Treasury Issues Final Rule on Employer-Sponsored Coverage and Premium Tax Credit

The Department of Treasury has issued a final rule amending the affordability determination used to determine a family’s eligibility for the premium tax credit. The final rule provides that employer-sponsored health coverage is affordable based on the cost of coverage for the employee and related individuals, not just on the cost of coverage of the employee. In addition, the final rule requires the plan to provide a minimum value coverage for related individuals of 60 percent, similar to the existing rule for employees. An employer plan that provides minimum value to an employee also provides minimum value to related individuals if the scope of benefits and cost sharing under the plan are the same for employees and family members.

The final rule does not require employers to compute minimum value separately for employee and related individuals. The final rule also does not

• affect reporting required under Code section 6055 and 6056 (i.e.,1094 and 1095),
• affect affordability calculations for individual coverage health reimbursement arrangements or qualified small employer health reimbursement arrangements, or
• affect affordability calculations for employees offered multiple offers of coverage.

Finally, employers that offer coverage through a cafeteria plan may permit an employee to disenroll from coverage to enroll in Exchange coverage beginning January 1, 2023. Coincident with this final rule, the IRS has issued Notice 2022-41, which allows a non-calendar year cafeteria plan to permit an employee to revoke an election of family coverage to enroll in Exchange coverage under two conditions.

• the individual qualifies for a special enrollment period and
• the revocation corresponds with the intent to enroll in Exchange coverage no later than the day immediately following the last day employer coverage is revoked.

An employer choosing to amend the cafeteria plan may amend the plan retroactively to the first day of the plan year and must adopt the amendment before the last day of the plan year that begins in 2024. The final rule becomes effective on December 12, 2022.