Internal Revenue Bulletin 2010-18 (PDF rendition): IRS Announcements

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Bulletin No. 201
0-18
May 3, 2010
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.
INCOME TAX
Rev. Rul. 2010–12, page 617.
Federal rates; adjusted federal rates; adjusted federal
long-termrateandthelong-termexemptrate.For pur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for May 2010.
Notice 2010–37, page 654.
Renewable electricity production, refined coal produc-
tion, and Indian coal production; calendar year 2010
inflation adjustment factors and reference prices.This
notice announces the calendar year 2010 inflation adjustment
factors and reference prices for the renewable electricity pro-
duction credit, refined coal production credit, and Indian coal
production credit under section 45 of the Code.
EMPLOYEE PLANS
T.D. 9479, page 618.
Final regulations under section 9812 of the Code provide guid-
ance on the requirements imposed on group health plans by
the Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (MHPAEA), generally prohibiting
plans from imposing financial requirements or treatment limita-
tions with respect to mental health or substance use disorder
benefits that are more restrictive than those imposed with re-
spect to medical/surgical benefits under the plan.
EXCISE TAX
T.D. 9479, page 618.
Final regulations under section 9812 of the Code provide guid-
ance on the requirements imposed on group health plans by
the Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (MHPAEA), generally prohibiting
plans from imposing financial requirements or treatment limita-
tions with respect to mental health or substance use disorder
benefits that are more restrictive than those imposed with re-
spect to medical/surgical benefits under the plan.
TAX CONVENTIONS
Announcement 2010–27, page 657.
The competent authorities of the United States and Belgium en-
tered into the following agreement regarding the types of pen-
sion plans established in either Contracting State that will be
deemed to generally correspond to a pension plan recognized
for tax purposes in the other Contracting State as required by
paragraphs 7 and 9 of Article 17 (Pensions, Social Security, An-
nuities, Alimony, and Child Support) of the Convention Between
the Government of the United States of America and the Gov-
ernment of the Kingdom of Belgium for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect to
Taxes on Income, signed at Brussels on November 27, 2006.
The Agreement is entered into under paragraph 3 of Article 24
(Mutual Agreement Procedure).
(Continued on the next page)
Finding Lists begin on page ii.

ADMINISTRATIVE
Notice 2010–30, page 650.
This notice provides an extension of time to pay tax through Oc-
tober 15, 2010, to civilian spouses of servicemembers work-
ing in a U.S. territory but claiming a residence or domicile for
tax purposes in a state or the District of Columbia pursuant to
the Military Spouses Residency Relief Act (MSRRA). In addition,
this notice provides procedures for filing claims for refund of
federal income taxes to civilian spouses of servicemembers
working in a state or the District of Columbia but claiming res-
idence or domicile for tax purposes in a U.S. territory under
MSRRA.
Announcement 2010–33, page 658.
This document provides notice of public hearing on proposed
regulations (REG–134235–08, 2010–16 I.R.B. 596) providing
guidance to tax return preparers on furnishing an identifying
number on tax returns and claims for refund of tax that they
prepare. A public hearing is scheduled for May 6, 2010.
May 3, 20102010–18 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
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, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of 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 rulings 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.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d 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 c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2010–18 I.R.B.May 3, 2010

May 3, 20102010–18 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 1274.
—Determi-
nation of Issu
ePriceinthe
Case of Certai
nDebtInstru-
ments Issued
for Property
(Also Section
s 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807
, 846, 1288, 7520, 7872.)
Federal rates
; adjusted federal rates;
adjusted fed
eral long-term rate and the
long-term ex
empt rate.For purposes of
sections 382
, 642, 1274, 1288, and other
sections of t
he Code, tables set forth the
rates for Ma
y 2010.
Rev. Rul. 2010
–12
This revenue r
uling provides various
prescribed ra
tes for federal income tax pur-
poses for May 2
010 (the current month).
Table 1 conta
ins the short-term, mid-term,
and long-ter
m applicable federal rates
(AFR) for the
current month for purposes
of section 12
74(d) of the Internal Revenue
Code. Table
2 contains the short-term,
mid-term, a
nd long-term adjusted appli-
cable feder
al rates (adjusted AFR) for
the current
month for purposes of section
1288(b). T
able 3 sets forth the adjusted
federal lo
ng-term rate and the long-term
tax-exemp
t rate described in section
382(f). Table
4 contains the appropriate
percentages f
or determining the low-in-
come housing c
redit described in section
42(b)(1) for
buildings placed in service
during the cu
rrent month. However, under
section 42(b
)(2), the applicable percentage
for non-fede
rally subsidized new build-
ings placed
in service after July 30, 2008,
and before D
ecember 31, 2013, shall not
be less than
9%. Finally, Table 5 contains
the federal
rate for determining the present
value of an a
nnuity, an interest for life
or for a ter
m of years, or a remainder or
a reversio
nary interest for purposes of
section 75
20.
REV. RUL. 2010–12 TABLE 1
Applicable Federal Rates (AFR) for May 2010
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR.79%.79%.79%.79%
110% AFR.87%.87%.87%.87%
120% AFR
.95%.95%.95%.95%
130% AFR1.03%1.03%1.03%1.03%
Mid-term
AFR2.87%
2.85%
2.84%2.83%
110% AFR3.16%3.14%3.13%3.12%
120% AFR
3.45%
3.42%3.41%3.40%
130% AFR3.74%3.71%3.69%3.68%
150% AFR
4.33%4.28%4.26%4.24%
175% AFR5.05%
4.99%4.96%4.94%
Long-term
AFR4.47%4.42%4.40%4.38%
110% AFR4.92%4.86%4.83%4.81%
120% AFR
5.37%5.30%5.27%5.24%
130% AFR
5.83%5.75%5.71%5.68%
2010–18 I.R.B.617May 3, 2010

REV. RUL. 2010–12 TABLE 2
Adjusted AFR for May 2010
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adj
usted
AFR
.66%.66%.66%.66%
Mid-term adjusted AFR1.88%1.87%1.87%1.86%
Long-term adjusted
AFR
3.98%3.94%3.92%3.91%
REV. RUL. 2010–12 TABLE 3
Rates Under Section 382 for May 2010
Adjusted federal long-term rate for the current month3.98%
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.)4.03%
REV. RUL. 2010–12 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for May 2010
Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after
July 30, 2008, and before December 31, 2013, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit
7.85%
Appropriate percentage for the 30% present value low-income housing credit3.36%
REV. RUL. 2010–12 TABLE 5
Rate Under Section 7520 for May 2010
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 interest3.4%
S
ection 9812.—Parity
in Mental Health and
Substance Use Disorder
Benefits
26 CFR 54.9812: Parity in mental health and sub-
stance use disorder benefits (temporary).
T.D. 9479
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 54
Interim Final Rules Under
the Paul Wellstone and Pete
Domenici Mental Health Parity
and Addiction Equity Act of
2008
AGENCIES:Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration, Depart-
ment of Labor; Centers for Medicare &
Medicaid Services, Department of Health
and Human Services.
ACTION:Interim final rules with request
for comments.
SUMMARY:This document contains in-
terim final rules implementing the Paul
Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act
of 2008, which requires parity between
mental health or substance use disorder
benefits and medical/surgical benefits with
respect to financial requirements and treat-
ment limitations under group health plans
and health insurance coverage offered in
connection with a group health plan.
DATES:Effective date. These interim fi-
nal regulations are effective on April 5,
2010.
Comment date. Comments are due on
or before May 3, 2010.
Applicability date. These interim fi-
nal regulations generally apply to group
health plans and group health insurance is-
suers for plan years beginning on or after
July 1, 2010.
May 3, 20106182010–18 I.R.B.

ADDRESSES:Written comments may be
submitted to any of the addresses specified
below. Any comment that is submitted to
any Department will be shared with the
other Departments. Please do not submit
duplicates.
All comments will be made available
to the public.WARNING:Donotin-
clude any personally identifiable informa-
tion (such as name, address, or other con-
tact information) or confidential business
information 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 engines.
No deletions, modifications, or redactions
will be made to the comments received, as
they are public records. Comments may be
submitted anonymously.
Department of Labor. Comments to the
Department of Labor, identified by RIN
1210–AB30, by one of the following meth-
ods:
•FederaleRulemakingPortal:
http://www.regulations.gov.Follow
the instructions for submitting com-
ments.
•Email:E-OHPSCA.EBSA@dol.gov.
•Mail or Hand Delivery:Officeof
Health Plan Standards and Compliance
Assistance, Employee Benefits Secu-
rity Administration, Room N–5653,
U.S. Department of Labor, 200 Con-
stitution Avenue NW, Washington, DC
20210,Attention: RIN 1210–AB30.
Comments received by the Depart-
ment of Labor will be posted without
change towww.regulations.govand
www.dol.gov/ebsa, and available for
public inspection at the Public Dis-
closure Room, N–1513, Employee
Benefits Security Administration, 200
Constitution Avenue, NW, Washing-
ton, DC 20210.
DepartmentofHealthandHuman
Services. In commenting, please refer
to file code CMS–4140–IFC. Because
of staff and resource limitations, we
cannot accept comments by facsimile
(FAX) transmission.
You may submit comments in one
of four ways (please choose only one
of the ways listed):
1.Electronically. You may submit
electronic comments on this regulation
tohttp://www.regulations.gov.Fol-
low the instructions under the “More
Search Options” tab.
2.By regular mail.Youmaymail
written comments to the following ad-
dress ONLY:
Centers for Medicare &
Medicaid Services,
Department of Health and
Human Services,
Attention: CMS–4140–IFC,
P.O. Box 8016,
Baltimore, MD 21244–1850.
Please allow sufficient time for mailed
comments to be received before the close
of the comment period.
3.By express or overnight mail.You
maysendwrittencommentstothefollow-
ing address ONLY:
Centers for Medicare &
Medicaid Services,
Department of Health and
Human Services,
Attention: CMS–4140–IFC,
Mail Stop C4–26–05,
7500 Security Boulevard,
Baltimore, MD 21244–1850.
4.By hand or courier. If you prefer,
you may deliver (by hand or courier) your
written comments before the close of the
comment period to either of the following
addresses:
a. For delivery in Washington, DC—
Centers for Medicare &
Medicaid Services,
Department of Health and
Human Services,
Room 445-G, Hubert H.
Humphrey Building,
200 Independence Avenue, SW,
Washington, DC 20201
(Because access to the interior of the
Hubert H. Humphrey Building is not read-
ily available to persons without Federal
government identification, commenters
are encouraged to leave their comments
in the CMS drop slots located in the main
lobby of the building. A stamp-in clock is
available for persons wishing to retain a
proof of filing by stamping in and retain-
ing an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD—
Centers for Medicare &
Medicaid Services,
Department of Health and
Human Services,
7500 Security Boulevard,
Baltimore, MD 21244–1850
If you intend to deliver your comments
to the Baltimore address, please call (410)
786–7195 in advance to schedule your ar-
rival with one of our staff members.
Comments mailed to the addresses in-
dicated as appropriate for hand or courier
delivery may be delayed and received after
the comment period.
Submission of comments on paperwork
requirements. You may submit comments
on this document’s paperwork require-
ments by following the instructions at the
end of the “Collection of Information Re-
quirements” section in this document.
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 information that is included in
a comment. We post all comments re-
ceived before the close of the comment
period on the following website as soon
as possible after they have been received:
http://www.regulations.gov. Follow the
search instructions on that Web site to
view public comments.
Comments received timely will also
be available for public inspection as they
are received, generally beginning approxi-
mately 3 weeks after publication of a doc-
ument, at the headquarters of the Centers
for Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, Maryland
21244, Monday through Friday of each
week from 8:30 a.m. to 4 p.m. EST. To
schedule an appointment to view public
comments, phone 1–800–743–3951.
Internal Revenue Service.Comments
to the IRS, identified by REG–120692–09,
by one of the following methods:
•FederaleRulemakingPortal:
http://www.regulations.gov. Follow
the instructions for submitting com-
ments.
•Mail:CC:PA:LPD:PR
(REG–120692–09), room 5205, Inter-
nal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20044.
2010–18 I.R.B.619May 3, 2010

•Hand or courier delivery: Monday
through Friday between the hours of
8 a.m. and 4 p.m. to: CC:PA:LPD:PR
(REG–120692–09), Courier’s Desk,
Internal Revenue Service, 1111
Constitution Avenue, NW, Washington
DC 20224.
All submissions to the IRS will be open
to public inspection and copying in room
1621, 1111 Constitution Avenue, NW,
Washington, DC from 9 a.m. to 4 p.m.
FOR FURTHER INFORMATION
CONTACT:Amy Turner or Beth Baum,
Employee Benefits Security Adminis-
tration, Department of Labor, at (202)
693–8335; Russ Weinheimer, Internal
Revenue Service, Department of the Trea-
sury, at (202) 622–6080; Adam Shaw,
Centers for Medicare & Medicaid Ser-
vices, Department of Health and Human
Services, at (877) 267–2323, extension
61091.
CUSTOMERSERVICE
INFORMATION:Individuals inter-
ested in obtaining information from
the Department of Labor concerning
employment-based health coverage laws,
including the mental health parity pro-
visions, may call the EBSA Toll-Free
Hotline at 1–866–444–EBSA (3272) or
visit the Department of Labor’s website
(http://www.dol.gov/ebsa). In addition,
information from HHS on private health
insurance for consumers (such as mental
health and substance use disorder parity)
can be found on the Centers for Medicare
& Medicaid Services (CMS) website
(http://www.cms.hhs.gov/HealthInsRe-
formforConsume/01_Overview.asp).
SUPPLEMENTARY INFORMATION:
I. Background
The Paul Wellstone and Pete Domenici
Mental Health Parity and Addiction Equity
Act of 2008 (MHPAEA) was enacted on
October 3, 2008 as sections 511 and 512 of
the Tax Extenders and Alternative Mini-
mum Tax Relief Act of 2008 (Division C of
Public Law 110–343).
1
MHPAEA amends
the Employee Retirement Income Security
Act of 1974 (ERISA), the Public Health
Service Act (PHS Act), and the Internal
Revenue Code of 1986 (Code). In 1996,
Congress enacted the Mental Health Parity
Act of 1996 (MHPA 1996), which required
parity in aggregate lifetime and annual
dollar limits for mental health benefits and
medical and surgical benefits. Those men-
tal health parity provisions were codified
in section 712 of ERISA, section 2705
of the PHS Act, and section 9812 of the
Code, which apply to employment-related
group health plans andhealth insurance
coverage offered in connection with a
group health plan. The changes made
by MHPAEA are codified in these same
sections and consist of new requirements
as well as amendments to the existing
mental health parity provisions. The
changes made by MHPAEA are generally
effective for plan years beginning after
October 3, 2009.
On April 28, 2009, the Departments
of the Treasury, Labor, and HHS (collec-
tively, the Departments) published in the
Federal Register(74 FR 19155) a request
for information (RFI) soliciting comments
on the requirements of MHPAEA. After
consideration of the comments received in
response to the RFI, the Departments are
publishing these interim final regulations.
These regulations generally become appli-
cable to plans and issuers for plan years be-
ginning on or after July 1, 2010.
II. Overview of the Regulations
These interim final regulations replace
regulations published on December 22,
1997 at 62 FR 66932 implementing MHPA
1996. These regulations also make con-
forming changes to reflect modifications
MHPAEA made to the original MHPA
1996 definitions and provisions regarding
parity in aggregate lifetime and annual
dollar limits, and incorporate new parity
standards.
A.Meaning of Terms (26 CFR
54.9812–1T(a), 29 CFR 2590.712(a), and
45 CFR 146.136(a))
The paragraph with the heading “def-
initions” in the MHPA 1996 regulations
has been renamed “meaning of terms” un-
der these regulations because some of the
terms added by MHPAEA are not compre-
hensively defined. The change in heading
reflects the fact that if a term is described
as including a list of examples, the term
may have a broader meaning than the il-
lustrative list of examples.
1. Aggregate Lifetime and Annual Dollar
Limits
The word “dollar” has been added to the
terms “aggregate lifetime limit” and “an-
nual limit” under the MHPA 1996 regula-
tions to distinguish them from lifetime and
annual limits expressed in terms of days
or visits which are subject to new require-
ments under MHPAEA.
2. Coverage Unit
Paragraph (a) in these regulations
cross-references the definition of coverage
unit in paragraph (c)(1). Paragraph (c)(1)
clarifies the term for purposes of the new
MHPAEA rules and is discussed later in
this preamble.
3. Cumulative Financial Requirements
These regulations add a definition for
the term “cumulativefinancial require-
ments”. Under this definition, a cumula-
tive financial requirement is a financial
requirement that typically operates as a
threshold amount that, once satisfied, will
determine whether, or to what extent, ben-
efits are provided. A common example
of a cumulative financial requirement is a
deductible that must be satisfied before a
plan will start paying for benefits. How-
ever, aggregate lifetime and annual dollar
limits are excluded from being cumulative
financial requirements (because the statu-
tory term financial requirements excludes
aggregate lifetime and annual dollar lim-
its).
4. Cumulative Quantitative Treatment
Limitations
These regulations add a definition for
the term “cumulative quantitative treat-
ment limitations”. Similar to the definition
for cumulative financial requirements, a
cumulative quantitative treatment limita-
tion is defined as a treatment limitation
that will determine whether, or to what
extent, benefits areprovided based on an
accumulated amount. A common exam-
ple of a cumulative quantitative treatment
1
A technical correction to the effective date for collectively bargained plans was made by Public Law 110–460, enacted on December 23, 2008.
May 3, 20106202010–18 I.R.B.

limitation is a visit limit (whether imposed
annually or on a lifetime basis).
5. Financial Requirements
These regulations repeat the statutory
language that provides the term “financial
requirements” includes deductibles, co-
payments, coinsurance, and out-of-pocket
maximums. The statute and these reg-
ulations exclude aggregate lifetime and
annual dollar limits from the meaning of
financial requirements; these limits are
subject to separate provisions originally
enacted as part of MHPA 1996 that remain
in paragraph (b).
6. Medical/Surgical Benefits, Mental
Health Benefits, and Substance Use
Disorder Benefits
Among the changes enacted by
MHPAEA is an expansion of the parity
requirements for aggregate lifetime and
annual dollar limits to include protections
for substance use disorder benefits. Prior
law specifically excluded substance
abuse or chemical dependency benefits
2
from those requirements. Consequently,
these regulations amend the meanings
of medical/surgical benefits and mental
health benefits (and add a definition
for substance use disorder benefits).
Under these regulations, medical/surgical
benefits are benefits for medical or surgical
services, as defined under the terms of the
plan or health insurance coverage, but do
not include mental health or substance use
disorder benefits. Mental health benefits
and substance use disorder benefits are
benefits with respect to services for mental
health conditions and substance use
disorders, as defined under the terms of
the plan and in accordance with applicable
Federal and State law. These regulations
further provide that the plan terms defining
whether the benefits are mental health
or substance use disorder benefits must
be consistent with generally recognized
independent standards of current medical
practice. This requirement is included to
ensure that a plan does not misclassify a
benefit in order to avoid complying with
the parity requirements.
The word “generally” in the require-
ment “to be consistent with generally rec-
ognized independent standards of current
medical practice” is not meant to imply
that the standard must be a national stan-
dard; it simply means that a standard must
be generally accepted in the relevant med-
ical community. There are many differ-
ent sources that would meet this require-
ment. For example, a plan may follow
the most current version of the Diagnos-
tic and Statistical Manual of Mental Dis-
orders (DSM), the most current version
of the International Classification of Dis-
eases (ICD), or a State guideline. All of
these would be considered acceptable re-
sources to determine whether benefits for a
particular condition are classified as med-
ical/surgical, mental health, or substance
use disorder benefits.
7. Treatment Limitations
These regulations repeat the statutory
language with respect to the term “treat-
ment limitation” and also distinguish be-
tween a quantitative and a nonquantita-
tive treatment limitation. These regula-
tions provide that the parity requirements
in the statute apply to both quantitative and
nonquantitative treatment limitations. A
quantitative treatment limitation is a lim-
itation that is expressed numerically, such
as an annual limit of 50 outpatient visits.
A nonquantitative treatment limitation is
a limitation that is not expressed numeri-
cally, but otherwise limits the scope or du-
ration of benefits for treatment. A non-ex-
haustive list of nonquantitative treatment
limitations is included in these regulations
in paragraph (c)(4). This list, as well as
the application of these regulations to non-
quantitative treatment limitations, is fur-
ther discussed later in this preamble. How-
ever, these regulations provide that a per-
manent exclusion of all benefits for a spe-
cific condition or disorder is not a treat-
ment limitation.
B.Conforming Amendments to Parity
Requirements With Respect To Aggregate
Lifetime and Annual Dollar Limits
(26 CFR 54.9812–1T(b), 29 CFR
2590.712(b), and 45 CFR 146.136(b))
Paragraph (b) of these regulations
addresses the parity requirements with
respect to aggregate lifetime and annual
dollar limits. The mechanics of these re-
quirements generally remain the same as
under the MHPA 1996 regulations, except
that MHPAEA expanded the scope of the
parity provisions to apply also to substance
use disorder benefits. Accordingly, these
regulations make conforming changes to
reflect this expansion. Certain examples
illustrating the application of MHPA 1996
to benefits for substance abuse and chem-
ical dependency were deleted (as they are
no longer accurate); other provisions were
modified to include references to sub-
stance use disorder benefits as within the
scope of the parity requirements for ag-
gregate lifetime and annual dollar limits.
C.Parity Requirements With Respect To
Financial Requirements and Treatment
Limitations (26 CFR 54.9812–1T(c),
29 CFR 2590.712(c), and 45 CFR
146.136(c))
Paragraph (c) of these regulations im-
plements the core of MHPAEA’s new
rules, which require parity with respect
to financial requirements and treatment
limitations.
1. Clarification of Terms
In addition to the meaning of terms in
paragraph (a), paragraph (c)(1) of these
regulations clarifies certain terms that have
been given specific meanings for purposes
of MHPAEA.
a.Classification of benefits. Paragraph
(c)(1) cross-references the term “classifi-
cation of benefits” in paragraph (c)(2)(ii).
Paragraph (c)(2)(ii) describes the six ben-
efit classifications and their application,
which are discussed later in this pream-
ble. These regulations provide that the par-
ity requirements for financial requirements
and treatment limitations are applied on a
classification-by-classification basis.
b.Type. These regulations use the
term “type” to refer to financial require-
ments and treatment limitations of the
same nature. Different types include co-
payments, coinsurance, annual visit limits,
and episode visit limits. Plans often apply
more than one financial requirement or
treatment limitation to benefits. These
regulations specify that a financial re-
quirement or treatment limitation must
2
The terms “substance abuse,” “chemical dependency,” and “substance use disorder” are variously used to refer to substance use disorders. Although they mean essentially the same thing,
the term used in MHPAEA is “substance use disorder”.
2010–18 I.R.B.621May 3, 2010

be compared only to financial require-
ments or treatment limitations of the same
type within a classification. For example,
copayments are compared only to other
copayments, and annual visit limits are
compared only to other annual visit limits;
copayments are not compared to coin-
surance, and annual visit limits are not
compared to episode visit limits.
c.Level. A type of financial require-
ment or treatment limitation may vary in
magnitude. For example, a plan may im-
pose a $20 copayment or a $30 copayment
depending on the medical/surgical benefit.
In these regulations, a “level” of a type of
financial requirement or treatment limita-
tion refers to the magnitude (such as the
dollar, percentage, day, or visit amount) of
the financial requirement or treatment lim-
itation.
d.Coverage unit. Plans typically dis-
tinguish between coverage for a single
participant, for a participant plus a spouse,
for a family, and so forth. Coverage unit
is the term used in these regulations to
refer to how a plan groups individuals
for purposes of determining benefits, or
premiums or contributions. These reg-
ulations provide that the general parity
requirement of MHPAEA for financial
requirements and treatment limitations is
applied separately for each coverage unit.
2. General Parity Requirement for
Financial Requirements and Treatment
Limitations
The general parity requirement of para-
graph (c)(2) of these regulations prohibits
a plan (or health insurance coverage)
from applying any financial requirement
or treatment limitation to mental health
or substance use disorder benefits in any
classification that is more restrictive than
the predominant financial requirement or
treatment limitation applied to substan-
tially all medical/surgical benefits in the
same classification. For this purpose, the
general parity requirement of MHPAEA
applies separately for each type of finan-
cial requirement or treatment limitation
(that is, for example, copayments are com-
paredtocopayments,anddeductiblesto
deductibles). The test is applied somewhat
differently to nonquantitative treatment
limitations, as discussed later in this pre-
amble.
a.Classifications of benefits.Plans
often vary the financial requirements and
treatment limitations imposed on benefits
based on whether a treatment is provided
on an inpatient, outpatient, or emergency
basis; whether a provider is a member of
the plan’s network; or whether the bene-
fit is specifically for a prescription drug.
Therefore, determining the predominant
financial requirements and treatment lim-
itations for the entire plan without taking
these distinctions into account could po-
tentially lead to absurd results. For ex-
ample, if a plan generally requires a $100
copayment on inpatient medical/surgical
benefits and a $10 copayment on outpa-
tient medical/surgical benefits, and most
services (as measuredby plan costs) are
provided on an inpatient basis, the plan
theoretically could charge a $100 copay-
ment for outpatient mental health and sub-
stance use disorder benefits. Similarly, if
most benefits are provided on an outpa-
tient basis, the plan would only be able to
charge a $10 copayment for inpatient men-
tal health and substance use disorder ben-
efits. Commenters generally agreed that
the statute should be applied within several
broad classifications of benefits.
These regulations specify, in para-
graph (c)(2)(ii), six classifications of
benefits: inpatient, in-network; inpatient,
out-of-network; outpatient, in-network;
outpatient, out-of-network; emergency
care; and prescription drugs. If a plan does
not have a network of providers for in-
patient or outpatient benefits, all benefits
in the classification are characterized as
out-of-network. These regulations provide
that the parity requirements for financial
requirements and treatment limitations
are generally applied on a classifica-
tion-by-classification basis and these are
the only classifications used for purposes
of satisfying the parity requirements of
MHPAEA. Moreover, these classifications
must be used for all financial require-
ments and treatment limitations to the
extent that a plan (or health insurance
coverage) provides benefits in a classifi-
cation and imposes any separate financial
requirement or treatment limitation (or
separate level of a financial requirement
or treatment limitation) for benefits in the
classification. Examples illustrate the ap-
plication of this rule.
Commenters noted that a common plan
design imposes lower copayments for
treatment from a primary care provider
(for example, an internist or a pediatri-
cian) as compared to higher copayments
for treatment from a specialist (such as
a cardiologist or an orthopedist). Some
of these commenters requested that this
distinction be permitted in applying the
parity requirements by recognizing a sepa-
rate classification for specialists; others of
these commenters opposed allowing this
distinction. Some plans (or health insur-
ance coverage) identify a large range of
mental health and substance use disorder
providers as specialists. Allowing plans
to provide less favorable benefits with
respect to services by these providers than
for services by providers of medical/sur-
gical care that are classified by the plan as
primary care providers would undercut the
protections that the statute was intended
to provide. These regulations, therefore,
do not allow the separate classification of
generalists and specialists in determining
the predominant financial requirement that
applies to substantially all medical/surgi-
cal benefits.
Under these regulations, if a plan pro-
vides any benefits for a mental health con-
dition or substance use disorder, benefits
must be provided for that condition or dis-
order in each classification for which any
medical/surgical benefits are provided.
This follows from the statutory require-
ment that any treatment limitations applied
to mental health or substance use disorder
benefits may be no more restrictive than
the predominant treatment limitations ap-
plied to substantially all medical/surgical
benefits. Treatment limitation is not com-
prehensively defined under the statute.
The statute describes the term as including
limits on the frequency of treatment, num-
ber of visits, days of coverage, or other
similar limits on the scope or duration
of treatment, but it is not limited to such
types of limits. Indeed, these regulations
make a distinction between quantitative
treatment limitations (such as day limits,
visit limits, frequency of treatment limits)
and non-quantitative treatment limitations
(such as medical management, formulary
design, step therapy). If a plan provides
benefits for a mental health condition or
substance use disorder in one or more clas-
sifications but excludes benefits for that
condition or disorder in a classification
(such as outpatient, in-network) in which
it provides medical/surgical benefits, the
May 3, 20106222010–18 I.R.B.

exclusion of benefits in that classification
for a mental health condition or substance
use disorder otherwise covered under the
plan is a treatment limitation. It is a limit,
at a minimum, on the type of setting or
context in which treatment is offered.
This rule does not require an expansion
of the range of mental health conditions
or substance use disorders covered un-
der the plan; it merely requires, for those
conditions or disorders covered under
the plan, that coverage also be provided
for them in each classification in which
medical/surgical coverage is provided. If
a plan does not offer, for instance, any
benefits for medical/surgical services on
an outpatient basis by an out-of-network
provider, then there is no requirement to
provide benefits for mental health condi-
tions or substance use disorders on an out-
patient, out-of-network basis. Although
this rule follows from the general par-
ityrequirementaddedbyMHPAEA,the
statute includes a specific provision in
the case of out-of-network benefits.
3
The rule for out-of-network benefits is
stated separately in these regulations to
reflect the separate statutory provision,
but the application of the general rule
requires the same result with respect to all
classifications.
These regulations do not define inpa-
tient, outpatient, or emergency care. These
terms are subject to plan design and their
meaningsmaydifferfromplantoplan.
Additionally, State health insurance laws
may define these terms. A plan must ap-
ply these terms uniformly for both medi-
cal/surgical benefits and mental health or
substance use disorder benefits. However,
the manner in which they apply may differ
from plan to plan. For example, a plan may
treat a hospital stay of more than 12 hours
as inpatient care for medical/surgical bene-
fits; in such case, it must also treat a hospi-
talstayofmorethan12hoursasinpatient
care for mental health and substance use
disorder benefits. However, another plan
may treat a hospital stay that includes mid-
night as inpatient care for medical/surgical
benefits; in such a case the plan must also
treat a hospital stay that includes midnight
as inpatient care for mental health or sub-
stance use disorder benefits.
b.Applying the general parity require-
ment to financial requirements and quan-
titative treatment limitations. Paragraph
(c)(3) of these regulations addresses the
application of the general parity require-
ment of MHPAEA to plan financial re-
quirements and quantitative treatment lim-
itations.
(1)Measuring plan benefits.Inorder
to apply the substantive rules, these regu-
lations first establish standards for measur-
ing plan benefits. These regulations, simi-
lar to the MHPA 1996 regulations, provide
that the portion of plan payments subject
to a financial requirement or quantitative
treatment limitation is based on the dol-
lar amount of all plan payments for med-
ical/surgical benefits in the classification
expected to be paid under the plan for the
plan year. Also similar to the MHPA 1996
regulations, any reasonable method may
be used to determine the dollar amount ex-
pected to be paid under the plan for med-
ical/surgical benefits subject to a financial
requirement or quantitative treatment lim-
itation.
Some cumulative financial re-
quirements, such as deductibles and
out-of-pocket maximums, involve a
threshold amount that causes the amount
of a plan payment to change. These
regulations clarify that, for purposes of
deductibles, the dollar amount of plan
payments includes all payments with re-
spect to claims that would be subject to
the deductible if it had not been satisfied.
For purposes of out-of-pocket maximums,
the dollar amount of plan payments in-
cludes all plan payments associated with
out-of-pocket payments that were taken
into account towards the out-of-pocket
maximum as well as all plan payments
associated with out-of-pocket payments
that would have been made towards the
out-of-pocket maximum if it had not been
satisfied. Other threshold requirements
are treated similarly.
(2)“Substantially all”. The first step
of these regulations in applying the gen-
eral parity requirement of MHPAEA is to
determine whether a financial requirement
or quantitative treatment limitation applies
to substantially all medical/surgical ben-
efits in a classification. Regulations is-
sued under MHPA 1996 interpreted the
term “substantially all” to mean at least
two-thirds. Under these regulations, a fi-
nancial requirement or quantitative treat-
ment limitation applies to substantially all
medical/surgical benefits in a classifica-
tion if it applies to at least two-thirds of
the benefits in that classification. In de-
termining whether a financial requirement
or quantitative treatment limitation applies
to substantially all medical/surgical bene-
fits in a classification, benefits expressed
as subject to a zero level of a type of fi-
nancial requirement are treated the same
as benefits that are not subject to that type
of requirement, and benefits expressed as
subject to an unlimited quantitative treat-
ment limitation are treated the same as
benefits that are not subject to that type of
limitation. For example, in the classifica-
tion of outpatient, in-network medical/sur-
gical benefits, a plan could reduce the nor-
mal copayment amount of $15 to $0 for
well baby care or routine physical exami-
nations, while a copayment is not imposed
on office visits for allergy shots. For pur-
poses of this analysis, both of these bene-
fits are treated as not subject to a copay-
ment.
If a type of financial requirement or
quantitative treatment limitation does not
apply to at least two-thirds of the medical
surgical benefits in a classification, that
type of requirement or limitation cannot be
applied to mental health or substance use
disorder benefits in that classification. If a
single level of a type of financial require-
ment or quantitative treatment limitation
applies to at least two-thirds of medi-
cal/surgical benefits in a classification,
then it is also the predominant level and
that is the end of the analysis. However,
if the financial requirement or quantita-
tive treatment limitation applies to at least
two-thirds of all medical/surgical benefits
in a classification but has multiple lev-
els and no single level applies to at least
two-thirds of all medical/surgical benefits
in the classification,then additional analy-
sis is required. In such a case, the next step
is to determine which level of the finan-
cial requirement or quantitative treatment
limitation is considered predominant.
(3)“Predominant”. MHPAEA pro-
vides that a financial requirement or treat-
ment limitation is predominant if it is the
most common or frequent of a type of
limit or requirement. Under these regula-
tions, the predominant level of a type of
financial requirement or quantitative treat-
3
See sections 9812(a)(5) of the Code, 712(a)(5) of ERISA, 2705(a)(5) of the PHS Act.
2010–18 I.R.B.623May 3, 2010

ment limitation is the level that applies
to more than one-half of medical/surgical
benefits subject to the financial require-
ment or quantitative treatment limitation
in that classification. If a single level of a
type of financial requirement or quantita-
tive treatment limitation applies to more
than one-half of medical/surgical bene-
fits subject to the financial requirement
or quantitative treatment limitation in a
classification (based on plan costs, as dis-
cussed earlier in this preamble), the plan
may not apply that particular financial
requirement or quantitative treatment lim-
itation to mental health or substance use
disorder benefits at a level that is more
restrictive than the level that has been de-
termined to be predominant.
If no single level applies to more than
one-half of medical/surgical benefits sub-
ject to a financial requirement or quan-
titative treatment limitation in a classifi-
cation, plan payments for multiple lev-
els of the same type of financial require-
ment or quantitative treatment limitation
can be combined by the plan (or health
insurance issuer) until the portion of plan
payments subject to the financial require-
ment or quantitative treatment limitation
exceeds one-half. For any combination
of levels that exceeds one-half of medi-
cal/surgical benefits subject to the finan-
cial requirement or quantitative treatment
limitation in a classification, the plan may
not apply that particular financial require-
ment or quantitative treatment limitation to
mental health and substance use disorder
benefits at a level that is more restrictive
than the least restrictive level within the
combination. The plan may combine plan
payments for the most restrictive levels
first, with each less restrictive level added
to the combination until the combination
applies to more than one-half of the ben-
efits subject to the financial requirement
or treatment limitation. Examples in these
regulations illustrate the application of this
rule.
These regulations provide an alterna-
tive, simpler method for compliance when
a type of financial requirement or quantita-
tive treatment limitation applies to at least
two-thirds of medical surgical benefits in
a classification but no single level applies
to more than one-half of the medical/surgi-
cal benefits subject to the financial require-
ment or quantitative treatment limitation in
that classification. In such a situation, a
plan is permitted to treat the least restric-
tive level of the financial requirement or
quantitative treatment limitation applied to
medical/surgical benefits in that classifica-
tion as the predominant level.
If a plan provides benefits for more
than one coverage unit and applies dif-
ferent levels of financial requirements or
quantitative treatment limitations to these
coverage units within a classification of
benefits, determining the predominant
level of a particular financial requirement
or quantitative treatment limitation must
be done separately for each coverage unit.
Thus, for example, a plan with differ-
ent deductibles for self-only and family
coverage units would not determine the
predominant level of a deductible applied
for benefits across both the self-only and
family coverage units. Instead, the plan
would determine the predominant level
of the deductible for self-only coverage
independently from the predominant level
for family coverage.
c.Special rule for prescription drug
benefits with multiple levels of financial re-
quirements. These regulations include, in
paragraph (c)(3)(iii), a special rule for ap-
plying the general parity requirement of
MHPAEA to prescription drug benefits.
Although applying the general parity re-
quirement to a prescription drug program
with a single level of a type of financial
requirement would be relatively uncom-
plicated, the analysisbecomes more diffi-
cult if different financial requirements are
imposed for different tiers of drugs. The
placement of a drug in a tier is generally
based on factors (such as cost and effi-
cacy) unrelated to whether the drug is usu-
ally prescribed for the treatment of a med-
ical/surgical condition or a mental health
condition or substance use disorder. To
the extent such a program does not dis-
tinguish between drugs as medical/surgi-
cal benefits or mental health or substance
use disorder benefits, requiring the pro-
gram to make that distinction solely for
the purpose of determining the predomi-
nant financial requirement or quantitative
treatment limitation that applies to sub-
stantially all medical/surgical benefits in
a classification might impose significant
burdens without ensuring any greater par-
ity for mental health and substance use dis-
order benefits.
Consequently, these regulations pro-
vide that if a plan imposes different levels
of financial requirements on different tiers
of prescription drugs based on reasonable
factors (such as cost, efficacy, generic
versus brand name, and mail order versus
pharmacy pick-up), determined in accor-
dance with the requirements for nonquan-
titative treatment limitations, and without
regard to whether a drug is generally pre-
scribed with respect to medical/surgical
benefits or mental health or substance use
disorder benefits, the plan satisfies the
parity requirements with respect to the
prescription drug classification of ben-
efits. The special rule for prescription
drugs, in effect, allows a plan or issuer
to subdivide the prescription drug classi-
fication into tiers and apply the general
parity requirement separately to each tier
of prescription drug benefits. For any tier,
the financial requirements and treatment
limitations imposed with respect to the
drugs prescribed for medical/surgical con-
ditions are the same as (and thus not more
restrictive than) the financial requirements
and treatment limitations imposed with
respect to the drugs prescribed for men-
tal health conditions and substance use
disorders in the tier. Moreover, because
the financial requirements and treatment
limitations apply to 100 percent of the
medical/surgical drug benefits in the tier,
they are the predominant financial require-
ments and treatment limitations that apply
to substantially all of the medical/surgical
drug benefits in the tier.
d.Cumulative financial requirements
and quantitative treatment limitations, in-
cluding deductibles. While financial re-
quirements such as copayments and coin-
surance generally apply separately to each
covered expense, other financial require-
ments (in particular, deductibles) accumu-
late across covered expenses. In the case
of deductibles, generally an amount of oth-
erwise covered expenses must be accumu-
lated before the plan pays benefits. Finan-
cial requirements andquantitative treat-
ment limitations that determine whether
and to what extent benefits are provided
based on accumulated amounts are defined
in these regulations as cumulative finan-
cial requirements and cumulative quantita-
tive treatment limitations.
In response to the RFI, the Departments
received a number of comments regarding
how to apply the parity requirements to
cumulative financial requirements, in par-
ticular to deductibles (although some also
May 3, 20106242010–18 I.R.B.

referred to out-of-pocket maximums). The
comments reflect two opposing views.
One view is that a plan can have de-
ductibles that accumulate separately for
medical/surgical benefits on the one hand,
and mental health or substance use disor-
der benefits on the other, as long as the
level of the two deductibles is the same
(separately accumulating deductibles).
The opposing view is that expenses for
both mental health or substance use disor-
der benefits and medical/surgical benefits
must accumulate to satisfy a single com-
bined deductible before the plan provides
either medical/surgical benefits or mental
health or substance use disorder benefits
(combined deductible).
The provisions of the statute impos-
ing parity on financial requirements and
treatment limitations do not specifically
address this issue; the language of the
statute can be interpreted to support ei-
ther position. The comments that sup-
ported allowing separately accumulating
deductibles maintained that it is common-
place for plans to have such deductibles,
and that the projected cost of convert-
ing systems to permit unified deductibles
would be extremely high for the many
plans that use a separate managed behav-
ioral health organization (MBHO).
4
By contrast, comments that supported
requiring combined deductibles argued
that allowing separately accumulating de-
ductibles undermines a central goal of
parity legislation, to affirm that mental
health and substance use disorder benefits
are integral components of comprehen-
sive health care and generally should not
be distinguished from medical/surgical
benefits. Distinguishing between the two
requires individuals who need both kinds
of care to satisfy a deductible that is greater
than that required for individuals needing
only medical/surgical care. Other com-
ments that supported requiring combined
deductibles noted that mental health and
substance use disorder benefits typically
comprise only 2 to 5percent of a plan’s
costs, so that even using identical levels
for separately accumulating deductibles
imposes a greater barrier to mental health
and substance use disorder benefits.
The Departments carefully considered
the positions advanced by both groups
of comments regarding separately ac-
cumulating and combined deductibles.
Given that the statutory language does
not preclude either interpretation, the
Departments’ view is that prohibiting sep-
arately accumulating financial restrictions
and quantitative treatment limitations is
more consistent with the policy goals that
led to the enactment of MHPAEA. Con-
sequently, these regulations provide, in
paragraph (c)(3)(v), that a plan may not
apply cumulative financial requirements
or cumulative quantitative treatment lim-
itations to mental health or substance
use disorder benefits in a classification
that accumulate separately from any such
cumulative financial requirements or cu-
mulative quantitative treatment limitations
established for medical/surgical benefits
in the same classification.
5
Examples in
these regulations illustrate the application
of this rule.
e.Application to nonquantitative treat-
ment limitations. Plans impose a variety
of limits affecting the scope or duration
of benefits under the plan that are not ex-
pressed numerically. Nonetheless, such
nonquantitative provisions are also treat-
ment limitations affecting the scope or
duration of benefits under the plan. These
regulations provide an illustrative list of
nonquantitative treatment limitations, in-
cluding medical management standards;
prescription drug formulary design; stan-
dards for provider admission to participate
in a network; determination of usual,
customary, and reasonable amounts; re-
quirements for using lower-cost therapies
before the plan will cover more expensive
therapies (also known as fail-first policies
or step therapy protocols); and condition-
ing benefits on completion of a course of
treatment.
Paragraph (c)(4) of these regulations
generally prohibits the imposition of any
nonquantitative treatment limitation to
mental health or substance use disorder
benefits unless certain requirements are
met. Any processes, strategies, eviden-
tiary standards, or other factors used in
applying the nonquantitative treatment
limitation to mental health or substance
use disorder benefits in a classification
must be comparable to, and applied no
more stringently than, the processes,
strategies, evidentiary standards, or other
factors used in applying the limitation
with respect to medical surgical/bene-
fits in the classification. However, these
requirements allow variations to the ex-
tent that recognized clinically appropriate
standards of care may permit a difference.
These requirements apply to the terms of
the plan (or health insurance coverage)
both as written and in operation.
The phrase, “applied no more strin-
gently” was included to ensure that any
processes, strategies, evidentiary stan-
dards, or other factors that are comparable
on their face are applied in the same man-
ner to medical/surgical benefits and to
mental health or substance use disorder
benefits. Thus, for example, assume a
claims administrator has discretion to
approve benefits for treatment based on
medical necessity. If that discretion is
routinely used to approve medical/surgical
benefits while denying mental health or
substance use disorder benefits and recog-
nized clinically appropriate standards of
care do not permit such a difference, the
processes used in applying the medical
necessity standard are considered to be ap-
plied more stringently to mental health or
substance use disorder benefits. The use
of discretion in this manner violates the
parity requirements for nonquantitative
treatment limitations.
Different types of illnesses or injuries
may require different review, as well as
different care. The acute versus chronic
nature of a condition, the complexity of
it or the treatment involved, and other
factors may affect the review. Although
the processes, strategies, evidentiary stan-
4
Several commenters stated that the estimated cost to develop interfaces between MBHOs and the entity administering medical/surgical claims would be $420,000-$750,000 per interface,
and that in some cases multiple interfaces per MBHO (as many as 40–50) would be necessary. In response to these cost concerns, the Departments performed an independent analysis, which
indicated that the initial cost per interface could be as low as $35,000. The Departments’ lower estimated cost reflects, in part, the use of less expensive interface systems (for example, batch
processing rather than real-time), and the ability to model new interfaceson existing systems used to interface with pharmacy benefit managers and dental insurers. In addition, many MBHOs
already have developed interfaces, because their clients requested combined deductibles. This should result in reduced costs, because interface development costs are incremental and should
decrease after the first interface is created. For a further discussion of this issue, see section IV. Economic Impact and Paperwork Burden later in this preamble.
5
This rule in the interim final regulations prohibiting separately accumulating financial requirements and quantitative treatment limitations does not apply with respect to aggregate lifetime
and annual dollar limits. The statutory language of MHPA 1996 specifically permitted plans to impose aggregate lifetime or annual dollar limits thatdistinguish between mental health benefits
and medical/surgical benefits. MHPAEA left the language of this statutoryprovision intact, modifying it only to expand its applicability to include substance use disorder benefits.
2010–18 I.R.B.625May 3, 2010

dards, and other factors used in applying
these limitations must generally be applied
in a comparable manner to all benefits,
the mere fact of disparate results does not
mean that the treatment limitations do not
comply with parity.
Examples in these regulations illus-
trate the operation of the requirements
for nonquantitative treatment limitations.
Medical management standards are im-
plemented by processes such as preautho-
rization, concurrent review, retrospective
review, case management, and utilization
review; the examples feature the appli-
cation of these requirements to some of
these processes. The facts in the examples
reflect simple situations for purposes of
better illustrating the application of the
rules rather than reflecting the realistic,
complex facts that would typically be
found in a plan. The Departments invite
comments on whether additional examples
would be helpful to illustrate the appli-
cation of the nonquantitative treatment
limitation rule to other features of medical
management or general plan design.
Commenters asked if the MHPAEA re-
quirements apply when eligibility for men-
tal health and substance use disorder bene-
fits under a major medical program is con-
ditioned on exhausting some limited num-
ber of mental health and substance use dis-
order counseling sessions offered through
an employee assistance program (EAP).
Generally, the provision of mental health
or substance use disorder benefits by an
EAP in addition to the benefits offered
by a major medical program that other-
wise complies with the parity rules would
not violate MHPAEA. However, requiring
participants to exhaust the EAP benefits —
making the EAP a gatekeeper — before an
individual is eligible for the major medical
program’s mental health or substance use
disorder benefits is a nonquantitative treat-
ment limitation subject to the parity re-
quirements. Consequently, if similar gate-
keeping processes with a similar exhaus-
tion requirement (whether or not through
the EAP) are not applied to medical/sur-
gical benefits, the requirement to exhaust
mental health or substance use disorder
benefits available under the EAP would
violate the rule that nonquantitative treat-
ment limitations be applied comparably
and not more stringently to mental health
and substance use disorder benefits.
The Departments received many com-
ments addressing an issue characterized
as “scope of services” or “continuum of
care”. Some commenters requested, with
respect to a mental health condition or
substance use disorder that is otherwise
covered, that the regulations clarify that
a plan is not required to provide benefits
for any particular treatment or treatment
setting (such as counseling or non-hos-
pital residential treatment)ifbenefitsfor
the treatment or treatment setting are not
provided for medical/surgical conditions.
Other commenters requested that the reg-
ulations clarify that a participant or bene-
ficiary with a mental health condition or
substance use disorder have coverage for
the full scope of medically appropriate ser-
vices to treat the condition or disorder if
the plan covers the full scope of medically
appropriate services totreat medical/surgi-
cal conditions, even if some treatments or
treatment settings are not otherwise cov-
ered by the plan. Other commenters re-
quested that MHPAEA be interpreted to re-
quire that group health plans provide ben-
efits for any evidence-based treatment.
The Departments recognize that not all
treatments or treatment settings for mental
health conditions or substance use disor-
ders correspond to those for medical/sur-
gical conditions. The Departments also
recognize that MHPAEA prohibits plans
and issuers from imposing treatment limi-
tations on mental health and substance use
disorder benefits that are more restrictive
than those applied to medical/surgical ben-
efits. These regulations do not address
the scope of services issue. The Depart-
ments invite comments on whether and to
what extent MHPAEA addresses the scope
of services or continuum of care provided
by a group health plan or health insurance
coverage.
D.Availability of Plan Information
(26 CFR 54.9812–1T(d), 29 CFR
2590.712(d), and 45 CFR 146.136(d))
MHPAEA includes two new disclo-
sure provisions for group health plans
(and health insurance coverage offered
in connection with a group health plan).
First, the criteria for medical necessity
determinations made under a plan (or
health insurance coverage) with respect
to mental health or substance use disor-
der benefits must be made available by
the plan administrator (or the health in-
surance issuer offering such coverage) in
accordance with regulations to any current
or potential participant, beneficiary, or
contracting provider upon request. These
regulations repeat the statutory language
without substantive change. The Depart-
ments invite comments on what additional
clarifications might be helpful to facilitate
compliance with this disclosure require-
ment for medical necessity criteria.
MHPAEA also provides that the reason
for any denial under a group health plan (or
health insurance coverage) of reimburse-
ment or payment for services with respect
to mental health or substance use disor-
der benefits in the case of any participant
or beneficiary must be made available,
upon request or as otherwise required,
by the plan administrator (or the health
insurance issuer) to the participant or ben-
eficiary in accordance with regulations.
These regulations clarify that, in order
for plans subject to ERISA (and health
insurance coverage offered in connection
with such plans) to satisfy this require-
ment, disclosures must be made in a form
and manner consistent with the rules for
group health plans in the ERISA claims
procedure regulations,
6
which provide
(among other things) that such disclosures
must be provided automatically and free
of charge. In the case of non-Federal gov-
ernmental and church plans (which are
not subject to ERISA), and health insur-
ance coverage offered in connection with
such plans, these regulations provide that
compliance with the form and manner of
the ERISA claims procedure regulations
for group health plans satisfies this disclo-
sure requirement. The Departments invite
comments regarding any additional clari-
fications that would be helpful to facilitate
compliance with MHPAEA’s disclosure
requirements regarding denials of mental
health or substance use disorder benefits.
6
29 CFR 2560.503–1.
May 3, 20106262010–18 I.R.B.

E.General Applicability Provisions
(26 CFR 54.9812–1T(e), 29 CFR
2590.712(e), and 45 CFR 146.136(e))
Paragraph (e) of these regulations ad-
dresses the applicability of these regula-
tions to group health plans and health in-
surance issuers and clarifies the scope of
these regulations.
1. Overview
These regulations make a number of
changes to the general applicability provi-
sions in the MHPA 1996 regulations (para-
graphs (c) and (d) in those regulations).
Amendments made by MHPAEA require
some of these changes. For example, the
MHPA 1996 rules of construction specifi-
cally excluded any plan provisions relating
to cost sharing, limits on the number of vis-
its or days of coverage, and requirements
relating to medical necessity from the ap-
plication of the parity requirements for ag-
gregate lifetime and annual dollar limits.
MHPAEA replaces these exclusions with
a rule providing that the provisions should
not be construed as affecting the terms and
conditions of the plan or coverage relat-
ing to mental health and substance use dis-
order benefits except as provided in the
rules relating to financial requirements and
treatment limitations. These regulations
make corresponding changes to the MHPA
1996 regulations.
These regulations also (1) establish a
new rule with respect to the mental health
and substance use disorder parity require-
ments for the determination of the num-
ber of plans that an employer or employee
organization maintains, (2) combine what
were in the MHPA 1996 regulations sepa-
rate rules for group health plans and bene-
fit packages, and (3) make additional clar-
ifications.
a.Grouphealthplans. In 2004, the
Departments issued proposed regulations
for a number of issues under Chapter 100
of the Code, Part 7 of ERISA, and Title
XXVII of the PHS Act, including rules for
determining the number of group health
plans that an employer or employee or-
ganizationisconsideredtomaintainfor
purposes of those provisions.
7
Those pro-
posed regulations generally would have re-
spected the number of plans designated in
the instruments governing the employer’s
or employee organization’s arrangements
to provide medical care benefits as long as
the arrangements were operated pursuant
to those instruments as separate plans.
The 2004 proposed regulations included
an anti-abuse clause, providing that, if a
principal purpose of establishing separate
plans was to evade any requirement of law,
then the separate plans would be consid-
ered a single plan to the extent necessary
to prevent the evasion.
The Departments recognized that under
the 2004 proposed regulations, absent the
anti-abuse clause, plan sponsors might
attempt to provide mental health (and now
substance use disorder) benefits under
a plan that is separate from a plan that
provides only medical/surgical benefits.
Because the mental health (and now sub-
stance use disorder) parity requirements
apply only to plans that provide both
mental health or substance use disorder
benefits and medical/surgical benefits, the
absence of medical/surgical benefits in a
plan providing mental health or substance
use disorder benefits would have resulted
in, absent the anti-abuse clause, the in-
applicability of the parity requirements.
The 2004 proposed regulations included
the anti-abuse clause to avoid this kind of
evasion of the parity requirements. Com-
menters raised problems of proof with
the subjective intent element of the pro-
posed anti-abuse clause. While the 2004
rule remains proposed, these interim final
regulations include a rule for determin-
ing the number of plans that an employer
or employee organization maintains for
the mental health and substance use dis-
order parity requirements that operates
irrespective of the intent of a plan sponsor.
The rule is that all medical care benefits
provided by an employer or employee or-
ganization constitute a single group health
plan.
MHPAEA left unchanged the rule from
MHPA 1996 requiring that the parity re-
quirements be applied separately to each
benefit package option under a group
health plan. The MHPA 1996 regulations
used the term “benefit package” rather
than “benefit package option” and clarified
that the parity requirements would apply
separately to separate benefit packages
also in situations in which the participants
(or beneficiaries) had no choice between
multiple benefit packages, such as where
retirees are provided one benefit package
and active employees a separate benefit
package. Under these regulations, the
statutory rule providing that the parity
requirements apply separately to separate
benefit package options(reflected in para-
graph (c) of the MHPA 1996 regulations),
the statutory rule providing that the parity
requirements apply to a group health plan
providing both mental health or substance
use disorder benefits and medical/surgical
benefits (reflected in paragraph (d) of the
MHPA 1996 regulations), and the deter-
mination of how many plans an employer
or employee organization maintains have
been combined as a single rule in para-
graph (e)(1).
The new combined rule in these reg-
ulations does not use the term benefit
package. Instead, it provides that (1)
the parity requirements apply to a group
health plan offering both medical/surgical
benefits and mental health or substance
use disorder benefits, (2) the parity re-
quirements apply separately with respect
to each combination of medical/surgical
coverage and mental health or substance
use disorder coverage that any partici-
pant (or beneficiary) can simultaneously
receive from an employer’s or employee
organization’s arrangement or arrange-
ments to provide medical care benefits,
and (3) all such combinations constitute a
single group health plan for purposes of
the parity requirements. This new com-
bined rule clearly prohibits what might
have been formerly viewed as a poten-
tial evasion of the parity requirements
by allocating mental health or substance
use disorder benefits to a plan or benefit
package without medical/surgical benefits
(when medical/surgical benefits are also
otherwise available). For example, if an
employer with a single benefit package
for medical/surgical benefits also has a
separately administered benefit package
for mental health and substance use disor-
der benefits, the parity requirements apply
to the combined benefit package and the
combined benefit package is considered
a single plan for purposes of the parity
requirements.
Similarly, if an employer offered three
medical/surgical benefit packages, A, B,
and C, and a mental health and substance
7
See 69 FR 78800 (December 30, 2004).
2010–18 I.R.B.627May 3, 2010

use disorder benefit package, D, that could
be combined with each of A, B , and C,
then the parity requirements must be satis-
fied with respect to each of AD, BD, and
CD. If the A benefit package had a stan-
dard option and a high option, A
1
and A
2
,
then the parity requirements would have to
be satisfied with respect to each of A
1
D
and A
2
D.
b.Health insurance issuers. These reg-
ulations make a change regarding applica-
bility with respect to health insurance is-
suers. Both the MHPA 1996 regulations
and these regulations apply to an issuer
offering health insurance coverage. The
MHPA 1996 regulations provide that the
health insurance coverage must be for both
medical/surgical and mental health bene-
fits in connection with a group health plan;
the rule in these regulations provides that
the health insurance coverage must be for
mental health or substance use disorder
benefits in connection with a group health
plan subject to MHPAEA under paragraph
(e)(1). Thus, under these regulations, an
issuer offering health insurance coverage
without any medical/surgical benefits is
nonetheless subject tothe parity require-
ments if it offers health insurance coverage
with mental health or substance use dis-
order benefits in connection with a group
health plan subject to the parity require-
ments. In addition, under these regula-
tions, the parity requirements do not apply
to an issuer offering health insurance cov-
erage to a group health plan not subject to
the parity requirements.
c.Scope. Paragraph (e)(3) of these reg-
ulations provides that nothing in these reg-
ulations requires a plan or issuer to provide
any mental health or substance use disor-
der benefits. Moreover, the provision of
benefits for one or more mental health con-
ditions or substance use disorders does not
require the provision of benefits for any
other condition or disorder.
2. Interaction with State Insurance Laws
Numerous comments requested guid-
ance on how MHPAEA interacts with
State insurance laws requiring parity
for, or mandating coverage of, mental
health or substance use disorder bene-
fits. Some commenters sought clarifi-
cation that MHPAEA does not preempt
any State insurance law mandating a
minimum level of coverage (such as a
minimum dollar, day, or visit level) for
mental health conditions or substance use
disorders. Other commenters suggested
that, while MHPAEA does not preempt
State insurance parity and mandate laws
to the extent that they do not prevent the
application of MHPAEA, provisions in the
State laws that are more restrictive than the
requirements of MHPAEA are preempted.
The preemption provisions of section
731 of ERISA and section 2723 of the
PHS Act (added by the Health Insurance
Portability and Accountability Act of 1996
(HIPAA) and implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) ap-
ply so that the MHPAEA requirements
are not to be “construed to supersede any
provision of State law which establishes,
implements, or continues in effect any
standard or requirement solely relating
to health insurance issuers in connection
with group health insurance coverage ex-
cept to the extent that such standard or
requirement prevents the application of a
requirement” of MHPAEA. The HIPAA
conference report indicates that this is in-
tended to be the “narrowest” preemption
of State laws. (See House Conf. Rep. No.
104–736, at 205, reprinted in 1996 U.S.
Code Cong. & Admin. News 2018.)
A State law, for example, that man-
dates that an issuer offer a minimum dol-
lar amount of mental health or substance
use disorder benefits does not prevent the
application of MHPAEA. Nevertheless, an
issuer subject to MHPAEA may be re-
quired to provide mental health or sub-
stance use disorder benefits beyond the
State law minimum in order to comply
with MHPAEA.
F.Small Employer Exemption (26 CFR
54.9812–1T(f), 29 CFR 2590.712(f), and
45 CFR 146.136(f))
Paragraph (f) of these regulations
amends the MHPA 1996 regulations to im-
plement the exemption for a group health
plan (or health insurance issuer offering
coverage in connection with a group health
plan) for a plan year of a small employer.
For this purpose, a small employer is gen-
erally defined, in connection with a group
health plan with respect to a calendar year
and a plan year, as an employer who em-
ployed an average of not more than 50
employees on business days during the
preceding calendar year.
G.Increased Cost Exemption (26 CFR
54.9812–1T(g), 29 CFR 2590.712(g), and
45 CFR 146.136(g))
Both MHPA 1996 and MHPAEA in-
clude an increased cost exemption under
which, if certain requirements are met,
plans that incur increased costs above a
certain threshold as a result of the ap-
plication of the parity requirements of
both these laws can be exempt from the
statutory parity requirements. MHPAEA
changed the MHPA 1996 increased cost
exemption in several ways, including (1)
raising the threshold for qualification from
one percent to two percent for the first year
for which the plan is subject to MHPAEA;
(2) requiring certification by qualified and
licensed actuaries who are members in
good standing of the American Academy
of Actuaries; and (3) revising the notice
requirements. Under MHPAEA, plans that
comply with the parity requirements for
one full plan year and that satisfy the con-
ditions for the increased cost exemption
are exempt from the parity requirements
for the following plan year, and the exemp-
tion lasts for one year. Thus, the increased
cost exemption may only be claimed for
alternating plan years.
These regulations withdraw the MHPA
1996 regulatory guidance on the increased
cost exemption and reserve paragraph (g).
The Departments intend to issue, in the
near future, guidance implementing the
new requirements for the increased cost
exemption under MHPAEA. The Depart-
ments invite comments on implementing
the new statutory requirements for the in-
creased cost exemption under MHPAEA,
as well as information on how many plans
expect to use the exemption.
H.Sale of Nonparity Health Insurance
Coverage (26 CFR 54.9812–1T(h),
29 CFR 2590.712(h), and 45 CFR
146.136(h))
These regulations make a few changes
to what was paragraph (g) in the MHPA
1996 regulations. That paragraph included
a paragraph (g)(2) relating to how long
the increased cost exemption applies once
its requirements have been satisfied. It
has been deleted because MHPAEA pro-
vides a new rule for how long the increased
cost exemption applies. In addition, minor
changes have been made to the presenta-
May 3, 20106282010–18 I.R.B.

tion in what was paragraph (g)(1) in the
MHPA 1996 regulations. Both that para-
graph and paragraph (h) in these regula-
tions address the circumstances of health
insurance coverage that does not comply
with the parity requirements being sold to
a group health plan. The MHPA 1996 reg-
ulationsrefertoanissuersellingapolicy;
these regulations refer to an issuer selling
a policy, certificate, or contract of insur-
ance. The longer phrase in these regula-
tions includes health insurance coverage
sold in a form that might not always be
described by the term “policy” and is the
more typical formulation used throughout
the regulations under Chapter 100 of the
Code, Part 7 of ERISA, and Title XXVII
of the PHS Act. An additional change
shifts the emphasis by stating the rule in
termsofanissuernotbeingabletosellex-
cept in the described circumstances, rather
than in terms of an issuer being able to
sell only in the described circumstances.
Finally, the cross-reference contained in
this paragraph to the parity requirements
has been conformed to include the new re-
quirements of MHPAEA.
I.Applicability Dates (26 CFR
54.9812–1T(i), 29 CFR 2590.712(i), and
45 CFR 146.136(i))
In general, the requirements of these
regulations apply for plan years beginning
on or after July 1, 2010. There is a spe-
cial effective date forcertain collectively-
bargained plans, which provides that, for
group health plans maintained pursuant to
one or more collective bargaining agree-
ments ratified before October 3, 2008, the
requirements of these regulations do not
apply to the plan (or health insurance cov-
erage offered in connection with the plan)
for plan years beginning before the later
of either the date on which the last of the
collective bargaining agreements relating
to the plan terminates (determined without
regard to any extension agreed to after Oc-
tober 3, 2008) or July 1, 2010. MHPAEA
provides that any plan amendment made
pursuant to a collective bargaining agree-
ment solely to conform to the requirements
of MHPAEA not be treated as a termina-
tion of the agreement.
Many commenters requested guidance
on what percentage of employees covered
by a plan must be union employees for the
plan to be considered a plan maintained
pursuant to one or more collective bar-
gaining agreements — some suggesting
as low a percentage as 25 percent while
others suggested 90 percent. This issue
arises in a number of statutes that pro-
vide special rules forplans maintained
pursuant to collective bargaining agree-
ments. As such, the issue is beyond the
scope of these regulations implementing
the MHPAEA amendments and is not
addressedinthem.
Because the statutory MHPAEA provi-
sions are self-implementing and are gener-
ally effective for planyears beginning after
October 3, 2009, many commenters asked
for a good faith compliance period from
Departmental enforcement until plans (and
healthinsuranceissuers)havetimetoim-
plement changes consistent with these reg-
ulations. For purposes of enforcement, the
Departments will take into account good-
faith efforts to comply with a reasonable
interpretation of the statutory MHPAEA
requirements with respect to a violation
that occurs before the applicability date of
paragraph (i) of these regulations. How-
ever, this does not prevent participants or
beneficiaries from bringing a private ac-
tion.
III. Interim Final Regulations and
Request for Comments
Section 9833 of the Code, section 734
ofERISA,andsection2792ofthePHS
Act authorize the Secretaries of the Trea-
sury, Labor, and HHS (collectively, the
Secretaries) to promulgate any interim fi-
nal rules that they determine are appropri-
ate to carry out the provisions of Chapter
100 of Subtitle K of the Code, Part 7 of
Subtitle B of Title I of ERISA, and Part A
of Title XXVII of the PHS Act, which in-
clude the provisions of MHPAEA.
Under Section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. 551et
seq.) a general notice of proposed rule-
making is not required when an agency,
for good cause, finds that notice and pub-
lic comment thereon are impracticable, un-
necessary, or contrary to the public inter-
est.
These rules are being adopted on an
interim final basis because the Secretaries
have determined that without prompt
guidance some members of the regulated
community may not know what steps to
take to comply with the requirements of
MHPAEA, which may result in an adverse
impact on participants and beneficiaries
with regard to their health benefits under
group health plans and the protections
provided under MHPAEA. Moreover,
MHPAEA’s requirements will affect the
regulated community in the immediate
future.
The requirements of MHPAEA are gen-
erally effective for all group health plans
and for health insurance issuers offering
coverage in connection with such plans
for plan years beginning after October 3,
2009. Plan administrators and sponsors,
issuers, and participants and beneficiaries
need guidance on how to comply with
the new statutory provisions. As noted
earlier, these regulations take into account
comments received by the Departments in
response to the request for information on
MHPAEA published in theFederal Regis-
teron April 28, 2009 (74 FR 19155). For
the foregoing reasons, the Departments
find that the publication of a proposed
regulation, for the purpose of notice and
public comment thereon, would be im-
practicable, unnecessary, and contrary to
the public interest.
IV. Economic Impact and Paperwork
Burden
A.Summary—Department of Labor
and Department of Health and Human
Services
As discussed earlier in this preamble,
MHPAEA requires group health plans
and group health insurance issuers to
ensure that financial requirements (e.g.,
copayments, deductibles) and treatment
limitations (e.g., visit limits) applicable
to mental health or substance use disor-
der benefits are no more restrictive than
the predominant financial requirements
or treatment limitations applied to sub-
stantially all medical/surgical benefits.
Under MHPAEA, a financial requirement
or treatment limitation is considered to
be predominant if it is the most common
or frequent of such type of requirement
or limitation. Additionally, there can be
no separate cost-sharing requirements
or treatment limitations applicable only
with respect to mental health or substance
use disorder benefits. The statute does
not mandate coverage for either mental
health or substance use disorder bene-
2010–18 I.R.B.629May 3, 2010

fits. Thus, self-insured plans are free to
choose whether to provide mental health
or substance use disorder benefits; insured
plans may have to provide these benefits
under state laws. Either type of plan that
provides mental health or substance use
disorder benefits must do so in accordance
with MHPAEA’s parity provisions.
The Departments have crafted these
regulations to secure the protections in-
tended by Congress in as economically
efficient a manner as possible. Although
the Departments are unable to quantify the
regulations’ economic benefits, they have
quantified some of the costs and have pro-
vided a qualitative discussion of some of
the benefits and costs that may stem from
these regulations.
B.Statement of Need for Regulatory
Action
Congress directed the Departments
to issue regulations implementing the
MHPAEA provisions. In response to this
Congressional directive, these interim
final regulations clarify and interpret
the MHPAEA provisions under section
712ofERISA,section2705ofthePHS
Act, and section 9812 of the Code.
These regulations are needed to secure
and implement MHPAEA’s provisions
and ensure that the rights provided to
participants, beneficiaries, and other
individuals under MHPAEA are fully
realized. The Departments’ assessment
of the expected economic effects of these
regulations is discussed in detail below.
C.Executive Order 12866—Department
of Labor and Department of Health and
Human Services
Under Executive Order 12866 (58 FR
51735), the Department must determine
whether a regulatory action is “significant”
and therefore subject to review by the Of-
fice of Management and Budget (OMB).
Section 3(f) of the Executive Order defines
a “significant regulatory action” as an ac-
tion that is likely to result in a rule (1) hav-
ing an annual effect on the economy of
$100 million or more, or adversely and ma-
terially affecting a sector of the economy,
productivity, competition, jobs, the envi-
ronment, public health or safety, or State,
local or tribal governments or communi-
ties (also referred to as “economically sig-
nificant”); (2) creating a serious inconsis-
tency or otherwise interfering with an ac-
tion taken or planned by another agency;
(3) materially altering the budgetary im-
pacts of entitlement grants, user fees, or
loan programs or the rights and obligations
of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal
mandates, the President’s priorities, or the
principles set forth in the Executive Order.
The Departments have determined that this
regulatory action is economically signifi-
cant within the meaning of section 3(f)(1)
of the Executive Order, because it is likely
to have an effect on the economy of $100
million or more in any one year. Accord-
ingly, the Departments provide the follow-
ing assessment of its potential costs and
benefits. As elaborated below, the Depart-
ment believes that the benefits of the rule
justify its costs.
Table 1, below, summarizes the costs
associated with the rule. The estimates are
explained in the following sections. Over
the ten-year period of 2010 to 2019, the
total undiscounted cost of the rule is es-
timated to be $115 million in 2010 Dol-
lars. Columns E and F display the costs
discounted at 3 percent and 7 percent re-
spectively. Column G shows a transfer of
$25.6 billion over the ten-year period. All
other numbers included in the text are not
discounted, except where noted.
TABLE 1.—Total Costs of Rule (in Millions of 2010 Dollars)
Year
General
Review
(A)
Medical
Necessity
Disclosure
(B)
Single
Deductible
(C)
Total
Undiscounted
Costs
A+B+C
Total 3%
Discounted
Costs
(E)
Total 7%
Discounted
Costs
(F)
Transfer
(undiscounted)
(G)
2010
$27.8$1.2$39.2$68.2$68.2$68.2$2,360.0
2011
$0$1.2$3.9$5.2$5.0$4.8$2,400.0
2012
$0$1.2$3.9$5.2$4.9$4.5$2,430.0
2013
$0$1.2$3.9$5.2$4.7$4.2$2,4
60.0
2014
$0$1.2$3.9$5.2$4.6$3.9$2,510.0
2015
$0$1.2$3.9$5.2$4.4$3.7$2,570.0
2016
$0$1.2$3.9$5.2$4.3$3.4$2,620.0
201
7
$0$1.2$3.9$5.2$4.2$3.2$2,680.0
2018
$0$1.2$3.9$5.2$4.1$3.0$2,740.0
2019
$0$1
.2
$3
.9
$5
.2
$4
.0
$2
.8
$2
,810.0
To
tal
$114.6$108.4$101.8$25,600.0
Note: The displayed numbers are rounded to the nearest thousand and therefore may not add up to the totals.
The Departments performed a compre-
hensive, unified analysis to estimate the
costs and, to the extent feasible, provide
a qualitative assessment of benefits attrib-
utable to the regulations for purposes of
compliance with Executive Order 12866,
the Regulatory Flexibility Act, and the
Paperwork Reduction Act. The Depart-
ments’ assessment and underlying analysis
is set forth below.
1. Regulatory Alternatives
Section 6(a)(3)(C)(iii) of Executive Or-
der 12866 requires an economically sig-
nificant regulation to include an assess-
ment of the costs and benefits of poten-
May 3, 20106302010–18 I.R.B.

tially effective and reasonable alternatives
to the planned regulation, and an expla-
nation of why the planned regulatory ac-
tion is preferable to the potential alterna-
tives. As discussed earlier in this pream-
ble, the Departments considered the alter-
native of whether to require the same sep-
arately accumulating deductible for medi-
cal/surgical benefits and mental health or
substance use disorder benefits or a com-
bined deductible for such benefits.
The language of the statute can be
interpreted to support either alternative.
The comments that supported allowing
separately accumulating deductibles main-
tained that it is commonplace for plans to
have such deductibles, and that the pro-
jected cost of converting systems to permit
unified deductibles would be extremely
high for the many plans that use a separate
managed behavioral health organization
(MBHO).
8
By contrast, comments that
supported requiring combined deductibles
argued that allowing separately accumulat-
ing deductibles undermines a central goal
of parity legislation: to affirm that mental
health and substance use disorder benefits
are integral components of comprehen-
sive health care and generally should not
be distinguished from medical/surgical
benefits. Distinguishing between the two
requires individuals who need both kinds
of care to satisfy a deductible that is greater
than that required for individuals needing
only medical/surgical care. Other com-
ments that supported requiring combined
deductibles noted that mental health and
substance use disorder benefits typically
comprise only 2 to 5percent of a plan’s
costs, so that even using identical levels
for separately accumulating deductibles
imposes a greater barrier to mental health
and substance use disorder benefits.
The Departments carefully considered
the alternative of requiring separately
accumulating or combined deductibles.
Given that the statutory language does
not preclude either interpretation, the De-
partments choose to require combined
deductibles, because this position is more
consistent with the policy goals that led to
the enactment of MHPAEA.
2. Affected Entities and Other
Assumptions
The Departments expect MHPAEA
to benefit the approximately 111 million
participants in 446,400 ERISA-covered
employer group health plans, and an es-
timated 29 million participants in the
approximately 20,300 public, non-Federal
employer group health plans sponsored by
state and local governments.
9
In addition,
approximately 460 health insurance is-
suers providing mental health or substance
use disorder benefits in the group health
insurance market and at least 120 MBHOs
providing mental health or substance use
disorder benefits to group health plans are
expected to be affected.
10
3. Benefits
Congress first passed mental health par-
itylegislationin1996withtheenactment
of MHPA 1996.
11
As discussed earlier in
this preamble, this law requires health in-
surance issuers and group health plans that
offer mental health benefits to have aggre-
gate annual and lifetime dollar limits on
mental health benefits that are no more re-
strictive than those for all medical/surgical
benefits.
The impact of MHPA 1996 was limited,
however, because it did not require parity
with respect to day limits for inpatient or
outpatient care, deductibles, co-payments
or coinsurance, substance use disorder
benefits, and prescription drug coverage.
12
While a large majority of plans complied
with the MHPA 1996 parity requirement
regarding annual and lifetime dollar limits,
many employer-sponsored group health
plans contained plan design features that
were more restrictive for mental health
benefits than for medical/surgical benefits.
For example, data on private insurance
arrangements from the pre-MHPAEA era
show that after MHPA 1996, the most sig-
nificant disparities in coverage for mental
health substance use treatment involve
limits on the number of covered days of
inpatient care and the number of outpatient
visits. Survey data from the Kaiser/HRET
national employer survey shows that 64
percent of covered workers had more re-
strictive limits on the number of covered
hospital days for mental health care and 74
percent had more restrictive limits on out-
patient mental health visits. In addition,
22 percent of covered workers had higher
cost-sharing imposed on mental health
care benefits. Among those workers with
more restrictive limits on inpatient days,
77 percent had limits of 30 days or less.
13
For these reasons, as discussed more
fully below, the Departments expect that
MHPAEA and these regulations will have
their greatest impacton people needing
the most intensive treatment and financial
protection. The Departments do not have
an estimate of the number of individuals
who have exceeded the treatment limits.
However, according to the FEHBP data
used to analyze the FEHBP parity directive
in the year before its implementation,
the 90th percentile of the mental health
spending distribution was corresponded to
$2,134 in 1999 dollars. Among the people
spending at the 90th percentile or higher,
12% had inpatient psychiatric stays and
20% of those above the 90th percentile
had a diagnosis of schizophrenia or bipolar
disorder, chronic conditions requiring
prescription drugs and regular contact with
8
For a full discussion of the cost considerations involved with these alternatives, see section 4. b., below, Costs associated with cumulative financial requirements and quantitative treatment
limitations, including deductibles.
9
The Departments’ estimates of the numbers of affected participants are based on DOL estimates using the 2008 CPS. ERISA plan counts are based on DOL estimates using the 2008 MEP-IC
and Census Bureau statistics. The number of state and local government employer-sponsored plans was estimated using 2007 Census data and DOL estimates. Please note that the estimates
are based on survey data that is not broken down by the employer size covered byMHPAEA making it difficult to exclude from estimates those participantsemployed by employers who
employed an average of at least 2 but no more than 50 employees on the first day of the plan year.
10
The Departments’ estimate of the number of insurers is based on industry trade association membership. Please note that these estimates could undercount small state regulated insurers.
11
P.L. 104–204, title VII, 110 Stat. 2874, 2944–50.
12
GAO/HEHS–00–95,Implementation of the Mental Health Parity Act.In the report, GAO found that 87 percent of compliant plans contained at least one more restrictive provision for
mental health benefits with the most prevalent being limits on the number of outpatient office visits and hospital day limits.Id.at 5.
13
Barry, Colleen,et al.“Design of Mental Health Benefits: Still Unequal After All These Years,”Health AffairsVol. 22, Number 5, 2003. Please note that the baseline data from the Kaiser
HRET survey cited in this article are weighted by region, firm size and industry to reflect the national composition of employers. So the data cited establishing the baseline reflects the impact
of state parity laws. It is important to realize that state parity laws frequently focus on a subset of diagnoses,e.g.biologically based disorders, and do not apply to self-funded insurance
programs. Thus, in most states only a minority of insurance contracts is affected by state parity laws.
2010–18 I.R.B.631May 3, 2010

mental health service providers. It is this
group that experienced especially large
declines in out of pocket payments after
FEHBP implemented parity.
Treatment for alcohol abuse disorders
showed a similar trend: Surveys indicate
that 74 percent of private industry employ-
ees were covered by plans that imposed
more restrictive limits for inpatient detox-
ification benefits than medical and surgi-
cal benefits, 88 imposed more restrictive
limits for inpatient rehabilitation, and 89
percent imposed more restrictive limits for
outpatient rehabilitation.
14
After MHPA 1996, many states also
passed mental health parity laws. Re-
search focused on the impacts of parity
laws found that similar to MHPA 1996,
even the most comprehensive state laws
resulted in little or no increase in access
to and utilization of mental health services
for covered individuals.
15
To address these issues, Congress
amended MHPA 1996 by enacting
MHPAEA. One of Congress’ primary
objectives in enacting MHPAEA was
to improve access to mental health
and substance use disorder benefits by
eliminating discrimination that existed
with respect to these benefits after MHPA
1996. Congress’ intent in enacting
MHPAEA was articulated in a floor
statement from Representative Patrick
Kennedy (D-RI), one of the chief sponsors
of the legislation, who said “[a]ccess to
mental health services is one of the most
important and most neglected civil rights
issues facing the Nation. For too long,
persons living with mental disorders have
suffered discriminatory treatment at all
levels of society.”
16
In a similar statement,
Representative James Ramstad (R-MN)
said, “[i]t’s time to end the discrimination
against people who need treatment for
mental illness and addition. It’s time
to prohibit health insurers from placing
discriminatory barriers on treatment.”
17
The Departments expect that the largest
benefit associated with MHPAEA and
these regulations will be derived from
applying parity to cumulative quantita-
tive treatment limitations such as annual
or lifetime day or visit limits (visit lim-
itations). As discussed above, a large
percentage of plans imposed visit limita-
tions pre-MHPAEA, and the GAO found
that a major shortcoming of MHPA 1996
was its failure to apply parity to visit
limitations. Applying parity to visit lim-
itations will help ensure that vulnerable
populations — those accessing substantial
amounts of mental health and substance
use disorder services — have better ac-
cess to appropriate care. The Departments
cannot estimate how large this benefit will
be, because sufficient data is not available
to estimate the number of covered indi-
viduals that had their benefits terminated
because they reached their coverage limit.
Though difficult to estimate, the number
of beneficiaries who have a medical ne-
cessity for substantial amount of care are
likely to be relatively small. Severe mental
health disorders account for 2–3 percent
of people in private health insurance plans
and a substantially larger share of mental
health spending. Evidenced-based treat-
ments for severe and persistent mental
illnesses like schizophrenia, bipolar disor-
der and chronic major depression requires
prolonged (possibly lifetime) maintenance
treatment that consists of pharmacother-
apy, supportive counseling and often
rehabilitation services.
18
The most com-
mon visit limits under current insurance
arrangements are those for 20 visits per
year. That means assuming a minimal ap-
proach to treatment of one visit per week,
people with severe and persistent men-
tal disorders will exhaust their coverage
in about five months. This often results
in people foregoing outpatient treatment
and a higher likelihood of non-adherence
to treatment regimes that produce poor
outcomes and the potential for increased
hospitalization costs.
Increased coverage also should pro-
vide enhanced financial protection for
this group by reducing out-of-pocket ex-
penses for services that previously were
needed but uncovered. This should help
prevent bankruptcy and financial distress
for these individuals and families and re-
duce cost-shifting of care to the public
sector, both of which occur when cov-
ered benefits are exhausted. In addition,
increased coverage for those seeking sub-
stantial amounts of care potentially could
reduce emergency room use by ensuring
that benefits for individuals with serious
conditions are not terminated. Finally,
reduced entry into disability programs
may result from having more complete
insurance coverage for mental health and
substance use disorder treatment.
Since the early 1990s, many health in-
surers and employers have made use of
specialized vendors, known as behavioral
health carve-outs to manage their mental
health and substance abuse benefits. These
vendors have specialized expertise in the
treatment of mental and addictive disor-
ders and organized specialty networks of
providers. These vendors are known as be-
havioral health carve-outs. They use in-
formation technology, clinical algorithms
and selective contracts to control spend-
ing on mental health and substance abuse
treatment. There is an extensive litera-
ture that has examined the cost savings and
impacts on quality of these organizations.
Researchers
19
have reviewed this litera-
ture and estimated reductions in private in-
surance spending of 20 percent to 48 per-
cent compared to fee-for-service indem-
nity arrangements. Also, it appears that
the rate of utilization of mental health care
rises under behavioral health carve out ar-
rangements. The number of people receiv-
ing inpatient psychiatric care typically de-
clines as does the average number of out-
patient visits per episode.
14
Morton, John D. and Patricia Aleman. “Trends in Employer-provided Mental Health and Substance Abuse Benefits.”Monthly Labor Review, April 2005.
15
Id., at 9. The state mental health parity laws varied significantly with most ofdifferences related the following areas: the type of mental health mandate, definition of mental illness, the
inclusion of substance abuse coverage, small employers’ coverage, and cost increase exceptions. Few state laws provide as extensive coverage as MHPAEA, particularly with regard to its
prohibition of visit limitations.
16
153Cong. Rec. S1864–5 (daily ed., February 12, 2007).
17
154Cong. Rec. H8619 (daily ed., September 23, 2008).
18
See, Lehman AF “Quality of care in mental health: the case of schizophrenia” Health Affairs 18(5): 52–65.
19
Sturm R, “Tracking changes in behavioral health services: How carve-outs changed care?” Journal of Behavioral Health Services and Research 26(4): 360–371, 1999. Frank RG and
Garfield RL; “Managed Behavioral Health Carve-Outs: Past Performance and Future Prospects”Annual Reviews of Public Health 2007, 28:11; 1–18. Frank RG and Garfield RL; “Managed
Behavioral Health Carve-Outs: Past Performance and Future Prospects”Annual Reviews of Public Health 2007, 28:11; 1–18.
May 3, 20106322010–18 I.R.B.

The OPM encouraged its insurers to
consider carve-out arrangements when im-
plementing the parity directive in 2000 for
the FEHBP. This is because of the ability of
behavioral health carve-outs to use utiliza-
tion management tools to control utiliza-
tion and spending in the face of reductions
in cost-sharing and elimination of limits.
Thus, parity in a world dominated by be-
havioral carve-outs has meant increased
utilization rates, reduced provider fees, re-
duced rates of hospitalization and fewer
very long episodes of outpatient care. In-
tensive treatment was more closely aligned
with higher levels of severity.
Another potential benefit associated
with MHPAEA and these regulations is
that use of mental health and substance
use disorder benefits could improve.
20
Untreated or under treated mental health
conditions and substance use disorders are
detrimental to individuals and the entire
economy. Day and visit limits can inter-
fere with appropriate treatment thereby
reducing the impact of care for workers
seeking treatment. Many people with
mental health conditions and substance
use disorders are employed and these de-
bilitating conditions have a devastating
impact on employee attendance and pro-
ductivity, which results in lost productivity
for employers and lost earnings for em-
ployees. For example, studies have shown
that the high prevalence of depression and
the low productivity it causes have cost
employers $31 billion to $51 billion an-
nually in lost productivity in the United
States.
21
More days of work loss and work
impairment are caused by mental illness
than by various other chronic conditions,
including diabetes and lower back pain.
22
Moreover, studies have consistently
found that workers who report symptoms
of mental disorders have lower earnings
than other similarly-situated coworkers.
For example, a recent study funded by
the National Institutes of Health’s Na-
tional Institute of Mental Health
23
found
that mental disorders cost employees at
least $193 billion annually in lost earnings
alone, a staggering number that proba-
bly is a conservative estimate because it
did not include the costs associated with
people in hospitals and prisons, and in-
cluded very few participants with autism,
schizophrenia and other chronic illnesses
that are known to greatly affect a person’s
ability to work. The study also noted that
individuals suffering from depression earn
40 percent less than non-depressed indi-
viduals.
Although accurately determining cause
and effect can be difficult, studies have at-
tempted to estimate the beneficial impact
of treating mental disorders. One study
found that treating individuals suffering
from mental disorders helped close the gap
in productivity between those with men-
tal disorders and those who did not have
a mental disorder.
24
The finding that treat-
ment can help increase the productivity of
those suffering from mental illness sug-
gests that increasing access to treatment
of mental disorders could have a benefi-
cial impact on lost productivity cost and
lost earnings that stem from untreated and
under treated mentalhealth conditions and
substance use disorders. The Departments,
however, do not have sufficient data to de-
termine whether this result will occur, and,
if it does, the extent to which lost produc-
tivity cost and lost earnings could improve.
As noted above the combination of re-
duced cost sharing and the elimination of
day and visit limits have the effect of mak-
ing coverage more complete. The dom-
inant role of managed behavioral health
care in the market and the evidence about it
success in controlling costs means that the
moral hazard problem can be controlled
(the evidence on this is discussed in more
detail below). The implication is that more
complete financial protection can be of-
fered to people without a significant in-
crease in social costs. This implies im-
proved efficiency inthe insurance market
since more efficient risk spreading would
occur without much welfare loss due to
moral hazard.
In order to comply with MHPAEA and
these regulations, cost-sharing require-
ments for mental health and substance
use disorder benefits cannot be any more
restrictive than the predominant cost-shar-
ing requirement applied to substantially
all medical/surgical benefits. Because
expenditures on mental health and sub-
stance use disorder benefits only comprise
3–6 percent of the total benefits covered
by a group health plan and 8 percent of
overall healthcare costs,
25
the Depart-
ments expect that group health plans will
lower cost-sharing on mental health and
substance use disorder benefits instead of
raising cost-sharing on medical/surgical
benefits.
MHPAEA and these interim final regu-
lations could have a positive impact on the
delivery system of mental health services.
Currently, approximately half of mental
health care is delivered solely by primary
care physicians.
26
This trend is likely due
in part to the large discrepancies between
20
While studies have shown that state parity laws have increased access only marginally, most state laws still allowed disparate treatment limits for mental health conditions and substance
use disorders, which limited access for those needing significant amounts of treatment. As discussed above, MHPAEA and these regulations prohibit the imposition of such disparate limits,
which could increase access for those individuals. Nine states have treatment limit requirements similar to MHPAEA for mental health benefits, while 10 states have similar requirements for
substance abuse disorder benefits.
21
Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R. & Morgenstein, D. (2003, June 18). “Cost of lost productive work time among US workers with depression.”JAMA: Journal of the American
Medical Association.289,23, 3135–3144.
Kessler,R.C.,Akiskal,H.S.,Ames,M.,Birnbaum,H.,Greenberg,P.,Hirschfeld,H.M.A.et al.(2006). “Prevalence and effects of mood disorders on work performance in a nationally
representative sample of U.S. workers.”American Journal of Psychiatry, 163, 1561–1568.
22
Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R. & Morgenstein, D. (2003, June 18). “Cost of lost productive work time among US workers with depression.”JAMA: Journal of the American
Medical Association.289,23, 3135–3144.
23
Kessler, Ronald C., Steven Heeringa, Matthew D. Lakoma, Maria Petukhova, Agnes E. Rupp, Michael Schoenbaum, Philip S. Wang, and Alan M. Zaslavsky. “Individual and Societal
Effects of Mental Disorders on Earnings in the United States:Results From the National Comorbidity Survey Replication.”
The American Journal of Psychiatry; June 2008; 165, 6; Research Library pg. 703.
24
Hilton, Michael F., Paul A. Schuffham, Judith Sheridan, Catherine M. Clearly, Neria Vecchio, and Harvey A. Whiteford. “The Association Between Mental Disorders and Productivity in
Treated and Untreated Employees.”Journal of Occupational and Environmental Medicine. Volume 51, Number 9, September 2009.
25
Finch R.A., Phillips K.. Center for Prevention and Health Services. “An Employer’s Guide to Behavioral HealthServices: A Roadmap and Recommendations for Evaluating Designing,
and Implementing Behavioral Health Services.” National Business Group on Health 2005.
26
Wang, P.S., Lane, M., Olfson, M., Pincus, H.A., Wells, K.B., and Kessler, R.C. (2005, June). “Twelve month use of mental health services in the United States.”Archives of General
Psychiatry, 62, 629–640. The study found that 40 percent of people reporting mental health and substance use disorders receive some treatment in a year.
2010–18 I.R.B.633May 3, 2010

insurance cost-sharing for services deliv-
ered by mental health professionals and
primary care physicians. Historically, the
cost-sharing associated with primary care
physician visits is lower than cost-shar-
ing for mental health professional visits.
This difference in the relative price en-
couraged patients suffering from mental
illness to visit primary care physicians
for mental health-related conditions. If
MHPAEA and these regulations result in
lowering the relative price of mental health
care, more individuals suffering from
mental illness could visit and receive care
from mental health professionals. One
study
27
foundthatonly12.7percentof
individuals treated in the general medical
sector received at least minimally adequate
mental health care compared to 48.3
percent of patients treated in the specialty
mental health sector.
28
Ashiftinsource
of treatment from primary care physicians
to mental health professionals could lead
to more appropriate care, and thus, better
health outcomes.
29
The Departments,
however, do not have sufficient data to
estimate how large this shift in treatment
could be or determine whether it will
occur.
Mental health and physical health are
interrelated, and individuals with poor
mental health are more likely to have phys-
ical health problems as well. Increased
access and utilization of mental health
and substance use disorder benefits could
result in a reduction of medical/surgical
costs for individuals afflicted with mental
health conditions and substance use dis-
orders. The decrease in medical/surgical
costs could be significant; however, the
Departments do not have sufficient data
to estimate how large these health care
spending offsets could be or determine
whether they will occur.
There is disagreement among experts
as to whether depression is an important
antecedent risk factor for physical illness
or whether the causal relationship acts in
the opposite direction. Regardless, there is
evidence that comorbid depression wors-
ens the prognosis, prolongs recovery and
may increase the risk of mortality associ-
ated with physical illness. In addition, co-
morbid depression has been shown to in-
crease the costs of medical care, over and
above the costs of treating the depression
itself.
30
The returns on investment from treat-
ment of substance use disorders can be
large.
31
Studies in Washington state clin-
ics demonstrated that each dollar invested
in inpatient and outpatient substance abuse
treatment yielded returns of about 10
and 23 times their initial investments, re-
spectively.
32
California and Oregon state
treatment systems demonstrated a seven-
fold return in their investments.
33
Other
studies show effects ranging from a return
of one and a half times the cost in a large
study of a treatment clinic in Chicago to
a return of 5 times the initial investment
for a treatment for mentally ill chemical
abusers,
34
resulting in a net benefit of
about $85,000 per client for an investment
of nearly $20,000.
35
4. Costs
a.Cost associated with increased uti-
lization of mental health and substance use
disorder benefits. As discussed in the Ben-
efits section earlier in this preamble, one of
Congress’ primary objectives in enacting
MPHAEA was to eliminate barriers that
impede access to and utilization of mental
health and substance use disorder benefits.
This has raised concerns among some that
increased access and utilization of mental
health and substance use disorder benefits
will result in increases in associated pay-
ments and plan expenditures, which could
lead to large premium increases that will
make mental health and substance use dis-
order benefits unaffordable. The Depart-
ments are uncertain regarding the level of
increased costs and premium increases that
will result from MHPAEA and these regu-
lations, but there isevidence that any in-
creases will not be large.
One theory for increased costs re-
sulting from parity is based on the fact
that cost-sharing for mental health and
substance use disorder benefits will de-
crease. A frequent justification for higher
cost-sharing of mental health and sub-
stance use disorder benefits is the greater
extent of moral hazard for these benefits;
individuals will utilize more mental health
and substance use disorder benefits at a
higher rate when they are not personally
required to pay the cost. To support this
27
Wang, P.S., Lane, M., Olfson, M., Pincus, H.A., Wells, K.B., and Kessler, R.C. (2005, June). “Twelve month use of mental health services in the United states.”Archives of General
Psychiatry, 62, 629–640.
28
Another analysis demonstrating poor adherence to evidence-based treatment for mental disorders is:
Wa
ngPS,BerglundP,KesslerRC,Journal of General Internal Medicine. 2000; 15:284–292. Recent care of common mental disorders in the United States: prevalence and conformance
w
ith evidence-based recommendations. This study finds that only 57.3 percent of people with major depression receive treatment during a year and lessthan one-third of those who receive
t
reatment receive effective treatment.
B
ased on expert opinion, Normandet al.rated the likely effectiveness of combinations of general medical visits, specialty visits (with psychotherapy)and drug treatment to demonstrate
t
he correlation between adequate treatment for depression and the probability of remission. For patients with no anti-depressant medication, the probability of remission increased as the
number of specialty visits increased from one or less during a year to ten or more. The probability of remission was greater for patients with antidepressant medication and improved with
more specialty visits during the year. Normand SLT, Frank RG, McGuire, TG. “Using elicitation techniques to estimate the value of ambulatory treatments for depression.” Medical Decision
Making, 2001; 22: 245–261.
29
The Healthcare Effectiveness Data and Information Set report card for 2007 produced by National Center for Quality Assurance shows that for treatment of depression, only 20 percent of
patients get appropriate levels of provider contacts; about 45 percent receive appropriate maintenance level medications and 62 percent obtain adequate medication doses and duration during
the acute phase of illness.
30
Conti R, Berndt ER, Frank RG. “Early retirement and DI/SSI applications: exploring the impact of depression”, in Culter DM, Wise DA.Health in Older Ages:The causes and consequences
of declining disability among the elderly, (Chicago: National Bureau of Economic Research, 2008).
31
The Office of National Drug Control Policy has information on effective treatment and cost savings atwww.whitehousedrugpolicy.gov.
32
French, M. T., H. J. Salome, A. Krupski, J. R. McKay, D. M. Donovan, A. T. McLellan, and J. Durrell. (2000). “Benefit-cost analysis of residential and outpatient addiction treatment in
the State of Washington.”Evaluation Review, 24(6), 609–634.
33
Ettner, S. L., D. Huang, E. Evans, D. R. Ash, M. Hardy, M. Jourabchi, and Y. Hser. (2006). “Benefit-Cost in the California Treatment Outcome Project: Does Substance Abuse Treatment
‘Pay for Itself?’”Health Services Research, 41(1), 192–213.
34
French, M.T., K. E. McCollister, S. Sacks, K. McKendrick, & G. De Leon. (2002). “Benefit cost analysis of a modified therapeutic community for mentally ill chemical abusers.”Evaluation
and Program Planning, 25, 137–148.
35
The returns are the ratio of benefits to costs. Benefits include personal aswell as societal benefits including increased employment and reduced crime.
May 3, 20106342010–18 I.R.B.

assumption, many have cited the RAND
Health Insurance Experiment, conducted
in 1977–1982, which demonstrated that
individuals are more likely to increase
their mental health care usage when their
personal cost-sharing for mental health
care services fall than they are to increase
their physical health care usage when their
personal cost-sharing for physical health
care services decreases. Because this
experiment was conducted nearly thirty
years ago, researchers recently tested to
determine whether this result held true.
36
Their results indicate that individuals’
sensitivity to changes in cost-sharing may
have changed significantly over time.
These changes are explained at least in
part due to the expansion of managed
behavioral health care (described ear-
lier). The authors found that individuals’
price responsiveness of ambulatory mental
health treatment is now slightly lower than
physical health treatment. These results
indicate that if plans lower the cost-shar-
ing associated with mental health services,
costs will not rise as much as would be
expected using the results from the RAND
Experiment.
37
When the RAND Experiment was con-
ducted, managed care was not nearly as
prevalent as it is today. Health care econo-
mists have studied the impact of using cost
control techniques associated with man-
aged care to reduce thequantity of mental
health and substance use disorder benefits
utilized so that lowered cost sharing may
result in only a small increase in spend-
ing.
38
This research concluded that “com-
prehensive parity implemented in the con-
text of managed care would have little im-
pact on total spending.”
39
These findings were similar to those of
a recent study published in the New Eng-
land Journal of Medicine examining the
Federal Employees Health Benefits Pro-
gram (FEHBP), which implemented parity
for mental health and substance use disor-
der benefits in 2001.
40
The primary con-
cern has been that the existence of par-
ity in the FEHBP would result in large
increases in the use of mental health and
substance-abuse services and spending on
these services. However, the study con-
cluded that these fears were unfounded and
“that parity of coverage of mental health
and substance-abuse services, when cou-
pled with management of care, is feasi-
ble and can accomplish its objectives of
greater fairness and improved insurance
protection without adverse consequences
for health care costs.”
41
The study found
average per user declines in out patient
cost sharing of between zero and $87 de-
pending on the plan. The reductions were
largest for high users of mental health care.
The study also found that insurers were not
likely to drop out of the FEHBP pool due
to the implementation of parity.
The experience of states that have
enacted mental health parity laws with
appropriate managedcare also suggests
that minimal increased cost results from
implementing parity. One study found
that “with the implementation of mental
health parity at the same time as man-
aged behavioral health care, many states
have discovered thatoverall health care
costs increased minimally and in some
cases even were reduced.”
42
For exam-
ple, at least nine states — California,
Maine, Maryland, Minnesota, North Car-
olina, Pennsylvania, Rhode Island, South
Carolina, and Vermont — have actually
documented experience that implement-
ing mental health parity including cost
controls through managed care resulted in
lower costs and lowered premiums (or at
most, very modest cost increases of less
than one percent) within the first year of
implementation.
43
Similarly, the Departments expect med-
ical management and managed care tech-
niques will help control any major cost im-
pact resulting from MHPAEA and these
regulations. As discussed earlier in this
preamble, these regulations provide that
medical management can be applied to
mental health and substance use disorder
benefits by plans as long as any processes,
strategies, evidentiary standards, or other
factors used in applying medical manage-
ment are comparable to, and are applied
no more stringently than, the processes,
strategies, evidentiary standards, or other
factors used in applying medical manage-
ment to medical/surgical benefits.
Although the increase in per plan costs
associated with parity is not likely to be
substantial, there may be plans that de-
cide to drop coverage for mental health and
substance use disorder benefits in response
to higher costs, or individuals may decide
to drop coverage even if it is offered. The
Departments do not have an estimate of the
number of plans that will drop coverage
or the number of individuals that will lose
benefits. Currently 98 percent of covered
workers have some form of mental health
benefits.
44
The lack of coverage for mental
health and substance use disorder benefits
for these people may lead to many of the
typical costs associated with uninsured in-
dividuals: lack of access, decreased health,
and increased financial burden. The De-
partments are not able to quantify these
costs. Research on the introduction of state
parity laws suggests few plans or individ-
36
Meyerhoefer, Chad D. and Samuel Zuvekas, 2006. “New Estimates of the Demand for Physical and Mental Health Treatment.” Agency for Healthcare Research and Quality Working Paper
No. 06008
37
Another paper showing a similar result to the Myerhoefer paper cited aboveis: Lu CL, Frank, RG and McGuire TG. “Demand Response Under Managed Care.”Contemporary Economic
Policy, 27(1):1–15, 2009.
38
Barry, Frank, and McGuire. “The Costs of Mental Health Parity: Still an Impediment?”Health Affairs, no. 3:623 (2006).
39
Id.
40
Goldman,et al., “Behavioral Health Insurance Parity for Federal Employees,” New England Journal of Medicine (March 30, 2006) Vol. 354, No. 13. In 1999, President Clinton directed
the Office of Personnel Management (OPM) to equalize benefits coverage in the FEHBP, and parity was implemented in 2001. Parity under the FEHBP is verysimilar to MHPAEA. It requires
benefits coverage for plan mental health, substance abuse, medical, surgical, and hospital providers to have the same limitations and cost-sharingsuch as deductibles, coinsurance, and co-pays.
When patients use plan providers and follow a treatment regime approved bytheir plan, all diagnostic categories of mental health and substance abuseconditions listed in the Diagnostic and
Statistical Manual of Mental Disorders, Fourth Edition (DSM IV) are covered.
41
Id.
42
Melek, Steve, “The Costs of Mental Health Parity,”Health Section News(March 2005).
43
Bachman, Ronald,Mental Health Parity — Just the Facts(2000).
44
Kaiser Family Foundation and Health Research & Educational Trust.Employer Health Benefits 2008 Annual Survey.
2010–18 I.R.B.635May 3, 2010

uals will drop insurance coverage due to
parity.
45
b.Costs associated with cumula-
tive financial requirements and quan-
titative treatment limitations, including
deductibles. As discussed earlier in this
preamble, paragraph (c)(3)(v) of these
regulations provide that a group health
plan may not apply cumulative finan-
cial requirements, such as deductibles,
for mental health and substance use dis-
order benefits in a classification that
accumulate separately from any such re-
quirements or limitations established for
medical/surgical benefits in the same clas-
sification. Some group health plans and
health insurance issuers “carve-out” the
administration and management of mental
health and substance use disorder benefits
to MBHOs. These entities obtain cost
savings for plan sponsors by providing
focused case management and directing
care to a broad network of mental and
behavioral health specialists (with whom
they negotiate lower fees) who ensure
that appropriate care for mental health
conditions and substance use disorders is
provided.
46
When a group health plan or health
insurance issuer uses a carve-out arrange-
ment, at least two entities are involved in
separately managing and administering
medical/surgical and mental health and
substance use disorder benefits.
47
The
imposition of a single deductible requires
entities providing medical/surgical and
mental health and substance use disorder
benefits to develop and program a com-
munication network often referred to as an
“interface” or an “accumulator” that will
allow them to exchange the data necessary
to make timely and accurate determina-
tions of when participants have incurred
sufficient combined medical/surgical and
mental health and substance use disorder
expenses to satisfy the single deductible.
Two comments received in response
to the RFI indicate that MBHOs would
confront significant costs to develop
real-time interfaces that could range from
$420,000-$750,000 with an additional
$40,000-$70,000 required for annual
maintenance.
48
The Departments held dis-
cussions with the regulated community
which indicated that interface develop-
ment costs may not be as high as stated
in the RFI comments. For example, the
Departments have learned that MBHOs
could develop less costly “batch process”
interfaces that exchange data on a daily or
weekly basis rather than real-time for as
low as approximately $35,000 per inter-
face.
49
It also appears that some plan sponsors
using carve-out arrangements already are
implementing a unified, single deductible,
and MBHOs have created interfaces to
service these clients. For example, the
Departments’ discussions found that one
MBHO already has established 10–15
accumulators, because its plan sponsor
clients requested a single deductible. The
MBHO reported that another 10–15 accu-
mulators were being implemented for the
current benefit year, because plan sponsors
wanted to ensure thatthey were compliant
with MHPAEA. This finding suggests that
while costly, puttingthese accumulators
in place is not cost prohibitive for the
MBHOs and plan sponsors. Moreover,
plans and issuers have created and used
interfaces with separate pharmacy benefit
managers and dental insurers for years.
Interface development costs should de-
crease after the firstinterface is created.
The experience and lessons learned from
creating these interfaces should reduce the
cost associated withdesigning and imple-
menting interfaces with MBHOs.
While the RFI comment letters sug-
gested that MBHOs would have to create
40–50 interfaces each, this number most
likely only relates to the largest MBHOs.
The smallest MBHOs would need to create
fewer interfaces. The Departments as-
sume that a significant number of smaller
MBHOs exist; therefore, the Departments
estimate that, on average, seven interfaces
would have to be created per insurer. The
Departments acknowledge that there is un-
certainty in this estimate due to incomplete
information about the MBHO industry.
For purposes of this analysis, the De-
partments have used an estimated interface
development cost of $35,000 per interface,
because the Departments were not able to
substantiate the higher estimated costs pro-
vided in the RFI comment letters, and the
propensity of the evidence leads to the con-
clusion that the cost could be significantly
less. Based on the foregoing, the Depart-
ments estimate total interface development
costs of approximately $39.2 million.
50
Once the interfacesare created, ongo-
ing annual maintenance costs will be in-
curred. One industry source suggested
that ongoing maintenance costs could be
one-tenth of the development costs, and
based on this information, the Departments
estimate that maintenance cost of $3.9 mil-
lion will be incurred annually after the in-
terfaces are created.
While the total interface development
and maintenance costs are large, a useful
measure to examine is the per-participant
cost impact. While reliable estimates
of the number of participants enrolled
in plans utilizing MBHOs are not avail-
able, based on the best available infor-
mation, the Departments estimate that
at least 70 million participants are cov-
ered by MBHOs. Based on this count,
the per-participant first year interface
development costs would be $0.60, and
the maintenance costs in subsequent years
would be less than one cent.
Comments from health insurance is-
suers have suggested that the costs of
45
Cseh, Attila. “Labor Market Consequences of State Mental Health Parity Mandates,” Forum for Health Economics & Policy, Vol. 11, issue 2, 2008.
46
Research papers have indicated that carve-out arrangements have reduced the cost of proving mental health and substance use disorder benefits by an estimated 25–40 percent. Frank,
Richard G. and Thomas G. McGuire, “Savings from a Carve-Out Program for Mental Health and SubstanceAbuse in Massachusetts Medicaid” Psychiatric Services 48(9); 1147–1152, 1997;
Ma, Ching-to Albert and Thomas G. McGuire, “Costs and Incentives in a Behavioral Health Carve-out.Health AffairsMarch/April 1998.
47
This can create a coordination issue that has cost implications that otherwise do not exist when a single vendor is used.
48
RFI comments. MHPAEA RFI comments can be viewed athttp://www.dol.gov/ebsa/regs/cmt-MHPAEA.html.
49
An additional undetermined expense would be required to reconcile and make adjustments in instances when two claims are received on the same day satisfying the unified deductible.
While this alternative would produce a much lower cost than real-time interfaces, the costs remain significant. A low-end estimate of the first year cost for MBHOs and insurers to create, on
average, at least 20 new interfaces would be $700,000 per insurer. There is uncertainty regarding the total cost,because the number of entities that would need to create interfaces is unclear.
The Departments are aware of 460 health insurance issuers and at least 120 MBHOs that could be affected.
50
Please note that using the $420,000 per interface estimate cited in the RFI comment letters would result in total interface development costs of $470 million, with annual maintenance costs
of $47 million. Based on this estimate, the per-participant first year interface development costs would be $7, and the annual maintenance costs in subsequent years would be $.06 cents per
participant per month.
May 3, 20106362010–18 I.R.B.

creating these interfaces would be passed
on to participants in the form of higher
premiums; however, no independent in-
formation has been found to corroborate
this assertion.
c.Compliance review costs.TheDe-
partments expect that group health plans
and health insurance issuers will conduct
a compliance review to ensure that their
plan documents, summary plan descrip-
tions, and any associated policies and pro-
cedures comply with therequirementsof
MHPAEA and these regulations. While
the Departments do not know the total
number of issuers that will be affected by
the regulations, the Departments estimate
that there are approximately 460 issuers
operating in the group market. In addi-
tion, the Departments are aware of at least
120 MBHOs.
51
The Departments believe
smaller MBHOs exist but were unable to
obtain a count.
The Departments assume that insured
plans will rely on the issuers providing
coverage to ensure compliance, and that
self-insured plans will rely on third-party
administrators to ensure compliance. The
per-plan compliance costs are expected to
be low, because vendors and issuers will
be able to spread these costs across multi-
ple client plans. These regulations provide
examples illustrating the application of the
rules to specific situations, which are in-
tended to reduce the compliance burden.
The Departments assume that the aver-
age burden per plan will be one-half hour
of a legal professional’s time at an hourly
labor rate of $120 to conduct the compli-
ance review and make the needed changes
to the plan and related documents. This re-
sults in a total cost of $27.8 million in the
first year. The Departments welcome pub-
lic comments on this estimate.
d.Costs associated with MHPAEA dis-
closures. MHPAEA and these regulations
contain two new disclosure provisions for
group health plans and health insurance
coverage offered in connection with a
group health plan that are addressed in
paragraph (d) of the rules.
(1)Medical necessity disclosure.The
first disclosure requires plan administra-
tors to make the plan’s medical necessity
determination criteria available upon re-
quest to potential participants, beneficia-
ries, or contracting providers. The De-
partments are unable to estimate with cer-
tainty the number of requests that will be
received by plan administrators based on
this requirement. However, the Depart-
ments have assumed that, on average, each
plan affected by the rule will receive one
request. For purposes of this estimate,
the Departments assume that it will take
a medically trained clerical staff member
five minutes to respond to each request
at a labor rate of $26.85 per hour result-
ing in an annual cost of approximately
$1,044,000.
52
The Departments also estimated the
cost to deliver the requested criteria for
medical necessity determinations. Many
insurers already have the information pre-
paredinelectronicform,andtheDepart-
ments assume that 38 percent
53
of requests
will be delivered electronically resulting
in ade minimiscost. The Departments
estimate that the cost associated with
distributing the approximately 290,000 re-
quests sent by paper will be approximately
$192,000.
54
(2)Claims denial disclosure.
MHPAEA and these regulations also
provide that the reason for any denial
under a group health plan (or health
insurance coverage) of reimbursement
or payment for services with respect to
mental health or substance use disorder
benefits in the case of any participant or
beneficiary must be made available upon
request or as otherwise required by the
plan administrator (orthe health insurance
issuer offering such coverage) to the
participant or beneficiary. The Department
of Labor’s ERISA claims procedure
regulation (29 CFR 2560.503–1) requires,
among other things, such disclosures to
be provided automatically to participants
and beneficiaries free of charge. Although
non-ERISA covered plans, such as plans
sponsoredbystateandlocalgovernments
that are subject to the PHS Act, are not
required to comply with the ERISA claims
procedure regulation, these regulations
provide that such plans (and health
insurance coverage offered in connection
with such plans) will be deemed to satisfy
the MHPAEA claims denial disclosure
requirement if they comply with the
ERISA claims procedure regulation.
For purposes of this cost analysis,
the Departments assume that non-Fed-
eral governmental plans will satisfy the
safe harbor, because the same third-party
administrators and insurers are hired by
ERISA- and non-ERISA-covered plans,
and these entities provide the same claims
denial notifications to participants cov-
ered by ERISA- and non-ERISA-covered
plans. Therefore, based on the foregoing,
the Departments havenot included a cost
for plans to provide the claims denial dis-
closures.
5. Transfer resulting for premium increase
due to MHPAEA
The evaluation of mental health and
substance use disorder parity in the Fed-
eral Employees Health Benefit Program
(FEHBP) estimated the overall impact of
parity on total spending for mental health
and substance use disorder services rel-
ative to a set of control plans that did
not experience any increase in mental
health coverage.
55
That evaluation also as-
sessed changes in out-of-pocket spending.
The overall results on total mental health
and substance use disorder (MH/SUD)
spending (health plan spending plus out
of pocket spending) showed essentially
no significant increase in total MH/SUD
spending. The evaluation also showed
that in general parity resulted in a statisti-
cally significant decrease in out-of-pocket
spending. This means that while there
was no increase in the total spending on
MH/SUD services there was a significant
shift in the final responsibility for pay-
ing for these services. In other words,
health plan spending expanded due to par-
51
There are about 460 issuers in the group market; this is an average of 1,000 plans per issuers. In addition, there are at least 120 MBHOs.
52
EBSA estimates of labor rates include wages, other benefits, and overhead based on the National Occupational Employment Survey (May 2008, Bureau of Labor Statistics) and the Em-
ployment Cost Index (June 2009, Bureau of Labor Statistics).
53
For purposes of this burden estimate, the Departments assume that 38 percent of the disclosures will be provided through electronic means in accordance with the Department’s standards
for electronic communication of required information provided under 29 CFR 2520.104b–1(c).
54
This estimate is based on an average document size of four pages, $.05cents per page material and printing costs, $.44 cent postage costs.
55
Goldman,et al., “Behavioral Health Insurance Parity for Federal Employees,” New England Journal of Medicine (March 30, 2006) Vol. 354, No. 13.
2010–18 I.R.B.637May 3, 2010

ity. The magnitude of the change implies
an estimated increase in total health care
premiums of 0.4 percent.
56
Thus the 0.4
percent increase derived from the FEHBP
evaluation is due entirely to a shift in final
responsibility for payment.
The Congressional Budget Office
57
es-
timated the direct and indirect costs to the
private and public sector of implementing
MHPAEA and similarly found that health
insurance premiums would go up by ap-
proximately 0.4 percent. The FEHBP esti-
mate contrasts with the CBO estimate, be-
cause the CBO estimate appears to include
some shift in final payment along with an
increase in service utilization.
The Departments estimate that total
health care premiums will rise 0.4 per-
cent due to MHPAEA based on data and
analysis from the FEHBP evaluation. The
premium increase is a transfer from those
not using MH/SUD benefits to those who
do, because given the size of the estimated
impacts and the known changes in cover-
age from baseline discussed earlier in this
Regulatory Impact Analysis, any change
in utilization must be very small again
suggesting that premium changes were
primarily due to a shift in responsibility
for final payments for MH/SUD care.
Using data on private health insurance
premiums from the National Health Ex-
penditure Projections
58
and data on pre-
miums for individual insurance
59
from the
National Association of Insurance Com-
missioners, the Departments estimate that
the dollar amount of the 0.4 percent pre-
mium increases attributable to MHPAEA
would be approximately $25.6 billion over
the ten-year period 2010–2019. The ten-
year value using a discount rate of seven
percent is $19.0 billion, and it is $22.4 bil-
lion using a three percent discount rate.
Yearly estimates are reported in Table 1,
column G. Due to the magnitude of this
transfer, this regulatory action is economi-
cally significant pursuant to section 3(f)(1)
of Executive Order 12866.
D.Regulatory Flexibility
Act—Department of Labor and
Department of Health and Human
Services
The Regulatory Flexibility Act
(5 U.S.C. 601et seq.) (RFA) imposes
certain requirements with respect to
federal rules that are subject to the notice
and comment requirements of section
553(b) of the Administrative Procedure
Act (APA) (5 U.S.C. 551et seq.)and
that are likely to have a significant
economic impact on a substantial number
of small entities. Under Section 553(b)
of the Administrative Procedures Act
(APA), a general notice of proposed
rulemaking is not required when an
agency, for good cause, finds that
notice and public comment thereon are
impracticable, unnecessary, or contrary
to the public interest. These interim final
regulations are exempt from APA, because
the Departments made a good cause
finding that a general notice of proposed
rulemaking is not necessary earlier in this
preamble. Therefore, the RFA does not
apply and the Departments are not required
to either certify that the rule would not
have a significant economic impact on
a substantial number of small entities or
conduct a regulatory flexibility analysis.
Nevertheless, the Departments care-
fully considered the likely impact of the
rule on small entities in connection with
their assessment under Executive Order
12866. The Departments expect the rules
to reduce the compliance burden imposed
on plans and insurers by clarifying defini-
tions and terms contained in the statute and
providing examples of acceptable methods
to comply with specific provisions. The
Departments believe that the rule’s impact
on small entities will be minimized by the
fact that MHPAEA does not apply to small
employers who have between two and 50
employees.
E.Special Analyses-Department of the
Treasury
Notwithstanding the determinations of
the Department of Labor and Department
of Health and Human Services, for pur-
poses of the Department of the Treasury, it
has been determined that this Treasury de-
cision is not a significant regulatory action
for purposes of Executive Order 12866.
Therefore, a regulatory assessment is not
required. It has also been determined that
section 553(b) of the Administrative Pro-
cedure Act (5 U.S.C. chapter 5) does not
apply to these regulations. For the appli-
cability of the RFA, refer to the Special
Analyses section in the preamble to the
cross-referencing notice of proposed rule-
making published elsewhere in this issue
of the Bulletin. Pursuant to section 7805(f)
of the Code, these temporary regulations
have been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on their impact
on small businesses.
F.Paperwork Reduction Act
1. Departments of Labor and the Treasury
As part of their continuing efforts to
reduce paperwork and respondent burden,
the Departments conduct a preclearance
consultation program to provide the gen-
eral public and federal agencies with an
opportunity to comment on proposed
and continuing collections of information
in accordance with the Paperwork Re-
duction Act of 1995 (PRA) (44 U.S.C.
3506(c)(2)(A)). This helps to ensure that
requested data can be provided in the de-
sired format, reporting burden (time and
financial resources) is minimized, collec-
tion instruments are clearly understood,
and the impact of collection requirements
on respondents can be properly assessed.
As discussed earlier in this preamble,
MHPAEA includes two new disclosure
provisions for group health plans and
health insurance coverage offered in con-
nection with a group health plan. First,
the criteria for medical necessity determi-
56
The estimated .04 percent increase was derived from an authors’ final calculation based on data from the report cited in the previous footnote.
57
Congressional Budget Office Cost Estimate on H.R. 1424-Paul Wellstone Mental Health and Addiction Equity Act of 2007, 21 November 2007.
58
National Health Expenditures Projections 2008–2018, Centers for Medicare & Medicaid Services, Office of the Actuary,http://www.cms.hhs.gov/NationalHealthExpendData/.
59
The National Health Expenditure estimate of total spending on private healthinsurance includes premiums for purchases made in the individual market, which is not affected by MHPAEA.
Therefore it needs to be subtracted from the total. The NAIC data does not contain information from California; therefore, an adjustment based on the number of lives covered in California
and average premiums was used to impute a value for California.
May 3, 20106382010–18 I.R.B.

nations made under a group health plan
with respect to mental health or substance
use disorder benefits (or health insur-
ance coverage offered in connection with
the plan with respect to such benefits)
must be made available in accordance
with regulations by the plan administrator
(or the health insurance issuer offering
such coverage) to any current or poten-
tial participant, beneficiary, or contracting
provider upon request (“medical necessity
disclosure”).
MHPAEA also requires the reason for
any denial under a group health plan (or
health insurance coverage) of reimburse-
ment or payment for services with respect
to mental health or substance use disorder
benefits in the case of any participant or
beneficiary must be made available upon
request or as otherwise required by the
plan administrator (or the health insurance
issuer offering such coverage) to the par-
ticipant or beneficiary in accordance with
regulations (“claims denial notice”).
The MHPAEA disclosures are in-
formation collection requests (ICRs)
subject to the PRA. The Departments
are not soliciting comments concern-
ing an ICR pertaining to the claims de-
nial notice, because the Department of
Labor’s ERISA claims procedure reg-
ulation (29 CFR 2560.503–1) requires
(among other things) ERISA-covered
group health plans to provide such
disclosures automatically to participants
and beneficiaries free of charge. Although
non-ERISA covered plans, such as
certain church plan under Treasury/IRS
jurisdiction and plans sponsored by state
and local governmentsthat are subject to
the PHS Act and under HHS jurisdiction
(these plans are discussed under the HHS
ICR discussion below) are not required to
comply with the ERISA claims procedure
regulation, these regulations provide that
such plans (and health insurance coverage
offered in connection with such plans)
will be deemed to satisfy the MHPAEA
claims denial disclosure requirement if
they comply with the ERISA claims
procedure regulation. For purposes of this
PRA analysis, the Departments assume
that non-ERISA plans will satisfy the
safe harbor, because the same third-party
administrators and insurers are hired by
ERISA- and non-ERISA-covered plans,
and these entities provide the same claims
denial notifications to participants covered
by ERISA- and non-ERISA-covered
plans. Therefore, the Departments hereby
determine that the hour and cost burden
associated with the claims denial notice
already is accounted for in the ICR for the
ERISA claims procedure regulation that
is approved under OMB Control Number
1210–0053.
Currently, the Departments are solic-
iting comments concerning the medical
necessity disclosure. The Departments
have submitted a copy of these interim
final regulations to OMB in accordance
with 44 U.S.C. 3507(d) for review of the
information collections. The Departments
and OMB are particularly interested in
comments that:
•Evaluate whether the collection of in-
formation is necessary for the proper
performance of the functions of the
agency, including whether the infor-
mation will have practical utility;
•Evaluate the accuracy of the agency’s
estimate of the burden of the collection
of information, including the validity
of the methodology and assumptions
used;
•Enhance the quality, utility, and clarity
of the information to be collected; and
•Minimize the burden of the collection
of information on those who are to re-
spond, including through the use of
appropriate automated, electronic, me-
chanical, or othertechnological collec-
tion techniques or other forms of in-
formation technology, for example, by
permitting electronic submission of re-
sponses.
Comments should be sent to the Office
of Information and Regulatory Affairs,
Attention: Desk Officer for the Em-
ployee Benefits Security Administration
either by fax to (202) 395–7285 or by
email tooira_submission@omb.eop.gov.
Although comments may be submitted
through April 5, 2010, OMB requests that
comments be received within 30 days of
publication of these interim final regula-
tions to ensure their consideration. A copy
of the ICR may be obtained by contact-
ing the PRA addressee: G. Christopher
Cosby, Office of Policy and Research,
U.S. Department of Labor, Employee
Benefits Security Administration, 200
Constitution Avenue, NW, Room N–5718,
Washington, DC 20210. Telephone:
(202) 693–8410; Fax: (202) 219–4745.
These are not toll-free numbers. E-mail:
ebsa.opr@dol.gov. ICRs submitted to
OMB also are available at reginfo.gov
(http://www.reginfo.gov/public/do/PRA-
Main).
The Departments are unable to estimate
with certainty the number of requests for
medical necessity criteria disclosures that
will be received by plan administrators;
however, the Departments have assumed
that, on average, each plan affected by the
rule will receive one request. The De-
partments estimate that approximately 93
percent of large plans and all small plans
administer claims using service providers;
therefore, 5.1 percent of the medical ne-
cessity criteria disclosures will be done
in-house. For PRA purposes, plans using
service providers will report the costs as
a cost burden, while plans administering
claims in-house will report the burden as
an hour burden.
The Departments assume that it will
take a medically trained clerical staff mem-
ber five minutes to respond to each request
at a wage rate of $27 per hour. This results
in an annual hour burden of nearly 1,900
hours and an associated equivalent cost
of nearly $51,000 for the approximately
23,000 requests done in-house by plans.
The remaining 424,000 medical neces-
sity criteria disclosures will be provided
through service providers resulting in a
cost burden of approximately $950,000.
The Departments also calculated the
cost to deliver the requested medical ne-
cessity criteria disclosures. Many insurers
and plans already may have the informa-
tion prepared in electronic form, and the
Departments assume that 38 percent of
requests will be delivered electronically
resulting in ade minimiscost. The De-
partments estimate that the cost burden
associated with distributing the approxi-
mately 277,000 medical necessity criteria
disclosures sent by paper will be approxi-
mately $177,000.
60
The Departments note
that persons are not required to respond
to, and generally are not subject to any
penalty for failing to comply with, an ICR
60
This estimate is based on an average document size of four pages, $.05cents per page material and printing costs, $.44 cent postage costs.
2010–18 I.R.B.639May 3, 2010

unless the ICR has a valid OMB control
number.
61
These paperwork burden estimates are
summarized as follows:
Type of Review: New collection.
Agencies: Employee Benefits Security
Administration, Department of Labor; In-
ternal Revenue Service, U.S. Department
of the Treasury,
Title: Notice of Medical Necessity Cri-
teria under the Mental Health Parity and
Addition Equity Act of 2008.
OMB Number: 1210-NEW; 1545-
NEW.
Affected Public: Business or other for-
profit; not-for-profit institutions.
Total Respondents: 446,400.
Total Responses: 446,400.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours:
950 hours (Employee Benefits Security
Administration); 950 hours (Internal Rev-
enue Service).
Estimated Total Annual Burden Cost:
$562,500 (Employee Benefits Security
Administration); $562,500 (Internal Rev-
enue Service).
2. Department of Health and Human
Services
Under the PRA, we are required to pro-
vide 30-days notice in theFederal Reg-
isterand solicit public comment before
a collection of information requirement is
submitted to the Office of Management
and Budget (OMB) for review and ap-
proval. In order to fairly evaluate whether
an information collection should be ap-
proved by OMB, section 3506(c)(2)(A) of
the PRA requires that we solicit comment
on the following issues:
•The need for the information collection
and its usefulness in carrying out the
proper functions of our agency.
•The accuracy of our estimate of the
information collection burden.
•The quality, utility, and clarity of the
information to be collected.
•Recommendations to minimize the in-
formation collection burden on the af-
fected public, including automated col-
lection techniques.
We are soliciting public comment on
each of these issues for the following sec-
tions of this document that contain infor-
mation collection requirements (ICRs):
ICRs Regarding Parity in Mental Health
and Substance Use Disorder Benefits.
(45 CFR §146.136(d))
As discussed above, MHPAEA in-
cludes two new disclosure provisions for
group health plans andhealth insurance
coverage offered in connection with a
group health plan. First, the criteria for
medical necessity determinations made
under a group health plan with respect to
mental health or substance use disorder
benefits (or health insurance coverage
offered in connection with the plan with
respect to such benefits) must be made
available in accordance with regulations
by the plan administrator (or the health
insurance issuer offering such coverage)
to any current or potential participant,
beneficiary, or contracting provider upon
request (“medical necessity disclosure”).
MHPAEA also requires the reason for
any denial under a group health plan (or
health insurance coverage) of reimburse-
ment or payment for services with respect
to mental health or substance use disorder
benefits in the case of any participant or
beneficiary must be made available upon
request or as otherwise required by the
plan administrator (orthe health insurance
issuer offering such coverage) to the par-
ticipant or beneficiary in accordance with
regulations (“claims denial disclosure”).
Medical Necessity Disclosure
The Department estimates that there
are 29.1 million participants covered by
20,300 state and local public plans that
are subject to the MHPAEA disclosure
requirements that are employed by em-
ployers with more than 50 employees.
62
The Department is unable to estimate
with certainty the number of requests for
medical necessity criteria disclosures that
will be received by plan administrators;
however, the Department has assumed
that, on average, each plan affected by
the rule will receive one request. CMS
estimates that approximately 93 percent of
large plans administer claims using third
party providers. Furthermore the vast
majority of all smaller employers usually
are fully insured such that issuers will
be administering their claims. Therefore
5.1 percent of claims are administered
in-house. For plans that use issuers or third
party providers the costs are reported as
cost burden while for plans that adminis-
ter claims in-house the burden is reported
as an hour burden. For purposes of this
estimate, the Department assumes that it
will take a medically trained clerical staff
member five minutes to respond to each
request at a wage rate of $26.85 per hour.
This results in an annual hour burden of 86
hours and an associated equivalent cost of
about $2,300 for the approximately 1,000
requests handled by plans. The remaining
19,300 claims (94.9 percent) are provided
through a third-partyprovider or an issuer
and results in a cost burden of approxi-
mately $43,000.
Claims Denial Disclosure
MHPAEA requires plans to disclose to
participants and beneficiaries upon request
the reason for any denial under the plan (or
coverage) of reimbursement or payment
for services with respect to mental health
or substance use disorder benefits. The
Department of Labor’s ERISA claims pro-
cedure regulation (29 CFR 2560.503–1)
requires, among other things, such dis-
closures to be provided automatically
to participants and beneficiaries free of
charge. Although non-ERISA covered
plans, such as plans sponsored by state and
local governments that are subject to the
PHS Act, are not required to comply with
the ERISA claims procedure regulation,
the interim final regulations provide that
these plans (and health insurance coverage
offeredinconnectionwithsuchplans)
will be deemed to satisfy the MHPAEA
claims denial disclosure requirement if
they comply with the ERISA claims pro-
cedure regulation.
Using assumptions similar to those used
for the ERISA claims procedure regula-
tion, the Department estimates that there
will be approximately 29.7 million claims
for mental health or substance use disorder
benefits with approximately 4.45 million
61
5 CFR 1320.1 through 1320.18.
62
Non-Federal governmental plans may opt-out of MHPAEA and certain other requirements under Section 2721 of the PHS Act. Since past experience has shown that the number of non-
Federal governmental plans that opt-out is small, the impact of the opt-out election should be immaterial on the Department’s estimates.
May 3, 20106402010–18 I.R.B.

denials that could result in a request for an
explanation of reasonfor denial. The De-
partment has no data on the percent of de-
nials that will result in a request for an ex-
planation, but assumed that ten percent of
denials will result in a request for an expla-
nation (445,000 requests).
The Department estimates that a med-
ically trained clerical staff member may
require five minutes to respond to each
requestatalaborrateof$27perhour.
This results in an annual hour burden
of nearly 1,900 hours and an associated
equivalent cost of nearly $51,000 for the
approximately 22,700 requests completed
by plans. The remaining 422,300 are pro-
vided through an issuer or a third-party
provider, which results in a cost burden of
approximately $945,000.
In association with the explanation of
denial, participants may request a copy of
the medical necessity criteria. While the
Department does not know how many no-
tices of denial will result in a request for
the criteria of medical necessity, the De-
partment assumes that ten percent of those
requesting an explanation of the reason
for denial will also request the criteria of
medical necessity, resulting in 44,500 re-
quests, 2,300 of which will be completed
in-house with an hour burden of 190 hours
and equivalent cost of $5,000 and 42,000
requests handled by issuers or third-party
providers with a cost burden of $95,000.
The Department also calculated the
cost to deliver the requested information.
Many insurers or plans may already have
the information prepared in electronic
format, and the Department assumes that
requests will be delivered electronically
resulting in ade minimiscost.
63
The De-
partment estimates that the cost burden
associated with distributing the approxi-
mately 135,000 disclosures sent by paper
will be approximately $86,000.
64
The
Department notes that persons are not
required to respond to, and generally are
not subject to any penalty for failing to
comply with, an ICR unless the ICR has a
valid OMB control number.
65
These paperwork burden estimates are
summarized as follows:
Type of Review: New collection.
Agency: Department of Health and Hu-
man Services.
Title: Required Disclosures Under the
Mental Health Parity and Addition Equity
Act of 2008.
OMB Number: 0938-NEW.
Affected Public:State,Local,orTribal
Governments.
Respondents: 20,300.
Responses: 510,000.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours:
2,200 hours.
Estimated Total Annual Burden Cost:
$1,169,000.
If you comment on these information
collection and recordkeeping require-
ments, please do either of the following:
1. Submit your comments electroni-
cally as specified in the ADDRESSES sec-
tion of this proposed rule; or
2. Submit your comments to the Office
of Information and Regulatory Affairs, Of-
fice of Management and Budget,
Attention: CMS Desk Officer, 4140-
IFC
Fax: (202) 395–6974; or
Email:
OIRA_submission@omb.eop.gov
G.Congressional Review Act
These regulations are subject to the
Congressional Review Act provisions of
the Small Business Regulatory Enforce-
ment Fairness Act of 1996 (5 U.S.C. 801
et seq.) and have been transmitted to
Congress and the Comptroller General for
review.
H.Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of
1995 (Public Law 104–4) requires agen-
cies to prepare severalanalytic statements
before proposing any rules that may re-
sult in annual expenditures of $100 mil-
lion (as adjusted for inflation) by state, lo-
cal and tribal governments or the private
sector. These rules are not subject to the
Unfunded Mandates Reform Act because
they are being issued as interim final rules.
However, consistent with the policy em-
bodied in the Unfunded Mandates Reform
Act, the regulation has been designed to be
the least burdensome alternative for state,
local and tribal governments, and the pri-
vate sector, while achieving the objectives
of MHPAEA.
I.Federalism Statement—Department of
Labor and Department of Health and
Human Services
Executive Order 13132 outlines fun-
damental principles of federalism, and
requires the adherence to specific criteria
by federal agencies in the process of their
formulation and implementation of poli-
cies that have “substantial direct effects”
on the States, the relationship between the
national government and States, or on the
distribution of power and responsibilities
among the various levels of government.
Federal agencies promulgating regulations
that have these federalism implications
must consult with Stateand 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 regu-
lations have federalism implications, be-
cause they have direct effects on the States,
the relationship between the national gov-
ernment and States, or on the distribution
of power and responsibilities among var-
ious levels of government. However, in
the Departments’ view, the federalism im-
plications of these regulations are substan-
tially mitigated because, with respect to
health insurance issuers, the Departments
expect that the majority of States have en-
acted or will enact laws or take other ap-
propriate action resulting in their meeting
or exceeding the federal MHPAEA stan-
dards.
In general, through section 514, ERISA
supersedes State laws to the extent that
they relate to any covered employee ben-
efit plan, and preserves State laws that
regulate insurance, banking, or securi-
ties. While ERISA prohibits States from
regulating a plan as an insurance or in-
vestment company or bank, the preemp-
tion provisions of section 731 of ERISA
and section 2723 of the PHS Act (im-
plemented in 29 CFR 2590.731(a) and
45 CFR 146.143(a)) apply so that the
63
Following the assumption in the ERISA claims regulation, it was assumed 75 percent of the explanation of denials disclosures would be delivered electronically, while it was assumed that
38 percent of non-denial related requests for the medical necessity criteria would be delivered electronically.
64
This estimate is based on an average document size of four pages, $.05cents per page material and printing costs, $.44 cent postage costs.
65
5 CFR 1320.1 through 1320.18.
2010–18 I.R.B.641May 3, 2010

MHPAEA requirements are not to be
“construed to supersede any provision of
State law which establishes, implements,
or continues 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 application of a requirement”
of MHPAEA. The conference report
accompanying HIPAA indicates that this is
intended to be the “narrowest” preemption
of State 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
requirements except to the extent that such
requirements prevent the application of the
MHPAEA requirements that are the sub-
ject of this rulemaking. State insurance
laws that are more stringent than the fed-
eral requirements are unlikely to “prevent
the application of”’ MHPAEA, and be pre-
empted. Accordingly, States have signif-
icant latitude to impose requirements on
health insurance issuers that are more re-
strictive than the federal law.
In compliance with the requirement of
Executive Order 13132 that agencies ex-
amine closely any policies that may have
federalism implications or limit the policy
making discretion of the States, the De-
partments have engaged in numerous ef-
forts to consult with and work coopera-
tively with affected State and local offi-
cials. It is expected that the Departments
will act in a similar fashion in enforcing
the MHPAEA requirements.
Throughout the process of developing
these regulations, to the extent feasible
within the specific preemption provisions
of HIPAA as it applies to MHPAEA, the
Departments have attempted to balance the
States’ interests in regulating health insur-
ance issuers, and Congress’ intent to pro-
vide uniform minimum protections to con-
sumers in every State. By doing so, it is
the Departments’ view that they have com-
plied 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 reg-
ulations, the Departments certify that the
Employee Benefits Security Administra-
tion and the Centers for Medicare & Med-
icaid Services have complied with the re-
quirements of Executive Order 13132 for
the attached regulations in a meaningful
and timely manner.
V. Statutory Au
thority
The Department of the Treasury tempo-
rary and final regulations are adopted pur-
suant to the authority contained in sections
7805 and 9833 of the Code.
The Department of Labor interim final
regulations are 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; sec. 101(g),
Public Law 104–191, 110 Stat. 1936; sec.
401(b), Public Law 105–200, 112 Stat.
645 (42 U.S.C. 651 note); sec. 512(d),
Public Law 110–343, 122 Stat. 3765;
Public Law 110–460, 122 Stat. 5123;
Secretary of Labor’s Order 6–2009, 74 FR
21524 (May 7, 2009).
The Department of Health and Hu-
man Services interim final regulations are
adopted pursuant to the authority con-
tained in sections 2701 through 2763,
2791, and 2792 of the PHS Act (42 USC
300gg through 300gg–63, 300gg–91, and
300gg–92), as amended.
*****
Accordingly, 26 CFR Parts 54 and 602
are amended 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 54.9812–1T is revised
to read as follows:
§54.9812 Parity in mental health
and substance use disorder benefits
(temporary).
(a)Meaning of terms. For purposes
of this section, except where the context
clearly indicates otherwise, the following
terms have the meanings indicated:
Aggregate lifetime dollar limitmeans
a dollar limitation on the total amount of
specified benefits that may be paid under a
group health plan for any coverage unit.
Annual dollar limitmeans a dollar limi-
tation on the total amount of specified ben-
efitsthatmaybepaidina12-monthperiod
under a group health plan for any coverage
unit.
Coverage unitmeans coverage unit as
described in paragraph (c)(1)(iv) of this
section.
Cumulative financial requirementsare
financial requirements that determine
whether or to what extent benefits are
provided based on accumulated amounts
and include deductibles and out-of-pocket
maximums. (However, cumulative finan-
cial requirements do not include aggregate
lifetime or annual dollar limits because
these two terms are excluded from the
meaning of financial requirements.)
Cumulative quantitative treatment limi-
tationsare treatment limitations that deter-
mine whether or to what extent benefits are
provided based on accumulated amounts,
such as annual or lifetime day or visit lim-
its.
Financial requirementsinclude de-
ductibles, copayments, coinsurance, or
out-of-pocket maximums. Financial re-
quirements do not include aggregate life-
time or annual dollar limits.
Medical/surgical benefitsmeans bene-
fits for medical or surgical services, as de-
fined under the terms of the plan, but does
not include mental health or substance use
disorder benefits. Any condition defined
by the plan as being or as not being a med-
ical/surgical condition must be defined to
be consistent with generally recognized
independent standards of current medical
practice (for example, the most current
version of the International Classification
of Diseases (ICD) or State guidelines).
Mental health benefitsmeans benefits
with respect to services for mental health
conditions, as defined under the terms of
the plan and in accordance with applicable
Federal and State law. Any condition de-
fined by the plan as being or as not being
a mental health condition must be defined
to be consistent with generally recognized
independent standards of current medical
practice (for example, the most current
version of the Diagnostic and Statistical
Manual of Mental Disorders (DSM), the
most current version of the ICD, or State
guidelines).
Substance use disorder benefitsmeans
benefits with respect to services for sub-
stance use disorders, as defined under the
terms of the plan and in accordance with
applicable Federal and State law. Any dis-
order defined by the plan as being or as not
being a substance use disorder must be de-
fined to be consistent with generally rec-
May 3, 20106422010–18 I.R.B.

ognized independent standards of current
medical practice (for example, the most
current version of the DSM, the most cur-
rent version of the ICD, or State guide-
lines).
Treatment limitationsinclude limits on
benefits based on the frequency of treat-
ment, number of visits, days of coverage,
days in a waiting period, or other similar
limits on the scope or duration of treat-
ment. Treatment limitations include both
quantitative treatment limitations, which
are expressed numerically (such as 50 out-
patient visits per year), and nonquantita-
tive treatment limitations, which otherwise
limit the scope or duration of benefits for
treatment under a plan. (See paragraph
(c)(4)(ii) of this section for an illustra-
tive list of nonquantitative treatment limi-
tations.) A permanent exclusion of all ben-
efits for a particular condition or disorder,
however, is not a treatment limitation.
(b)Parity requirements with respect
to aggregate lifetime and annual dollar
limits—(1)—General—(i)General parity
requirement. A group health plan that
provides both medical/surgical benefits
and mental health or substance use disor-
der benefits must comply with paragraph
(b)(2), (b)(3), or (b)(6) of this section.
(ii)Exception. The rule in paragraph
(b)(1)(i) of this section does not apply if
a plan satisfies the requirements of para-
graph (f) or (g) of this section (relating to
exemptions for smallemployers and for in-
creased cost).
(2)Plan with no limit or limits on less
than one-third of all medical/surgical ben-
efits. If a plan does not include an ag-
gregate lifetime or annual dollar limit on
any medical/surgical benefits or includes
an aggregate lifetime or annual dollar limit
that applies to less than one-third of all
medical/surgical benefits, it may not im-
pose an aggregate lifetime or annual dol-
lar limit, respectively, on mental health or
substance use disorder benefits.
(3)Plan with a limit on at least two-
thirds of all medical/surgical benefits.Ifa
plan includes an aggregate lifetime or an-
nual dollar limit on at least two-thirds of all
medical/surgical benefits, it must either—
(i) Apply the aggregate lifetime or an-
nual dollar limit both to the medical/surgi-
cal benefits to which the limit would oth-
erwise apply and to mental health or sub-
stance use disorder benefits in a manner
that does not distinguish between the med-
ical/surgical benefits and mental health or
substance use disorder benefits; or
(ii) Not include an aggregate lifetime
or annual dollar limit on mental health or
substance use disorder benefits that is less
than the aggregate lifetime or annual dol-
lar limit, respectively, on medical/surgical
benefits. (For cumulative limits other than
aggregate lifetime or annual dollar limits,
see paragraph (c)(3)(v) of this section pro-
hibiting separately accumulating cumula-
tive financial requirements or cumulative
quantitative treatment limitations.)
(4)Examples. The rules of paragraphs
(b)(2) and (b)(3) of this section are illus-
trated by the following examples:
Example 1.(i)Facts. A group health plan has
no annual limit on medical/surgical benefits and a
$10,000 annual limit on mental health and substance
use disorder benefits. To comply with the require-
ments of this paragraph (b), the plan sponsor is con-
sidering each of the following options:
(A) Eliminating the plan’s annual dollar limit on
mental health and substance use disorder benefits;
(B) Replacing the plan’s annual dollar limit on
mental health and substance use disorder benefits
with a $500,000 annual limit on all benefits (includ-
ing medical/surgical and mental health and substance
use disorder benefits); and
(C) Replacing the plan’s annual dollar limit on
mental health and substance use disorder benefits
with a $250,000 annual limit on medical/surgical
benefits and a $250,000 annual limit on mental health
and substance use disorder benefits.
(ii)Conclusion.InthisExample 1, each of the
three options being considered by the plan sponsor
would comply with the requirements of this para-
graph (b).
Example 2.(i)Facts. A plan has a $100,000 an-
nual limit on medical/surgical inpatient benefits and
a $50,000 annual limit on medical/surgical outpatient
benefits. To comply with the parity requirements of
this paragraph (b), the plan sponsor is considering
each of the following options:
(A) Imposing a $150,000 annual limit on mental
health and substance use disorder benefits; and
(B) Imposing a $100,000 annual limit on mental
health and substance use disorder inpatient benefits
and a $50,000 annual limit on mental health and sub-
stance use disorder outpatient benefits.
(ii)Conclusion.InthisExample 2, each option
under consideration by the plan sponsor would com-
ply with the requirements of this section.
(5)Determining one-third and
two-thirds of all medical/surgical bene-
fits. For purposes of this paragraph (b),
the determination of whether the portion
of medical/surgical benefits subject to an
aggregate lifetime or annual dollar limit
represents one-third or two-thirds of all
medical/surgical benefits is based on the
dollar amount of all plan payments for
medical/surgical benefits expected to be
paid under the plan for the plan year (or for
the portion of the plan year after a change
in plan benefits that affects the applica-
bility of the aggregate lifetime or annual
dollar limits). Any reasonable method
maybeusedtodeterminewhetherthedol-
lar amount expected to be paid under the
plan will constitute one-third or two-thirds
of the dollar amount of all plan payments
for medical/surgical benefits.
(6)Plan not described in paragraph
(b)(2) or (b)(3) of this section—(i)In gen-
eral. A group health plan that is not de-
scribed in paragraph (b)(2) or (b)(3) of this
section with respect to aggregate lifetime
or annual dollar limits on medical/surgical
benefits, must either—
(A) Impose no aggregate lifetime or an-
nual dollar limit, as appropriate, on mental
health or substance use disorder benefits;
or
(B) Impose an aggregate lifetime or an-
nual dollar limit on mental health or sub-
stance use disorder benefits that is no less
than an average limit calculated for medi-
cal/surgical benefits in the following man-
ner. The average limit is calculated by tak-
ing into account the weighted average of
the aggregate lifetime or annual dollar lim-
its, as appropriate, that are applicable to
the categories of medical/surgical benefits.
Limitsbasedondeliverysystems,such
as inpatient/outpatient treatment or nor-
mal treatment of common, low-cost condi-
tions (such as treatment of normal births),
do not constitute categories for purposes
of this paragraph (b)(6)(i)(B). In addition,
for purposes of determining weighted av-
erages, any benefits that are not within a
category that is subject to a separately-
designated dollar limit under the plan are
taken into account as a single separate cat-
egory by using an estimate of the upper
limit on the dollar amount that a plan may
reasonably be expected to incur with re-
spect to such benefits, taking into account
any other applicable restrictions under the
plan.
(ii)Weighting. For purposes of this
paragraph (b)(6), the weighting applicable
to any category of medical/surgical bene-
fits is determined in the manner set forth in
paragraph (b)(5) of this section for deter-
mining one-third or two-thirds of all med-
ical/surgical benefits.
(iii)Example. The rules of this para-
graph (b)(6) are illustrated by the follow-
ing example:
2010–18 I.R.B.643May 3, 2010

Example.(i)Facts. A group health plan that is
subject to the requirements of this section includes
a $100,000 annual limit on medical/surgical benefits
related to cardio-pulmonary diseases. The plan does
not include an annual dollar limit on any other cat-
egory of medical/surgical benefits. The plan deter-
mines that 40 percent of the dollar amount of plan
payments for medical/surgical benefits are related to
cardio-pulmonary diseases. The plan determines that
$1,000,000 is a reasonable estimate of the upper limit
on the dollar amount that the plan may incur with re-
spect to the other 60 percent of payments for medi-
cal/surgical benefits.
(ii)Conclusion.InthisExample, the plan is not
described in paragraph (b)(3) of this section because
there is not one annual dollar limit that applies to at
least two-thirds of all medical/surgical benefits. Fur-
ther, the plan is not described in paragraph (b)(2) of
this section because more than one-third of all med-
ical/surgical benefits are subject to an annual dollar
limit. Under this paragraph (b)(6), the plan sponsor
can choose either to include no annual dollar limit on
mental health or substance use disorder benefits, or
to include an annual dollar limit on mental health or
substance use disorder benefits that is not less than
the weighted average of the annual dollar limits ap-
plicable to each category of medical/surgical benefits.
In this example, the minimum weighted average an-
nual dollar limit that can be applied to mental health
or substance use disorder benefits is $640,000 (40%
x $100,000 + 60% x $1,000,000 = $640,000).
(c)Parity requirements with respect to
financial requirements and treatment lim-
itations—(1)Clarification of terms—(i)
Classification of benefits. When reference
is made in this paragraph (c) to a classifi-
cation of benefits, the term “classification”
means a classification as described in
paragraph (c)(2)(ii) of this section.
(ii)Type of financial requirement or
treatment limitation. When reference is
made in this paragraph (c) to a type of
financial requirement or treatment limita-
tion, the reference to type means its nature.
Different types of financial requirements
include deductibles, copayments, coin-
surance, and out-of-pocket maximums.
Different types of quantitative treatment
limitations include annual, episode, and
lifetime day and visit limits. See paragraph
(c)(4)(ii) of this section for an illustrative
list of nonquantitative treatment limita-
tions.
(iii)Level of a type of financial require-
ment or treatment limitation. When refer-
ence is made in this paragraph (c) to a level
of a type of financial requirement or treat-
ment limitation, level refers to the magni-
tude of the type of financial requirement or
treatment limitation. For example, differ-
ent levels of coinsurance include 20 per-
cent and 30 percent; different levels of a
copayment include $15 and $20; differ-
ent levels of a deductible include $250 and
$500; and different levels of an episode
limit include 21 inpatient days per episode
and 30 inpatient days per episode.
(iv)Coverage unit. When reference is
made in this paragraph (c) to a coverage
unit, coverage unit refers to the way in
which a plan groups individuals for pur-
poses of determining benefits, or premi-
ums or contributions. For example, differ-
ent coverage units include self-only, fam-
ily, and employee-plus-spouse.
(2)General parity requirement—(i)
General rule. A group health plan that
provides both medical/surgical benefits
and mental health or substance use disor-
der benefits may not apply any financial
requirement or treatment limitation to
mental health or substance use disorder
benefits in any classification that is more
restrictive than the predominant financial
requirement or treatment limitation of that
type applied to substantially all medi-
cal/surgical benefits in the same classifi-
cation. Whether a financial requirement
or treatment limitation is a predominant
financial requirement or treatment lim-
itation that applies to substantially all
medical/surgical benefits in a classifica-
tion is determined separately for each type
of financial requirement or treatment lim-
itation. The application of the rules of this
paragraph (c)(2) to financial requirements
and quantitative treatment limitations is
addressed in paragraph (c)(3) of this sec-
tion; the application of the rules of this
paragraph (c)(2) to nonquantitative treat-
ment limitations is addressed in paragraph
(c)(4) of this section.
(ii)Classifications of benefits used
for applying rules—(A)In general.Ifa
plan provides mental health or substance
use disorder benefits in any classification
of benefits described in this paragraph
(c)(2)(ii), mental health or substance use
disorder benefits must be provided in
every classification in which medical/sur-
gical benefits are provided. In determining
the classification in which a particular ben-
efit belongs, a plan must apply the same
standards to medical/surgical benefits and
to mental health or substance use disorder
benefits. To the extent that a plan provides
benefits in a classification and imposes
any separate financial requirement or
treatment limitation (or separate level of a
financial requirement or treatment limita-
tion) for benefits in the classification, the
rules of this paragraph (c) apply separately
with respect to that classification for all
financial requirements or treatment limi-
tations. The following classifications of
benefits are the only classifications used
in applying the rules of this paragraph (c):
(1)Inpatient, in-network. Benefits fur-
nished on an inpatient basis and within a
network of providers established or recog-
nized under a plan.
(2)Inpatient, out-of-network. Benefits
furnished on an inpatient basis and out-
side any network of providers established
or recognized under a plan. This classifi-
cation includes inpatient benefits under a
plan that has no network of providers.
(3)Outpatient, in-network. Benefits
furnished on an outpatient basis and within
a network of providers established or rec-
ognized under a plan.
(4)Outpatient, out-of-network. Bene-
fitsfurnishedonanoutpatientbasisand
outside any network of providers estab-
lished or recognized under a plan. This
classification includes outpatient bene-
fits under a plan that has no network of
providers.
(5)Emergency care. Benefits for emer-
gency care.
(6)Prescription drugs. Benefits for
prescription drugs. See special rules for
multi-tiered prescription drug benefits in
paragraph (c)(3)(iii) of this section.
(B)Application to out-of-network
providers. See paragraph (c)(2)(ii)(A)
of this section, under which a plan that
provides mental health or substance use
disorder benefits in any classification of
benefits must provide mental health or
substance use disorder benefits in ev-
ery classification in which medical/sur-
gical benefits are provided, including
out-of-network classifications.
(C)Examples. The rules of this para-
graph (c)(2)(ii) are illustrated by the fol-
lowing examples. In each example, the
group health plan is subject to the re-
quirements of this section and provides
both medical/surgical benefits and mental
health and substance use disorder benefits.
Example 1.(i)Facts. A group health plan offers
inpatient and outpatient benefits and does not con-
tract with a network of providers. The plan imposes
a $500 deductible on all benefits. For inpatient med-
ical/surgical benefits, the plan imposes a coinsurance
requirement. For outpatient medical/surgical bene-
fits, the plan imposes copayments. The plan imposes
no other financial requirements or treatment limita-
tions.
May 3, 20106442010–18 I.R.B.

(ii)Conclusion. In thisExample 1, because the
plan has no network of providers, all benefits pro-
vided are out-of-network. Because inpatient, out-of-
network medical/surgical benefits are subject to sep-
arate financial requirements from outpatient, out-of-
network medical/surgical benefits, the rules of this
paragraph (c) apply separately with respect to any
financial requirements and treatment limitations, in-
cluding the deductible, in each classification.
Example 2.(i)Facts. A plan imposes a $500
deductible on all benefits. The plan has no network
of providers. The plan generally imposes a 20 percent
coinsurance requirement with respect to all benefits,
without distinguishing among inpatient, outpatient,
emergency, or prescriptiondrugbenefits. Theplan
imposes no other financial requirements or treatment
limitations.
(ii)Conclusion. In thisExample 2, because the
plan does not impose separate financial requirements
(or treatment limitations) based on classification, the
rules of this paragraph (c) apply with respect to the
deductible and the coinsurance across all benefits.
Example 3.(i)Facts. Same facts asExample
2, except the plan exempts emergency care benefits
from the 20 percent coinsurance requirement. The
plan imposes no other financial requirements or treat-
ment limitations.
(ii)Conclusion. In thisExample 3, because the
plan imposes separate financial requirements based
on classifications, the rules of this paragraph (c) ap-
ply with respect to the deductible and the coinsurance
separately for—
(A) Benefits in the emergency classification; and
(B)Allotherbenefits.
Example 4.(i)Facts. Same facts asExample 2,
except the plan also imposes a preauthorization re-
quirement for all inpatient treatment in order for ben-
efits to be paid. No such requirement applies to out-
patient treatment.
(ii)Conclusion. In thisExample 4, because the
plan has no network of providers, all benefits pro-
vided are out-of-network. Because the plan imposes a
separate treatment limitation based on classifications,
the rules of this paragraph (c) apply with respect to the
deductible and coinsurance separately for—
(A) Inpatient, out-of-network benefits;
and
(B)Allotherbenefits.
(3)Financial requirements and quan-
titative treatment limitations—(i)Deter-
mining “substantially all” and “predom-
inant”—(A)Substantially all. For pur-
poses of this paragraph (c), a type of fi-
nancial requirement or quantitative treat-
ment limitation is considered to apply to
substantially all medical/surgical benefits
in a classification of benefits if it applies
to at least two-thirds of all medical/surgi-
cal benefits in that classification. (For this
purpose, benefits expressed as subject to
a zero level of a type of financial require-
ment are treated as benefits not subject to
that type of financial requirement, and ben-
efits expressed as subject to a quantitative
treatment limitation that is unlimited are
treated as benefits not subject to that type
of quantitative treatment limitation.) If a
type of financial requirement or quantita-
tive treatment limitation does not apply to
at least two-thirds of all medical/surgical
benefits in a classification, then that type
cannot be applied to mental health or sub-
stance use disorder benefits in that classi-
fication.
(B)Predominant—(1)Ifatypeoffi-
nancial requirement or quantitative treat-
ment limitation applies to at least two-
thirds of all medical/surgical benefits in
a classification as determined under para-
graph (c)(3)(i)(A) of this section, the level
of the financial requirement or quantitative
treatment limitation that is considered the
predominant level ofthat type in a classi-
fication of benefits is the level that applies
to more than one-half of medical/surgical
benefits in that classification subject to the
financial requirement or quantitative treat-
ment limitation.
(2) If, with respect to a type of finan-
cial requirement or quantitative treatment
limitation that applies to at least two-thirds
of all medical/surgical benefits in a clas-
sification, there is no single level that ap-
plies to more than one-half of medical/sur-
gical benefits in the classification subject
to the financial requirement or quantitative
treatment limitation, the plan may com-
bine levels until the combination of lev-
els applies to more than one-half of med-
ical/surgical benefits subject to the finan-
cial requirement or quantitative treatment
limitation in the classification. The least
restrictive level within the combination is
considered the predominant level of that
type in the classification. (For this pur-
pose, a plan may combine the most restric-
tive levels first, with each less restrictive
level added to the combination until the
combination applies to more than one-half
of the benefits subject to the financial re-
quirement or treatment limitation.)
(C)Portion based on plan payments.
For purposes of this paragraph (c), the de-
termination of the portion of medical/sur-
gical benefits in a classification of bene-
fits subject to a financial requirement or
quantitative treatment limitation (or sub-
ject to any level of a financial require-
ment or quantitative treatment limitation)
is based on the dollar amount of all plan
payments for medical/surgical benefits in
the classification expected to be paid un-
der the plan for the plan year (or for the
portion of the plan year after a change in
plan benefits that affects the applicability
of the financial requirement or quantitative
treatment limitation).
(D)Clarifications for certain threshold
requirements. For any deductible, the dol-
lar amount of plan payments includes all
plan payments with respect to claims that
would be subject to the deductible if it had
not been satisfied. For any out-of-pocket
maximum, the dollar amount of plan pay-
ments includes all plan payments asso-
ciated with out-of-pocket payments that
are taken into account towards the out-of-
pocket maximum as well as all plan pay-
ments associated with out-of-pocket pay-
ments that would have been made towards
the out-of-pocket maximum if it had not
been satisfied. Similar rules apply for any
other thresholds at which the rate of plan
payment changes.
(E)Determining the dollar amount
of plan payments. Subject to paragraph
(c)(3)(i)(D) of this section, any reasonable
methodmaybeusedtodeterminethedol-
lar amount expected to be paid under a
plan for medical/surgical benefits subject
to a financial requirement or quantitative
treatment limitation (or subject to any
level of a financial requirement or quanti-
tative treatment limitation).
(ii)Application to different coverage
units. If a plan applies different levels
of a financial requirement or quantitative
treatment limitation to different coverage
units in a classification of medical/surgical
benefits, the predominant level that ap-
plies to substantially all medical/surgical
benefits in the classification is determined
separately for each coverage unit.
(iii)Special rule for multi-tiered pre-
scription drug benefits. If a plan applies
different levels of financial requirements
to different tiers of prescription drug
benefits based on reasonable factors de-
termined in accordance with the rules in
paragraph (c)(4)(i) of this section (relat-
ing to requirements for nonquantitative
treatment limitations) and without regard
to whether a drug is generally prescribed
with respect to medical/surgical benefits or
with respect to mental health or substance
use disorder benefits, the plan satisfies the
parity requirements of this paragraph (c)
with respect to prescription drug benefits.
Reasonable factors include cost, efficacy,
generic versus brand name, and mail order
versus pharmacy pick-up.
2010–18 I.R.B.645May 3, 2010

(iv)Examples. The rules of paragraphs
(c)(3)(i), (c)(3)(ii), and (c)(3)(iii) of this
section are illustrated by the following ex-
amples. In each example, the group health
plan is subject to the requirements of this
section and provides both medical/surgical
benefits and mental health and substance
use disorder benefits.
Example 1.(i)Facts. For inpatient, out-of-net-
work medical/surgical benefits, a group health plan
imposes five levels of coinsurance. Using a reason-
able method, the plan projects its payments for the
upcoming year as follows:
Coinsurance rate0 %10%
15%
20%30%Total
Projected payments
$200x$100x$450x$100x$150x$1,000x
Percent of total plan
costs
20%10%
45%
10%
15%
Percent subject to
coinsurance level
N/A
12.5%
(100x/800x)
56.25%
(450x/800x)
12.5%
(100x/800x)
18.75%
(150x/800x)
Theplanprojectsplancostsof$800xtobesub-
ject to coinsurance ($100x + $450x + $100x + $150x
= $800x). Thus, 80 percent ($800x/$1,000x) of the
benefits are projected to be subject to coinsurance,
and 56.25 percent of the benefits subject to coinsur-
ance are projected to be subject to the 15 percent coin-
surance level.
(ii)Conclusion.InthisExample 1, the two-thirds
threshold of the substantially all standard is met for
coinsurance because 80 percent of all inpatient, out-
of-network medical/surgical benefits are subject to
coinsurance. Moreover, the 15 percent coinsurance
is the predominant level because it is applicable to
more than one-half of inpatient, out-of-network med-
ical/surgical benefits subject to the coinsurance re-
quirement. The plan may not impose any level of
coinsurance with respect to inpatient, out-of-network
mental health or substance use disorder benefits that
is more restrictive than the15 percent level of coin-
surance.
Example 2.(i)Facts. For outpatient, in-network
medical/surgical benefits, a plan imposes five differ-
ent copayment levels. Using a reasonable method,
the plan projects payments for the upcoming year as
follows:
Copayment amount
$0$10$15$20$50
Total
Projected payments
$200x$200x$200x$300x$100x$1,000x
Percent of total plan
costs
20%20%20%30%10%
Percent subject to
copayments
N/A
25%
(200x/800x)
25%
(200x/800x)
37.5%
(300x/800x)
12.5%
(100x/800x)
Theplanprojectsplancostsof$800xtobesub-
ject to copayments ($200x + $200x +$300x + $100x
= $800x). Thus, 80 percent ($800x/$1,000x) of the
benefits are projected to be subject to a copayment.
(ii)Conclusion.InthisExample 2, the two-thirds
threshold of the substantially all standard is met for
copayments because 80 percent of all outpatient,
in-network medical/surgical benefits are subject to a
copayment. Moreover, there is no single level that
applies to more than one-half of medical/surgical
benefits in the classification subject to a copayment
(for the $10 copayment, 25 percent; for the $15
copayment, 25 percent; for the $20 copayment,
37.5 percent; and for the $50 copayment, 12.5
percent). The plan can combine any levels of co-
payment, including the highest levels, to determine
the predominant level that can be applied to mental
health or substance use disorder benefits. If the
plan combines the highest levels of copayment, the
combined projected payments for the two highest
copayment levels, the $50 copayment and the $20
copayment, are not more than one-half of the out-
patient, in-network medical/surgical benefits subject
to a copayment because they are exactly one-half
($300x + $100x = $400x; $400x/$800x = 50%). The
combined projected payments for the three highest
copayment levels — the $50 copayment, the $20
copayment, and the $15 copayment — are more than
one-half of the outpatient, in-network medical/sur-
gical benefits subject to the copayments ($100x +
$300x + $200x = $600x; $600x/$800x = 75%).
Thus, the plan may not impose any copayment on
outpatient, in-network mental health or substance
use disorder benefits that is more restrictive than the
least restrictive copayment in the combination, the
$15 copayment.
Example 3.(i)Facts. A plan imposes a $250 de-
ductible on all medical/surgical benefits for self-only
coverage and a $500 deductible on all medical/sur-
gical benefits for family coverage. The plan has no
network of providers. For all medical/surgical bene-
fits, the plan imposes a coinsurance requirement. The
plan imposes no other financial requirements or treat-
ment limitations.
(ii)Conclusion.InthisExample 3, because the
plan has no network of providers, all benefits are pro-
vided out-of-network. Because self-only and family
coverage are subject to different deductibles, whether
the deductible applies to substantially all medical/sur-
gical benefits is determined separately for self-only
medical/surgical benefits and family medical/surgical
benefits. Because the coinsurance is applied with-
out regard to coverage units, the predominant coin-
surance that applies to substantially all medical/sur-
gical benefits is determined without regard to cover-
age units.
Example 4.(i)Facts. A plan applies the fol-
lowing financial requirements for prescription drug
benefits. The requirements are applied without re-
gard to whether a drug is generally prescribed with
respect to medical/surgical benefits or with respect
to mental health or substance use disorder benefits.
Moreover, the process for certifying a particular drug
as “generic”, “preferredbrand name”, “non-pre-
ferred brand name”, or “specialty” complies with the
rules of paragraph (c)(4)(i) of this section (relating
to requirements for nonquantitative treatment limita-
tions).
Tier 1Tier 2Tier 3Tier 4
Tier descriptionGeneric drugsPreferredbrand name drugsNon-preferred brand name
drugs (which may have Tier
1 or Tier 2 alternatives)
Specialty drugs
Percent paid by plan90%80%60%
50%
May 3, 20106462010–18 I.R.B.

(ii)Conclusion. In thisExample 4, the financial
requirements that apply to prescription drug benefits
are applied without regard to whether a drug is gener-
ally prescribed with respect to medical/surgical ben-
efits or with respect to mental health or substance
use disorder benefits; the process for certifying drugs
in different tiers complies with paragraph (c)(4) of
this section; and the bases for establishing different
levels or types of financial requirements are reason-
able. The financial requirements applied to prescrip-
tion drug benefits do not violate the parity require-
ments of this paragraph (c)(3).
(v)No separate cumulative financial
requirements or cumulative quantitative
treatment limitations. (A) A group health
plan may not apply any cumulative finan-
cial requirement or cumulative quantita-
tive treatment limitation for mental health
or substance use disorder benefits in a
classification that accumulates separately
from any established for medical/surgical
benefits in the same classification.
(B) The rules of this paragraph (c)(3)(v)
are illustrated by the following examples:
Example 1.(i)Facts. A group health plan im-
poses a combined annual $500 deductible on all med-
ical/surgical, mental health, and substance use disor-
der benefits.
(ii)Conclusion.InthisExample 1, the combined
annual deductible complies with the requirements of
this paragraph (c)(3)(v).
Example 2.(i)Facts. A plan imposes an annual
$250 deductible on all medical/surgical benefits and a
separate annual $250 deductible on all mental health
and substance use disorder benefits.
(ii)Conclusion.InthisExample 2, the separate
annual deductible on mental health and substance
use disorder benefits violates the requirements of this
paragraph (c)(3)(v).
Example 3.(i)Facts. A plan imposes an annual
$300 deductible on all medical/surgical benefits and a
separate annual $100 deductible on all mental health
or substance use disorder benefits.
(ii)Conclusion.InthisExample 3,theseparate
annual deductible on mental health and substance
use disorder benefits violates the requirements of this
paragraph (c)(3)(v).
Example 4.(i)Facts. A plan generally imposes
a combined annual $500 deductible on all benefits
(both medical/surgical benefits and mental health and
substance use disorder benefits) except prescription
drugs. Certain benefits, such as preventive care, are
provided without regard to the deductible. The im-
position of other types of financial requirements or
treatment limitations varies with each classification.
Using reasonable methods, the plan projects its pay-
ments for medical/surgical benefits in each classifi-
cation for the upcoming year as follows:
ClassificationBenefits Subject to DeductibleTotal BenefitsPercent Subject to Deductible
Inpatient, in-network
$1,800x$2,000x
90%
Inpatient, out-of-network
$1,000x$1,000x
100%
Outpatient, in-network
$1,400x$2,000x
70%
Outpatient, out-of-network
$1,880x$2,000x
94%
Emergency care
$300x$500x
60%
(ii)Conclusion.InthisExample 4, the two-thirds
thr
eshold of the substantially all standard is met with
respect to each classification except emergency care
because in each of those other classifications at least
two
-thirds of medical/surgical benefits are subject to
the $500 deductible. Moreover, the $500 deductible
is the predominant level in each of those other classi-
fi
cations because it is the only level. However, emer-
gency care mental health and substance use disorder
benefits cannot be subject to the $500 deductible be-
ca
use it does not apply to substantially all emergency
care medical/surgical benefits.
(4)Nonquantitative treatment limita-
tions—(i)General rule. A group health
plan may not impose a nonquantitative
treatment limitation with respect to mental
health or substance use disorder benefits in
any classification unless, under the terms
of the plan as written and in operation,
any processes, strategies, evidentiary stan-
dards, or other factors used in applying
the nonquantitative treatment limitation to
mental health or substance use disorder
benefits in the classification are compara-
ble to, and are applied no more stringently
than, the processes, strategies, evidentiary
standards, or other factors used in apply-
ing the limitation with respect to medical
surgical/benefits in the classification, ex-
cept to the extent that recognized clinically
appropriate standards of care may permit
a difference.
(ii)Illustrative list of nonquantitative
treatment limitations. Nonquantitative
treatment limitations include—
(A) Medical management standards
limiting or excluding benefits based on
medical necessity or medical appropriate-
ness, or based on whether the treatment is
experimental or investigative;
(B) Formulary design for prescription
drugs;
(C) Standards for provider admission to
participate in a network, including reim-
bursement rates;
(D) Plan methods for determining
usual, customary, and reasonable charges;
(E) Refusal to pay for higher-cost ther-
apies until it can be shown that a lower-
cost therapy is not effective (also known
as fail-first policies or step therapy proto-
cols); and
(F) Exclusions based on failure to com-
plete a course of treatment.
(iii)Examples. The rules of this para-
graph (c)(4) are illustrated by the follow-
ing examples. In each example, the group
health plan is subject to the requirements
of this section and provides both medi-
cal/surgical benefits and mental health and
substance use disorder benefits.
Example 1.(i)Facts. A group health plan limits
ben
efits to treatment that is medically necessary. The
plan requires concurrent review for inpatient, in-net-
work mental health and substance use disorder ben-
efi
ts but does not require it for any inpatient, in-net-
work medical/surgical benefits. The plan conducts
retrospective review for inpatient, in-network medi-
ca
l/surgical benefits.
(ii)Conclusion.InthisExample 1, the plan vio-
lates the rules of this paragraph (c)(4). Although the
sa
me nonquantitative treatment limitation — medi-
cal necessity — applies to both mental health and
substance use disorder benefits and to medical/sur-
gi
cal benefits for inpatient, in-network services, the
concurrent review process does not apply to medi-
cal/surgical benefits. The concurrent review process
i
s not comparable to the retrospective review process.
While such a difference might be permissible in cer-
tain individual cases based on recognized clinically
a
ppropriate standards of care, it is not permissible for
distinguishing between all medical/surgical benefits
and all mental health or substance use disorder bene-
fits.
Example 2.(i)Facts. A plan requires prior
approval that a course of treatment is medically nec-
essary for outpatient, in-network medical/surgical,
mental health, and substance use disorder benefits.
For mental health and substance use disorder treat-
ments that do not have prior approval, no benefits
will be paid; for medical/surgical treatments that
do not have prior approval, there will only be a 25
percent reduction in the benefits the plan would
otherwise pay.
(ii)Conclusion.InthisExample 2, the plan vio-
lates the rules of this paragraph (c)(4). Although the
same nonquantitative treatment limitation — medi-
2010–18 I.R.B.647May 3, 2010

cal necessity — is applied both to mental health and
substance use disorder benefits and to medical/surgi-
cal benefits for outpatient, in-network services, the
penalty for failure to obtain prior approval for men-
tal health and substance use disorder benefits is not
comparable to the penalty for failure to obtain prior
approval for medical/surgical benefits.
Example 3.(i)Facts. A plan generally covers
medically appropriate treatments. For both medi-
cal/surgical benefits and mental health and substance
use disorder benefits, evidentiary standards used in
determining whether a treatment is medically appro-
priate (such as the number of visits or days of cover-
age) are based on recommendations made by panels
of experts with appropriate training and experience in
the fields of medicine involved. The evidentiary stan-
dards are applied in a manner that may differ based
on clinically appropriate standards of care for a con-
dition.
(ii)Conclusion. In thisExample 3,theplancom-
plies with the rules of this paragraph (c)(4) because
the nonquantitative treatment limitation — medical
appropriateness — is the same for both medical/sur-
gical benefits and mental health and substance use
disorder benefits, and the processes for developing
the evidentiary standards and the application of them
to mental health and substance use disorder benefits
are comparable to and are applied no more stringently
than for medical/surgical benefits. This is the result
even if, based on clinically appropriate standards of
care, the application of the evidentiary standards does
not result in similar numbers of visits, days of cover-
age, or other benefits utilized for mental health con-
ditions or substance use disorders as it does for any
particular medical/surgical condition.
Example 4.(i)Facts. A plan generally cov-
ers medically appropriate treatments. In determin-
ing whether prescription drugs are medically appro-
priate, the plan automatically excludes coverage for
antidepressant drugs that are given a black box warn-
ing label by the Food and Drug Administration (in-
dicating the drug carries a significant risk of serious
adverse effects). For other drugs with a black box
warning (including those prescribed for other men-
tal health conditions and substance use disorders, as
well as for medical/surgical conditions), the plan will
provide coverage if the prescribing physician obtains
authorization from the plan that the drug is medically
appropriate for the individual, based on clinically ap-
propriate standards of care.
(ii)Conclusion. In thisExample 4, the plan vio-
lates the rules of this paragraph (c)(4). Although the
same nonquantitative treatment limitation — medical
appropriateness — is applied to both mental health
and substance use disorder benefits and medical/sur-
gical benefits, the plan’s unconditional exclusion of
antidepressant drugs given a black box warning is
not comparable to the conditional exclusion for other
drugs with a black box warning.
Example 5.(i)Facts. An employer maintains
both a major medical program and an employee as-
sistance program (EAP). The EAP provides, among
other benefits, a limited number of mental health or
substance use disorder counseling sessions. Partici-
pants are eligible for mental health or substance use
disorder benefits under the major medical program
only after exhausting the counseling sessions pro-
vided by the EAP. No similar exhaustion requirement
applies with respect to medical/surgical benefits pro-
vided under the major medical program.
(ii)Conclusion.InthisExample 5, limiting el-
igibility for mental health and substance use disor-
der benefits only after EAP benefits are exhausted is
a nonquantitative treatment limitation subject to the
parity requirements of this paragraph (c). Because no
comparable requirement applies to medical/surgical
benefits, the requirement may not be applied to men-
tal health or substance use disorder benefits.
(5)Exemptions. The rules of this para-
graph (c) do not apply if a group health
plan satisfies the requirements of para-
graph (f) or (g) of this section (relating to
exemptions for smallemployers and for
increased cost).
(d)Availability of plan informa-
tion—(1)Criteria for medical necessity
determinations. The criteria for medical
necessity determinations made under a
group health plan with respect to mental
health or substance use disorder bene-
fits must be made available by the plan
administrator to anycurrent or potential
participant, beneficiary, or contracting
provider upon request.
(2)Reason for denial. The reason for
any denial under a group health plan of re-
imbursement or payment for services with
respect to mental health or substance use
disorder benefits in the case of any partic-
ipant or beneficiary must be made avail-
able by the plan administrator to the par-
ticipant or beneficiary in accordance with
this paragraph (d)(2).
(i)Plans subject to ERISA.Ifaplan
is subject to ERISA, it must provide the
reason for the claim denial in a form and
manner consistent with the requirements
of 29 CFR 2560.503–1 for group health
plans.
(ii)Plans not subject to ERISA.Ifa
plan is not subject to ERISA, upon the re-
quest of a participant or beneficiary the
reason for the claim denial must be pro-
vided within a reasonable time and in a rea-
sonable manner. For this purpose, a plan
that follows the requirements of 29 CFR
2560.503–1 for group health plans com-
plies with the requirements of this para-
graph (d)(2)(ii).
(e)Applicability—(1)Group health
plans. The requirements of this section
apply to a group health plan offering med-
ical/surgical benefits and mental health or
substance use disorder benefits. If, under
an arrangement or arrangements to pro-
vide health care benefits by an employer
or employee organization (including for
this purpose a joint board of trustees of a
multiemployer trust affiliated with one or
more multiemployer plans), any partici-
pant (or beneficiary) can simultaneously
receive coverage for medical/surgical ben-
efits and coverage for mental health or
substance use disorder benefits, then the
requirements of this section (including the
exemption provisions in paragraph (g) of
this section) apply separately with respect
to each combination of medical/surgical
benefits and of mental health or substance
use disorder benefits that any participant
(or beneficiary) can simultaneously re-
ceive from that employer’s or employee
organization’s arrangement or arrange-
ments to provide health care benefits, and
all such combinations are considered for
purposes of this section to be a single
group health plan.
(2)Health insurance issuers.See
29 CFR 2590.712(e)(2) and 45 CFR
146.136(e)(2), under which a health in-
surance issuer offering health insurance
coverage for mental health or substance
use disorder benefits is subject to require-
ments similar to those applicable to group
health plans under this section if the health
insurance coverage is offered in connec-
tion with a group health plan subject to
requirements under 29 CFR 2590.712 or
45 CFR 146.136 similar to those appli-
cable to group healthplans under this
section.
(3)Scope. This section does not—
(i) Require a group health plan to pro-
vide any mental health benefits or sub-
stance use disorder benefits, and the provi-
sion of benefits by a plan for one or more
mental health conditions or substance use
disorders does not require the plan under
this section to provide benefits for any
other mental health condition or substance
use disorder; or
(ii) Affect the terms and conditions re-
lating to the amount, duration, or scope
of mental health or substance use disorder
benefits under the plan except as specifi-
cally provided in paragraphs (b) and (c) of
this section.
(f)Small employer exemption—(1)In
general. The requirements of this sec-
tion do not apply to a group health plan
for a plan year of a small employer. For
purposes of this paragraph (f), the term
small employermeans, in connection with
a group health plan with respect to a cal-
endar year and a plan year, an employer
May 3, 20106482010–18 I.R.B.

who employed an average of at least two
(or one in the case of an employer resid-
ing in a state that permits small groups to
include a single individual) but not more
than 50 employees on business days during
the preceding calendar year. See section
9831(a)(2) and §54.9831–1(b), which pro-
vide that this section (and certain other sec-
tions) does not apply to any group health
plan for any plan year if, on the first day of
the plan year, the plan has fewer than two
participants who arecurrent employees.
(2)Rules in determining employer size.
For purposes of paragraph (f)(1) of this
section—
(i) All persons treated as a single em-
ployer under subsections (b), (c), (m), and
(o) of section 414 are treated as one em-
ployer;
(ii) If an employer was not in existence
throughout the preceding calendar year,
whether it is a small employer is deter-
mined based on the average number of em-
ployees the employer reasonably expects
to employ on business days during the cur-
rent calendar year; and
(iii) Any reference to an employer for
purposes of the small employer exemption
includes a reference to a predecessor of the
employer.
(g)Increasedcostexemp-
tion—[Reserved].
(h)Sale of nonparity health insur-
ance coverage. See 29 CFR 2590.712(h)
and 45 CFR 146.136(h), under which a
health insurance issuer may not sell a
policy, certificate, orcontract of insurance
that fails to comply with requirements
similar to those under paragraph (b) or
(c) of this section, except to a plan for
a year for which the plan is exempt
from requirements similar to those under
paragraph (b) or (c) of this section
because the plan meets requirements under
paragraph (f) or (g) of 29 CFR 2590.712
or 45 CFR 146.136 similar to those under
paragraph (f) or (g) of this section.
(i)Effective/applicability dates—(1)In
general. Except as provided in paragraph
(i)(2) of this section, the requirements of
this section are applicable for plan years
beginning on or after July 1, 2010.
(2)Special effective date for certain
collectively-bargained plans. For a group
health plan maintained pursuant to one or
more collective bargaining agreements rat-
ified before October 3, 2008, the require-
ments of this section do not apply to the
plan for plan years beginning before the
laterofeither—
(i) The date on which the last of the
collective bargaining agreements relating
to the plan terminates (determined without
regard to any extension agreed to after Oc-
tober 3, 2008); or
(ii) July 1, 2010.
(j)Expiration date. This section expires
on or before January 29, 2013.
PART 602—OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 3. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 4. In §602.101, paragraph (b) is
amended by adding the following entry in
numerical order to the table:
§602.101 OMB Control numbers.
*****
(b) * * *
CFR part or section where
Identified and described
Current OMB
control No.
*****
54.9812–1T
...........................................................
1545–2165
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement,
Internal Revenue Service.
Approved January 27, 2010.
Michael F. Mundaca,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on January 29,
2010, 8:45 a.m., and published in the issue of the Federal
Register
for February 2, 2010, 75 F.R. 5410)
2010–18 I.R.B.649May 3, 2010

Part III. Administrative, Procedural, and Miscellaneous
Transitional Guidance for
Taxpayers Claiming Relief
Under the Military Spouses
Residency Relief Act for
Taxable Year 2009
Notice 2010–30
I. PURPOSE
This notice grants certain civilian
spouses of active duty members of the
uniformed services (servicemembers), as
defined under 10 U.S.C. § 101(a)(5), an
extension of time through October 15,
2010 for paying the amount of tax shown
or required to be shown on a federal in-
come tax return for the taxable year that
includes November 11, 2009 (this will
generally be the calendar year 2009 and
is referred to hereinafter as “2009”). This
extension is granted with respect to civil-
ian spouses of servicemembers (civilian
spouses) who: (1) were away from their
residence or domicile (tax residence) in a
State or the District of Columbia during
2009 solely to be with a servicemember
spouse serving in compliance with military
orders at a military duty station in Ameri-
can Samoa, Guam, the Northern Mariana
Islands, Puerto Rico, or the U.S. Virgin
Islands (hereinafter, a “U.S. territory”);
and (2) maintained their tax residence in
a State or the District of Columbia for
2009 under MSRRA. As discussed in Part
III(A)(2) of this notice, the extension to
pay tax provided in this notice does not
apply to civilian spouses claiming tax resi-
dence in a State or the District of Columbia
who are (1) federal employees in Amer-
ican Samoa, Guam, or the U.S. Virgin
Islands (USVI), or (2) individuals working
in Guam or the Northern Mariana Islands
(NMI) to whom section 935 applies.
Certaintaxpayerswhoworkedina
State or the District of Columbia during
2009 and who claim tax residence in a
U.S. territory under MSRRA for 2009 may
apply for a refund of federal income taxes
that the taxpayer’s employer withheld and
remitted to the Internal Revenue Service
(IRS) or estimated tax payments that the
taxpayer paid to the IRS during 2009. This
notice provides guidance and procedures
for submitting claims for refund of fed-
eral income taxes to civilian spouses who:
(1) were away from their tax residence
in the U.S. territories during 2009 solely
to be with a servicemember spouse serv-
ing in compliance with military orders at
a military duty station in a State or the
District of Columbia; and (2) maintained
their tax residence in the U.S. territories
for 2009 under MSRRA. As discussed in
Part III(B)(2), the procedures set forth in
this notice do not apply to certain civilian
spouses claiming tax residence in Guam,
the NMI, or the USVI.
II. BACKGROUND
MSRRA was signed into law on
November 11, 2009 and applies retroac-
tively to 2009 as well as to subsequent
taxable years. MSRRA amends the Ser-
vicemembers Civil Relief Act, 50 U.S.C.
App. § 501et seq., to provide a civilian
spouse with rights similar to those afforded
to the servicemember when the civilian
spouse accompanies the servicemember
serving at a duty station on military orders
within one of the 50 States, the District of
Columbia, or a U.S. territory.
Although it does not explicitly amend
any provision of the Internal Revenue
Code (Code), MSRRA nonetheless may
have the effect of modifying the applica-
tion of certain provisions of the Code with
respect to federal income tax withhold-
ing, source of income, and residency for a
civilian spouse who claims relief under the
tax provisions of MSRRA and who was
employed in a State, the District of Colum-
bia, or a U.S. territory. MSRRA provides
in relevant part that a civilian spouse shall
neither lose nor acquire tax residence by
reason of being absent or present in any
tax jurisdiction of the United States (de-
finedin50U.S.C.App. §§511and571
to include the 50 States, the District of
Columbia, and a commonwealth, territory,
or possession of the United States) solely
to be with the servicemember serving in
compliance with military orders if the tax
residence is the same for the servicemem-
ber and civilian spouse.SeeMSRRA,
§ 3. Accordingly, pursuant to MSRRA,
a civilian spouse may maintain tax resi-
dence other than where the civilian spouse
is physically present while accompanying
the servicemember to a military duty sta-
tion.
MSRRA also provides that income
for services performed by the civilian
spouse in a tax jurisdiction of the United
States shall not be deemed to be income
for services performed or from sources
within that tax jurisdiction if the civilian
spouse is not a resident or domiciliary of
the jurisdiction in which the income is
earned because the civilian spouse is in
thejurisdictionsolelytobewiththeser-
vicemember serving in compliance with
military orders.SeeMSRRA, § 3. Con-
sequently, the civilian spouse claiming the
benefits of MSRRA may not be required to
pay income taxes to a jurisdiction in which
the civilian spouse performs services if
that jurisdiction is different from the civil-
ian spouse’s chosen tax residence under
MSRRA. Instead, the civilian spouse may
be required to pay applicable State and
local income taxes or U.S. territory taxes
in the jurisdiction in which the civilian
spouse claims tax residence. In addition,
the civilian spouse will be required to
pay federal income taxes on income from
services if the civilian spouse’s chosen
tax residence is in a State or the District
of Columbia. For example, if a civilian
spouse is working in Guam but properly
claims tax residence in Virginia under
MSRRA, the civilian spouse’s income
from services would not be considered
to be from sources in Guam. Thus, this
income would not constitute taxable in-
come for Guam tax purposes. However,
the civilian spouse would owe taxes to the
IRS and may owe taxes to Virginia.
III. TRANSITIONAL RELIEF FOR
2009
A.Taxpayers Claiming Tax Residence in
a State or the District of Columbia
1.In General
MSRRA was enacted on November 11,
2009, and applies retroactively to 2009. As
a result, the IRS recognizes that taxpay-
ers working in a U.S. territory who claim
tax residence in a State or the District of
Columbia may experience undue hardship
in timely paying federal income tax lia-
bilities due the IRS for 2009. This sit-
May 3, 20106502010–18 I.R.B.

uation may occur, in particular, if a tax-
payer claims tax residence in a State or
the District of Columbia and files a 2009
federal income tax return with the IRS,
but the taxpayer’s employer withheld in-
come tax for 2009 that was remitted to
a U.S. territory tax administration, and/or
the taxpayer made estimated tax payments
to a U.S. territory tax administration. (As
discussed in Part III(A)(2), this situation
generally should not arise for (1) federal
employees in American Samoa, Guam, or
the USVI, or (2) individuals working in
Guam or the NMI to whom section 935 of
the Code applies.) Accordingly, withheld
amounts and estimated tax payments that
should have been paid to the IRS were ac-
tually paid to the territory. The IRS recog-
nizes that a taxpayer in this situation, in or-
der to recover amounts erroneously paid to
a U.S. territory, may need to file a claim for
refund or credit of amounts withheld by the
taxpayer’s employer or estimated tax pay-
ments that the taxpayer remitted to the U.S.
territory tax administration during 2009.
Furthermore, a civilian spouse should
be aware that to the extent that a Form
W–2,Wage and Tax Statement(or its
equivalent), issued to the taxpayer by an
employer indicates income tax withhold-
ingpaidtoataxadministrationofaU.S.
territory for 2009, such amount should
not be claimed as a payment on a federal
income tax return (e.g., Form 1040, Line
61) if such withholding amount has not
been paid or treated as paid to the IRS. In
such a case, the amount owed as shown
on a tax return filed with the IRS will be
higher than if such withholding amounts
had been paid to the IRS.
a.Applicable Provisions of the Code
Section 6651(a) of the Code imposes a
penalty on any failure to pay (on or before
the due date for payment, including exten-
sions) any amount shown as tax on any re-
turn. In general, individuals must pay in-
come tax by April 15. Section 6161 of the
Code authorizes the Secretary of the Trea-
sury or his delegate to grant taxpayers rea-
sonable extensions of time (generally not
to exceed 6 months) to pay the amount of
taxshownorrequiredtobeshownonany
return. However, section 6601 of the Code
imposes interest on any amount of tax not
paid by the due date, determined without
regard to any extension of time for pay-
ment or any installment agreement entered
into under section 6159 of the Code, from
such due date to the date the tax is paid.
Section 6654(a) of the Code provides
for an addition to tax in the case of an un-
derpayment of estimated tax by an indi-
vidual. An underpayment of estimated tax
is the excess of the required quarterly es-
timated tax payment over the amount ac-
tually paid on or before the due date for
the payment. Section 6654(e)(3)(A) of the
Code provides that the addition to tax shall
not be imposed to the extent that the Sec-
retary or his delegate determines that the
imposition of such addition to tax would
be against equity and good conscience due
to unusual circumstances.
b.Procedures for Relief
Pursuant to section 6161 of the Code,
the IRS is providing to certain taxpayers
an extension of time through October 15,
2010 for paying the amount of tax shown
or required to be shown on a federal in-
come tax return for 2009. This extension
is being provided to taxpayers who: (i)
worked in a U.S. territory; (ii) claim tax
residence in a State or the District of Co-
lumbia under MSRRA; and (iii) are not
(1) federal employees in American Samoa,
Guam, or the USVI, or (2) individuals
working in Guam or the NMI to whom sec-
tion 935 applies. Additionally, pursuant to
section 6654(e)(3)(A) of the Code, the IRS
has determined that with respect to such
taxpayers, applying the addition to tax un-
der section 6654(a) is against equity and
good conscience due to unusual circum-
stances. However, interest on the amount
of tax must be paid for the period from the
time the tax is due, without regard to such
extension (generally, April 15), until the
date the tax is paid.
Taxpayers should be aware that the ex-
tension of time to pay provided in this no-
tice isnotan extension of time to file a
return. To obtain an automatic extension
of time to file, a taxpayer should file IRS
Form 4868.
To qualify for the extension of time to
pay under this notice, taxpayers must fol-
low these procedures:
•Taxpayers must mark “MSRRA” in red
ink on the top of their returns and in-
clude with their returns a copy of the
Form(s) W–2, or its equivalent, that
they received from their employers in
the U.S. territory where they worked
during 2009.
•Taxpayers must also attach the follow-
ing declaration:
“Iamclaiming
as my
residence or domicile under the
Military Spouses Residency Relief
Act (“MSRRA”). Under penalties of
perjury, I declare that I am qualified
for relief under MSRRA because I am
present in
solely
to accompany my spouse who is a
servicemember serving in compliance
with military orders, and my claimed
residence or domicile is the same as
my spouse’s residence or domicile.”
•The declaration must be signed and
dated by the taxpayer. Neither a
stamped signature nor a faxed signa-
ture is permitted.
•Taxpayers must mail their returns to
the IRS Service Center to which the
return would be mailed if the tax-
payer lived in the jurisdiction claimed
as the taxpayer’s tax residence under
MSRRA. The address for the appropri-
ate IRS Service Center may be found
in the instructions to IRS Form 1040.
For example, if a civilian spouse works
in Puerto Rico but claims tax residence
in Virginia under MSRRA, the civilian
spouse should mail the federal income
tax return to the IRS Service Center in
Kansas City, Missouri. Taxpayers may
use private delivery services desig-
natedbytheIRStomailtheirreturns,
as provided in the instructions to IRS
Form 1040.
2.Exceptions
a.Taxpayers Employed by the U.S.
Federal Government in American
Samoa, Guam, or the USVI
The relief provided in Part III(A)(1)(b)
does not apply to a federal employee
claiming tax residence under MSRRA in a
State or the District of Columbia but who
was working in American Samoa, Guam,
or the USVI in 2009. In this case, the
taxpayer’s federal agency employer with-
held income taxes and remitted amounts
withheld to the IRS during 2009. As a
result, the taxpayer does not need the relief
provided in Part III(A)(1)(b). Instead, the
2010–18 I.R.B.651May 3, 2010

taxpayer should file an income tax return
with the IRS and may claim as a payment
on that federal income tax return (e.g.,
Form 1040, Line 61) the amount reported
as income tax withholding paid to the IRS
on the Form W–2, or its equivalent, issued
to the taxpayer by the federal agency em-
ployer.
b.Certain Other Taxpayers Present in
Guam or the NMI
The relief provided in Part III(A)(1)(b)
also does not apply to a civilian spouse
working in Guam or the NMI to whom sec-
tion 935 applies. In that case, the civil-
ian spouse does not need to file a claim
for refund with Guam or the NMI because
the civilian spouse may treat amounts paid
to Guam or the NMI as paid to the IRS.
Section 935 applies to a civilian spouse
claiming tax residence in a State or the
District of Columbia under MSRRA if the
civilian spouse is a U.S. citizen or resi-
dent alien and has income from sources
in Guam or the NMI (other than income
from services performed in Guam or the
NMI). A resident alien is a person with
a green card or who meets the substantial
presence test, which generally means that
the person is present in the United States
for a specified number of days. If sec-
tion 935 applies, the taxpayer may treat
amounts withheld and paid to the relevant
U.S.territoryaspaidtotheIRS.SeeTreas.
Reg. § 1.935–1(c)(1)(ii)(A). The taxpayer
should file an income tax return with the
IRS and pay any tax due by the relevant
due date.
B.Taxpayers Claiming Tax Residence in
a U.S. territory
Circumstances similar to those de-
scribed in Part III(A)(1) may arise for a
civilian spouse who is present in a State or
the District of Columbia but who claims
tax residence under MSRRA in one of the
U.S. territories. In that case, the civilian
spouse may be required to file a 2009
income tax return with the relevant U.S.
territory tax administration, but the civil-
ian spouse’s employer withheld income
taxfor2009thatwasremittedtotheIRS,
and/or the civilian spouse made estimated
tax payments to the IRS. Thus, taxes that
should have been paid to the U.S. territory
tax administration were actually paid to
the IRS.
AsdescribedinmoredetailinParts
III(B)(1) and (2), the federal income tax
treatment of taxpayers in this situation
may depend in part on whether the tax-
payer is treated under section 937 as a
bona fideresident of the U.S. territory
in which the taxpayer claims tax resi-
dence under MSRRA. Under Treas. Reg.
§ 1.937–1(b)(2), a servicemember who
qualified as abona fideresident of a U.S.
territory in a prior taxable year is deemed
to satisfy the requirements forbona fide
residence in such U.S. territory for a sub-
sequent taxable year if the servicemember
is otherwise unable to satisfy such re-
quirements during such subsequent year
by reason of being absent from the U.S.
territory or present in a State or the Dis-
trict of Columbia solely in compliance
with military orders. The IRS and the
Department of Treasury intend to issue
regulations under section 937 to provide
a civilian spouse with treatment similar to
that provided to the servicemember spouse
for purposes of section 937. In particular,
the regulations will provide that a civilian
spouse who claims tax residence under
MSRRA in a U.S. territory but is present
in a State or the District of Columbia qual-
ifiesasabona fideresident of such U.S.
territory under section 937 of the Code if
the civilian spouse satisfies the following
requirements: (1) the civilian spouse qual-
ified as abona fideresident of the U.S.
territory in a prior taxable year, and (2)
the civilian spouse is unable to satisfy the
requirements forbona fideresidence in
the U.S. territory in a subsequent taxable
year by reason of being present in a State
or the District Columbia solely to be with
the servicemember spouse who is serving
in compliance with military orders. For
general rules regardingbona fideresi-
dence in a U.S. territory, please refer to
IRS Publication 570.
1.American Samoa and Puerto Rico
Section 931 of the Code provides that,
in the case of abona fideresident of Amer-
ican Samoa, income derived from sources
within American Samoa is not included in
gross income for U.S. federal income tax
purposes (except amounts paid for services
performedasanemployeeoftheUnited
States or any agency thereof). A civilian
spouse who claims tax residence in Amer-
ican Samoa under MSRRA and is abona
fideresident of American Samoa, but who
had income taxes withheld and paid to the
IRS during 2009 with respect to services
performed by the taxpayer in a State or the
District of Columbia, may therefore be en-
titled to claim a refund of these withheld
amounts because the income from such
services may be deemed to be from sources
in American Samoa.
Similar rules apply in the case of Puerto
Rico. Specifically, section 933 generally
provides that gross income for U.S. federal
income tax purposes does not include in-
come of abona fideresident of Puerto Rico
from sources within Puerto Rico (except
amounts received for services performed
as an employee of the United States or any
agency thereof). A civilian spouse who
claims tax residence in Puerto Rico un-
der MSRRA and is abona fideresident
of Puerto Rico, but who had income taxes
withheld and paid to the IRS during 2009
with respect to services performed by the
taxpayer in a State or the District of Co-
lumbia, may therefore be entitled to claim
a refund of income taxes withheld and paid
to the IRS.
a.Procedures for Taxpayers Claiming
Tax Residence in American Samoa
or Puerto Rico Who Are Not Federal
Employees
Taxpayers who worked in a State or the
District of Columbia during 2009 but were
not employees of the U.S. federal govern-
ment, who claim tax residence in Ameri-
can Samoa or Puerto Rico for 2009 under
MSRRA, and who claim a refund of fed-
eral income taxes should follow these pro-
cedures.
•Complete the appropriate Form 1040
and mark “MSRRA” in red ink on the
top of the return;
•Attach the statement signed under
penalties of perjury described in Part
III(A)(1)(b), verifying the taxpayer’s
eligibility for relief under MSRRA;
and
•Mail the Form 1040 and attached state-
ment to the IRS Service Center indi-
cated in the instructions to the Form
1040, based on the location in which
the taxpayer lives at the end of the year.
(For example, if the taxpayer lives and
works in Virginia but claims tax resi-
dence in Guam under MSRRA, the tax-
payer should mail the required forms
May 3, 20106522010–18 I.R.B.

and statements to the IRS Service Cen-
ter in Kansas City, Missouri.) Taxpay-
ers may use private delivery services
designated by the IRS to mail their re-
turns, as provided in the instructions to
IRS Form 1040.
Taxpayers claiming tax residence in
American Samoa or Puerto Rico under
MSRRA may be required to pay taxes
to American Samoa or Puerto Rico, as
the case may be, on their income from
services. Taxpayers should contact the ap-
propriate U.S territory tax administration
for further information regarding their tax
obligations in that U.S. territory, including
whether any relief may be available for
late filings and payments. See Part IV
below for contact information for the U.S.
territory tax administrations.
b.Procedures for Taxpayers Claiming
Tax Residence in American Samoa or
Puerto Rico Who Are Federal Employees
Taxpayers claiming tax residence in
American Samoa or Puerto Rico un-
der MSRRA who are federal employees
should file a return with the relevant U.S.
territory tax administration and file a fed-
eral income tax return with the IRS. These
taxpayers should report income from fed-
eral employment as income from sources
in American Samoa or Puerto Rico on
their federal income tax returns.
Taxpayers should contact the appro-
priate U.S territory tax administration for
further information regarding their tax
obligations in that U.S. territory, including
whether any relief may be available for
late filings and payments. See Part IV
below for contact information for the U.S.
territory tax administrations.
2.Guam, the NMI, and the USVI
Under section 932(c) of the Code, an
individual who is abona fideresident
of the USVI for the entire taxable year
(or a person who files a joint return with
such an individual) must file an income
tax return for the taxable year with the
USVI. For purposes of the territorial in-
come tax of the USVI (that is, “mirrored”
sections of the Code), abona fideresident
of USVI may take income tax paid to the
United States into account as payments
to the USVI under mirrored sections 31
(tax withheld on wages), 6315 (payments
of estimated income tax), and 6402(b)
(credits against estimated tax).SeeTreas.
Reg. § 1.932–1(g)(2)(ii)(A). As a result, a
civilian spouse who claims tax residence
in the USVI under MSRRA and is abona
fideresident of the USVI should file an
incometaxreturnwiththeUSVIandmay
treat amounts paid to the IRS in 2009 as
paid to the USVI on the taxpayer’s return.
Section 935(b) of the Code provides in
relevant part that, with respect to a tax-
payer who is (i) abona fideresident of
Guam or the NMI, (ii) a citizen of Guam
or the NMI (but not otherwise a U.S. citi-
zen and not a resident of the United States),
or (iii) an individual who files a joint re-
turn for a taxable year with an individ-
ual described in (i) or (ii) if the individ-
ual described in (i) or (ii) has the greater
adjusted gross income, the taxpayer shall
file an income tax return with Guam or the
NMI, as the case may be. Under section
935(c)(3), an individual is relieved of li-
ability for income tax to the jurisdiction
other than the jurisdiction with which the
individual is required to file under sec-
tion 935(b). In applying the territorial in-
cometaxofGuamortheNMI(under“mir-
rored” sections of the Code), abona fide
resident or citizen of Guam or the NMI
maytakeincometaxpaidtotheUnited
States into account under mirrored sec-
tions 31 (tax withheld on wages), 6315
(payments of estimated income tax), and
6402(b) (credits against estimated tax), as
payments to the relevant U.S. territory.See
Treas. Reg. § 1.935–1(c)(1)(ii)(A). Con-
sequently, a civilian spouse who claims
tax residence in Guam or the NMI under
MSRRA and is abona fideresident or citi-
zen of Guam or the NMI should file an in-
come tax return with the relevant U.S. ter-
ritory and may treat amounts paid to the
IRS in 2009 as paid to the U.S. territory.
C.Other Guidance
In the case of taxpayers described in
Part III(A)(1) and III(B)(1) of this notice,
the IRS and tax administrations of the U.S.
territories may determine by agreement or
otherwise to coordinate relief for taxpay-
ers claiming the benefits of MSRRA. The
IRS and U.S. territories will issue addi-
tional guidance if coordinated procedures
become available. Taxpayers claiming the
benefits of MSRRA should continue to use
the procedures set forth in this notice until
the IRS issues further guidance.
Taxpayers who have already filed 2009
federal income tax returns and were not
aware of the procedures provided in this
notice and taxpayers who have any ques-
tions regarding the relief or procedures in
this notice, may call 1(800) 829–1040 or
(215) 516–2000 (not a toll-free call) for as-
sistance.
State, local, and U.S. territory tax ad-
ministrations may establish their own pro-
cedures for the implementation of the taxa-
tion provisions of MSRRA. However, such
procedures are beyond the scope of this no-
tice.
IV. CONTACT INFORMATION
FOR U.S. TERRITORY TAX
ADMINISTRATIONS
Taxpayers may direct questions regard-
ing U.S. territory taxes and claims for re-
fund to the following:
American Samoa
Tax Division
Government of American Samoa
Pago Pago, American Samoa 96799
Phone number: 684–633–4181
Fax Number: 684–633–1513
The Northern Mariana Islands
Department of Finance
Division of Revenue and Taxation
Commonwealth of the Northern
Mariana Islands
P.O. Box 5234 CHRB
Saipa
n, MP 96950
Phone number: 670–664–1000
Fax Nu
mber: 670–664–1015
Guam
Depa
rtment of Revenue and Taxation
Government of Guam
P.O. Box 23607
GMF
, GU 96921
Ph
one number: 671–635–1840 or
67
1–635–1841
Fax Number: 671–633–2643
2010–18 I.R.B.653May 3, 2010

Puerto Rico
Departamento de Hacienda
Negociado de Asistencia Contributiva
P.O. Box 9024140
San Juan, Puerto Rico 00902–4140
Phone number: 787–721–2020,
extension 3611,
or 1–800–981
–9236 (toll-free within
Puerto Rico b
ut outside San Juan)
U.S. Virgin Islands
Virgin Islands Bureau of Internal
Revenue
9601 Estat
e Thomas
Charlotte Amalie
St. Thomas, VI 00802
Phone number: 340–715–1040
Fax Number: 340–714–9341 and
340–714–9345
V. EFFECTIVE DATE
The relief provided in Part III(A)(1)(b)
and the procedures in Part III(B)(1) of this
notice are effective for taxable years that
include November 11, 2009.
The regulations under section 937 pro-
viding a civilian spouse with treatment
similar to that provided to the servicemem-
ber spouse for purposes of section 937 will
be effective for taxable years that include
November 11, 2009 and subsequent years.
VI. PAPERWORK REDUCTION ACT
The collection of information contained
in this notice has been reviewed and ap-
proved by the Office of Management and
Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. § 3507) under
control number 1545–2169.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collections of information in this
notice are in Part III(A)(1) and III(B)(1).
This information will be used to verify a
taxpayer’s eligibility for relief under the
taxation provisions of MSRRA. The col-
lection of information is required to obtain
a benefit. The likely respondents are indi-
viduals.
The estimated total annual reporting
burden is 6,200 hours. Public reporting
burden for this collection of information is
estimated to average 1 hour per response,
including the time for reviewing instruc-
tions, searching existing data sources,
gathering and maintaining the data needed,
and completing and reviewing the collec-
tion of paperwork. The estimated number
of respondents is 6,200. Send comments
regarding this burden estimate or any
other aspect of this collection of informa-
tion, including suggestions for reducing
this burden, to Internal Revenue Service,
Tax Products Coordinating Committee,
SE:W:CAR:MP:T:T:SP, 1111 Constitution
Avenue, NW, IR–6526, Washington, DC
20224.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. § 6103.
VII. DRAFTING INFORMATION
The principal author of this notice is
Rosy L. Lor of the Office of Associate
Chief Counsel (International). For fur-
ther information regarding this notice, con-
tact Rosy L. Lor at (202) 435–5262 (not a
toll-free call).
Credit for Renewable
Electricity Production,
Refined Coal Production,
and Indian Coal Production,
and Publication of Inflation
Adjustment Factors and
Reference Prices for Calendar
Year 2010
Notice 2010–37
This notice publishes the inflation ad-
justment factors and reference prices for
calendar year 2010 for the renewable elec-
tricity production credit, the refined coal
production credit, and the Indian coal pro-
duction credit under § 45 of the Internal
Revenue Code. The 2010 inflation adjust-
ment factors and reference prices are used
in determining the availability of the cred-
its. The 2010 inflation adjustment factors
and reference pricesapply to calendar year
2010 sales of kilowatt-hours of electricity
produced in the United States or a pos-
session thereof from qualified energy re-
sources and to calendar year 2010 sales of
refined coal and Indian coal produced in
the United States or a possession thereof.
BACKGROUND
Section 45(a) provides that the renew-
able electricity production credit for any
tax year is an amount equal to the prod-
uct of 1.5 cents multiplied by the kilowatt
hours of specified electricity produced by
the taxpayer and sold to an unrelated per-
son during the tax year. This electricity
must be produced from qualified energy
resources and at a qualified facility during
the 10-year period beginning on the date
the facility was originally placed in ser-
vice.
Section 45(b)(1) provides that the
amount of the credit determined under
§ 45(a) is reduced by an amount which
bears the same ratio to the amount of the
credit as (A) the amount by which the
reference price for the calendar year in
which the sale occurs exceeds 8 cents,
bears to (B) 3 cents. Under § 45(b)(2),
the 1.5 cent amount in § 45(a), the 8 cent
amount in § 45(b)(1), the $4.375 amount in
§ 45(e)(8)(A), and in § 45(e)(8)(B)(i), the
$2.00 amount in § 45(e)(8)(D)(ii)(I), the
reference price of fuel used as feedstock
(within the meaning of § 45(c)(7)(A)) in
2002 are each adjusted by multiplying the
amount by the inflation adjustment factor
for the calendar year in which the sale
occurs. If any amount as increased under
the preceding sentence is not a multiple
of 0.1 cent, the amount is rounded to the
nearest multiple of 0.1 cent.
Section 45(c)(1) defines qualified
energy resources as wind, closed-loop
biomass, open-loop biomass, geother-
mal energy, solar energy, small irrigation
power, municipal solid waste, qualified
hydropower production, marine and hy-
drokinetic renewable energy.
Section 45(d)(1) defines a qualified fa-
cility using wind to produce electricity as
any facility owned by the taxpayer that is
originally placed in service after Decem-
ber 31, 1993, and before January 1, 2013.
See § 45(e)(7) for rules relating to the in-
applicability of the credit to electricity sold
to utilities under certain contracts.
May 3, 20106542010–18 I.R.B.

Section 45(d)(2)(A) defines a qualified
facility using closed-loop biomass to pro-
duce electricity as any facility (i) owned
by the taxpayer that is originally placed in
service after December 31, 1992, and be-
fore January 1, 2014, or (ii) owned by the
taxpayer which before January 1, 2014, is
originally placed in service and modified
to use closed-loop biomass to co-fire with
coal, with other biomass, or with both,
but only if the modification is approved
under the Biomass Power for Rural De-
velopment Programs or is part of a pilot
project of the Commodity Credit Corpora-
tionasdescribedin65Fed. Reg. 63052.
Section 45(d)(2)(C)provides that in the
case of a qualified facility described in
§ 45(d)(2)(A)(ii), (i) the 10-year period re-
ferred to in § 45(a) is treated as beginning
no earlier than the date of enactment of
§ 45(d)(2)(B)(i); and (ii) if the owner of
the facility is not the producer of the elec-
tricity, the person eligible for the credit al-
lowable under § 45(a) is the lessee or the
operator of the facility.
Section 45(d)(3)(A) defines a qualified
facility using open-loop biomass to pro-
duce electricity as any facility owned by
the taxpayer which (i) in the case of a facil-
ity using agricultural livestock waste nutri-
ents, (I) is originally placed in service after
the date of enactment of § 45(d)(3)(A)(i)(I)
and before January 1, 2014, and (II) the
nameplate capacity rating of which is not
less than 150 kilowatts; and (ii) in the case
of any other facility, is originally placed in
service before January 1, 2014. In the case
of any facility described in § 45(d)(3)(A),
if the owner of the facility is not the pro-
ducer of the electricity, § 45(d)(3)(C) pro-
vides that the person eligible for the credit
allowable under § 45(a) is the lessee or the
operator of the facility.
Section 45(d)(4) defines a qualified fa-
cility using geothermal or solar energy to
produce electricity as any facility owned
by the taxpayer which is originally placed
in service after the date of enactment of
§ 45(d)(4) and before January 1, 2014 (Jan-
uary 1, 2006, in the case of a facility us-
ing solar energy). A qualified facility us-
ing geothermal or solar energy does not in-
clude any property described in § 48(a)(3)
the basis of which is taken into account by
the taxpayer for purposes of determining
the energy credit under § 48.
Section 45(d)(5) defines a qualified
facility using small irrigation power to
produce electricityas any facility owned
by the taxpayer which is originally placed
in service after the date of enactment of
§ 45(d)(5) and before October 3, 2008.
Section 45(d)(6) defines a qualified fa-
cility using gas derived from the biodegra-
dation of municipal solid waste to produce
electricity as any facility owned by the tax-
payer which is originally placed in service
after the date of enactment of § 45(d)(6)
and before January 1, 2014.
Section 45(d)(7) defines a qualified fa-
cility (other than a facility described in
paragraph (6)) that burns municipal solid
waste to produce electricity as any facil-
ity owned by the taxpayer which is orig-
inally placed in service after the date of
enactment of § 45(d)(7) and before Jan-
uary 1, 2014. A qualified facility burn-
ing municipal solid waste includes a new
unit placed in service in connection with
a facility placed in service on or before the
date of enactment of § 45(d)(7), but only to
the extent of the increased amount of elec-
tricity produced at the facility by reason of
such new unit.
Section 45(d)(8) provides in the case
of a facility that produces refined coal,
the term “refined coal production facility”
means (i) with respect to a facility produc-
ing steel industry fuel, any facility (or any
modification to a facility) which is placed
in service before January 1, 2010, and (ii)
with respect to any other facility produc-
ing refined coal, and facilty placed in ser-
vice after the date of the enactment of the
American Jobs Creation Act of 2004 and
before January 1, 2010.
Section 45(d)(9) defines a qualified
facility producing qualified hydroelec-
tric production described in § 45(c)(8) as
(A) any facility producing incremental
hydropower production, but only to the
extent of its incremental hydropower pro-
duction attributable toefficiency improve-
ments or additions to capacity described
in § 45(c)(8)(B) placed in service after the
date of enactment of § 45(d)(9) and before
January 1, 2014, and (B) any other facility
placed in service after the date of enact-
ment of § 45(d)(9) and before January 1,
2014. Section 45(d)(9)(C) provides that in
the case of a qualified facility described in
§ 45(d)(9)(A), the 10-year period referred
to in § 45(a) is treated as beginning on
the date the efficiency improvements or
additions to capacity are placed in service.
Section 45(d)(10) provides in the case
of a facility that produces Indian coal,
the term “Indian coalproduction facility”
means a facility which is placed in service
before January 1, 2009.
Section 45(d)(11) provides in the case
of a facility producing electricity from ma-
rine and hydrokinetic renewable energy,
the term “qualified facility” means any
facility owned by the taxpayer which (i)
has a nameplate capacity rating of at least
150 kilowatts, and (ii) which is originally
placed in service on or after the date of
the enactment of this paragraph and before
Janaury 1, 2012.
Section 45(e)(8)(A) provides that the
refined coal production credit is an amount
equal to $4.375 per ton of qualified re-
fined coal (i) produced by the taxpayer
at a refined coal production facility dur-
ing the 10-year period beginning on the
date the facility was originally placed in
service, and (ii) sold by the taxpayer (I)
to an unrelated person and (II) during the
10-year period and the tax year. Section
45(e)(8)(B) provides that the amount of
credit determined under § 45(e)(8)(A) is
reduced by an amount which bears the
same ratio to the amount of the increase
as (i) the amount by which the reference
price of fuel used as feedstock (within the
meaning of § 45(c)(7)(A)) for the calendar
year in which the sale occurs exceeds an
amount equal to 1.7 multiplied by the ref-
erence price for such fuel in 2002, bears to
(ii) $8.75. Section 45(e)(8)(D)(ii)(I) pro-
vides that in the case of a taxpayer who
produces steel industry fuel, subparagraph
(A) shall be applied by substituting “2.00
per barrel-of-oil equivalent” for $4.375 per
ton.” Section 45(e)(8)(D)(ii)(II) provides
that in lieu of the 10-yeasr period referred
to in clauses (i) and (ii)(II) of subpara-
graph (A), the credit period shall be the
period beginning in the later of the date
such facility was originally placed-in-ser-
vice, or October 1, 2008, and ending on
the later of December 31, 2009, or the
date which is 1 year after the date such
facility or the modifications described in
clause (iii) were placedin service. Section
45(e)(8)(D)(ii)(III)provides that subpara-
graph (B) (dealing with the phaseout of the
credit) will not apply.
Section 45(e)(10)(A) provides in the
case of a producer of Indian coal, the credit
determined under section 45 for any tax-
able year shall be increased by an amount
2010–18 I.R.B.655May 3, 2010

equal to the applicable dollar amount per
ton of Indian coal (i) produced by the tax-
payer at an Indian coal production facility
during the 7-year period beginning on Jan-
uary 1, 2006, and (ii) sold by the taxpayer
(I) to an unrelated person, and (II) during
such 7-year period and such taxable year.
Section 45(e)(10)(B)(i) defines “ap-
plicable dollar amount” for any taxable
year as (I) $1.50 in the case of calendar
years 2006 through 2009, and (II) $2.00 in
the case of calendar years beginning after
2009.
Section 45(e)(2)(A) requires the Secre-
tary to determine and publish in the Fed-
eral Register each calendar year the infla-
tion adjustment factor and the reference
price for the calendar year. The inflation
adjustment factors and the reference prices
for the 2010 calendar year were published
in the Federal Register on April 1, 2010 (75
Fed. Reg.16576).
Section 45(e)(2)(B) defines the infla-
tion adjustment factor for a calendar year
as the fraction the numerator of which is
the GDP implicit price deflator for the pre-
ceding calendar year and the denominator
of which is the GDP implicit price defla-
tor for the calendar year 1992. The term
“GDP implicit price deflator” means the
most recent revision of the implicit price
deflator for the gross domestic product as
computed and published by the Depart-
ment of Commerce before March 15 of the
calendar year.
Section 45(e)(2)(C) provides that the
reference price is the Secretary’s determi-
nation of the annual average contract price
per kilowatt hour of electricity generated
from the same qualified energy resource
and sold in the previous year in the United
States. Only contracts entered into af-
ter December 31, 1989, are taken into ac-
count.
Under § 45(e)(8)(C), the determination
of the reference price for fuel used as feed-
stock within the meaning of § 45(c)(7)(A)
is made according to rules similar to the
rules under § 45(e)(2)(C).
Under section 45(e)(10)(B)(ii), in the
case of any calendar year after 2006,
each of the dollar amounts under section
45(e)(10)(B)(i) shall be equal to the prod-
uct of such dollar amount and the inflation
adjustment factor determined under sec-
tion 45(e)(2)(B) for the calendar year,
except that section 45(e)(2)(B) shall be
applied by substituting 2005 for 1992.
INFLATION ADJUSTMENT FACTORS
AND REFERENCE PRICES
The inflation adjustment factor for
calendar year 2010 for qualified energy
resources and refined coal is 1.4342. The
inflation adjustment factor for Indian coal
is 1.0976. The reference price for calendar
year 2010 for facilities producing elec-
tricity from wind (based upon information
provided by the Department of Energy)
is 4.22 cents per kilowatt hour. The ref-
erence prices for fuel used as feedstock
within the meaning of § 45(c)(7)(A), re-
lating to refined coal production (based
upon information provided by the Depart-
ment of Energy) are $31.90 per ton for
calendar year 2002 and $54.74 per ton for
calendar year 2010. The reference prices
for facilities producing electricity from
closed-loop biomass, open-loop biomass,
geothermal energy, solar energy, small
irrigation power, municipal solid waste,
qualified hydropower production, marine
and hydrokinetic energy have not been
determined for calendar year 2010.
PHASE-OUT CALCULATION
Because the 2010 reference price for
electricity produced from wind does not
exceed 8 cents multiplied by the infla-
tion adjustment factor, the phaseout of
the credit provided in § 45(b)(1) does
not apply to such electricity sold during
calendar year 2010. Because the 2010 ref-
erence price of fuel used as feedstock for
refined coal does not exceed the $31.90
reference price of such fuel in 2002 mul-
tiplied by the inflation adjustment factor
and 1.7, the phaseout of credit provided
in § 45(e)(8)(B) does not apply to re-
fined coal sold during calendar year 2010.
Further, for electricity produced from
closed-loop biomass, open-loop biomass,
geothermal energy, solar energy, small
irrigation power, municipal solid waste,
qualified hydropower production, marine
and hydrokinetic energy, the phaseout of
credit provided in § 45(b)(1) does not ap-
ply to such electricitysold during calendar
year 2010.
CREDIT AMOUNT BY QUALIFIED
ENERGY RESOURCE AND FACILITY,
REFINEDCOAL,ANDINDIANCOAL
Asrequiredby§45(b)(2),the1.5
cent amount in § 45(a)(1), the 8 cent
amount in § 45(b)(1), the $4.375 amount
in § 45(e)(8)(A) and the $2.00 amount in
§ 45(e)(8)(D) are each adjusted by multi-
plying such amount by the inflation adjust-
ment factor for the calendar year in which
the sale occurs. If any amount as increased
under the preceding sentence is not a mul-
tiple of 0.1 cent, such amount is rounded
to the nearest multiple of 0.1 cent. In the
case of electricity produced in open-loop
biomass facilities, small irrigation power
facilities, landfill gas facilities, trash com-
bustion facilities, qualified hydropower
facilities, marine and hydrokinetic renew-
able energy, § 45(b)(4)(A) requires the
amount in effect under § 45(a)(1) (before
rounding to the nearest 0.1 cent) to be
reduced by one-half. Under the calcula-
tion required by § 45(b)(2), the credit for
renewable electricityproduction for calen-
dar year 2010 under § 45(a) is 2.2 cents per
kilowatt hour on the sale of electricity pro-
duced from the qualified energy resources
of wind, closed-loop biomass, geothermal
energy, and solar energy, and 1.1 cent per
kilowatt hour on the sale of electricity
produced in open-loop biomass facilities,
small irrigation power facilities, landfill
gas facilities, trash combustion facilities,
qualified hydropowerfacilities, marine
and hydrokinetic energy facilities. Under
the calculation required by § 45(b)(2), the
credit for refined coal production for cal-
endar year 2010 under section 45(e)(8)(A)
is $6.27 per ton on the sale of qualified
refined coal. The credit for steel industry
fuel is $2.87 per barrel-of-oil equivalent
of steel industry fuel sold. The credit for
Indian coal production for calendar year
2010 under § 45(e)(10)(B) is $2.2 per ton
on the sale of Indian coal.
DRAFTING AND CONTACT
INFORMATION
The principal author of this notice is
Philip Tiegerman of the Office of Asso-
ciate Chief Counsel (Passthroughs and
Special Industries). For further infor-
mation regarding this notice, contact
Mr. Tiegerman at (202) 622–3110 (not a
toll-free call).
May 3, 20106562010–18 I.R.B.

Part IV. Items o
fGeneralInterest
US-Belgium Ag
reement on
Pension Plans
under Treaty
Article 17
Announcemen
t 2010–27
The followin
g is a copy of the Com-
petent Autho
rity Agreement entered into
by the compet
ent authorities of the United
States of Ame
rica and Belgium with re-
spect to the
types of pension plans es-
tablished i
n either Contracting State that
will be deem
ed to generally correspond
to a pension
plan recognized for tax pur-
poses in th
e other Contracting State as re-
quired by p
aragraphs 7 and 9 of Article
17 (Pensio
ns, Social Security, Annuities,
Alimony, a
nd Child Support) of the Con-
vention Be
tween the Government of the
United St
ates of America and the Gov-
ernment o
f the Kingdom of Belgium for
the Avoid
ance of Double Taxation and the
Preventi
on of Fiscal Evasion with Respect
to Taxes
on Income signed at Brussels on
Novembe
r 27, 2006.
The text
of the Competent Authority
Agreeme
nt is as follows:
COMPETENT AUTHORITY
AGREEMENT
The competent authorities of the United
States and Belgium hereby enter into the
following agreement (the “Agreement”)
regarding the types of pension plans es-
tablished in either Contracting State that
will be deemed to generally correspond
to a pension plan recognized for tax pur-
poses in the other Contracting State as
required by paragraphs 7 and 9 of Article
17 (Pensions, SocialSecurity, Annuities,
Alimony, and Child Support) of the Con-
vention Between the Government of the
United States of America and the Gov-
ernment of the
Kingdom of Belgium for
the Avoidance
of Double Taxation and the
Prevention of
Fiscal Evasion with Respect
to Taxes on Inc
ome signed at Brussels on
November 27, 2
006 (the “Treaty”). The
Agreement is
entered into under paragraph
3 of Article 2
4 (Mutual Agreement Proce-
dure).
The competen
t authorities agree as fol-
lows:
1.Belgian Pensions
For purposes of paragraphs 7 and 9 of
Article 17, the following types of pen-
sion plans established in Belgium will
be deemed to generally correspond to
a pension plan recognized for tax pur-
poses in the United States:
a. a qualified complementary retire-
ment benefit arrangement for pur-
poses of Article 52, 3°, b, of the
Code of Income Taxes (Code des
Impôts sur les revenues 1992),
b. a qualified complementary retire-
ment benefit arrangement for pur-
poses of Article 52, 7° bis, of the
Code on Income taxes (Code des
Impôts sur les revenues 1992),
c. a qualified complementary retire-
ment benefit arrangement for pur-
poses of Article 59, of the Code of
Income Taxes (Code des Impôts
sur les revenues 1992),
d. a qualified complementary retire-
ment benefit arrangement for pur-
poses of Article 145–1, 1°, of the
Code of Income Taxes (Code des
Impôts sur les revenues 1992),
and
e. a qualified complementary retire-
ment benefit arrangement for pur-
poses of Article 145–3, of the
Code of Income Taxes (Code des
Impôts sur les revenues 1992).
2.US Pensions
For purposes of
paragraphs 7 and 9 of
Article 17, th
e following types of pen-
sion plans est
ablished in the United
States will be
deemed to generally
correspond to
a pension plan recog-
nized for tax p
urposes in Belgium:
a. a qualified p
lan under section
401(a) of the
Internal Revenue
Code (includ
ing a Code section
401(k) arran
gement),
b. an individua
l retirement plan (in-
cludinganin
dividual retirement
plan that is
part of a simplified
employee pe
nsion plan that sat-
isfies Code
section 408(k)), an
individual
retirement account, an
individual
retirement annuity, a
Code sectio
n 408(p) account, and
aRothIRAu
nder Code section
408A,
c. a Code sect
ion 403(a) qualified
annuity pl
an,
d. a Code sect
ion 403(b) plan,
e. a Code sect
ion 457(b) plan, and
f. the Thrift
Savings Plan (Code
section 77
01(j)).
The listin
g above is not intended to be
exclusive
. Any U.S. or Belgian pension
plan of a ty
pe not mentioned above, in-
cluding an
y type of plan established pur-
suant to le
gislation enacted after the date
of signat
ure of this Agreement, or any par-
ticipant
in a type of plan not mentioned
above, ma
y ask the competent authority of
the other
Contracting State for a determi-
nation th
at the plan generally corresponds
to a pens
ion plan recognized for tax pur-
poses in
that other State.
Agreed t
o by the undersigned compe-
tent aut
horities on January 14, 2010:
/s/1-14-2010/s/11-20-2009
Douglas W. O’DonnellDate
U.S. Competent Authority
Sandra KnaepenDate
Belgian Competent Authority
2010–18 I.R.B.657May 3, 2010

Furnishing Identifying Number
of Tax Return Preparer;
Hearing
Announcement 2010–33
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of public hearing on pro-
posed rulemaking.
SUMMARY: This document provides
notice of public hearing on a notice of
proposed rulemaking (REG–134235–08,
2010–16 I.R.B. 596) providing guidance
to tax return preparers on furnishing an
identifying number on tax returns and
claims for refund of tax that they prepare.
DATES: The public hearing is being held
on Thursday, May 6, 2010, at 1:30 p.m.
The IRS must receive outlines of the topics
to be discussed at the hearing by Thursday,
April 29, 2010.
ADDRESSES: The public hearing is be-
ing held in room 2615, Internal Revenue
Building, 1111 Constitution Avenue, NW,
Washington, DC. Send submissions to:
CC:PA:LPD:PR (REG–134235–08), room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to CC:PA:LPD:PR (REG–134235–08),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Wash-
ington, DC. Alternatively, taxpayers may
submit electronic outlines of oral com-
ments via the Federal eRulemaking Portal
athttp://www.regulations.gov.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Stuart Murray at (202) 622–4940 (not
a toll-free number); concerning submis-
sions of comments, the hearing, and/or
to be placed on the building access list to
attend the hearing, Richard A. Hurst at
Richard.A.Hurst@irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:
The subject of the public hearing is
the notice of proposed rulemaking
(REG–134235–08) that was published
in theFederal Registeron Friday,
March 26, 2010 (75 FR 14539).
Persons,whowishtopresentoralcom-
ments at the hearing that submitted writ-
ten comments, must submit an outline of
the topics to be discussed and the amount
of time to be devoted to each topic (signed
original and eight (8) copies) by Thursday,
April 29, 2010.
A period of 10 minutes is allotted to
each person for presenting oral comments.
After the deadline for receiving out-
lines has passed, the IRS will prepare an
agenda containing the schedule of speak-
ers. Copies of the agenda will be made
available, free of charge, at the hearing or
in the Freedom of Information Reading
Room (FOIA RR) (Room 1621) which
is located at the 11th and Pennsylvania
Avenue NW entrance, 1111 Constitution
Avenue, NW, Washington, DC.
Because of access restrictions, the IRS
will not admit visitors beyond the imme-
diateentranceareamorethan30minutes
before the hearing starts. For informa-
tion about having your name placed on the
building access list to attend the hearing,
see the FOR FURTHER INFORMATION
CONTACT section of this document.
Approved February 18, 2010.
LaNita Van Dyke,
Chief, Publications and
Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on April 21, 2010,
8:45 a.m., and published in the issue of the Federal Register
for April 22, 2010, 75 F.R. 20941)
May 3, 20106582010–18 I.R.B.

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 ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
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 withmodi-
fied,below).
Clarifiedis 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
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis 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
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings 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.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes 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 previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis 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 rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis 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 cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
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—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2010–18 I.R.B.iMay 3, 2010

Numerical Finding List
1
Bulletins 2010–1 through 2010–18
Announcements:
2010-1, 2010-4 I.R.B.333
2010-2, 2010-2 I.R.B.271
2010-3, 2010-4 I.R.B.333
2010-4, 2010-5 I.R.B.384
2010-5, 2010-6 I.R.B.402
2010-6, 2010-6 I.R.B.402
2010-7, 2010-6 I.R.B.403
2010-8, 2010-7 I.R.B.408
2010-9, 2010-7 I.R.B.408
2010-10, 2010-7 I.R.B.410
2010-11, 2010-10 I.R.B.438
2010-12, 2010-7 I.R.B.410
2010-13, 2010-8 I.R.B.426
2010-14, 2010-11 I.R.B.449
2010-15, 2010-10 I.R.B.438
2010-16, 2010-11 I.R.B.450
2010-17, 2010-13 I.R.B.515
2010-18, 2010-12 I.R.B.460
2010-19, 2010-14 I.R.B.529
2010-20, 2010-15 I.R.B.551
2010-21, 2010-15 I.R.B.551
2010-22, 2010-16 I.R.B.602
2010-23, 2010-16 I.R.B.602
2010-24, 2010-15 I.R.B.587
2010-25, 2010-15 I.R.B.588
2010-26, 2010-16 I.R.B.604
2010-27, 2010-18 I.R.B.657
2010-28, 2010-17 I.R.B.616
2010-29, 2010-17 I.R.B.616
2010-33, 2010-18 I.R.B.658
Notices:
2010-1, 2010-2 I.R.B.251
2010-2, 2010-2 I.R.B.251
2010-3, 2010-2 I.R.B.253
2010-4, 2010-2 I.R.B.253
2010-5, 2010-2 I.R.B.256
2010-6, 2010-3 I.R.B.275
2010-7, 2010-3 I.R.B.296
2010-8, 2010-3 I.R.B.297
2010-9, 2010-3 I.R.B.298
2010-10, 2010-3 I.R.B.299
2010-11, 2010-4 I.R.B.326
2010-12, 2010-4 I.R.B.326
2010-13, 2010-4 I.R.B.327
2010-14, 2010-5 I.R.B.344
2010-15, 2010-6 I.R.B.390
2010-16, 2010-6 I.R.B.396
2010-17, 2010-14 I.R.B.519
2010-18, 2010-14 I.R.B.525
2010-19, 2010-7 I.R.B.404
Notices— Continued:
2010-20, 2010-8 I.R.B.422
2010-21, 2010-12 I.R.B.451
2010-22, 2010-10 I.R.B.435
2010-23, 2010-11 I.R.B.441
2010-24, 2010-12 I.R.B.452
2010-25, 2010-14 I.R.B.527
2010-26, 2010-14 I.R.B.527
2010-27, 2010-15 I.R.B.531
2010-28, 2010-15 I.R.B.541
2010-29, 2010-15 I.R.B.547
2010-30, 2010-18 I.R.B.650
2010-31, 2010-16 I.R.B.594
2010-32, 2010-16 I.R.B.594
2010-33, 2010-17 I.R.B.609
2010-34, 2010-17 I.R.B.612
2010-36, 2010-17 I.R.B.612
2010-37, 2010-18 I.R.B.654
Proposed Regulations:
REG-132232-08, 2010-6 I.R.B.401
REG-134235-08, 2010-16 I.R.B.596
REG-137036-08, 2010-6 I.R.B.398
REG-101896-09, 2010-5 I.R.B.347
REG-117501-09, 2010-11 I.R.B.442
REG-131028-09, 2010-4 I.R.B.332
REG-148681-09, 2010-11 I.R.B.443
Revenue Procedures:
2010-1, 2010-1 I.R.B.1
2010-2, 2010-1 I.R.B.90
2010-3, 2010-1 I.R.B.110
2010-4, 2010-1 I.R.B.122
2010-5, 2010-1 I.R.B.165
2010-6, 2010-1 I.R.B.193
2010-7, 2010-1 I.R.B.231
2010-8, 2010-1 I.R.B.234
2010-9, 2010-2 I.R.B.258
2010-10, 2010-3 I.R.B.300
2010-11, 2010-2 I.R.B.269
2010-12, 2010-3 I.R.B.302
2010-13, 2010-4 I.R.B.329
2010-14, 2010-12 I.R.B.456
2010-15, 2010-7 I.R.B.404
2010-17, 2010-8 I.R.B.425
2010-18, 2010-9 I.R.B.427
2010-19, 2010-13 I.R.B.469
2010-20, 2010-14 I.R.B.528
2010-21, 2010-13 I.R.B.473
Revenue Rulings:
2010-1, 2010-2 I.R.B.248
2010-2, 2010-3 I.R.B.272
2010-3, 2010-3 I.R.B.272
2010-4, 2010-4 I.R.B.309
2010-5, 2010-4 I.R.B.312
Revenue Rulings— Continued:
2010-6, 2010-6 I.R.B.387
2010-7, 2010-8 I.R.B.417
2010-8, 2010-10 I.R.B.432
2010-9, 2010-13 I.R.B.461
2010-10, 2010-13 I.R.B.461
2010-11, 2010-14 I.R.B.516
2010-12, 2010-18 I.R.B.617
Tax Conventions:
2010-2, 2010-2 I.R.B.271
2010-26, 2010-16 I.R.B.604
2010-27, 2010-18 I.R.B.657
Treasury Decisions:
9474, 2010-4 I.R.B.322
9475, 2010-4 I.R.B.304
9476, 2010-5 I.R.B.336
9477, 2010-6 I.R.B.385
9478, 2010-4 I.R.B.315
9479, 2010-18 I.R.B.618
9480, 2010-11 I.R.B.439
9481, 2010-17 I.R.B.605
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin
2009–52, dated December 28, 2009.
May 3, 2010ii2010–18 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–1 through 2010–18
Announcements:
2009-23
Corrected by
Ann. 2010-29, 2010-17 I.R.B.616
2009-51
Supplemented and superseded by
Ann. 2010-16, 2010-11 I.R.B.450
2010-4
Corrected by
Ann. 2010-10, 2010-7 I.R.B.410
Notices:
2005-88
Superseded by
Notice 2010-13, 2010-4 I.R.B.327
2006-87
Superseded by
Notice 2010-27, 2010-15 I.R.B.531
2007-25
Superseded by
Notice 2010-27, 2010-15 I.R.B.531
2007-77
Superseded by
Notice 2010-27, 2010-15 I.R.B.531
2008-14
Modified and superseded by
Notice 2010-33, 2010-17 I.R.B.609
2008-41
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-55
Modified by
Notice 2010-3, 2010-2 I.R.B.253
2008-88
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-107
Superseded by
Notice 2010-27, 2010-15 I.R.B.531
2008-113
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2008-115
Modified by
Notice 2010-6, 2010-3 I.R.B.275
Notices— Continued:
2008-116
Modified and superseded by
Notice 2010-32, 2010-16 I.R.B.594
2009-11
Amplified by
Notice 2010-9, 2010-3 I.R.B.298
2009-13
Obsoleted by
T.D. 9478, 2010-4 I.R.B.315
REG-131028-09, 2010-4 I.R.B.332
2009-35
Supplemented by
Notice 2010-17, 2010-14 I.R.B.519
2009-38
Amplified and superseded by
Notice 2010-2, 2010-2 I.R.B.251
2009-62
Modified and supplemented by
Notice 2010-23, 2010-11 I.R.B.441
Proposed Regulations:
REG-127270-06
Hearing scheduled by
Ann. 2010-6, 2010-6 I.R.B.402
REG-134235-08
Hearing scheduled by
Ann. 2010-33, 2010-18 I.R.B.658
Revenue Procedures:
80-59
Modified and superseded by
Rev. Proc. 2010-11, 2010-2 I.R.B.269
87-35
Obsoleted by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2008-14
Updated by
Rev. Proc. 2010-15, 2010-7 I.R.B.404
2009-1
Superseded by
Rev. Proc. 2010-1, 2010-1 I.R.B.1
2009-2
Superseded by
Rev. Proc. 2010-2, 2010-1 I.R.B.90
2009-3
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-4
Superseded by
Rev. Proc. 2010-4, 2010-1 I.R.B.122
Revenue Procedures— Continued:
2009-5
Superseded by
Rev. Proc. 2010-5, 2010-1 I.R.B.165
2009-6
Superseded by
Rev. Proc. 2010-6, 2010-1 I.R.B.193
2009-7
Superseded by
Rev. Proc. 2010-7, 2010-1 I.R.B.231
2009-8
Superseded by
Rev. Proc. 2010-8, 2010-1 I.R.B.234
2009-9
Superseded by
Rev. Proc. 2010-9, 2010-2 I.R.B.258
2009-15
Amplified and superseded by
Rev. Proc. 2010-12, 2010-3 I.R.B.302
2009-17
Superseded by
Rev. Proc. 2010-21, 2010-13 I.R.B.473
2009-25
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-55
Corrected by
Ann. 2010-11, 2010-10 I.R.B.438
2010-1
Corrected by
Ann. 2010-5, 2010-6 I.R.B.402
Revenue Rulings:
67-436
Obsoleted by
REG-101896-09, 2010-5 I.R.B.347
92-19
Supplemented in part by
Rev. Rul. 2010-7, 2010-8 I.R.B.417
2008-52
Supplemented and superseded by
Rev. Rul. 2010-2, 2010-3 I.R.B.272
Treasury Decisions:
9424
Corrected by
Ann. 2010-18, 2010-12 I.R.B.460
9443
Corrected by
Ann. 2010-8, 2010-7 I.R.B.408
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin 2009–52, dated December 28,
2009.
2010–18 I.R.B.iiiMay 3, 2010

Treasury Decisions— Continued:
9458
Corrected by
Ann. 2010-7, 2010-6 I.R.B.403
May 3, 2010iv2010–18 I.R.B.

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