Notice 2010-82

in income to be eligible for relief under this
notice, and that inclusion in income occurs
in a year subsequent to the year the plan
was corrected, the service provider must
include the statement with the return for
the year of the correction as well as the return for the year of income inclusion.”
H. To provide relief from the employee
information reporting requirements upon
the correction of an operational failure in
the same taxable year as the failure occurs,
§ IX.A of Notice 2008–113 is modified to
read as follows:

terms of this notice, and that the service recipient has taken all actions required, and
otherwise met all requirements, for such
correction.
In addition, each service recipient relying on the relief provided in § IV of this
notice must make reasonable efforts to provide notice to the examining agent upon
the commencement of an examination of
the service recipient’s federal tax return
that the service recipient was relying upon
the relief provided under this notice for
years covered by the examination.”

“A. Information Required with Respect
to Correction of an Operational Failure
in the Same Taxable Year as the Failure
Occurs

IV. EFFECTIVE DATE

A service recipient described in § IV
of this notice must attach to its timely
filed (including extensions) original federal income tax return for its taxable year
in which the failure occurred a statement
entitled Ҥ 409A Relief under IV of Notice
2008–113” stating that it is relying upon
§ IV of this notice with respect to a correction of a failure to comply with § 409A and
setting out the following information with
respect to each such failure:
1. The name and taxpayer identification number of each service provider affected by the failure and whether such service provider is an insider with respect to
the service recipient. Where the same or
a substantially similar operational failure
has occurred with respect to multiple service providers, the information required
in § IX.A.2 through 5 may be supplied
only once with respect to such operational
failure, provided that the identification of
each service provider affected by the operational failure in this § IX.A.1 references
such information and the amount involved
in the operational failure with respect to
such service provider.
2. Identification of the nonqualified deferred compensation plan with respect to
which such failure occurred.
3. A brief description of the failure and
the circumstances under which it occurred,
including the amount involved and date on
which the failure occurred.
4. A brief description of the steps taken
to correct the failure and the date on which
such correction was completed.
5. A statement that the operational failure is eligible for the correction under the

December 20, 2010

Taxpayers may rely on this Notice
2010–80 for the modifications to Notice
2008–113 for taxable years beginning on
or after January 1, 2010. Taxpayers may
rely on this Notice 2010–80 for the modifications to Notice 2010–6 for taxable years
beginning on or after January 1, 2009.
V. EFFECT ON OTHER
DOCUMENTS
Notice 2008–113 and Notice 2010–6
are modified as provided in this notice.
Except as explicitly provided, this notice
does not otherwise affect the guidance
provided in Notice 2010–6 and Notice
2008–113.
VI. DRAFTING INFORMATION
The principal author of this notice is
Keith Ranta of the Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities), although other Treasury and IRS officials
participated in its development. For further information on the provisions of
this notice, contact Keith Ranta at (202)
927–9639 (not a toll-free number).

Tax Credit for Employee
Health Insurance Expenses of
Small Employers
Notice 2010–82
I. PURPOSE AND BACKGROUND
Section 45R of the Internal Revenue
Code (Code) offers a tax credit to certain
small employers that provide health insurance coverage to their employees. The

857

credit is available for taxable years beginning after December 31, 2009. Both taxable employers and employers that are organizations described in § 501(c) and exempt from tax under § 501(a) (tax-exempt
employers) may be eligible for the § 45R
credit. Employers that satisfy the requirements for the credit are referred to in this
notice as “eligible small employers.”
Notice 2010–44, 2010–22 I.R.B. 717,
provides guidance on § 45R as in effect for
taxable years beginning before January 1,
2014, including transition relief for taxable
years beginning in 2010 with respect to the
requirements for a qualifying arrangement
under § 45R. This notice expands on the
guidance provided in Notice 2010–44 and
provides guidance on additional issues relating to the small employer tax credit.
II. ISSUES RELATING TO
EMPLOYER’S ELIGIBILITY FOR
THE CREDIT
To be an eligible small employer: (1)
the employer must have fewer than 25
full-time equivalent employees (FTEs) for
the taxable year; (2) the average annual
wages of its employees for the year must
be less than $50,000 per FTE; and (3) the
employer must maintain a “qualifying arrangement.” In general, a qualifying arrangement is an arrangement under which
the employer pays premiums for each employee enrolled in health insurance coverage offered by the employer in an amount
equal to a uniform percentage (not less
than 50 percent) of the premium cost of the
coverage.
A. Tax-Exempt Employers Not Described
in § 501(c) and Exempt Under § 501(a)
Section 45R(f)(1) provides that the
credit is available to a tax-exempt eligible
small employer, defined in § 45R(f)(2) as
“any organization described in § 501(c)
which is exempt from taxation under
§ 501(a).” Tax-exempt organizations that
are not both described in § 501(c) and
exempt from taxation under § 501(a) are
not eligible to claim the credit. However,
a § 521 farmers cooperative that is subject
to tax under § 1381 is eligible to claim the
credit as a taxable employer, if it otherwise
meets the definition of an eligible small
employer.

2010–51 I.R.B.

B. Employers Not Engaged in a Trade or
Business

III. OTHER ISSUES RELATING TO
ELIGIBILITY FOR THE CREDIT

The statute does not require that, in order for an employer to be an eligible small
employer, the employees of the employer
must be performing services in a trade or
business. Thus, an employer that otherwise meets the requirements for the credit
under § 45R for a taxable year beginning
before January 1, 2014 does not fail to be
an eligible small employer merely because
the employees of the employer are not performing services in a trade or business. For
example, a household employer that otherwise satisfies the requirements of § 45R is
eligible for the credit.

A. Determining Employees Taken Into
Account — Spouses

C. Employers Located Outside the United
States
For taxable years 2010 through 2013,
an eligible small employer’s credit is based
on premiums paid for health insurance
coverage offered by a health insurance
issuer, as described in § 9832(b)(1). Section 9832(b)(2) requires that an insurer
be licensed to engage in the business of
insurance in a State and that the insurer is
subject to State law regulating insurance.
For purposes of § 9832(b)(2) and § 45R,
“State” is defined in § 7701(a)(10), and
means the 50 States plus the District of
Columbia. Therefore, an eligible small
employer located outside the United States
(including an employer located in a U.S.
territory), which has income effectively
connected with the conduct of a trade or
business in the United States, may claim
the § 45R credit only if it pays premiums
for an employee’s health insurance coverage that is issued in and regulated by
one of the 50 States or the District of Columbia. Similarly, a tax-exempt eligible
small employer located outside the United
States (including an employer located in
a U.S. territory) would also be required to
pay premiums for an employee’s health
insurance coverage that is issued in and
regulated by one of the 50 States or the
District of Columbia in order to obtain the
refundable credit described in § 45R(f).

2010–51 I.R.B.

Employees who perform services for
the employer during the taxable year are
taken into account in determining the employer’s FTEs, average wages, and premiums paid, with certain individuals excluded and with employees of certain related employers included. See section II.B
of Notice 2010–44. Sole proprietors, partners in a partnership, shareholders owning more than two percent of the stock in
an S corporation, and any owners of more
than five percent of other businesses are
not taken into account as employees for
purposes of the credit. Family members
of these owners and partners are also not
taken into account as employees.
The definition of “family members” for
purposes of § 45R does not specifically
refer to spouses. However, spouses of
certain business owners are excluded from
being taken into account as employees
by operation of the ownership attribution rules in the Code. Therefore, the
following individuals also are not taken
into account as employees for purposes
of § 45R: (1) the employee-spouse of a
shareholder owning more than two percent of the stock of an S corporation; (2)
the employee-spouse of an owner of more
than five percent of a business; (3) the
employee-spouse of a partner owning
more than a five percent interest in a
partnership; and (4) the employee-spouse
of a sole proprietor. See §§ 45R(e)(1)(A);
1372(b), 318, 416(i)(1)(B)(i).
B. Determining Employees Taken Into
Account — Leased Employees and Others
Leased employees (as defined in
§ 414(n)) are counted in computing an employer’s FTEs and average annual wages.
See § 45R(e)(1)(B). However, no provision of § 45R supports attributing to the
service recipient the leasing organization’s
payment of premiums. Therefore, premiums for health insurance coverage paid
by a leasing organization for a leased employee are not taken into account by the
service recipient in computing the service
recipient’s § 45R credit.
Unless specifically excluded, all employees of the employer during the year

858

for which the credit is being claimed are
taken into account in computing an employer’s FTEs and annual average wages
under § 45R, including, for example, former employees who terminated employment during the year for which the credit
is being claimed, employees covered under a collective bargaining agreement, and
employees who do not enroll in their employer’s health insurance plan (whether or
not they are covered under another health
insurance plan).
A minister performing services in
the exercise of his or her ministry is
treated as self-employed for Social Security and Medicare tax purposes. See
§§ 1402(c)(2)(D) and 3121(b)(8)(A).
However, for other tax purposes, including
§ 45R, whether a minister is an employee
or self-employed is determined under the
common law test for determining worker
status. If, under the common law test,
a minister is self-employed, the minister
is not taken into account in determining an employer’s FTEs and premiums
paid because § 45R(e)(A)(i) excludes a
self-employed individual from the term
“employee” for purposes of the credit. If,
under the common law test, the minister is
an employee, the minister is taken into account in determining an employer’s FTEs
and premiums paid by the employer for
the minister’s health insurance coverage
can be taken into account in computing
the credit, subject to limitations on the
credit. (Note that, under § 45R(f)(1)(B),
a tax-exempt employer’s § 45R credit
cannot exceed the total of the tax-exempt
eligible small employer’s income tax and
Medicare tax withholding and its Medicare tax liability for the year). Because
compensation of a minister performing
services in the exercise of his or her ministry is not subject to Social Security or
Medicare tax under the Federal Insurance
Contributions Act (FICA), a minister has
no wages as defined under § 3121(a) for
purposes of computing an employer’s average annual wages.
C. Determining Average Annual Wages,
Number of Hours Worked, and Number
of FTEs
All wages (as defined under § 3121(a)
but without regard to the wage base limitation under § 3121(a)) paid (including
overtime pay) are taken into account in

December 20, 2010

computing an employer’s average annual
wages. Thus, for example, if an employee
works more than 2,080 hours in a year,
all wages paid to the employee, including
wages for the hours in excess of 2,080, are
taken into account in computing the employer’s average annual wages.
Notice 2010–44 provides three methods
that employers are permitted to use for calculating employees’ hours of service for
the taxable year: (1) counting actual hours
worked; (2) using a days-worked equivalency; or (3) using a weeks-worked equivalency. Employers need not use the same
method for all employees, but may apply
different methods for different classifications of employees, if the classifications
are reasonable and consistently applied.
For example, an employer may use the actual hours worked method for all hourly
employees and the weeks-worked equivalency method for all salaried employees.
In addition, employers may change the
method for calculating employees’ hours
of service for each taxable year.
As explained in Notice 2010–44, the
number of an employer’s FTEs is determined by dividing the total hours of service (but not more than 2,080 hours of service for any employee) by 2,080 hours.
See § 45R(d)(2). The result, if not a whole
number, is then rounded to the next lowest
whole number. However, if, after dividing the total hours of service by 2,080, the
resulting number is less than one, the employer rounds up to one FTE.
D. HSAs and Self-Insured Plans, including
HRAs and FSAs, are not Qualifying
Arrangements
An employer’s premium payments are
not taken into account for purposes of the
§ 45R credit unless they are paid for health
insurance coverage under a qualifying
arrangement. A qualifying arrangement
is an arrangement under which the employer pays premiums for each employee
enrolled in health insurance coverage offered by the employer in an amount equal
to a uniform percentage (not less than 50
percent) of the premium cost of the coverage. Under § 45R(g)(2)(B), for years
prior to 2014, health insurance coverage
for purposes of the credit is defined in
§ 9832(b)(1). Among the requirements of
§ 9832(b)(1) is that the coverage be offered by a health insurance issuer. A health

December 20, 2010

insurance issuer is defined in § 9832(b)(2)
as an entity licensed to engage in the business of insurance in a State and which
is subject to State law regulating insurance. See § 9832(b)(1) and section II.G
of Notice 2010–44. Thus, an employer’s
self-insured plan is not health insurance
coverage for purposes of the credit and any
employer contribution to such coverage is
not a qualifying arrangement for purposes
of § 45R.
Because Health Reimbursement Arrangements (HRAs) and health Flexible
Spending Arrangements (health FSAs)
are self-insured plans, these arrangements
are not health insurance coverage. Health
Savings Accounts (HSAs) (defined in
§ 223(d)(1)) are also not health insurance
coverage. Thus, employer contributions
to HRAs, health FSAs, or HSAs are not
taken into account for purposes of the
§ 45R credit.
E. Multiemployer Health and Welfare
Plans Providing Health Insurance
Coverage
For purposes of the § 45R credit, contributions by an employer to a multiemployer plan that are used to pay premiums
for health insurance coverage for employees covered by the multiemployer plan are
treated as payment of health insurance premiums by the employer. Moreover, if 100
percent of the cost of coverage under the
multiemployer plan is paid from nonelective employer contributions, and not by
employees, each employer in the multiemployer plan is considered to be contributing a uniform percentage of 100 percent of
the premium on behalf of each employee
covered by the plan. Accordingly, an employer that is otherwise an eligible small
employer and that contributes to a multiemployer plan that provides for insured
health care coverage does not fail to satisfy the requirements for the § 45R credit
merely because the insurance premiums
are paid by the plan and not directly paid
by the employer. In addition, the employer
does not fail to be considered to be contributing a uniform percentage of the premium for each employee if 100 percent of
the cost of coverage for all employees covered by the plan is paid through employer
nonelective contributions. However, selfinsured health coverage provided through
a multiemployer plan is not health insur-

859

ance coverage provided under a qualifying
arrangement under § 45R.
Multiemployer plans may provide welfare-type benefits in addition to health insurance, such as life insurance or short- or
long-term disability benefits. Only the employer contributions to the multiemployer
plan that are used to purchase health insurance for an employee are permitted to
be taken into account in determining premium payments by the employer under
§ 45R. Thus, if amounts are contributed
to a multiemployer plan for health insurance coverage and also for other benefits,
the employer must allocate contributions
among the benefits provided, and only the
amount allocable to health insurance premiums applies in calculating the § 45R
credit. An employer contributing to a multiemployer plan is permitted to rely on information provided by the plan to determine the amount of its contribution that is
used to purchase health insurance.
F. Qualifying Arrangements – Church
Welfare Benefit Plans
As noted above, for taxable years beginning prior to 2014, health insurance
coverage for purposes of the credit means
benefits consisting of medical care offered by a health insurance issuer, which
is an entity licensed to engage in the business of insurance in a State, and which
is subject to State law regulating insurance. See §§ 9832(b)(1) and 9832(b)(2).
The Church Plan Parity and Entanglement
Prevention Act of 1999 (CPPEPA), Pub.
L. No. 106–244, clarifies the status of
church welfare benefit plans providing
medical benefits in the context of State
insurance laws. Section 2(d) of CPPEPA
provides that “[n]otwithstanding any other
provision of this section, for purposes of
enforcing provisions of State insurance
laws that apply to a church plan that is
a welfare plan, the church plan shall be
subject to State enforcement as if the
church plan were an insurer licensed by
the State.” Thus, under § 2(d) of CPPEPA,
a church welfare benefit plan is subject to
State insurance law enforcement as if it
were licensed as an insurance company.
Section 2(e) of the CPPEPA provides that
§ 2 generally shall not be construed as
recharacterizing the status, or modifying
or affecting the rights, of any plan participant or beneficiary.

2010–51 I.R.B.

Pursuant to this notice, because a
church welfare benefit plan is subject to
State insurance law enforcement as if it
were licensed under State law, it will be
treated as satisfying the requirements for
health insurance coverage for purposes
of the § 45R credit. Therefore, for these
purposes, an arrangement under which
a small church employer pays premiums
for employees who receive medical care
provided through a church welfare benefit plan may be a qualifying arrangement
and a small church employer paying for
employees’ medical coverage under such
a plan may be a tax-exempt eligible small
employer. This treatment of church plan
coverage as health insurance coverage applies solely for purposes of § 45R, which
applies to the tax treatment of the employer but does not affect the rights of plan
participants and beneficiaries.
G. Uniformity Requirement
To receive the tax credit, an eligible
small employer must pay a uniform percentage (not less than 50 percent) of the
premium for each employee enrolled in
health insurance coverage offered by the
employer. See § 45R(d)(4). Section V of
Notice 2010–44 provides transition relief
in applying the uniformity requirement for
taxable years beginning in 2010. This section provides rules for applying the uniformity requirement in taxable years beginning after December 31, 2009 and prior
to 2014. For taxable years beginning in
2010, an employer may satisfy the uniformity requirement either by meeting the requirements of this section or by meeting
the requirements of Section V of Notice
2010–44.
1. Terminology Used in this Notice
For purposes of this notice:
(a) Each benefits package is considered
a separate health insurance plan. For example, an employer offers a single health
insurance plan if the employer makes only
one benefits package available to its employees.
(b) A health insurer that charges a uniform premium for each of the employer’s
employees or that charges a single aggregate premium for the group of covered employees that the employer may then divide
by the number of covered employees to de-

2010–51 I.R.B.

termine the uniform premium is referred to
as using “composite billing.”
(c) A health insurer that lists a separate
premium for each employee based on the
age of the employee or other factors is referred to as using “list billing.”
(d) A “tier” of coverage is coverage under a benefits package that varies only by
the number of individuals covered. For
example, self-only coverage, self plus one
coverage, and family coverage would constitute three separate tiers of coverage.
(e) The “employer-computed composite rate” for a tier of coverage is the average rate determined by adding the premiums for that tier of coverage for all employees eligible to participate in the employer’s health insurance plan (whether or
not they actually receive coverage under
the plan or under that tier of coverage) and
dividing by the total number of such eligible employees.
2. Employers Offering One Plan. An
employer that offers a single health insurance plan will satisfy the uniformity requirement of section 45R if it satisfies the
requirements of this subsection G.2. An
employer whose health insurer uses composite billing must satisfy the requirements
of paragraph (a) of this subsection G.2
with respect to self-only coverage under
the plan. An employer whose health insurer uses list billing must satisfy the requirements of paragraph (c) of this subsection G.2 with respect to self-only coverage under the plan. If an employer offers a
more expensive tier of coverage than single coverage, it must also satisfy paragraph
(b) of this subsection G.2 with respect to
each such more expensive tier if its insurer
uses composite billing and paragraph (d)
of this subsection G.2 if its insurer uses list
billing.
(a) Employers offering one plan -Selfonly coverage — composite billing. An
employer satisfies the requirements of this
paragraph (a) if it pays the same amount
toward the premium for each employee receiving self-only coverage under the plan,
so long as that amount is equal to at least
50 percent of the self-only premium.
(b) Employers offering one plan -other
tiers of coverage — composite billing. If
an employer offers a tier of coverage that
is more expensive than self-only coverage,
the employer satisfies the requirements of
this paragraph (b) if it pays an amount for
each employee enrolled in that more ex-

860

pensive tier of coverage that is the same for
all employees and that is no less than the
amount that the employer would have contributed toward self-only coverage for that
employee. Alternatively, an employer that
offers a tier of coverage that is more expensive than self-only coverage may satisfy the requirements of this paragraph (b)
by meeting the requirements of paragraph
(a) of this subsection G.2 for each tier of
coverage that it offers.
(c) Employers offering one plan -selfonly coverage — list billing. An employer
satisfies the requirements of this paragraph
(c) if the employer either: (i) pays toward
the premium an amount equal to a uniform
percentage (not less than 50 percent) of the
premium charged for each employee or (ii)
converts the individual premiums for selfonly coverage into an employer-computed
composite rate for self-only coverage, and,
if an employee contribution is required,
each employee who receives coverage under the plan pays a uniform amount toward the self-only premium that is no more
than 50 percent of the employer-computed
composite rate for self-only coverage.
(d) Employers offering one plan -other
tiers of coverage — list billing. If an
employer offers a tier of coverage that is
more expensive than self-only coverage,
the employer satisfies the requirements of
this paragraph (d) by paying toward the
premium for each employee covered under that tier of coverage an amount equal
to the amount that the employer would
have contributed with respect to that employee for self-only coverage, calculated
either based upon the actual premium that
would have been charged by the insurer
for that employee for self-only coverage or
based upon the employer-computed composite rate for self-only coverage. Alternatively, an employer that offers a tier of coverage that is more expensive than self-only
coverage may satisfy the requirements of
this paragraph (d) by meeting the requirements of paragraph (b) of this subsection
G.2 for each tier of coverage that it offers and substituting the employer-computed composite rate for that tier of coverage for the employer-computed composite
rate for self-only coverage.
3. Employers Offering More than One
Plan. If an employer offers more than one
health insurance plan (i.e., more than one
benefit package), the employer may satisfy

December 20, 2010

the uniformity requirement in either of two
ways:
(a) The employer’s payments toward
the premium with respect to each plan for
which the employer is claiming the credit
satisfy subsection G.2 on a plan-by-plan
basis. The amounts or percentages of premium paid by the employer for each plan
need not be identical, so long as the payments with respect to each plan satisfy subsection G.2, or
(b) If the requirements of subsection
G.4 are satisfied, the employer may designate a “reference plan” and make employer
contributions in accordance with the following requirements:
(i) The employer determines a level of
employer contributions for each employee
such that, if all eligible employees enrolled
in the reference plan, the contributions
would satisfy subsection G.2.
(ii) The employer allows each employee to apply the amount determined
under (i) of this paragraph (b) either toward the reference plan or toward the cost
of coverage under any of the other available plans.
4. Anti-abuse rule for employers offering more than one plan and using reference
plan. The requirements of this subsection
G.4 are satisfied if the self-only composite rate for the reference plan is at least
66 percent of the self-only composite rate
for each non-reference plan with respect to
which the employer claims the credit. For
purposes of this paragraph, the self-only
composite rate is, in the case of a plan with
composite billing, the rate actually charged
by the health insurance issuer for self-only
coverage, and, in the case of a plan with list
billing, the employer-computed composite
rate for self-only coverage.
Example 1. (i) In 2011, Employer offers one
health insurance plan, Plan A. The premiums for Plan
A are $5,000 per year for self-only coverage, and
$10,000 for family coverage. Employees can elect
self-only or family coverage under Plan A.
(ii) Employer pays $3,000 (60% of the premium)
toward self-only coverage under Plan A and $6,000
(60% of the premium) toward family coverage under
Plan A.
(iii) Employer’s contributions of 60% of the premium for each tier of coverage satisfy the uniformity
requirement in § 45R(d)(4).
Example 2. (i) Same facts as Example 1, except
that Employer pays $3,000 (60% of the premium)
for each employee electing self-only coverage under
Plan A and pays $3,000 (30% of the premium) for
each employee electing family coverage under Plan
A.

December 20, 2010

(ii) Employer’s contributions of 60% of the premium toward self-only coverage and the same dollar
amount toward the premium for family coverage satisfy the uniformity requirement in § 45R(d)(4).
Example 3. (i) In 2011, Employer offers two
health insurance plans, Plan A and Plan B, both of
which use composite billing. The premiums for Plan
A are $5,000 per year for self-only coverage and
$10,000 for family coverage. The premiums for Plan
B are $7,000 per year for self-only coverage and
$13,000 for family coverage. Employees can elect
self-only or family coverage under either Plan A or
Plan B.
(ii) Employer pays $3,000 (60% of the premium)
for each employee electing self-only coverage under
Plan A, $3,000 (30% of the premium) for each employee electing family coverage under Plan A, $3,500
(50% of the premium) for each employee electing
self-only coverage under Plan B, and $3,500 (27% of
the premium) for each employee electing family coverage under Plan B.
(ii) Employer’s contributions of 60% of the premiums for self-only coverage and the same dollar
amounts toward the premium for family coverage under Plan A, and of 50% of the premium for self-only
of coverage and the same dollar amount toward the
premium for family coverage under Plan B, satisfy
the uniformity rule on a plan-by-plan basis; therefore
the employer’s contributions to both plans satisfy the
uniformity requirement in § 45R(d)(4).
Example 4. (i) Same facts as Example 3, except that Employer designates Plan A as the reference
plan. Employer pays $2,500 (50% of the premium)
for each employee electing self-only coverage under
Plan A and pays $2,500 of the premium for each employee electing family coverage under Plan A or either self-only or family coverage under Plan B.
(iii) The self-only composite rate for Plan A
($5,000) is greater than 66% of the self-only composite rate for Plan B ($7,000). ($5,000 ÷ $7,000 =
71%).
(iv) Employer’s contribution of $2,500 toward
the premium of each employee enrolled under Plan
A or Plan B satisfies the uniformity requirement in
§ 45R(d)(4).
Example 5. (i) Same facts as Example 4, except
that the self-only composite rate for Plan B is $8,000.
(ii) The self-only composite rate for Plan A
($5,000) is less than 66% of the self-only composite
rate for Plan B ($8,000). ($5,000 ÷ $8,000 = 63%).
Accordingly, Employer may not designate Plan A
as the reference plan. The Employer’s contribution
of $2,500 toward the premium of each employee
enrolled under Plan B fails to satisfy the uniformity
requirement in § 45R(d)(4) and the Employer is not
eligible for a credit with respect to the premiums paid
for Plan B. However, the Employer’s contribution
of $2,500 toward the premium of each employee
enrolled under Plan A satisfies the uniformity requirement in § 45R(d)(4) and, accordingly, if the
other requirements of section 45R are satisfied, the
Employer may receive a credit with respect to its
contributions to Plan A.
Example 6. (i) For the 2011 taxable year, Employer receives a list billing premium quote from
Health Insurance Issuer W for health insurance coverage for each of Employer’s four employees.
(ii) For Employee L, age 20, the self-only premium is $3,000 per year, and the family premium is

861

$8,000. For Employees M, N and O, each age, 40, the
self-only premium is $5,000 per year and the family
premium is $10,000.
(iii) The total self-only premium for the four employees is $18,000 ($3,000 + (3 x $5,000)). Employer
calculates a employer-computed composite self-only
rate of $4,500 ($18,000 ÷ 4).
(iii) Employer offers to make contributions such
that each employee would need to pay $2,000 of the
premium for self-only coverage. Under this arrangement, Employer would contribute $1,000 toward selfonly coverage for L and $3,000 toward self-only coverage for M, N, and O. In the event an employee
elects family coverage, Employer would make the
same contribution ($1,000 for L or $3,000 for M, N,
or O) toward the family premium.
(v) Employer satisfies the uniformity requirement
in § 45R(d)(4), because it offers and makes contributions based on an employer-calculated composite
self-only rate such that, to receive self-only coverage,
each employee must pay a uniform amount which is
not more than 50 percent of the composite rate, and
it allows employees to use the same employer contributions toward family coverage.
Example 7. (i) Same facts as Example 6, except
that Employer calculates a employer-computed composite family rate of $9,500 (($8,000 + (3 x $10,000))
÷ 4) and requires each employee to pay $4,000 of the
premium for family coverage.
(ii) Employer satisfies the uniformity requirement
in § 45R(d)(4), because it offers and makes contributions based on a calculated self-only and family rate
such that, to receive either self-only or family coverage, each employee must pay a uniform amount
which is not more than 50 percent of the composite
rate for coverage of that tier.
Example 8. (i) Same facts as Example 6, except
that Employer also receives a list billing premium
quote from Health Insurance Issuer X for health insurance coverage for each of Employer’s four employees, in addition to the list billing premium quote from
Health Insurance Issuer W.
(ii) Health Insurance Issuer X’s quote for Employee L, age 20, is $4,000 per year for self-only coverage or $12,000 per year for family coverage. For
Employees M, N and O, each age 40, the premium is
$7,000 per year for self-only coverage or $15,000 per
year for family coverage.
(iii) The total self-only premium under Plan X is
$25,000 ($4,000 + (3 x $7,000). The employer-computed composite self-only rate is $6,250 ($25,000 ÷
4).
(iv) Employer designates Health Insurance Issuer
W’s health care coverage as the reference plan.
(v) Employer offers to make contributions based
on the employer-calculated composite premium for
the reference plan (Plan W) such that each employee
has to contribute $2,000 to receive self-only coverage
through Plan W. Under this arrangement, Employer
would contribute $1,000 toward self-only coverage
for L and $3,000 toward self-only coverage for M, N,
and O. In the event an employee elects family coverage through Plan W or either self-only or family
coverage through Plan X, Employer would make the
same contribution ($1,000 for L or $3,000 for M, N,
or O) toward that coverage.
(vi) The self-only composite rate for Plan W
($4,500) is at least 66% of the self-only composite
rate for Plan X ($6,250). ($4,500 ÷ $6,250 = 72%).

2010–51 I.R.B.

(vii) Employer satisfies the uniformity requirement in § 45R(d)(4), because it offers and makes contributions based on the employer-calculated composite self-only premium for the Plan W reference plan
such that, in order to receive self-only coverage, each
employee must pay a uniform amount which is not
more than 50 percent of the self-only composite premium of the reference plan; it allows employees to
use the same employer contributions toward family
coverage in the reference plan or coverage through
another plans; and the self-only composite rate for the
reference plan is at least 66% of the self-only composite rate for the non-reference plan.

Section 45R does not impose a coverage requirement (although, other provisions of the Code, such as § 105(h),
may impose coverage requirements on the
health plan).
IV. ISSUES RELATING TO
CALCULATING THE CREDIT
A. Small Group Market — Employees in
Multiple States
Under § 45R(b)(2), the credit is limited by the average premium for the small
group market in the State (or area within
the State) in which the employee enrolls
for coverage. See Rev. Rul. 2010–13,
2010–21 I.R.B. 691, for average State premiums for the taxable year beginning after December 31, 2009. If an employer
has employees in multiple States, the employer applies the average premium for the
small group market in the State (or area
within the State) separately for each employee using the average State premium
for the State in which the employee works.

employee takes. This is not affected by
whether the employer’s contribution for
that employee is determined with reference to the self-only plan, or whether an
employer satisfies the uniformity requirement in § 45R(d)(4) by paying an amount
equal to at least 50 percent of the premium
for self-only coverage.

Funding Relief For
Multiemployer Defined Benefit
Plans Under PRA 2010

Example 9. (i) In 2011, Employer offers one
health insurance plan, Plan X. The premiums for Plan
X are $4,000 per year for self-only coverage, and
$6,000 for family coverage.
(ii) Employer pays 50% of the premiums ($2,000)
for each employee electing self-only coverage and
pays $2,000 for each employee electing family coverage.
(iii) $2,000 is 50% of the premium for self-only
coverage and 33% of the premium for family coverage.
(iv) For employees electing self-only coverage, the limitation to the average State premium
for the small group market is 50% of the premium
for self-only coverage, and for employees electing
family coverage, the limitation to the average State
premium for the small group market is 33% of the
premium for family coverage.

This notice provides guidance in the
form of questions and answers for sponsors of multiemployer defined benefit
plans with respect to the special funding rules under § 431(b)(8), as added by
section 211(a)(2) of the Preservation of
Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA
2010), Pub. L. No. 111–192.

C. Taxpayers With Fiscal Taxable Years
Section 45R is effective for taxable
years beginning after December 31, 2009.
If a taxpayer is a calendar year taxpayer,
the § 45R credit first applies for the taxable year beginning on January 1, 2010
and ending on December 31, 2010. If the
taxpayer is a fiscal year taxpayer with a
taxable year beginning, for example, on
July 1, 2010, the § 45R credit first applies
for the taxable year beginning on July 1,
2010 and ending on June 30, 2011.

B. Application of Average Premium Cap

EFFECT ON OTHER DOCUMENTS

Under § 45R(b)(2) and 45R(g)(2)(c),
the amount of an employer’s premium payments that are taken into account in calculating the credit is limited to the premium
payments the employer would have made
under the same arrangement if the average premium for the small group market
in the State (or an area within the State) in
which the employer offers coverage were
substituted for the actual premium. See
Notice 2010–44 for additional detail. Rev.
Rul. 2010–13, 2010–21 I.R.B. 691 lists the
applicable average premium for self-only
and family plans in the small group market
in each State for the 2010 taxable year. For
purposes of this calculation, the cap that
is used for each employee (be it self-only
or family) depends on the coverage the

Notice 2010–44, 2010–22 I.R.B. 717, is
amplified.

2010–51 I.R.B.

EFFECTIVE DATE
Section 45R is effective for taxable
years beginning after December 31, 2009.
DRAFTING INFORMATION
The principal author of this notice is
Mireille Khoury of the Office of Division
Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this notice, contact Stephanie Caden at (202) 622–6080
(not a toll-free call).

862

Notice 2010–83
I. PURPOSE

II. BACKGROUND
Section 412 contains minimum funding rules that generally apply to pension
plans. Section 431 sets forth the funding rules that apply specifically to multiemployer defined benefit plans. Section
432 sets forth additional rules that apply to
multiemployer plans in effect on July 16,
2006, that are in endangered or critical status.
Section 431 provides rules for determining, based on charges and credits to
the plan’s funding standard account, the
minimum contribution that must be made
to a multiemployer defined benefit plan in
order to satisfy the funding requirements
under § 412. Under § 431(b)(2)(B)(iii)
and (b)(3)(B)(ii), net experience losses and
gains are amortized by charges (in the case
of losses) and credits (in the case of gains)
in equal annual installments over 15 plan
years.
Section 431(b)(8), added to the Code
by section 211(a)(2) of PRA 2010, provides two special funding rules available
to multiemployer plans, a special amortization rule in § 431(b)(8)(A) and a special
asset valuation rule in § 431(b)(8)(B).
Section 431(b)(8)(A) provides a special
amortization rule for certain net investment losses in the case of a multiemployer
plan that meets a solvency test. The special
rule applies to the portion of the plan’s experience loss or gain for a plan year attributable to net investment losses (if any) incurred in either or both of the first two plan
years ending after August 31, 2008 (an eligible loss year). This portion of the experience loss or gain may be treated as an item

December 20, 2010