IRS Proposes Regulations to Revise Premium Tax Credit’s Affordability Test
The IRS recently issued proposed regulations regarding the determination of the affordability of employer-sponsored health care coverage for purposes of a premium tax credit (PTC).
Currently, under Sec. 36B(c)(2)(C) (i)(II) of the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, an employee is generally eligible for a PTC and health care coverage through an exchange if the employee's required contribution with respect to the coverage offered by their employer is more than 9.5% of household income. Because the current regulations do not directly address coverage for an employee’s family, the affordability of family coverage is determined by the same calculation.
In the proposed regulations, the IRS and Treasury state that they are exercising their regulatory authority in Sec. 36B(h) to adopt an "alternative reading" of the statute to provide that an employer-sponsored plan is affordable for related individuals if the portion of the annual premium the employee must pay for family coverage does not exceed 9.5% of household income.
The proposed regulations also extend to related individuals the rule under existing Regs. Sec. 1.36B-6(a)(1) that an employer plan provides minimum value if its share of the total allowed cost of benefits provided to an employee is at least 60%.
Additionally, the proposed regulations address situations where an individual has offers of coverage from more than one employer and withdraw previously proposed regulations REG-143800-14, which had incorporated the minimum-value rule in final regulations issued by the Department of Health and Human Services.
The regulations are proposed to be effective for tax years beginning after the date they are finalized, and the IRS expects them to be finalized this year.
A public hearing on the proposed regulations is scheduled for June 27, 2022, and written comments may be submitted, with hearing participation and comment submission details in the preamble.