Marketplace Certification of Employee Subsidies

October 23, 2015

Since 2014, individuals have been able to purchase their own medical coverage through the Health Insurance Marketplace, and apply for federal subsidies (premium tax credits) towards the cost of coverage. Employees who are offered “affordable coverage” by their employers are, in general, not eligible for federal subsidies.

When individuals are approved for a subsidy, the Internal Revenue Code requires that a “certification” be sent to the individual’s employer from the Marketplace to notify the employer that its employee has enrolled in coverage through the Marketplace and is receiving an advance premium tax subsidy. The purpose of the certification is to alert large employers of the potential for a §4980H penalty and the employer’s right to appeal the employee’s eligibility for the subsidy.

For individuals enrolled through the Federally-Facilitated Marketplace (FFM), no certifications were sent out to employers in 2015 and only some state exchanges sent out certifications. The certifications that were sent out varied greatly and were not always mailed to the correct employer address or easily recognized as important mail. Some included a statement that the employer must appeal the certification within 90 days, but others were simply informational. Additionally, the certifications were not restricted to only individuals employed full-time or only large employers.

CMS has published a Frequently Asked Questions and announced that it will start sending out FFM certifications to some, but not all, employers in 2016. Additionally, since the information is entered by the applicant, it seems that there will still be issues of incorrect employer addresses, certifications regarding individuals who are not full-time, and certifications being sent unnecessarily to small employers.

Regardless of whether or not an employer receives a Marketplace certification, the IRS will determine independently whether the individual was eligible for the subsidy and if the employer is liable for a penalty or not.

If you receive a certification notice, please contact your Keller team for assistance. In many cases, no action will be required on your part. However, if you believe a full-time employee was incorrectly provided a subsidy, you may consider appealing the determination in advance of receiving a notice from the IRS.