23.02 Affordable coverage for employer-sponsored MEC

An individual will not be eligible for a federal premium tax credit if the employer-sponsored plan in which they may enroll is affordable. The details of affordability are described in this subsection. In general (1) Affordability for employee.54 Except as provided in paragraph (a)(3) of this subsection, an eligible employer-sponsored plan is affordable for an employee if the portion of the annual premium the employee must pay, whether by salary reduction or otherwise (required contribution), for self-only coverage does not exceed the required contribution percentage (as defined in paragraph (c)) of the applicable tax filer's household income for the benefit year. (2) Affordability for related individual.55 Except as provided in paragraph (a)(3) of this subsection, an eligible employer-sponsored plan is affordable for a related individual if the employee’s required contribution for family coverage under the plan does not exceed the required contribution percentage, as defined in paragraph (c) of this subsection, of the applicable tax filer’s household income for the benefit year. For purposes of this paragraph (a)(2), an employee’s required contribution for family coverage is the portion of the annual premium the employee must pay for coverage of the employee and all other individuals 53 See, IRS Notice 2014-71. 54 26 CFR § 1.36B-2(c)(3)(v)(A)(1). 55 26 CFR § 1.36B-2(c)(3)(v)(A)(2). Nonfinancial eligibility requirements Part 3 – Page 26 (Sec.23.00, Sub.23.02) included in the employee’s family who are offered coverage under the eligible employer-sponsored plan. (3) Employee safe harbor.56 An employee or a related individual who is eligible for a safe harbor as defined in this sub clause will not be subject to repayment of APTC based on the finding that affordable MEC was in fact available to them for all or part of a plan year, should such fact be discovered at a time subsequent to enrollment in a QHP. (i) An employer-sponsored plan is not affordable for an employee or a related individual for a plan year if, when the employee or a related individual enrolls in a QHP for a period coinciding with the plan year (in whole or in part), it is determined that the eligible employer-sponsored plan is not affordable for that plan year. (ii) This paragraph does not apply to a determination made as part of the redetermination process described in § 75.00 unless the individual receiving a redetermination notification affirmatively responds and provides current information on affordability. (iii) This paragraph does not apply for an individual who, with reckless disregard for the facts, provides incorrect information concerning the portion of the annual premium for coverage for the employee or related individual under the plan. (4) Wellness program incentives.57 Nondiscriminatory wellness program incentives offered by an eligible employer-sponsored plan that affect premiums are treated as earned in determining an employee’s required contribution for purposes of affordability of an eligible employer-sponsored plan to the extent the incentives relate exclusively to tobacco use. Wellness program incentives that do not relate to tobacco use or that include a component unrelated to tobacco use are treated as not earned for this purpose. For purposes of this subsection, the term “wellness program incentive” has the same meaning as the term “reward” in 26 CFR § 54.9802-1(f)(1)(i). (5) Employer contributions to health reimbursement arrangements.58 Amounts newly made available for the current plan year under a health reimbursement arrangement that an employee may use to pay premiums, or may use to pay cost-sharing or benefits not covered by the primary plan in addition to premiums, reduce the employee’s required contribution if the health reimbursement arrangement would be integrated, as that term is used in IRS Notice 2013-54 (2013-40 IRB 287), with an eligible employer- sponsored plan for an employee enrolled in the plan. The eligible employer-sponsored plan and the health reimbursement arrangement must be offered by the same employer. Employer contributions to a health reimbursement arrangement reduce an employee’s required contribution only to the extent the amount of the annual contribution is required under the terms of the plan or otherwise determinable within a reasonable time before the employee must decide whether to enroll in the eligible employer-sponsored plan. 56 26 CFR § 1.36B-2(c)(3)(v)(A)(3). 57 26 CFR § 1.36B-2(c)(3)(v)(A)(4). 58 26 CFR § 1.36B-2(c)(3)(v)(A)(5). Nonfinancial eligibility requirements Part 3 – Page 27 (Sec.23.00, Sub.23.02) (6) Employer contributions to cafeteria plans.59 Amounts made available for the current plan year under a cafeteria plan, within the meaning of 26 USC § 125, reduce an employee’s or a related individual’s required contribution if: (i) The employee may not opt to receive the amount as a taxable benefit; (ii) The employee may use the amount to pay for minimum essential coverage; and (iii) The employee may use the amount exclusively to pay for medical care, within the meaning of 26 USC § 213. (7) [Reserved] (8) Multiple offers of coverage. An individual who has offers of coverage under eligible employer-sponsored plans from multiple employers, either as an employee or a related individual, has an offer of affordable coverage if at least one of the offers of coverage is affordable under paragraph (a)(1) or (a)(2) of this subsection. Affordability for part-year period.60 Affordability under paragraph (a)(1) of this subsection is determined separately for each employment period that is less than a full calendar year or for the portions of an employer's plan year that fall in different benefit years of an applicable tax filer (a part-year period). Coverage under an eligible employer-sponsored plan is affordable for a part-year period if the annualized required contribution for self-only coverage, in the case of an employee, or family coverage, in the case of a related individual, under the plan for the part-year period does not exceed the required contribution percentage of the applicable tax filer's household income for the benefit year. The employee's annualized required contribution is the employee's required contribution for the part-year period times a fraction, the numerator of which is 12 and the denominator of which is the number of months in the part-year period during the applicable tax filer's benefit year. Only full calendar months are included in the computation under this paragraph. Required contribution percentage.61 The required contribution percentage for 2014 is 9.5 percent. For plan years beginning in a calendar year after 2014, the percentage will be adjusted by the ratio of premium growth to income growth for the preceding calendar year and may be further adjusted to reflect changes to the data used to compute the ratio of premium growth to income growth for the 2014 calendar year or the data sources used to compute the ratio of premium growth to income growth. Premium growth and income growth will be determined under IRS-published guidance. In addition, the percentage may be adjusted for plan years beginning in a calendar year after 2018 to reflect rates of premium growth relative to growth in the consumer price index. 59 26 CFR § 1.36B-2(c)(3)(v)(A)(6). 60 26 CFR § 1.36B-2(c)(3)(v)(B). 61 26 CFR § 1.36B-2(c)(3)(v)(C). For plan years after 2014, the required contribution percentage will be updated in accordance with IRS-published guidance, available at www.irs.gov. For example, the required contribution percentage for 2016 is located at: https://www.irs.gov/pub/irs-drop/rp-14-62.pdf. Nonfinancial eligibility requirements Part 3 – Page 28 (Sec.23.00, Sub.23.03) Examples.62 For examples illustrating these provisions, see 26 CFR § 1.36B-2(c)(3)(v)(D).