation to recipients.
Need for Correction
As published, the revenue procedure
contains the following errors that are in
need of correction.
1. In Section 2.1.1, Online Fillable
Forms, under the heading Specifica-
tions. The error consists in including
in the first paragraph Form 1099-
NEC. Form 1099-NEC should be de-
leted from the paragraph.
2. In Section 4.5.3, Perforations, under
the heading Miscellaneous Instruc-
tions for Copies B, C, D, E, 1, and
2. The error consists in indicating that
instructions for perforation can be
found in Section 2.1.8. The instruc-
tions for perforation can be found in
Section 2.1.9.
Announcement of
Disciplinary Sanctions
From the Office of
Professional Responsibility
Announcement 2020-9
The Office of Professional Respon-
sibility (OPR) announces recent disci-
plinary sanctions involving attorneys, cer-
tified public accountants, enrolled agents,
enrolled actuaries, enrolled retirement
plan agents, appraisers, and unenrolled/
unlicensed return preparers (individuals
who are not enrolled to practice and are
not licensed as attorneys or certified pub-
lic accountants). Licensed or enrolled
practitioners are subject to the regulations
governing practice before the Internal
Revenue Service (IRS), which are set out
in Title 31, Code of Federal Regulations,
Subtitle A, Part 10, and which are released
as Treasury Department Circular No.
230. The regulations prescribe the duties
and restrictions relating to such practice
and prescribe the disciplinary sanctions
for violating the regulations. Unenrolled/
unlicensed return preparers are subject to
Revenue Procedure 81-38 and supersed-
ing guidance in Revenue Procedure 2014-
42, which govern a preparer’s eligibility
to represent taxpayers before the IRS in
examinations of tax returns the preparer
both prepared for the taxpayer and signed
as the preparer. Additionally, unenrolled/
unlicensed return preparers who volun-
tarily participate in the Annual Filing Sea-
son Program under Revenue Procedure
2014-42 agree to be subject to the duties
and restrictions in Circular 230, including
the restrictions on incompetent or disrep-
utable conduct.
The disciplinary sanctions to be im-
posed for violation of the applicable stan-
dards are:
Disbarred from practice before the
IRS—An individual who is disbarred
is not eligible to practice before the IRS
as defined at 31 C.F.R. § 10.2(a)(4) for a
minimum period of five (5) years.
Suspended from practice before the
IRS—An individual who is suspended is
not eligible to practice before the IRS as
defined at 31 C.F.R. § 10.2(a)(4) during
the term of the suspension.
Censured in practice before the
IRS—Censure is a public reprimand. Un-
like disbarment or suspension, censure
does not affect an individual’s eligibility
to practice before the IRS, but OPR may
subject the individual’s future practice
rights to conditions designed to promote
high standards of conduct.
Monetary penalty—A monetary pen-
alty may be imposed on an individual who
engages in conduct subject to sanction,
or on an employer, firm, or entity if the
individual was acting on its behalf and it
knew, or reasonably should have known,
of the individual’s conduct.
Disqualification of appraiser—An
appraiser who is disqualified is barred
from presenting evidence or testimony in
any administrative proceeding before the
Department of the Treasury or the IRS.
Ineligible for limited practice—An
unenrolled/unlicensed return preparer
who fails to comply with the requirements
in Revenue Procedure 81-38 or to comply
with Circular 230 as required by Revenue
Procedure 2014-42 may be determined in-
eligible to engage in limited practice as a
representative of any taxpayer.
Under the regulations, individuals sub-
ject to Circular 230 may not assist, or ac-
cept assistance from, individuals who are
suspended or disbarred with respect to
matters constituting practice (i.e., repre-
sentation) before the IRS, and they may
not aid or abet suspended or disbarred in-
dividuals to practice before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision, Suspended by
decision, Censured by decision, Mone-
tary penalty imposed by decision, and
Disqualified after hearing—An adminis-
trative law judge (ALJ) issued a decision
imposing one of these sanctions after the
ALJ either (1) granted the government’s
summary judgment motion or (2) con-
ducted an evidentiary hearing upon OPR’s
complaint alleging violation of the regu-
lations. After 30 days from the issuance
of the decision, in the absence of an ap-
peal, the ALJ’s decision becomes the final
agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured
by default decision, Monetary penalty
imposed by default decision, and Dis-
qualified by default decision—An ALJ,
after finding that no answer to OPR’s
complaint was filed, granted OPR’s mo-
tion for a default judgment and issued
a decision imposing one of these sanc-
tions.

Bulletin No. 2020–32 245 August 3, 2020
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on appeal,
and Disqualified by decision on ap-
peal—The decision of the ALJ was ap-
pealed to the agency appeal authority, act-
ing as the delegate of the Secretary of the
Treasury, and the appeal authority issued a
decision imposing one of these sanctions.
Disbarred by consent, Suspended by
consent, Censured by consent, Mone-
tary penalty imposed by consent, and
Disqualified by consent—In lieu of a
disciplinary proceeding being instituted or
continued, an individual offered a consent
to one of these sanctions and OPR accept-
ed the offer. Typically, an offer of consent
will provide for: suspension for an indef-
inite term; conditions that the individual
must observe during the suspension; and
the individual’s opportunity, after a stat-
ed number of months, to file with OPR a
petition for reinstatement affirming com-
pliance with the terms of the consent and
affirming current fitness and eligibility
to practice (i.e., an active professional li-
cense or active enrollment status, with no
intervening violations of the regulations).
Suspended indefinitely by decision in
expedited proceeding, Suspended indef-
initely by default decision in expedited
proceeding, Suspended by consent in
expedited proceeding—OPR instituted
an expedited proceeding for suspension
(based on certain limited grounds, in-
cluding loss of a professional license for
cause, and criminal convictions).
Determined ineligible for limited
practice—There has been a final deter-
mination that an unenrolled/unlicensed
return preparer is not eligible for limited
representation of any taxpayer because the
preparer violated standards of conduct or
failed to comply with any of the require-
ments to act as a representative.
A practitioner who has been disbarred
or suspended under 31 C.F.R. § 10.60, or
suspended under § 10.82, or a disqualified
appraiser may petition for reinstatement
before the IRS after the expiration of 5
years following such disbarment, suspen-
sion, or disqualification (or immediately
following the expiration of the suspension
or disqualification period if shorter than 5
years). Reinstatement will not be granted
unless the IRS is satisfied that the peti-
tioner is not likely to engage thereafter in
conduct contrary to Circular 230, and that
granting such reinstatement would not be
contrary to the public interest.
Reinstatement decisions are published
at the individual’s request, and described
in these terms:
Reinstated to practice before the
IRS—The individual’s petition for re-
instatement has been granted. The
agent, and eligible to practice before the
IRS, or in the case of an appraiser, the in-
dividual is no longer disqualified.
Reinstated to engage in limited
practice before the IRS—The individ-
ual’s petition for reinstatement has been
granted. The individual is an unenrolled/
unlicensed return preparer and eligible to
engage in limited practice before the IRS,
subject to requirements the IRS has pre-
scribed for limited practice by tax return
preparers.
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a final de-
cision; (2) the individual has settled a dis-
ciplinary case by signing OPR’s “consent
to sanction” agreement admitting to one
or more violations of the regulations and
consenting to the disclosure of the admit-
ted violations (for example, failure to file
Federal income tax returns, lack of due
diligence, conflict of interest, etc.); (3)
OPR has issued a decision in an expedited
proceeding for indefinite suspension; or
(4) OPR has made a final determination
(including any decision on appeal) that an
unenrolled/unlicensed return preparer is
ineligible to represent any taxpayer before
the IRS.
Announcements of disciplinary sanc-
tions appear in the Internal Revenue Bul-
letin at the earliest practicable date. The
sanctions announced below are alphabet-
ized first by state and second by the last
names of the sanctioned individuals.
City & State
NameProfessional
Designation
Disciplinary SanctionEffective Date(s)
Florida
StuartKoplas,
Michael R.
C PASuspended by
consent for admitted
violations of
31 C.F.R.
§§ 10.51(a)(6) and (a)(17)
Indefinite from
April 20, 2020
New Jersey
Morris PlainsFraser, CarlyleC PAReinstated to practice before
the IRS, effective
March 23, 2020

August 3, 2020 246 Bulletin No. 2020–32
City & State
NameProfessional
Designation
Disciplinary SanctionEffective Date(s)
New Mexico
AlbuquerqueVaughn,
James A.
C PAReinstated to practice before
the IRS, effective
April 15, 2020
Pennsylvania
Lower GwyneddVance, DeanC PADisbarred by Consent
under 31 C.F.R.
§ 10.51(a)(6)
Indefinite from
August 27, 2018
South Carolina
CharlestonMolony,
John W.
C PADisbarred by ALJIndefinite from
May 24, 2020
Wisconsin
Hales CornersNeal, Jon C.C PAReinstated to practice before
the IRS, effective
April 27, 2020
Notice of Proposed
Rulemaking
Grandfathered Group
Health Plans and
Grandfathered Group
Health Insurance Coverage
REG-130081-19
AGENCY: Internal Revenue Service, De-
partment of the Treasury; Employee Ben-
efits Security Administration, Department
of Labor; Centers for Medicare & Med-
icaid Services, Department of Health and
Human Services.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document is a notice
of proposed rulemaking regarding grand-
fathered group health plans and grandfa-
thered group health insurance coverage
that would, if finalized, amend current
rules to provide greater flexibility for cer-
tain grandfathered health plans to make
changes to certain types of cost-sharing
requirements without causing a loss of
grandfather status.
DATES: To be assured consideration,
comments must be received at one of the
addresses provided below, no later than 5
p.m. on August 14, 2020.
ADDRESSES: Written comments may be
submitted to the addresses specified be-
low. Any comment that is submitted will
be shared among the Departments. Please
do not submit duplicates.
All comments will be made available
to the public. Warning: Do not include
any personally identifiable information
(such as name, address, or other contact
information) or confidential business in-
formation that you do not want publicly
disclosed. All comments are posted on
the internet exactly as received and can
be retrieved by most internet search en-
gines. No deletions, modifications, or re-
dactions will be made to the comments
received, as they are public records.
Comments may be submitted anony-
mously.
In commenting, refer to file code RIN
1210-AB89. Because of staff and resource
limitations, we cannot accept comments
by facsimile (FAX) transmission.
Comments, including mass comment
submissions, must be submitted in one of
the following three ways (please choose
only one of the ways listed):
1. Electronically. You may submit
electronic comments on this regulation to
http://www.regulations.gov. Follow the
“Submit a comment” instructions.
2. By regular mail. You may mail writ-
ten comments to the following address
ONLY:
Office of Health Plan Standards and
Compliance Assistance
Employee Benefits Security Adminis-
tration
US Department of Labor
Attention: RIN 1210-AB89
200 Constitution Avenue NW, Room
N-5653
Washington, DC 20210
Please allow sufficient time for mailed
comments to be received before the close
of the comment period.
3. By express or overnight mail. You
may send written comments to the follow-
ing address ONLY:
Office of Health Plan Standards and
Compliance Assistance
Employee Benefits Security Adminis-
tration
US Department of Labor

Bulletin No. 2020–32 247 August 3, 2020
Attention: RIN 1210-AB89
200 Constitution Avenue NW, Room
N-5653
Washington, DC 20210
For information on viewing public
comments, see the beginning of the “SUP-
PLEMENTARY INFORMATION” sec-
tion.
FOR FURTHER INFORMATION
CONTACT:
William Fischer, Internal Revenue Ser-
vice, Department of the Treasury, at (202)
317-5500.
David Sydlik or Frank Kolb, Employee
Benefits Security Administration, Depart-
ment of Labor, at (202) 693-8335.
Cam Clemmons, Centers for Medi-
care & Medicaid Services, Department
of Health and Human Services, at (301)
492-4400.
Customer Service Information:
Individuals interested in obtaining in-
formation from the Department of Labor
(DOL) concerning employment-based
health coverage laws may call the EBSA
Toll-Free Hotline at 1-866-444-EBSA
(3272) or visit the DOL’s web site (www.
dol.gov/ebsa). In addition, information
from the Department of Health and Human
Services (HHS) on private health insurance
coverage and on non-federal governmen-
tal group health plans can be found on the
Centers for Medicare & Medicaid Services
(CMS) web site (www.cms.gov/cciio), and
information on health care reform can be
found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All
comments received before the close of the
comment period are available for viewing
by the public, including any personally
identifiable or confidential business in-
formation that is included in a comment.
Comments received before the close of the
comment period are posted on the follow-
ing website as soon as possible after they
have been received: http://www.regula-
tions.gov. Follow the search instructions
on that website to view public comments.
I. Background
A. Purpose
On January 20, 2017, the President is-
sued Executive Order 13765, “Minimiz-
ing the Economic Burden of the Patient
Protection and Affordable Care Act Pend-
ing Repeal” (82 FR 8351) “to minimize
the unwarranted economic and regulato-
ry burdens of the [Patient Protection and
Affordable Care Act (Pub. L. 111-148)
and the Health Care and Education Rec-
onciliation Act of 2010 (Pub. L. 111-152)
(collectively, PPACA), as amended].” To
meet these objectives, the President di-
rected that the executive departments and
agencies with authorities and responsibil-
ities under PPACA, “to the maximum ex-
tent permitted by law . . . shall exercise all
authority and discretion available to them
to waive, defer, grant exemptions from, or
delay the implementation of any provision
or requirement of [PPACA] that would
impose a fiscal burden on any State or a
cost, fee, tax, penalty, or regulatory bur-
den on individuals, families, healthcare
providers, health insurers, patients, recip-
ients of healthcare services, purchasers of
health insurance, or makers of medical de-
vices, products, or medications.”
The Departments of Health and Human
Services (HHS), Labor, and the Treasury
(collectively, the Departments) share in-
terpretive jurisdiction over section 1251
of PPACA, which generally provides that
certain group health plans and health in-
surance coverage existing as of March 23,
2010, the date of enactment of PPACA
(referred to collectively in the statute as
grandfathered health plans), are subject to
only certain provisions of PPACA. Con-
sistent with the objectives of Executive
Order 13765, on February 25, 2019, the
Departments issued a request for informa-
tion regarding grandfathered group health
plans and grandfathered group health in-
surance coverage (2019 RFI).
1
The pur-
pose of the 2019 RFI was to gather input
from the public in order to better under-
stand the challenges that group health
plans and group health insurance issuers
face in avoiding a loss of grandfather sta-
tus, and to determine whether there are
opportunities for the Departments to assist
such plans and issuers, consistent with the
law, in preserving the grandfather status
of group health plans and group health
insurance coverage in ways that would
benefit plan participants and beneficiaries,
employers, employee organizations, and
other stakeholders.
Based on feedback received from
stakeholders who submitted comments
in response to the 2019 RFI, the Depart-
ments are issuing this notice of proposed
rulemaking that would, if finalized, amend
current rules to provide greater flexibili-
ty for certain grandfathered health plans
to make changes to certain types of
cost-sharing requirements without causing
a loss of grandfather status. In the Depart-
ments’ view, these proposed amendments
are appropriate because they would enable
these plans to continue offering affordable
coverage while also enhancing their abil-
ity to respond to rising healthcare costs.
In some cases, the proposed amendments
would also ensure that the plans are able
to comply with minimum cost-sharing
requirements for high deductible health
plans (HDHPs) so enrolled individuals are
eligible to contribute to health savings ac-
counts (HSAs).
These proposed rules would only ad-
dress the requirements for grandfathered
group health plans and grandfathered
group health insurance coverage, and
would not apply to or otherwise change
the current requirements applicable to
grandfathered individual health insur-
ance coverage. With respect to individual
health insurance coverage, it is the De-
partments’ understanding that the num-
ber of individuals with grandfathered
individual health insurance coverage has
declined each year since PPACA was
enacted. As one commenter noted, this
decline in enrollment in grandfathered
individual health insurance coverage will
continue due to the natural churn that
occurs, because most consumers stay in
the individual market for less than five
years.
2
Compared to the number of in-
dividuals in grandfathered group health
plans and group health insurance cover-
1
84 FR 5969 (Feb. 25, 2019).
2
The cause of this churn varies. For example, beginning a new job that offers group health insurance coverage may result in the natural transition from the individual market to the group
market. Eligibility for Medicaid or Medicare can also result in a consumer leaving the individual market.

August 3, 2020 248 Bulletin No. 2020–32
age, only a small number of individuals
are enrolled in grandfathered individual
health insurance coverage.
3
The Depart-
ments are therefore of the view that any
amendments to requirements for grandfa-
thered individual health insurance cover-
age would be of limited utility.
B. Grandfathered Group Health Plans
and Grandfathered Group Health
Insurance Coverage
Section 1251 of PPACA provides that
grandfathered health plans are subject to
certain, but not all, provisions of PPACA
for as long as they maintain their status as
grandfathered health plans.
4
For example,
grandfathered health plans are subject nei-
ther to the requirement to cover certain
preventive services without cost sharing
under section 2713 of the Public Health
Service Act (PHS Act), enacted by section
1001 of PPACA, nor to the annual limita-
tion on cost sharing set forth under section
1302(c) of PPACA and section 2707(b) of
the PHS Act, enacted by section 1201 of
PPACA. If a plan were to lose its grandfa-
ther status, it would be required to comply
with both provisions, in addition to sever-
al other requirements.
On June 17, 2010, the Departments is-
sued interim final rules with request for
comments implementing section 1251
of PPACA.
5
On November 17, 2010, the
Departments issued an amendment to
the interim final rules with request for
comments to permit certain changes in
policies, certificates, or contracts of in-
surance without a loss of grandfather sta-
tus.
6
Also, over the course of 2010 and
2011, the Departments released Afford-
able Care Act Implementation Frequently
Asked Questions (FAQs) Parts I, II, IV,
V, and VI to answer questions related to
maintaining a plan’s status as a grandfa-
thered health plan.
7
After consideration
of the comments and feedback received
from stakeholders, the Departments is-
sued regulations on November 18, 2015,
which finalized the interim final rules
without substantial change and incorpo-
rated the clarifications that the Depart-
ments had previously provided in other
guidance (2015 final rules).
8
In general, under the 2015 final rules,
a group health plan or group health insur-
ance coverage is considered grandfathered
if it has continuously provided coverage
for someone (not necessarily the same
person, but at all times at least one person)
since March 23, 2010, and if the plan (or
its sponsor) or issuer has not taken certain
actions.
Under the 2015 final rules, certain
changes to a group health plan or cover-
age do not result in a loss of grandfather
status. For example, new employees and
their families may enroll in a group health
plan or group health insurance coverage
without causing a loss of grandfather sta-
tus. Further, the addition of a new contrib-
uting employer or a new group of employ-
ees of an existing contributing employer
to a grandfathered multiemployer health
plan will not affect the plan’s grandfather
status. Also, grandfather status is deter-
mined separately for each benefit package
under a group health plan or coverage;
thus, if any benefit package under the plan
or coverage loses its grandfather status, it
will not affect the grandfather status of the
other benefit packages.
The 2015 final rules specify when
changes to the terms of a plan or coverage
cause the plan or coverage to cease to be
a grandfathered health plan. Specifically,
the regulations outline certain changes to
benefits, cost-sharing requirements, and
contribution rates that will cause a plan
or coverage to relinquish its grandfather
status. There are six types of changes
(measured from March 23, 2010) that
will cause a group health plan or health
insurance coverage to cease to be grand-
fathered:
1. The elimination of all or substantially
all benefits to diagnose or treat a par-
ticular condition;
2. Any increase in a percentage
cost-sharing requirement (such as co-
insurance);
3. Any increase in a fixed-amount
cost-sharing requirement (other than
a copayment) (such as a deductible
or out-of-pocket maximum) that ex-
ceeds certain thresholds;
4. Any increase in a fixed-amount co-
payment that exceeds certain thresh-
olds;
5. A decrease in contribution rate by an
employer or employee organization
toward the cost of coverage by more
than five percentage points below the
contribution rate for the coverage pe-
riod that includes March 23, 2010; or
6. The imposition of annual limits on the
dollar value of all benefits for group
health plans and insurance coverage
that did not impose such a limit prior
to March 23, 2010.
The 2015 final rules provide different
thresholds for the increases to different
types of cost-sharing requirements that
will cause a loss of grandfather status.
The nominal dollar amount of a coinsur-
ance obligation automatically rises when
3
HHS estimates that less than seven percent of enrollees in grandfathered plans have individual market coverage. This estimate is based on analysis of enrollment data issuers submitted in
the HHS Health Insurance and Oversight System (HIOS) and the CMS External Data Gathering Environment (EDGE) for the 2018 plan year, as well as Kaiser Family Foundation estimates
regarding the percentage of enrollees with employer-sponsored coverage that are covered by a grandfathered health plan.
4
For a list of the market reform provisions applicable to grandfathered health plans under title XXVII of the PHS Act that PPACA added or amended and were incorporated into the Employee
Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (the Code), visit https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/afford-
able-care-act/for-employers-and-advisers/grandfathered-health-plans-provisions-summary-chart.pdf.
5
75 FR 34538 (June 17, 2010).
6
75 FR 70114 (Nov. 17, 2010).
7
See Affordable Care Act Implementation FAQs Part I, available at https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-i.pdf and https://www.
cms.gov/ CCIIO/ Resources/ Fact-Sheets-and-FAQs/ aca_ implementation_ faqs.html; Affordable Care Act Implementation FAQs Part II, available at https://www.dol.gov/sites/default/files/
ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-ii.pdf and https://www.cms.gov/ CCIIO/ Resources/ Fact-Sheets-and-FAQs/ aca_ implementation_ faqs2.html; Affordable Care
Act Implementation FAQs Part IV, available at https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-iv.pdf and https://www.cms.gov/ CCIIO/
Resources/ Fact-Sheets-and-FAQs/ aca_ implementation_ faqs4.html; Affordable Care Act Implementation FAQs Part V, available at https://www.dol.gov/sites/default/files/ebsa/about-ebsa/
our-activities/resource-center/faqs/aca-part-v.pdf and https://www.cms.gov/ CCIIO/ Resources/ Fact-Sheets-and-FAQs/ aca_ implementation_ faqs5.html; and Affordable Care Act Implemen-
tation FAQs Part VI, available at https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-vi.pdf and https://www.cms.gov/ CCIIO/ Resources/ Fact-
Sheets-and-FAQs/ aca_ implementation_ faqs6.html.
8
80 FR 72192 (Nov. 18, 2015), codified at 26 CFR 54.9815-1251, 29 CFR 2590.715-1251, and 45 CFR 147.140.

Bulletin No. 2020–32 249 August 3, 2020
the cost of the healthcare benefit subject
to the coinsurance obligation increases, so
changes to the level of coinsurance (such
as modifying a requirement that the pa-
tient pay 20 percent to a requirement that
the patient pay 30 percent of inpatient
surgery costs) could significantly alter the
financial obligation of consumers and a
plan or health insurance coverage. On the
other hand, fixed-amount cost-sharing re-
quirements (such as copayments and de-
ductibles) do not automatically rise when
healthcare costs increase. This means that
changes to fixed-amount cost-sharing re-
quirements (for example, modifying a
$35 copayment to a $40 copayment for
outpatient doctor visits) may be reason-
able to keep pace with the rising cost of
medical items and services. Accordingly,
under the 2015 final rules, any increase
in a percentage cost-sharing requirement
(such as coinsurance) causes a plan or
health insurance coverage to cease to be a
grandfathered health plan. With respect to
fixed-amount cost-sharing requirements,
however, there are two standards for per-
mitted increases, one for fixed-amount
cost-sharing requirements other than co-
payments (for example, deductibles and
out-of-pocket maximums) and another for
copayments.
With respect to fixed-amount cost-shar-
ing requirements other than copayments, a
plan or coverage ceases to be a grandfa-
thered health plan if there is an increase,
since March 23, 2010, that is greater than
the maximum percentage increase. For
fixed-amount copayments, a plan or cov-
erage ceases to be a grandfathered health
plan if there is an increase, since March
23, 2010, in the copayment that exceeds
the greater of (1) the maximum percent-
age increase or (2) five dollars increased
by medical inflation. The 2015 final
rules define the maximum percentage in-
crease as medical inflation (from March
23, 2010) plus 15 percentage points. For
this purpose, medical inflation is defined
by reference to the overall medical care
component of the Consumer Price Index
for All Urban Consumers, unadjusted
(CPI-U), published by the Department of
Labor using the 1982–1984 base of 100.
For any change that causes a loss of
grandfather status under the 2015 final
rules, the plan or coverage will cease to
be a grandfathered plan when the change
becomes effective, regardless of when the
change is adopted.
In addition, the 2015 final rules re-
quire that a grandfathered plan or cover-
age include a statement in any summary
of benefits provided under the plan that it
believes the plan or coverage is a grandfa-
thered health plan, as well as provide con-
tact information for questions and com-
plaints. Failure to provide this disclosure
results in a loss of grandfather status. The
2015 final rules further provide that, once
grandfather status is relinquished, there is
no opportunity to regain it.
C. 2019 Request for Information
It is the Departments’ understanding
that the number of grandfathered group
health plans and group health insurance
policies has declined each year since the
enactment of PPACA, but many employ-
ers continue to maintain grandfathered
group health plans and coverage. The fact
that a significant number of grandfathered
group health plans and coverage remain
indicates that some employers and issuers
have found value in preserving grandfa-
ther status. Accordingly, on February 25,
2019, the Departments published in the
Federal Register the 2019 RFI
9
to gather
input from the public in order to better un-
derstand the challenges that group health
plans and group health insurance issuers
face in avoiding a loss of grandfather sta-
tus and to determine whether there are
opportunities for the Departments to assist
such plans and issuers, consistent with the
law, in preserving the grandfather status
of group health plans and group health
insurance coverage in ways that would
benefit plan participants and beneficiaries,
employers, employee organizations, and
other stakeholders.
Comments submitted in response to the
2019 RFI provided information regarding
grandfathered health plans that has in-
formed these proposed rules. Comment-
ers shared data regarding the prevalence
of grandfathered group health plans and
grandfathered group health insurance cov-
erage, insights regarding the impact that
grandfathered plans have had in terms of
delivering benefits to participants and ben-
eficiaries at a lower cost than non-grand-
fathered plans, and suggestions for po-
tential amendments to the Departments’
2015 final rules that would provide more
flexibility for a plan or coverage to retain
grandfather status.
Several commenters directed the De-
partments’ attention to a Kaiser Family
Foundation survey, which indicates that
one out of every five firms that offered
health benefits in 2018 offered at least
one grandfathered health plan, and 16
percent of covered workers were enrolled
in a grandfathered group health plan that
year.
10
One commenter indicated the inci-
dence of grandfathered plan status differs
by various types of plan sponsors. Another
commenter cited survey data released in
2018 by the International Foundation of
Employee Benefit Plans, which indicated
that 57 percent of multiemployer plans are
grandfathered, compared to 20 percent of
private-sector plans and 30 percent of pub-
lic sector plans. However, a professional
association with members who work with
employer groups on health plan design
and administration commented that their
members have found far fewer grandfa-
thered plans than survey results suggest
are in existence and suggested that very
large employers with self-funded plans
may have a disproportionate share of
grandfathered plans, as well as that some
employers that have “grandmothered”
plans or that previously had grandfathered
plans may unintentionally be reporting
9
84 FR 5969 (Feb. 25, 2019), available at https://www.federalregister.gov/documents/2019/02/25/2019-03170/request-for-information-regarding-grandfathered-group-health-plans-and-
grandfathered-group-health.
10
On September 25, 2019, the Kaiser Family Foundation issued its 2019 report, which showed little change since 2018 with respect to grandfathered plans. According to survey data, 22
percent of offering firms report having at least one grandfathered plan in 2019, and 13 percent of covered workers were enrolled in a grandfathered health plan in 2019. See 2019 Employer
Health Benefits Survey, Kaiser Family Foundation, available at https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/. See also 2018 Employer Health Benefits Sur-
vey, Kaiser Family Foundation, available at https://www.kff.org/report-section/2018-employer-healthbenefits-survey-section-13-grandfathered-healthplans/.

August 3, 2020 250 Bulletin No. 2020–32
incorrectly in surveys that they still have
grandfathered plans.
11
Some commenters stated that grand-
fathered health plans are less compre-
hensive and provide fewer consumer
protections than non-grandfathered plans;
thus, these commenters opined that the
Departments should not amend the 2015
final rules to provide any greater flexi-
bility for a plan or coverage to maintain
grandfather status. Other commenters
noted, however, that grandfathered plans
often have lower premiums and cost-shar-
ing requirements than non-grandfathered
plans. One commenter gave examples
of premium increases ranging from 10
percent to 40 percent that grandfathered
plan participants would experience if they
transitioned to non-grandfathered group
health plans. Several commenters also ar-
gued that grandfathered health plans do in
fact offer comprehensive benefits and in
some cases are even more generous than
certain non-grandfathered plans that are
subject to all the requirements of PPACA.
Some commenters also stated that they
have found that their grandfathered plans
offer more robust provider networks than
other coverage options that are available
to them or that they want to ensure that
they are able to keep receiving care from
current in-network providers.
Commenters who supported allowing
greater flexibility for grandfathered health
plans offered a range of suggestions on
how the 2015 final rules should be amend-
ed. For example, several commenters re-
quested additional flexibility regarding
plan or coverage changes that would con-
stitute an elimination of substantially all
benefits to diagnose or treat a condition,
arguing that it is often difficult to discern
what constitutes a benefit reduction giv-
en that the regulations apply a “facts and
circumstances” standard. Some comment-
ers requested flexibility to make certain
changes so long as the grandfathered plan
or coverage’s actuarial value is not af-
fected. Some commenters also stated that
the 2015 final rules should be amended
to permit decreases in contribution rates
by employers and employee organiza-
tions by more than five percentage points
to account for employers experiencing a
business change or economic downturn
and the difficulty issuers face in gathering
necessary information from employers to
know that their contribution rates have not
decreased.
Commenters also suggested amend-
ments relating to the permitted changes
in cost-sharing requirements for grand-
fathered health plans. These commenters
generally argued that the 2015 final rules
were too restrictive. Several commenters
stated that relying on the medical care
component of the CPI-U for purposes of
those rules to account for inflation adjust-
ments to the maximum percentage increase
was misguided, and the methodology used
to calculate the “premium adjustment per-
centage” (as defined in 45 CFR 156.130)
would be more appropriate because it is
tied to the increase in premiums for health
insurance and, therefore, better reflects
the increase in costs for health coverage.
These commenters also noted that relying
on the premium adjustment percentage
would be consistent with the methodology
used to adjust the annual limitation on cost
sharing under section 1302(c) of PPACA
and section 2707(b) of the PHS Act that
applies to non-grandfathered plans. Addi-
tionally, one commenter articulated a con-
cern that the 2015 final rules eventually
may preclude some grandfathered group
health plans or issuers of grandfathered
group health insurance coverage from be-
ing able to make changes to cost-sharing
requirements that are necessary for a plan
to maintain its status as an HDHP within
the meaning of section 223 of the Inter-
nal Revenue Code (Code), which would
effectively mean that individuals covered
by those plans would no longer be eligible
to contribute to an HSA.
D. The Premium Adjustment Percentage
Section 1302(c)(4) of PPACA directs
the Secretary of HHS to determine an an-
nual premium adjustment percentage, a
measure of premium growth that is used
to set the rate of increase for three param-
eters detailed in PPACA: (1) the maxi-
mum annual limitation on cost sharing
(defined at 45 CFR 156.130(a)); (2) the
required contribution percentage used to
determine eligibility for certain exemp-
tions under Code section 5000A (defined
at 45 CFR 155.605(d)(2)); and (3) the
employer shared responsibility payment
amounts under Code section 4980H(a)
and (b) (see Code section 4980H(c)(5)).
Section 1302(c)(4) of PPACA and 45 CFR
156.130(e) provide that the premium ad-
justment percentage is the percentage (if
any) by which the average per capita pre-
mium for health insurance coverage for
the preceding calendar year exceeds such
average per capita premium for health in-
surance for 2013, and 45 CFR 156.130(e)
provides that this percentage will be pub-
lished in the annual HHS notice of benefit
and payment parameters.
To calculate the premium adjustment
percentage for a benefit year, HHS calcu-
lates the percentage by which the average
per capita premium for health insurance
coverage for the preceding calendar year
exceeds the average per capita premium
for health insurance for 2013, and rounds
the resulting percentage to 10 significant
digits. The resulting premium index re-
flects cumulative, historic growth in pre-
miums from 2013 through the preceding
year. HHS calculates the premium ad-
justment percentage using as a premium
growth measure the most recently avail-
able, at the time of proposal in the annual
HHS notice of benefit and payment pa-
rameters proposed rule, National Health
Expenditure Accounts (NHEA) projec-
tion of per enrollee premiums for private
health insurance, excluding Medigap and
11
“Grandmothered” plans, also known as transitional plans, are certain non-grandfathered health insurance coverage in the small group and individual market that meet certain conditions.
On November 14, 2013, CMS issued a letter to the State Insurance Commissioners outlining a policy under which, if permitted by the state, non-grandfathered small group and individual
market health plans that were in effect on October 1, 2013, would send a notice to all individuals and small businesses that received or would otherwise receive a cancellation or termination
notice with respect to the coverage, and the coverage would not be treated as being out of compliance with certain specified market reforms. CMS has extended this non-enforcement policy
each year, with the most recent extension in effect until policy years beginning on or before October 1, 2021, provided that all such coverage comes into compliance by January 1, 2022. See
Insurance Standards Bulletin Series – INFORMATION – Extension of Limited Non-Enforcement Policy through 2021 (January 31, 2020), available at https://www.cms.gov/files/document/
extension-limited-non-enforcement-policy-through-calendar-year-2021.pdf.

Bulletin No. 2020–32 251 August 3, 2020
property and casualty insurance, for 2013
and the preceding calendar year.
12
E. High Deductible Health Plans and
HSA-compatibility
Section 223 of the Code permits eligi-
ble individuals to establish and contribute
to HSAs. HSAs are tax-favored accounts
established for the purpose of providing
tax benefits to pay for qualified medi-
cal expenses on behalf of the account
beneficiary, his or her spouse, and any
dependents claimed. Among the require-
ments for an individual to qualify as an
eligible individual under section 223(c)
(1) of the Code (and thus to be eligible
to make tax-favored contributions to an
HSA) is the requirement that the individu-
al be covered under an HDHP. An HDHP
is a health plan that satisfies certain re-
quirements with respect to minimum de-
ductibles and maximum out-of-pocket
expenses, which increase annually with
cost-of-living adjustments. Generally, ex-
cept for preventive care, an HDHP may
not provide benefits for any year until the
deductible for that year is met. Pursuant to
section 223(g) of the Code, the minimum
deductible for an HDHP is adjusted annu-
ally for cost-of-living based on changes in
the CPI-U.
II. Overview of Proposed Rules
A. Introduction
This notice of proposed rulemaking
would, if finalized, amend the 2015 fi-
nal rules to provide greater flexibility
for grandfathered group health plans and
issuers of grandfathered group health in-
surance coverage to make certain chang-
es without causing a loss of grandfather
status. However, there is no authority
for non-grandfathered plans to become
grandfathered, and therefore these pro-
posed rules would not provide any oppor-
tunity for a plan or coverage that has lost
its grandfather status under the 2015 final
rules to regain that status.
In issuing these proposed rules, the De-
partments considered comments submit-
ted in response to the 2019 RFI regarding
ways that the 2015 final rules should be
amended. Many suggestions outlined in
the comments are not being proposed here
because, in the Departments’ view, they
would allow for such significant changes
that the modified plan or coverage could
not reasonably be described as being the
same plan or coverage that was offered on
March 23, 2010, for purposes of grand-
father status. However, the commenters’
arguments that there are better means of
accounting for inflation in the standard
for the maximum percentage increase
that should be permitted to fixed-amount
cost-sharing requirements were persua-
sive. The Departments also agree that,
as one commenter highlighted, there is
an opportunity to clarify that changes to
fixed-amount cost-sharing requirements
that are necessary for a plan to maintain its
status as an HDHP should not cause a loss
of grandfather status. Given that the 2015
final rules permit increases that are meant
to account for inflation in healthcare costs
over time, the Departments are of the view
that these suggestions are reasonably nar-
row and consistent with the intent of the
2015 final rules to permit adjustments in
response to inflation without causing a
loss of grandfather status.
Accordingly, these proposed rules
would amend the 2015 final rules in two
ways. First, these proposed rules include
a new paragraph (g)(3) which would spec-
ify that grandfathered group health plans
and grandfathered group health insur-
ance coverage that are HDHPs may make
changes to fixed-amount cost-sharing re-
quirements that would otherwise cause a
loss of grandfather status without causing
a loss of grandfather status, but only to
the extent those changes are necessary to
comply with the requirements for HDHPs
under section 223(c)(2) of the Code. Sec-
ond, these proposed rules include a re-
vised definition of “maximum percentage
increase” in redesignated paragraph (g)
(4), which provides an alternative method
of determining that amount based on the
premium adjustment percentage. This al-
ternative method would be available only
for grandfathered group health plans and
grandfathered group health insurance cov-
erage with changes that are effective on or
after the effective date of a final rule.
The Departments request comments on
all aspects of these proposed rules. In the
preamble discussion that follows, the De-
partments also solicit comments on spe-
cific issues related to the proposed rules
where stakeholder feedback would be par-
ticularly useful in evaluating whether and
how to issue final rules.
B. Special Rule for Certain
Grandfathered HDHPs
As explained above, paragraph (g)
(1) of the 2015 final rules identifies cer-
tain types of changes that will cause a
plan or coverage to cease to be a grand-
fathered health plan, including increases
in cost-sharing requirements that exceed
certain thresholds. However, cost-sharing
requirements for a grandfathered group
health plan or group health insurance cov-
erage that is an HDHP must satisfy the
minimum annual deductible requirement
and maximum out-of-pocket expenses
requirement under section 223(c)(2)(A)
of the Code. These amounts are updated
annually to reflect a cost-of-living adjust-
ment and are published each year by the
Internal Revenue Service.
The annual cost-of-living adjustment
to the required minimum deductible for an
HDHP has not yet exceeded the maximum
percentage increase that would cause an
HDHP to lose grandfather status.
13
Never-
theless, the Departments are of the view
12
85 FR 29164, 29228 (May 14, 2020). The series used in the determinations of the adjustment percentages can be found in Table 17 on the CMS web site, which can be accessed by clicking
the “NHE Projections 2018-2027 – Tables” link located in the Downloads section at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHeal-
thExpendData/NationalHealthAccountsProjected.html. A detailed description of the NHE projection methodology is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
13
For calendar year 2020, a “high deductible health plan” is defined under Code § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or
$2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) for which do not exceed $6,900 for self-only coverage
or $13,800 for family coverage. Rev. Proc. 2019-25. For calendar year 2021, a “high deductible health plan” is defined under Code § 223(c)(2)(A) as a health plan with an annual deductible
that is not less than $1,400 for self-only coverage or $2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) for
which do not exceed $7,000 for self-only coverage or $14,000 for family coverage. Rev. Proc. 2020-32.

August 3, 2020 252 Bulletin No. 2020–32
that there is value in providing assurance
to grandfathered plans that if a grandfa-
thered group health plan or group health
insurance coverage that is an HDHP in-
creases its fixed-amount cost-sharing
requirements to meet a future adjusted
minimum annual deductible requirement
under section 223(c)(2)(A) of the Code
that is greater than the increase that would
be permitted under paragraph (g)(1), such
an increase would not cause the plan or
coverage to relinquish its grandfather
status. Otherwise, if such a conflict were
to occur, the sponsor of the plan would
have to decide whether to preserve the
plan’s grandfather status or its status as
an HDHP. This would mean participants
and beneficiaries would experience either
substantial changes to their coverage (and
likely premium increases) or a loss of eli-
gibility to contribute to an HSA.
To address this potential conflict, these
proposed rules include a new paragraph
(g)(3), which provides that, with respect
to a grandfathered group health plan or
group health insurance coverage that
is an HDHP, increases to fixed-amount
cost-sharing requirements that otherwise
would cause a loss of grandfather status
would not cause the plan or coverage to
relinquish its grandfather status, but only
to the extent the increases are necessary to
maintain its status as an HDHP under sec-
tion 223(c)(2)(A) of the Code.
14
Thus, in-
creases with respect to such a plan or cov-
erage that would otherwise cause a loss
of grandfather status and that exceed the
amount necessary to satisfy the minimum
annual deductible requirement under sec-
tion 223(c)(2)(A) of the Code would still
cause a loss of grandfather status. These
proposed rules would also add a new ex-
ample 11 under paragraph (g)(5) to illus-
trate how this special rule would apply.
C. Definition of Maximum Percentage
Increase
The Departments agree with stake-
holders who submitted comments on the
2019 RFI stating that the premium adjust-
ment percentage (as defined at 45 CFR
156.130(e) and published for each year
by HHS in the annual notice of benefit
and payment parameters) may be a more
appropriate measurement of changes in
healthcare costs over time than medical
inflation, as defined in the 2015 final rules.
Under the 2015 final rules, medical
inflation means the increase since March
2010 in the overall medical care compo-
nent of the CPI-U published by the De-
partment of Labor using the 1982-1984
base of 100. The medical care component
of the CPI-U is a measure of the average
change over time in the prices paid by ur-
ban consumers for medical care. Although
the Departments continue to believe this
is an appropriate measure for medical in-
flation in this context, the Departments
recognize that the medical care compo-
nent of CPI-U reflects not only changes
in price for private insurance, but also for
self-pay patients and Medicare, neither
of which are reflected in the underlying
costs for grandfathered group health plans
and grandfathered group health insurance
coverage. In contrast, the premium ad-
justment percentage reflects the cumula-
tive, historic growth from 2013 through
the preceding calendar year in premiums
for only private health insurance, exclud-
ing Medigap and property and casualty
insurance. Therefore, the Departments
agree with comments that the premium
adjustment percentage better reflects the
increase in underlying costs for grandfa-
thered group health plans and grandfa-
thered group health insurance coverage.
The Departments acknowledge that the
premium adjustment percentage does not
capture premium growth from 2010 to
2013, and that it reflects increases in pre-
miums in the individual market, which
have increased more rapidly than pre-
miums for group health plans and group
health insurance. However, the Depart-
ments believe the premium adjustment
percentage is the best existing measure
to reflect the increase in underlying costs
for grandfathered group health plans and
grandfathered group health insurance
coverage. Additionally, the Departments
believe using a measure with which plans
and issuers are already familiar would
increase administrative simplicity. Nev-
ertheless, the Departments seek comment
on alternative measures that more accu-
rately represent the increase in underlying
costs for grandfathered group health plans
and grandfathered group health insurance
coverage.
These proposed rules include an
amended definition of the maximum per-
centage increase that provides an alterna-
tive standard that relies on the premium
adjustment percentage, rather than med-
ical inflation (which continues to be de-
fined, for purposes of these rules, as the
overall medical care component of the
Consumer Price Index for All Urban Con-
sumers, unadjusted), to account for chang-
es in healthcare costs over time. This al-
ternative standard would not supplant the
current standard; rather, it would be avail-
able to the extent it yields a greater result
than the current standard, and it would ap-
ply only with respect to increases in fixed-
amount cost-sharing requirements that are
made effective on or after the effective
date of the final rule. With respect to in-
creases for group health plans and group
health insurance coverage made effective
on or after March 23, 2010, and before the
effective date of the final rule, the max-
imum percentage increase would still be
defined as medical inflation expressed as
a percentage, plus 15 percentage points.
15
Thus, under these proposed rules, in-
creases to fixed-amount cost-sharing re-
quirements for grandfathered group health
plans and grandfathered group health in-
surance coverage that are made effective
on or after the effective date of the final
rule, would cause the plan or coverage to
cease to be a grandfathered health plan,
if the total percentage increase in the
cost-sharing requirement measured from
March 23, 2010 exceeds the greater of (1)
medical inflation, expressed as a percent-
age, plus 15 percentage points; or (2) the
portion of the premium adjustment per-
centage, as defined in 45 CFR 156.130(e),
14
Paragraph (g)(3) of the 2015 final rules would be renumbered as paragraph (g)(4), and subsequent paragraphs would be renumbered accordingly. Additionally, the proposed rules include
conforming amendments to other paragraphs in the proposed rules to update all cross-references to those subparagraphs.
15
The amendments included in these proposed rules would apply only with respect to grandfathered group health plans and grandfathered group health insurance coverage. Because HHS reg-
ulations at 45 CFR 147.140 apply to both grandfathered individual and group health coverage, the amended definition of the maximum percentage increase in the HHS proposed regulations
would also add a separate provision for individual health insurance coverage to show that the applicable definition remains unchanged.

Bulletin No. 2020–32 253 August 3, 2020
that reflects the relative change between
2013 and the calendar year prior to the
effective date of the increase (that is, the
premium adjustment percentage minus
1), expressed as a percentage, plus 15
percentage points. These proposed rules
would also add a new example 5 under
paragraph (g)(5) to demonstrate how this
alternative measure for determining the
maximum percentage increase might ap-
ply in practice. Similar to other examples
in paragraph (g)(5), the new example 5 in-
cludes hypothetical numbers with respect
to both the overall medical care compo-
nent of the CPI-U and the premium ad-
justment percentage that do not relate to
any specific time period and are used for
illustrative purposes only. These proposed
rules would also renumber examples 5-9
in paragraph (g)(5) to allow the inclusion
of new example 5 and to revise examples
3-6 to clarify that these examples involve
plan changes that become effective before
the effective date of the final rule. These
proposed revisions would ensure that the
examples accurately reflect the other pro-
visions of the rule.
Stakeholders reviewing these proposed
rules should look to official publications
from the Bureau of Labor Statistics and
HHS to identify the relevant overall med-
ical care component of the CPI-U amount
or premium adjustment percentage with
respect to a change being considered by a
grandfathered health plan.
III. Effective Date
The amendments to the 2015 final
rules that are included in these proposed
rules would apply to grandfathered group
health plans and grandfathered group
health insurance coverage beginning 30
days after the publication of any final
rules. The Departments solicit comment
on this proposed effective date.
IV. Economic Impact Analysis and
Paperwork Burden
A. Summary/Statement of Need
Section 1251 of PPACA provides that
certain group health plans and health in-
surance coverage existing on March 23,
2010, are not subject to certain provisions
of PPACA as long as they maintain grand-
father status. On February 25, 2019, the
Departments published an RFI to gath-
er information on grandfathered group
health plans and grandfathered group
health insurance coverage. Comments re-
ceived from stakeholders in response to
the 2019 RFI suggest that issuers and plan
sponsors, as well as participants and ben-
eficiaries, continue to value the option to
continue grandfathered group health plan
and grandfathered group health insurance
coverage. The Departments are of the view
that these proposed rules would be appro-
priate to provide certain grandfathered
health plans greater flexibility to make
changes to certain types of cost-sharing
requirements without causing a loss of
grandfather status. These changes would
allow certain grandfathered group health
plans and grandfathered group health in-
surance coverage to continue to be exempt
from certain provisions of PPACA and al-
low those plans’ participants and benefi-
ciaries to maintain their current coverage.
In drafting these proposed rules, the De-
partments attempted to balance a number
of competing interests. For example, the
Departments sought to balance providing
greater flexibility to grandfathered group
health plans and grandfathered group
health insurance coverage that would en-
able these plans and coverage to continue
offering quality, affordable coverage to
participants and beneficiaries against en-
suring that the proposed policies would not
allow for such significant changes that the
plan or coverage could not reasonably be
described as being the same plan or cov-
erage that was offered on March 23, 2010.
Additionally, the Departments sought to
allow grandfathered group health plans
and grandfathered group health insur-
ance coverage to better account for rising
healthcare costs, including ensuring that
grandfathered group HDHPs are able to
maintain their grandfather status, while
continuing to comply with minimum
cost-sharing requirements for HDHPs, so
that the individuals enrolled in the HDHPs
are eligible to contribute to an HSA. In
previous rulemaking, the Departments
recognized that many group health plans
and issuers make changes to the terms of
plans or health insurance coverage on an
annual basis: premiums fluctuate, provid-
er networks and drug formularies change,
employer and employee contributions
and cost-sharing requirements change,
and covered items and services may vary.
Without some flexibility to make adjust-
ments while retaining grandfather status,
the ability of many individuals to maintain
their current coverage would be frustrated,
because much of the grandfathered group
health plan coverage would quickly cease
to be regarded as the same health plan or
health insurance coverage in existence
on March 23, 2010. At the same time, al-
lowing plans to make unfettered changes
while retaining grandfather status would
be inconsistent with Congress’s intent in
enacting PPACA.
16
These proposed rules, if finalized,
would amend the 2015 final rules to pro-
vide greater flexibility for grandfathered
group health plans and issuers of grandfa-
thered group health insurance coverage in
two ways. First, the proposed rules would
specify that any grandfathered group
health plan and grandfathered group health
insurance coverage that is an HDHP may
make changes to fixed-amount cost-shar-
ing requirements that would otherwise
cause a loss of grandfather status without
causing a loss of grandfather status, but
only to the extent those changes are nec-
essary to comply with the requirements
for HDHPs under section 223(c)(2) of the
Code. Second, these proposed rules would
include a revised definition of “maximum
percentage increase,” which provides an
alternative method of determining that
amount that is based on the premium ad-
justment percentage.
B. Overall Impact
The Departments have examined the
impacts of these proposed rules as re-
quired by Executive Order 12866 on
Regulatory Planning and Review (Sep-
tember 30, 1993), Executive Order 13563
on Improving Regulation and Regulatory
Review (January 18, 2011), the Regu-
latory Flexibility Act (RFA) (Septem-
ber 19, 1980, Pub. L. 96-354), section 202
of the Unfunded Mandates Reform Act
of 1995 (March 22, 1995, Pub. L. 104-
16
75 FR 34538, 34546 (June 17, 2010).

August 3, 2020 254 Bulletin No. 2020–32
4), Executive Order 13132 on Federalism
(August 4, 1999), the Congressional Re-
view Act (5 U.S.C. 804(2)), and Executive
Order 13771 on Reducing Regulation and
Controlling Regulatory Costs (January 30,
2017).
Executive Orders 12866 and 13563 di-
rect agencies to assess all costs and ben-
efits of available regulatory alternatives
and, if regulation is necessary, to select
regulatory approaches that maximize net
benefits (including potential economic,
environmental, public health and safety
effects, distributive impacts, and equi-
ty). Executive Order 13563 emphasizes
the importance of quantifying both costs
and benefits, reducing costs, harmonizing
rules, and promoting flexibility. A regula-
tory impact analysis must be prepared for
rules with economically significant effects
($100 million or more in any one year).
Section 3(f) of Executive Order 12866
defines a “significant regulatory action”
as an action that is likely to result in a
rule (1) having an annual effect on the
economy of $100 million or more in any
one year, or adversely and materially
affecting a sector of the economy, pro-
ductivity, competition, jobs, the environ-
ment, public health or safety, or state, lo-
cal or tribal governments or communities
(also referred to as “economically signifi-
cant”); (2) creating a serious inconsisten-
cy or otherwise interfering with an action
taken or planned by another agency; (3)
materially altering the budgetary impacts
of entitlement grants, user fees, or loan
programs or the rights and obligations of
recipients thereof; or (4) raising novel le-
gal or policy issues arising out of legal
mandates, the President’s priorities, or
the principles set forth in the Executive
Order. A regulatory impact analysis must
be prepared for major rules with econom-
ically significant effects ($100 million or
more in any one year), and a “significant”
regulatory action is subject to Office of
Management and Budget (OMB) review.
As discussed below regarding their an-
ticipated effects, these proposals are not
likely to have economic impacts of $100
million or more in any one year, and
therefore do not meet the definition of
‘‘economically significant’’ under Execu-
tive Order 12866. OMB has determined,
however, that the actions are significant
within the meaning of section 3(f)(4) of
the Executive Order. Therefore, OMB
has reviewed these proposed rules and
the Departments have provided the fol-
lowing assessment of their impact.
C. Impact Estimates of Grandfathered
Group Health Plans and Grandfathered
Group Health Insurance Coverage
Provisions and Accounting Table
These proposed rules, if finalized,
would amend the 2015 final rules to pro-
vide greater flexibility for grandfathered
group health plan sponsors and issuers
of grandfathered group health insur-
ance coverage to make certain changes
to cost-sharing requirements without
causing a loss of grandfather status. The
proposed rules would specify that is-
suers or sponsors of any grandfathered
group health plan and grandfathered
group health insurance coverage that is
an HDHP may make changes to fixed-
amount cost-sharing requirements that
would otherwise cause a loss of grand-
father status without causing a loss of
grandfather status, but only to the extent
those changes are necessary to comply
with the requirements for HDHPs under
section 223(c)(2) of the Code. The pro-
posed rules would also revise the defini-
tion of “maximum percentage increase”
to provide an alternative method of deter-
mining that amount that is based on the
premium adjustment percentage. In ac-
cordance with OMB Circular A-4, Table
1 depicts an accounting statement sum-
marizing the Departments’ assessment of
the benefits, costs, and transfers associat-
ed with this regulatory action.
The Departments are unable to quanti-
fy all benefits, costs, and transfers of these
proposed rules. The effects in Table 1 re-
flect non-quantified impacts and estimated
direct monetary costs and transfers result-
ing from the provisions of these proposed
rules for plans, issuers, participants, and
beneficiaries.
TABLE 1: Accounting Table
Benefits
Non-Quantified:
• Allows sponsors of grandfathered group health plans and grandfathered group health insurance coverage more flexibility to
make changes to certain fixed-amount cost-sharing requirements without losing grandfather status.
• Allows participants and beneficiaries in grandfathered group health plans and grandfathered group health insurance coverage
to maintain coverage they are familiar with and potentially provides continuity of care by not requiring them to change their
health plan to one that may not include their current provider(s).
• Ensures plan sponsors are able to comply with minimum cost-sharing requirements for HDHPs and allows participants and
beneficiaries to maintain their coverage and eligibility to contribute to an HSA.
• Decreases the likelihood that plan sponsors would cease offering health benefits due to a lack of flexibility to make changes to
certain fixed cost-sharing amounts without losing grandfather status.
Costs:Primary EstimateYear DollarDiscount RatePeriod Covered
Annualized Monetized ($/year)$7.95 million20207 percent2021-2025
$7.40 million20203 percent2021-2025
Quantitative:
• Regulatory review costs of $34.9 million, incurred in 2020 only, by grandfathered group health plan coverage sponsors and
issuers.

Bulletin No. 2020–32 255 August 3, 2020
Non-Quantified:
• Potential increase in adverse health outcomes if a participant or beneficiary would forego treatment because the necessary
services became unaffordable due to an increase in cost sharing.
• Potential increase in adverse health outcomes if there is an increase in the uninsured rate if participants and beneficiaries
choose to cancel their coverage because of the increases in cost-sharing requirements associated with grandfathered group
health plans and grandfathered group health insurance coverage.
• If an employer would have otherwise switched to a non-grandfathered plan, potential increase in adverse health outcomes if a
participant or beneficiary foregoes treatment for medical conditions that are not covered by their grandfathered group health
plan and grandfathered group health insurance coverage but that would have been covered by non-grandfathered health plan
coverage subject to PPACA.
Transfers
Non-Quantified:
• In grandfathered group health plans and grandfathered group health insurance coverage that utilize the expanded flexibilities
to increase fixed-amount cost-sharing requirements, potential transfers occur from participants and beneficiaries with resulting
higher out-of-pocket costs to participants and beneficiaries with no or low out-of-pocket costs and nonparticipants through
potentially lower premiums and correspondingly smaller wage adjustments to pay for the premiums.
• If an employer would have otherwise switched to a non-grandfathered plan with expanded benefits, potential transfers occur
from participants and beneficiaries who would have benefited from these expanded benefits to others in the plan who would
not have benefited from these expanded benefits through lower premiums and correspondingly smaller wage adjustments.
Table 1 provides the anticipated bene-
fits, costs, and transfers (quantitative and
non-quantified) to sponsors and issuers
of grandfathered health plan coverage,
participants and beneficiaries enrolled in
grandfathered plans, as well as nonpartici-
pants. The following section describes the
benefits, costs, and transfers to grandfa-
thered group health plan sponsors, issuers
of grandfathered group health insurance
coverage, and those individuals enrolled
in such plans.
These proposed rules propose a new
paragraph (g)(3) which would specify
that grandfathered group health plans
and grandfathered group health insurance
coverage that are HDHPs may increase
fixed-amount cost-sharing requirements
that otherwise would cause a loss of
grandfather status, without causing the
plan or coverage to relinquish its grand-
father status, but only to the extent the in-
creases are necessary to comply with the
requirements for HDHPs under section
223(c)(2) of the Code. Additionally, the
proposed rules propose a revised defini-
tion of “maximum percentage increase” in
redesignated paragraph (g)(4) to provide
an alternative method of determining that
amount that is based on the premium ad-
justment percentage.
Economic Impacts of Retaining or
Relinquishing Grandfather Status and
Affected Entities and Individuals
The Departments estimate that there
are 2.4 million ERISA-covered plans of-
fered by private employers that cover an
estimated 134.7 million participants and
beneficiaries in those private employ-
er-sponsored plans.
17
Similarly, the De-
partments estimate that there are 83,500
state and local governments that offer
health coverage to their employees, with
an estimated 42.8 million participants and
beneficiaries in those employer-sponsored
plans.
18
The 2019 Employer Health Benefits
Survey reports that 22 percent of firms
offering health benefits have at least one
health plan or benefit package option that
is a grandfathered plan, and 13 percent of
covered workers are enrolled in grand-
fathered plans.
19
Using the above infor-
mation, the Departments estimate that,
of those firms offering health benefits,
527,000 sponsor ERISA-covered plans
(2.4 million * 0.22) that are grandfathered
(or include a grandfathered benefit pack-
age option) and cover 17.5 million partic-
ipants and beneficiaries (134.7 million *
0.13). The Departments further estimate
there are 18,400 state and local govern-
ments (83,500 * 0.22) offering at least one
grandfathered health plan and 5.6 million
participants and beneficiaries (42.8 mil-
lion * 0.13) covered by a grandfathered
state or local government plan.
Although the 2019 Employer Health
Benefits Survey reports that 26 percent of
firms offering health benefits offered an
17
The Department of Labor estimates based on the 2018 Medical Expenditure Panel Survey Insurance Component (MEPS-IC), available at https://meps.ahrq.gov/data_stats/summ_tables/
insr/national/series_1/2018/ic18_ia_g.pdf; Health Insurance Coverage Bulletin: Abstract of Auxiliary Data for the March 2016 Annual Social and Economic Supplement to the Current Pop-
ulation Survey, Table 3C, available at https://www.dol.gov/sites/dolgov/files/EBSA/researchers/data/health-and-welfare/health-insurance-coverage-bulletin-2016.pdf.
18
2017 Census of Governments, Government Organization Report, available at https://www.census.gov/data/tables/2017/econ/gus/2017-governments.html; 2017 MEPS-IC State and Local
Government data, available for query at https://meps.ahrq.gov/mepsweb/data_stats/MEPSnetIC/startup.; Health Insurance Coverage Bulletin: Abstract of Auxiliary Data for the March
2016 Annual Social and Economic Supplement to the Current Population Survey, Table 3C, available at https://www.dol.gov/sites/dolgov/files/EBSA/researchers/data/health-and-welfare/
health-insurance-coverage-bulletin-2016.pdf.
19
The Departments note that comments received in response to the 2019 RFI and summarized earlier in this preamble described data obtained from Kaiser Family Foundation 2018 Employer
Health Benefits Survey. See supra note 9. For the purposes of this regulatory impact analysis, the Departments used more recent data from the same survey. See Kaiser Family Foundation,
“2019 Employer Health Benefits Survey,” available at https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/.

August 3, 2020 256 Bulletin No. 2020–32
HDHP and 23 percent of covered work-
ers were enrolled in HDHPs, the Depart-
ments believe the 2010 Employer Health
Benefits Survey provides a better esti-
mate of the prevalence of HDHPs in the
grandfathered group market as it provides
an estimate for the number of potential
HDHPs that would have been able to ob-
tain and maintain grandfather status. The
2010 Employer Health Benefits Survey
reports that 12 percent of firms offering
health benefits offered an HDHP, and 6
percent of covered workers were enrolled
in HDHPs.
20
Benefits
The Departments believe that the eco-
nomic effects of these proposed rules
would ultimately depend on any deci-
sions made by grandfathered plan spon-
sors (including sponsors of grandfathered
HDHPs) and the preferences of plan par-
ticipants and beneficiaries. To determine
the value of retaining a health plan’s
grandfather status, each group plan spon-
sor must determine whether the plan, un-
der the rules applicable to grandfathered
health plan coverage, would continue to
be more or less favorable than the plan,
under the rules applicable to non-grand-
fathered group health plans. This deter-
mination would depend on such factors
as the respective prices of grandfathered
and non-grandfathered health plans, the
willingness of grandfathered group health
plans’ covered populations to pay for
benefits and protections available under
non-grandfathered health plans, and their
willingness to accept any increases in out-
of-pocket costs due to changes to certain
types of cost-sharing requirements. The
Departments are of the view that providing
the proposed flexibilities to make changes
to certain types of cost-sharing require-
ments in grandfathered group health plans
and grandfathered group health insurance
coverage without causing a loss of grand-
father status would enable plan sponsors
and issuers to continue to offer quality, af-
fordable coverage to their participants and
beneficiaries while taking into account ris-
ing health care costs.
The Departments anticipate that the
premium adjustment percentage index
will continue to experience faster growth
than medical CPI-U, and therefore believe
that providing the proposed alternative
method of determining the “maximum
percentage increase” would, over time,
give grandfathered group health plans
and grandfathered group health insurance
coverage the flexibility to make changes
to the plans’ fixed-amount cost-sharing re-
quirements (such as copayments, deduct-
ibles, and out-of-pocket limits) that would
have previously resulted in the loss of
grandfather status. Thus, the Departments
believe that these proposed rules would
allow sponsors of those grandfathered
health plans to continue to provide the
coverage with which their participants and
beneficiaries are familiar and comfortable,
without the unnecessary burden of finding
other coverage.
As noted previously in the preamble,
some commenters suggested that their
grandfathered plans offer more robust
provider networks than other coverage
options available to them or that they
want to ensure that participants and ben-
eficiaries are able to keep receiving care
from current in-network providers. The
Departments agree that providing the pro-
posed flexibilities could help participants
and beneficiaries maintain their current
provider and service networks. If provid-
ers continue participating in the grand-
fathered plans’ networks, this continuity
offers participants and beneficiaries the
ability to continue current and future care
through those providers with whom they
have built relationships.
As discussed previously in the pream-
ble, one commenter on the 2019 RFI artic-
ulated a concern that the 2015 final rules
may eventually preclude some sponsors
and issuers of grandfathered group health
plans and grandfathered group health in-
surance coverage from being able to make
changes to fixed-amount cost-sharing re-
quirements necessary to maintain a plan’s
HDHP status. For participants and benefi-
ciaries, this would mean they could expe-
rience either substantial changes to their
coverage (and likely premium increases)
or a loss of eligibility to contribute to an
HSA. The Departments expect that, under
the 2015 final rules, there may be limit-
ed circumstances in which grandfathered
group health plans and grandfathered
group health insurance coverage that is an
HDHP (grandfathered HDHP) is unable
to simultaneously maintain its grandfa-
ther status and satisfy the requirements
for HDHPs under section 223(c)(2) of
the Code. To reduce the likelihood of this
potential scenario, these proposed rules
would allow a grandfathered HDHP to
make changes to fixed-amount cost-shar-
ing requirements that otherwise could
cause a loss of grandfather status without
causing a loss of grandfather status, but
only to the extent the increases are nec-
essary to comply with the requirements
for HDHPs under section 223(c)(2) of the
Code.
The Departments are of the view that
providing this flexibility to grandfathered
HDHPs will allow them to preserve their
grandfather status even if they increase
their cost-sharing requirements to meet a
future adjusted minimum annual deduct-
ible requirement under section 223(c)(2)
(A) of the Code beyond the increase that
would be permitted under paragraph (g)
(1) of the 2015 final rules. Under section
223(g) of the Code, the required mini-
mum deductible for an HDHP is adjusted
for cost-of-living based on changes in the
overall economy. Historically, the allowed
increases under the 2015 final rules, which
are based on changes in medical care costs
(medical CPI-U), have exceeded increas-
es based on changes in the overall econo-
my (CPI-U), which are used to adjust the
HDHP minimum deductible. Using ten
years of projections from the President’s
FY 2021 Budget, medical-CPI-U is ex-
pected to grow faster than CPI-U. Further,
because the allowed increases under the
2015 final rules are based on the cumula-
tive effect over a period of years, it is un-
likely that using medical CPI-U to index
deductibles would result in lower deduct-
ibles than using CPI-U as required under
section 223(g) of the Code. Therefore,
the Departments note that, to the extent
these trends continue, it is unlikely that
20
Kaiser Family Foundation, “2010 Employer Health Benefits Survey.” Available at: https://www.kff.org/wp-content/uploads/2013/04/8085.pdf.

Bulletin No. 2020–32 257 August 3, 2020
an increase required under section 223 of
the Code for a plan to remain an HDHP
would exceed the allowed increases under
the 2015 final rules. Furthermore, to the
extent that the revised definition of “max-
imum percentage increase” in these pro-
posed rules would allow the deductible to
grow as fast, or faster, than under the 2015
final rules, grandfathered HDHPs may not
need to avail themselves of the addition-
al flexibility provided in these proposed
rules. Nevertheless, the Departments are
of the view that affording this flexibility
would make the rules more transparent to
sponsors of grandfathered HDHPs. Thus,
the proposed regulations would allow
participants and beneficiaries enrolled in
those plans to maintain their current cov-
erage, continue contributing to any exist-
ing HSA, and potentially realize any re-
duction in premiums that may result from
changes in cost-sharing requirements.
Costs and Transfers
The Departments recognize there may
be costs associated with these proposed
rules that are difficult to quantify giv-
en the lack of information and data. For
example, the Departments do not have
data related to the current annual out-of-
pocket costs for participants and bene-
ficiaries in grandfathered group HDHPs
or other grandfathered group health plans
and grandfathered group health insurance
coverage. The Departments recognize
that as medical care costs increase, some
participants and beneficiaries in grandfa-
thered health plans could face higher out-
of-pocket costs for services that may be
excluded by such plans, but that would be
required or covered by non-grandfathered
group health plans and group health in-
surance coverage subject to PPACA. It
is possible these increased costs could
be (partially) offset by lower premiums
from participation in the grandfathered
plans. Further, participants and beneficia-
ries who would otherwise be covered by a
non-grandfathered plan could potentially
face increases in adverse health outcomes
if they chose to forego treatment because
certain services are not covered by their
grandfathered group plan or grandfa-
thered group health insurance coverage.
The Departments cannot accurately pre-
dict the number of grandfathered health
plans and group health insurance coverage
that would retain their grandfather status
should they choose to avail themselves of
the flexibilities provided in these proposed
rules. The 2019 Employer Health Benefits
Survey reports no significant change from
2018 in the number of firms offering at
least one grandfathered health plan or the
number of covered individuals.
21
A large
change would have indicated that the cur-
rent rules were too restrictive and that a
relaxation of those rules would have a big
effect. The actual small change suggests
the opposite. Therefore, the Departments
do not expect a significant impact on the
number of grandfathered plans or group
health insurance coverage as a result of
these proposed rules.
For those plans that would continue to
maintain their grandfather status as a re-
sult of the flexibilities in these proposed
rules, the participants and beneficiaries
would continue to have coverage and may
experience lower premiums when com-
pared to non-grandfathered group health
plans. Although some participants and
beneficiaries would pay higher cost-shar-
ing amounts, these increased costs may
be partially offset by reduced employee
premiums, and indirectly through wage
adjustments that reflect reduced employer
contributions due to the lower premiums.
In contrast, individuals who have low or
no medical expenses, along with nonpar-
ticipants, would be unlikely to experience
increased cost-sharing amounts and may
benefit from lower employee premiums,
and indirectly through wage adjustments.
The Departments recognize there
would be transfers associated with these
proposed rules that are difficult to quan-
tify given the lack of information and
data. The Departments realize that if plan
sponsors avail themselves of the flexibili-
ties in these proposed rules, some partic-
ipants and beneficiaries of grandfathered
group health plans and grandfathered
group health insurance coverage could
potentially see increases in out-of-pocket
costs depending on the changes made to
their plans. Additionally, participants and
beneficiaries in a grandfathered HDHP
could face increases in the plan’s deduct-
ible if plans increase their fixed-amount
cost-sharing requirements to meet a fu-
ture adjusted minimum annual deduct-
ible requirement beyond the increase
that would be permitted under paragraph
(g)(1). Changes in costs associated with
increased deductibles or other cost shar-
ing would be a transfer from participants
and beneficiaries with high out-of-pocket
costs to participants and beneficiaries with
low or no out-of-pocket costs and to non-
participants, as the related premium re-
ductions could affect wages.
Due to the overall lack of information
and data related to what plan sponsors
would choose to do, the Departments are
unable to accurately determine the over-
all economic impact, but the Departments
anticipate that the overall impact would be
minimal. However, there is a large degree
of uncertainty regarding the effect of the
proposed rules on any potential changes
to cost sharing at the plan level so actual
experience could differ.
Revenue Impact of Proposed Rules
This section of the preamble discusses
the revenue impact of the proposed rules,
considers a variety of approaches that
employers offering grandfathered health
plan coverage might take in the future if
the 2015 final rules are not amended, and
compares the revenue impact of each ap-
proach under the 2015 final rules with the
revenue impact under the proposed rules.
a. Employees who would have Remained
in Grandfathered Plans and Coverage
without the Proposed Rules
If the 2015 final rules are not amended,
some employers might choose to contin-
ue to maintain their grandfathered health
plan coverage. This subsection discusses
the revenue impact that the proposed rules
may have on this group of employers and
employees.
Under the proposed rules, grandfa-
thered group health plans and grand-
fathered group health insurance cov-
erage would be allowed to increase
21
Kaiser Family Foundation, “2019 Employer Health Benefits Survey,” available at https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/.

August 3, 2020 258 Bulletin No. 2020–32
fixed-amount cost-sharing requirements
(such as copayments, deductibles, and
out-of-pocket limits) at a somewhat
higher rate than under the 2015 final
rules, which may result in a premium
reduction (or similar cost reduction for
a self-insured plan). Specifically, for in-
creases in fixed-amount cost sharing on
or after the effective date of these rules,
if finalized, grandfathered group health
plans and grandfathered group health in-
surance coverage could use an alternative
standard for determining the maximum
percentage increase that relies on the
premium adjustment percentage, rather
than medical inflation, to the extent that
it yields a greater result than the current
standard under the 2015 final rules.
The premium adjustment percentage
is estimated to be about three percentage
points higher than medical inflation in
2026, using FY2021 President’s Budget
projections of medical CPI and National
Health Expenditures premium projec-
tions. Therefore, as of that year, fixed-
amount copayments, deductibles, and out-
of-pocket limits could be three percentage
points higher under the proposed rules
than under the 2015 final rules. Howev-
er, a plan that increases fixed-amount cost
sharing to the maximum amount allowed
under the proposed rules is likely to real-
ize only a small reduction in premiums.
This is because plans incur most of their
costs for a relatively small fraction of par-
ticipants–that is, from high-cost individ-
uals. Because high-cost individuals gen-
erally exceed the out-of-pocket limit for
the year, they are only modestly affected
by higher out-of-pocket limits. Low-cost
individuals are more likely to be affected
by an increase in fixed-amount cost shar-
ing, but they incur a small portion of the
overall costs. Therefore, the impact of the
proposed rules for a particular plan will
depend on the parameters of covered ben-
efits under the plan, as well as the distri-
bution of expenditures for the plan partic-
ipants. In addition, increased cost sharing
could result in participants and beneficia-
ries making fewer visits to providers (that
is, lower utilization), which could result
in lower medical costs for some individu-
als, but higher costs for others who delay
important visits. If individuals generally
would forgo relatively unimportant visits,
but continue to go to providers when cru-
cial, premiums could decline even more,
but this outcome is uncertain.
Because of the Federal tax exclusion
for employer-sponsored coverage, a pre-
mium reduction would increase tax reve-
nues due to reduced employer contribu-
tions and employee pre-tax contributions
made through a cafeteria plan. However,
some employees might partially offset
their increases in out-of-pocket payments
through increased pre-tax contributions
to health flexible spending arrangements
(FSAs) or HSAs. Those increases in pre-
tax contributions to health FSAs and
HSAs would reduce tax revenues. There-
fore, the potential increase in tax reve-
nues from premium reductions is affect-
ed by whether employees increase their
contributions to health FSAs and HSAs.
To the extent that employers would have
continued to offer a grandfathered plan
without changes to the 2015 final rules,
under the proposed rules, tax revenues
would be expected to increase slightly
on net as a result of premium reductions.
Further, there would be additional reve-
nue gains to the extent that higher out-
of-pocket payments discourage employ-
ees from continuing participation in the
employer’s plan.
b. Employees who would no Longer have
been Covered by Grandfathered Plans or
Coverage without the Proposed Rules
If the 2015 final rules are not amend-
ed, some employers might choose to
change their insured grandfathered plans
to self-insured, non-grandfathered plans,
rather than continue to comply with the
2015 final rules, which would result in
little, if any, revenue change. Thus, with
respect to these employers, the adoption
of the proposed rules would have little, if
any, revenue effect.
Alternatively, assuming the 2015 final
rules are not amended, an employer might
switch to a fully insured non-grandfa-
thered non-HDHP plan. With respect to
small employers, employees who would
transfer to the non-grandfathered plan
could improve the risk pool or make it
worse. An employer with a healthy pop-
ulation might be more likely to self-in-
sure, whereas a small employer with a less
healthy population might be more likely
to join an insurance pool.
Although the type of benefits cov-
ered in the new, non-grandfathered plans
(whether self-insured or fully insured)
would likely be broader in some ways,
such as for preventive care, the share of
costs covered by the plan would likely
decrease due to higher cost sharing. Pre-
sumably, if the 2015 final rules are not
amended, an employer would not make
the switch from a grandfathered plan to a
non-grandfathered plan unless the overall
cost of providing benefits would decrease,
which would cause some revenue gain.
(Again, though, the revenue gain could
be partially offset by increases in the em-
ployees’ pre-tax contributions to health
FSAs or HSAs.) On the other hand, if the
proposed rules enabled an employer that
otherwise might switch to a non-grand-
fathered plan to retain its grandfathered
plan, this revenue gain would not occur,
resulting in a revenue loss compared to the
status quo under the 2015 final rules. As a
further variation, if the employer retained
its grandfathered plan under the proposed
rules, rather than switching to an HDHP,
the revenue loss would be smaller than
if the employer had switched to a non-
HDHP. Indeed, this could even result in a
revenue gain depending on the magnitude
of tax-preferred contributions that the em-
ployees would have made to HSAs.
Without the change to the 2015 final
rules, some employers might replace their
grandfathered plan with an individual
coverage health reimbursement arrange-
ment (individual coverage HRA). If the
employer contributed a similar dollar
amount to the individual coverage HRA as
it currently does to the grandfathered plan,
the employees’ tax exclusion would be at
least roughly the same as for the grand-
fathered plan. Moreover, the employees
offered the individual coverage HRA
would be as likely to be “firewalled” from
obtaining a premium tax credit as if they
had continued to participate in the grand-
fathered plan. Thus, under this scenario,
there would be very little revenue effect
from the proposed rules.
c. Termination of Employer-Sponsored
Coverage
If the 2015 final rules are not amended,
some employers might drop health cover-
age altogether and opt instead to make an

Bulletin No. 2020–32 259 August 3, 2020
employer shared responsibility payment, if
required under section 4980H of the Code,
which may result in an increase in federal
revenue. In this case, all affected employ-
ees would qualify for a special enrollment
period to enroll in other group coverage,
if available, or individual health insurance
coverage on or off the Exchange. Those
employees with household incomes be-
tween 100-400 percent of the federal
poverty level may qualify for financial
assistance to help pay for their Exchange
coverage and related healthcare expens-
es, which would increase federal outlays,
as discussed further below. Others may
have household incomes too high to be
eligible for a premium tax credit or might
receive a smaller tax subsidy through the
income-related premium tax credit than
through an employer-sponsored health
insurance tax exclusion. Accordingly, if
these employers continued their grand-
fathered plan under the proposed rules,
there may be an associated revenue loss.
Other employees could purchase individ-
ual health insurance coverage, but receive
a premium tax credit that is greater than
the value of the tax exclusion for their cur-
rent employer plans. For this population,
the proposed rules may result in a revenue
gain. However, this is likely a small pop-
ulation for an employer that is currently
offering a grandfathered plan.
Despite the availability of a special en-
rollment period, some affected employees
might forgo enrolling in alternative health
coverage and become uninsured or might
opt instead to purchase short-term, limit-
ed-duration insurance. In this case, these
employees would no longer receive a
tax exclusion for the grandfathered plan,
which along with an employer shared re-
sponsibility payment, if any, may result in
an increase in federal revenue. However,
if these employees were to remain cov-
ered under a grandfathered plan as a result
of this proposed rule, there may be a loss
in federal revenue for this group.
Overall, there are a number of poten-
tial revenue effects of the proposed rules,
some of which could offset each other.
Additionally, there is a large degree of
uncertainty, including uncertainty with re-
gard to how many plans would continue as
grandfathered plans if the 2015 final rules
are not amended, what alternatives would
be chosen by the employers who do not
keep grandfathered plans, and how many
plans would make plan design changes as
a result of the proposed rules. As a result,
it is unclear whether these effects in the
aggregate would result in a revenue gain
or revenue loss. Because the employer
market is so large, even a small percentage
change to aggregate premiums can result
in large revenue changes. Nevertheless,
the Departments are of the view that over-
all net effects are likely to be relatively
small. The Departments seek comments
on the impact estimates in this analysis.
Regulatory Review Costs
Affected entities will need to under-
stand the requirements of these proposed
rules, if finalized, before they can avail
themselves of any of the proposed flexi-
bilities. Sponsors and issuers of grandfa-
thered group health plan coverage would
be responsible for ensuring compliance
with these proposed rules should they seek
to make changes to their plans’ cost-shar-
ing requirements. The Departments esti-
mate the burden for the regulatory review
to be incurred by the 546,234 grandfa-
thered plan sponsors and issuers of grand-
fathered group health insurance coverage.
If regulations impose administrative
costs on private entities, such as the time
needed to read and interpret these pro-
posed rules, if finalized, the Departments
should estimate the cost associated with
regulatory review. Due to the uncertainty
involved with accurately quantifying the
number of entities that will review and
interpret these proposed rules, the De-
partments assume that the total number of
grandfathered group health plan coverage
sponsors and issuers that would be able to
avail themselves and comply with these
proposed rules would be a fair estimate of
the number of entities affected.
The Departments acknowledge that
this assumption may understate or over-
state the costs of reviewing these proposed
rules. It is possible that not all affected en-
tities will review these rules, if finalized,
in detail, and that others may seek the
assistance of outside counsel to read and
interpret the rules. For example, firms pro-
viding or sponsoring a grandfathered plan
may not read the rules, if finalized, but
might rely upon the issuer or a third-par-
ty administrator (TPA), if self-funded,
to read and interpret the rules. For these
reasons, the Departments are of the view
that the number of grandfathered group
health plan coverage sponsors and issuers
would be a fair estimate of the number of
reviewers of these proposed rules. The
Departments welcome any comments on
the approach in estimating the number of
affected entities that will review and inter-
pret these proposed rules, if finalized.
Using the wage information from the
Bureau of Labor and Statistics (BLS) for
a Compensation and Benefits Manager
(Code 11-3141), the Departments esti-
mate that the cost of reviewing this rule is
$127.74 per hour, including overhead and
fringe benefits.
22
Assuming an average
reading speed, the Departments estimate
that it would take approximately 0.5 hour
for the staff to review and interpret these
proposed rules, if finalized; therefore, the
Departments estimate that the cost of re-
viewing and interpreting these proposed
rules, if finalized, for each grandfathered
group health plan coverage sponsor and
issuer is approximately $63.87. Thus, the
Departments estimate that the overall cost
for the estimated 546,234 grandfathered
group health plan coverage sponsors and
issuers would be $34,887,965.58 ($63.87
*546,234 total number of estimated grand-
fathered plan sponsors and issuers).
23
D. Regulatory Alternatives Considered
In developing the policies contained
in these proposed rules, the Departments
considered alternatives to the presented
proposals. In the following paragraphs,
22
Wage information is available at https://www.bls.gov/oes/current/oes_nat.htm. Hourly wage rate is determining by multiplying the mean hourly wage by 100 percent to account for overhead
and fringe benefits. The mean hourly wage for a Compensation and Benefit Manager (Code 11-3141) is $63.38, when multiplied by 100 percent results in a total adjusted hourly wage of
$127.74.
23
Total number of grandfathered plan sponsors and issuers of grandfathered group health insurance coverage, discussed earlier in the preamble, was derived from the total number of ERISA
covered plan sponsors multiplied by the percentage of entities offering grandfathered health plans (2.4 million * 0.22 = 527,000), the number of state and local governments multiplied by the
percentage of entities offering grandfathered health plans (83,500 * 0.22 = 18,400), and the 834 issuers offering at least one grandfathered health plan (527,000 + 18,400 + 843 = 546,234).

August 3, 2020 260 Bulletin No. 2020–32
the Departments discuss the key regulato-
ry alternatives considered.
The Departments considered whether
to modify each of the six types of changes,
measured from March 23, 2010, that cause
a group health plan or health insurance
coverage to cease to be grandfathered. To
provide more flexibility regarding chang-
es to fixed cost-sharing requirements, the
Departments considered revising the defi-
nition of maximum percentage increase
to increase the allowed percentage points
that are added to medical inflation. How-
ever, the Departments are of the view
that the proposed policy allows for the
desired flexibility, while better reflecting
underlying costs for grandfathered group
health plans and group health insurance
coverage. The Departments acknowledge
that the premium adjustment percentage,
which the Departments propose to incor-
porate into the definition of “maximum
percentage increase,” reflects the changes
in premiums in both the individual and
group market, and that individual mar-
ket premiums have increased faster than
premiums in the group market. Due to the
comparative sizes of the individual and
group markets, however, the historical-
ly faster growth in the individual market
has had a minimal impact on the premium
adjustment percentage index. Therefore,
the Departments believe that the premium
adjustment percentage is an appropriate
measure to incorporate into the definition
of “maximum percentage increase.”
Another option the Departments con-
sidered was allowing a decrease in contri-
bution rates by an employer or employee
organization without triggering a loss of
grandfather status. Under the 2015 final
rules, an employer or employee organi-
zation cannot decrease contribution rates
based on cost of coverage toward the
cost of any tier of coverage for any class
of similarly situated individuals by more
than five percentage points below the con-
tribution rate for the coverage period that
included March 23, 2010 without losing
grandfather status. The Departments con-
sidered permitting group health plans and
health insurance coverage with grandfa-
ther status to decrease the contribution
rates by more than five percentage points.
This would increase employer flexibility,
but the Departments were concerned that
a decrease in the contribution rate could
change the plan or coverage to such an
extent that the plan or coverage could
not reasonably be described as being the
same plan or coverage that was offered on
March 23, 2010. As a result, this option
was not included in the proposed rules.
Another option the Departments consid-
ered was allowing a change to annual dol-
lar limits for a group health plan or health
insurance coverage without triggering a
loss of grandfather status. Under the 2015
final rules, a group health plan or group
health insurance coverage that did not
have an annual dollar limit on March 23,
2010, may not establish an annual dollar
limit for any individual, whether provided
in-network or out-of-network, without re-
linquishing grandfather status. If the plan
or coverage had an annual dollar limit on
March 23, 2010, it may not decrease the
limit. Although for plan years beginning on
or after January 1, 2014, group health plans
and health insurance issuers generally may
no longer impose annual or lifetime dollar
limits on essential health benefits, permit-
ting changes to annual dollar limits on ben-
efits that are not essential health benefits
may still represent a significant change to
participants and beneficiaries who need the
benefits on which a limit is applied. There-
fore, this option was not included in the
proposed rules.
The Departments considered options
to offset cost-sharing requirement chang-
es by allowing sponsors of group health
plans and issuers of group health insur-
ance coverage to increase different types
of cost-sharing requirements as long as
any increase is offset by lowering anoth-
er cost-sharing requirement to preserve
the plan’s actuarial value. As discussed
in previous rulemaking, however, an ac-
tuarial equivalency standard would allow
a plan or coverage to make fundamental
changes to the benefit design, potentially
conflicting with the goal of allowing par-
ticipants and beneficiaries to retain health
plans they like, and still retain grandfather
status.
24
There would also be significant
complexity involved in defining and de-
termining actuarial value for these pur-
poses, as well as significant burdens as-
sociated with administering and ensuring
compliance with such rules. Therefore,
the Departments did not include this op-
tion in the proposed rules.
The Departments considered changing
the date of measurement for calculating
whether changes to group health plans or
health insurance coverage will cause a loss
of grandfather status. For example, instead
of looking at the cumulative change from
March 23, 2010, the rules could measure
the annual increases, starting from the ef-
fective date of the proposed rules, if final-
ized. However, the Departments conclud-
ed that this option could limit flexibility
for some employers. For example, some
employers might want to keep the terms
of the plan the same for a few years and
then make a more significant change later.
The Departments also considered mak-
ing changes to the 2015 final rules to en-
courage more cost-effective care. One
option the Departments considered to en-
courage cost-effective care was allowing
greater cost sharing for brand name drugs
if a generic becomes available. Howev-
er, the Departments decided not to make
this change because allowing greater
cost-sharing for brand name drugs when
a generic becomes available does not re-
sult in loss of grandfather status under
the 2015 final rules.
25
Another option the
Departments considered was allowing
unlimited changes to cost sharing for out-
of-network benefits. However, the Depart-
ments are concerned that unlimited discre-
tion to change cost-sharing requirements
for out-of-network benefits could result
in changes to plans of such a magnitude
that they no longer resemble the plan as
it existed as of March 23, 2010. Addi-
tionally, the Departments decided that the
proposal to change the applicable index
for medical inflation provides sufficient
flexibility for fixed cost-sharing require-
ments. This option would give flexibility
to grandfathered plans with respect to all
fixed-amount cost-sharing requirements,
including for out-of-network benefits.
E. Collection of Information
Requirements
These proposed rules do not impose
new information collection require-
ments; that is, reporting, recordkeeping,
24
75 FR 34538, 34547 (June 17, 2010).
25
80 FR 72192, 72197, 72198 (Nov. 18, 2015).

Bulletin No. 2020–32 261 August 3, 2020
or third-party disclosure requirements.
Consequently, there is no need for OMB
review under the authority of the Paper-
work Reduction Act of 1995 (44 U.S.C.
3501 et seq.). Though the proposed rules
do not contain any new information col-
lection requirements, the Departments are
continuing the current requirements that
grandfathered plans maintain records doc-
umenting the terms of the plan in effect
on March 23, 2010, include a statement
in any summary of benefits that the plan
or coverage believes it is grandfathered
health plan coverage and provide contact
information for participants to direct ques-
tions and complaints. Additionally, the
Departments are continuing the require-
ment that a grandfathered group health
plan that is changing health insurance is-
suers is required to provide the succeed-
ing health insurance issuer documenta-
tion of plan terms under the prior health
insurance coverage sufficient to make
a determination whether the standards
of paragraph 26 CFR 54.9815-1251(g)
(1), 29 CFR 2590.715-1251(g)(1) and 45
CFR 147.140(g)(1) are exceeded and that
insured group health plans (or multiem-
ployer plans) that are grandfathered plans
are required to notify the issuer (or mul-
tiemployer plan) if the contribution rate
changes at any point during the plan year.
The Departments do not anticipate that
the proposed provisions would make a
substantive or material modification to the
collections currently approved under the
collection of information OMB control
number 0938-1093 (CMS-10325), OMB
control number 1210-0140 (DOL), and
OMB control number 1545-2178 (Depart-
ment of the Treasury).
F. Regulatory Flexibility Act
The Regulatory Flexibility Act, (5
U.S.C. 601, et seq.), requires agencies
to prepare an initial regulatory flexibility
analysis to describe the impact of pro-
posed rules on small entities, unless the
head of the agency can certify that the
rules would not have a significant eco-
nomic impact on a substantial number of
small entities. The RFA generally defines
a “small entity” as (1) a proprietary firm
meeting the size standards of the Small
Business Administration (SBA), (2) a not-
for-profit organization that is not domi-
nant in its field, or (3) a small government
jurisdiction with a population of less than
50,000. States and individuals are not in-
cluded in the definition of “small entity.”
HHS uses a change in revenues of more
than three to five percent as its measure of
significant economic impact on a substan-
tial number of small entities.
These proposed rules would amend
the 2015 final rules to allow greater flex-
ibility for grandfathered group health
plans and issuers of grandfathered group
health insurance coverage. Specifical-
ly, the proposed rules would specify that
grandfathered group health plans that
are HDHPs may make changes to fixed-
amount cost-sharing requirements that
would otherwise cause a loss of grandfa-
ther status without causing a loss of grand-
father status, but only to the extent those
changes are necessary to comply with the
requirements for being HDHPs under sec-
tion 223(c)(2) of the Code. The proposed
rules would also include a revised defini-
tion of “maximum percentage increase”
that would provide an alternative method
of determining the “maximum percentage
increase” that is based on the premium ad-
justment percentage.
G. Impact of Regulations on Small
Business – Department of Health and
Human Services and the Department of
Labor
The Departments are of the view that
health insurance issuers would be clas-
sified under the North American Indus-
try Classification System code 524114
(Direct Health and Medical Insurance
Carriers). According to SBA size stan-
dards, entities with average annual re-
ceipts of $41.5 million or less would be
considered small entities for these North
American Industry Classification System
codes. Issuers could possibly be classified
in 621491 (HMO Medical Centers) and,
if this is the case, the SBA size standard
would be $35 million or less.
26
Few, if
any, insurance companies underwriting
comprehensive health insurance policies
(in contrast, for example, to travel insur-
ance policies or dental discount policies)
fall below these size thresholds. Based
on data from MLR annual report submis-
sions for the 2018 MLR reporting year,
approximately 84 out of 498 issuers of
health insurance coverage nationwide had
total premium revenue of $41.5 million
or less.
27
This estimate may overstate the
actual number of small health insurance
companies that may be affected, since
over 72 percent of these small companies
belong to larger holding groups. Most, if
not all, of these small companies are like-
ly to have non-health lines of business
that will result in their revenues exceed-
ing $41.5 million, and it is likely not all
of these companies offer grandfathered
plans. The Departments do not expect any
of these 84 potentially small entities to
experience a change in revenues of more
than three to five percent as a result of
these proposed rules. Therefore, the De-
partments do not expect the provisions of
these proposed rules to affect a substan-
tial number of small entities. Due to the
lack of knowledge regarding what small
entities may decide to do with regard to
the provisions proposed in these proposed
rules, the Departments are not able to ac-
curately ascertain the economic effects on
small entities. However, the Departments
believe that the flexibilities provided for
in these proposed rules would result in
overall benefits for small entities by al-
lowing them to make changes to certain
cost-sharing requirements within limits
and maintain their current grandfathered
group health plans. The Departments seek
comment on ways that the proposed rules
may impose additional costs and burdens
on small entities.
For purposes of analysis under the
RFA, the Employee Benefits Security Ad-
ministration (EBSA) continues to consid-
er a small entity to be an employee benefit
plan with fewer than 100 participants.
28

The basis of this definition is found in sec-
26
“Table of Small Business Size Standards Matched to North American Industry Classification System Codes.” U.S. Small Business Administration, available at https://www.sba.gov/sites/
default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf.
27
“Medical Loss Ratio Data and System Resources.” CCIIO, available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
28
The Department of Labor consulted with the Small Business Administration in making this determination as required by 5 U.S.C. 603(c) and 13 CFR 121.903(c).

August 3, 2020 262 Bulletin No. 2020–32
tion 104(a)(2) of ERISA, which permits
the Secretary of Labor to prescribe sim-
plified annual reports for pension plans
that cover fewer than 100 participants.
Under section 104(a)(3), the Secretary of
Labor may also provide for exemptions
or simplified annual reporting and disclo-
sure for welfare benefit plans. Pursuant
to the authority of section 104(a)(3), the
Department of Labor has previously is-
sued at 29 CFR 2520.104–20, 2520.104–
21, 2520.104–41, 2520.104–46, and
2520.104b–10 certain simplified reporting
provisions and limited exemptions from
reporting and disclosure requirements for
small plans, including unfunded or in-
sured welfare plans covering fewer than
100 participants and satisfying certain
other requirements. Further, while some
large employers may have small plans, in
general small employers maintain most
small plans. Thus, EBSA believes that as-
sessing the impact of these proposed rules
on small plans is an appropriate substitute
for evaluating the effect on small entities.
The definition of small entity considered
appropriate for this purpose differs, how-
ever, from a definition of small business
that is based on size standards promul-
gated by the Small Business Administra-
tion (SBA) (13 CFR 121.201) pursuant
to the Small Business Act (15 U.S.C. 631
et seq.). Therefore, EBSA requests com-
ments on the appropriateness of the size
standard used in evaluating the impact of
these proposed rules on small entities.
H. Impact of Regulations on Small
Business – Department of the Treasury
Pursuant to section 7805(f) of the
Code, these proposed rules have been sub-
mitted to the Chief Counsel for Advocacy
of the SBA for comment on their impact
on small business.
I. Effects on small rural hospitals
Section 1102(b) of the Social Securi-
ty Act (SSA) (42 U.S.C. 1302) requires
agencies to prepare a regulatory impact
analysis if a rule may have a significant
impact on the operations of a substan-
tial number of small rural hospitals. This
analysis must conform to the provisions
of section 603 of the RFA. For purposes
of section 1102(b) of the SSA, the HHS
defines a small rural hospital as a hospi-
tal that is located outside of a metropoli-
tan statistical area and has fewer than 100
beds. These proposed rules would not af-
fect small rural hospitals. Therefore, the
Departments have determined that these
proposed rules would not have a signifi-
cant impact on the operations of a substan-
tial number of small rural hospitals.
J. Unfunded Mandates
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain actions before
issuing a proposed rule that includes any
federal mandate that may result in expen-
ditures in any one year by state, local, or
tribal governments, in the aggregate, or by
the private sector, of $100 million in 1995
dollars, updated annually for inflation.
In 2020, that threshold is approximately
$156 million.
While the Departments recognize that
some state, local, and tribal governments
may sponsor grandfathered health plan
coverage, the Departments do not expect
any state, local, or tribal government to
incur any additional costs associated with
these proposed rules, if finalized. The De-
partments estimate that any costs associ-
ated with the proposed rules if finalized
would not exceed the $156 million thresh-
old. Thus, the Departments conclude that
these proposed rules would not impose an
unfunded mandate on state, local, or tribal
governments or the private sector.
K. Federalism
Executive Order 13132 establishes
certain requirements that an agency must
meet when it issues a proposed rule that
imposes substantial direct costs on state
and local governments, preempts state
law, or otherwise has federalism implica-
tions. Federal agencies promulgating reg-
ulations that have federalism implications
must consult with state and local officials
and describe the extent of their consulta-
tion and the nature of the concerns of state
and local officials in the preamble to the
regulation.
In the Departments’ view, these pro-
posed rules do not have any federal-
ism implications. They simply provide
grandfathered plan sponsors and issuers
more flexibility to increase fixed-amount
cost-sharing requirements and to make
changes to fixed-amount cost-sharing re-
quirements in grandfathered group health
plans and grandfathered group health in-
surance coverage that are HDHPs to the
extent those changes are necessary to com-
ply with the requirements for HDHPs un-
der section 223(c)(2) of the Code, without
causing the plan or coverage to relinquish
its grandfather status. The Departments
recognize that some state, local, and tribal
governments may sponsor grandfathered
health plan coverage. The proposed rules
would provide these entities with addi-
tional flexibility.
In general, through section 514, ER-
ISA supersedes state laws to the extent
that they relate to any covered employee
benefit plan, and preserves state laws that
regulate insurance, banking, or securities.
While ERISA prohibits states from regu-
lating a plan as an insurance or investment
company or bank, the preemption provi-
sions of section 731 of ERISA and section
2724 of the PHS Act (implemented in 29
CFR 2590.731(a) and 45 CFR 146.143(a))
apply so that the requirements in title XX-
VII of the PHS Act (including those en-
acted by PPACA) are not to be “construed
to supersede any provision of state law
which establishes, implements, or contin-
ues in effect any standard or requirement
solely relating to health insurance issuers
in connection with group health insurance
coverage except to the extent that such
standard or requirement prevents the ap-
plication of a “requirement of a federal
standard.” The conference report accom-
panying HIPAA indicates that this is in-
tended to be the “narrowest” preemption
of states laws (see House Conf. Rep. No.
104– 736, at 205, reprinted in 1996 U.S.
Code Cong. & Admin. News 2018). States
may continue to apply state law require-
ments to health insurance issuers except to
the extent that such requirements prevent
the application of PHS Act requirements
that are the subject of this rulemaking. Ac-
cordingly, states have significant latitude
to impose requirements on health insur-
ance issuers that are more restrictive than
the federal law.
In compliance with the requirement
of Executive Order 13132 that agencies
examine closely any policies that may

Bulletin No. 2020–32 263 August 3, 2020
have federalism implications or limit the
policy making discretion of the states,
the Departments have engaged in efforts
to consult with and work cooperative-
ly with affected states, including par-
ticipating in conference calls with and
attending conferences of the National
Association of Insurance Commission-
ers, and consulting with state insurance
officials on an individual basis. While
developing these proposed rules, the
Departments attempted to balance the
states’ interests in regulating health in-
surance issuers with Congress’ intent to
provide uniform minimum protections
to consumers in every state. By doing
so, it is the Departments’ view that they
have complied with the requirements of
Executive Order 13132.
Pursuant to the requirements set forth
in section 8(a) of Executive Order 13132,
and by the signatures affixed to these pro-
posed rules, the Departments certify that
the Department of Treasury, Employee
Benefits Security Administration, and
the Centers for Medicare & Medicaid
Services have complied with the require-
ments of Executive Order 13132 for the
attached proposed rules in a meaningful
and timely manner.
L. Reducing Regulation and Controlling
Regulatory Costs
Executive Order 13771, entitled “Re-
ducing Regulation and Controlling Regu-
latory Costs,” was issued on January 30,
2017, and requires that the costs associat-
ed with significant new regulations “shall,
to the extent permitted by law, be offset by
the elimination of existing costs associat-
ed with at least two prior regulations.” The
designation of these proposed rules under
Executive Order 13771—as a regulatory
action, a deregulatory action, or neither—
will be informed by comments received.
V. Statutory Authority
The Department of the Treasury regu-
lations are proposed to be adopted pursu-
ant to the authority contained in sections
7805 and 9833 of the Code.
The Department of Labor regulations
are proposed to be adopted pursuant
to the authority contained in 29 U.S.C.
1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b,
1191, 1191a, 1191b, and 1191c; section
101(g), Public Law 104-191, 110 Stat.
1936; section 401(b), Public Law 105-
200, 112 Stat. 645 (42 U.S.C. 651 note);
section 512(d), Public Law 110-343,
122 Stat. 3881; section 1001, 1201, and
1562(e), Public Law 111-148, 124 Stat.
119, as amended by Public Law 111-152,
124 Stat. 1029; Secretary of Labor’s Or-
der 6-2009, 74 FR 21524 (May 7, 2009).
The Department of Health and Hu-
man Services regulations are proposed
to be adopted pursuant to the authority
contained in sections 2701 through 2763,
2791, and 2792 of the PHS Act (42 U.S.C.
300gg through 300gg-63, 300gg-91, and
300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health in-
surance, Pensions, Reporting and record-
keeping requirements. 26 CFR Part 602
Reporting and recordkeeping require-
ments.
29 CFR Part 2590
Continuation coverage, Disclosure,
Employee benefit plans, Group health
plans, Health care, Health insurance,
Medical child support, Reporting and re-
cordkeeping requirements.
45 CFR Part 147
Health care, Health insurance, Report-
ing and recordkeeping requirements, and
State regulation of health insurance.
Sunita Lough
_______________________________
Deputy Commissioner for Services
and Enforcement, Internal Revenue
Service
Signed at Washington DC, this 6th day of
July, 2020.
_______________________________
Jeanne Klinefelter Wilson
Acting Assistant Secretary
Employee Benefits Security
Administration
U.S. Department of Labor
Dated: July 1, 2020.
_______________________________
Seema Verma,
Administrator,
Centers for Medicare & Medicaid
Services.
Dated: July 6, 2020.
_______________________________
Alex M. Azar II,
Secretary,
Department of Health and Human
Services.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
Amendments to the Regulations
Accordingly, the Internal Revenue Ser-
vice, Department of the Treasury, propos-
es to amend 26 CFR part 54 as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation
for part 54 continues to read, in part, as
follows:
Authority: 26 U.S.C. 7805.
* * * * *
Par. 2. Section 54.9815-1251, as
amended:
a. By revising the first sentence of para-
graph (g)(1) introductory text;
b. By revising paragraphs (g)(1)(iii), (g)
(1)(iv)(A) and (B), and (g)(1)(v);
c. By redesignating paragraphs (g)(3)
and (4) as paragraphs (g)(4) and (5);
d. By adding a new paragraph (g)(3);
e. By revising newly redesignated para-
graphs (g)(4)(i) and (ii);
f. In newly redesignated paragraph (g)
(5), by revising Examples 3 and 4;
g. In newly redesignated paragraph (g)
(5), by redesignating Examples 5
through 9 as Examples 6 through 10;
h. In newly redesignated paragraph (g)
(5), by adding a new Example 5;

August 3, 2020 264 Bulletin No. 2020–32
i. In newly redesignated paragraph (g)
(5), by revising newly redesignated
Examples 6 through 10;
j. In newly redesignated paragraph (g)
(5), by adding Example 11.
The revisions and additions read as fol-
lows:
§ 54.9815-1251 Preservation of right
to maintain existing coverage.
* * * * *
(g) * * *
(1) * * * Subject to paragraphs (g)(2)
and (3) of this section, the rules of this
paragraph (g)(1) describe situations in
which a group health plan or health in-
surance coverage ceases to be a grandfa-
thered health plan. * * *
* * * * *
(iii) Increase in a fixed-amount
cost-sharing requirement other than a co-
payment. Any increase in a fixed-amount
cost-sharing requirement other than a
copayment (for example, deductible or
out-of-pocket limit), determined as of
the effective date of the increase, causes
a group health plan or health insurance
coverage to cease to be a grandfathered
health plan, if the total percentage in-
crease in the cost-sharing requirement
measured from March 23, 2010 exceeds
the maximum percentage increase (as de-
fined in paragraph (g)(4)(ii) of this sec-
tion).
(iv) * * *
(A) An amount equal to $5 increased
by medical inflation, as defined in para-
graph (g)(4)(i) of this section (that is, $5
times medical inflation, plus $5), or
(B) The maximum percentage increase
(as defined in paragraph (g)(4)(ii) of this
section), determined by expressing the
total increase in the copayment as a per-
centage.
(v) Decrease in contribution rate by
employers and employee organizations—
(A) Contribution rate based on cost of
coverage. A group health plan or group
health insurance coverage ceases to be a
grandfathered health plan if the employ-
er or employee organization decreases its
contribution rate based on cost of cover-
age (as defined in paragraph (g)(4)(iii)
(A) of this section) towards the cost of
any tier of coverage for any class of simi-
larly situated individuals (as described in
§54.9802(d)) by more than 5 percentage
points below the contribution rate for the
coverage period that includes March 23,
2010.
(B) Contribution rate based on a for-
mula. A group health plan or group health
insurance coverage ceases to be a grandfa-
thered health plan if the employer or em-
ployee organization decreases its contri-
bution rate based on a formula (as defined
in paragraph (g)(4)(iii)(B) of this section)
towards the cost of any tier of coverage
for any class of similarly situated indi-
viduals (as described in §54.9802(d)) by
more than 5 percent below the contribu-
tion rate for the coverage period that in-
cludes March 23, 2010.
* * * * *
(3) Special rule for certain grandfa-
thered high deductible health plans. With
respect to a grandfathered group health
plan or group health insurance coverage
that is a high deductible health plan within
the meaning of section 223(c)(2), increas-
es to fixed-amount cost-sharing require-
ments that otherwise would cause a loss of
grandfather status will not cause the plan
or coverage to relinquish its grandfather
status, but only to the extent such increas-
es are necessary to maintain its status as a
high deductible health plan under section
223(c)(2)(A).
(4) * * *
(i) Medical inflation defined. For pur-
poses of this paragraph (g), the term med-
ical inflation means the increase since
March 2010 in the overall medical care
component of the Consumer Price Index
for All Urban Consumers (CPI-U) (unad-
justed) published by the Department of
Labor using the 1982-1984 base of 100.
For this purpose, the increase in the over-
all medical care component is computed
by subtracting 387.142 (the overall med-
ical care component of the CPI-U (unad-
justed) published by the Department of
Labor for March 2010, using the 1982-
1984 base of 100) from the index amount
for any month in the 12 months before the
new change is to take effect and then di-
viding that amount by 387.142.
(ii) Maximum percentage increase de-
fined. For purposes of this paragraph (g),
the term maximum percentage increase
means:
(A) With respect to increases for a
group health plan and group health insur-
ance coverage made effective on or after
March 23, 2010, and before [the effective
date of final rule], medical inflation (as
defined in paragraph (g)(4)(i) of this sec-
tion), expressed as a percentage, plus 15
percentage points; and
(B) With respect to increases for a
group health plan and group health insur-
ance coverage made effective on or after
[effective date of final rule], the greater of:
(1) Medical inflation (as defined in
paragraph (g)(4)(i) of this section), ex-
pressed as a percentage, plus 15 percent-
age points; or
(2) The portion of the premium ad-
justment percentage, as defined in 45
CFR 156.130(e), that reflects the relative
change between 2013 and the calendar
year prior to the effective date of the in-
crease (that is, the premium adjustment
percentage minus 1), expressed as a per-
centage, plus 15 percentage points.
* * * * *
(5) * * *
Example 3. (i) Facts. On March 23, 2010, a
grandfathered group health plan has a copayment re-
quirement of $30 per office visit for specialists. The
plan is subsequently amended to increase the copay-
ment requirement to $40, effective before [effective
date of final rule]. Within the 12-month period before
the $40 copayment takes effect, the greatest value of
the overall medical care component of the CPI-U
(unadjusted) is 475.
(ii) Conclusion. In this Example 3, the increase in
the copayment from $30 to $40, expressed as a per-
centage, is 33.33% (40−30 = 10; 10 ÷ 30 = 0.3333;
0.3333 = 33.33%). Medical inflation (as defined in
paragraph (g)(4)(i) of this section) from March 2010
is 0.2269 (475−387.142 = 87.858; 87.858 ÷ 387.142
= 0.2269). The maximum percentage increase per-
mitted is 37.69% (0.2269 = 22.69%; 22.69% +
15% = 37.69%). Because 33.33% does not exceed
37.69%, the change in the copayment requirement
at that time does not cause the plan to cease to be a
grandfathered health plan.
Example 4. (i) Facts. Same facts as Example 3,
except the grandfathered group health plan subse-
quently increases the $40 copayment requirement to
$45 for a later plan year, effective before [effective
date of final rule]. Within the 12-month period before
the $45 copayment takes effect, the greatest value of
the overall medical care component of the CPI-U
(unadjusted) is 485.
(ii) Conclusion. In this Example 4, the increase
in the copayment from $30 (the copayment that was
in effect on March 23, 2010) to $45, expressed as
a percentage, is 50% (45−30 = 15; 15 ÷ 30 = 0.5;
0.5 = 50%). Medical inflation (as defined in para-
graph (g)(4)(i) of this section) from March 2010 is
0.2527 (485−387.142 = 97.858; 97.858 ÷ 387.142
= 0.2527). The increase that would cause a plan to
cease to be a grandfathered health plan under para-
graph (g)(1)(iv) of this section is the greater of the
maximum percentage increase of 40.27% (0.2527 =
25.27%; 25.27% + 15% = 40.27%), or $6.26 (5 ×
0.2527 = $1.26; $1.26 + $5 = $6.26). Because 50%

Bulletin No. 2020–32 265 August 3, 2020
exceeds 40.27% and $15 exceeds $6.26, the change
in the copayment requirement at that time causes the
plan to cease to be a grandfathered health plan.
Example 5. (i) Facts. Same facts as Example 4,
except the grandfathered group health plan increas-
es the copayment requirement to $45, effective after
[effective date of final rule]. The greatest value of the
overall medical care component of the CPI-U (unad-
justed) in the preceding 12-month period is still 485.
In the calendar year that includes the effective date of
the increase, the applicable portion of the premium
adjustment percentage is 36%.
(ii) Conclusion. In this Example 5, the grand-
fathered health plan may increase the copayment
by the greater of: medical inflation, expressed as a
percentage, plus 15 percentage points; or the appli-
cable portion of the premium adjustment percent-
age for the calendar year that includes the effective
date of the increase, plus 15 percentage points. The
latter amount is greater because it results in a 51%
maximum percentage increase (36% + 15% = 51%)
and, as demonstrated in Example 4, determining the
maximum percentage increase using medical infla-
tion yields a result of 40.27%. The increase in the co-
payment, expressed as a percentage, is 50% (45−30
= 15; 15 ÷ 30 = 0.5; 0.5 = 50%). Because the 50%
increase in the copayment is less than the 51% max-
imum percentage increase, the change in the copay-
ment requirement at that time does not cause the plan
to cease to be a grandfathered health plan.
Example 6. (i) Facts. On March 23, 2010, a
grandfathered group health plan has a copayment of
$10 per office visit for primary care providers. The
plan is subsequently amended to increase the copay-
ment requirement to $15, effective before [effective
date of final rule]. Within the 12-month period before
the $15 copayment takes effect, the greatest value of
the overall medical care component of the CPI-U
(unadjusted) is 415.
(ii) Conclusion. In this Example 6, the increase
in the copayment, expressed as a percentage, is 50%
(15−10 = 5; 5 ÷ 10 = 0.5; 0.5 = 50%). Medical in-
flation (as defined in paragraph (g)(4)(i) of this sec-
tion) from March 2010 is 0.0720 (415.0−387.142 =
27.858; 27.858 ÷ 387.142 = 0.0720). The increase
that would cause a group plan to cease to be a grand-
fathered health plan under paragraph (g)(1)(iv) of
this section is the greater of the maximum percentage
increase of 22.20% (0.0720 = 7.20%; 7.20% + 15%
= 22.20%), or $5.36 ($5 × 0.0720 = $0.36; $0.36 +
$5 = $5.36). The $5 increase in copayment in this
Example 6 would not cause the plan to cease to be
a grandfathered health plan pursuant to paragraph
(g)(1)(iv) of this section, which would permit an in-
crease in the copayment of up to $5.36.
Example 7. (i) Facts. The same facts as Exam-
ple 6, except on March 23, 2010, the grandfathered
health plan has no copayment ($0) for office visits
for primary care providers. The plan is subsequently,
amended to increase the copayment requirement to
$5, effective before [effective date of final rule].
(ii) Conclusion. In this Example 7, medical in-
flation (as defined in paragraph (g)(4)(i) of this sec-
tion) from March 2010 is 0.0720 (415.0−387.142 =
27.858; 27.858 ÷ 387.142 = 0.0720). The increase
that would cause a plan to cease to be a grandfa-
thered health plan under paragraph (g)(1)(iv)(A) of
this section is $5.36 ($5 × 0.0720 = $0.36; $0.36 +
$5 = $5.36). The $5 increase in copayment in this Ex-
ample 7 is less than the amount calculated pursuant
to paragraph (g)(1)(iv)(A) of this section of $5.36.
Thus, the $5 increase in copayment does not cause
the plan to cease to be a grandfathered health plan.
Example 8. (i) Facts. On March 23, 2010, a
self-insured group health plan provides two tiers of
coverage—self-only and family. The employer con-
tributes 80% of the total cost of coverage for self-on-
ly and 60% of the total cost of coverage for family.
Subsequently, the employer reduces the contribution
to 50% for family coverage, but keeps the same con-
tribution rate for self-only coverage.
(ii) Conclusion. In this Example 8, the decrease
of 10 percentage points for family coverage in the
contribution rate based on cost of coverage causes
the plan to cease to be a grandfathered health plan.
The fact that the contribution rate for self-only cov-
erage remains the same does not change the result.
Example 9. (i) Facts. On March 23, 2010, a
self-insured grandfathered health plan has a COBRA
premium for the 2010 plan year of $5,000 for self-on-
ly coverage and $12,000 for family coverage. The
required employee contribution for the coverage is
$1,000 for self-only coverage and $4,000 for family
coverage. Thus, the contribution rate based on cost of
coverage for 2010 is 80% ((5,000−1,000)/5,000) for
self-only coverage and 67% ((12,000−4,000)/12,000)
for family coverage. For a subsequent plan year, the
COBRA premium is $6,000 for self-only coverage
and $15,000 for family coverage. The employee con-
tributions for that plan year are $1,200 for self-only
coverage and $5,000 for family coverage. Thus, the
contribution rate based on cost of coverage is 80%
((6,000−1,200)/6,000) for self-only coverage and
67% ((15,000−5,000)/15,000) for family coverage.
(ii) Conclusion. In this Example 9, because there
is no change in the contribution rate based on cost
of coverage, the plan retains its status as a grandfa-
thered health plan. The result would be the same if
all or part of the employee contribution was made
pre-tax through a cafeteria plan under section 125.
Example 10. (i) Facts. A group health plan not
maintained pursuant to a collective bargaining agree-
ment offers three benefit packages on March 23,
2010. Option F is a self-insured option. Options G
and H are insured options. Beginning July 1, 2013,
the plan increases coinsurance under Option H from
10% to 15%.
(ii) Conclusion. In this Example 10, the cover-
age under Option H is not grandfathered health plan
coverage as of July 1, 2013, consistent with the rule
in paragraph (g)(1)(ii) of this section. Whether the
coverage under Options F and G is grandfathered
health plan coverage is determined separately under
the rules of this paragraph (g).
Example 11. (i) Facts. A group health plan that is
a grandfathered health plan and also a high deduct-
ible health plan within the meaning of section 223(c)
(2) had a $2,400 deductible for family coverage on
March 23, 2010. The plan is subsequently amend-
ed after [effective date of final rule] to increase the
deductible limit by the amount that is necessary to
comply with the requirements for a plan to qualify
as a high deductible health plan under section 223(c)
(2)(A), but that exceeds the maximum percentage
increase.
(ii) Conclusion. In this Example 11, the increase
in the deductible at that time does not cause the plan
to cease to be a grandfathered health plan because
the increase was necessary for the plan to continue to
satisfy the definition of a high deductible health plan
under section 223(c)(2)(A).

Bulletin No. 2020–32 i August 3, 2020
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
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.

August 3, 2020 ii Bulletin No. 2020–32
Numerical Finding List
1
Bulletin 2020–32
Announcements:
2020-8, 2020-32 I.R.B. 244
2020-9, 2020-32 I.R.B. 244
Notices:
2020-43, 2020-27 I.R.B. 1
2020-45, 2020-27 I.R.B. 3
2020-46, 2020-27 I.R.B. 7
2020-47, 2020-27 I.R.B. 7
2020-49, 2020-27 I.R.B. 8
2020-50, 2020-28 I.R.B. 35
2020-48, 2020-29 I.R.B. 72
2020-51, 2020-29 I.R.B. 73
2020-52, 2020-29 I.R.B. 79
2020-53, 2020-30 I.R.B. 151
2020-54, 2020-31 I.R.B. 226
2020-56, 2020-32 I.R.B. 239
2020-57, 2020-32 I.R.B. 240
Proposed Regulations:
REG-119307-19, 2020-28 I.R.B. 44
REG-112339-19, 2020-30 I.R.B. 155
REG-117589-18, 2020-30 I.R.B. 184
REG-125716-18, 2020-30 I.R.B. 197
REG-123027-19, 2020-31 I.R.B. 229
REG-130081-19, 2020-32 I.R.B. 246
Revenue Procedures:
2020-16, 2020-27 I.R.B. 10
2020-31, 2020-27 I.R.B. 12
2020-35, 2020-29 I.R.B. 82
2020-36, 2020-32 I.R.B. 243
Revenue Rulings:
2020-14, 2020-28 I.R.B. 33
2020-15, 2020-32 I.R.B. 233
Treasury Decisions:
9899, 2020-29 I.R.B. 62
9900, 2020-30 I.R.B. 143
9903, 2020-32 I.R.B. 235
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2019–27 through 2019–52 is in Internal Revenue Bulletin
2019–52, dated December 27, 2019.

Bulletin No. 2020–32 iii August 3, 2020
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2020–32
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2019–27 through 2019–52 is in Internal Revenue Bulletin
2019–52, dated December 27, 2019.

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