Premium Tax Credits (PTC) cannot be used at the same time as an ICHRA or QSEHRA for the same month if the HRA is considered “affordable,” and in some cases any HRA offer will disqualify employees from receiving advance premium tax credits through the Marketplace.
References: Healthcare.gov & IRS.gov
What are Premium Tax Credits (PTC)?
Premium Tax Credits (PTC) are refundable credits that help individuals and family's lower monthly insurance premiums via the Health Insurance Marketplace. Eligibility depends on income, household size, and filing status, excluding those claimed as dependents. PTC amount is based on household income and size, adjustable through the Marketplac
Navigating PTC with Health Reimbursement Arrangements (HRAs) can be complex. For instance, with Qualified Small Employer HRAs (QSEHRA), eligibility for PTC hinges on the affordability of employer reimbursements. If the reimbursement is deemed affordable, individuals cannot claim PTC. Conversely, if it's unaffordable, individuals can claim PTC while also accepting reimbursements, subject to adjustments.With Individual Coverage HRAs (ICHRAs), the affordability of the HRA affects PTC eligibility. If the ICHRA is affordable, individuals opt for reimbursements; if not, they can choose PTC.
Interaction with the HRAs Take Command Administers ICHRAs, QSEHRAs, and PTCs:
Affordable ICHRA – PTCs are not allowed for an employee or their dependents if an employee is offered an affordable ICHRA, regardless of whether or not the employee participates in the ICHRA (so an employee is better off accepting the ICHRA).
Unaffordable ICHRA – PTCs are allowed if an employee is offered an unaffordable ICHRA if the employee waives the ICHRA.
Affordable QSEHRA – PTCs are not allowed for an employee or their dependents if an employee is offered an affordable QSEHRA, regardless of whether or not the employee participates in the QSEHRA (so an employee is better off to accept the QSEHRA).
Unaffordable QSEHRA – PTCs are allowed if an employee is offered an unaffordable QSEHRA, but the PTC is offset dollar for dollar by the QSEHRA regardless of whether or not the employee participates in the QSEHRA (so an employee is better off accepting the QSEHRA).
The determination of HRA affordability is vital, influencing PTC eligibility and usage. Various factors, including IRS safe harbors, contribute to this determination.
Qualifying criteria:
Who is eligible to receive a tax credit?
By completing your information in the Take Command Portal during the onboarding process, we can determine your qualification amount, if any. The amount depends on the following factors listed below. To ensure compliance and avoid simultaneous claims, update your Marketplace application by contacting Healthcare.gov or your state-based exchange, requesting to remove the advance Premium Tax Credits (APTC), and following the Marketplace team's guidance during the process.
Household income within the specified range
Not filing as Married Filing Separately
Not claimed as a dependent
Covered by Marketplace insurance
Unable to access affordable employer-sponsored coverage or government programs like Medicaid
The amount of PTC depends on household size and estimated income.
How much will I qualify for?
How many people are in your household, including yourself, your spouse if married, and anyone you'll claim as a tax-dependent
Your estimated total household income
Employees play a crucial role in providing accurate information to the Exchange to facilitate PTC determination. A proper understanding of HRA affordability impacts ensures informed decision-making.
Application:
PTC can be used fully, partially, or not at all to reduce monthly premiums depending on your HRA type.
Excess PTC usage may require repayment during tax filing if the IRS deems your HRA as affordable.
Unused PTC results in a refundable credit during tax filing.
The marketplace is the sole source for PTC.
In case of proof of premium rejections due to incorrect information, update your Marketplace application by removing Premium Tax Credits, adjust your plan accordingly, and provide new documentation reflecting updated premiums.
Affordability criteria:
QSEHRA: Employee contributions compared to PTC.
ICHRA: Self-only silver plan costs versus household income.
Exchange interaction:
Reporting HRA information affects PTC eligibility and advance payments.
Opting out of HRAs allows PTC claims if affordability criteria are met.
Former employees may claim PTC if no longer accepting HRAs.
Determining affordability:
By completing your information in the Take Command Portal during the onboarding process, we will be able to determine your qualification amount, if applicable. Additionally, you can access this information through the following sources: Marketplace platforms display full insurance premiums before applying HRA reimbursements or credits. If discrepancies appear, consult with your Enrollment Team or employer for validation.
Calculators and IRS safe harbors aid affordability assessments.
Employer-provided information guides PTC eligibility and Exchange interactions.
How does my Premium Tax Credit work with my HRA?
ICHRA
For Employees: What happens to my premium tax credits with ICHRA?
QSEHRA
Administratively, employers support employees in navigating HRA and PTC interactions, ensuring compliance with tax and healthcare regulations. Effective communication fosters transparency and trust, empowering employees to make well-informed choices about their healthcare benefits. Even if an HRA is canceled, employees will still receive necessary end-of-year tax documentation to ensure compliance with filing requirements.
Administrative guidance:
Employers assist employees in navigating HRA and PTC interactions.
Proper documentation ensures compliance with tax and healthcare regulations.
Employees' role:
Providing accurate information to the Exchange ensures proper PTC determination.
Understanding HRA affordability impacts PTC eligibility and usage.
Can you have both an HRA and Premium Tax Credits?
No, you generally cannot use both for the same coverage month.
Whether you can claim PTC depends on whether your HRA is considered affordable:
If your ICHRA or QSEHRA is affordable → you are not eligible for PTC
If your HRA is unaffordable → you may choose either the HRA or PTC, but not both
If you accept HRA reimbursements, you cannot also receive PTC for that same coverage period.
How does ICHRA affect Premium Tax Credits?
For ICHRAs:
Affordable ICHRA → Employees are not eligible for Premium Tax Credits
Unaffordable ICHRA → Employees may choose either:
ICHRA reimbursements, or
Premium Tax Credits (PTC), but not both
An ICHRA is considered affordable based on the cost of a self-only silver plan compared to household income using IRS-defined rules.
How does QSEHRA affect Premium Tax Credits?
For QSEHRA:
Affordable QSEHRA → Employees cannot receive Premium Tax Credits
Unaffordable QSEHRA → Employees may receive PTC, but the credit is reduced dollar-for-dollar by the QSEHRA benefit
This means QSEHRA can reduce or eliminate the value of any Marketplace subsidy.
What does “affordable” mean for HRAs?
Affordability depends on IRS-defined calculations:
For ICHRA: cost of the lowest-cost self-only silver plan vs. household income
For QSEHRA: employee’s required premium cost after applying the HRA vs. household income
If affordability thresholds are met, Premium Tax Credits are not available.
What happens if I already applied for Premium Tax Credits?
If you receive or apply for advance Premium Tax Credits (APTC):
You must report your HRA offer to the Marketplace
The Marketplace will adjust or remove your subsidy based on affordability
You may need to repay excess credits when filing taxes if eligibility changes
Employees should coordinate Marketplace updates with their HRA enrollment.
What information does the Marketplace need?
When applying for coverage, you must report:
That you were offered an ICHRA or QSEHRA
The monthly HRA allowance amount
Whether the coverage is considered affordable
Your employment status (current or former employee)
This information is used to determine eligibility for Premium Tax Credits.
Can I waive the HRA and keep Premium Tax Credits?
It depends on affordability:
If the HRA is affordable → you cannot keep PTC even if you waive the HRA
If the HRA is unaffordable → you may waive the HRA and use PTC instead
The Marketplace determines final eligibility based on reported information.
What should employers and employees remember?
You cannot “stack” HRA reimbursements and Premium Tax Credits for the same coverage period
Affordability determines whether PTC is allowed
Employees must report HRA offers to the Marketplace
Incorrect reporting can result in tax adjustments or repayment of subsidies
Where can I confirm my eligibility?
Employees can determine eligibility by:
Reviewing their HRA affordability notice in the Take Command portal
Using Marketplace eligibility tools during enrollment
Consulting a tax advisor for complex situations involving income or family coverage
The final determination of Premium Tax Credit eligibility is made by the Marketplace.