IRS Announces Fix to ACA “Family Glitch”

The IRS has proposed regulations that would fix the so-called "family glitch" under the Affordable Care Act. Under current law, a family's ACA marketplace subsidy eligibility is based on the employee's cost for employee-only coverage (not the cost of the employee's family coverage). So, if the employee's contribution for self-only coverage is deemed affordable, the entire family is ineligible for marketplace subsidies (and the employer cannot be assessed an employer mandate penalty). The new proposal would allow an employee's family members to enroll in marketplace coverage and potentially become eligible for government subsidies if the cost for the family is deemed to be unaffordable. However, there is not any new mandate for employers, so the employer's obligations would continue to be based on whether the employee's self-only coverage is deemed affordable. However, it is possible that employers could become subject to additional reporting requirements in order to determine whether the health plan is affordable at the family level. For more information on the employer mandate, visit Tax Facts Online. : Q 8883. Note: Q is updated.