IRS Updates FAQs on the Premium Tax Credit

On February 9, 2024, the IRS updated its frequently asked questions (FAQs) for the premium tax credit. These FAQs superseded earlier FAQs that were posted on February 24, 2022. Nine existing FAQs were updated, and four new FAQs were added. Among other items, the FAQs explain the basics of the premium tax credit, the eligibility requirements, and how the affordability of employer coverage affects eligibility.

The updates include the addition of a new section, “Affordability of employer coverage for employees and for family members of employees,” with new FAQs 12, 13, 14 and 22. FAQs 12, 13 and 14 document that coverage is affordable to an individual (making the individual not eligible for the credit) if they are offered coverage under more than one employer’s plan and either of those plans are affordable to the individual as an employee or family member. FAQ 13 sums up the changes:

“Q13. What if I receive an offer of coverage from multiple employers?

A13. If you receive offers of coverage from multiple employers, whether the coverage is offered by your employer or someone else’s employer, you are generally considered to have an offer of affordable coverage if at least one of the offers of coverage is affordable for you.”

New FAQ 22 clarified the treatment of Individual Coverage Health Reimbursement Arrangements (ICHRAs). The response explains that if an employer offers an ICHRA, the employee is not allowed a premium tax credit for marketplace coverage unless 1) the ICHRA is considered unaffordable and 2) the employee opts out of receiving reimbursements under the ICHRA. As referenced in the response, the IRS has issued specific rules for determining when an ICHRA is considered affordable.

The IRS notes that guidance, including FAQs, that is not reported in an Internal Revenue Bulletin will not be relied on, used, or cited as precedents by service personnel in the disposition of cases. But taxpayers “who show that they relied in good faith on an FAQ and that their reliance was reasonable based on all the facts and circumstances will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax.”

Employers that sponsor group health plans and are subject to the employer mandate should be aware of these FAQ updates.

IRS Fact Sheet »