HCTC: Glossary of Common Terms
Scroll down to view a list of the most common HCTC-related terms:
Please note: the HCTC expired January 1, 2014 and is not available for tax years after 2013. The definitions below are included for historical purposes only.
After-tax income is the income that remains after taxes have been taken out. For the HCTC, individuals must pay more than 50% of their health premium costs for certain employer-sponsored plans with after-tax income. Any part of health premium costs for certain employer-sponsored plans that are paid with before-tax income - or pre-tax dollars - cannot be counted in the calculations to determine one's HCTC eligibility. The rationale for this rule about after-tax income is that an individual cannot receive a double tax benefit; that is, an individual cannot receive both pre-tax dollars for health premium costs and then also the health coverage tax credit for those same health premium costs.
Alternative Trade Adjustment Assistance (ATAA) recipient
- are at least 50 years old,
- have lost a job at a trade-affected company,
- have another job where they make less money, and
- get a wage supplement from their state to make up for their lower income.
The ATAA benefit is a wage subsidy designed for workers with hard-to-transfer skills. To be eligible for this Department of Labor program, workers must meet certain eligibility criteria.
Note: There are additional requirements for that ATAA recipients must meet to qualify for the HCTC. If you register for the monthly HCTC program when you are receiving TAA benefits and then you start receiving ATAA benefits, you must re-register and requalify for the HCTC at that time.
Break in coverage
A period of time when an individual has no creditable health coverage. An HCTC qualified health plan may require an HCTC candidate to have three months of creditable coverage before enrolling in the health plan. However, an HCTC candidate may have a possible break in coverage of up to 62 days. If the break in coverage is more than 62 days, then the plan can impose preexisting condition exclusions. A health plan can, however, waive these exclusions.
Consolidated Omnibus Budget Reconciliation Act of 1985. COBRA is a federal law that lets you extend your job based health coverage if you lose your job or run into other qualifying events that cause you to lose your health insurance. The HCTC can pay for COBRA health insurance expenses if the eligible person pays for more than 50% of the cost of coverage.
Beginning in February 2009 and ending January 1, 2014, COBRA benefits are extended for HCTC-eligible individuals. Eligible TAA, ATAA and RTAA individuals can receive COBRA for as long as they have TAA eligibility or until January 1, 2014. PBGC payees are eligible for COBRA coverage extensions until January 1, 2014. If the payee passes away, their spouse or dependents are able to receive an additional 24 months of COBRA, or until January 1, 2014. Employers are responsible for extending COBRA benefits for these individuals and should check with their legal counsel if they have questions about the new law.
The number of months you had health insurance in place before your current or new policy became effective. This previous health insurance coverage can be used to shorten the preexisting condition waiting period that may be required by your current or new policy. Your previous insurer will have given you a Certificate of Creditable Coverage to prove you had prior qualifying coverage.
A state qualified health plan may require an HCTC candidate to have three months of creditable coverage before enrolling in the health plan. An HCTC candidate must not have more than a 62 day break in their insurance coverage. The TAA Health Coverage Improvement Act of 2009 changed how the 63-day lapse in creditable coverage is calculated. Now, this 63-day lapse does not take into account the period of time beginning when a TAA-eligible individual has a TAA-related loss of coverage and ending seven days after the date of printed on their HCTC Eligibility Certificate (i.e. Candidate Letter mailed with the HCTC Eligibility Kit). By not calculating this period of time, individuals will be able avoid a 63-day lapse in creditable coverage when they enroll in a qualified health plan for the HCTC.
Electronic Funds Transfer. This is any process of electronically transferring funds to or from an account; EFT does not involve the exchanging of hard currency. A federal law to allow the transfer of funds electronically was passed in the United States in 1978. Common forms of EFT are Automated Clearing House (ACH) and Wire transactions. EFT is the principal method for transferring HCTC payments to Health Plan Administrators (HPAs).
Eligible family member
Eligible family members are an HCTC-eligible individual's spouse and dependent(s) that can be claimed on the eligible individual's federal income tax return. Eligible family members can receive the HCTC if they meet general requirements and have a qualified health plan.
Eligible individual for the HCTC
Generally, a PBGC payee or TAA/RTAA recipient is referred to as a candidate for the HCTC. To be eligible for the HCTC, a candidate must meet further general requirements and have a qualified health plan.
Generally, an eligible premium for the HCTC is for major medical coverage. Premiums for prescription drug plans and other certain plans may also qualify for the tax credit.
Federal Employees Health Benefits Program (FEHBP)
The FEHBP offers health insurance plans for federal employees, retirees, and their families. Individuals cannot receive the HCTC if their health coverage is through the FEHBP.
Group Plan or Group Health Plan
Health coverage sponsored by an employer or employee organization (such as a union) for employees and their eligible dependents.
Qualifying individuals must be guaranteed enrollment to an HCTC state-qualified health plan regardless of their medical status and must be permitted to remain enrolled so long as they pay the premiums. To be considered a qualifying individual, one must have had at least three months of continuous creditable coverage prior to becoming eligible for the HCTC and not have had a break in coverage of over 62 days immediately preceding the time that the individual applies for health plan enrollment.
Health Coverage Tax Credit (HCTC)
Created by the Trade Act of 2002 and administered by the Internal Revenue Service (IRS), the HCTC is an important benefit that pays 72.5% of a qualified health plan premium for eligible individuals. The HCTC is a unique tax credit that individuals can receive either as their monthly health plan premium becomes due or as a credit on their federal tax return. The HCTC is refundable so it can be received even if you do not owe any federal income tax. The HCTC is not a government health insurance program; it is a federal tax credit.
Health Plan Administrator (HPA)
An entity that provides or pays the cost of medical care. An HPA can include an insurance company, insurance service, or insurance organization (including an HMO) that is licensed to engage in the business of insurance in a state, and is subject to state law that regulates insurance.
Health plan policyholder
Typically the individual who subscribes to the health insurance benefit. The other individuals covered under the policy are the policyholder's dependents. The HCTC-eligible individual does not have to be the policyholder of a qualified health plan.
High risk pool
Subsidized health insurance pools that are organized by some states. High risk pools offer health insurance to individuals who have been denied health insurance because of a medical condition or to individuals whose premiums are rated significantly higher than average due to health status or claims experience. High risk pools can be a form of qualified health coverage for the HCTC if they are deemed state-qualified.
IRS Form 1099-H
Health Coverage Tax Credit (HCTC) Advance Payments; IRS Form 1099-H provides the amount of the Monthly HCTC an individual has received, and the months to which the HCTC Program paid a health plan on an individual's behalf for a specific tax year. This form is informational only and should not be included with a person's federal income tax return.
IRS Form 8885
Health Coverage Tax Credit; eligible individuals must complete and file IRS Form 8885 with their federal income tax return to claim the Yearly HCTC. The instructions for IRS Form 8885 provide guidance as to who can receive the Yearly HCTC and what supporting documents are required.
Medicaid provides health coverage for low-income people who cannot afford it. Each state operates their own Medicaid Program and therefore determines who is eligible and the scope of health services offered. Individuals cannot receive the HCTC when they are a part of the Medicaid Program.
Medicare is a federal program that pays for certain health care expenses for people aged 65 or older or with certain disabilities. Receiving Medicare benefits disqualifies individuals from being eligible for the HCTC.
Option by which the HCTC Program assists in paying an eligible individual's monthly health insurance premiums as they become due. Candidates must register for the monthly HCTC program by completing Form 13441-A, HCTC Monthly Registration Form.
National Emergency Grants (NEG) or Bridge Grants
These grants, also called Gap-filler funds, provide temporary state-level assistance to help individuals pay their qualified health plan premiums while they are registering for, but have not yet received, the Monthly HCTC. The grant ends when an individual receives their first monthly HCTC invoice.
Means that your health plan may not charge HCTC recipients a higher premium than a member who is not an HCTC recipient. Complaints about how premiums are set should be referred to a state's Department of Insurance.
Non-group/individual health plan
An individual policy for a single person or family. This coverage is usually provided under a contract purchased through an insurance company, agent, or broker. It is not health insurance provided through a company or union. In order to have the HCTC cover this type of health insurance policy, coverage under the non-group/individual plan must have started at least 30 days before the last paid day of work from the job that made the individual eligible for TAA/ATAA/RTAA, or PBGC benefits.
Payment Advice Internet Delivery (PAID)
Program through Financial Management Systems (FMS) which provides information on electronic payments made by the Federal government to a vendor. PAID is available to HPAs to assist in reconciling payments, as well as crediting HCTC participant accounts.
Pension Benefit Guaranty Corporation (PBGC) payee
- are 55 years old or older
- are receiving pension payments from the PBGC
The PBGC insures the pension benefits of workers in some private sector industries. When an employer faces severe financial difficulty, such as bankruptcy, and cannot continue paying pensions to their retirees, the employer may request the PBGC to take over the responsibility for paying pension benefits to their retirees. The PBGC decides if it will assume responsibility for the pension plan, which is also known as the PBGC becoming the "trustee" of the pension plan. If the PBGC becomes the trustee of the pension plan, then the PBGC will pay pension benefits under the terms of the plan, subject to legal limits, to plan participants and beneficiaries. PBGC pension benefit recipients can receive their pension benefits as a monthly or annual payment or as a one-time lump sum.
Note: PBGC pension benefit recipients become candidates for the HCTC on the day the PBGC becomes the trustee of their pension plan, even if they do not receive an HCTC Eligibility Kit for a few months after that. This means that if the PBGC became the trustee of your pension plan on January 31, and you were enrolled in a qualified health plan, then you could file for the HCTC on your federal income tax return using Form 8885, Health Coverage Tax Credit, starting in January.
Plan or Health Plan
A person's specific health benefits package or the organization that provides such a package. It can be a health maintenance organization (HMO), a preferred provider organization (PPO), a commercial insurance carrier, or a company that provides health insurance.
Any physical or mental condition that an individual has before health coverage begins. The cause of the condition does not matter and could be the result of an accident or illness. During a preexisting condition exclusion period, a health plan will not pay for treatment related to a preexisting condition. However, the health plan must pay for any unrelated treatments or conditions that the plan covers. Once the exclusion period is over, the health plan must pay for all covered services, including the ones for the preexisting condition. A plan may not impose preexisting condition exclusions on qualifying individuals, to be considered a state-qualified health plan. A qualifying individual is defined as someone who have not had a 63 days break in coverage. The TAA Health Coverage Improvement Act of 2009 changed how the 63-day lapse in creditable coverage is calculated. A 63-day break in coverage is significant because health insurers may impose preexisting condition exclusions if applicants for health insurance have had such breaks in coverage. Now, this 63-day lapse does not take into account the period of time beginning when a TAA-eligible individual has a TAA-related loss of coverage and ending seven days after the date of printed on their HCTC Eligibility Certificate (i.e. Candidate Letter mailed with the HCTC Eligibility Kit). By not calculating this period of time, individuals will be able avoid a 63-day lapse in creditable coverage when they enroll in a qualified health plan for the HCTC.
The amount an individual pays in exchange for health coverage. An individual's employer can pay a portion of this amount.
Qualified health plan
Eligible individuals must be enrolled in a qualified health plan to receive the HCTC. The following types of health plans are qualified for the HCTC:
- State-qualified health plan
- Spousal coverage
- Voluntary Employees’ Beneficiary Association (VEBA)
- Non-group/individual health plan
Rapid Response Teams
Administered by the U.S. Department of Labor, Rapid Response Teams provide information to workers who are being laid off in large groups (more than 50 workers) or to workers who work at a facility where the employer has announced that a plant or facility is closing. Rapid Response programs exist in every state. It may be a team, a unit or any other such division.
Reemployment Trade Adjustment Assistance (RTAA)
RTAA is a program that went into effect for workers' petitions on or after May 18th, 2009. To be eligible for this Department of Labor program, workers must meet the following eligibility requirements:
- Must be 50 years of age or older
- Does not require a separate certification of group eligibility
- Workers may participate in TAA- approved training
- Requires full-time employment, unless the worker is also enrolled in TAA-approved training and employed at least 20 hours per week, and does not set a deadline for reemployment
- Available only for workers earning less than $55,000 per year in reemployment
- Maximum benefit of $12,000 over a period of up to two years
If an eligible individual’s spouse has employer-sponsored coverage, and the spouse pays more than 50% of the cost with after-tax dollars, it is considered one of the qualified health plans for the HCTC. If the spouse’s coverage is COBRA, the individual has the option to enroll in the Monthly HCTC; if it is not COBRA, the individual can only claim the Yearly HCTC when filing his or her federal income tax return. NOTE: Spousal coverage is NOT qualified for the HCTC COBRA Extension (see COBRA).
State Children's Health Insurance Program (SCHIP)
Administered by the Federal Centers for Medicare and Medicaid Services, it makes funds available to states that have programs providing health insurance coverage to uninsured children. While each state sets its own guidelines for eligibility and services, SCHIP can offer health insurance for children up to age 19, who are not already insured.
Note: If your child has SCHIP, he or she is not eligible for the HCTC. You can still be eligible for the HCTC since SCHIP only disqualifies your child.
State-qualified health plan
Plans that a state’s Department of Insurance approves as meeting the requirements of the Trade Act of 2002. These are one of the five types of qualified health plans for the HCTC.
State Workforce Agency (SWA)
This is an inclusive term the HCTC Program uses to describe various state agencies that handle unemployment benefits and TAA programs within their state. They may be referred to in the state as the state Workforce Commission, Department of Unemployment Benefits, or a local SWA/State Employment Office.
Trade Act of 2002
The legislation that created the HCTC. It is also known as the Trade Adjustment Assistance Reform Act of 2002.
Trade Adjustment Assistance (TAA) recipient
- receive Trade Readjustment Allowance (TRA) or are in an approved break in training, or receive Unemployment Insurance (UI) in lieu of TRA, while otherwise eligible for TRA, and
- must meet eligibility deadlines for enrollment in TAA-approved training or receive a written waiver to maintain HCTC eligibility.
TAA is a benefit for individuals who have lost their jobs because of trade with foreign countries. Employers and unions file a petition with the Department of Labor to have their employees TAA certified. TAA offers an income supplement (called TRA), assistance in skill assessment, job search workshops, job development or referral, and job placement. In addition, workers may be eligible for training, job search allowance, relocation allowance, and other reemployment services.
Trade Readjustment Allowance (TRA)
Trade Adjustment Assistance recipients receive TRA as income support while they participate in full-time training. TAA recipients can also receive TRA when they have a waiver from training because the training is either not appropriate or not available. Recipients start receiving TRA after they use up their initial 26 weeks of unemployment insurance. They can continue to receive TRA for up to 26 weeks, with an additional 26 weeks if they take remedial educational classes as part of their training plan.
TRICARE is the name of the Department of Defense's managed health care program for active duty military, active duty service families, retirees and their families, and other beneficiaries. Under TRICARE, you will generally have three options for health care: TRICARE Standard (formerly called CHAMPUS), TRICARE Extra, and TRICARE Prime. TRICARE Standard is the basic TRICARE health care program.
When the PBGC has “trusteed” a plan, it means that the PBGC and the plan’s administrator have signed a legal document called a Trusteeship Agreement, which states the PBGC will assume responsibility for paying the pension benefits due to employees under the terms of the plan. The PBGC also takes possession of any assets owned by the plan.
Other types of health coverage may be qualified for the HCTC including health plans associated with Voluntary Employee Benefit Associations (VEBA) and Trust Funds. Qualified VEBAs are established as a result of a former employer’s bankruptcy. You should call the HCTC Customer Contact Center for more details if you have health coverage through a VEBA or Trust Fund.
Option by which an individual receives the HCTC as a refund or a credit against taxes they owe. Eligible individuals must claim the Yearly HCTC by completing an IRS Form 8885.