HCTC: Frequently Asked Questions
Scroll down to view the answers to the most frequently asked questions about the following HCTC-related topics:
Partners - PBGC
Partners - State and Local
Partners - Tax Professionals
Partners - Health Plan Administrators
1. What was the HCTC?
The Health Coverage Tax Credit (HCTC) was a unique tax credit administered by the Internal Revenue Service (IRS) that expired January 1, 2014, and paid 72.5% of qualified health insurance premiums for eligible individuals and their families. During the time the tax credit was available, individuals could receive the tax credit monthly as their health plan premium became due, or yearly by filing Form 8885, Health Coverage Tax Credit, with their federal income tax return. The following individuals are candidates for the tax credit:
1. Pension Benefit Guaranty Corporation (PBGC) payees who are at least 55 years old,
2. Individuals receiving a Trade Readjustment Allowance (TRA) under the Trade Adjustment Assistance (TAA) program and attending TAA-approved training, and
3. Individuals receiving a wage subsidy under the Alternative TAA (ATAA)/Reemployment Trade Adjustment Assistance (RTAA) program for older workers.
People in these three groups must also meet general requirements and have a qualified health plan to receive the HCTC. Learn more by visiting the HCTC Eligibility Requirements page.
2. How was the HCTC created?
The Trade Act of 2002, enacted by Congress in August 2002, created the Health Insurance Tax Credit (HITC), which was referred to as the Health Coverage Tax Credit (HCTC). Learn more by visiting the Latest News and Background page.
3. What government agency administered the HCTC?
The Department of the Treasury (Internal Revenue Service) administered the HCTC in partnership with other federal agencies, the states, and the private health industry.
4. What is the Pension Benefit Guaranty Corporation (PBGC)?
The PBGC is a federal corporation which insures the pension benefits of about 44 million workers and retirees in over 30,000 private sector defined benefits pension plans. The PBGC was created on September 2, 1974 when the “Employee Retirement Income Security Act (ERISA) of 1974” was enacted. A defined benefits pension plan that does not have enough money to pay benefits may be terminated if the employer responsible for the plan faces severe financial difficulty, such as bankruptcy, and is unable to maintain the plan. In cases such as these, the PBGC then pays pension benefits under the terms of the plan, subject to legal limits, to plan participants and beneficiaries. The majority of the plans the PBGC has trusteed have been in the manufacturing, steel and airline industries. To learn more about the PBGC, please visit the PBGC website.
5. What is Trade Adjustment Assistance?
Trade Adjustment Assistance (TAA) is a program administered by the U.S. Department of Labor for workers who lose their jobs, or whose hours of work and wages are reduced as a result of increased imports or shifts in company production to foreign countries. TAA includes a variety of benefits and reemployment services to help unemployed workers prepare for and obtain suitable employment. Workers may receive assistance in skill assessment, job search workshops, job development, referral, and job placement. In addition, workers may be eligible for training, job search allowances, relocation allowances, and the HCTC. Trade Readjustment Allowances (TRA) may be payable to eligible workers following their exhaustion of unemployment insurance benefits. Usually, TRA benefits will be paid only if an individual is enrolled in a TAA-approved training program or has a training waiver. Contact the U.S. Department of Labor Employment and Training Administration (DOLETA) at 1-877-US-2JOBS or visit the DOLETA website for more information.
1. How will I find out if I am a candidate for the HCTC?
You will receive an HCTC Eligibility Certificate in the mail once the HCTC Program is notified by your state workforce agency or the PBGC that you may be able to receive the tax credit.
If you lost your job due to foreign trade, you must apply for TAA benefits at your local employment, One Stop, or Career Link office after your company has been trade certified. Visit the Service Locator website to find the closest local employment office to you. If operation of your company's pension plan has been transferred to the PBGC, you must work with the PBGC to begin receiving pension payments. In either case, the state or the PBGC will need to transmit your eligibility record to the HCTC, after which you will receive an HCTC Eligibility Certificate.
2. How do I know if I'm covered under the TAA Program?
Please contact the Department of Labor Employment and Training Administration (DOLETA) for a referral to the appropriate state office that handles unemployment benefits. Call DOLETA at 1-877-US-2JOBS or visit them online at the DOLETA website.
3. If the PBGC pays me annually rather than monthly, am I still eligible for the HCTC?
Yes. You may be eligible for the HCTC if you receive your annuity from the PBGC annually and if you are 55 years old or older. However, please note that you must still meet all other eligibility requirements and the tax credit is not available for tax years after 2013.
4. Am I still eligible for the HCTC if I received my entire PBGC benefit as a lump sum?
Yes. However, the following conditions must be met:
- The PBGC became the trustee of your plan on or before the date you received your lump sum payment.
- You received your payment after August 5, 2002. This is the effective date of the Trade Act of 2002.
5. Can the HCTC pay for health coverage for my family members?
Yes. If you are claiming the Yearly HCTC, you may include your family members (spouse or dependents) if they meet all HCTC general requirements and are enrolled in a qualified health plan.
Qualified family members of TAA recipients (including ATAA and RTAA recipients) or PBGC payees who enroll in Medicare, pass away, or finalize a divorce, are eligible to receive the HCTC for up to 24 months from the month of the qualifying event, or until January 1, 2014, whichever comes first.
Qualified family members must be spouses or dependents at the time of the event, must meet all general requirements, and must have a qualified health plan. Learn more about eligibility requirements for your family members by visiting the qualified family members page.
6. How long can I receive the HCTC?
The tax credit expired January 1, 2014. Therefore, as long as you continued receiving TAA or PBGC benefits, met the general requirements, and enrolled in a qualified health plan, you could receive the HCTC through the 2013 tax year. Learn more by visiting the HCTC Eligibility Requirements page.
7. If I received the HCTC in 2012, am I automatically eligible to receive it for 2013?
No. Eligibility for the HCTC is determined on a monthly basis. For each month an individual claims the credit, they must also be a TAA (including ATAA) recipient or a PBGC payee and enrolled in a qualified health plan.
1. Does a regional or local PBGC office transmit eligibility for individuals to claim the HCTC?
The national PBGC office notifies the HCTC Program of an individual's PBGC eligibility via eligibility file transmission.
2. How soon after a pension plan is assumed by the PBGC can an individual claim the Yearly HCTC?
As long as the individual is enrolled in a qualified health plan, they can claim the Yearly HCTC on their federal income tax return for the month of the PBGC's official trusteeship of the employer's pension plan. For example, if the PBGC trustees a plan on November 30, the individual can claim the credit for all of November. An individual can claim the Yearly HCTC as soon as they receive an HCTC Eligibility Certificate in the mail, which is after the PBGC sends eligibility records to the HCTC Program via a secure electronic file transfer.
1. In addition to being trade-certified, do TAA recipients need to be receiving TRA payments to qualify for the HCTC?
Yes. TAA recipients must be receiving money from their state (either TRA or unemployment insurance while otherwise eligible for TRA), and attend TAA-approved training (or be in a break in training) or have a waiver saying they do not need training. The HCTC was also available to Alternative and Reemployment TAA recipients.
2. How do states transmit files to the HCTC Program?
States must transmit their 2013 files via the ICON (Interstate Connection Network) system through April 2014. See the Transmit Eligibility Records page for more information on how to transmit files manually after April 2014.
1. Can I get a list of companies whose employees have been certified for TAA benefits?
Yes. You should refer to the U.S. Department of Labor Employee and Training Administration website for this information.
2. Can I get a list of companies whose pensions have been taken over by the PBGC?
Yes. Refer to the PBGC website for this information.
3. What IRS publications can I use to help individuals receive the Yearly HCTC on their federal income tax return?
IRS Publication 502, Medical and Dental Expenses, and Publication 17, Your Federal Income Tax for Individuals, provide information about the HCTC. These publications may be obtained on this website or by calling the IRS at 1-800-TAX-FORM (1-800-829-3676).
4. What IRS tax form should be used to claim the Yearly HCTC on a federal income tax return?
Eligible individuals should use IRS Form 8885, Health Coverage Tax Credit, to claim the Yearly HCTC on their federal income tax returns. This form helps them determine if they are eligible and provides instructions for claiming the tax credit. They should complete Form 8885, attach the supporting documents, and file it along with Form 1040, 1040NR (long form), 1040PR (Puerto Rico), or 1040SS (self-employed). Form 8885 cannot be filed with 1040EZ or 1040A (short form). Learn more about how to claim the Yearly HCTC by visiting the Tax Professionals page.
5. What supporting documents should be submitted for the Yearly HCTC on a federal income tax return?
Whether filing electronically or on paper, the following must be attached for all types of qualified health coverage: health insurance bills and proof of payment (for example, a cancelled check) for any amounts included on Line 2 of IRS Form 8885. For COBRA, appropriate supporting documents like the COBRA Election Letter must also be attached. See the instructions on Form 8885 for detailed guidance on what to submit as supporting documents.
1. What types of benefits are HPAs required to offer?
The Trade Act of 2002 does not specify the types of plans that HPAs are required to offer in order to qualify for the HCTC.
2. What is HCTC's HIPAA status?
After consultation with the Office of Civil Rights (OCR) and the Centers for Medicare and Medicaid Services (CMS), it was determined that the HCTC Program is not a "covered entity" under the Administrative Simplification rules of HIPAA. The HCTC Program also is not considered a business associate to health plan administrators participating in the Program, nor are health plan administrators acting as business associates to the HCTC Program.