Family Members of Covered Employee May Be Eligible for PTC

The final regulations (TD 9968) under §36b of the Affordable Care Act published last month largely adopt with some amendments the proposed regs released last April (REG-114339-21). Most notably, the final regs revise the affordability test for family members of an employee with health insurance received through their employer. Previously, if the employee’s share of the cost of self-only insurance was less than 9.5% of household income (9.12% for 2023), family members were ineligible for a premium tax credit on an exchange. This was true even if the cost of family coverage exceeded the 9.5% threshold.

The final rules provide that the affordability test for family coverage is based on the employee’s share of the cost for the employee and all other members of the employee’s family. Thus, the new regulations eliminate the “family glitch” by allowing family members of an employee who has affordable minimum essential coverage for a self-only plan, but not a family plan, to obtain health insurance on an exchange and receive a premium tax credit. The new rules are effective starting in 2023.

Note. Treasury and the IRS clarified in the regulations that nothing in these new rules affects any information reporting requirements for employers, including the reporting required under sections 6055 and 6056, which is done on Form 1095-B, Health Coverage, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, respectively.