Family Glitch Final Rule Overview

The IRS recently issued final regulations that revise how employer-sponsored affordability is calculated for a family regarding their eligibility for the premium tax credit for Marketplace coverage. 

Previously, an employee’s family coverage was deemed to be affordable based solely on the employee-only coverage being affordable, regardless of the cost of the entire family’s coverage. This situation has been referred to as the “family glitch” and meant that the employee’s family members would not be eligible for any Affordable Care Act subsidies.

These final regulations aim to fix the “family glitch” by changing the definition of affordability to now reference the cost to cover the entire family when determining premium tax credit eligibility for the employee and their family members. The regulations go into effect December 12, 2022.

For Employers

• The final rule does not affect the employer-shared responsibility penalties 
• The final rule does not affect the employee affordability test (9.12% in 2023) and the employer mandate penalty structure

Important note: CCSB allows employers to offer employee-only coverage. With this new ruling, groups that previously selected the employee-only coverage may want to now offer dependent coverage as it would give employees with dependents more flexibility, whether they qualify for ACA subsidies or not. Please contact your B&P Sales Team if you have any groups in this situation.

For Employees

• Employees may want to look at individual coverage for their family if family coverage is unaffordable through their employer
• An employee enrolling in their employer-sponsored coverage and some or all of the remaining family members enrolling in Marketplace coverage may mean more deductibles and out-of-pocket maximums, as well as different provider networks

Additional Resources

• Kaiser Family Foundation: Navigating the Family Glitch Fix: Hurdles for Consumers with Employer-sponsored Coverage
• White House: Statement by President Joe Biden on “Family Glitch” Final Rule 
• HHS: Statement by HHS Secretary Xavier Becerra on Administration Action to Resolve “Family Glitch” and Lower Health Care Costs 
• House Ways & Means Committee: Neal, Wyden Applaud Biden Administration for “Family Glitch” Fix, Lowering Health Care Costs for American Families
• CMS: Affordability of Employer Coverage for Family Members of Employees: “Fixing the Family Glitch”
• HealthCare.Gov: Affordable Coverage
• Covered CA: Employer Coverage and Financial Help (Affordability Calculator Tool)

The information contained herein is for informational purposes only and is not intended as legal or tax advice.