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Fixing the Family Glitch in Premium Tax Eligibility

 Family Glitch in Premium Tax Eligibility

2 minute read

Last year, the IRS released a final rule that changed the eligibility rules for the premium tax credit (PTC) for family members beginning with the 2023 tax year. The credit lowers the monthly premiums for eligible individuals who purchase health insurance through an Exchange. Individuals aren’t eligible for PTC if they have access to employer-sponsored coverage.

Before 2023, the affordability of employer-sponsored coverage was determined based on the lowest-cost self-only coverage available to the employee rather than the cost of family coverage. This glitch made it more difficult for family members to receive a PTC. The final rule fixes the glitch by basing affordability of employer-sponsored coverage for family members on the cost of family coverage.

The IRS also issued Notices 2022-41 to expand permitted midyear election changes for Section 125 cafeteria plans. Starting in 2023, employers can permit employees to revoke their elections from family coverage to allow one or more family members to enroll in an Exchange plan if certain requirements are met.

 

Employer Impact

Due to these changes, more family members may be eligible for the PTC for coverage purchased through an Exchange. But affordability rules for employees are still based on the employer’s required contribution for self-only coverage. An employer’s health coverage may be unaffordable for a family member even though it’s affordable for the employee. Employers may see some employees move from family coverage to self-only coverage.

In addition, employers that decide to expand their cafeteria plan’s midyear election change events based on the new guidance, should amend their plan documents by the deadline.

Download the bulletin for more details.

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National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Emily Halter-Kinter

Emily Halter-Kinter

Emily Halter-Kinter looks for ways, either large or small, to make a difference each day. She’s outgoing and really loves what she does. Emily enjoys working closely with her clients to provide the best care. As Account Manager for National Insurance Services, Emily works with schools, cities, and counties in Wisconsin on their health insurance, wellness plans, benefit communication, and retirement incentives. She oversees new client implementation, takes policy-related questions, and meets directly with clients to explain their benefits. Emily is a licensed insurance agent and has over 20 years of insurance experience.