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ICHRA: What happens to your Premium Tax Credits when your employer offers coverage

This article is for employees enrolled in or offered an ICHRA through Take Command who want to understand how Premium Tax Credits are affected.

Written by Support

If your employer offers you an Individual Coverage Health Reimbursement Arrangement (ICHRA), you generally cannot receive Premium Tax Credits (PTC) for Marketplace coverage in the same month unless the ICHRA is considered unaffordable and you opt out of the ICHRA.

Can I use an ICHRA and Premium Tax Credits at the same time?

No. You cannot receive both:

  • ICHRA reimbursements, and

  • Premium Tax Credits (PTC) for Marketplace coverage

for the same coverage month. You must choose one option.

When does an ICHRA affect Premium Tax Credits?

Whether you can receive Premium Tax Credits depends on affordability:

If the ICHRA is affordable

  • You are not eligible for Premium Tax Credits

  • You can still use the ICHRA reimbursement benefit- If the ICHRA is affordable, neither you nor your dependents can claim Premium Tax Credits, even if you opt out.

If the ICHRA is unaffordable

  • You may choose either:

  • The ICHRA reimbursement, or

  • Premium Tax Credits (PTC)

  • You cannot use both at the same time- If the ICHRA is unaffordable and you opt out, your dependents may be eligible for Premium Tax Credits.

If you choose Premium Tax Credits, you must opt out of the ICHRA.

What does “affordable” mean for ICHRA?

An ICHRA is considered affordable based on IRS rules that compare:

  • The cost of the lowest-cost silver Marketplace plan (self-only coverage)

  • Minus your employer’s monthly ICHRA allowance

  • Compared to a percentage of your household income- The IRS affordability threshold percentage is 9.02% for 2025.

If your required contribution is below the IRS affordability threshold, the ICHRA is considered affordable and blocks Premium Tax Credits.

What happens if I already receive Premium Tax Credits?

If you are already receiving Advance Premium Tax Credits (APTC):

  1. You must report your ICHRA offer to the Marketplace

  2. The Marketplace will reassess your eligibility

  3. Your Premium Tax Credits may be reduced or removed

  4. You may need to repay excess credits when filing taxes

Failing to update your Marketplace application may result in tax adjustments later.

Steps to Transition Between ICHRA and PTCs

If you wish to switch from PTCs to ICHRA benefits, follow these steps:

  1. Cancel Premium Tax Credits: Contact the Marketplace to remove PTCs before the month you want to receive ICHRA reimbursements.

  2. Provide Proof of Coverage: Submit documentation showing that PTCs are no longer applied. Acceptable proof includes a dated document from the last three days.

  3. Set Up ICHRA: Select "Individual Coverage Health Reimbursement Arrangement" as the HRA type on your Marketplace application. Enter the coverage start date and leave the end date blank if there is no scheduled end date.

What should I tell the Marketplace about my ICHRA?

When applying for Marketplace coverage, you must report:

  • That your employer offers an ICHRA

  • Your monthly allowance amount

  • Whether the coverage is for current or former employment

  • Whether the ICHRA is considered affordable (as determined by the Marketplace)

This information determines your eligibility for Premium Tax Credits.To ensure compliance and avoid declined reimbursements, submit proof of coverage that does not reflect any PTCs or income-based discounts. Ensure all documentation is current and accurately reflects your plan details.

Can I decline the ICHRA and keep Premium Tax Credits?

It depends on affordability:

  • If the ICHRA is affordable → you cannot receive Premium Tax Credits even if you decline it

  • If the ICHRA is unaffordable → you may decline it and receive Premium Tax Credits instead

You must formally opt out of the ICHRA to use Marketplace subsidies.

What happens if I accept the ICHRA?

If you accept the ICHRA:

  • You can purchase individual health insurance (including Marketplace plans)

  • Your employer reimburses eligible premiums or medical expenses

  • You cannot receive Premium Tax Credits while using the ICHRA

Where can I confirm my situation?

You can confirm your eligibility by:

  • Reviewing your ICHRA affordability notice in your Take Command portal

  • Checking Marketplace eligibility results during enrollment

  • Consulting a tax advisor for complex household income situations

The Marketplace makes the final determination of Premium Tax Credit eligibility.### Special Scenarios

Dependents and Family Plans

If you accept an affordable ICHRA, neither you nor your dependents can claim PTCs. However, if the ICHRA is unaffordable and you opt out, your dependents may be eligible for PTCs.

State Assistance

State premium assistance is treated the same as federal PTCs. If your plan includes any subsidy, it is not eligible for ICHRA reimbursement. To qualify for ICHRA, you must remove the subsidy and provide proof.

Partial-Year ICHRA Offers

If your employer offers ICHRA for only part of the year, you may be eligible for PTCs during months without ICHRA coverage, provided you meet other Marketplace criteria.

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