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Home ACA Reform The ACA’s “Family Glitch” Resolution And How It Impacts You

The ACA’s “Family Glitch” Resolution And How It Impacts You

3 minute read
by Maxfield Marquardt
Family Glitch Resolution

The Affordable Care Act (ACA) has undergone recent developments that carry significant implications for employer ACA compliance and reporting requirements. One of the most notable changes is the resolution of the long-standing “family glitch” through new IRS regulations, along with the extension of Premium Tax Credits (PTCs) under the Inflation Reduction Act. To understand the consequences of these changes, let’s delve deeper into the “family glitch” resolution and its effects on both employers and individuals seeking healthcare coverage.

Understanding the “Family Glitch” Resolution

The “family glitch” has been a perplexing issue, where employer health insurance coverage was deemed “affordable” based solely on the cost for the employee. However, this calculation did not take into account family members who were ineligible for Premium Tax Credits (PTCs) to obtain coverage through ACA marketplace plans. This meant that, even if the family coverage was expensive, as long as the employee’s individual coverage was affordable, the entire family was excluded from PTC eligibility.

However, recent IRS regulations have brought about a positive change by extending PTC eligibility to include family members. This means that now employees’ entire families can qualify for PTC coverage if the family coverage costs more than 9.12% of the household income under the lowest-cost employer-sponsored option.

Consequences for Employers

The resolution of the “family glitch” brings significant implications for employers. Employees now have the option to opt out of their employer’s coverage and instead join their family members in the ACA marketplace. This could result in cost savings for employees and simplify the process of obtaining coverage for the entire family.

The Inflation Reduction Act, signed into law in July, further extends ACA subsidies through 2025, making PTCs available to Americans for no more than 8.5% of their household income. With PTC eligibility more widely accessible, it is expected that ACA participation will increase, leading to higher enrollment in ACA marketplaces.

Increased ACA Compliance Enforcement

While expanded PTC eligibility benefits employees and their families, it also raises compliance risks for employers. PTCs serve as triggers for the IRS to identify potential ACA non-compliance. When an employee receives a PTC from a state or federal health exchange, the IRS cross-references the request with the employer’s ACA filings to identify organizations that may not be compliant with the ACA’s Employer Mandate.

As ACA participation and PTC utilization increase, ACA compliance enforcement is likely to intensify for employers. The Inflation Reduction Act allocated additional funds for IRS tax enforcement, including the ACA, signaling a higher focus on enforcement. Employers must be proactive in addressing affordability issues for employees and their dependents to minimize the risk of receiving penalties via Letter 226J.

Ensuring Accurate Reporting and Compliance

Given the potential risks and penalties associated with non-compliance, it is crucial for employers to prioritize accurate ACA reporting and compliance. Employers should ensure that their recordkeeping is accurate and up-to-date, and that they meet the requirements set forth by the IRS in terms of affordability and minimum value of health insurance offerings.

It’s not hard to understand that employers are likely to have a lot of questions about these changes and the impact on their operations, their employees, and their compliance risks. As open enrollment season approaches, it’s important for employers to ensure they fully understand these implications.

Trusaic Can Help

To navigate the complexities of ACA reporting and compliance, employers can turn to Trusaic for assistance. Our full-service ACA Complete software solution provides everything employers need to become 100% ACA compliant. From 1095-C form preparation to monthly tracking, safe harbor calculations, year-end ACA filings, and IRS audit defense, Trusaic has helped thousands of clients prevent over $1 billion in ACA penalties.

The resolution of the “family glitch” and the extension of PTCs under the Inflation Reduction Act bring about positive changes for employees and their families seeking healthcare coverage. However, for employers, it means an increased focus on accurate reporting and compliance with the ACA’s Employer Mandate. By proactively addressing affordability issues and leveraging compliance solutions like Trusaic’s ACA Complete, employers can navigate the reporting season successfully and ensure the well-being of their workforce while avoiding potential penalties. 

As open enrollment begins, accurate ACA reporting and compliance remain paramount for employers to stay compliant and avoid enforcement actions. We can help.   

Download: ACA Essential Guide

The ACA’s “Family Glitch” Resolution And How It Impacts You
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The ACA’s “Family Glitch” Resolution And How It Impacts You
Explore ACA's Family Glitch resolution and the extended PTCs' impact on employers and compliance risks. See how Trusaic's ACA Complete can assist you.
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