Supporting Statement for REG-118412-10-2

SUPPORTING STATEMENT
1. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION
Section 1251 of the Patient Protection and Affordable Care Act, Public Law 111-148, provides that certain plans and
health insurance coverage in existence as of March 23, 2010, known as grandfathered health plans, are not required to
comply with certain statutory provisions in the Act. Treas. Reg. §54.9815-1215T requires a grandfathered health plan
to include a statement in any plan material provided to participants or beneficiaries stating the plan’s intent to be a
grandfathered health plan within the meaning of §1251 of the Act. To maintain status as a grandfathered health plan,
the plan or issuer must maintain records documenting the terms of the plan or health insurance coverage in effect on
March 23, 2010 and any other documents that are necessary to verify, explain or clarify status as a grandfathered
health plan. The plan or issuer must make such records available for examination.

2. USE OF DATA
Section 1251 contains a third party disclosure requirement. Participants and beneficiaries may not know that their
health plan or health insurance coverage is not required to comply with certain health coverage reforms under the
Affordable Care Act. Individuals reading the statement will be informed that a grandfathered health plan is not required
to comply with certain requirements of the Act. The recordkeeping requirement, will allow a participant, beneficiary or
Federal or state official to inspect plan documents to verify that a plan or health insurance coverage is a grandfathered
health plan.

3. USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN
Plans and issuers may satisfy the disclosure component of this requirement by electronic means if they comply with
applicable electronic disclosure requirements. It is estimated that 38% of the notices will be sent electronically.

4. EFFORTS TO IDENTIFY DUPLICATION
Model language can be incorporated into existing plan documents, such as a summary plan description. The
Departments assume that most of the documents required to be retained to satisfy the recordkeeping requirement are
already retained by plans for tax purposes, to satisfy ERISA’s record retention and statute of limitations requirements,
and for other business reasons.

5. METHODS TO MINIMIZE BURDEN ON SMALL BUSINESSES OR OTHER SMALL ENTITIES
The regulations provide model language to be incorporated into existing plan documents. After plans satisfy the group
health plan disclosure requirement in 2011, any additional burden should be de minimis if the plan wants to maintain
status as a grandfathered health plan in subsequent years.

6. CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL PROGRAMS OR
POLICY ACTIVITIES
The statutory objective of providing notice to participants and beneficiaries that their health plan or health insurance
coverage is not required to comply with certain provisions of the Affordable Care Act would not be met without this level
of frequency.

Form 14029 (Rev. 4-2009) Catalog Number 51944B Page 4

Department of the Treasury–Internal Revenue Service

7. SPECIAL CIRCUMSTANCES REQUIRING DATA COLLECTION TO BE INCONSISTENT
WITH GUIDELINES IN 5 CFR 1320.5(d)(2)
Not applicable.

8. CONSULTATION WITH INDIVIDUALS OUTSIDE OF THE AGENCY ON AVAILABILITY
OF DATA, FREQUENCY OF COLLECTION, CLARITY OF INSTRUCTIONS AND FORMS,
AND DATA ELEMENTS
These temporary regulations will be published in the Federal Register, and provide the public a 60-day period in which
to review and provide public comments relating to any aspect of the proposed regulations.

9. EXPLANATION OF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO RESPONDENTS
Not applicable.

10. ASSURANCE OF CONFIDENTIALITY OF RESPONSES
Not applicable.

11. JUSTIFICATION OF SENSITIVE QUESTIONS
Not applicable.

12. ESTIMATED BURDEN OF INFORMATION COLLECTION
The Departments assume that 2,151,000 ERISA covered plans will need to notify 56,347,000 million policy holders of
their plan's grandfathered health plan status. The Departments estimate that meeting the disclosure requirement will
require time one minute of clerical time and two minutes of human resource professional time, resulting in a one-time
hours burden of approximately 108,000 hours. The recordkeeping burden will require five minutes of legal professional
time and ten minutes of clerical time, resulting in an hour burden of approximately 538,000 hours. This results in a
one-time hours burden of approximately 645,000 hours. This hours burden has been split in half between the two
agencies responsible for administering this requirement with respect to plans in the private sector -- IRS and the
Employee Benefits Security Administration -- assigning each of them a one-time hours burden of 323,000.

Form 14029 (Rev. 4-2009) Catalog Number 51944B

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Department of the Treasury–Internal Revenue Service

13. ESTIMATED TOTAL ANNUAL COST BURDEN TO RESPONDENTS
The Departments assume that only printing and material costs are associated with the disclosure requirement,
because the interim final regulations provide model language that can be incorporated into existing plan documents,
such as an SPD. THe Departments estimate that the notice will require one-sixth of a page, $0.05 per page printing
and material cost will be incurred, and that 38 percent of the notices will be delivered electronically. This results in a
cost burden of $291,000. EBSA and IRS are each assigned one-half of this amount, or $146,000.

14. ESTIMATED ANNUALIZED COST TO THE FEDERAL GOVERNMENT
Not applicable -- third party disclosure.

15. REASONS FOR CHANGE IN BURDEN
Not applicable, this is a new collection.

16. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION
Not applicable.

17. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS INAPPROPRIATE
We believe that displaying the OMB expiration date is inappropriate because it could cause confusion by leading
taxpayers to believe that the regulation sunsets as of the expiration date. Taxpayers are not likely to be aware that the
Service intends to request renewal of OMB approval and obtain a new expiration date before the old one expires.

18. EXCEPTIONS TO THE CERTIFICATION STATEMENT ON OMB PRA SUBMISSION FORM
Not applicable.

19. REASON FOR EMERGENCY SUBMISSION
This document contains interim final regulations implementing the rules for group health plans and health insurance
coverage in the group and individual markets under provisions of the Patient Protection and Affordable Care Act
regarding status as a grandfathered health plan. These interim final regulations are effective on the date of release.
To provide taxpayers the proper amount of time to understand, comply, notify the appropriate recipients, and comment
on these interim regulations we are requesting emergency approval. We have incorporated a 60-day comment in the
document for taxpayers to voice their questions.

Form 14029 (Rev. 4-2009) Catalog Number 51944B

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Department of the Treasury–Internal Revenue Service