November 14, 2022

Effective for 2023, the affordability of employer-sponsored coverage for family members is determined based on the cost of family coverage.

Changes Come to Family Coverage Affordability Rules


  • The final rule addresses eligibility for the premium tax credit, which is available for Exchange health coverage.
  • The rule provides that affordability of employer-sponsored coverage for family members is determined based on the cost of family coverage.
  • The final rule’s changes apply to taxable years beginning after Dec. 31, 2022.

On Oct. 11, 2022, the IRS released a final rule that changes the eligibility rules for the premium tax credit (PTC). The PTC is available to eligible individuals who purchase health insurance coverage through an Exchange. Individuals are not eligible for the PTC if they have access to employer-sponsored health coverage that is affordable and provides minimum value.

PTC Eligibility Change

Effective for 2023, the final rule changes the PTC rules for determining whether employer-sponsored coverage is affordable for family members. Currently, whether employer-sponsored coverage is considered affordable for family members is determined based on the lowest-cost self-only coverage available to the employee. The cost of family coverage is not taken into account under the current rules.

Under the final rule, an employer-sponsored plan is affordable for family members if the portion of the annual premium the employee must pay for family coverage (the employee’s required contribution) does not exceed 9.5% (as adjusted annually) of household income. For 2023, the adjusted affordability percentage is 9.12%. The final rule also adds a minimum value rule based on the benefits provided to the family members.

Impact of the Final Rule

Effective for 2023, more family members will likely be eligible for the PTC for coverage purchased through an Exchange. However, the final rule does not change the affordability rules for employees, which will continue to be based on the employee’s required contribution for self-only coverage. Therefore, an employer’s offer of coverage may be unaffordable for a family member even though it is affordable for the employee.

Also, this new guidance does not affect the ACA’s “pay or play” penalties for applicable large employers (ALEs), as these penalties are triggered only when an employee receives a PTC, not a family member. According to the IRS, this new guidance also does not impact an employer’s reporting requirements under Internal Revenue Code Sections 6055 and 6056.


Compliance alert provided to you by Apex Benefits.

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