Internal Revenue Bulletin 2017-47 (PDF rendition): IRS Notices

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# INTERNAL REVENUE BULLETIN

IRS

Bulletin No. 2017-47

November

20, 2017

## 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.

## EMPLOYEE PLANS

### Announcement 2017-15, page 534.

Announcement 2017-15 provides relief to victims of Hurricane
Maria and the recent California wildfires. It permits easier
access to funds held in workplace retirement plans and in IRAs,
for periods beginning in September and October 2017 and
ending March 15, 2018. The relief provided in the announce-
ment is in addition to the relief already provided by the IRS
pursuant to several recent news releases.

### Notice 2017-67, page 517.

This notice provides guidance on the requirements for provid-
ing a qualified small employer health reimbursement arrange-
ment (QSEHRA) under section 9831(d) of the Internal Revenue
Code, the tax consequences of the arrangement, and the
requirements for providing written notice of the arrangement to
eligible employees.

## The IRS Mission

Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.

## Introduction

The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing 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.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal 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, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.

Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

### Part I .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.

### Part II .- Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion 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 Sec-
retary (Enforcement).

### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

## Part III. Administrative, Procedural, and Miscellaneous

### Qualified Small Employer Health Reimbursement Arrangements

Notice 2017-67
PURPOSE

This notice provides guidance on the
requirements for providing a qualified
small employer health reimbursement
arrangement (QSEHRA) under section
9831(d) of the Internal Revenue Code
(Code), the tax consequences of the ar-
rangement, and the requirements for
providing written notice of the arrange-
ment to eligible employees.

#### BACKGROUND

The 21st Century Cures Act (Cures Act),
P.L. 114-255, 130 Stat. 1033, was enacted
on December 13, 2016. Section 18001 of
the Cures Act amends the Code, the Em-
ployee Retirement Income Security Act of
1974 (ERISA), and the Public Health Ser-
vice Act (PHS Act), to permit an eligible
employer to provide a QSEHRA to its eli-
gible employees.1

Pursuant to section 9831(d)(1), a
QSEHRA is not a group health plan, and
as a result, is not subject to the group
health plan requirements that apply un-
der the Code, ERISA and, with one ex-
ception, the PHS Act.2 Generally, pay-
ments from a QSEHRA to reimburse an
eligible employee's medical expenses
are not includible in the employee's
gross income if the employee has cov-
erage that provides minimum essential
coverage (MEC) as defined in section
5000A(f).3 For this purpose, "medical ex-
penses" means expenses for medical care, as
defined in section 213(d) (which includes
premiums for other health coverage, such as
individual health insurance policies).

The Cures Act provides that a
QSEHRA is an arrangement that meets
the following criteria:

(a) The arrangement is funded solely
by an eligible employer, and no salary
reduction contributions may be made un-
der the arrangement;

(b) The arrangement provides, after the
eligible employee provides proof of cov-
erage, for the payment or reimbursement
of the medical expenses incurred by the
employee or the employee's family mem-
bers4 (in accordance with the terms of the
arrangement);

(c) The amount of payments and reim-
bursements described in paragraph (b) of
this section for any year does not exceed
$4,950 ($10,0005 for an arrangement that
also provides for payments or reimburse-
ments of medical expenses of the eligible
employee's family members (family cov-
erage)); and

(d) The arrangement is generally pro-
vided on the same terms (the "same terms
requirement") to all eligible employees of
the eligible employer.

To be an eligible employer that may
provide a QSEHRA, the employer must
not be an applicable large employer
(ALE), as defined in section 4980H(c)(2)
and the regulations thereunder (and, thus,
may not be an employer that, generally,
employed at least 50 full-time employees,
including full-time equivalent employees,
in the prior calendar year), and must not
offer a group health plan (as defined in
section 5000(b)) to any of its employees.
Pursuant to section 4980H(c)(2), an em-
ployer whose workforce increases to 50 or
more full-time employees during a calendar
year will not become an ALE before the first
day of the following calendar year.

In addition, Executive Order 13813 (82
Fed. Reg. 48385, Oct. 17, 2017), directed
the Secretaries of the Treasury, Labor, and

Health and Human Services to consider
revising guidance, to the extent permitted
by law and supported by sound policy, to
increase the usability of health reimburse-
ment arrangements (HRAs), expand em-
ployers' ability to offer HRAs to their
employees, and to allow HRAs to be used
in conjunction with non-group coverage.
The guidance provided in this notice ad-
dresses each of those objectives. The
Treasury Department (Treasury) and the
Internal Revenue Service (IRS) anticipate
that the Departments will issue additional
guidance in the future in response to Ex-
ecutive Order 13813.

#### GUIDANCE

This guidance includes sections on the
following topics:

A. Eligible employer

B. Eligible employee

C. Same terms requirement

D. Statutory dollar limits

E. Written notice requirement

F. MEC requirement

G. Proof of MEC requirement

H. Substantiation requirement

I. Reimbursement of medical expenses

J. Reporting requirement

K. Coordination with PTC

L. Failure to satisfy the requirements to
be a QSEHRA

M. Interaction with HSA requirements
N. Effective date

##### A. Eligible employer

Under section 9831(d)(3)(B)(ii), "eligi-
ble employer" means an employer that
does not offer a group health plan (includ-
ing a health reimbursement arrangement
(HRA) or a health flexible spending ar-
rangement (FSA)) to any of its employees.
A group health plan includes a plan that

1On December 20, 2016, the Department of Labor, the Department of the Treasury, and the Department of Health and Human Services (collectively, the Departments) issued FAQs About
Affordable Care Act Implementation (Part 35), Q&A-3 (https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-35.pdf) concerning the Cures
Act. That guidance continues to apply.

2A QSEHRA continues to be treated as a group health plan under the PHS Act for purposes of part C of title XI of the Social Security Act.

3MEC is defined in section 5000A(f) and the regulations thereunder. See Appendix A to this notice for a list of examples of plans and arrangements that are MEC, as provided in the 2016
Instructions for Form 8965, Health Coverage Exemptions (and Instructions for Figuring Your Shared Responsibility Payment).

4For purposes of this notice, "family member" of an eligible employee means any individual for whom an employer's reimbursement of the individual's medical expenses would be excluded
from the eligible employee's gross income under section 105(b).

5Section 9831(d)(2)(D)(ii) provides that both statutory dollar limits are adjusted for inflation beginning after 2016. This adjustment increased the $10,000 limit to $10,050 for a QSEHRA
provided in 2017; the adjustment did not increase the $4,950 limit for 2017. The adjusted limits for 2018 are $5,050 for self-only coverage and $10,250 for family coverage.

provides only excepted benefits described
in section 9831(c) (for example, a vision
or dental health plan that qualifies as an
excepted benefit) if that plan is offered by
an employer to its employees.

If an employer endorses a particular
policy, form, or issuer of individual health
insurance, the coverage may constitute a
group health plan. However, providing
employees with information about the Af-
fordable Insurance Exchange, also called
a Health Insurance Marketplace (Market-
place), or the premium tax credit (PTC)
under section 36B, is not an endorsement
of a particular policy, form, or issuer of
health insurance.

Question 1: Does an employer fail to be
an eligible employer if it offers a group
health plan to former employees (for ex-
ample, retirees)?

Answer 1: No. For purposes of the
QSEHRA requirements, former employ-
ees are not treated as employees. As a
result, offering a group health plan to for-
mer employees does not cause the em-
ployer to fail to be an eligible employer.
Question 2: Does an employer fail to be
an eligible employer if it provides current
employees with continued access to
amounts that were accumulated in an
HRA in prior years or carryover amounts
in an FSA?

Answer 2: Yes, but an employer does not
fail to be an eligible employer if it sus-
pends access to amounts accumulated in
an HRA in previous years (such that they
cannot be used for any purpose) during
the period a QSEHRA is provided to its
eligible employees.

Question 3: Does an S corporation fail to
be an eligible employer if, separate from a
QSEHRA, it reimburses the health in-
surance policy premiums of a 2-percent
shareholder (as defined in section
1372(b)) who is an employee?

Answer 3: No. But see Q&A-9 regard-
ing the status of an owner as an eligible
employee.

Question 4: Does an employer fail to be
an eligible employer for any month dur-
ing which it offers a group health plan?
Answer 4: Yes. An employer is not an
eligible employer for any month during
which the employer offers a group
health plan to its employees that would
provide coverage on any day of the
month. Thus, for example, in the case of

a non-calendar year group health plan,
the employer is not an eligible employer
for those months of a calendar year dur-
ing which the group health plan is
offered.

Question 5: If one employer in a group
of employers that are treated as a single
employer under section 414(b), (c), (m),
or (o) offers its employees a group
health plan, may any other employer in
the group be an eligible employer?
Answer 5: No.

Question 6: Does an employer fail to be
an eligible employer if it contributes to
an employee's health savings account
(HSA), including permitting an em-
ployee to make pre-tax contributions to
the HSA, by salary reduction, through a
cafeteria plan?

Answer 6: No.

Question 7: When does an employer fail
to be an eligible employer if it provides
a non-calendar year QSEHRA and be-
comes an ALE?

Answer 7: The employer fails to be an
eligible employer as of January 1 of the
year it becomes an ALE. That is, if an
employer increases in size during the
current year so that it employs an aver-
age of at least 50 full-time employees
(and full-time equivalent employees) on
business days during the current year,
then it is an ALE on January 1 of the
next year and ceases to be an eligible
employer on that date. Although the em-
ployer may no longer provide the
QSEHRA as of the date it becomes an
ALE (even if the QSEHRA were pro-
vided on a non-calendar plan year ba-
sis), the QSEHRA may have a run-out
period for medical expenses incurred
during the months of the prior year dur-
ing which the QSEHRA was provided.
For purposes of this notice, a "run-out
period" is a period following the cover-
age period for submitting a claim for
reimbursement of medical expenses in-
curred during the coverage period.

##### B. Eligible employee

Under section 9831(d)(3)(A), "eligi-
ble employee" means any employee of
an eligible employer, except that the
terms of a QSEHRA may exclude em-
ployees who have not completed 90
days of service with the employer, em-
ployees who have not attained age 25

before the beginning of the plan year,
part-time or seasonal employees, em-
ployees covered by a collective bargain-
ing agreement if health benefits were the
subject of good faith bargaining, and
employees who are nonresident aliens
with no earned income from sources
within the United States.

Question 8: What are the definitions of
"part-time employees" and "seasonal
employees" for purposes of determining
whether an employee may be excluded
from being an eligible employee under
the terms of a QSEHRA?

Answer 8: For purposes of determining
whether an employee may be excluded
from being an eligible employee under
the terms of a QSEHRA, "part-time em-
ployees" and "seasonal employees"
have the meanings set forth in § 1.105-
11(c)(2)

(iii)(C) of the Income Tax Regulations:
Part-time employees whose customary
weekly employment is less than 35
hours, if other employees in similar
work with the same employer (or, if no
employees of the employer are in sim-
ilar work, in similar work in the same
industry and location) have substan-
tially more hours and seasonal employ-
ees whose customary annual employ-
ment is less than 9 months, if other
employees in similar work with the
same employer (or, if no employees of
the employer are in similar work, in
similar work in the same industry and
location) have substantially more
months. Notwithstanding the preced-
ing sentence, any employee whose
customary weekly employment is
less than 25 hours or any employee
whose customary annual employment
is less than 7 months may be consid-
ered as a part-time or seasonal
employee.

Question 9: May an eligible employer
provide a QSEHRA to retirees, other
former employees, or non-employee
owners?

Answer 9: No. A QSEHRA may only be
provided to employees. A 2% share-
holder who is otherwise an employee is
not an employee for purposes of a
QSEHRA. See section 1372. An ar-
rangement provided to former employ-
ees is a group health plan within the

meaning of section 5000(b).6

Question 10: When must an eligible em-
ployer provide a QSEHRA to an eligible
employee who previously was excluded
under one or more categories of exclud-
able employees referenced in section
9831(d)(3)(A)?

Answer 10: If the employee is otherwise
an eligible employee, the eligible em-
ployer must provide a QSEHRA to the
employee no later than the day immedi-
ately following the date the employee is
no longer in any category of excludable
employees under the terms of the plan.
Question 11: May an eligible employee
waive participation in a QSEHRA?

Answer 11: No. Section 9831(d)
(2)(A)(ii) requires that the eligible em-
ployer provide, rather than offer, a
QSEHRA on the same terms to all eli-
gible employees.

##### C. Same terms requirement

Under section 9831(d)(2)(A)(ii), a
QSEHRA is an arrangement that is pro-
vided on the same terms to all eligible
employees of the eligible employer. In
addition, under section 9831(d)(2)(C), the
maximum amount of payments or reim-
bursements that may be made under the
arrangement during the year to a particu-
lar employee (the permitted benefit) may
vary from employee to employee based
only on the age of covered individuals or
the number of individuals covered in ac-
cordance with the variation in the price of
an insurance policy in a relevant individ-
ual health insurance market. This insur-
ance policy (the baseline policy) must be
the same insurance policy with respect to
all eligible employees.

Question 12: Does an arrangement fail to
satisfy the same terms requirement if it is
not operated on a uniform and consistent
basis with respect to all eligible
employees?

Answer 12: Yes. To satisfy the same
terms requirement, the arrangement must
be operated on a uniform and consistent
basis with respect to all eligible employ-
ees. However, an arrangement does not
fail to be operated on a uniform and con-
sistent basis merely because different eli-
gible employees who are provided the

same permitted benefit are reimbursed dif-
ferent amounts because they submitted
different expenses for reimbursement.

Example 1. Facts: In 2017, Employer
provides an arrangement that only re-
imburses premiums up to a self-only
permitted benefit of $4,950 and a fam-
ily permitted benefit of $10,050. Em-
ployee A purchases self-only coverage
with an annual premium of $3,450 and
is reimbursed $3,450. Employee B pur-
chases family coverage with an annual
premium of $9,000 and is reimbursed
$9,000. Employee C purchases self-
only coverage with an annual premium
of $6,000 and is reimbursed $4,950.

Conclusion: The arrangement does
not fail to satisfy the same terms
requirement.

Example 2. Facts: An employer pro-
vides an arrangement the terms of
which state that one category of em-
ployees may be reimbursed for all
medical expenses, but that another
category of employees may only be
reimbursed for premiums for individ-
ual health insurance policies.

Conclusion: The arrangement fails to
satisfy the same terms requirement.

Question 13: What type of insurance pol-
icy in the relevant individual health insur-
ance market may be used as the baseline
policy for determining permissible varia-
tions in the permitted benefit based on age
or number of family members?

Answer 13: The baseline policy must be
both MEC and available for purchase by
at least one eligible employee.

Question 14: Does an arrangement fail to
satisfy the same terms requirement if it
provides for reimbursements up to a sin-
gle dollar amount regardless of whether
an eligible employee has self-only or fam-
ily coverage?

Answer 14: No.

Question 15: Does an arrangement fail to
satisfy the same terms requirement if it
provides for reimbursements up to the
self-only and family statutory dollar limits
or up to an equal percentage of the statu-
tory dollar limits without referring to a
baseline policy?

Answer 15: No.

Example. Facts: In 2017, Employer

provides an arrangement with a self-
only permitted benefit of $3,960 (80%
of the 2017 statutory dollar limit of
$4,950 for self-only coverage) and a
family permitted benefit of $8,040
(80% of the 2017 statutory dollar limit
of $10,050 for family coverage).

Conclusion: The arrangement does not
fail to satisfy the same terms require-
ment. (Although this example illus-
trates an arrangement that does not re-
fer to a baseline policy and does not
fail to satisfy the same terms require-
ment, there may be other arrangements
that also do not fail to satisfy the same
terms requirement.)

Question 16: Does an arrangement that
varies the permitted benefit based on the
number of family members fail to satisfy
the same terms requirement if it provides
a self-only permitted benefit to an eligible
employee who enrolls in self-only cover-
age without regard to whether the em-
ployee has a family member that has MEC
under one or more separate policies?

Answer 16: Yes. To the extent that an
arrangement covers medical expenses of
family members of eligible employees,
the same terms requirement is satisfied
only if the permitted benefit is based on
the number of family members that have
MEC without regard to whether they have
a single policy or multiple policies.

Example. Facts: Employer provides an
arrangement with a self-only permitted
benefit and a family permitted benefit
that is larger than the self-only permit-
ted benefit. Employee enrolls in self-
only coverage; Employee's spouse en-
rolls in a different plan or policy that
provides MEC. Employer provides Em-
ployee with a self-only permitted
benefit.

Conclusion: The arrangement fails to
satisfy the same terms requirement.

Question 17: Does an arrangement fail to
satisfy the same terms requirement merely
because it determines an eligible employ-
ee's permitted benefit based on the em-
ployee's family size and age on the first
day of the plan year?

Answer 17: No. An arrangement that de-
termines an eligible employee's permitted
benefit based on the employee's family

6Provided the arrangement meets the general exception set forth in section 9831(a)(2) that on the first day of the plan year the plan has less than two participants who are current employees,
the arrangement would not be subject to the market reforms and other requirements of chapter 100.

size and age on the first day of the plan
year does not fail to satisfy the same terms
requirement merely because the determi-
nation is made as of the first day of the
plan year and the arrangement does not
provide for a change in permitted benefits
if the employee changes coverage during
the plan year due to a change in personal
circumstances (for example, the employee
marries, divorces, or adopts a child during
the plan year).

Example. Facts: Employer provides an
arrangement with a self-only permitted
benefit and a family permitted benefit.
Employee is enrolled in self-only cov-
erage on January 1 and has no family
members. In July, Employee enrolls in
family coverage. Employer provides
Employee with a self-only permitted
benefit for the entire plan year.

Conclusion: The arrangement does not
fail to satisfy the same terms requirement.
Question 18: What rounding rules may an
eligible employer use in order for the QSEH-
RA's permitted benefit to comply with the
same terms requirement?

Answer 18: The eligible employer may set the
permitted benefit by rounding amounts in in-
crements of $50 to the nearest whole dollar
amount that does not exceed the applicable
statutory dollar limit.

Question 19: Does an arrangement fail to sat-
isfy the same terms requirement if it limits the
permitted benefit provided to two or more
eligible employees covered under the same
family health insurance policy (for example, if
two eligible employees are married to each
other) to the permitted benefit that would be
provided to one eligible employee?

Answer 19: Yes. To satisfy the same terms
requirement, a QSEHRA provided to two or
more eligible employees of the same eligible
employer must provide separate permitted
benefits (which will be subject to separate stat-
utory dollar limits) to each employee without
regard to whether the employees are covered
under separate health insurance policies or a
single family policy. Notwithstanding the pre-
vious sentence, a QSEHRA may not provide
duplicative reimbursements of a single medi-
cal expense.

Example. Facts: In 2017, Employer pro-
vides an arrangement that reimburses all
medical expenses with a self-only permitted
benefit of $3,960 and a family permitted
benefit of $8,040. The permitted benefit for
eligible employees that are covered under a

single family health insurance policy is col-
lectively limited to one shared family per-
mitted benefit of $8,040. Employee A, Em-
ployee B, and Employee C are covered
under one family health insurance policy
with a $10,000 premium. The arrangement
collectively reimburses a total amount of
$8,040 to Employee A, Employee B, and
Employee C.

Conclusion: The arrangement fails to
satisfy the same terms requirement.
Employee A, Employee B, and Em-
ployee C are each entitled to a permit-
ted benefit of $8,040. (However, reim-
bursements with respect to the $10,000
premium are limited to $10,000 among
the employees.)

Question 20: Does an arrangement fail to
satisfy the same terms requirement if eli-
gible employees are offered a choice be-
tween two different permitted benefit op-
tions (for example, the QSEHRA only
reimburses employees for premiums or
the QSEHRA only reimburses employees
for non-premium medical expenses)?
Answer 20: Yes.

Question 21: Does an arrangement fail to
satisfy the same terms requirement if it
limits reimbursements for all eligible em-
ployees to one or more of the following:
(a) insurance premiums, (b) cost-sharing
expenses that are medical expenses, or (c)
certain other medical expenses specified
under the arrangement?

Answer 21: Generally, no. A QSEHRA
may limit reimbursements to certain med-
ical expenses, but the arrangement will
fail to satisfy the same terms requirement,
if, under the facts and circumstances, the
arrangement's limitation of reimburse-
ments causes the arrangement not to be
effectively available to all eligible
employees.

Question 22: Does an arrangement fail to
satisfy the same terms requirement if it
reimburses premiums for Medicare or
Medicare supplement (Medigap) policies?
Answer 22: No. However, an arrangement
that limits reimbursements to only premi-
ums for Medicare or Medigap policies
may fail to satisfy the same terms require-
ment if the reimbursements would not be
effectively available to all eligible
employees.

Question 23: Does an arrangement fail to
satisfy the same terms requirement if it
allows for carryover of unused benefit

amounts (the carryover amount) from a
prior plan year?

Answer 23: No. A difference in permitted
benefits that is due only to the availability
of a carryover amount from a prior plan
year does not cause a QSEHRA to fail to
satisfy the same terms requirement. Note
that the sum of the carryover amount and
the permitted benefit amount under the
QSEHRA for the later year cannot exceed
the statutory dollar limit in that later year.
See Q&A-29.

Example. Facts: Employer provides a
QSEHRA with a permitted benefit of
$2,000. The QSEHRA allows eligible
employees to use carryover amounts
from the prior plan year. Employee A
receives $500 in reimbursements from
the QSEHRA, leaving a carryover
amount of $1,500. Employee B re-
ceives $2,000 in reimbursements from
the QSEHRA, leaving no carryover
amount. In the following plan year,
Employee A has a permitted benefit of
$3,500 ($2,000 plus the $1,500 carry-
over amount). Employee B has a per-
mitted benefit of $2,000.

Conclusion: The QSEHRA does not fail
to satisfy the same terms requirement.

Question 24: Does an arrangement fail to sat-
isfy the same terms requirement if it is only
available to the eligible employees of one eli-
gible employer in a group of employers that
are treated as a single employer under section
414(b), (c), (m), or (o)?

Answer 24: Yes. If a group of eligible em-
ployers are treated as a single employer under
section 414(b), (c), (m), or (o), each employer
in the group must provide a QSEHRA to all
eligible employees. Moreover, each employ-
er's QSEHRA must be provided on the same
terms (for example, with the same amounts of
permitted benefits).

Question 25: Does an arrangement fail to sat-
isfy the same terms requirement if it provides
a different permitted benefit for a category of
employees that may be excluded as eligible
employees?

Answer 25: Yes. Although an eligible em-
ployer is not required to provide a QSEHRA
to employees in a category described in any
clause of section 105(h)(3)(B), if a QSEHRA
is provided to employees in an excludable
category, those employees must be provided
the QSEHRA on the same terms as all em-
ployees to whom the QSEHRA is provided.
Further, an employer that provides a group

health plan to current employees in an exclud-
able category is not an eligible employer.

Question 26: Does an arrangement fail to sat-
isfy the same terms requirement if the permit-
ted benefits are determined based on the prior
year's statutory dollar limits?

Answer 26: No. For purposes of the same
terms requirement, because indexed amounts
for a calendar year are not expected to be
published before October of the immediately
preceding year (and the written notice must be
provided to eligible employees at least 90 days
before the beginning of the year), it is permis-
sible for each year's permitted benefits to be
determined based on the prior year's statutory
dollar limits. Thus, for example, for a
QSEHRA designed to satisfy the same terms
requirement using proportional amounts of the
statutory dollar limits, it is permissible to use
the 2017 indexed limits to determine permitted
benefits for 2018, even if the result would not
be proportional to the dollar limits as those
limits are indexed for 2018.

##### D. Statutory dollar limits

Under section 9832(d)(2)(B)(iii), a
QSEHRA may not provide reimburse-
ments that exceed the statutory dollar lim-
its. The statutory dollar limits are indexed
for inflation for years after 2016. The in-
dexed dollar limits for 2017 are $4,950 for
self-only coverage and $10,050 for family
coverage. In the case of an individual who
is not covered by a QSEHRA for the
entire year, section 9831(d)(2)(D)(i) re-
quires the statutory dollar limits to be pro-
rated to reflect the number of months that
the individual is covered by the QSEHRA.
Question 27: What are the statutory dollar
limits for a QSEHRA provided for 2018?
Answer 27: For 2018, the maximum per-
mitted benefit for self-only coverage is
$5,050 and for family coverage is
$10,250. See Rev. Proc. 2017-58. The
statutory dollar limits for a calendar year
are determined based on information that
is not expected to be available until Sep-
tember of the immediately preceding year.
As a result, the statutory dollar limits for a
calendar year are not expected to be pub-
lished before mid-October of that imme-
diately preceding year. A QSEHRA may
comply with the statutory dollar limits by
relying on the indexed dollar limits for the
immediately preceding year to determine
the permitted benefits for the current year.
However, if an arrangement provided for

the current year assumes statutory dollar
limits in excess of the actual indexed
amounts for the current year, the arrange-
ment will fail to be a QSEHRA. For a
QSEHRA that varies the permitted benefit
based on the statutory dollar limits, see
Q&A-26 regarding the use of the prior
year's statutory dollar limits to satisfy the
same terms requirements.

Question 28: How are the statutory dollar
limits for a non-calendar year QSEHRA
determined?

Answer 28: The statutory dollar limits are
prorated based on the number of months
in each portion of the two calendar years
in which the QSEHRA is provided. How-
ever, as a practical matter, it is unlikely
that the eligible employer will have suffi-
cient information three months before the
beginning of the non-calendar plan year to
allow the employer to provide accurate
information in the written notice. There-
fore, the QSEHRA may use the statutory
dollar limits applicable on the first day of
the plan year for the entire plan year. If an
arrangement assumes statutory dollar lim-
its in excess of the actual indexed dollar
limits for the applicable year, the arrange-
ment will fail to be a QSEHRA.

Question 29: If a QSEHRA allows for the
use of carryover amounts from a prior
plan year, may an eligible employee's car-
ryover amount be added to the newly
available amount to provide a total per-
mitted benefit that exceeds the applicable
statutory dollar limit?

Answer 29: No. An eligible employee's
total permitted benefit, taking into account
both carryover amounts and newly avail-
able amounts, may not exceed the appli-
cable statutory dollar limit.

Example. Facts: Employer provides a
QSEHRA with a permitted benefit of
$3,000. The QSEHRA allows for the
use of carryover amounts from the prior
plan year. Employee receives $500 in
reimbursements from the QSEHRA for
the year, leaving a carryover amount of
$2,500. In the following year, the ap-
plicable statutory dollar limit is $5,050.
Conclusion: Employee is limited to a
permitted benefit of $5,050 in the sec-
ond year (the $3,000 newly available
amount plus $2,050 of the $2,500 car-
ryover amount).

Question 30: How are the statutory dollar
limits determined for a newly eligible em-

ployee (for example, a newly hired em-
ployee) who is first provided a QSEHRA
on a day other than the first day of the
calendar year?

Answer 30: The statutory dollar limits are
prorated to reflect the actual number of
months that an eligible employee is pro-
vided the QSEHRA when the QSEHRA is
provided for a period that does not include
all months of the year. For this purpose,
an eligible employee is treated as having
been provided a QSEHRA for the entire
month if the employee is eligible for re-
imbursements from the QSEHRA for ex-
penses incurred on any day of that month.

Example. Facts: In 2017, Employer
provides a calendar year QSEHRA. The
self-only permitted benefit is $4,950
and the family permitted benefit is
$10,050. Employee becomes an eligible
employee on August 6, 2017. The
QSEHRA provides Employee with ei-
ther a self-only permitted benefit of
$2,050 ($4,950 x 5/12, rounded) or a
family permitted benefit of $4,150
($10,050 x 5/12, rounded). The pro-
rated statutory dollar limit for family
coverage is $4,187.50. As explained in
Q&A-18, rounding to an amount in
excess of the statutory dollar limit is not
permitted.

Conclusion: The QSEHRA does not
fail to satisfy the statutory dollar limit.
Question 31: If an eligible employee re-
ceives reimbursements from a QSEHRA
that equal the applicable statutory dollar
limit but later terminates employment be-
fore the end of the plan year so the em-
ployee was not covered by the QSEHRA
for the entire year, does the QSEHRA
satisfy the statutory dollar limit?

Answer 31: Yes. Because the arrangement
satisfied the statutory dollar limit at the
time the expenses were incurred and re-
imbursed, the arrangement is treated as
satisfying the statutory dollar limit for the
calendar year. If the eligible employee
receives a reimbursement before the em-
ployee's termination that would be in ex-
cess of the prorated statutory dollar limit
except for the fact that it is payable under
the terms of the QSEHRA as described in
the preceding sentence, then the reim-
bursement that would otherwise have ex-
ceeded the prorated statutory dollar limit
is not taxable. However, to the extent a
QSEHRA allows medical expenses in-

curred before termination of employment
to be submitted during a run-out period
after termination of employment, the
QSEHRA may not reimburse medical ex-
penses in excess of the prorated statutory
dollar limit.

Question 32: May a QSEHRA be pro-
vided for a period that is less than 12
months in total and begins after January
1?

Answer 32: Yes. However, section
9831(d)(2)(D)(i) requires the statutory
dollar limit for the applicable year to be
prorated to reflect the number of months
that the QSEHRA is provided.

Example. Facts: Employer provides a
QSEHRA with a short plan year begin-
ning August 1, 2017, and ending on
December 31, 2017. The QSEHRA is
designed to provide permitted benefits
at 100% of the statutory dollar limit.
For the short 2017 plan year, the
QSEHRA provides permitted benefits
of $2,050 for self-only coverage (5/12 x
$4,950 = $2,062.50, rounded to
$2,050) and $4,150 for family coverage
(5/12 x $10,050 = $4,187.50, rounded
to $4,150).

Conclusion: The QSEHRA does not
fail to satisfy the statutory dollar limit.
Question 33: How do the statutory dollar
limits apply if an eligible employee re-
ceives a QSEHRA from more than one
eligible employer in a calendar year?

Answer 33: If an eligible employee is
provided more than one QSEHRA from
separate eligible employers that are not
members of a group of employers that are
treated as a single employer under section
414(b), (c), (m), or (o), each employer
may provide the employee with a permit-
ted benefit up to the applicable statutory
dollar limit. (However, no expense may
be reimbursed more than once.)

Question 34: May a mistaken reimburse-
ment from a QSEHRA in excess of the
statutory dollar limit be corrected if the
eligible employee timely repays the ex-
cess reimbursement?

Answer 34: Yes. If an eligible employee
timely repays with after-tax funds an ex-
cess reimbursement that was made by
mistake, the QSEHRA will be treated as
satisfying the statutory dollar limit. For
this purpose, timely repayment does not
include repayments made after the earlier
of (a) March 15 of the year following the

year in which the excess reimbursement
was made, or (b) in the case of an eligible
employer whose federal income tax return
is under examination for the taxable year
during which the excess reimbursement
was made, the date the eligible employer
receives written notification from the ex-
amining agent(s) specifically citing the
excess reimbursement as an issue under
consideration.

##### E. Written notice requirement

Section 9831(d)(4) requires an eligible
employer who provides a QSEHRA to its
eligible employees to furnish a written
notice (the written notice) to each eligible
employee at least 90 days before the be-
ginning of each year or, for an employee
who is not eligible to participate at the
beginning of the year, the date on which
the employee is first eligible to participate
in the QSEHRA. Section 6652(o) pro-
vides a penalty of $50 per employee (up to
a maximum of $2,500 per calendar year
per eligible employer) for failure to pro-
vide the written notice.

The Cures Act provides a transition
rule under which an eligible employer will
not be treated as failing to furnish the
written notice if the notice is provided no
later than 90 days after the date of enact-
ment of the Cures Act. Notice 2017-20,
2017-11 IRB 1010, released February 27,
2017, provides that the period for furnish-
ing the initial written notice for a
QSEHRA beginning in 2017 is extended
to at least 90 days following the issuance
of further guidance concerning the written
notice. This notice constitutes such guid-
ance. Employers that furnished the written
notice to their eligible employees before
the publication of this notice were permit-
ted to determine the contents of the writ-
ten notice using a reasonable good faith
interpretation of the Cures Act.

Question 35: When is an eligible em-
ployer required to furnish the initial writ-
ten notice to its eligible employees with
respect to a QSEHRA provided during
2017 or 2018?

Answer 35: An eligible employer that
provides a QSEHRA during 2017 or 2018
must furnish the initial written notice to its
eligible employees by the later of (a) Feb-
ruary 19, 2018, or (b) 90 days before the
first day of the plan year of the QSEHRA.

The penalties under section 6652(o) apply
to any employer that does not furnish the
initial written notice by that date. Thus, an
employer that provided a QSEHRA be-
fore the release of this notice and has not
previously furnished the written notice
must furnish the written notice by Febru-
ary 19, 2018. For some employees, the
information in the notice will be necessary
to complete their individual tax returns
even if the information is not available
when they are making decisions about
health coverage, and the information will
alert them to potential tax consequences.
In addition, employers are encouraged to
provide employees with information re-
garding the QSEHRA as soon as possible
to allow employees to make informed de-
cisions about health coverage, even if that
information is less than the full notice
required to satisfy the written notice re-
quirement that will be provided at a later
date.

Question 36: May an eligible employer
use an electronic medium (for example,
email) to furnish the written notice to its
eligible employees?

Answer 36: Yes. An eligible employer
may furnish the written notice electroni-
cally to its eligible employees if the em-
ployer follows the rules for the use of
electronic media in § 1.401(a)-21.

Question 37: When must the initial writ-
ten notice be furnished to a newly eligible
employee?

Answer 37: Except as provided in Q&A-
35, in the case of a newly eligible em-
ployee, the initial written notice must be
furnished on or before the first day the
employee becomes eligible to participate
in the QSEHRA.

Example. Facts: A QSEHRA provides
that newly hired employees are eligible
for reimbursement of expenses incurred
beginning the first day of the first
month following an employee's date of
hire. An employee is hired on the 15th
day of the month and receives the initial
written notice on the 20th day of the
month.

Conclusion: Because the employee
was not eligible to participate until the
first day of the first month after the
employee's date of hire, and the writ-
ten notice was furnished before that
date, the eligible employer timely pro-
vided the initial written notice to the

eligible employee.

Question 38: What information must be
included in the written notice?

Answer 38: The written notice must in-
clude the information described below,
and may include other information, as
long as the additional information does
not conflict with the following required
information:

(a) A statement of the amount of each
permitted benefit for which the employee
might be eligible. To the extent the per-
mitted benefit varies based on the number
of family members covered under the ar-
rangement or their ages, the written notice
for an employee may include either each
available permitted benefit, or the permit-
ted benefit for which that employee is
eligible. In the case of a newly eligible
employee whose permitted benefit has
been prorated, the written notice must ei-
ther (i) include the prorated permitted
benefit for which that employee is eligi-
ble, or (ii) state that the amounts are pro-
rated based on months of coverage and
provide the information necessary to cal-
culate the prorated amount (for example,
the permitted benefit amounts and the first
month the employee will become eligible
to participate in the QSEHRA). The notice
must include the date on which the
QSEHRA is first provided to the eligible
employee.

(b) A statement that the eligible em-
ployee must inform any Marketplace to
which the employee applies for advance
payments of the PTC (APTC) of the
amount of the permitted benefit. The writ-
ten notice must state that the amount of
the permitted benefit may affect the eligi-
bility for and amount of any PTC and that
the employee should retain the written
notice because it may be needed to calcu-
late the PTC on the employee's individual
income tax return.

(c) A statement that if the eligible em-
ployee does not have MEC for any month,
the employee may be liable for an indi-
vidual shared responsibility payment un-
der section 5000A for that month, and
reimbursements under the QSEHRA for
expenses incurred in the month will be
includible in gross income.

Example. Facts: In 2017, Employer
provides a QSEHRA with a self-only
permitted benefit of $3,960 and a fam-
ily permitted benefit of $8,040. These

dollar amounts are the maximum
amounts for which an eligible em-
ployee in each category may be reim-
bursed; the amount each employee is
actually reimbursed depends on the ex-
penses submitted by the employee for
reimbursement. The first month of eli-
gibility begins on January 1. Employer
timely provides the following written
notice to its eligible employees:

"Your permitted benefit for 2017 is
$3,960 if you have self-only coverage
or $8,040 if any members of your fam-
ily also have coverage. (These amounts
are prorated by month if you are not
eligible on the first day of the year.)
Your permitted benefit applies to med-
ical expenses incurred on or after Jan-
uary 1 (your eligibility date)."

"You are required to inform any Mar-
ketplace to which you apply for ad-
vance payments of the premium tax
credit about the amount of your permit-
ted benefit. The amount of your permit-
ted benefit may affect your eligibility
for a premium tax credit and will re-
duce the amount of the premium tax
credit for which you are eligible. You
should retain this written notice be-
cause it may be needed to calculate the
premium tax credit on your individual
income tax return."

"If you do not have minimum essen-
tial coverage for any month, you may
be liable for an individual shared re-
sponsibility payment under section
5000A of the Internal Revenue Code,
and all of the reimbursements you re-
ceive under this arrangement for ex-
penses incurred in that month will be
includible in your gross income. For a
list of examples of plans and arrange-
ments that are minimum essential cov-
erage, you may refer to the Instruc-
tions for IRS Form 8965, which are
available on the IRS website."

An employee hired after the begin-
ning of the year receives the same
written notice except the first para-
graph includes the newly eligible em-
ployee's initial eligibility date.

Conclusion: Employer satisfies the
written notice requirements.

Question 39: Must an eligible employer
directly provide to a Marketplace any in-
formation about a QSEHRA that it pro-

vides to its eligible employees?
Answer 39: No.

#### F. MEC requirement

Under section 106(g), payments or re-
imbursements from a QSEHRA are not
treated as paid or reimbursed under
employer-provided coverage for medical
expenses under an accident or health plan
for purposes of sections 106 and 105 if,
for the month in which the medical care is
provided, the individual does not have
MEC.

Question 40: What are the tax conse-
quences for an eligible employee who
mistakenly received reimbursements from
a QSEHRA with respect to medical care
provided during one or more months in
the year when the individual to whom the
care was provided did not have MEC?

Answer 40: To the extent medical care
was provided (or incurred) during one or
more months when the individual for
whom the expenses were incurred did not
have MEC, the amount of the reimburse-
ments of those expenses mistakenly paid
from the QSEHRA is included in the
gross income of the eligible employee
who was provided the QSEHRA. See
Q&A-62 regarding information reporting
requirements related to the reimburse-
ment.

#### G. Proof of MEC requirement

Under section 9831(d)(2)(B)(ii), a
QSEHRA may only provide reimburse-
ments to an eligible employee after the
eligible employee provides proof of cov-
erage. Consistent with section 106(g),
such coverage must qualify as MEC.

Question 41: What satisfies the require-
ment that a QSEHRA only provide reim-
bursements after the eligible employee
provides proof of coverage?

Answer 41: Before a QSEHRA can reim-
burse an expense for any plan year, the
eligible employee must first provide proof
that the eligible employee and (if differ-
ent) the individual whose expense will be
reimbursed has MEC for the month during
which the expense was incurred. This
proof must consist of either (a) a docu-
ment from a third party (for example, the
insurer) showing that the employee and
the individual have coverage (for exam-

ple, an insurance card or an explanation of
benefits) and an attestation by the em-
ployee that the coverage is MEC; or (b) an
attestation by the employee stating that
the employee and the individual have
MEC, the date coverage began, and the
name of the provider of the coverage. See
Appendix B for model attestation lan-
guage. The initial proof of MEC must be
provided with respect to each individual
whose expenses are eligible for reim-
bursement before the first reimbursement
of an expense of that individual. An eli-
gible employer may rely on the employ-
ee's attestation unless the employer has
actual knowledge that the individual
whose expense is submitted does not have
MEC. Additionally, following this initial
proof of coverage, with each new request
for reimbursement of an incurred expense
for the same plan year, at a minimum, the
employee must attest that the employee
and the individual whose expense is being
reimbursed continue to have MEC (for
example, as part of the form for requesting
reimbursement). Receipt of the documen-
tation described above satisfies a QSEH-
RA's requirement that the QSEHRA re-
imburse medical expenses only after the
employee provides proof of coverage.

Question 42: Does the requirement that
an eligible employee provide proof of
MEC apply separately to each year the
QSEHRA is provided?

Answer 42: Yes. An eligible employee
must provide initial proof of MEC as de-
scribed in Q&A-41 at least annually for
all individuals for whom the employee
intends to seek payments or reimburse-
ments for medical expenses incurred dur-
ing a year in order to receive payments or
reimbursements from the QSEHRA. In
addition, following an initial submission
of proof of coverage, with each new re-
quest for reimbursement of an incurred
expense for the same plan year, at a min-
imum, the employee must attest that the
individual whose expense is being reim-
bursed continues to have MEC.

Question 43: May a QSEHRA reimburse
an eligible employee on a taxable basis if
the employee fails to provide proof of MEC
for the individual for whom the employee
seeks payments or reimbursements?

Answer 43: No.

H. Substantiation requirement

Section 18001(a)(8) of the Cures Act
provides that the Secretary of the Treasury
may issue substantiation requirements as
necessary to carry out the exception from
group health plan requirements for
QSEHRAs. Section 105(b) excludes from
gross income employer reimbursements
for medical expenses, including expenses
reimbursed by a QSEHRA. Section
1.105-2 provides that this income exclu-
sion applies only to amounts paid to re-
imburse the taxpayer for expenses in-
curred by the taxpayer for medical care
and not for amounts that the taxpayer
would be entitled to receive irrespective
of whether such an expense was incurred.
Therefore, to ensure that a particular pay-
ment is a reimbursement of a medical
expense, all claims for expense reimburse-
ments must be substantiated.

Question 44: How may an eligible em-
ployee substantiate medical expenses to
receive a reimbursement from a
QSEHRA?

Answer 44: The eligible employee may
satisfy the substantiation requirements by
complying with the substantiation require-
ments for FSAs as proposed at § 1.125-6.
If an eligible employer pays an issuer di-
rectly for an employee's premium pay-
ment or uses the methods for payment of
premiums described in Rev. Rul. 61-146,
1961-2 C.B. 25, no additional substantia-
tion is required in relation to these pay-
ments. See also Publication 969, Health
Savings Accounts and Other Tax-Favored
Health Plans.

Question 45: What are the tax conse-
quences if an arrangement mistakenly re-
imburses medical expenses of an eligible
employee who failed to satisfy the sub-
stantiation requirements?

Answer 45: If an arrangement mistakenly
reimburses an eligible employee for a
medical expense that has not been sub-
stantiated, the arrangement fails to satisfy
the requirements for the payments to be
excluded from the employee's income,
and all payments to all employees under
the arrangement, substantiated and unsub-
stantiated, on or after the date the mis-
taken reimbursement was made, become
taxable. See also Q&A-72. If an em-
ployee timely substantiates or repays an
unsubstantiated amount with after-tax

funds, the QSEHRA will not be treated as
failing to satisfy the substantiation re-
quirements. Similarly, if an arrangement
mistakenly reimburses employees for ex-
penses that do not qualify as medical ex-
penses, all payments to all employees un-
der the arrangement, substantiated and
unsubstantiated, on or after the date the
reimbursement was made, become tax-
able. If a non-medical expense is mistak-
enly reimbursed and the employee timely
repays the amount with after-tax funds,
the arrangement will be treated as not
failing the requirement for exclusion un-
der section 105(b). For this purpose,
timely substantiation or repayment does
not include substantiations or repayments
made after the earlier of (a) March 15 of
the year following the year in which the
error was identified, or (b) in the case of
an eligible employer whose federal in-
come tax return is under examination for
the taxable year during which the error
was identified, the date the eligible em-
ployer receives written notification from
the examining agent(s) specifically citing
the mistaken reimbursement as an issue
under consideration.

Example. Facts: A QSEHRA reim-
burses an eligible employee for a med-
ical expense. Upon later internal re-
view, it is determined that the expense
was not adequately substantiated. Upon
request, the employee provides the
missing substantiation by March 15th
of the year following the year the sub-
stantiation error was identified.

Conclusion: The reimbursement is ex-
cluded from the employee's income
and wages, and payments to other em-
ployees under the arrangement remain
excluded from their income and wages.

I. Reimbursement of medical expenses

Section 9831(d)(2)(B)(ii) provides that
a QSEHRA is an arrangement that pro-
vides, after the eligible employee provides
proof of coverage, for the payment of, or
reimbursement of, expenses for medical
care as defined in section 213(d) that are
incurred by an employee or the employ-
ee's family members (as determined un-
der the terms of the QSEHRA). Section
105(b) generally excludes from gross in-
come payments by eligible employers to
reimburse employees for medical ex-
penses incurred by an employee or mem-

bers of the employee's family.

Question 46: May a QSEHRA reimburse
eligible employees with a taxable pay-
ment of unused permitted benefits at the
end of the year (sometimes referred to as
a cash-out)?

Answer 46: No. A cash-out of unused
permitted benefits would result in all pay-
ments to all eligible employees under the
QSEHRA for the year being includible in
income and wages because the exclusion
under section 105(b) does not apply to
amounts the taxpayer would be entitled to
receive irrespective of whether the tax-
payer incurs medical expenses.

Question 47: May a QSEHRA reimburse
health insurance premiums related to an
eligible employee's family member if the
family member's coverage is a separate
policy from the policy covering the
employee?

Answer 47: Yes.

Question 48: May a QSEHRA reimburse
premiums for coverage under a group
health plan sponsored by the employer of
the eligible employee's spouse?

Answer 48: Yes. However, the reimburse-
ment is taxable to the extent that the
spouse's share of premiums was paid on a
pre-tax basis. See Q&A-63 for informa-
tion regarding the taxation and reporting
of the reimbursement.

Question 49: On what date may payments
or reimbursements under a QSEHRA first
be made to a newly eligible employee?
Answer 49: Payments or reimbursements
may be made immediately upon an em-
ployee becoming eligible to participate in
the QSEHRA, provided the employee has
satisfied the other requirements (for exam-
ple, substantiation) for receiving pay-
ments or reimbursements.

Question 50: May a QSEHRA make re-
imbursements available ratably on a
month-by-month basis, rather than mak-
ing the full amount of the annual permit-
ted benefit available at the beginning of
the year?

Answer 50: Yes. A QSEHRA may pro-
vide that any expense incurred during the
year may be reimbursed by amounts avail-
able during that year after the date the
expense was incurred.

Example. Facts: Employer provides a
QSEHRA with a permitted benefit of
$3,000. An eligible employee's avail-
able reimbursement on any date during

the year is restricted to the number of
months elapsed in the year plus the
current month multiplied by $250, less
any expenses reimbursed as of that
date. On January 4, Employee substan-
tiates medical expenses of $4,000. Em-
ployee receives $250 in January and an
additional $250 in each month for the
rest of the year.

Conclusion: The reimbursements do
not fail to satisfy the QSEHRA rules.
Question 51: May a QSEHRA impose a
deductible or other cost-sharing require-
ments that must be met before the
QSEHRA reimburses medical expenses?
Answer 51: No.

Question 52: May a QSEHRA reimburse
medical expenses incurred before the eli-
gible employee is provided the QSEHRA?
Answer 52: No. A QSEHRA may not
reimburse medical expenses incurred be-
fore the eligible employee is provided the
QSEHRA. For this purpose, medical ex-
penses are treated as incurred when the
covered individual is provided the medi-
cal care that gives rise to the expense, and
not when the amount is billed or paid.
However, for this purpose, a QSEHRA is
permitted to treat a premium expense for a
period of coverage as incurred on (a) the
first day of each month of coverage on a
pro rata basis, (b) the first day of the
period of coverage, or (c) the date the
premium is paid.

Example 1. Facts: Employee pays
$6,000 for health insurance coverage
from January 1 through June 30, 2018.
Employee is first eligible to participate
in a QSEHRA on July 1, 2018.

Conclusion: The QSEHRA may not re-
imburse the $6,000 premium.

Example 2. Facts: Employee pays
$6,000 on January 1, 2018 for health
insurance coverage from January 1
through June 30, 2018. Employee is
first eligible to participate in a
QSEHRA on March 1, 2018.

Conclusion: The QSEHRA may either
(1) reimburse up to $1,000 for each
month of coverage between March 1
and June 30, 2018, or (2) reimburse up
to $4,000 on March 1, 2018. Alterna-
tively, the QSEHRA is permitted to not
reimburse the insurance premium be-
cause it was paid before the date Em-
ployee first became eligible to partici-
pate in the QSEHRA. See Q&A-12

regarding the requirement that an ar-
rangement must be operated on a uni-
form and consistent basis to satisfy the
same terms requirement.

Question 53: May a QSEHRA have a
run-out period following the coverage pe-
riod during which eligible employees may
submit claims for medical expenses in-
curred during the coverage period?

Answer 53: Yes. A QSEHRA may have a
run-out period with a deadline on or after
the end of the coverage period for submit-
ting a claim for reimbursement of medical
expenses incurred during the coverage pe-
riod. Any run-out period must be provided
on a uniform and consistent basis with
respect to all eligible employees.

Question 54: May a QSEHRA reimburse
expenses for over-the-counter drugs pur-
chased without a prescription?

Answer 54: Yes. A QSEHRA is permit-
ted, but not required, to reimburse ex-
penses for over-the-counter drugs pur-
chased without a prescription. However,
these reimbursements are taxable to the
eligible employee because section 106(f)
permits income exclusion for reimburse-
ments for a medicine or drug only if it is
prescribed. See Q&A-64 for information
regarding the taxation and reporting of the
reimbursements.

Question 55: May an eligible employer
provide for an eligible employee to pay
the excess of a health insurance premium
over the amount paid by the QSEHRA
with an after-tax payroll deduction (in
contrast to a pre-tax salary reduction) as-
suming that this payroll practice otherwise
satisfies any state law requirements?

Answer 55: Yes. However, if an employer
endorses a particular policy, form, or is-
suer of health insurance, it may constitute
a group health plan, in which case the
employer would not be an eligible em-
ployer that could provide a QSEHRA.

Question 56: May a self-employed tax-
payer be allowed a deduction under sec-
tion 162(l) for a calendar month during
which a family member is provided a
QSEHRA that would pay or reimburse for
premiums or other medical expenses of
the taxpayer?

Answer 56: No. The deduction under sec-
tion 162(l) for amounts paid during the
taxable year for insurance that constitutes
medical care for the taxpayer and the tax-
payer's family members is not available

for any calendar month in which the tax-
payer is eligible to participate in any sub-
sidized health plan maintained by any em-
ployer of the taxpayer or of the taxpayer's
family members. For purposes of section
162(l), coverage under a QSEHRA con-
stitutes participation in a subsidized health
plan maintained by an employer.

##### J. Reporting requirement

Section 6051(a)(15) requires an eligi-
ble employee's permitted benefit to be
reported on the Form W-2, Wage and Tax
Statement.

Question 57: How is an eligible employ-
ee's permitted benefit reported on the
Form W-2?

Answer 57: The eligible employer must
report the amount of payments and re-
imbursements that the eligible employee
is entitled to receive from the QSEHRA
for the calendar year in box 12 of the
Form W-2 using code FF, without re-
gard to the amount of payments or re-
imbursements actually received. See
Q&A-60 regarding the exclusion of the
carryover amount from box 12 of the
Form W-2.

Example 1. Facts: A QSEHRA pro-
vides a permitted benefit of $3,000.
Employee receives reimbursements of
$2,000 from the QSEHRA.

Conclusion: On the Form W-2, Em-
ployer reports a permitted benefit of
$3,000 in box 12 using code FF.

Example 2. Facts: A QSEHRA pro-
vides a permitted benefit of $3,000,
prorated by month for employees not
eligible for the full year. Employee be-
comes eligible on May 1 for a permit-
ted benefit of $2,000 ($3,000 x 8/12)
for the year.

Conclusion: On the Form W-2, Em-
ployer reports a permitted benefit of
$2,000 in box 12 using code FF.

Question 58: If an eligible employer pro-
vides a QSEHRA that varies based on the
number of family members covered under
the arrangement or their ages, what
amount of permitted benefit is reported on
the Form W-2 of an eligible employee
who is provided a QSEHRA but receives
no payments or reimbursements and pro-
vides no proof of MEC?

Answer 58: If the eligible employee re-
ceives no payments or reimbursements
and provides no proof of MEC, the

amount reported is the highest value per-
mitted benefit that the QSEHRA provides.
However, if the eligible employee later
provides proof of MEC establishing eligi-
bility for a lesser value permitted benefit,
the Form W-2 must report this lesser
value permitted benefit.

Question 59: How is the permitted benefit
provided under a QSEHRA with a non-
calendar year plan year reported?

Answer 59: The amount reported is the
prorated amount of the permitted benefit
for the calendar year (not the plan year, if
different) for which the employee is eligi-
ble, regardless of whether the employee
actually receives payments or reimburse-
ments from the QSEHRA.

Example. Facts: Employer provides a
non-calendar year QSEHRA that be-
gins on April 1, 2017. (From January 1,
2017 to March 30, 2017, Employer
does not provide a QSEHRA.) From
April 1, 2017 to March 31, 2018, the
QSEHRA provides a permitted benefit
of $2,000. From April 1, 2018 to March
31, 2019, the QSEHRA provides a per-
mitted benefit of $3,000.

Conclusion: On the 2017 Form W-2,
Employer reports a permitted benefit of
$1,500 ($2,000 x 9/12) for calendar
year 2017, and, on the 2018 Form
W-2, Employer reports a permitted
benefit of $2,750 (($2,000 x 3/12) +
($3,000 x 9/12)) for calendar year
2018.

Question 60: If a QSEHRA allows for the
use of carryover amounts from prior
years, how are the carryover amounts
reported?

Answer 60: The permitted benefit re-
ported on the Form W-2 includes only
newly available amounts. If the QSEHRA
allows for the use of carryover amounts
from prior years, those amounts are not
included in the amount reported for the
current year.

Question 61: How is the permitted benefit
reported on the Form W-2 for an eligible
employee who is provided a self-only per-
mitted benefit for part of the year and a
family permitted benefit for another part
of the year?

Answer 61: If the QSEHRA provides that
the eligible employee's permitted benefit
will be adjusted during the year if the
employee enrolls in a different type of
coverage, then the amount reported on the

employee's Form W-2 is prorated to re-
flect the change.

Example. Facts: Employer provides a
QSEHRA with a self-only permitted
benefit of $3,960 and a family permit-
ted benefit of $8,040. The QSEHRA
provides that the permitted benefit will
be adjusted ratably by month if the type
of coverage changes during the year.
Employee enrolls in self-only coverage
from January 1 through July 31 and in
family coverage from August 1 to De-
cember 31.

Conclusion: On the Form W-2, Em-
ployer reports a permitted benefit of
$5,660 (($3,960 x 7/12) + ($8,040 x
5/12)).

Question 62: What is reported on the
Form W-2 of an eligible employee who
received taxable reimbursements as a re-
sult of an individual's failure to have
MEC for one or more months in the year?
Answer 62: Although a QSEHRA may
not reimburse the medical expenses in-
curred on behalf of an individual who
does not have MEC, to the extent an eli-
gible employer discovers that a reim-
bursement was mistakenly made with re-
spect to medical expenses incurred during
a month that the individual whose expense
was reimbursed did not have MEC, re-
porting on the Form W-2 of the eligible
employee provided the QSEHRA should
be as follows:

(a) The amount of the taxable reim-
bursement received with respect to ex-
penses incurred during any month or
months when the individual whose medi-
cal expense was reimbursed did not have
MEC is included in the gross income of
the eligible employee as other compensa-
tion in box 1, Wages, tips, and other com-
pensation.

(b) The taxable reimbursements re-
ported in box 1 are excluded from wages
under sections 3121(a)(2)(B) and
3306(b)(2)(B) for purposes of Federal In-
surance Contributions Act (FICA) taxes
(including social security and Medicare
taxes) and Federal Unemployment Tax
Act (FUTA) taxes, respectively. Thus, the
taxable reimbursements included in box 1
should not be included in box 3, Social
security wages, or box 5, Medicare wages
and tips.

federal income tax withholding. See sec-
tion 3401(a)(20).

(d) The permitted benefit reported in
box 12 using code FF will be the same
amount that would have been reported had
there been no failure to maintain MEC.

(e) If the employer discovers the lapse
in MEC after filing the Form W-2 with
the Social Security Administration (SSA)
for the calendar year, the employer must
furnish the employee a Form W-2c, Cor-
rected Wage and Tax Statement, and file
the Form W-2c with SSA.

Question 63: What is reported on the
Form W-2 of an eligible employee who
received taxable reimbursements related
to either (a) over-the-counter drugs pur-
chased without a prescription, or (b) pre-
miums paid on a pre-tax basis for cover-
age under a group health plan sponsored
by the employer of the eligible employ-
ee's spouse?

Answer 63: If a QSEHRA provides for
taxable reimbursements of either (a) over-
the-counter drugs purchased without a
prescription, or (b) premiums paid on a
pre-tax basis for coverage under a group
health plan sponsored by the employer of
the eligible employee's spouse, then the
amount should be reported on the employ-
ee's Form W-2 as follows:

(a) The taxable reimbursements are
wages subject to income tax withholding,
and are included in box 1.

(b) The taxable reimbursements re-
ported in box 1 are included in wages for
purposes of FICA taxes (including social
security and Medicare taxes) and FUTA
taxes. Thus, the taxable reimbursements
included in box 1 must also be included in
box 3 and box 5.

(c) The permitted benefit is reported in
box 12 using code FF as provided in
Q&A-57; the fact that a portion of the
permitted benefit is a taxable reimburse-
ment does not change the amount reported
in box 12 using code FF.

Question 64: Is an eligible employer that
provides a QSEHRA to its eligible em-
ployees required to provide Forms
1095-B, Health Coverage, regarding the
QSEHRA?
Answer 64: No.

#### K. Coordination with PTC

Section 36B allows a PTC for certain
taxpayers who enroll (or whose family
enrolls) in a qualified health plan (QHP)
through a Marketplace. A PTC is not
available for an individual who is eligible
for coverage under an eligible employer-
sponsored plan that is MEC, is affordable,
and provides minimum value. An eligible
employer-sponsored plan is affordable if
the employee's required contribution for
self-only coverage under the plan does not
exceed 9.5 percent (adjusted annually) of
the taxpayer's household income.

Under section 36B(c)(2) and §§ 1.36B-
2(a) and 1.36B-3(c), a taxpayer who meets
certain income and other criteria is allowed
a PTC only for months that are coverage
months. A coverage month is generally a
month for which (a) the taxpayer or a family
member of the taxpayer is enrolled in a
QHP through a Marketplace and is not eli-
gible for non-Marketplace MEC (for exam-
ple, Medicaid, Medicare, or employer-
sponsored coverage if that coverage is both
affordable and provides minimum value),
and (b) the premium for the individual's
coverage is paid by the unextended due date
of the taxpayer's income tax return for the
taxable year.

Under section 36B(c)(4)(A), neither an
employee nor a family member of the
employee has a coverage month if the
employee is provided a QSEHRA that
constitutes affordable coverage. Section
36B(c)(4)(C) provides that a QSEHRA
constitutes affordable coverage for a
month if the excess of the monthly pre-
mium for the self-only second lowest cost
silver plan over 1/12 of the employee's
permitted benefit, as defined in section
9831(d)(3)(C), under the QSEHRA does
not exceed 1/12 of 9.5 percent (adjusted
annually) of the employee's household in-
come.7

Section 36B(c)(4)(B) provides that if
an employee is provided a QSEHRA for a
coverage month, the PTC otherwise allow-
able for the month to the taxpayer who
claims a personal exemption deduction for
the employee is reduced by 1/12 of the
employee's permitted benefit (PTC reduc-
tion) under the QSEHRA for the year. For

purposes of the PTC reduction, the employ-
ee's permitted benefit is the maximum per-
mitted benefit (self-only or family, as appli-
cable) available to the employee under the
QSEHRA. This amount is reported on the
employee's Form W-2.

Question 65: If a QSEHRA provides differ-
ent amounts of permitted benefits for self-
only and family coverage, what amount of
permitted benefit reported by the eligible
employer in the written notice is used to
determine whether the QSEHRA constitutes
affordable coverage for an eligible em-
ployee and the employee's family
members?

Answer 65: The permitted benefit for self-
only coverage as reported by the eligible
employer in the written notice is used to
determine whether the QSEHRA constitutes
affordable coverage, regardless of whether
the permitted benefit provided to a particular
eligible employee is for self-only or family
coverage. If the amount of permitted benefit
varies based on the age of the employee, the
age-applicable self-only coverage amount is
used.

Example. Facts: For 2018, Employer
provides a QSEHRA with a self-only per-
mitted benefit of $3,960 and a family
permitted benefit of $8,040. Employee
has a spouse and a dependent. Employee
enrolls in a QHP that covers all three
family members and is provided an
$8,040 permitted benefit. The annual pre-
mium for the second-lowest cost self-
only silver plan offered by Employee's
Marketplace is $6,000. Employee's
household income is $20,000, and 9.56
percent of household income equals
$1,912.

Conclusion: Even though Employee
receives the family permitted benefit of
$8,040, the self-only permitted benefit
of $3,960 is used to determine whether
the QSEHRA constitutes affordable
coverage for Employee. The QSEHRA
does not constitute affordable coverage
for Employee for any month of 2018
because 1/12 of the second lowest-cost
silver self-only plan (1/12 x $6,000 =
$500), minus 1/12 of the self-only per-
mitted benefit (1/12 x $3,960 = $330),
equals $170 ($500-$330 = $170),
which is greater than 1/12 of 9.56 per-

"The affordability safe harbors under § 54.4980H-5(e) only apply for employer liability for assessable payments under section 4980H(b). Eligibility for the PTC is based on an individual's
household income.

cent of Employee's 2018 household in-
come (1/12 x $1,912 = $159). Thus,
Employee may be allowed a PTC for
2018 for coverage for Employee and
Employee's family.

Question 66: What amount of permitted
benefit is used to calculate any PTC
reduction?

Answer 66: The PTC reduction for an
eligible employee who is provided a
QSEHRA for a coverage month is 1/12 of
the employee's permitted benefit. The
maximum permitted benefit for the type of
coverage (self-only or family coverage) in
which the employee was enrolled for the
year, as reported by the eligible employer
on the employee's Form W-2, is used to
calculate the employee's PTC reduction.
Thus, an employee who is provided a per-
mitted benefit for self-only coverage uses
the self-only amount to calculate the PTC
reduction, and an employee who is pro-
vided a permitted benefit for family cov-
erage uses the family amount to calculate
the PTC reduction.

Example. Facts: Employer provides a
QSEHRA with a self-only permitted
benefit of $3,960 and a family permit-
ted benefit of $8,040. Employee enrolls
in a QHP covering Employee and Em-
ployee's three children for 2018.
Coverage under the QSEHRA does not
constitute affordable coverage for Em-
ployee, and Employee is allowed a PTC
for each month in 2018 for coverage for
Employee and Employee's three chil-
dren. Employee's Form W-2 reports a
permitted benefit of $8,040.

Conclusion: Employee's PTC reduc-
tion is $670 each month, which is 1/12
of the $8,040 family permitted benefit
under the QSEHRA.

Question 67: If a Marketplace determines
that an eligible employee's QSEHRA does
not constitute affordable coverage when the
employee, or the employee's family mem-
ber, enrolls in a QHP, does the QSEHRA
constitute affordable coverage for a month if
it is later determined that the QSEHRA con-
stitutes affordable coverage under the af-
fordability test described in section
36B(c)(4)(C) for that month?

Answer 67: No. If accurate information re-
garding the permitted benefit is provided to
the Marketplace when the eligible em-
ployee, or the employee's family member,
enrolls in a QHP and the Marketplace de-

termines that the QSEHRA does not consti-
tute affordable coverage, the QSEHRA is
treated as not constituting affordable cover-
age for all months of the year for which the
permitted benefit is provided to the em-
ployee (or until the Marketplace makes a
new determination).

Question 68: If an eligible employee is pro-
vided a permitted benefit for self-only cov-
erage for some months of a year and a
permitted benefit for family coverage for
other months of the year, how is the afford-
ability of the QSEHRA coverage deter-
mined? If the QSEHRA does not constitute
affordable coverage, how is the PTC reduc-
tion determined for the employee?

Answer 68: Regardless of whether an eligi-
ble employee is provided a permitted benefit
for self-only or family coverage, the permit-
ted benefit for self-only coverage is used to
determine whether the QSEHRA constitutes
affordable coverage. For the PTC reduction,
the prorated self-only permitted benefit is
used for the months in which the employee
was provided a permitted benefit for self-
only coverage, and the prorated family per-
mitted benefit is used for the months in
which the employee was provided a permit-
ted benefit for family coverage.

Example. Facts: Employer provides a
QSEHRA with a self-only permitted ben-
efit of $3,960 and a family permitted ben-
efit of $8,040. Employee enrolls in a self-
only QHP from January through August
of 2018. In August, Employee marries
and enrolls in a family QHP with cover-
age commencing on September 1, 2018,
and continuing through the remaining
months of 2018. Under the terms of the
QSEHRA, Employee is provided a pro-
rated permitted benefit based on whether
Employee is enrolled in self-only or fam-
ily coverage. Employee's permitted ben-
efit for 2018 is $5,320 ($2,640 for Janu-
ary through August (8/12 x $3,960), plus
$2,680 for September through December
(4/12 x $8,040)).

Conclusion: To determine whether the
QSEHRA constitutes affordable cover-
age for Employee for each month of
2018, 1/12 of the $3,960 permitted
benefit for self-only coverage is used.
If the QSEHRA does not constitute
affordable coverage for Employee and
Employee is allowed a PTC for 2018,
Employee's PTC is reduced as follows:
for the eight-month period of January

through August that Employee was en-
rolled in self-only coverage, the PTC
for each month is reduced by $330 (1/8
of $2,640), and for the four-month pe-
riod of September through December
that Employee was enrolled in family
coverage, the PTC for each month is
reduced by $670 (1/4 of $2,680).

Question 69: If an eligible employee is
provided a permitted benefit under a
QSEHRA for some but not all months of a
year, how is the affordability of the
QSEHRA determined? If the QSEHRA
does not constitute affordable coverage,
how is the PTC reduction determined for the
employee?

Answer 69: If an eligible employee is pro-
vided a permitted benefit under a QSEHRA
for some, but not all, months of a year, the
affordability of the QSEHRA is determined
for each month for which a benefit was
provided using the prorated permitted ben-
efit amount for self-only coverage. If the
QSEHRA does not constitute affordable
coverage, the employee's PTC is reduced
by the prorated self-only permitted benefit
for the months in which the employee was
provided a permitted benefit for self-only
coverage, and by the prorated family per-
mitted benefit for the months in which the
employee is provided a permitted benefit for
family coverage. For example, if an eligible
employer provided a QSEHRA with a per-
mitted benefit of $3,960 for self-only cov-
erage, an employee who worked for the
employer for just four months of the year
would be provided a permitted benefit of
$1,320 ($3,960 x 4/12 = $1,320), then $330
($1,320/4 = $330) of the permitted benefit
amount is used to determine whether the
QSEHRA constitutes affordable coverage
for the employee for each of the four
months. Similarly, if an employee is pro-
vided a permitted benefit for some, but not
all, months of a year, the employee must
reduce the PTC by a ratable portion of the
permitted benefit amount for each month for
which a benefit was provided. For example,
if an employer provided a QSEHRA with a
permitted benefit of $8,040 for family cov-
erage, an employee who worked for the
employer for just nine months of the year
and who received family coverage would be
provided with a permitted benefit of $6,030
($8,040 x 9/12 = $6,030), then the em-
ployee must reduce the PTC by $670
($6,030/9 = $670) for each of the nine

months the employee worked for the
employer.

Question 70: If a QSEHRA allows for the
use of carryover amounts from the prior
plan year, how do these carryover amounts
affect a taxpayer's affordability determina-
tion and PTC reduction in the later year?
Answer 70: The carryover amounts do not
affect the affordability determination or the
PTC reduction in the later year because the
carryover amount was already taken into
account in both the affordability determina-
tion and the PTC reduction in the year the
amount was initially available. However,
the sum of the carryover amount and the
permitted benefit amount under the
QSEHRA for the later year cannot exceed
the statutory dollar limit. See Q&A-29, re-
garding the rule that an eligible employee's
total permitted benefit, taking into account
both carryover amounts and newly available
amounts, may not exceed the applicable
statutory dollar limit. For purposes of the
affordability determination and PTC reduc-
tion, if the amount of permitted benefit in-
cluding carryover amounts from prior years
is restricted by the statutory dollar limits, the
carryover amounts from prior years are re-
duced, rather than the initially available
amounts.

Example. Facts: For 2017 and 2018, Em-
ployer provides a QSEHRA with a self-
only permitted benefit of $3,960 and a
family permitted benefit of $8,040. The
QSEHRA allows for the use of carryover
amounts in the following year. In 2017
and 2018, Employee enrolls in a self-only
QHP; in both years, the Marketplace de-
termines that the QSEHRA does not con-
stitute affordable coverage. Employee re-
ceives reimbursements of $3,000 in 2017,
leaving an unused amount of $960, which
is available to Employee in 2018.

Conclusion: Although Employee may
receive reimbursements of $4,920
($3,960 self-only permitted benefit
plus $960 carryover amount) for med-
ical expenses for 2018, only $3,960 in
initially available amounts is consid-
ered in determining whether the

QSEHRA is affordable for Employee
for 2018. If Employee claims a PTC
for 2018, only $3,960 is considered in
determining the amount by which Em-
ployee must reduce the monthly PTC.

Question 71: For 2017 or 2018, if APTC
is paid on behalf of an eligible employee
who was also provided a permitted benefit
under a QSEHRA, is the permitted benefit
taken into account by Federally-facilitated
Marketplaces (FFM) in determining the
amount of the APTC?

Answer 71: No. For 2017 and 2018, if
APTC is paid on behalf of an eligible
employee who is also provided a permit-
ted benefit under a QSEHRA, the permit-
ted benefit is not considered by an FFM
when calculating the amount of the em-
ployee's APTC; therefore, the employee
may have APTC for 2017 or 2018 that
exceeds the amount of the employee's al-
lowed PTC (excess APTC). Any em-
ployee who receives the benefit of APTC
must file Form 8962, Premium Tax
Credit, with the employee's federal in-
come tax return to reconcile (compare) the
APTC with the PTC for which the em-
ployee is eligible. The employee must re-
pay the excess APTC, subject to limita-
tions. To reduce the risk of receiving
excess APTC, the employee may reduce
the amount of APTC to be paid on the
employee's behalf to account for a
QSEHRA permitted benefit for 2017 or
2018 by applying a lower APTC amount
to the employee's policy through the Mar-
ketplace. For example, suppose an em-
ployee was determined eligible for and
receives APTC in the amount of $400 per
month for 2017, and the employee's em-
ployer provides the employee with a
QSEHRA permitted benefit of $200 per
month beginning in July 2017. Because
this change in the employee's circum-
stances could affect the amount of APTC
that the employee might have to repay at
tax filing and reconciliation, the employee
could reduce, in whole or in part, the
monthly amount of APTC to be paid on
the employee's behalf. While employees

may not know the exact amount by which
to reduce their APTC, they may reduce it
in whole or in part. As noted above, ex-
cess APTC must be repaid, within certain
limitations, when the employee files and
reconciles APTC at tax filing.

L. Failure to satisfy the requirements to
be a QSEHRA

If an arrangement fails to be a
QSEHRA because one or more of the
requirements to be a QSEHRA are not
satisfied, the arrangement is a group
health plan subject to chapter 100. Any
violation of chapter 100 is subject to the
excise tax under section 4980D ($100 per
affected person per day).8

Question 72: What will cause an arrange-
ment to fail to be a QSEHRA?

Answer 72: An arrangement will be a
group health plan that is not a QSEHRA if
it does not comply with the requirements
in section 9831(d), including if (a) it is not
provided by an eligible employer (such as
an employer that offers another group
health plan to its employees), (b) it is not
provided on the same terms to all eligible
employees, (c) it reimburses medical ex-
penses without first requiring proof of
MEC, or (d) it provides a permitted ben-
efit in excess of the statutory dollar limits.
An arrangement's failure to be a
QSEHRA will not cause any reimburse-
ment of a properly substantiated medical
expense that is otherwise excludable from
income to be included in the employee's
income or wages. Notwithstanding the
previous sentence, an arrangement de-
signed to reimburse expenses other than
medical expenses (whether or not also re-
imbursing medical expenses) is neither a
QSEHRA nor a group health plan. Ac-
cordingly, all payments under such an ar-
rangement are includible in the employ-
ee's gross income and wages. An
employer's failure to timely provide a
compliant written notice does not cause an
arrangement to fail to be a QSEHRA, but
instead results in the penalty under section
6652(o).

8There have been several prior releases on the compliance of HRAs with the group health plan rules of chapter 100: (1) FAQs About Affordable Care Act Implementation (Part XI), issued
on January 24, 2013 by DOL (http://www.dol.gov/ebsa/faqs/faq-aca11.html) and HHS (http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.html); (2)
IRS Notice 2013-54 and DOL Technical Release 2013-03, issued on September 13, 2013; (3) IRS FAQ on Employer Healthcare Arrangements (http://www.irs.gov/Affordable-Care-Act/
Employer-Health-Care-Arrangements); (4) FAQs About Affordable Care Act Implementation (Part XXII), issued on November 6, 2014 by DOL (http://www.dol.gov/ebsa/faqs/faq-
aca22.html) and HHS (https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-XXII-FINAL.pdf); (5) Notice 2015-17, 2015-14 I.R.B. 845, issued by
Treasury and IRS on February 18, 2015; (6) Notice 2015-87, 2015-52 I.R.B. 889, Q&A-1 to Q&A-6, issued by Treasury and IRS on December 16, 2015; and (7) FAQs About Affordable
Care Act Implementation (Part 37), issued on January 12, 2017 (http://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-37.pdf). See also 26 CFR
54.9815-2711(d), 29 CFR 2590.715-2711(d), and 45 CFR 147.126(d) (80 FR 72192, Nov. 18, 2015).

Question 73: What are the tax conse-
quences if an arrangement operationally
or by its terms either (a) reimburses med-
ical expenses without full substantiation,
(b) reimburses medical expenses in ad-
vance of receiving substantiation, or (c)
reimburses non-medical expenses in addi-
tion to reimbursing medical expenses?

Answer 73: If an arrangement operation-
ally or by its terms reimburses eligible
employees for expenses (a) that have not
been substantiated, (b) that are reimbursed
in advance of substantiation, or (c) that are
not medical expenses, then the arrange-
ment is neither a QSEHRA nor a group
health plan, and all amounts paid under
the arrangement are included in every em-
ployee's gross income and wages. See
also Q&A 45.

Example 1. Facts: An arrangement that
otherwise satisfies the requirements for
a QSEHRA reimburses medical ex-
penses incurred by eligible employees
based solely on their verbal statements
that the expenses were incurred.

Conclusion: The arrangement is not an
accident or health plan, and all amounts
paid under the arrangement are included
in every eligible employee's gross in-
come and wages.

Example 2. Facts: Employer pays its em-
ployees on a weekly basis. Employer pro-
vides an arrangement that otherwise sat-
isfies the requirements for a QSEHRA.
Under the arrangement, 1/52 of the per-
mitted benefit is paid to employees in
addition to each eligible employee's
weekly salary without regard to whether
the employee has incurred any medical
expense.

Conclusion: The arrangement is not an
accident or health plan, and all
amounts paid under the arrangement
are included in every eligible employ-
ee's gross income and wages.

Question 74: Is a QSEHRA an applicable
self-insured health plan subject to the
Patient-Centered Outcomes Research
Trust Fund (PCORTF) fee under section
4376 for years ending before September
30, 2019?

Answer 74: Yes. Plan sponsors of appli-
cable self-insured health plans must file
Form 720, Quarterly Federal Excise Tax
Return, annually to report and pay the
PCORTF fee; a QSEHRA is an applicable
self-insured health plan for this purpose.

The Form 720 is due on July 31 of the
year following the last day of the policy
year or plan year. The fee is applicable
with respect to plan years ending before
October 1, 2019.

### M. Interaction with HSA requirements

Under section 223, individuals who
have high deductible health plan (HDHP)
coverage and no other disqualifying
health coverage may contribute to an
HSA. Individuals who are covered by per-
mitted insurance (defined under section
223(c)(3)) or certain disregarded coverage
(defined under section 223(c)(1)(B)), in
addition to HDHP coverage, remain eligi-
ble to contribute to an HSA.

Question 75: Does an individual fail to be
an eligible individual under section 223
because the individual is provided a
QSEHRA that, by its terms, may reim-
burse any medical expense, including cost
sharing?

Answer 75: Yes.

Question 76: Does an individual fail to be
an eligible individual under section 223
because the individual is provided a
QSEHRA that, by its terms, may reim-
burse only premiums?

Answer 76: No.

Question 77: Does an individual fail to be
an eligible individual under section 223
because the individual is provided a
QSEHRA that, by its terms, may only
reimburse expenses that qualify as permit-
ted insurance or disregarded coverage un-
der section 223(c), in addition to reim-
bursing premiums for health insurance
policies?

Answer 77: No.

Question 78: If an employer terminates its
group health plan during the calendar year
and thereafter provides a QSEHRA, may
an HDHP later purchased as individual
coverage by an employee take into ac-
count, for purposes of the HDHP's de-
ductible, the unreimbursed medical ex-
penses incurred by the employee while
covered under the group health plan be-
fore termination?

Answer 78: Yes.

N. Effective Date

Question 79: How does the guidance in
this notice apply to an eligible employer
that provided a QSEHRA to its eligible

employees before the date this notice was
released?

Answer 79: The guidance in this notice
applies to plan years beginning on or after
November 20, 2017 (the effective date).
QSEHRAs established before that date
may rely on these rules. However, if an
eligible employer established a QSEHRA
and operated it in accordance with a rea-
sonable good faith interpretation of the
applicable statutory provisions before the
effective date, the employer may continue
to operate the QSEHRA according to its
terms until the last day of the plan year
that began in 2017 so long as the
QSEHRA was established before the ef-
fective date. In order to have established a
QSEHRA before the effective date, the em-
ployer must have either (a) taken official
action to adopt a QSEHRA before the ef-
fective date, (b) provided a QSEHRA to its
eligible employees before the effective date,
or (c) furnished its eligible employees with a
written notice before the effective date.

## PUBLIC COMMENTS

This notice generally provides guid-
ance that Treasury and IRS intend to in-
corporate into proposed regulations.
These proposed regulations will provide
interested parties an opportunity for com-
ment on the issues addressed in the pro-
posed regulations. However, to assist in
development of those proposed regula-
tions, Treasury and IRS request comments
on the guidance provided in this notice.
Public comments should be submitted no
later than January 19, 2018. Comments
should include a reference to Notice 2017-
67. Send submissions to CC:PA:LPD:PR
(Notice 2017-67), Room 5203, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC 20044.
Submissions may be hand delivered Mon-
day through Friday between the hours of 8
a.m. and 4 p.m. to CC:PA:LPD:PR (Notice
2017-67), Courier's Desk, Internal Reve-
nue Service, 1111 Constitution Avenue,
NW, Washington, DC 20044, or sent elec-
tronically, via the following e-mail address:
Notice.comments@irscounsel.treas.gov.
Please include "Notice 2017-67" in the
subject line of any electronic communi-
cation. All material submitted will be
available for public inspection and
copying.

## APPLICABILITY DATE AND RELIANCE PERIOD

Except as otherwise explicitly pro-
vided in this notice, the guidance provided
in this notice applies for plan years begin-
ning on and after November 20, 2017.

## PAPERWORK REDUCTION ACT

The collections of information con-
tained in this notice has been submitted
for approval by the Office of Management
and Budget for review in accordance with
the Paperwork Reduction Act (44 U.S.C.
3507) under control number 1545-0008.

An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information un-
less the collection of information displays
a valid control number.

The collections of information in this
notice are in the section entitled Guidance,
subsections E, G, H, I and J. This infor-
mation is required by the IRS to assure
compliance with the new provisions of the
21st Century Cures Act. The likely respon-
dents are employers and employees.

An eligible employee's permitted ben-
efit must be reported on the Form W-2.
The reporting burden on the employer will
be evaluated at the time of renewal of
control number 1545-0008.

The numbers provided in the following
paragraphs are estimated numbers because

this is the first year with respect to this
voluntary provision; the numbers will be
adjusted when additional data is available.

With respect to the requirement that an
eligible employer furnish eligible employ-
ees with an annual written notice, the es-
timated number of respondents (employ-
ers) is 11,000. The estimated number of
responses (annual notices) will be
220,000. The estimated annual frequency
of responses is annually. Because Notice
2017-67 provides sample language for
inclusion in the response, it is estimated
that 10 minutes of a human resource pro-
fessional's time will be required to pre-
pare each response. Therefore, it is ex-
pected that employers will incur an
estimated annual hour burden of 36,667
hours (estimated responses (220,000)
multiplied by estimated frequency (one
per year) multiplied by estimated time per
response (10 minutes)), for the first year
and for subsequent years. The estimated
average annual burden associated with
furnishing the written notice will be in-
cluded in the estimated annual burden re-
ported for Form W-2, when the Form
W-2 is revised.

With respect to the employee's satis-
faction of the attestation and gathering of
documentation requirement (collectively,
the attestation), the estimated number of
respondents (employees) will be 220,000.
The estimated annual frequency of re-
sponses is two times per year. Because

Notice 2017-67 provides model language
for inclusion in the response, it is esti-
mated that five minutes of an employee's
time will be required to prepare the attes-
tation. Therefore, it is expected that em-
ployees will incur an estimated annual
hour burden of 36,667 hours (estimated
responses (220,000) multiplied by esti-
mated frequency (two per year) multiplied
by estimated time per response (five min-
utes)), for the first year and for subsequent
years. The estimated average annual bur-
den associated with the satisfaction of the
attestation will be included in the esti-
mated annual burden reported for Form
W-2, when the Form W-2 is revised.

Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial 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.

## DRAFTING INFORMATION

The principal author of this notice is
Karen Levin of the Office of Associate
Chief Counsel (Tax Exempt and Govern-
ment Entities). For further information re-
garding this notice contact Ms. Levin or
Ronald Rutherford-Triche at (202) 317-
5500 (not a toll-free number).

# APPENDIX A

## Types of Minimum Essential Coverage

Minimum essential coverage means health care coverage under any of the following programs. It does not, however, include
coverage consisting solely of excepted benefits. Excepted benefits include stand-alone vision and dental plans, workers' compen-
sation coverage, and coverage limited to a specified disease or illness.

### Employer-sponsored coverage:

· Group health insurance coverage for employees under:

o A plan or coverage offered in the small or large group market within a state,

o A plan provided by a governmental employer, such as the Federal Employees Health Benefit program, or

o A grandfathered health plan offered in a group market.

· A self-insured health plan for employees,

· COBRA coverage,

· Retiree coverage, or

· Coverage under an expatriate health plan for employees and related individuals.

### Individual health coverage:

· Health insurance purchased directly from an insurance company,

· Health insurance purchased through the Marketplace,

· Health insurance provided through a student health plan,

· Catastrophic coverage, or

· Coverage under an expatriate health plan for non-employees such as students and missionaries.

### Coverage under government-sponsored programs:

· Medicare Part A coverage,

· Medicare Advantage plans,

· Most Medicaid coverage,*

· Children's Health Insurance Program (CHIP) coverage,

· Most types of TRICARE coverage,

· Comprehensive health care programs offered by the Department of Veterans Affairs,

· Health coverage provided to Peace Corps volunteers,

· Department of Defense Nonappropriated Fund Health Benefits Program,

· Refugee Medical Assistance, or

· Coverage through a Basic Health Program (BHP) standard health plan.

### Other coverage:

· Certain foreign coverage,

· Certain coverage for business owners, or

· Coverage recognized by HHS as minimum essential coverage .**

*Medicaid programs that provide limited benefits generally don't qualify as minimum essential coverage.

** Plans recognized as minimum essential coverage are listed at: www.cms.gov/CCIIO/Programs-and-Initiatives/Health-
Insurance-Market-Reforms/minimum-essential-coverage.html, scroll down and click on the link for the list of approved plans.

# APPENDIX B

As described in Q&A-42, before reimbursement of an expense by a QSEHRA for any plan year, the eligible employee must first
provide proof that the eligible employee and (if different) the individual whose expense will be reimbursed has MEC for the month
during which the expense was incurred. This proof may consist of either (a) a document from a third party (for example, the insurer)
showing that the eligible employee and the individual have coverage (for example, an insurance card or an explanation of benefits)
and an attestation by the employee that the coverage is MEC; or (b) an attestation by the employee stating that the eligible employee
and the individual have MEC, the date coverage(s) began, and the name of the provider of the coverage(s). Below is model
attestation language for the employee to satisfy the attestation requirement.

Model Attestation for Initial Proof of MEC
Instruction - Complete the following to provide information on your current health coverage.
I am attesting to the following:
I,
(insert name)
am covered under the following health cover-
age: (insert name of the health coverage)
,
The coverage began on (insert date coverage began)

The coverage is minimum essential coverage (MEC).

Instruction - Also complete the following if a family member's expenses can be reimbursed from the QSEHRA.

The following family member
(insert name)
is covered under the following health
coverage: (insert name of the health coverage)
.
The coverage began on (insert date coverage began).
The coverage is MEC.

I hereby affirm that the above information is true and accurate.

Signed:

Date:

Below is model attestation language that an employer can choose to include on a QSEHRA's reimbursement form for the
employee to satisfy the requirement to attest that the individual whose expense is being reimbursed continues to have MEC.
Model Attestation for Request for Reimbursement of an Incurred Expense

Instruction - Complete the following for any expenses being reimbursed from the QSEHRA.

(insert name)
, am covered under the following health coverage:
I,
(insert name of the health coverage)
,
The coverage continues to be minimum essential coverage (MEC). The submitted medical expense has not been previously
reimbursed and reimbursement will not be sought for the expense from any other arrangement or health plan.
Instruction - Also, complete the following if a family member's expense is being reimbursed from the QSEHRA.

The following family member
(insert name)
is covered under the
following health coverage:
(insert name of the health coverage)

The coverage continues to be MEC. The submitted medical expense has not been previously reimbursed and reimbursement will
not be sought for the expense from any other arrangement or health plan.
I hereby affirm that the above information is true and accurate.

Signed:
Date:

# Part IV. Items of General Interest

## Relief for Victims of Hurricane Maria and the California Wildfires

## Announcement 2017-15

### Purpose

This announcement provides relief to
taxpayers who have been adversely af-
fected by Hurricane Maria and recent
wildfires in California (“California Wild-
fires") and who have retirement assets in
qualified employer plans that they would
like to use to alleviate hardships caused by
these disasters. In addition, this announce-
ment provides relief from certain verifica-
tion procedures that may be required un-
der retirement plans with respect to loans
and hardship distributions. The relief pro-
vided under this announcement is in addi-
tion to the relief already provided by the
Service pursuant to News Releases CA-
2017-06, VI-2017-02 and PR-2017-02
under § 7508A of the Internal Revenue
Code ("Code") for victims of these disas-
ters, and to any future news releases pro-
viding relief related to these disasters.
These news releases can be found on
https://www.irs.gov/newsroom/tax-relief-
in-disaster-situations. (For a listing of em-
ployee benefit-related acts and deadlines
that, under the news releases, were post-
poned until January 31, 2018, in response
to these disasters, see the regulations un-
der § 7508A and Section 8 of Rev. Proc.
2007-56, 2007-2 C.B. 388.) The relief in
this announcement is separate and in ad-
dition to the relief provided to victims of
Hurricane Maria by the Disaster Tax Re-
lief and Airport and Airway Extension
Act of 2017, P.L. 115-63.

### Background

The laws relating to qualified employer
plans impose various limitations on the per-
missibility of loans and distributions from
those plans. For example, § 401(k)(2)(B)(i)
of the Code provides that in the case of a
§ 401(k) plan that is part of a profit-sharing
or stock bonus plan, elective deferrals may
be distributed only in certain situations, one
of which is on account of hardship. Section
403(b)(11) provides similar rules with re-

spect to elective deferrals under a
§ 403(b) plan. Section 457(d)(1)(A) pro-
vides that a plan described in § 457(b)
may not permit distributions before
the occurrence of certain enumerated
events, one being when the participant is
faced with an unforeseeable emergency.
Certain other types of plans or accounts
are not permitted to make in-service dis-
tributions (distributions to a participant
who is still an employee) even if there is
a hardship. For example, in-service
hardship distributions are generally not
permitted from pension plans or from
accounts holding qualified nonelective
contributions ("QNECs") described in
§ 401(m)(4)(C) or qualified matching
contributions ("QMACs") described in
§ 401(k)(3)(D)(ii)(I). However, Rev.
Rul. 2004-12, 2004-2 C.B. 478, holds
that if amounts attributable to rollover
contributions are separately accounted
for within a plan, those amounts may be
distributed at any time, pursuant to the
employee's request. Section 72(p) im-
poses certain requirements relating to
plan loans. Unless those requirements
are satisfied, a loan is treated as a dis-
tribution under the plan.

In order to make a loan or distribution
(including a hardship distribution), a plan
must contain language authorizing the
loan or distribution. Also, except to the
extent a distribution consists of already-
taxed amounts, the distribution will be
includible in gross income and generally
subject to the 10-percent additional tax
under § 72(t). Similar rules relating to
income inclusion and taxation apply to a
distribution from an IRA.

Plan provisions and regulations under
certain Code sections establish verifica-
tion procedures that a plan must follow
before loans or distributions can be made
from the plan. For example, the regula-
tions under § 401(k) set forth certain cri-
teria an employee must meet in order to
receive a hardship distribution. A plan
may contain procedures designed to con-
firm that the criteria have been satisfied.

### Relief

As described below, a qualified em-
ployer plan will not be treated as failing to

satisfy any requirement under the Code or
regulations merely because the plan
makes a loan, or a hardship distribution
for a need arising from Hurricane Maria
or the California Wildfires, to an em-
ployee or former employee whose princi-
pal residence on September 16, 2017, in
the case of the U.S. Virgin Islands; Sep-
tember 17, 2017, in the case of Puerto
Rico; or October 8, 2017, in the case of
California ("Incident Date") was located
in one of the areas identified for individual
assistance by the Federal Emergency
Management Agency ("FEMA") because
of the devastation caused by these disas-
ters or whose place of employment was
located in one of these areas on that date
or whose lineal ascendant or descendant,
dependent, or spouse had a principal res-
idence or place of employment in one of
these areas on that date. The areas identi-
fied for individual assistance by FEMA
can be found on FEMA's website at
https://www.fema.gov/disasters. If addi-
tional areas are identified by FEMA for
individual assistance because of damage
related to these disasters, the relief pro-
vided in this announcement will also ap-
ply, from the date specified by FEMA as
the beginning of the incident period, and
that date should be substituted for refer-
ences to the Incident Date in this an-
nouncement. Plan administrators may rely
upon representations from the employee
or former employee as to the need for and
amount of a hardship distribution, unless
the plan administrator has actual knowl-
edge to the contrary, and the distribution
is treated as a hardship distribution for all
purposes under the Code and regulations.

For purposes of this announcement, a
"qualified employer plan" means a plan or
contract meeting the requirements of
§ 401(a) (including a plan treated as qual-
ified under § 401(a) on account of an
election made pursuant to § 1022(i)(2) of
the Employee Retirement Income Secu-
rity Act of 1974, P.L. 93-406), 403(a) or
403(b), and, for purposes of the hardship
relief, that could, if it contained enabling
language, make hardship distributions.
For purposes of this paragraph, a "quali-
fied employer plan" also means a plan
described in § 457(b) maintained by an
eligible employer described in

§ 457(e)(1)(A), and any hardship arising
from Hurricane Maria or the California
Wildfires is treated as an "unforeseeable
emergency" for purposes of distributions
from such plans. For example, a profit-
sharing or stock bonus plan that currently
does not provide for hardship or other
in-service distributions may nevertheless
make hardship distributions related to
these disasters pursuant to this announce-
ment, except from QNEC or QMAC ac-
counts or from earnings on elective con-
tributions (see below for plan amendment
requirements). A defined benefit or money
purchase plan, which generally cannot
make in-service hardship distributions,
may not make hardship distributions pur-
suant to this announcement, other than
from a separate account, if any, within the
plan containing either employee contribu-
tions or rollover amounts.

The amount available for hardship dis-
tribution is limited to the maximum
amount that would be permitted to be
available for a hardship distribution under
the plan under the Code and regulations.
However, the relief provided by this an-
nouncement applies to any hardship of the
employee, not just the types enumerated
in the regulations, and no post-distribution
contribution restrictions are required. For
example, regulations under § 401(k) pro-
vide safe harbor hardship distribution
standards under which a hardship is
deemed to exist only for certain enumer-
ated events, and, after receipt of the hard-
ship amount, the employee is prohibited
from making contributions for at least 6
months. Plans need not follow these rules

with respect to hardship distributions for
which relief is provided under this an-
nouncement.

To make a loan or hardship distribution
pursuant to the relief provided in this an-
nouncement, a qualified employer plan
that does not provide for them must be
amended to provide for loans or hardship
distributions no later than the end of the
first plan year beginning after December
31, 2017. To qualify for the relief under
this announcement, a hardship distribu-
tion must be made on account of a hard-
ship resulting from Hurricane Maria or the
California Wildfires and be made on or
after the Incident Date and no later than
March 15, 2018. Plan loans made pursu-
ant to this announcement must satisfy the
requirements of § 72(p).

In addition, a retirement plan will not
be treated as failing to follow procedural
requirements for plan loans (in the case of
retirement plans other than IRAs) or dis-
tributions (in the case of all retirement
plans, including IRAs) imposed by the
terms of the plan merely because those
requirements are disregarded for any pe-
riod beginning on or after the Incident
Date and continuing through March 15,
2018, with respect to loans or distributions
to individuals described in the first para-
graph under "Relief," above, provided the
plan administrator (or financial institution
in the case of distributions from IRAs)
makes a good-faith diligent effort under
the circumstances to comply with those
requirements. However, as soon as prac-
ticable, the plan administrator (or financial
institution in the case of IRAs) must make

a reasonable attempt to assemble any for-
gone documentation. For example, if
spousal consent is required for a plan loan
or distribution and the plan terms require
production of a death certificate if the
employee claims his or her spouse is de-
ceased, the plan will not be disqualified
for failure to operate in accordance with
its terms if it makes a loan or distribution
to an individual described in the first para-
graph under "Relief" in the absence of a
death certificate if it is reasonable to be-
lieve, under the circumstances, that the
spouse is deceased, the loan or distribu-
tion is made no later than March 15, 2018,
and the plan administrator makes reason-
able efforts to obtain the death certificate
as soon as practicable. For purposes of
this announcement, "retirement plan" has
the same meaning as "eligible retirement
plan" under § 402(c)(8)(B).

Taxpayers are reminded that in general
the normal spousal consent rules continue
to apply, and, except to the extent the
distribution consists of already-taxed
amounts, any distribution made pursuant
to the relief provided in this announce-
ment will be includible in gross income
and generally subject to the 10-percent
additional tax under § 72(t).

The Department of Labor has advised
Treasury and the IRS that it will not treat
any person as having violated the provi-
sions of Title I of the Employee Retire-
ment Income Security Act solely because
that person complied with the provisions
of this announcement.

# Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as "rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A

and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).

Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future 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.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-

stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.

Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.

# Abbreviations

The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

GP-General Partner.

TFR-Transferor.

T.I.R .- Technical Information Release.

TP-Taxpayer.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

TR-Trust.

CY-County.

LE-Lessee.

TT-Trustee.

D-Decedent.

LP-Limited Partner.

LR-Lessor.

X-Corporation.

DE-Donee.

Del. Order-Delegation Order.

Nonacq .- Nonacquiescence.

O Organization.

DR-Donor.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.

PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.
Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S-Subsidiary.

S.P.R .- Statement of Procedural Rules.

Stat .- Statutes at Large.

T-Target Corporation.

T.C .- Tax Court.

T.D .- Treasury Decision.

TFE-Transferee.

CFR-Code of Federal Regulations.

CI-City.

GR-Grantor.

COOP-Cooperative.

IC-Insurance Company.

U.S.C .- United States Code.

DC-Dummy Corporation.

M-Minor.

DISC-Domestic International Sales Corporation.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.
EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

FPH-Foreign Personal Holding Company.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C-Individual.

C.B .- Cumulative Bulletin.

Y-Corporation.

Z-Corporation.

## Numerical Finding List1

Bulletin 2017-27 through 2017-47

### Action on Decision:

2017-5, 2017-27 I.R.B. 1
2017-6, 2017-33 I.R.B. 194
2017-7, 2017-42 I.R.B. 311

### Announcements:

2017-05, 2017-27 I.R.B. 5
2017-08, 2017-28 I.R.B. 9

2017-09, 2017-35 I.R.B. 219
2017-10, 2017-33 I.R.B. 210
2017-11, 2017-39 I.R.B. 255
2017-12, 2017-38 I.R.B. 238
2017-13, 2017-40 I.R.B. 271
2017-15, 2017-47 I.R.B. 534
2017-17, 2017-46 I.R.B. 515

### Notices:

2017-36, 2017-33 I.R.B. 208
2017-37, 2017-29 I.R.B. 89
2017-38, 2017-30 I.R.B. 147
2017-39, 2017-31 I.R.B. 150
2017-40, 2017-32 I.R.B. 190
2017-41, 2017-34 I.R.B. 211
2017-42, 2017-34 I.R.B. 212
2017-43, 2017-36 I.R.B. 224
2017-44, 2017-36 I.R.B. 226
2017-45, 2017-38 I.R.B. 232
2017-46, 2017-41 I.R.B. 275
2017-47, 2017-38 I.R.B. 232
2017-48, 2017-39 I.R.B. 254
2017-49, 2017-40 I.R.B. 258
2017-50, 2017-41 I.R.B. 280
2017-51, 2017-40 I.R.B. 260
2017-52, 2017-40 I.R.B. 262
2017-53, 2017-42 I.R.B. 318
2017-54, 2017-42 I.R.B. 321
2017-55, 2017-42 I.R.B. 324
2017-56, 2017-43 I.R.B. 365
2017-57, 2017-42 I.R.B. 324
2017-58, 2017-42 I.R.B. 326
2017-59, 2017-45 I.R.B. 484
2017-60, 2017-43 I.R.B. 365
2017-61, 2017-43 I.R.B. 371
2017-62, 2017-44 I.R.B. 460
2017-63, 2017-44 I.R.B. 460
2017-64, 2017-45 I.R.B. 486
2017-67, 2017-47 I.R.B. 517
2017-68, 2017-46 I.R.B. 513

### Proposed Regulations:

REG-128841-07, 2017-42 I.R.B. 327
REG-139633-08, 2017-31 I.R.B. 175
REG-128483-15, 2017-32 I.R.B. 191

Proposed Regulations :- Continued

REG-136118-15, 2017-28 I.R.B. 9
REG-105004-16, 2017-41 I.R.B. 295
REG-125374-16, 2017-41 I.R.B. 300
REG-115615-17, 2017-44 I.R.B. 463
REG-116256-17, 2017-46 I.R.B. 514
REG-129631-17, 2017-44 I.R.B. 464

## Revenue Procedures:

2017-41, 2017-29 I.R.B. 92
2017-42, 2017-29 I.R.B. 124
2017-43, 2017-31 I.R.B. 153
2017-44, 2017-35 I.R.B. 216
2017-45, 2017-35 I.R.B. 216
2017-46, 2017-43 I.R.B. 372
2017-47, 2017-38 I.R.B. 233
2017-48, 2017-36 I.R.B. 229
2017-50, 2017-37 I.R.B. 230
2017-52, 2017-41 I.R.B. 283
2017-53, 2017-40 I.R.B. 263
2017-54, 2017-42 I.R.B. 336
2017-55, 2017-43 I.R.B. 373
2017-56, 2017-44 I.R.B. 465
2017-57, 2017-44 I.R.B. 474
2017-58, 2017-45 I.R.B. 489

## Revenue Rulings:

2017-14, 2017-27 I.R.B. 2
2017-15, 2017-32 I.R.B. 176
2017-16, 2017-35 I.R.B. 215
2017-17, 2017-36 I.R.B. 222
2017-18, 2017-39 I.R.B. 239
2017-19, 2017-40 I.R.B. 257
2017-20, 2017-41 I.R.B. 273
2017-21, 2017-45 I.R.B. 482

## Treasury Decisions:

9819, 2017-29 I.R.B. 85
9820, 2017-32 I.R.B. 178
9821, 2017-32 I.R.B. 181
9822, 2017-33 I.R.B. 195
9823, 2017-33 I.R.B. 206
9824, 2017-42 I.R.B. 312
9825, 2017-46 I.R.B. 500
9827, 2017-44 I.R.B. 382
9828, 2017-44 I.R.B. 431

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017-01 through 2017-26 is in Internal Revenue Bulletin
2017-26, dated June 27, 2017.

## Finding List of Current Actions on Previously Published Items1

Bulletin 2017-27 through 2017-47

Notices:

2015-77
Amplified by
Notice 2017-40, 2017-32 I.R.B. 190

2017-10
Modified by
Notice 2017-58, 2017-42 I.R.B. 326
2017-29
Modified by
Notice 2017-58, 2017-42 I.R.B. 326

### Revenue Procedures:

2016-27
Modified by
Rev. Proc. 2017-43, 2017-31 I.R.B. 153

2016-27
Superseded by
Rev. Proc. 2017-43, 2017-31 I.R.B. 153

2016-48
Superseded by
Rev. Proc. 2017-48, 2017-36 I.R.B. 232

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017-01 through 2017-26 is in Internal Revenue Bulletin
2017-26, dated June 27, 2017.

# Internal Revenue Service Washington, DC 20224

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Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

# We Welcome Comments About the Internal Revenue Bulletin

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

Internal Revenue Bulletin 2017-47 (PDF rendition): IRS Notices

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