Proposed regs address ACA premium tax credit


The IRS recently issued proposed regulations (REG-114339-21) that would require a separate premium tax credit (PTC) affordability determination for employees and for family members. Currently, under the Section 36B regulations, a PTC is not allowed for children and other family members who have been offered employer coverage if the cost of the employee’s self-only coverage is affordable, regardless of the employee’s cost to cover those family members.

The IRS re-examined the current regulations after President Joe Biden released Executive Order 14009, Strengthening Medicaid and the Affordable Care Act (ACA) which instructed agencies to review policies and practices that reduce the affordability of coverage or financial assistance for coverage.

The IRS concluded that it would be more consistent with the ACA for the regulations to provide that the determination of affordability of employer coverage considers not just the cost to the employee, but also to members of the employee’s family who may also enroll. The IRS acknowledged that the statutory language could be read to provide for the affordability for the employee and family members to be determined based solely on the cost of self-only coverage to the employee. The proposed regulations, however, would adopt an alternative reading, which provides for separate affordability determinations for employees and family members.

The proposed regulations provide examples on how the new affordability rules should be applied, while the preamble to the regulations provides an economic and affected entity analysis. Per the analysis, employers may see a shift for some of their employees from family coverage to self-only coverage when family members newly qualify for a PTC. The preamble states that the cost per enrollee could increase or decrease depending on the characteristics of those that remain covered, and notes the federal government’s increase on PTC spending could lead to a decrease in the total amount employers are spending on health insurance.



Tax professional standards statement

This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.


More tax hot topics