Husbands or wives who reject an employer’s group health coverage may block their dependents’ access to Affordable Care Act exchange plan tax credits.
Officials at the Internal Revenue Service talk about dependents’ efforts to get ACA premium tax credits in a new answer to questions about how the tax credit works.
IRS officials describe a situation in which the spouse, children and other dependents of a worker can enroll in an employer’s health plan only if the worker signs up for the employer’s plan.
The plan provides coverage with what the IRS classifies as minimum value. To get employee-only coverage, the worker would pay a premium that the IRS classifies as affordable.
If the worker in that situation rejects the employer’s coverage, the spouse and children have no right to use the ACA premium tax credit to pay for exchange plan coverage, officials say.
“Because all three family members could have enrolled in … employer-sponsored coverage through employee’s enrollment, and the coverage was affordable and provided minimum value, they are not eligible for a premium tax credit,” officials say.
Drafters of the ACA created the exchange system in an effort to give consumers a way to shop for high-quality coverage on an apples-to-apples basis.
The drafters created the premium tax credit program to help exchange plan users with family income from 100 percent to 400 percent of the federal poverty level pay for the coverage.
Partly because of concerns that overly generous tax credit rules would encourage employers to drop dependent coverage, the IRS has ruled that an employer can meet ACA employer coverage offer mandate rules simply by offering employee-only coverage with an employee cost that the IRS classifies as affordable for the employee. The employer does not have to family coverage with an employee cost that’s affordable for the employee.
A worker who rejects affordable employer coverage with a minimum value cannot get the ACA premium tax credit.
The IRS does not appear to have answered earlier questions about whether dependents of a worker have any independent ability to get access to tax credits if the worker has rejected affordable group health coverage with a minimum value.
The IRS has developed special tax credit eligibility rules for victims of domestic abuse and people abandoned by their husbands or wives. The IRS does not say in the new answer how the new answer interacts with the domestic abuse and spousal abandonment guidelines.
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