On April 5, 2022, the IRS and Treasury Department announced a proposed rule to fix the “family glitch” in eligibility rules for the ACA premium tax credit (PTC). In a press statement, the Biden administration reported the “family glitch” affects about 5 million people.
A PTC for purchasing health insurance on the ACA’s marketplace is available to people who do not have access to “affordable” coverage through their jobs. Under current regulations, spouses and children are ineligible for the PTC if an employee’s access to employer-sponsored coverage is deemed affordable (for 2022 plan years, less than 9.61% of household income) based on the cost of self-only coverage, without considering any additional cost of family coverage.
To increase access to the PTC for low-income families, the proposed rule applies a separate PTC affordability standard for family members based on the full cost of family coverage. As a result, an employee’s family may qualify for the PTC even if the employee does not. Importantly, the proposed rule does not increase exposure to employer shared responsibility penalties. Penalties will continue to be triggered only by an employee’s receipt of a marketplace PTC, not their spouse’s or dependents’ PTC. However, employers may see an indirect impact with more families dropping employer-sponsored coverage for newly subsidized ACA marketplace coverage.
As part of the rulemaking process, comments may be submitted through June 6, 2022. If finalized, the new PTC affordability standard would take effect on January 1, 2023.
Proposed Rule » Fact Sheet »
PPI Benefit Solutions does not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.
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