References: Healthcare.gov & IRS.gov
Premium Tax Credits (PTC) are refundable credits that help individuals and families 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 Marketplace.
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.
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.
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:
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.
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.
FAQ :
If I accept the ICHRA, can I claim the premium tax credit for my Exchange coverage?
No. You may not claim the premium tax credit for your Exchange coverage for any month you are covered by the HRA. Additionally, your dependents may not claim any premium tax credits during this time as well regardless if they participate in ICHRA or not.
What information do I need to provide to the Exchange to know whether or not I can accept my tax credit?
Please refer to the ICHRA Employee Notice in your Member Portal for more detailed information on what information to provide.
If you’re applying for advance payments of the premium tax credit, you’ll need to provide information from the answer to “What are the basic terms of the ICHRA that my employer is offering?”
This information will be located on Page 2 of your ICHRA Employee Notice. You will also need to tell the Exchange whether you are a current employee or a former employee.
What if my income is too high for a premium tax credit?
Unfortunately, if your income is too high, then you won't qualify for a premium tax credit and will have to pay full price for your insurance premium.