Rules and Regulations. Final rule

Agency: Federal Trade Commission
Action: Final rule
Citation: FR Doc. 06-6587 · 16 CFR 310

Summary

The Federal Trade Commission (the “Commission” or “FTC”) is issuing this Final Rule to amend section 310.8 (“the Final Amended Fee Rule”) of the FTC's Telemarketing Sales Rule (“TSR”) by revising the fees charged to entities accessing the National Do Not Call Registry (“the Registry”).

Dates

Effective Date: Revised section 310.8 will become effective September 1, 2006.

Supplementary Information

The amended rule increases the annual fee for access to the Registry for each area code of data to $62 per area code, or $31 per area code of data during the second six months of an entity's annual subscription period. The maximum amount that would be charged to any single entity for accessing 280 area codes of data or more is increased to $17,050. In addition, the amended rule retains the provisions regarding free access by “exempt” organizations, as well as free access to the first five area codes of data by all entities. Statement of Basis And Purpose I. Background On December 18, 2002, the Commission issued final amendments to the Telemarketing Sales Rule, which, inter alia, established the National Do Not Call Registry, permitting consumers to register, via either a toll-free telephone number or the Internet, their preference not to receive certain telemarketing calls (“Amended TSR”). 1 Under the Amended TSR, most telemarketers are required to refrain from calling consumers who have placed their numbers on the Registry. 2 Telemarketers must periodically access the Registry to remove from their telemarketing lists the telephone numbers of those consumers who have registered. 3 1 68 FR 4580 (Jan. 29, 2003). 2 16 CFR 310.4(b)(1)(iii)(B). 3 16 CFR 310.4(b)(3)(iv). The Amended TSR requires telemarketers to access the Registry at least once every 31 days, effective January 1, 2005. See 69 FR 16368 (Mar. 29, 2004). Shortly after issuance of the Amended TSR, Congress passed The Do-Not-Call Implementation Act (“the Implementation Act”). 4 The Implementation Act gave the Commission the specific authority to “promulgate regulations establishing fees sufficient to implement and enforce the provisions relating to the ‘do-not-call' registry of the [TSR]. * * * No amounts shall be collected as fees pursuant to this section for such fiscal years except to the extent provided in advance in appropriations Acts. Such amounts shall be available * * * to offset the costs of activities and services related to the implementation and enforcement of the [TSR], and other activities resulting from such implementation and enforcement.” 5 4 Pub. L. 108-10, 117 Stat. 557 (2003). 5 Id. On July 29, 2003, pursuant to the Implementation Act, Telemarketing Fraud and Abuse Prevention Act (“the Telemarketing Act”), 6 and the Consolidated Appropriations Resolution, 2003, 7 the Commission issued a Final Rule further amending the TSR to impose fees on entities accessing the National Do Not Call Registry (“the Original Fee Rule”). 8 Those fees were based on the FTC's best estimate of the number of entities that would be required to pay for access to the Registry, and the need to raise $18.1 million in Fiscal Year 2003 to cover the costs associated with the implementation and enforcement of the “do-not-call” provisions of the Amended TSR. The Commission determined that the fee structure would be based on the number of different area codes of data that an entity wished to access annually. The Original Fee Rule established an annual fee of $25 for each area code of data requested from the Registry, with the first five area codes of data provided at no cost. 9 The maximum annual fee was capped at $7,375 for entities accessing 300 area codes of data or more. 10 6 15 U.S.C. 6101-08. 7 Pub. L. 108-7, 117 Stat. 11 (2003). 8 68 FR 45134 (July 31, 2003). 9 Once an entity requested access to area codes of data in the Registry, it could access those area codes as often as it deemed appropriate for one year (defined as its “annual period”). If, during the course of its annual period, an entity needed to access data from more area codes than those initially selected, it would be required to pay for access to those additional area codes. For purposes of these additional payments, the annual period was divided into two semi-annual periods of six-months each. Obtaining additional data from the Registry during the first semi-annual, six month period required a payment of $25 for each new area code. During the second semi-annual, six-month period, the charge for obtaining data from each new area code requested during that six-month period was $15. These payments would provide the entity access to those additional area codes of data for the remainder of its annual period. 10 68 FR at 45141. On July 30, 2004, pursuant to the Implementation Act, the Telemarketing Act, and the Consolidated Appropriations Act, 2004, 11 the Commission issued a revised Final Rule further amending the TSR and increasing fees on entities accessing the National Do Not Call Registry (“the 2004 Fee Rule”). 12 Those fees were based on the FTC's experience through June 1, 2004, its best estimate of the number of entities that would be required to pay for access to the Registry, and the need to raise $18 million in Fiscal Year 2004 to cover the costs associated with the implementation and enforcement of the “do-not-call” provisions of the Amended TSR. The Commission determined that the fee structure would continue to be based on the number of different area codes of data that an entity wished to access annually. The 2004 Fee Rule established an annual fee of $40 for each area code of data requested from the Registry, with the first five area codes of data provided at no cost. 13 The maximum annual fee was capped at $11,000 for entities accessing 280 area codes of data or more. 14 11 Pub. L. 108-199, 118 Stat. 3 (2004). 12 69 FR 45580 (July 30, 2004). 13 Id. at 45584. The 2004 Fee Rule had the same fee structure as the Original Fee Rule. However, fees were increased from $25 to $40 per area code for the annual period and from $15 to $20 per area code for the second six-month period. 14 Id. On July 27, 2005, pursuant to the Implementation Act, the Telemarketing Act, and the Consolidated Appropriations Act, 2005, 15 the Commission issued a revised Final Rule further amending the TSR and increasing fees on entities accessing the National Do Not Call Registry (“the 2005 Fee Rule”). 16 These fees were based on the FTC's experience through June 1, 2005, its best estimate of the number of entities that would be required to pay for access to the Registry, and the need to raise $21.9 million in Fiscal Year 2005 to cover the costs associated with the implementation and enforcement of the “do-not-call” provisions of the Amended TSR. The Commission again determined that the fee structure would be based on the number of different area codes of data that an entity wished to access annually. The 2005 Fee Rule established an annual fee of $56 for each area code of data requested from the Registry, with the first five area codes of data provided at no cost. 17 The maximum annual fee was capped at $15,400 for entities accessing 280 area codes of data or more. 18 15 Pub. L. 108-447, 118 Stat. 2809 (2004). 16 70 FR 43273 (July 27, 2005). 17 Id. at 43275. The 2005 Fee Rule had the same fee structure as the 2004 Fee Rule, except that the fees were increased from $40 to $56 per area code for the annual period and from $20 to $28 per area code for the second six-month period. 18 Id. In the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006 (“the 2006 Appropriations Act”), 19 Congress directed the FTC to collect offsetting fees in the amount of $23 million in Fiscal Year 2006 to implement and enforce the Amended TSR. 20 Pursuant to the 2006 Appropriations Act and the Implementation Act, as well as the Telemarketing Act, the FTC issued a Notice of Proposed Rulemaking to amend the fees charged to entities accessing the Registry (“the 2006 Fee Rule NPR”). 21 19 Pub. L. 109-108, 119 Stat. 2290 (2005). 20 Id. at 2330. 21 71 FR 25512 (May 1, 2006). In the 2006 Fee Rule NPR, the Commission proposed revising the fees for access to the Registry in order to raise $23 million to offset costs the FTC expects to incur in this Fiscal Year for purposes related to implementing and enforcing the “do-not-call” provisions of the Amended TSR. Based on the number of entities that had accessed the Registry through the end of February 2006, the Commission proposed revising the fees to $62 annually and $31 during the second six months of an entity's annual subscription period for each area code of data requested from the Registry, with the first five area codes of data provided at no cost. As a consequence of the increase in the per-area-code charge, the maximum annual fee would increase to $17,050 for entities accessing 280 area codes of data or more. 22 22 Id. at 25514. In the 2006 Fee Rule NPR, the Commission sought comment on the following issues relating to the proposed amendment: (1) Whether entities accessing the Registry should continue to obtain the first five area codes of data for free; 23 23 Id. at 25514-5. (2) Whether “exempt” organizations should continue to be provided with free access to the Registry; 24 24 Id. at 25515. The 2006 Fee Rule NPR, the 2005 Fee Rule, the 2004 Fee Rule, and the Original Fee Rule stated that “there shall be no charge to any person engaging in or causing others to engage in outbound telephone calls to consumers and who is accessing the National Do Not Call Registry without being required to under this Rule, 47 CFR 64.1200, or any other federal law.” 16 CFR 310.8(c). Such “exempt” organizations include entities that engage in outbound telephone calls to consumers to induce charitable contributions, for political fund raising, or to conduct surveys. They also include entities engaged solely in calls to persons with whom they have an established business relationship or from whom they have obtained express written agreement to call, pursuant to 16 CFR 310.4(b)(1)(iii)(B)(i) or (ii), and who do not access the National Registry for any other purpose. See 71 FR at 25514; 70 FR at 43275; 69 FR at 45585-6; and 68 FR at 45144. (3) The number and type of small businesses that may be subject to the revised fees; 25 and 25 71 FR at 25515. (4) Whether there are any significant alternatives that would further minimize the impact of the rule on small entities, consistent with the objectives of the Telemarketing Act, the 2006 Appropriations Act, the Implementation Act, and the Regulatory Flexibility Act. 26 26 Id. In response to the 2006 Fee Rule NPR, the Commission received twelve comments. 27 The amended rule, comments, and the basis for the Commission's decision on the various recommendations are analyzed in detail below. 27 A list of the commenters in this proceeding, and the acronyms used to identify each, is attached hereto as an appendix. Comments submitted in response to the 2006 Fee Rule NPR will be cited in this Notice as “[Acronym of Commenter] at [page number].” II. The Amended Rule Based on the 2006 Appropriations Act, the Implementation Act, and the Telemarketing Act, as well as its review of the record in this proceeding, and on its law enforcement experience in this area, the Commission has decided to modify the fees required under the TSR Fee Rule. Under the amended rule provisions adopted herein, the annual fee for accessing the Registry will increase from $56 per area code to $62 per area code, and from a maximum of $15,400 to $17,050 for access to 280 area codes of data or more. The fee for accessing area codes during the second six months of an entity's annual subscription period also will increase, from $28 to $31. Further, the Commission has decided to continue to provide all organizations with free access to the first five area codes of data, and has decided to continue to provide “exempt” organizations with free access to the Registry, as well. III. Discussion of Comments The Commission received twelve comments in response to the 2006 Fee Rule NPR. Of the twelve comments received, one comment was from a consumer who wanted to be added to the Registry. 28 Two comments were from consumers who supported the increase in fees. 29 The remaining nine comments were submitted by a mix of business and industry commenters, all of whom were opposed to the increase in fees, but who were divided on whether the Commission should eliminate the number of free area codes provided. In addressing the specific issues posed by the Commission, the commenters submitted only limited data or information that differed from that submitted in connection with earlier fee rulemakings. Instead, the comments primarily relied on information provided by the FTC as part of its 2006 Fee Rule NPR, and/or in previous rulemaking proceedings. Similarly, the primary arguments submitted in response to the 2006 Fee Rule NPR's proposal to raise fees have also been considered previously by the Commission. 28 See JJ at 1. 29 See BAS at 1, and S at 1. While most of the comments submitted represented views previously considered, some of the comments raised new points. For example, one commenter stated that the prohibition against entities cooperating and sharing the expense of subscribing to the Registry creates a burden for small businesses. 30 Still other commenters raised issues beyond the scope of this Notice, such as the impact of the “do-not-call” provisions of the Amended TSR on local economies, and criticism of the technical operation of the Registry. 31 30 See AN at 1. The Commission addressed the issue of entities sharing the cost of accessing the Registry in the Original Fee Rule. 68 FR at 45136-7. The Commission agreed with the FCC that allowing entities to share the information obtained from the Registry would threaten the financial support for maintaining the database. Id. at 45136. Moreover, as noted below, the Commission believes that providing all entities with access to five free area codes of data limits the burden placed on small businesses. 31 See SW at 1, DMA at 6. According to one commenter, telemarketers reported to the city of Branson, Missouri that because of the no-call lists fewer room nights and show tickets were purchased in 2005 than in 2002. SW at 1. On the technical front, another commenter stated that the Commission should remove telephone numbers from the Registry as soon as they are dropped or abandoned. DMA at 6. The commenter argued that when a telephone number is dropped or abandoned, it should be removed from the Registry promptly so that the new subscriber may receive telemarketing calls. Id. According to the commenter, this is the time when new subscribers are most interested in receiving calls regarding, for example, home alarm systems, home insurance, lawn care, and newspaper delivery. Id. The major themes that emerged from the record are summarized below. A. Five Free Area Codes of Data In the 2006 Fee Rule NPR, the Commission proposed, at least for the next annual period, to continue allowing all entities accessing the Registry to obtain the first five area codes of data for free. 32 The Commission proposed to continue allowing such free access in the Original Fee Rule, the 2004 Fee Rule, and the 2005 Fee Rule, “to limit the burden placed on small businesses that only require access to a small portion of the national registry.” 33 The Commission noted, as it has in the past, that such a fee structure was consistent with the mandate of the Regulatory Flexibility Act, 34 which requires that to the extent, if any, a rule is expected to have a significant economic impact on a substantial number of small entities, agencies should consider regulatory alternatives to minimize such impact. As stated in the prior fee rules, “the Commission continues to believe that providing access to five area codes of data for free is an appropriate compromise between the goals of equitably and adequately funding the national registry, on one hand, and providing appropriate relief for small businesses, on the other.” 35 In addition, requiring over 57,800 entities to pay a small fee for access to five or fewer area codes of data from the Registry would place a significant burden on the Registry, requiring the expenditure of even more resources to handle properly that additional traffic. 36 32 71 FR at 25514. 33 See 68 FR at 45140; 69 FR at 45582; and 70 FR at 43275. 34 5 U.S.C. 601. 35 See 68 FR at 45141; 69 FR at 45584; and 70 FR at 43275-6. 36 From May 2005 to June 2006, over 57,800 entities accessed five or fewer area codes of data. The Commission received four comments that addressed the issue of five free area codes of data. Three of the commenters agreed that defining a small business as one that accesses five area codes or less of data excludes certain small businesses that either operate in a large metropolitan area or whose business is not limited to a small geographic market area. 37 As one commenter put it: 37 NAR at 1-2, ATA at 6-7, and DMA at 5. [S]mall businesses * * * often have the need to call a limited number of consumers who reside in a variety of states and/or area codes beyond their primary five area code calling region * * * It is common for these small businesses to find themselves forced to pay for access to a number of additional area codes in order to research a single phone number in each area code. At the same time, a large company who relies heavily on telemarketing, and makes thousands of calls to consumers but limits these calls to within the five-code area, does not have to pay a fee. 38 38 NAR at 1-2. Another commenter pointed out that a large, publicly traded home product retailer in Colorado may access “the entire state of Colorado in preparation for a telemarketing campaign at no charge, while a truly small business operating in New York City may incur charges to access the fourteen area codes that comprise the State of New York, and this does not include the vicinal area codes of neighboring New Jersey and Connecticut.” 39 39 ATA at 7. The commenters, however, differed on how to solve the problem. Two of the commenters supported continuing to allow all entities access to five area codes of data at no cost. 40 DMA noted that the fact that small businesses are able to access up to five area codes of data at no cost encourages their compliance. 41 NADA stated that removing the five area code exemption would disproportionally impact small businesses. 42 The third commenter supported providing small businesses with free access to the entire Registry. 43 The commenter cited information from the Small Business Administration's Office of Advocacy, which claimed that “very small firms with fewer than 20 employees spend 60 percent more per employee than larger firms to comply with federal regulations.” 44 40 See DMA at 5, NADA at 1. 41 DMA at 5. 42 NADA at 1. 43 NAR at 2. NAR also opposes any reduction of the number of area codes provided at no cost. 44 NAR at 2. See also SW at 1 (arguing that the fee increase penalizes small businesses). As stated in the 2006 Fee Rule NPR, this alternative would require entities seeking an exemption from the fees to submit information, such as their annual revenues, to demonstrate that they meet the statutory threshold to be classified a small business and exempt from the fees. 71 FR at 25516. The fourth commenter proposed that the Commission impose a modest $200 flat fee on all entities that subscribe to five or fewer area codes of data in lieu of increasing the fees on all entities that access the Registry. 45 The commenter argued that allowing entities to obtain the first five area codes of data from the Registry for free is inequitable, as it unfairly benefits those who place the greatest burden on the Registry. 46 The commenter noted that while the number of entities that have accessed the Registry over the past two years has increased, the number of entities required to pay for access has decreased. 47 According to the commenter, “[t]his structure permits entities subscribing to five area codes to save $80 versus the $280 fee they would incur if they paid $56 per area code, thereby minimizing the effect of the regulation per the Regulatory Flexibility Act's mandate.” 48 Assuming that the same number of entities would access five or fewer area codes of data at no cost in Fiscal Year 2006, the commenter contends that by charging these entities a $200 flat fee, this alternative fee proposal will generate $11,660,000 in revenue from these entities alone. 49 45 ATA at 5. The commenter also recommended that all entities pay $200 for the first five area codes of data that they access. 46 Id. at 3. 47 Id. 48 Id. at 5 (emphasis in original). 49 Id. at 6. The commenter further points out that by charging entities that access more than five area codes $200 for the first five area codes of data they access, the Commission can raise an additional $1,300,000. After considering all of the comments submitted in this proceeding, the Commission has determined to retain the provision allowing entities to access up to five area codes of data at no cost. Although the Commission continues to recognize that only a small percentage of the total number of entities accessing the Registry pay for that access, these figures also illustrate the large number of businesses—many of them likely small businesses—that likely would be adversely affected by a change in the number of area codes of data provided at no cost. In fact, over 57,800 entities have accessed five or fewer area codes of data from the Registry. It is true that a large seller that operates solely within five area codes may access the Registry at no cost in preparation for a large telemarketing campaign. 50 However, the Commission continues to believe, as observed in prior fee rules, that most entities accessing five or fewer area codes of data—realtors, car dealers, community-based newspapers, and other small businesses—are precisely the types of businesses that the Regulatory Flexibility Act requires the FTC to consider when adopting regulations. 51 Moreover, the Commission again finds significant the information submitted by commenters discussing the disproportionate impact compliance with the “do-not-call” regulations may have on small businesses. In order to lessen that impact, the Commission believes that retaining the five free area code provision at least for the next annual period is appropriate. 50 See ATA at 7. 51 The comments submitted in response to the 2006 Fee Rule NPR do not offer any information or data to contradict this assertion. In fact, two of the commenters that represent these very entities support the provision allowing entities to access up to five area codes of data at no cost. See NAR at 1, and NADA at 1. The Commission does not believe that the alternatives suggested would be as effective in minimizing the impact of the “do-not-call” regulations on small businesses, and that these proposed alternatives may create undue burdens that the current system does not impose. For example, the suggestion to eliminate the number of area codes of data provided at no cost would result in tens of thousands of entities—that are likely small businesses—having to pay to access the Registry. While, to some, such a fee might seem modest, it nonetheless would represent an increase in costs to more than 57,800 entities, most of whom already may be disproportionately impacted by other costs of complying with the “do-not-call” regulations. In contrast, the suggestion to charge a flat fee of $200 on all entities that subscribe to five or fewer area codes of data actually would result in tens of thousands of entities that access less than four area codes of data paying proportionally more per area code for access than other entities. 52 Alternatively, the suggestion to base the fees on the actual size of the entity requesting access would, as noted in prior rulemakings, require all entities to submit sensitive data concerning annual income, number of employees, or other similar factors. It also would require the FTC to develop an entirely new system to gather that information, maintain it in a proper manner, and investigate those claims to ensure proper compliance. As the Commission has previously stated, such a system “would present greater administrative, technical, and legal costs and complexities than the Commission's current exemptive proposal, which does not require any proof or verification of that status.” 53 As a result, the Commission continues to believe that the most appropriate and effective method to minimize the impact of the Rule on small businesses is to provide access to a certain number of area codes of data at no cost. 52 The commenters offered no other alternative fee structures. 53 See 70 FR 43277, 69 FR at 45583. See also 68 FR at 16243 n.53. The comments also do not provide any new information to support a change in the number of area codes provided at no cost. Thus, the Commission does not believe that any change in the current level of five free area codes is necessary or appropriate. The Commission continues to recognize that reducing the number of free area codes would result in slightly lower fees charged to the entities that must pay for access. At the same time, however, as noted previously, such a change also would likely result in increased costs to thousands of small businesses. On the other hand, the Commission is not persuaded that it should increase the number of area codes provided at no cost, although it continues to recognize that some small businesses located in large metropolitan areas or those whose businesses are not limited to small geographic areas may need to make calls to more than five area codes. Obviously, increasing the number of area codes provided at no cost would decrease the pool of paying entities, and further increase the fees these entities must pay. As a result, the Commission continues to believe that allowing all entities to gain access to the first five area codes of data from the Registry at no cost is appropriate. B. Exempt Entity Access In the 2006 Fee Rule NPR, the Commission also proposed to continue allowing “exempt” organizations to obtain free access to the Registry. 54 The Commission stated its belief that any exempt entity, voluntarily accessing the Registry to avoid calling consumers who do not wish to receive telemarketing calls, should not be charged for such access. 55 Charging such entities access fees, when they are under no legal obligation to comply with the “do-not-call” requirements of the Amended TSR, may make them less likely to obtain access to the Registry in the future, resulting in an increase in unwanted calls to consumers. 56 54 71 FR at 25515. 55 Id. 56 Id. No comments directly addressed this issue. 57 Accordingly, the Commission continues to believe that if it charged exempt entities for access to the Registry, many, if not most, of those entities would no longer seek access. As a result, as noted in prior fee rules, registered consumers would receive an increase in the number of unwanted telephone calls. Exempt entities are, by definition, under no legal obligation to access the Registry. Many are outside the jurisdiction of the FTC. They are voluntarily accessing the Registry in order to avoid calling consumers whose telephone numbers are registered. They should be encouraged to continue doing so, rather than be charged a fee for their efforts. The Commission will, therefore, continue to allow such exempt entities to access the Registry at no cost, after they have completed the required certification. 57 As part of its alternative fee proposal referenced above, ATA stated that it “acknowledges the Commission's reluctance to impose access charges on exempt entities. Without commenting on the substance of this policy, ATA's proposal similarly avoids charging these entities for access to the [Registry]. However, future circumstances may dictate that these entities be charged at some point in time.” ATA at 5 n. 17. C. Imposition of the Fees and Use of the Funds While the business and industry member commenters disagreed on whether access to five area codes of data should continue to be provided at no cost, they were unanimous in their opposition to the increase in fees for access to the National Do Not Call Registry. 58 58 As noted above, two consumers supported the increase in fees. See BAS at 1, and S at 1. Generally, these commenters argued that it would be unfair to continue raising fees given the fee increases over the last few years. 59 One commenter noted that: 59 See TT at 1, NN at 1, AN at 1, ATA at 4-5, DMA at 2, and NAR at 1. The Commission initially indicated its belief that it would cost a few thousand dollars per telemarketer to obtain access to the national registry. By the time the Commission made the registry available, the cost for access had already increased to $7,250. Less than a year later, the Commission increased fees 68% to $11,000. The following year, the Commission increased fees by 40% to $15,400. Now yet again, the Commission proposes an 11% increase to $17,050. 60 60 See DMA at 2. See also AN at 1. Another commenter argued that the fees are already high enough given that areas are growing and adding new area codes. TT at 1. The commenter noted that “[o]ther than reflecting the increase in the annual congressional authorization from $21.9 million to $23 million, the Commission provides no justification for any increase in these fees.” 61 61 DMA at 2. In the 2006 Fee Rule NPR, the Commission analyzed information available at that time, and issued a proposal that reflected both the amount that needed to be raised, 62 along with the number of area codes that were projected to be purchased. As a result, the fees that were proposed in the 2006 Fee Rule NPR represented an increase over the fees adopted in the 2005 Fee Rule. The increase in the amount of funding required to cover the cost to implement and enforce the Registry, while a component of the fee increase, is not the only component. As in prior fee rule proceedings, another factor that influenced the increase proposed in the 2006 Fee Rule NPR was the number of area codes of data that were purchased the prior year by entities accessing the Registry. The fees that the Commission proposed in the 2006 Fee Rule NPR reflect both the amount of funds necessary to implement and enforce the Registry, as well as the number of area codes that the Commission assumes will be purchased by entities accessing the Registry, based on the Commission's current experience. 62 The Commission views the current Congressional authorization as an instruction regarding the fees to be collected. In addition, two commenters further argued that there is no justification for the fee increase given the costs and economies of scale associated with operating the Registry. 63 Another commenter was concerned “that fees are being used for telemarketing enforcement based on fraud or other violations of the TSR, where there may also be incidental violation of the registry.” 64 The commenter further contended that “[s]uch enforcement actions should not be funded by registry fees when they otherwise would have been funded from other enforcement budgets prior to the existence of the registry.” 65 The commenter also noted the Commission's statements regarding industry's high rate of compliance, and argued that it is unfair to continue increasing fees and imposing enforcement costs on the very organizations that are most compliant with the rules. 66 63 See DMA at 2-3, and AN at 1. One commenter points out that the Commission's 2003 contract with AT&T to establish and administer the database was $3.5 million. DMA at 3. 64 DMA at 3. 65 Id. 66 Id. at 4. DMA further stated their belief that “it is inappropriate for entities that comply with the law to bear the enforcement costs of the FTC. If the do-not-call registry is as successful as the FTC indicates, the FTC itself or Congress should provide any additional necessary funding increases over the current fee structure.” DMA at 4. Consistent with the Implementation Act, and as stated in previous fee rules, the Commission has limited the amount of fees to be collected to those needed to implement and enforce the “do-not-call” provisions of the Amended TSR. The amount of fees collected pursuant to this revised rule is intended to offset costs in the following three areas: first, funds are required to operate the Registry. This includes items such as handling consumer registration and complaints, telemarketer access to the Registry, state access to the Registry, and the management and operation of law enforcement access to appropriate information. 67 Second, funds are required for law enforcement efforts, including identifying targets, coordinating domestic and international initiatives, challenging alleged violators, and consumer and business education efforts, which are critical to securing compliance with the Amended TSR. These law enforcement efforts are a significant component of the total costs, given the large number of ongoing investigations currently being conducted by the agency, and the substantial effort necessary to complete such investigations. Third, funds are required to cover ongoing agency infrastructure and administration costs associated with the operation and enforcement of the registry, including information technology structural supports and distributed mission overhead support costs for staff and non-personnel expenses such as office space, utilities, and supplies. 67 From June 2005 to May 2006, over 43 million phone numbers were added to the Registry, with a total since inception of approximately 124 million registrations. Since inception, the registry has also handled many requests from organizations wishing to access the registry ( e.g. telemarketers, states, and law enforcers), including hundreds of thousands of subscription requests, and millions of area code access requests (including downloads and interactive search requests). In addition, one commenter expressed opposition to any increase in fees that might be attributable to the inclusion of wireless telephone numbers on the Registry, stating that: Telemarketing calls to wireless numbers without consent are prohibited under the FCC's rules implementing the Telephone Consumer Protection Act of 1991 (“TCPA”), 47 U.S.C. 227 et seq. Thus, as a legal matter, consumers receive no fewer telemarketing calls by placing their wireless numbers on the registry. Because such calls already are prohibited in the first instance, there is no basis for allowing such numbers to be placed on the registry. 68 68 See DMA at 4-5. However, as noted in the 2005 Fee Rule, this commenter overstated the nature of the prohibition enacted by the Federal Communication Commission (“FCC”). The FCC's prohibitions on telemarketing calls placed to wireless telephone numbers proscribe the use of an “automatic telephone dialing system or an artificial or prerecorded message” to place such calls. 69 While the Commission recognizes that many telemarketers use automated dialers to contact consumers, not all telemarketers use such technology. In addition, the Amended TSR's prohibitions concerning fraudulent or abusive telemarketing acts or practices apply to both land line and wireless telephones, and the Registry has never differentiated between the two. At this point, the Commission sees no reason to make such a distinction. 69 See FCC Telemarketing and Telephone Solicitation Rules, 47 CFR 64.1200 (2006). Accordingly, the Commission concludes that an increase in fees is necessary. IV. Calculation of the Revised Fees As previously stated, the Commission proposed in the 2006 Fee Rule NPR to increase the fees charged to access the National Do Not Call Registry to $62 annually for each area code of data requested, with the maximum annual fee capped at $17,050 for entities accessing 280 area codes of data or more. The Commission based this proposal on the total number of entities that accessed the Registry from March 1, 2005 through February 28, 2006. 70 The Commission noted, however, that it would adjust the final revised fee to reflect the actual number of entities that had accessed the Registry at the time of issuance of the Final Amended Fee Rule. 71 70 At that time, slightly less than 66,200 entities had accessed all or part of the information in the Registry. Approximately 1,300 of these entities were “exempt” and therefore had accessed the Registry at no charge. An additional 58,300 entities had accessed five or fewer area codes of data, also at no charge. As a result, approximately 6,500 entities had paid for access to the Registry, with slightly less than 1,000 entities having paid for access to the entire Registry. 71 FR 25514. 71 Id. As of June 1, 2006, there have been no significant or material changes in the number of entities that have accessed the Registry since the Commission issued the 2006 Fee Rule NPR. Therefore, based on the figures contained in the 2006 Fee Rule NPR, and the need to raise $23 million in fees to offset costs it expects to incur in this Fiscal Year for implementing and enforcing the “do-not-call” provisions of the Amended TSR, the Commission is revising the fees to be charged for access to the Registry as follows: the fee charged for each area code of data will be $62 per year, with the first five area codes provided to each entity at no cost. The fee charged to entities requesting access to additional area codes of data during the second six months of their annual period will be $31. “Exempt” organizations, as defined by the “do-not-call” regulations, will continue to be allowed access to the Registry at no cost. The maximum amount that will be charged any single entity will be $17,050, which will be charged to any entity accessing 280 area codes of data or more. The Commission establishes September 1, 2006, as the effective date for this rule change. Thus, the revised fees will be charged to all entities that renew their subscription account number after that date. V. Paperwork Reduction Act Pursuant to the Paperwork Reduction Act, 72 the Office of Management and Budget (“OMB”) approved the information collection requirements in the Amended TSR and assigned OMB Control Number 3084-0097. The rule amendment, as discussed above, provides for an increase in the fees that are charged for accessing the National Do Not Call Registry. Therefore, the proposed rule amendment does not create any new recordkeeping, reporting, or third-party disclosure requirements that would be subject to review and approval by OMB pursuant to the Paperwork Reduction Act. 72 44 U.S.C. 3501-3520. VI. Regulatory Flexibility Act The Regulatory Flexibility Act 73 requires the FTC to provide an Initial Regulatory Flexibility Analysis (“IRFA”) with its proposed rule, and a Final Regulatory Flexibility Analysis (“FRFA”) with its final rule, unless the FTC certifies that the rule will not have a significant economic impact on a substantial number of small entities. As explained in the 2006 Fee Rule NPR and this Statement, the Commission hereby certifies that it does not expect that its Final Amended Free Rule will have the threshold impact on small entities. As discussed above, this amended rule specifically charges no fee for access to one to five area codes of data included in the Registry. As a result, the Commission anticipates that many small businesses will be able to access the Registry without having to pay any annual fee. Thus, it is unlikely that there will be a significant burden on small businesses resulting from the revised fees. Nonetheless, the Commission published an IRFA with the 2006 Fee Rule NPR, and is also publishing a FRFA with this Final Amended Fee Rule below, in the interest of further explaining its determination, even though the Commission believes that it is not required to publish such analysis. 73 5 U.S.C. 604(a). A. Reasons for Consideration of Agency Action The Final Amended Fee Rule has been considered and adopted pursuant to the requirements of the Implementation Act and the 2006 Appropriations Act, which authorize the Commission to collect fees sufficient to implement and enforce the “do-not-call” provisions of the Amended TSR. B. Statement of Objectives and Legal Basis As explained above, the objective of the Final Amended Fee Rule is to collect sufficient fees from entities that must access the National Do Not Call Registry. The legal authority for this Rule is the 2006 Appropriations Act, the Implementation Act, and the Telemarketing Act. C. Description of Small Entities to Which the Rule Will Apply The Small Business Administration has determined that “telemarketing bureaus” with $6.5 million or less in annual receipts qualify as small businesses. 74 Similar standards, i.e. , $6.5 million or less in annual receipts, apply for many retail businesses which may be “sellers” and subject to the proposed revised fee provisions set forth in this Final Amended Fee Rule. In addition, there may be other types of businesses, other than retail establishments, that would be “sellers” subject to this rule. 74 See 13 CFR 121.201. During the period June 1, 2005 to May 31, 2006, over 57,800 entities have accessed five or fewer area codes of data from the Registry at no charge. While not all of these entities may qualify as small businesses, and some small businesses may be required to purchase access to more than five area codes of data, the Commission believes that this is the best estimate of the number of small entities that would be subject to this Final Amended Fee Rule. In any event, as explained elsewhere in this Statement, the Commission believes that, to the extent the Final Amended Fee Rule has an economic impact on small businesses, the Commission has adopted an approach that minimizes that impact to ensure that it is not substantial, while fulfilling the legal mandate of the Implementation Act and the 2006 Appropriations Act to ensure that the telemarketing industry supports the cost of the National Do Not Call Registry. D. Projected Reporting, Recordkeeping and Other Compliance Requirements The information collection activities at issue in this Final Amended Fee Rule consist principally of the requirement that firms, regardless of size, that access the Registry submit minimal identifying and payment information, which is necessary for the agency to collect the required fees. The cost impact of that requirement and the labor or professional expertise required for compliance with that requirement were discussed in section V of the 2004 Fee Rule Notice of Proposed Rule Making. 69 FR 23701, 23704 (April 30, 2004). As for compliance requirements, small and large entities subject to the revised fee rule will pay the same rates to obtain access to the National Do Not Call Registry in order to reconcile their calling lists with the phone numbers maintained in the Registry. As noted earlier, however, compliance costs for small entities are not anticipated to have a significant impact on small entities, to the extent the Commission believes that compliance costs for those entities will be largely minimized by their ability to obtain data for up to five area codes at no charge. E. Duplication With Other Federal Rules None. F. Discussion of Significant Alternatives The Commission discussed the proposed alternatives in Section III, above. List of Subjects in 16 CFR Part 310 Telemarketing, Trade practices. VII. Final Rule Accordingly, for the reasons set forth above, the Federal Trade Commission amends part 310 of title 16 of the Code of Federal Regulations as follows: PART 310—TELEMARKETING SALES RULE 1. The authority citation for part 310 continues to read as follows: Authority: 15 U.S.C. 6101-6108. 2. Revise §§ 310.8(c) and (d) to read as follows: § 310.8 Fee for access to the National Do Not Call Registry. (c) The annual fee, which must be paid by any person prior to obtaining access to the National Do Not Call Registry, is $62 per area code of data accessed, up to a maximum of $17,050; provided, however, that there shall be no charge for the first five area codes of data accessed by any person, and provided further, that there shall be no charge to any person engaging in or causing others to engage in outbound telephone calls to consumers and who is accessing the National Do Not Call Registry without being required under this Rule, 47 CFR 64.1200, or any other Federal law. Any person accessing the National Do Not Call Registry may not participate in any arrangement to share the cost of accessing the registry, including any arrangement with any telemarketer or service provider to divide the costs to access the registry among various clients of that telemarketer or service provider. (d) After a person, either directly or through another person, pays the fees set forth in § 310.8(c), the person will be provided a unique account number which will allow that person to access the registry data for the selected area codes at any time for twelve months following the first day of the month in which the person paid the fee (“the annual period”). To obtain access to additional area codes of data during the first six months of the annual period, the person must first pay $62 for each additional area code of data not initially selected. To obtain access to additional area codes of data during the second six months of the annual period, the person must first pay $31 for each additional area code of data not initially selected. The payment of the additional fee will permit the person to access the additional area codes of data for the remainder of the annual period. By direction of the Commission. Donald S. Clark, Secretary. Note: This appendix will not appear in the Code of Federal Regulations. Appendix—List of Acronyms for Commenters to the TSR 2006 Fee Rule Proposal Commenter Acronym 1. AIMS AIMS 2. American Teleservices Association ATA 3. Aplus.Net AN 4. Barb Sachau BAS 5. Direct Marketing Association, Inc DMA 6. Judy Johnson JJ 7. National Association of Realtors NAR 8. National Automobile Dealers Association NADA 9. Nelnet NN 10. Solberg S 11. Summerwinds LLC SW 12. Turnstyles Ticketing TT [FR Doc. E6-12252 Filed 7-28-06; 8:45 am] BILLING CODE 6750-01-P SOCIAL SECURITY ADMINISTRATION 20 CFR Part 422 RIN 0960-AG25 Social Security Number (SSN) Cards; Limiting Replacement Cards AGENCY: Social Security Administration (SSA). ACTION: Final rules. SUMMARY: The interim final rules published at 70 FR 74649, on December 16, 2005, are adopted as final with only minor changes. These regulations reflect and implement amendments to the Social Security Act (the Act) made by part of the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA), Public Law (Pub. L.) 108-458. Section 7213(a)(1)(A) of Pub. L. 108-458 requires that we limit individuals to three replacement SSN cards per year and ten replacement SSN cards during a lifetime. The provision permits us to allow for reasonable exceptions from these limits on a case-by-case basis in compelling circumstances. This provision also helps us to further strengthen the security and integrity of the SSN issuance process. DATES: These regulations are effective December 16, 2005. FOR FURTHER INFORMATION CONTACT: Karen Cool, Social Insurance Specialist, Office of Income and Security Programs, 157 RRCC, Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235-6401, ((410) 966-7094, or TTY (410) 966-5609. For information on eligibility or filing for benefits, call our national toll-free numbers, 1-800-772-1213 or TTY 1-800-325-0778, or visit our Internet Web site, Social Security Online, at http://www.socialsecurity.gov. SUPPLEMENTARY INFORMATION: Electronic Version The electronic file of this document is available on the date of publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html. Background Our previous regulations at 20 CFR 422.103(e), Replacement of social security number card , stated that: • In the case of lost or damaged SSN card, a duplicate card bearing the same name and number may be issued, and • In the case of a need to change the name on the card, a corrected card bearing the same number and the new name may be issued. Furthermore, our previous regulations at 20 CFR 422.110(a) stated that an individual who wished to change his or her name or other personal identifying information previously submitted in connection with an application for an SSN card must prove his or her identity and may be required to provide other evidence. If a completed request and all applicable evidence are received for a change in name, a new SSN card with the new name and bearing the same number previously assigned will be issued to the person making the request. Our previous regulations did not put any numerical limits on the number of replacement SSN cards an individual may obtain. Prior to the new statutory replacement SSN card limit, the only limitation on the issuance of replacement cards that could affect the number of replacements an individual could obtain had been a protocol in our electronic records that prevented the issuance of a replacement SSN card within seven days of a previous issuance. Section 7213(a)(1)(A) of Pub. L. 108-458 (the Intelligence Reform and Terrorism Prevention Act of 2004), enacted on December 17, 2004, requires that we restrict the issuance of multiple replacement SSN cards to any individual to three replacement SSN cards per year and ten replacement cards for the life of the individual. The statute mandates implementation of the limits not later than one year after December 17, 2004. In applying these limits, we will not consider replacement social security number cards issued prior to December 16, 2005. The provision also states that we may allow for reasonable exceptions from the limits on a case-by-case basis in compelling circumstances. In order to comply with this provision of Pub. L. 108-458, we revised §§ 422.103 and 422.110 of our regulations. Explanation of Changes Section 422.103 Social Security Numbers. In these final rules, we are making a nonsubtantive change to § 422.103(c)(1) by replacing the word “duplicate” with the word “replacement” in that section. Although the interim final rules published on December 16, 2005 did not provide for this change to § 422.103(c)(1), the effect of this change is solely to make the terminology uniform throughout the section. We revised § 422.103(e) of our regulations by restricting the number of replacement cards an individual may obtain both during a year and over a lifetime. These limits are set at three replacement SSN cards in a year and ten per lifetime. However, as permitted by section 7213(a)(1)(A) of Pub. L. 108-458, we may allow for reasonable exceptions to these limits on a case-by-case basis in compelling circumstances. We are allowing exceptions for name changes and for changes in alien status that result in a necessary change to a restrictive legend on the SSN card, because we believe these situations satisfy the compelling circumstances test. We want to ensure the accuracy of our records and continue to encourage number holders to report name changes and changes in alien status. Consequently, every change in name or alien status, where the restrictive legend must change, presents compelling circumstances for not applying the replacement card limits. Further, because we investigate the validity of documents submitted when individuals change their name or alien status ( see 20 CFR 422.107 (c) and (e)), we believe these are reasonable exceptions to the limitations in light of our compelling need for accurate records. Therefore, we will not count toward the annual and lifetime limits SSN replacement cards issued due to a change in name or restrictive legend change. We will grant an exception to the limits on a case-by-case basis if the individual provides evidence of hardship, such as a referral letter from a governmental social services agency indicating that the SSN card must be shown in order to obtain benefits or services. Finally, in an effort to streamline our definition of a replacement SSN card, we eliminated language regarding the sub-categories of duplicate and corrected SSN cards from the language heretofore incorporated in this regulation. In these final rules, we are adding the term “legal” to the parenthethical statement that describes name changes ( i.e ., verified legal changes to first name and/or surname) to clarify what we consider an acceptable name change. Although this term was not included in the interim final rule, this is not a substantive change, but merely provides a more precise description of the kind of name change we intended as a basis for a replacement card. We believe this further clarification is necessary because we only accept name changes that can be verified by documentation obtained through a legal process. Section 422.110 Individual's Request for Change in Record. We revised § 422.110 to add cross-references to new paragraph (e)(2) in § 422.103, which describes the new limits on replacement SSN cards and the exceptions to those limits. We made a minor revision to paragraph (b) to reflect that the Immigration and Naturalization Service has been abolished and its functions and units incorporated into the Department of Homeland Security. We also made other clarifying language changes. In these final rules, we are adding a parenthetical statement in paragraphs (a) and (b) to clarify what is considered a name change. As previously explained, these are not substantive changes, but merely provide a further description of what is considered an acceptable change in name. While the preamble to the interim final rules made it clear that name changes meant specific verified changes to a first name and/or surname, this language was inadvertently omitted from the interim final regulatory language. We anticipate that the three-card per year limit will impact fewer than 10,000 individuals in any given year. For example, of the nearly 12.4 million replacement SSN cards we issued in 2004, the number of individuals who requested more than three replacement cards was 3,818. However, we do not have any data available for those individuals who requested replacement cards exceeding the ten-card per lifetime limit. We applied these changes prospectively beginning on December 16, 2005, and we will not consider replacement SSN cards that were issued prior to that date when applying either limit. Comments on Interim Final Rules On December 16, 2005, we published the interim final rules in the Federal Register at 70 FR 74649 and provided the public a 60-day comment period that ended on February 14, 2006. We received comments from four individuals and one organization in response to the interim final rules. We carefully considered all the comments. We adopted the interim final rules as final with only minor clarifying changes. We believe the following summaries accurately present the views of the commenters, and we provide our reasons for not adopting the comments in our responses below. Comment: Three individuals commented on the limits for replacement SSN cards. One agreed that limits are appropriate; another indicated that the new limits are too generous; and the last indicated that, after three cards, there should be a $100 (“or whatever it costs”) charge to get a replacement card. Response: We did not adopt these comments because the limits on replacement SSN cards in our rules were established by legislation that amended the Act. We believe these limits establish a fair balance between protecting the security and integrity of the SSN issuance process while not adversely affecting members of the public who may need to present an SSN card to obtain necessary benefits or services. Regarding fees for replacement cards, we had considered charging a fee in the past but determined that it was not practicable to do so. Comment: One individual commented that SSN cards should be typed in and issued from the local Social Security office, saying that this would increase the security and integrity of the SSN card. Response: This comment is outside the scope of the rule change which does not alter the centralized process we currently use for issuing SSN cards. Before we automated and centralized the SSN card issuance process, SSN cards were processed in the local Social Security offices. We believe a centralized process affords the greatest security and guarantees the integrity of SSN cards. Comment: A nonpartisan organization commented that it is in support of the limits on replacement SSN cards and our proposed exceptions to the limits as indicated in the interim final rule. The organization's representative further stated that the example of a person providing a referral letter from a governmental social services agency is exactly the sort of significant hardship that SSA could anticipate a person or family to face. Response: This comment supports our rule change and our definition of reasonable exceptions on a case-by-case basis in compelling circumstances. We want to ensure that individuals who need services are not precluded from receiving them based on an inability to obtain a replacement SSN card. For the reasons discussed above, we have not changed the interim final rules based on the public comments. Therefore, except for the clarifying language changes made to § 422.103 and § 422.110, the interim final rules are adopted as final without change. Dated: May 16, 2006. Jo Anne B. Barnhart, Commissioner of Social Security. Accordingly, the interim final rules amending 20 CFR part 422 published at 70 FR 74649 on December 16, 2005, are adopted as final with only minor clarifying language changes. PART 422—ORGANIZATION AND PROCEDURES Subpart B—[Amended] 1. The authority citation for subpart B of part 422 is revised to read as follows: Authority: Secs. 205, 232, 702(a)(5), 1131, 1143 of the Social Security Act (42 U.S.C. 405, 432, 902(a)(5), 1320b-1, and 1320b-13), and sec. 7213(a)(1)(A) of Pub. L. 108-458. 2. Section 422.103 is amended by revising paragraph (e) to read as follows and by amending paragraph (c)(1) by removing the word “duplicate” and adding in its place the word “replacement” in the last sentence of the paragraph. § 422.103 Social security numbers. (e) Replacement of social security number card. (1) When we may issue you a replacement card. We may issue you a replacement social security number card, subject to the limitations in paragraph (e)(2) of this section. In all cases, you must complete a Form SS-5 to receive a replacement social security number card. You may obtain a Form SS-5 from any Social Security office or from one of the sources noted in paragraph (b) of this section. For evidence requirements, see § 422.107. (2) Limits on the number of replacement cards. There are limits on the number of replacement social security number cards we will issue to you. You may receive no more than three replacement social security number cards in a year and ten replacement social security number cards per lifetime. We may allow for reasonable exceptions to these limits on a case-by-case basis in compelling circumstances. We also will consider name changes (i.e., verified legal changes to the first name and/or surname) and changes in alien status which result in a necessary change to a restrictive legend on the SSN card (see paragraph (e)(3) of this section) to be compelling circumstances, and will not include either of these changes when determining the yearly or lifetime limits. We may grant an exception if you provide evidence establishing that you would experience significant hardship if the card were not issued. An example of significant hardship includes, but is not limited to, providing SSA with a referral letter from a governmental social services agency indicating that the social security number card must be shown in order to obtain benefits or services. (3) Restrictive legend change defined. Based on a person's immigration status, a restrictive legend may appear on the face of an SSN card to indicate that work is either not authorized or that work may be performed only with Department of Homeland Security (DHS) authorization. This restrictive legend appears on the card above the individual's name and SSN. Individuals without work authorization in the U.S. receive SSN cards showing the restrictive legend, “Not Valid for Employment;” and SSN cards for those individuals who have temporary work authorization in the U.S. show the restrictive legend, “Valid For Work Only With DHS Authorization.” U.S. citizens and individuals who are permanent residents receive SSN cards without a restrictive legend. For the purpose of determining a change in restrictive legend, the individual must have a change in immigration status or citizenship which results in a change to or the removal of a restrictive legend when compared to the prior SSN card data. An SSN card request based upon a change in immigration status or citizenship which does not affect the restrictive legend will count toward the yearly and lifetime limits, as in the case of Permanent Resident Aliens who attain U.S. citizenship. 3. Section 422.110 is revised to read as follows: § 422.110 Individual's request for change in record. (a) Form SS-5. If you wish to change the name or other personal identifying information you previously submitted in connection with an application for a social security number card, you must complete and sign a Form SS-5 except as provided in paragraph (b) of this section. You must prove your identity, and you may be required to provide other evidence. (See § 422.107 for evidence requirements.) You may obtain a Form SS-5 from any local Social Security office or from one of the sources noted in § 422.103(b). You may submit a completed request for change in records to any Social Security office, or, if you are outside the U.S., to the Department of Veterans Affairs Regional Office, Manila, Philippines, or to any U.S. Foreign Service post or U.S. military post. If your request is for a change of name on the card (i.e., verified legal changes to the first name and/or surname), we may issue you a replacement card bearing the same number and the new name. We will grant an exception from the limitations specified in § 422.103(e)(2) for replacement social security number cards representing a change in name or, if you are an alien, a change to a restrictive legend shown on the card. (See § 422.103(e)(3) for the definition of a change to a restrictive legend.) (b) Assisting in enumeration. We may enter into an agreement with officials of the Department of State and the Department of Homeland Security to assist us by collecting, as part of the immigration process, information to change the name or other personal identifying information you previously submitted in connection with an application or request for a social security number card. If your request is to change a name on the card (i.e., verified legal changes to the first name and/or surname) or to correct the restrictive legend on the card to reflect a change in alien status, we may issue you a replacement card bearing the same number and the new name or legend. We will grant an exception from the limitations specified in § 422.103(e)(2) for replacement social security number cards representing a change of name or, if you are an alien, a change to a restrictive legend shown on the card. (See § 422.103(e)(3) for the definition of a change to a restrictive legend.) [FR Doc. E6-12254 Filed 7-28-06; 8:45 am] BILLING CODE 4191-02-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 54 [TD 9277] RIN 1545-BE30 Employer Comparable Contributions to Health Savings Accounts Under Section 4980G AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: This document contains final regulations that provide guidance regarding employer comparable contributions to Health Savings Accounts (HSAs) under section 4980G. In general, these final regulations affect employers that contribute to employees' HSAs. DATES: Effective Date: These regulations are effective on July 31, 2006. Applicability Date: These regulations apply to employer contributions to HSAs made on or after January 1, 2007. FOR FURTHER INFORMATION CONTACT: Mireille T. Khoury (202) 622-6080 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background This document contains final Pension Excise Tax Regulations (26 CFR part 54) under section 4980G of the Internal Revenue Code (Code). Under section 4980G of the Code, an excise tax is imposed on an employer that fails to make comparable contributions to the HSAs of its employees. Section 1201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Act), Public Law 108-173, (117 Stat. 2066, 2003) added section 223 to the Code to permit eligible individuals to establish HSAs for taxable years beginning after December 31, 2003. Section 4980G was also added to the Code by the Act. Section 4980G(a) imposes an excise tax on the failure of an employer to make comparable contributions to the HSAs of its employees for a calendar year. Section 4980G(b) provides that rules and requirements similar to section 4980E (the comparability rules for Archer Medical Savings Accounts (Archer MSAs)) apply for purposes of section 4980G. Section 4980E(b) imposes an excise tax equal to 35% of the aggregate amount contributed by the employer to the Archer MSAs of employees during the calendar year if an employer fails to make comparable contributions to the Archer MSAs of its employees in a calendar year. Therefore, if an employer fails to make comparable contributions to the HSAs of its employees during a calendar year, an excise tax equal to 35% of the aggregate amount contributed by the employer to the HSAs of its employees during that calendar year is imposed on the employer. See Sections 4980G(a) and (b) and 4980E(b). See also Notice 2004-2 (2004-2 IRB 269), Q & A-32. See § 601.601(d)(2). On August 26, 2005, proposed regulations (REG-138647-04) were published in the Federal Register (70 FR 50233). The proposed regulations clarified and expanded upon the guidance regarding the comparability rules published in Notice 2004-2 and in Notice 2004-50 (2004-33 IRB 196), Q & A-46 through Q & A-54. See § 601.601(d)(2) of this chapter. Written public comments on the proposed regulations were received and a public hearing was requested. The hearing was held on February 23, 2006. After consideration of all the comments, these final regulations adopt the provisions of the proposed regulations with certain modifications, the most significant of which are highlighted in this preamble. Explanation of Provisions and Summary of Comments Several commentators requested that the effective date should be at least one year from the date the regulations are finalized to give employers sufficient time to implement changes required to comply with the final regulations. The final regulations will apply to employer contributions to HSAs made on or after January 1, 2007. An employer is not required to contribute to the HSAs of its employees. In general, however, if an employer makes contributions to any employee's HSA, the employer must make comparable contributions to the HSAs of all comparable participating employees. Comparable participating employees are eligible individuals (as defined in section 223(c)(1)) who are in the same category of employees and who have the same category of high deductible health plan (HDHP) coverage. Under the proposed regulations, the categories of coverage were self-only HDHP coverage and family HDHP coverage. Several commentators recommended that the final regulations should recognize additional categories of coverage other than self-only and family HDHP. The final regulations adopt this recommendation and allow family HDHP coverage to be subdivided into the following additional categories of HDHP coverage: self plus one, self plus two and self plus three or more. In addition, the final regulations provide that an employer's contribution with respect to the self plus two category may not be less than the employer's contribution with respect to the self plus one category and the employer's contribution with respect to the self plus three or more category may not be less than the employer's contribution with respect to the self plus two category. In addition, several commentators requested separate treatment for groups of collectively bargained employees, such that employers' HSA contributions to collectively bargained employees would not be subject to the comparability rules. In response to these comments, the final regulations provide that employees who are included in a unit of employees covered by a bona fide collective bargaining agreement between employee representatives and one or more employers are not comparable participating employees, if health benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. Collectively bargained employees are, therefore, disregarded for purposes of section 4980G. Numerous commentators requested guidance on the exception to the comparability rules for employer contributions made through a section 125 cafeteria plan. In response to these comments, the final regulations provide additional guidance on how employer HSA contributions are made through a cafeteria plan. Specifically, the final regulations provide that employer contributions to employees' HSAs are made through the cafeteria plan if under the written cafeteria plan, the employees have the right to elect to receive cash or other taxable benefits in lieu of all or a portion of an HSA contribution (i.e., all or a portion of the HSA contributions are available as pre-tax salary reduction amounts), regardless of whether an employee actually elects to contribute any amount to the HSA by salary reduction. The final regulations also provide several examples that illustrate the application of the cafeteria plan exception to the comparability rules. One commentator requested guidance on what actions an employer must take to locate any missing comparable participating former employees for purposes of contributions to eligible former employees. The final regulations provide guidance on this issue and explain that an employer making comparable contributions to former employees must take reasonable actions to locate any missing comparable participating former employees. In general, such reasonable actions include the use of certified mail, the Internal Revenue Service Letter Forwarding Program, see Rev. Proc. 94-22 (1994-1 CB 608), or the Social Security Administration's Letter Forwarding Service. See § 601.601(d)(2). Several commentators requested that testing for comparability purposes be permitted on a plan year, rather than calendar year, basis. Section 4980G mandates the use of a calendar year for testing purposes. Accordingly, the final regulations do not adopt the suggestion for plan year testing. Also, the final regulations have removed and reserved the provision dealing with instances where an employee has not established an HSA by the end of the calendar year. Finally, one commentator requested clarification on what would constitute reasonable interest for purposes of section 4980G. In response to this comment, the final regulations provide that the determination of whether a rate of interest used by an employer is reasonable will be based on all of the facts and circumstances. However, if an employer calculates interest using the Federal short-term rate as determined by the Secretary in accordance with Code section 1274(d), the employer is deemed to use a reasonable interest rate. Special Analyses It has been determined that these regulations are not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. These regulations do not impose a collection of information on small entities, thus the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the proposed regulations preceding these regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Drafting Information The principal authors of these regulations are Barbara E. Pie and Mireille T. Khoury, Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). List of Subjects in 26 CFR Part 54 Excise taxes, Pensions, Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR part 54 is amended as follows: PART 54—PENSION EXCISE TAXES Paragraph 1. The authority citation for part 54 is amended by adding entries in numerical order to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * Section 54.4980G-1 also issued under 26 U.S.C. 4980G. Section 54.4980G-2 also issued under 26 U.S.C. 4980G. Section 54.4980G-3 also issued under 26 U.S.C. 4980G. Section 54.4980G-4 also issued under 26 U.S.C. 4980G. Section 54.4980G-5 also issued under 26 U.S.C. 4980G. * * * Par. 2. Sections 54.4980G-0, 54.4980G-1, 54.4980G-2, 54.4980G-3, 54.4980G-4, and 54.4980G-5 are added to read as follows: § 54.4980G-0 Table of contents. This section contains the questions for §§ 54.4980G-1, 54.4980G-2, 54.4980G-3, 54.4980G-4, and 54.4980G-5. § 54.4980G-1 Failure of employer to make comparable health savings account contributions. Q-1: What are the comparability rules that apply to employer contributions to Health Savings Accounts (HSAs)? Q-2: What are the categories of HDHP coverage for purposes of applying the comparability rules? Q-3: What is the testing period for making comparable contributions to employees' HSAs? Q-4: How is the excise tax computed if employer contributions do not satisfy the comparability rules for a calendar year? § 54.4980G-2 Employer contribution defined. Q-1: Do the comparability rules apply to amounts rolled over from an employee's HSA or Archer Medical Savings Account (Archer MSA)? Q-2: If an employee requests that his or her employer deduct after-tax amounts from the employee's compensation and forward these amounts as employee contributions to the employee's HSA, do the comparability rules apply to these amounts? § 54.4980G-3 Employee for comparability testing. Q-1: Do the comparability rules apply to contributions that an employer makes to the HSAs of independent contractors or self-employed individuals? Q-2: May a sole proprietor who is an eligible individual contribute to his or her own HSA without contributing to the HSAs of his or her employees who are eligible individuals? Q-3: Do the comparability rules apply to contributions by a partnership to a partner's HSA? Q-4: How are members of controlled groups treated when applying the comparability rules? Q-5: What are the categories of employees for comparability testing? Q-6: Are employees who are included in a unit of employees covered by a collective bargaining agreement comparable participating employees? Q-7: Is an employer permitted to make comparable contributions only to the HSAs of comparable participating employees who have coverage under the employer's HDHP? Q-8: If an employee and his or her spouse are eligible individuals who work for the same employer and one employee-spouse has family coverage for both employees under the employer's HDHP, must the employer make comparable contributions to the HSAs of both employees? Q-9: Does an employer that makes HSA contributions only for one class of non-collectively bargained employees who are eligible individuals, but not for another class of non-collectively bargained employees who are eligible individuals (for example, management v. non-management) satisfy the requirement that the employer make comparable contributions? Q-10: If an employer contributes to the HSAs of former employees who are eligible individuals, do the comparability rules apply to these contributions? Q-11: Is an employer permitted to make comparable contributions only to the HSAs of comparable participating former employees who have coverage under the employer's HDHP? Q-12: If an employer contributes only to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP, must the employer make comparable contributions to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1))? Q-13: How do the comparability rules apply if some employees have HSAs and other employees have Archer MSAs? § 54.4980G-4 Calculating comparable contributions. Q-1: What are comparable contributions? Q-2: How does an employer comply with the comparability rules when some non-collectively bargained employees who are eligible individuals do not work for the employer during the entire calendar year? Q-3: How do the comparability rules apply to employer contributions to employees' HSAs if some non-collectively bargained employees work full-time during the entire calendar year, and other non-collectively bargained employees work full-time for less than the entire calendar year? Q-4: May an employer make contributions for the entire year to the HSAs of its employees who are eligible individuals at the beginning of the calendar year (i.e., on a pre-funded basis) instead of contributing on a pay-as-you-go or on a look-back basis? Q-5: Must an employer use the same contribution method as described in Q & A-3 and Q & A-4 of this section for all employees who were comparable participating employees for any month during the calendar year? Q-6: How does an employer comply with the comparability rules if an employee has not established an HSA at the time the employer contributes to its employees' HSAs? Q-7: If an employer bases its contributions on a percentage of the HDHP deductible, how is the correct percentage or dollar amount computed? Q-8: Does an employer that contributes to the HSA of each comparable participating employee in an amount equal to the employee's HSA contribution or a percentage of the employee's HSA contribution (matching contributions) satisfy the rule that all comparable participating employees receive comparable contributions? Q-9: If an employer conditions contributions by the employer to an employee's HSA on an employee's participation in health assessments, disease management programs or wellness programs and makes the same contributions available to all employees who participate in the programs, do the contributions satisfy the comparability rules? Q-10: If an employer makes additional contributions to the HSAs of all comparable participating employees who have attained a specified age or who have worked for the employer for a specified number of years, do the contributions satisfy the comparability rules? Q-11: If an employer makes additional contributions to the HSAs of all comparable participating employees are eligible to make the additional contributions (HSA catch-up contributions) under section 223(b)(3), do the contributions satisfy the comparability rules? Q-12: If an employer's contributions to an employee's HSA result in non-comparable contributions, may the employer recoup the excess amount from the employee's HSA? Q-13: What constitutes a reasonable interest rate for purposes of making comparable contributions? § 54.4980G-5 HSA comparability rules and cafeteria plans and waiver of excise tax. Q-1: If an employer makes contributions through a section 125 cafeteria plan to the HSA of each employee who is an eligible individual, are the contributions subject to the comparability rules? Q-2: If an employer makes contributions through a cafeteria plan to the HSA of each employee who is an eligible individual in an amount equal to the amount of the employee's HSA contribution or a percentage of the amount of the employee's HSA contribution (i.e., matching contributions), are the contributions subject to the section 4980G comparability rules? Q-3: If under the employer's cafeteria plan, employees who are eligible individuals and who participate in health assessments, disease management programs or wellness programs receive an employer contribution to an HSA, unless the employees elect cash, are the contributions subject to the comparability rules? Q-4: May all or part of the excise tax imposed under section 4980G be waived? § 54.4980G-1 Failure of employer to make comparable health savings account contributions. Q-1: What are the comparability rules that apply to employer contributions to Health Savings Accounts (HSAs)? A-1: If an employer makes contributions to any employee's HSA, the employer must make comparable contributions to the HSAs of all comparable participating employees. See Q & A-1 in §54.4980G-4 for the definition of comparable contributions. Comparable participating employees are eligible individuals (as defined in section 223(c)(1)) who are in the same category of employees and who have the same category of high deductible health plan (HDHP) coverage. See sections 4980G(b) and 4980E(d)(3). See section 223(c)(2) and (g) for the definition of an HDHP. See also Q & A-5 in § 54.4980G-3 for the categories of employees and Q & A-2 of this section for the categories of HDHP coverage. But see Q & A-6 in § 54.4980G-3 for treatment of collectively bargained employees. Q-2: What are the categories of HDHP coverage for purposes of applying the comparability rules? A-2: (a) In general. Generally, the categories of coverage are self-only HDHP coverage and family HDHP coverage. Family HDHP coverage means any coverage other than self-only HDHP coverage. The comparability rules apply separately to self-only HDHP coverage and family HDHP coverage. In addition, if an HDHP has family coverage options meeting the descriptions listed in paragraph (b) of this Q & A-2, each such coverage option may be treated as a separate category of coverage and the comparability rules may be applied separately to each category. However, if the HDHP has more than one category that provides coverage for the same number of individuals, all such categories are treated as a single category for purposes of the comparability rules. Thus, the categories of “employee plus spouse” and “employee plus dependent,” each providing coverage for two individuals, are treated as the single category “self plus one” for comparability purposes. See, however, the final sentence of paragraph (a) of Q & A-1 of §54.4980G-4 for a special rule that applies if different amounts are contributed for different categories of family coverage. (b) HDHP Family coverage categories. The coverage categories are— (1) Self plus one; (2) Self plus two; and (3) Self plus three or more. (c) Examples. The rules of this Q & A-2 are illustrated by the following examples: Example 1. Employer A maintains an HDHP and contributes to the HSAs of eligible employees who elect coverage under the HDHP. The HDHP has self-only coverage and family coverage. Thus, the categories of coverage are self-only and family coverage. Employer A contributes $750 to the HSA of each eligible employee with self-only HDHP coverage and $1,000 to the HSA of each eligible employee with family HDHP coverage. Employer A's contributions satisfy the comparability rules. Example 2. (i) Employer B maintains an HDHP and contributes to the HSAs of eligible employees who elect coverage under the HDHP. The HDHP has the following coverage options: (A) Self-only; (B) Self plus spouse; (C) Self plus dependent; (D) Self plus spouse plus one dependent; (E) Self plus two dependents; and (F) Self plus spouse and two or more dependents. (ii) The self plus spouse category and the self plus dependent category constitute the same category of HDHP coverage (self plus one) and Employer B must make the same comparable contributions to the HSAs of all eligible individuals who are in either the self plus spouse category of HDHP coverage or the self plus dependent category of HDHP coverage. Likewise, the self plus spouse plus one dependent category and the self plus two dependents category constitute the same category of HDHP coverage (self plus two) and Employer B must make the same comparable contributions to the HSAs of all eligible individuals who are in either the self plus spouse plus one dependent category of HDHP coverage or the self plus two dependents category of HDHP coverage. Example 3. (i) Employer C maintains an HDHP and contributes to the HSAs of eligible employees who elect coverage under the HDHP. The HDHP has the following coverage options: (A) Self-only; (B) Self plus one; (C) Self plus two; and (D) Self plus three or more. (ii) Employer C contributes $500 to the HSA of each eligible employee with self-only HDHP coverage, $750 to the HSA of each eligible employee with self plus one HDHP coverage, $900 to the HSA of each eligible employee with self plus two HDHP coverage and $1,000 to the HSA of each eligible employee with self plus three or more HDHP coverage. Employer C's contributions satisfy the comparability rules. Q-3: What is the testing period for making comparable contributions to employees' HSAs? A-3: To satisfy the comparability rules, an employer must make comparable contributions for the calendar year to the HSAs of employees who are comparable participating employees. See section 4980G(a). See Q & A-3 and Q & A-4 in §54.4980G-4 for a discussion of HSA contribution methods. Q-4: How is the excise tax computed if employer contributions do not satisfy the comparability rules for a calendar year? A-4: (a) Computation of tax. If employer contributions do not satisfy the comparability rules for a calendar year, the employer is subject to an excise tax equal to 35% of the aggregate amount contributed by the employer to HSAs for that period. (b) Example. The following example illustrates the rules in paragraph (a) of this Q & A-4: Example. During the 2007 calendar year, Employer D has 8 employees who are eligible individuals with self-only coverage under an HDHP provided by Employer D. The deductible for the HDHP is $2,000. For the 2007 calendar year, Employer D contributes $2,000 each to the HSAs of two employees and $1,000 each to the HSAs of the other six employees, for total HSA contributions of $10,000. Employer D's contributions do not satisfy the comparability rules. Therefore, Employer D is subject to an excise tax of $3,500 (35% of $10,000) for its failure to make comparable contributions to its employees' HSAs. § 54.4980G-2 Employer contribution defined. Q-1: Do the comparability rules apply to amounts rolled over from an employee's HSA or Archer Medical Savings Account (Archer MSA)? A-1: No. The comparability rules do not apply to amounts rolled over from an employee's HSA or Archer MSA. Q-2: If an employee requests that his or her employer deduct after-tax amounts from the employee's compensation and forward these amounts as employee contributions to the employee's HSA, do the comparability rules apply to these amounts? A-2: No. Section 106(d) provides that amounts contributed by an employer to an eligible employee's HSA shall be treated as employer-provided coverage for medical expenses and are excludible from the employee's gross income up to the limit in section 223(b). After-tax employee contributions to an HSA are not subject to the comparability rules because they are not employer contributions under section 106(d). § 54.4980G-3 Employee for comparability testing. Q-1: Do the comparability rules apply to contributions that an employer makes to the HSAs of independent contractors or self-employed individuals? A-1: No. The comparability rules apply only to contributions that an employer makes to the HSAs of employees. Q-2: May a sole proprietor who is an eligible individual contribute to his or her own HSA without contributing to the HSAs of his or her employees who are eligible individuals? A-2: (a) Sole proprietor not an employee. Yes. The comparability rules apply only to contributions made by an employer to the HSAs of employees. Because a sole proprietor is not an employee, the comparability rules do not apply to contributions the sole proprietor makes to his or her own HSA. However, if a sole proprietor contributes to any employee's HSA, the sole proprietor must make comparable contributions to the HSAs of all comparable participating employees. In determining whether the comparability rules are satisfied, contributions that a sole proprietor makes to his or her own HSA are not taken into account. (b) Example. The following example illustrates the rules in paragraph (a) of this Q & A-2: Example. In a calendar year, B, a sole proprietor is an eligible individual and contributes $1,000 to B's own HSA. B also contributes $500 for the same calendar year to the HSA of each employee who is an eligible individual. The comparability rules are not violated by B's $1,000 contribution to B's own HSA. Q-3: Do the comparability rules apply to contributions by a partnership to a partner's HSA? A-3: (a) Partner not an employee. No. Contributions by a partnership to a bona fide partner's HSA are not subject to the comparability rules because the contributions are not contributions by an employer to the HSA of an employee. The contributions are treated as either guaranteed payments under section 707(c) or distributions under section 731. However, if a partnership contributes to the HSAs of any employee who is not a partner, the partnership must make comparable contributions to the HSAs of all comparable participating employees. (b) Example. The following example illustrates the rules in paragraph (a) of this Q & A-3: Example. (i) Partnership X is a limited partnership with three equal individual partners, A (a general partner), B (a limited partner), and C (a limited partner). C is to be paid $300 annually for services rendered to Partnership X in her capacity as a partner without regard to partnership income (a section 707(c) guaranteed payment). D and E are the only employees of Partnership X and are not partners in Partnership X. A, B, C, D, and E are eligible individuals and each has an HSA. During Partnership X's Year 1 taxable year, which is also a calendar year, Partnership X makes the following contributions— (A) A $300 contribution to each of A's and B's HSAs which are treated as section 731 distributions to A and B; (B) A $300 contribution to C's HSA in lieu of paying C the guaranteed payment directly; and (C) A $200 contribution to each of D's and E's HSAs, who are comparable participating employees. (ii) Partnership X's contributions to A's and B's HSAs are section 731 distributions, which are treated as cash distributions. Partnership X's contribution to C's HSA is treated as a guaranteed payment under section 707(c). The contribution is not excludible from C's gross income under section 106(d) because the contribution is treated as a distributive share of partnership income for purposes of all Code sections other than sections 61(a) and 162(a), and a guaranteed payment to a partner is not treated as compensation to an employee. Thus, Partnership X's contributions to the HSAs of A, B, and C are not subject to the comparability rules. Partnership X's contributions to D's and E's HSAs are subject to the comparability rules because D and E are employees of Partnership X and are not partners in Partnership X. Partnership X's contributions satisfy the comparability rules. Q-4: How are members of controlled groups treated when applying the comparability rules? A-4: All persons or entities treated as a single employer under section 414 (b), (c), (m), or (o) are treated as one employer. See sections 4980G(b) and 4980E(e). Q-5: What are the categories of employees for comparability testing? A-5: (a) Categories. The categories of employees for comparability testing are as follows (but see Q & A-6 of this section for the treatment of collectively bargained employees)— (1) Current full-time employees; (2) Current part-time employees; and (3) Former employees (except for former employees with coverage under the employer's HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1)). (b) Part-time and full-time employees. For purposes of section 4980G, part-time employees are customarily employed for fewer than 30 hours per week and full-time employees are customarily employed for 30 or more hours per week. See sections 4980G(b) and 4980E(d)(4)(A) and (B). (c) In general. Except as provided in Q & A-6 of this section, the categories of employees in paragraph (a) of this Q & A-5 are the exclusive categories of employees for comparability testing. An employer must make comparable contributions to the HSAs of all comparable participating employees (eligible individuals who are in the same category of employees with the same category of HDHP coverage) during the calendar year without regard to any classification other than these categories. For example, full-time eligible employees with self-only HDHP coverage and part-time eligible employees with self-only HDHP coverage are separate categories of employees and different amounts can be contributed to the HSAs for each of these categories. Q-6: Are employees who are included in a unit of employees covered by a collective bargaining agreement comparable participating employees? A-6: (a) In general. No. Collectively bargained employees who are covered by a bona fide collective bargaining agreement between employee representatives and one or more employers are not comparable participating employees, if health benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. Former employees covered by a collective bargaining agreement also are not comparable participating employees. (b) Examples. The following examples illustrate the rules in paragraph (a) of this Q & A-6. The examples read as follows: Example 1. Employer A offers its employees an HDHP with a $1,500 deductible for self-only coverage. Employer A has collectively bargained and non-collectively bargained employees. The collectively bargained employees are covered by a collective bargaining agreement under which health benefits were bargained in good faith. In the 2007 calendar year, Employer A contributes $500 to the HSAs of all eligible non-collectively bargained employees with self-only coverage under Employer A's HDHP. Employer A does not contribute to the HSAs of the collectively bargained employees. Employer A's contributions to the HSAs of non-collectively bargained employees satisfy the comparability rules. The comparability rules do not apply to collectively bargained employees. Example 2. Employer B offers its employees an HDHP with a $1,500 deductible for self-only coverage. Employer B has collectively bargained and non-collectively bargained employees. The collectively bargained employees are covered by a collective bargaining agreement under which health benefits were bargained in good faith. In the 2007 calendar year and in accordance with the terms of the collective bargaining agreement, Employer B contributes to the HSAs of all eligible collectively bargained employees. Employer B does not contribute to the HSAs of the non-collectively bargained employees. Employer B's contributions to the HSAs of collectively bargained employees are not subject to the comparability rules because the comparability rules do not apply to collectively bargained employees. Accordingly, Employer B's failure to contribute to the HSAs of the non-collectively bargained employees does not violate the comparability rules. Example 3. Employer C has two units of collectively bargained employees—unit Q and unit R—each covered by a collective bargaining agreement under which health benefits were bargained in good faith. In the 2007 calendar year and in accordance with the terms of the collective bargaining agreement, Employer C contributes to the HSAs of all eligible collectively bargained employees in unit Q. In accordance with the terms of the collective bargaining agreement, Employer C makes no HSA contributions for collectively bargained employees in unit R. Employer C's contributions to the HSAs of collectively bargained employees are not subject to the comparability rules because the comparability rules do not apply to collectively bargained employees. Example 4. Employer D has a unit of collectively bargained employees that are covered by a collective bargaining agreement under which health benefits were bargained in good faith. In accordance with the terms of the collective bargaining agreement, Employer D contributes an amount equal to a specified number of cents per hour for each hour worked to the HSAs of all eligible collectively bargained employees. Employer D's contributions to the HSAs of collectively bargained employees are not subject to the comparability rules because the comparability rules do not apply to collectively bargained employees. Q-7: Is an employer permitted to make comparable contributions only to the HSAs of comparable participating employees who have coverage under the employer's HDHP? A-7: (a) Employer-provided HDHP coverage. If during a calendar year, an employer contributes to the HSA of any employee who is an eligible individual covered under an HDHP provided by the employer, the employer is required to make comparable contributions to the HSAs of all comparable participating employees with coverage under any HDHP provided by the employer. An employer that contributes only to the HSAs of employees who are eligible individuals with coverage under the employer's HDHP is not required to make comparable contributions to HSAs of employees who are eligible individuals but are not covered under the employer's HDHP. (b) Non-employer provided HDHP coverage. An employer that contributes to the HSA of any employee who is an eligible individual with coverage under any HDHP that is not an HDHP provided by the employer, must make comparable contributions to the HSAs of all comparable participating employees whether or not covered under the employer's HDHP. An employer that makes a reasonable good faith effort to identify all comparable participating employees with non-employer provided HDHP coverage and makes comparable contributions to the HSAs of such employees satisfies the requirements in paragraph (b) of this Q & A-7. (c) Examples. The following examples illustrate the rules in this Q & A-7. None of the employees in the following examples are covered by a collective bargaining agreement. The examples read as follows: Example 1. In a calendar year, Employer E offers an HDHP to its full-time employees. Most full-time employees are covered under Employer E's HDHP and Employer E makes comparable contributions only to these employees' HSAs. Employee W, a full-time employee of Employer E and an eligible individual, is covered under an HDHP provided by the employer of W's spouse and not under Employer E's HDHP. Employer E is not required to make comparable contributions to W's HSA. Example 2. In a calendar year, Employer F does not offer an HDHP. Several full-time employees of Employer F, who are eligible individuals, have HSAs. Employer F contributes to these employees' HSAs. Employer F must make comparable contributions to the HSAs of all full-time employees who are eligible individuals. Example 3. In a calendar year, Employer G offers an HDHP to its full-time employees. Most full-time employees are covered under Employer G's HDHP and Employer G makes comparable contributions to these employees' HSAs and also to the HSAs of full-time employees who are eligible individuals and who are not covered under Employer G's HDHP. Employee S, a full-time employee of Employer G and a comparable participating employee, is covered under an HDHP provided by the employer of S's spouse and not under Employer G's HDHP. Employer G must make comparable contributions to S's HSA. Q-8: If an employee and his or her spouse are eligible individuals who work for the same employer and one employee-spouse has family coverage for both employees under the employer's HDHP, must the employer make comparable contributions to the HSAs of both employees? A-8: (a) In general. If the employer makes contributions only to the HSAs of employees who are eligible individuals covered under its HDHP where only one employee-spouse has family coverage for both employees under the employer's HDHP, the employer is not required to contribute to the HSAs of both employee-spouses. The employer is required to contribute to the HSA of the employee-spouse with coverage under the employer's HDHP, but is not required to contribute to the HSA of the employee-spouse covered under the employer's HDHP by virtue of his or her spouse's coverage. However, if the employer contributes to the HSA of any employee who is an eligible individual with coverage under an HDHP that is not an HDHP provided by the employer, the employer must make comparable contributions to the HSAs of both employee-spouses if they are both eligible individuals. If an employer is required to contribute to the HSAs of both employee-spouses, the employer is not required to contribute amounts in excess of the annual contribution limits in section 223(b). (b) Examples. The following examples illustrate the rules in paragraph (a) of this Q & A-8. None of the employees in the following examples are covered by a collective bargaining agreement. The examples read as follows: Example 1. In a calendar year, Employer H offers an HDHP to its full-time employees. Most full-time employees are covered under Employer H's HDHP and Employer H makes comparable contributions only to these employees' HSAs. T and U are a married couple. Employee T, who is a full-time employee of Employer H and an eligible individual, has family coverage under Employer H's HDHP for T and T's spouse. Employee U, who is also a full-time employee of Employer H and an eligible individual, does not have coverage under Employer H's HDHP except as the spouse of Employee T. Employer H is required to make comparable contributions to T's HSA, but is not required to make comparable contributions to U's HSA. Example 2. In a calendar year, Employer J offers an HDHP to its full-time employees. Most full-time employees are covered under Employer J's HDHP and Employer J makes comparable contributions to these employees' HSAs and to the HSAs of full-time employees who are eligible individuals but are not covered under Employer J's HDHP. R and S are a married couple. Employee S, who is a full-time employee of Employer J and an eligible individual, has family coverage under Employer J's HDHP for S and S's spouse. Employee R, who is also a full-time employee of Employer J and an eligible individual, does not have coverage under Employer J's HDHP except as the spouse of Employee S. Employer J must make comparable contributions to S's HSA and to R's HSA. Q-9: Does an employer that makes HSA contributions only for one class of non-collectively bargained employees who are eligible individuals, but not for another class of non-collectively bargained employees who are eligible individuals (for example, management v. non-management) satisfy the requirement that the employer make comparable contributions? A-9: (a) Different classes of employees. No. If the two classes of employees are comparable participating employees, the comparability rules are not satisfied. The only categories of employees for comparability purposes are current full-time employees, current part-time employees, and former employees. Collectively bargained employees are not comparable participating employees. But see Q & A-1 in 54.4980G-5 on contributions made through a cafeteria plan. (b) Examples. The following examples illustrate the rules in paragraph (a) of this Q & A-9. None of the employees in the following examples are covered by a collective bargaining agreement. The examples read as follows: Example 1. In a calendar year, Employer K maintains an HDHP covering all management and non-management employees. Employer K contributes to the HSAs of non-management employees who are eligible individuals covered under its HDHP. Employer K does not contribute to the HSAs of its management employees who are eligible individuals covered under its HDHP. The comparability rules are not satisfied. Example 2. All of Employer L's employees are located in city X and city Y. In a calendar year, Employer L maintains an HDHP for all employees working in city X only. Employer L does not maintain an HDHP for its employees working in city Y. Employer L contributes $500 to the HSAs of city X employees who are eligible individuals with coverage under its HDHP. Employer L does not contribute to the HSAs of any of its city Y employees. The comparability rules are satisfied because none of the employees in city Y are covered under an HDHP of Employer L. (However, if any employees in city Y were covered by an HDHP of Employer L, Employer L could not fail to contribute to their HSAs merely because they work in a different city.) Example 3. Employer M has two divisions—division N and division O. In a calendar year, Employer M maintains an HDHP for employees working in division N and division O. Employer M contributes to the HSAs of division N employees who are eligible individuals with coverage under its HDHP. Employer M does not contribute to the HSAs of division O employees who are eligible individuals covered under its HDHP. The comparability rules are not satisfied. Q-10: If an employer contributes to the HSAs of former employees who are eligible individuals, do the comparability rules apply to these contributions? A-10: (a) Former employees . Yes. The comparability rules apply to contributions an employer makes to former employees' HSAs. Therefore, if an employer contributes to any former employee's HSA, it must make comparable contributions to the HSAs of all comparable participating former employees (former employees who are eligible individuals with the same category of HDHP coverage). However, an employer is not required to make comparable contributions to the HSAs of former employees with coverage under the employer's HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1)). See Q & A-5 and Q & A-12 of this section. The comparability rules apply separately to former employees because they are a separate category of covered employee. See Q & A-5 of this section. Also, former employees who were covered by a collective bargaining agreement immediately before termination of employment are not comparable participating employees. See Q & A-6 of this section. (b) Locating former employees . An employer making comparable contributions to former employees must take reasonable actions to locate any missing comparable participating former employees. In general, such actions include the use of certified mail, the Internal Revenue Service Letter Forwarding Program or the Social Security Administration's Letter Forwarding Service. (c) Examples . The following examples illustrate the rules in paragraph (a) of this Q & A-10. None of the employees in the following examples are covered by a collective bargaining agreement. The examples read as follows: Example 1. In a calendar year, Employer N contributes $1,000 for the calendar year to the HSA of each current employee who is an eligible individual with coverage under any HDHP. Employer N does not contribute to the HSA of any former employee who is an eligible individual. Employer N's contributions satisfy the comparability rules. Example 2. In a calendar year, Employer O contributes to the HSAs of current employees and former employees who are eligible individuals covered under any HDHP. Employer O contributes $750 to the HSA of each current employee with self-only HDHP coverage and $1,000 to the HSA of each current employee with family HDHP coverage. Employer O also contributes $300 to the HSA of each former employee with self-only HDHP coverage and $400 to the HSA of each former employee with family HDHP coverage. Employer O's contributions satisfy the comparability rules. Q-11: Is an employer permitted to make comparable contributions only to the HSAs of comparable participating former employees who have coverage under the employer's HDHP? A-11: If during a calendar year, an employer contributes to the HSA of any former employee who is an eligible individual covered under an HDHP provided by the employer, the employer is required to make comparable contributions to the HSAs of all former employees who are comparable participating former employees with coverage under any HDHP provided by the employer. An employer that contributes only to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP is not required to make comparable contributions to the HSAs of former employees who are eligible individuals and who are not covered under the employer's HDHP. However, an employer that contributes to the HSA of any former employee who is an eligible individual with coverage under an HDHP that is not an HDHP of the employer, must make comparable contributions to the HSAs of all former employees who are eligible individuals whether or not covered under an HDHP of the employer. Q-12: If an employer contributes only to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP, must the employer make comparable contributions to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1))? A-12: No. An employer that contributes only to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP is not required to make comparable contributions to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1)). Q-13: How do the comparability rules apply if some employees have HSAs and other employees have Archer MSAs? A-13: (a) HSAs and Archer MSAs . The comparability rules apply separately to employees who have HSAs and employees who have Archer MSAs. However, if an employee has both an HSA and an Archer MSA, the employer may contribute to either the HSA or the Archer MSA, but not to both. (b) Example . The following example illustrates the rules in paragraph (a) of this Q & A-13: Example. In a calendar year, Employer P contributes $600 to the Archer MSA of each employee who is an eligible individual and who has an Archer MSA. Employer P contributes $500 for the calendar year to the HSA of each employee who is an eligible individual and who has an HSA. If an employee has both an Archer MSA and an HSA, Employer P contributes to the employee's Archer MSA and not to the employee's HSA. Employee X has an Archer MSA and an HSA. Employer P contributes $600 for the calendar year to X's Archer MSA but does not contribute to X's HSA. Employer P's contributions satisfy the comparability rules. § 54.4980G-4 Calculating comparable contributions. Q-1: What are comparable contributions? A-1: (a) Definition . Contributions are comparable if, for each month in a calendar year, the contributions are either the same amount or the same percentage of the deductible under the HDHP for employees who are eligible individuals with the same category of coverage on the first day of that month. Employees with self-only HDHP coverage are tested separately from employees with family HDHP coverage. Similarly, employees with different categories of family HDHP coverage may be tested separately. See Q & A-2 in § 54.4980G-1. An employer is not required to contribute the same amount or the same percentage of the deductible for employees who are eligible individuals with one category of HDHP coverage that it contributes for employees who are eligible individuals with a different category of HDHP coverage. For example, an employer that satisfies the comparability rules by contributing the same amount to the HSAs of all employees who are eligible individuals with family HDHP coverage is not required to contribute any amount to the HSAs of employees who are eligible individuals with self-only HDHP coverage, or to contribute the same percentage of the self-only HDHP deductible as the amount contributed with respect to family HDHP coverage. However, the contribution with respect to the self plus two category may not be less than the contribution with respect to the self plus one category and the contribution with respect to the self plus three or more category may not be less than the contribution with respect to the self plus two category. (b) Examples . The following examples illustrate the rules in paragraph (a) of this Q & A-1. None of the employees in the following examples are covered by a collective bargaining agreement. The examples read as follows: Example 1. In the 2007 calendar year, Employer A offers its full-time employees three health plans, including an HDHP with self-only coverage and a $2,000 deductible. Employer A contributes $1,000 for the calendar year to the HSA of each employee who is an eligible individual electing the self-only HDHP coverage. Employer A makes no HSA contributions for employees with family HDHP coverage or for employees who do not elect the employer's self-only HDHP. Employer A's HSA contributions satisfy the comparability rules. Example 2. In the 2007 calendar year, Employer B offers its employees an HDHP with a $3,000 deductible for self-only coverage and a $4,000 deductible for family coverage. Employer B contributes $1,000 for the calendar year to the HSA of each employee who is an eligible individual electing the self-only HDHP coverage. Employer B contributes $2,000 for the calendar year to the HSA of each employee who is an eligible individual electing the family HDHP coverage. Employer B's HSA contributions satisfy the comparability rules. Example 3. In the 2007 calendar year, Employer C offers its employees an HDHP with a $1,500 deductible for self-only coverage and a $3,000 deductible for family coverage. Employer C contributes $1,000 for the calendar year to the HSA of each employee who is an eligible individual electing the self-only HDHP coverage. Employer C contributes $1,000 for the calendar year to the HSA of each employee who is an eligible individual electing the family HDHP coverage. Employer C's HSA contributions satisfy the comparability rules. Example 4. In the 2007 calendar year, Employer D offers its employees an HDHP with a $1,500 deductible for self-only coverage and a $3,000 deductible for family coverage. Employer D contributes $1,500 for the calendar year to the HSA of each employee who is an eligible individual electing the self-only HDHP coverage. Employer D contributes $1,000 for the calendar year to the HSA of each employee who is an eligible individual electing the family HDHP coverage. Employer D's HSA contributions satisfy the comparability rules. Example 5. (i) In the 2007 calendar year, Employer E maintains two HDHPs. Plan A has a $2,000 deductible for self-only coverage and a $4,000 deductible for family coverage. Plan B has a $2,500 deductible for self-only coverage and a $4,500 deductible for family coverage. For the calendar year, Employer E makes contributions to the HSA of each full-time employee who is an eligible individual covered under Plan A of $600 for self-only coverage and $1,000 for family coverage. Employer E satisfies the comparability rules, if it makes either of the following contributions for the 2007 calendar year to the HSA of each full-time employee who is an eligible individual covered under Plan B— (A) $600 for each full-time employee with self-only coverage and $1,000 for each full-time employee with family coverage; or (B) $750 for each employee with self-only coverage and $1,125 for each employee with family coverage (the same percentage of the deductible Employer E contributes for full-time employees covered under Plan A, 30% of the deductible for self-only coverage and 25% of the deductible for family coverage). (ii) Employer E also makes contributions to the HSA of each part-time employee who is an eligible individual covered under Plan A of $300 for self-only coverage and $500 for family coverage. Employer E satisfies the comparability rules, if it makes either of the following contributions for the 2007 calendar year to the HSA of each part-time employee who is an eligible individual covered under Plan B— (A) $300 for each part-time employee with self-only coverage and $500 for each part-time employee with family coverage; or (B) $375 for each part-time employee with self-only coverage and $563 for each part-time employee with family coverage (the same percentage of the deductible Employer E contributes for part-time employees covered under Plan A, 15% of the deductible for self-only coverage and 12.5% of the deductible for family coverage). Example 6. (i) In the 2007 calendar year, Employer F maintains an HDHP. The HDHP has the following coverage options— (A) A $2,500 deductible for self-only coverage; (B) A $3,500 deductible for self plus one dependent (self plus one); (C) A $3,500 deductible for self plus spouse (self plus one); (D) A $3,500 deductible for self plus spouse and one dependent (self plus two); and (E) A $3,500 deductible for self plus spouse and two or more dependents (self plus three or more). (ii) Employer F makes the following contributions for the calendar year to the HSA of each full-time employee who is an eligible individual covered under the HDHP— (A) $750 for self-only coverage; (B) $1,000 for self plus one dependent; (C) $1,000 for self plus spouse; (D) $1,500 for self plus spouse and one dependent; and (E) $2,000 for self plus spouse and two or more dependents. (iii) Employer F's HSA contributions satisfy the comparability rules. Example 7. (i) In a calendar year, Employer G offers its employees an HDHP and a health flexible spending arrangement (health FSA). The health FSA reimburses employees for medical expenses as defined in section 213(d). Some of Employer G's employees have coverage under the HDHP and the health FSA, some have coverage under the HDHP and their spouse's FSA, and some have coverage under the HDHP and are enrolled in Medicare. For the calendar year, Employer G contributes $500 to the HSA of each employee who is an eligible individual. No contributions are made to the HSAs of employees who have coverage under Employer G's health FSA or under a spouse's health FSA or who are enrolled in Medicare. (ii) The employees who have coverage under a health FSA (whether Employer H's or their spouse's FSA) or who are covered under Medicare are not eligible individuals. Specifically, the employees who have coverage under the health FSA or under a spouse's health FSA are not comparable participating employees because they are not eligible individuals under section 223(c)(1). Similarly, the employees who are enrolled in Medicare are not comparable participating employees because they are not eligible individuals under section 223(b)(7) and (c)(1). Therefore, employees who have coverage under the health FSA or under a spouse's health FSA and employees who are enrolled in Medicare are excluded from comparability testing. See sections 4980G(b) and 4980E. Employer G's contributions satisfy the comparability rules. Q-2: How does an employer comply with the comparability rules when some non-collectively bargained employees who are eligible individuals do not work for the employer during the entire calendar year? A-2: (a) In general . In determining whether the comparability rules are satisfied, an employer must take into account all full-time and part-time employees who were employees and eligible individuals for any month during the calendar year. (Full-time and part-time employees are tested separately. See Q & A-5 in § 54.4980G-3.) There are two methods to comply with the comparability rules when some employees who are eligible individuals do not work for the employer during the entire calendar year; contributions may be made on a pay-as-you-go basis or on a look-back basis. See Q & A-9 through Q & A-11 in § 54.4980G-3 for the rules regarding comparable contributions to the HSAs of former employees. (b) Contributions on a pay-as-you-go basis . An employer may comply with the comparability rules by contributing amounts at one or more dates during the calendar year to the HSAs of employees who are eligible individuals as of the first day of the month, if contributions are the same amount or the same percentage of the HDHP deductible for employees who are eligible individuals as of the first day of the month with the same category of coverage and are made at the same time. Contributions made at the employer's usual payroll interval for different groups of employees are considered to be made at the same time. For example, if salaried employees are paid monthly and hourly employees are paid bi-weekly, an employer may contribute to the HSAs of hourly employees on a bi-weekly basis and to the HSAs of salaried employees on a monthly basis. An employer may change the amount that it contributes to the HSAs of employees at any point. However, the changed contribution amounts must satisfy the comparability rules. (c) Examples . The following examples illustrate the rules in paragraph (b) of this Q & A-2: The examples read as follows: Example 1. (i) Beginning on January 1st, Employer H contributes $50 per month on the first day of each month to the HSA of each employee who is an eligible individual on that date. Employer H does not contribute to the HSAs of former employees. In mid-March of the same year, Employee X, an eligible individual, terminates employment after Employer H has contributed $150 to X's HSA. After X terminates employment, Employer H does not contribute additional amounts to X's HSA. In mid-April of the same year, Employer H hires Employee Y, an eligible individual, and contributes $50 to Y's HSA in May and $50 in June. Effective in July of the same year, Employer H stops contributing to the HSAs of all employees and makes no contributions to the HSA of any employee for the months of July through December. In August, Employer H hires Employee Z, an eligible individual. Employer H does not contribute to Z's HSA. After Z is hired, Employer H does not hire additional employees. As of the end of the calendar year, Employer H has made the following HSA contributions to its employees' HSAs— (A) Employer H contributed $150 to X's HSA; (B) Employer H contributed $100 to Y's HSA; (C) Employer H did not contribute to Z's HSA; and (D) Employer H contributed $300 to the HSA of each employee who was an eligible individual and employed by Employer J from January through June. (ii) Employer H's contributions satisfy the comparability rules. Example 2. In a calendar year, Employer J offers its employees an HDHP and contributes on a monthly pay-as-you-go basis to the HSAs of employees who are eligible individuals with coverage under Employer J's HDHP. In the calendar year, Employer J contributes $50 per month to the HSA of each of employee with self-only HDHP coverage and $100 per month to the HSA of each employee with family HDHP coverage. From January 1st through March 31th of the calendar year, Employee X is an eligible individual with self-only HDHP coverage. From April 1st through December 31th of the calendar year, X is an eligible individual with family HDHP coverage. For the months of January, February and March of the calendar year, Employer J contributes $50 per month to X's HSA. For the remaining months of the calendar year, Employer J contributes $100 per month to X's HSA. Employer J's contributions to X's HSA satisfy the comparability rules. (d) Contributions on a look-back basis . An employer may also satisfy the comparability rules by determining comparable contributions for the calendar year at the end of the calendar year, taking into account all employees who were eligible individuals for any month during the calendar year and contributing the same percentage of the HDHP deductible or the same dollar amount to the HSAs of all employees with the same category of coverage for that month. (e) Examples . The following examples illustrate the rules in paragraph (d) of this Q & A-2. The examples read as follows: Example 1. In a calendar year, Employer K offers its employees an HDHP and contributes on a look-back basis to the HSAs of employees who are eligible individuals with coverage under Employer K's HDHP. Employer K contributes $600 ($50 per month) for the calendar year to the HSA of each of employee with self-only HDHP coverage and $1,200 ($100 per month) for the calendar year to the HSA of each employee with family HDHP coverage. From January 1st through June 30th of the calendar year, Employee Y is an eligible individual with family HDHP coverage. From July 1st through December 31, Y is an eligible individual with self-only HDHP coverage. Employer K contributes $900 on a look-back basis for the calendar year to Y's HSA ($100 per month for the months of January through June and $50 per month for the months of July through December). Employer K's contributions to Y's HSA satisfy the comparability rules. Example 2. On December 31st, Employer L contributes $50 per month on a look-back basis to each employee's HSA for each month in the calendar year that the employee was an eligible individual. In mid-March of the same year, Employee T, an eligible individual, terminated employment. In mid-April of the same year, Employer L hired Employee U, who becomes an eligible individual as of May 1st and works for Employer L through December 31st. On December 31st, Employer L contributes $150 to Employee T's HSA and $400 to Employee U's HSA. Employer L's contributions satisfy the comparability rules. (f) Periods and dates for making contributions . With both the pay-as-you-go method and the look-back method, an employer may establish, on a reasonable and consistent basis, periods for which contributions will be made (for example, a quarterly period covering three consecutive months in a calendar year) and the dates on which such contributions will be made for that designated period (for example, the first day of the quarter or the last day of the quarter in the case of an employer who has established a quarterly period for making contributions). An employer that makes contributions on a pay-as-you-go basis for a period covering more than one month will not fail to satisfy the comparability rules because an employee who terminates employment prior to the end of the period for which contributions were made has received more contributions on a monthly basis than employees who have worked the entire period. In addition, an employer that makes contributions on a pay-as-you-go basis for a period covering more than one month must make HSA contributions for any comparable participating employees hired after the date of initial funding for that period. (g) Example . The following example illustrates the rules in paragraph (f) of this Q & A-2: Example. Employer M has established, on a reasonable and consistent basis, a quarterly period for making contributions to the HSAs of eligible employees on a pay-as-you-go basis. Beginning on January 1st, Employer M contributes $150 for the first three months of the calendar year to the HSA of each employee who is an eligible individual on that date. On January 15th, Employee V, an eligible individual, terminated employment after Employer M has contributed $150 to V's HSA. On January 15th, Employer M hired Employee W, who becomes an eligible individual as of February 1st. On April 1st, Employer M has contributed $100 to W's HSA for the two months (February and March) in the quarter period that Employee W was an eligible employee. Employer M's contributions satisfy the comparability rules. Q-3: How do the comparability rules apply to employer contributions to employees' HSAs if some non-collectively bargained employees work full-time during the entire calendar year, and other non-collectively bargained employees work full-time for less than the entire calendar year? A-3: Employer contributions to the HSAs of employees who work full-time for less than twelve months satisfy the comparability rules if the contribution amount is comparable when determined on a month-to-month basis. For example, if the employer contributes $240 to the HSA of each full-time employee who works the entire calendar year, the employer must contribute $60 to the HSA of each full-time employee who works on the first day of each three months of the calendar year. The rules set forth in this Q & A-2 apply to employer contributions made on a pay-as-you-go basis or on a look-back basis as described in Q & A-3 of this section. See sections 4980G(b) and 4980E(d)(2)(B). Q-4: May an employer make contributions for the entire year to the HSAs of its employees who are eligible individuals at the beginning of the calendar year (on a pre-funded basis) instead of contributing on a pay-as-you-go or on a look-back basis? A-4: (a) Contributions on a pre-funded basis . Yes. An employer may make contributions for the entire year to the HSAs of its employees who are eligible individuals at the beginning of the calendar year. An employer that pre-funds the HSAs of its employees will not fail to satisfy the comparability rules because an employee who terminates employment prior to the end of the calendar year has received more contributions on a monthly basis than employees who work the entire calendar year. See Q & A-12 of this section. Under section 223(d)(1)(E), an account beneficiary's interest in an HSA is nonforfeitable. An employer must make comparable contributions for all employees who are comparable participating employees for any month during the calendar year, including employees who are eligible individuals hired after the date of initial funding. An employer that makes HSA contributions on a pre-funded basis may also contribute on a pre-funded basis to the HSAs of employees who are eligible individuals hired after the date of initial funding. Alternatively, an employer that has pre-funded the HSAs of comparable participating employees may contribute to the HSAs of employees who are eligible individuals hired after the date of initial funding on a pay-as-you-go basis or on a look-back basis. An employer that makes HSA contributions on a pre-funded basis must use the same contribution method for all employees who are eligible individuals hired after the date of initial funding. (b) Example . The following example illustrates the rules in paragraph (a) of this Q & A-4: Example. (i) On January 1, Employer N contributes $1,200 for the calendar year on a pre-funded basis to the HSA of each employee who is an eligible individual. In mid-May, Employer N hires Employee B, who becomes an eligible individual as of June 1st. Therefore, Employer N is required to make comparable contributions to B's HSA beginning in June. Employer N satisfies the comparability rules with respect to contributions to B's HSA if it makes HSA contributions in any one of the following ways— (A) Pre-funding B's HSA by contributing $700 to B's HSA; (B) Contributing $100 per month on a pay-as-you-go basis to B's HSA; or (C) Contributing to B's HSA at the end of the calendar year taking into account each month that B was an eligible individual and employed by Employer M. (ii) If Employer M hires additional employees who are eligible individuals after initial funding, it must use the same contribution method for these employees that it used to contribute to B's HSA. Q-5: Must an employer use the same contribution method as described in Q & A-2 and Q & A-4 of this section for all employees who were comparable participating employees for any month during the calendar year? A-5: Yes. If an employer makes comparable HSA contributions on a pay-as-you-go basis, it must do so for each employee who is a comparable participating employee as of the first day of the month. If an employer makes comparable contributions on a look-back basis, it must do so for each employee who was a comparable participating employee for any month during the calendar year. If an employer makes HSA contributions on a pre-funded basis, it must do so for all employees who are comparable participating employees at the beginning of the calendar year and must make comparable HSA contributions for all employees who are comparable participating employees for any month during the calendar year, including employees who are eligible individuals hired after the date of initial funding. See Q & A-4 of this section for rules regarding contributions for employees hired after initial funding. Q-6: How does an employer comply with the comparability rules if an employee has not established an HSA at the time the employer contributes to its employees' HSAs? A-6: (a) Employee has not established an HSA at the time the employer funds its employees' HSAs. If an employee has not established an HSA at the time the employer funds its employees' HSAs, the employer complies with the comparability rules by contributing comparable amounts plus reasonable interest to the employee's HSA when the employee establishes the HSA, taking into account each month that the employee was a comparable participating employee. See Q & A-13 of this section for rules regarding reasonable interest. (b) Employee has not established an HSA by the end of the calendar year. [Reserved]. (c) Example. The following example illustrates the rules in paragraph (a) of this Q & A-6: Example. Beginning on January 1st, Employer O contributes $500 per calendar year on a pay-as-you-go basis to the HSA of each employee who is an eligible individual. Employee C is an eligible individual during the entire calendar year but does not establish an HSA until March. Notwithstanding C's delay in establishing an HSA, Employer O must make up the missed HSA contributions plus reasonable interest for January and February by April 15th of the following calendar year. Q-7: If an employer bases its contributions on a percentage of the HDHP deductible, how is the correct percentage or dollar amount computed? A-7: (a) Computing HSA contributions. The correct percentage is determined by rounding to the nearest 1/100th of a percentage point and the dollar amount is determined by rounding to the nearest whole dollar. (b) Example. The following example illustrates the rules in paragraph (a) of this Q & A-7: Example. In this Example, assume that each HDHP provided by Employer P satisfies the definition of an HDHP for the 2007 calendar year. In the 2007 calendar year, Employer P maintains two HDHPs. Plan A has a deductible of $3,000 for self-only coverage. Employer P contributes $1,000 for the calendar year to the HSA of each employee covered under Plan A. Plan B has a deductible of $3,500 for self-only coverage. Employer P satisfies the comparability rules if it makes either of the following contributions for the 2007 calendar year to the HSA of each employee who is an eligible individual with self-only coverage under Plan B— (i) $1,000; or (ii) $1,167 (33.33% of the deductible rounded to the nearest whole dollar amount). Q-8: Does an employer that contributes to the HSA of each comparable participating employee in an amount equal to the employee's HSA contribution or a percentage of the employee's HSA contribution (matching contributions) satisfy the rule that all comparable participating employees receive comparable contributions? A-8: No. If all comparable participating employees do not contribute the same amount to their HSAs and, consequently, do not receive comparable contributions to their HSAs, the comparability rules are not satisfied, notwithstanding that the employer offers to make available the same contribution amount to each comparable participating employee. But see Q & A-1 in § 54.4980G-5 on contributions to HSAs made through a cafeteria plan. Q-9: If an employer conditions contributions by the employer to an employee's HSA on an employee's participation in health assessments, disease management programs or wellness programs and makes the same contributions available to all employees who participate in the programs, do the contributions satisfy the comparability rules? A-9: No. If all comparable participating employees do not elect to participate in all the programs and consequently, all comparable participating employees do not receive comparable contributions to their HSAs, the employer contributions fail to satisfy the comparability rules. But see Q & A-1 in § 54.4980G-5 on contributions made to HSAs through a cafeteria plan. Q-10: If an employer makes additional contributions to the HSAs of all comparable participating employees who have attained a specified age or who have worked for the employer for a specified number of years, do the contributions satisfy the comparability rules? A-10: No. If all comparable participating employees do not meet the age or length of service requirement, all comparable participating employees do not receive comparable contributions to their HSAs and the employer contributions fail to satisfy the comparability rules. Q-11: If an employer makes additional contributions to the HSAs of all comparable participating employees who are eligible to make the additional contributions (HSA catch-up contributions) under section 223(b)(3), do the contributions satisfy the comparability rules? A-11: No. If all comparable participating employees are not eligible to make the additional HSA contributions under section 223(b)(3), all comparable participating employees do not receive comparable contributions to their HSAs, and the employer contributions fail to satisfy the comparability rules. Q-12: If an employer's contributions to an employee's HSA result in non-comparable contributions, may the employer recoup the excess amount from the employee's HSA? A-12: No. An employer may not recoup from an employee's HSA any portion of the employer's contribution to the employee's HSA. Under section 223(d)(1)(E), an account beneficiary's interest in an HSA is nonforfeitable. However, an employer may make additional HSA contributions to satisfy the comparability rules. An employer may contribute up until April 15th following the calendar year in which the non-comparable contributions were made. An employer that makes additional HSA contributions to correct non-comparable contributions must also contribute reasonable interest. However, an employer is not required to contribute amounts in excess of the annual contribution limits in section 223(b). See Q & A-13 of this section for rules regarding reasonable interest. Q-13: What constitutes a reasonable interest rate for purposes of making comparable contributions? A-13: The determination of whether a rate of interest used by an employer is reasonable will be based on all of the facts and circumstances. If an employer calculates interest using the Federal short-term rate as determined by the Secretary in accordance with section 1274(d), the employer is deemed to use a reasonable interest rate. § 54.4980G-5 HSA comparability rules and cafeteria plans and waiver of excise tax. Q-1: If an employer makes contributions through a section 125 cafeteria plan to the HSA of each employee who is an eligible individual, are the contributions subject to the comparability rules? A-1: (a) In general. No. The comparability rules do not apply to HSA contributions that an employer makes through a section 125 cafeteria plan. However, contributions to an HSA made through a cafeteria plan are subject to the section 125 nondiscrimination rules (eligibility rules, contributions and benefits tests and key employee concentration tests). See section 125(b), (c) and (g) and the regulations thereunder. (b) Contributions made through a section 125 cafeteria plan. Employer contributions to employees' HSAs are made through a section 125 cafeteria plan and are subject to the section 125 cafeteria plan nondiscrimination rules and not the comparability rules if under the written cafeteria plan, the employees have the right to elect to receive cash or other taxable benefits in lieu of all or a portion of an HSA contribution (meaning that all or a portion of the HSA contributions are available as pre-tax salary reduction amounts), regardless of whether an employee actually elects to contribute any amount to the HSA by salary reduction. Q-2: If an employer makes contributions through a cafeteria plan to the HSA of each employee who is an eligible individual in an amount equal to the amount of the employee's HSA contribution or a percentage of the amount of the employee's HSA contribution (matching contributions), are the contributions subject to the section 4980G comparability rules? A-2: No. The comparability rules do not apply to HSA contributions that an employer makes through a section 125 cafeteria plan. Thus, where matching contributions are made by an employer through a cafeteria plan, the contributions are not subject to the comparability rules of section 4980G. However, contributions, including matching contributions, to an HSA made under a cafeteria plan are subject to the section 125 nondiscrimination rules (eligibility rules, contributions and benefits tests and key employee concentration tests). See Q & A-1 of this section. Q-3: If under the employer's cafeteria plan, employees who are eligible individuals and who participate in health assessments, disease management programs or wellness programs receive an employer contribution to an HSA and the employees have the right to elect to make pre-tax salary reduction contributions to their HSAs, are the contributions subject to the comparability rules? A-3: (a) In general. No. The comparability rules do not apply to employer contributions to an HSA made through a cafeteria plan. See Q & A-1 of this section. (b) Examples. The following examples illustrate the rules in this § 54.4980G-5. The examples read as follows: Example 1. Employer A's written cafeteria plan permits employees to elect to make pre-tax salary reduction contributions to their HSAs. Employees making this election have the right to receive cash or other taxable benefits in lieu of their HSA pre-tax contribution. The section 125 cafeteria plan nondiscrimination rules and not the comparability rules apply because the HSA contributions are made through the cafeteria plan. Example 2. Employer B's written cafeteria plan permits employees to elect to make pre-tax salary reduction contributions to their HSAs. Employees making this election have the right to receive cash or other taxable benefits in lieu of their HSA pre-tax contribution. Employer B automatically contributes a non-elective matching contribution or seed money to the HSA of each employee who makes a pre-tax HSA contribution. The section 125 cafeteria plan nondiscrimination rules and not the comparability rules apply to Employer B's HSA contributions because the HSA contributions are made through the cafeteria plan. Example 3. Employer C's written cafeteria plan permits employees to elect to make pre-tax salary reduction contributions to their HSAs. Employees making this election have the right to receive cash or other taxable benefits in lieu of their HSA pre-tax contribution. Employer C makes a non-elective contribution to the HSAs of all employees who complete a health risk assessment and participate in Employer C's wellness program. Employees do not have the right to receive cash or other taxable benefits in lieu of Employer C's non-elective contribution. The section 125 cafeteria plan nondiscrimination rules and not the comparability rules apply to Employer C's HSA contributions because the HSA contributions are made through the cafeteria plan. Example 4. Employer D's written cafeteria plan permits employees to elect to make pre-tax salary reduction contributions to their HSAs. Employees making this election have the right to receive cash or other taxable benefits in lieu of their HSA pre-tax contribution. Employees participating in the plan who are eligible individuals receive automatic employer contributions to their HSAs. Employees make no election with respect to Employer D's contribution and do not have the right to receive cash or other taxable benefits in lieu of Employer D's contribution but are permitted to make their own pre-tax salary reduction contributions to fund their HSAs. The section 125 cafeteria plan nondiscrimination rules and not the comparability rules apply to Employer D's HSA contributions because the HSA contributions are made through the cafeteria plan. Q-4: May all or part of the excise tax imposed under section 4980G be waived? A-4: In the case of a failure which is due to reasonable cause and not to willful neglect, all or a portion of the excise tax imposed under section 4980G may be waived to the extent that the payment of the tax would be excessive relative to the failure involved. See sections 4980G(b) and 4980E(c). Approved: July 14, 2006. Mark E. Matthews, Deputy Commissioner for Services and Enforcement. Eric Solomon, Acting Deputy Assistant Secretary (Tax Policy). [FR Doc. E6-11991 Filed 7-28-06; 8:45 am] BILLING CODE 4830-01-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 261 [FRL-8204-4] Hazardous Waste Management System; Identification and Listing of Hazardous Waste; Final Exclusion AGENCY: Environmental Protection Agency (EPA). ACTION: Direct final rule. SUMMARY: EPA is taking direct final action to codify a longstanding generator-specific delisting determination for brine purification muds (K071) generated by Olin Corporation (Olin) at its facility in Charleston, Tennessee. This rule will amend the Code of Federal Regulations to reflect the delisting, which was granted by EPA in December 1981 and by the Tennessee Department of Environment and Conservation in June 1983 after full notice and comment. The rule will not impose any new requirements on Olin or any other member of the regulated community. DATES: This rule is effective on September 29, 2006 without further notice unless we receive adverse comment by August 30, 2006. If we receive adverse comments, we will publish a timely withdrawal in the Federal Register informing the public that this rule will not take effect. ADDRESSES: Submit comments, identified by docket number EPA-R04-RCRA-2006-0478, by one of the following methods: • Federal eRulemaking Portal: www.regulations.gov . Follow the on-line instructions. • E-mail: lippert.kristin@epa.gov . • Mail or deliver: Kristin Lippert, North Enforcement and Compliance Section, Mail Code 4WD-RCRA, RCRA Enforcement and Compliance Branch, U.S. Environmental Protection Agency, Region 4, Sam Nunn Atlanta Federal Center, 61 Forsyth Street, SW., Atlanta, Georgia 30303. Instructions: All comments will be included in the public docket without change and may be made available online at www.regulations.gov , including any personal information provided, unless the comment includes Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Information that you consider CBI or otherwise protected should be clearly identified as such and should not be submitted through www.regulations.gov or e-mail. www.regulations.gov is an “anonymous access” system, and EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send e-mail directly to EPA, your e-mail address will be automatically captured and included as part of the public comment. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Docket: The index to the docket for this action is available electronically at www.regulations.gov and in hard copy at the EPA Library, U.S. Environmental Protection Agency, Region 4, Sam Nunn Atlanta Federal Center, 61 Forsyth Street SW., Atlanta, Georgia 30303. While all documents in the docket are listed in the index, some information may be publicly available only at the hard copy location (e.g., copyrighted material), and some may not be publicly available in either location (e.g., CBI). FOR FURTHER INFORMATION CONTACT: For general and technical information about this Direct Final Rule, contact Kristin Lippert, North Enforcement and Compliance Section, Mail Code 4WD-RCRA, RCRA Enforcement and Compliance Branch, U.S. Environmental Protection Agency, Region 4, Sam Nunn Atlanta Federal Center, 61 Forsyth Street SW., Atlanta, Georgia 30303 or call (404) 562-8605. SUPPLEMENTARY INFORMATION: The information in this section is organized as follows: I. Legal Background II. Olin's Petition to Delist its Waste III. Evaluation of Olin's Petition IV. History of this Rulemaking V. Final Action and Effective Date VI. Regulatory Impact VII. Regulatory Flexibility Act VIII. Executive Order 12875 IX. Executive Order 12898 X. Executive Order 13211 XI. Paperwork Reduction Act XII. Unfunded Mandates Reform Act XIII. Executive Order 13045 XIV. Executive Order 13175 XV. National Technology Transfer and Advancement Act XVI. Executive Order 13132 Federalism XVII. Submission to Congress and General Accounting Office I. Legal Background On January 16, 1981, as part of its final and interim final regulations implementing section 3001 of the Resource Conservation and Recovery Act (RCRA), EPA published an amended list of hazardous wastes from non-specific and specific sources. This list has been amended several times and is published in Title 40 Code of Federal Regulations (40 CFR) 261.31 and 261.32. These wastes are listed as hazardous because: (1) They exhibit one or more of the characteristics of hazardous waste identified in subpart C of part 261 (i.e., ignitability, corrosivity, reactivity, and toxicity); or (2) they meet the criteria for listing contained in 40 CFR 261.11(a)(2) or (a)(3). Individual waste streams may vary, however, depending on raw materials, industrial processes, and other factors. Thus, while a waste that is described in these regulations generally is hazardous, a specific waste from an individual facility meeting the listing description may not be. For this reason, 40 CFR 260.20 and 260.22 provide an exclusion procedure, called delisting, which allows persons to demonstrate that a specific waste generated at a particular facility should not be regulated as a hazardous waste. II. Olin's Petition to Delist its Waste On July 13, 1981, Olin petitioned EPA to amend 40 CFR part 261 to exclude sodium chloride purification muds generated at Olin's facility in Charleston, Tennessee. The muds meet the listing description for EPA Hazardous Waste No. K071—brine purification muds from the mercury cell process in chlorine production, where separately prepurified brine is not used. Olin's petition included a description of its production and treatment processes. Olin's Charleston facility manufactures chlorine using a mercury cell chlor-alkali process. The chlor-alkali production process at Charleston involves the preparation of a strong brine from rock salt, which then circulates through mercury where part of the dissolved sodium chloride is separated by electrolysis into chlorine and sodium. The chlorine is collected and processed into liquid chlorine and the sodium amalgamates with the mercury of the cell and is separated and decomposed to form sodium hydroxide. The weak brine leaves the cells, is dechlorinated, resaturated, and purified. The purification (settling and filtration) of the resaturated brine produces brine muds which contain low levels of mercury carried over from the cells. The muds are dewatered using gravity. Liquid brine and dissolved mercury drain out and are returned to the brine system. Olin's petition also included a description of total constituent and EP toxicity analyses of the muds for mercury, the constituent of concern for K071, and provided a plan for continuous testing of the muds prior to disposal. III. Evaluation of Olin's Petition Based on the information submitted by Olin, EPA granted a conditional temporary exclusion for Olin's sodium chloride purification muds on December 16, 1981 (46 FR 61272, December 16, 1981). The exclusion is conditioned on Olin's testing of samples from each batch of mud for mercury prior to disposal. Batches with a mercury concentration of 0.05 parts per million (ppm) or less are considered nonhazardous and are disposed of in Olin's on-site solid waste landfill. Batches that exceed 0.05 ppm of mercury are considered hazardous and are disposed of accordingly. EPA requested public comments on the delisting of Olin's brine purification muds. No adverse comments were received by the Agency. At EPA's direction on September 28, 1981, Olin also submitted a delisting petition to the Tennessee Division of Solid Waste Management because, at that time, Tennessee had Phase 1 Interim Authorization. On February 17, 1982, Tennessee published notice of its tentative decision to grant Olin's delisting petition and requested public comments. No public comments were received by Tennessee. On June 28, 1983, Tennessee granted final approval of Olin's petition. Under the terms of the final approval, Olin must analyze samples from every batch of mud before disposal and submit the results to Tennessee on a quarterly basis. If a batch exceeds a mercury concentration of 0.05 ppm, Olin must handle the batch as a hazardous waste. In 1984, Congress passed the Hazardous and Solid Waste Amendments (“HSWA”) to RCRA. HSWA included additional criteria for evaluating proposed exclusions of certain listed waste. In anticipation of HSWA, EPA and Tennessee asked Olin to supply additional information that would allow evaluation of Olin's delisting under HSWA's proposed criteria. Olin complied, supplying detailed information supporting the delisting determination previously made by the agencies. Subsequently, both agencies confirmed that final exclusions, such as Olin's delisting, which were granted before November 8, 1984 were not affected by HSWA. IV. History of This Rulemaking In 2004, Olin contacted EPA seeking confirmation that use of potassium chloride as a raw material in the mercury cell process would not affect application of Olin's delisting to brine purification muds generated in that process, provided the muds meet the criteria of the delisting. Olin determined that use of potassium chloride as a raw material in the production process will not alter the composition or characteristics of the resulting brine purification muds with respect to mercury, the constituent of concern, nor will use of potassium chloride introduce any other hazardous constituents into the muds. EPA agreed with Olin's determination and concluded that Olin did not need a modification to its current delisting in order to use the delisting to manage muds generated in the potassium chloride process. In the course of EPA's review of Olin's determination regarding use of potassium chloride, the Agency noted that Olin's delisting is not listed in the Code of Federal Regulations. EPA is issuing this direct final rule to correct this oversight. V. Final Action and Effective Date By this rule, EPA is taking direct final action to incorporate Olin's longstanding delisting into the Code of Federal Regulations. EPA is publishing this as a direct final rule because the Agency views this as a non-controversial amendment to the Code of Federal Regulations and anticipates no adverse comments. Interested parties had two prior opportunities to comment on Olin's delisting petition, first at the federal level and later at the state level, and no adverse comments were submitted. EPA sees no reason to provide a third comment period. This rule will be effective upon publication in the Federal Register . Section 3010(b) of RCRA allows rules to become effective immediately when the regulated community does not need time to come into compliance. That is the case here because this rule will codify Olin's longstanding delisting for brine purification muds by amending the Code of Federal Regulations to reflect the delisting. The rule does not impose any new requirements on Olin or any other member of the regulated community. This reason also provides a basis for making this rule effective immediately, upon publication, under the Administrative Procedure Act pursuant to 5 U.S.C. 553(d). VI. Regulatory Impact Because EPA is issuing today's rule under the Federal RCRA delisting program, only states subject to federal RCRA delisting provisions are affected. This exclusion may not be effective in states that have received EPA's authorization to make their own delisting decisions. Under section 3009 of RCRA, EPA allows states to impose their own non-RCRA regulatory requirements that are more stringent than EPA's requirements. These more stringent requirements may include a provision that prohibits a federally issued exclusion from taking effect in the state. EPA urges petitioners to contact the state regulatory authority to establish the status of their wastes under state law. EPA has also authorized some states to administer a delisting program in place of the federal program, that is, to make state delisting decisions. Therefore, this exclusion does not apply in those authorized states. If Olin manages brine purification muds in any state with delisting authorization, Olin must obtain delisting authorization from the state before Olin can manage the brine purification muds as nonhazardous in that state. Under Executive Order 12866 (58 FR 51735, October 4, 1993), EPA must conduct an “assessment of the potential costs and benefits” for all “significant” regulatory actions. Today's rule is not significant because its effect is to reduce the overall costs and economic impact of EPA's hazardous waste management regulations. This reduction is achieved by excluding waste generated at a specific facility from EPA's lists of hazardous wastes, thus enabling a facility to manage its waste as nonhazardous. Because there is no additional impact from today's rule, the rule is not a significant regulation, and no cost/benefit assessment is required. The Office of Management and Budget (OMB) has also exempted this rule from the requirement for OMB review under Section (6) of Executive Order 12866. VII. Regulatory Flexibility Act Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, whenever an agency is required to publish a general notice of rulemaking for any proposed or final rule, it must prepare and make available for public comment a regulatory flexibility analysis which describes the impact of the rule on small entities (that is, small businesses, small organizations, and small governmental jurisdictions). No regulatory flexibility analysis is required, however, if the Administrator or delegated representative certifies that the rule will not have a significant economic impact on a substantial number of small entities. Today's rule will not have any impact on small entities since its effect is to reduce the overall costs of EPA's hazardous waste regulations on one facility. Accordingly, EPA hereby certifies that this rule will not have a significant economic impact on a substantial number of small entities. This rule, therefore, does not require a regulatory flexibility analysis. VIII. Executive Order 12875 Under Executive Order 12875, EPA may not issue a regulation that is not required by statute and that creates a mandate upon a state, local, or tribal government, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by those governments. If the mandate is unfunded, EPA must provide to the Office of Management and Budget a description of the extent of EPA's prior consultation with representatives of affected state, local, and tribal governments, the nature of their concerns, copies of written communications from the governments, and a statement supporting the need to issue the regulation. In addition, Executive Order 12875 requires EPA to develop an effective process permitting elected officials and other representatives of state, local, and tribal governments “to provide meaningful and timely input in the development of regulatory proposals containing significant unfunded mandates.” Today's rule does not create a mandate on state, local or tribal governments. The rule does not impose any enforceable duties on these entities. Accordingly, the requirements of section 1(a) of Executive Order 12875 do not apply to this rule. IX. Executive Order 12898 Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Population” (February 11, 1994), is designed to address the environmental and human health conditions of minority and low-income populations. EPA is committed to addressing environmental justice concerns and has assumed a leadership role in environmental justice initiatives to enhance environmental quality for all citizens of the United States. The Agency's goals are to ensure that no segment of the population, regardless of race, color, national origin, income, or net worth bears disproportionately high and adverse human health and environmental impacts as a result of EPA's policies, programs, and activities. In response to Executive Order 12898, and to concerns voiced by many groups outside the Agency, EPA's Office of Solid Waste and Emergency Response (OSWER) formed an Environmental Justice Task Force to analyze the array of environmental justice issues specific to waste programs and to develop an overall strategy to identify and address these issues (OSWER Directive No. 9200.3-17). Today's final rule applies to a single waste at a single facility. We have no data indicating that today's final rule would result in disproportionately negative impacts on minority or low income communities. X. Executive Order 13211 Executive Order 13211, “Actions Concerning Regulations That Affect Energy Supply, Distribution, or Use” (May 18, 2001), addresses the need for regulatory actions to more fully consider the potential energy impacts of the proposed rule and resulting actions. Under the Order, agencies are required to prepare a Statement of Energy Effects when a regulatory action may have significant adverse effects on energy supply, distribution, or use, including impacts on price and foreign supplies. Additionally, the requirements obligate agencies to consider reasonable alternatives to regulatory actions with adverse effects and the impacts the alternatives might have upon energy supply, distribution, or use. Today's final rule applies to a single waste at a single facility and is not likely to have any significant adverse impact on factors affecting energy supply. EPA believes that 66 FR 28355 Executive Order 13211 is not relevant to this action. XI. Paperwork Reduction Act This final rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). Because there are no paperwork requirements as part of this final rule, EPA is not required to prepare an Information Collection Request (ICR) in support of today's action. XII. Unfunded Mandates Reform Act Under section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, which was signed into law on March 22, 1995, EPA generally must prepare a written statement for rules with Federal mandates that may result in estimated costs to State, local, and tribal governments in the aggregate, or to the private sector, of $100 million or more in any one year. When such a statement is required for EPA rules, under section 205 of the UMRA EPA must identify and consider alternatives, including the least costly, most cost-effective, or least burdensome alternative that achieves the objectives of the rule. EPA must select that alternative, unless the Administrator explains in the final rule why it was not selected or it is inconsistent with law. Before EPA establishes regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, EPA must develop under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, giving them meaningful and timely input in the development of EPA's regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising them on compliance with the regulatory requirements. The UMRA generally defines a Federal mandate for regulatory purposes as one that imposes an enforceable duty upon state, local, or tribal governments or the private sector. EPA finds that today's rule is deregulatory in nature and does not impose any enforceable duty on any State, local, or tribal governments or the private sector. Therefore, no statement is required under section 205 of the UMRA. In addition, this rule does not establish any regulatory requirements for small governments and so does not require a small government agency plan under UMRA section 203. XIII. Executive Order 13045 Executive Order 13045 (62 FR 19885, April 23, 1997), entitled “Protection of Children from Environmental Health Risks and Safety Risks,” applies to any rule that EPA determines: (1) Is economically significant as defined under Executive Order 12866; and (2) the environmental health or safety risk addressed by the rule has a disproportionate effect on children. If the regulatory action meets both criteria, EPA must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by EPA. Today's rule is not subject to Executive Order 13045 because the rule is not economically significant as defined under Executive Order 12866. XIV. Executive Order 13175 Under Executive Order 13175 (65 FR 67249, November 6, 2000), EPA may not issue a regulation that has tribal implications, that imposes substantial direct compliance costs on Indian tribal governments, and that is not required by statute, unless funds necessary to pay the direct costs incurred by the Indian tribal government or the tribe in complying with the regulation are provided by the Federal government or EPA takes certain steps prior to the formal promulgation of the regulation. Those steps include: (1) Consulting with tribal officials early in the process of developing the proposed regulation; (2) providing to the Director of OMB, in a separately identified section of the regulation's preamble, a description of the extent of EPA's prior consultation with tribal officials, a summary of the nature of their concerns and EPA's position supporting the need to issue the regulation, and a statement of the extent to which the concerns of tribal officials have been met; and (3) making available to the Director of OMB any written communications submitted to EPA by tribal officials. Today's rule does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes, as specified in Executive Order 13175. Accordingly, the requirements of Executive Order 13175 do not apply to this rule. XV. National Technology Transfer and Advancement Act Under section 12(d) of the National Technology Transfer and Advancement Act of 1995, 15 U.S.C. 272 note, EPA is directed to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, business practices) developed or adopted by voluntary consensus standard bodies. Where available and potentially applicable voluntary consensus standards are not used by EPA, the Act requires that EPA provide Congress, through OMB, with an explanation of the reasons for not using such standards. Today's rule does not establish any new technical standards and, therefore, EPA is not required to consider the use of voluntary consensus standards in developing this rule. XVI. Executive Order 13132 Federalism Executive Order 13132 (64 FR 43255, August 10, 1999), entitled “Federalism,” requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” are defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under section 6 of Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or EPA consults with State and local officials early in the process of developing the proposed regulation. EPA also may not issue a regulation that has federalism implications and that preempts State law unless EPA consults with State and local officials early in the process of developing the proposed regulation. Today's rule does not have federalism implications. It does not have a substantial direct effect on States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, because the rule only affects one facility. XVII. Submission to Congress and Government Accountability Office The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of Congress and to the Comptroller General of the United States. Under section 804 of the Congressional Review Act, rules of particular applicability are exempted from the requirements of section 801. See 5 U.S.C. 804(3). EPA is not required to submit a rule report regarding today's action under section 801 because this is a rule of particular applicability. This rule is effective on September 29, 2006. List of Subjects in 40 CFR Part 261 Environmental protection, Hazardous waste, Recycling, and Reporting and recordkeeping requirements. Authority: Section 3001(f) RCRA, 42 U.S.C. 6921(f). Dated: July 18, 2006. Beverly H. Banister, Acting Director, Waste Management Division, Region 4. For the reasons set out in the preamble, 40 CFR part 261 is amended as follows: PART 261—IDENTIFICATION AND LISTING OF HAZARDOUS WASTE 1. The authority citation for part 261 continues to read as follows: Authority: 42 U.S.C. 6905, 6912(a), 6921, 6922, and 6938. 2. In Table 2 of Appendix IX of Part 261, the following waste is added in alphabetical order by facility to read as follows: Appendix IX to Part 261—Wastes Excluded Under §§ 260.20 and 260.22 Table 2.—Wastes Excluded From Specific Sources Facility Address Waste description * * * * * * * Olin Corporation Charleston, TN Sodium chloride purification muds and potassium chloride purification muds (both classified as EPA Hazardous Waste No. K071) that have been batch tested using EPA's Toxicity Characteristic Leaching Procedure and have been found to contain less than 0.05 ppm mercury. Purification muds that have been found to contain less than 0.05 ppm mercury will be disposed in Olin's on-site non-hazardous waste landfill or another Subtitle D landfill. Purification muds that exceed this level will be considered a hazardous waste. * * * * * * * [FR Doc. 06-6587 Filed 7-28-06; 8:45 am]