Click on the links below to view answers to the most frequently asked questions about the HCTC Program:

General

Individuals

Partners - PBGC

State and Local Partners

Partners - Tax Professionals

Health Plan Administrators

Return to the HCTC Quick References page.
Go to the HCTC Program home page.

General

What is the HCTC and who is eligible?
The Health Coverage Tax Credit (HCTC) is an important benefit that pays 80% of a qualified health plan premium for eligible individuals. The HCTC is a unique tax credit that individuals can receive either monthly as their health plan premium becomes due or yearly as a credit on their federal tax return. The Internal Revenue Service (IRS) administers the HCTC. The following individuals are potentially eligible for the tax credit: 1. Pension Benefit Guaranty Corporation (PBGC) pension recipients 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 some general requirements and have a qualified health plan to be eligible for the HCTC. If eligible, individuals can get the tax credit for their family members as well.

What are the main reasons an individual would not be eligible for the HCTC?
Individuals are not eligible for the HCTC if they:

• are not receiving pension payments from the PBGC or benefits under the TAA or ATAA/RTAA programs
• are receiving Medicare benefits, or have another form of disqualifying health coverage
• are not enrolled in a qualified health plan
• are imprisoned by a federal, state, or local authority
• can be claimed as a dependent on another individual’s federal tax return

If an individual received the HCTC last year, is he or she automatically eligible to receive it this year?
No. Eligibility for the HCTC is determined on a monthly basis. For each month an individual receives the credit, whether monthly or yearly, he or she must also be a TAA, ATAA, RTAA, or PBGC recipient and enrolled in a qualified health plan.

Can a participant reside in a foreign or US territory or be a non-U.S. citizen and receive the monthly HCTC?
You can be a non-U.S. citizen and claim the tax credit as long as you meet all the eligibility requirements. At this time, individuals who receive mail at an address outside of the 50 states and the District of Columbia are not eligible to participate in the monthly HCTC Program. However, they may receive the yearly HCTC on their federal tax return provided they meet the eligibility requirements and maintain qualified health coverage.

What is the monthly HCTC?
Most tax credits are paid out when you file your federal taxes. However, health plan premiums can be expensive and some people need help to pay them each month as they become due instead of when they file their taxes. The monthly HCTC allows you to receive the HCTC in the form of a payment to your health plan on a monthly basis as your premium payments become due after you have paid your portions of the health insurance premiums to the HCTC Program.

Newly-enrolled monthly participants can request to receive reimbursement for health insurance payments they paid while eligible and enrolling in the monthly HCTC Program. To request reimbursement, complete and mail a Reimbursement Request Form.

What is the yearly HCTC?
The yearly HCTC is paid out when you file your federal taxes. You must complete and submit IRS Form 8885, Health Coverage Tax Credit, to claim the yearly HCTC on your federal tax return. The instructions on the form provide guidance on who may claim the HCTC and what documents you must provide with IRS Form 8885. If you do not have all the required documents, you may not receive the HCTC as a refund or a credit against any taxes you owe. You can get IRS form 8885 on the IRS website or by calling the IRS at 1-800-TAX-FORM.

What is a qualified health plan?
A qualified health plan is one that is allowable under the HCTC legislation. Only the following types of health plans qualify for the HCTC:

COBRA: Consolidated Omnibus Budget and Reconciliation Act (COBRA) is federal legislation that lets employees extend their job-based health coverage if they lose their job or run into other qualifying events that cause them to lose their health insurance. The HCTC can pay for COBRA health insurance expenses if the eligible person pays more than 50% of the cost of coverage. Please note that electing to receive the 65% COBRA Premium Reduction offered through your former employer will disqualify you from the HCTC. You may switch from the COBRA Premium Reduction to the HCTC.

Beginning in February 2009 and ending in December 2010, COBRA benefits are extended for HCTC-eligible individuals. Eligible TAA, ATAA and RTAA individuals can receive COBRA for as long as they continue to meet the definition of TAA-eligible, ATAA-eligible, and RTAA-eligible individuals. PBGC benefit recipients can receive COBRA as a lifetime benefit, and in the event of the benefit recipient's death, their surviving spouse and dependents can receive COBRA for an additional 24 months. Employers are responsible for extending COBRA benefits for these individuals and should check with their counsel if they have questions about the new law.

State-qualified health plan: This coverage type consists of health plans that a state’s Department of Insurance approves as meeting the requirements of the Trade Act of 2002. Most states have a health plan that qualifies for the HCTC.

Spousal coverage: This is coverage under a group plan that is available through the employment of an eligible individual’s spouse. 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 tax return. Additional restrictions apply to ATAA/RTAA benefit recipients.

Non-group/individual health plan: This coverage type is an individual policy for a single person or family. It is usually provided under a contract purchased through an insurance company, agent, or broker. In order to have the HCTC cover this type of coverage, the non-group/individual health plan must have started at least 30 days before the person left the job that made him or her eligible for TAA, ATAA, RTAA, or PBGC benefits.

How does a health plan become a state-qualified health plan?
A health plan becomes a state-qualified health plan when it is qualified by the state government, State Department of Insurance. To be considered for qualification by the state, the health plan must agree to four consumer protections specified in the Trade Act which created the HCTC. The four criteria are: 1. Guaranteed issue: qualifying individuals are guaranteed enrollment regardless of their medical status. 2. No preexisting condition exclusion: insurance companies must cover all of your illnesses. 3. Non-discriminatory premium: the health plan must have the same cost for all members, regardless of HCTC participation. 4. Same benefits for both HCTC and non-HCTC recipients. It is the state's decision to qualify a plan. Even if a health plan meets the above criteria, a state may choose not to qualify it. Every state is different. For more detailed information visit the State Departments of Insurance page.

How do I find out if a particular state has state-qualified health plans for the HCTC?
Visit the HCTC State-Qualified Health Plans page for a complete list by state.

What happens if HCTC participants do not send their payment (20% of the health plan premium plus exceptions not covered by the HCTC) to the HCTC Program?
The HCTC Program will not send a payment to a participant’s health plan unless the participant sends a payment or has a proper credit on their HCTC account. The HCTC Program must receive a participant’s payment before the due date on their HCTC invoice, not postmarked by the due date. Unless the participant has a sufficient credit on their HCTC account, the participant is sent a letter notifying them that the HCTC Program has not received their payment and has not sent a payment to their HPA. The letter advises the participant to pay 100% of the premium directly to the HPA for the missed payment period. HCTC participants are responsible for reconciling any outstanding balances directly with their HPAs. HPAs should follow their usual business guidelines when determining cancellation and/or re-enrollment of HCTC participants. The HCTC Program is not able to bill participants for any missed payment, balance, or portion thereof. All past due balances incurred prior to enrollment are the sole responsibility of the participant.

How was the HCTC created?
The Trade Act of 2002, enacted by Congress in August 2002, created the Health Insurance Tax Credit (HITC) that is now referred to as the Health Coverage Tax Credit (HCTC).

What government agency administers the HCTC?
The Department of the Treasury (Internal Revenue Service) administers the HCTC Program in partnership with other federal agencies, the states, and the private health industry.

How long will the HCTC be in effect?
There is no end date or sunset provision in the Health Coverage Tax Credit (HCTC) legislation. However, payment for the tax credit for eligible individuals is contingent upon funding for the Trade Adjustment Assistance Program (TAA).

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.

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) for more information.

What is Alternative Trade Adjustment Assistance?
The Alternative Trade Adjustment Assistance (ATAA) program is an alternative assistance program for older workers who are certified as eligible to apply for Trade Adjustment Assistance. ATAA is designed to allow TAA eligible workers age 50 and above (for whom retraining may not be appropriate) who find reemployment to receive a wage subsidy to help bridge the salary gap between their old and new employment. To receive the ATAA benefits, workers must be TAA- and ATAA-certified. Contact the U.S. Department of Labor Employment and Training Administration (DOLETA) for more information.

What is Reemployment Trade Adjustment Assistance?
The Reemployment Trade Adjustment Assistance (RTAA) program is the new program replacing ATAA that went into effect for workers' petitions on or after May 18, 2009. Contact the US Department of Labor Employment and Training Administration (DOLETA) for more information.

What is a State Workforce Agency (SWA)?
The HCTC Program uses the term SWA to describe any state agency that manages state unemployment benefits. SWAs have different names in every state. For example, they can be referred to as a Department of Workforce Security or Department of Unemployment at the state level, or as a One-Stop Career Center at the local level.

What is a One-Stop Shop?
One-Stop Shops are components of One-Stop Career Center systems located throughout the country. One-Stop Career Centers assist individuals looking for jobs by providing job searches, job listings, supportive services and training all under one roof. Call the U.S. Department of Labor at 1-877-US-2JOBS for more information.

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Individuals

Eligibility Requirements

What is the HCTC and who is eligible?
The Health Coverage Tax Credit (HCTC) is a federally funded program administered by the IRS that pays 80% of qualified health insurance premiums for eligible individuals and their family members. To receive the tax credit, you must be:

• Receiving Trade Adjustment Assistance (TAA) benefits - including Reemployment and Alternative TAA or
• Receiving pension payments from the Pension Benefit Guaranty Corporation (PBGC) and be 55 years old or older

You must also meet a set of general requirements and be enrolled in a qualified health plan.
You must meet all of these requirements for each month you receive the credit.

In what situations would I not be eligible for the HCTC?
You cannot receive the HCTC if you:

• Are not enrolled in a qualified health plan
• Do not pay more than 50% of your qualified health plan premium
• Are receiving another Federal health benefit such as Medicare or the 65% COBRA Premium Reduction (Subsidy)
• Are in prison
• Can be claimed as a dependent on another person's federal tax return

If I received the HCTC last year, am I automatically eligible to receive it this year?
No. Eligibility for the HCTC is determined on a monthly basis.

Can the HCTC pay for health coverage for my family members?
Yes. If you are enrolling in the monthly HCTC Program or if you are claiming the yearly HCTC, you may include your spouse's coverage if he or she meets all HCTC General Requirements (see the HCTC Program Kit) and is enrolled in a qualified health plan.

Other family members can also receive the HCTC if they:

• Are claimed as dependents on your federal tax return,
• Meet all HCTC General Requirements, and
• Are enrolled in a qualified health plan.

For more information about the ARRA provision affecting continued HCTC eligibility for family members in the event of Medicare enrollment, death, or divorce click here.

How will I find out if I may be eligible for the HCTC?
You will be notified of your eligibility for the HCTC when you receive an HCTC Program Kit in the mail.

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. 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 determine your eligibility and then transmit the record to the HCTC, after which we will mail you a Program Kit.

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.

How long can I receive the HCTC for?
You can receive the HCTC for as long as you continue to meet the eligibility requirements.

If I am receiving Social Security Administration (SSA) benefits as a result of a disability am I still eligible for the HCTC?
The receipt of benefits due to a disability does not automatically disqualify you. However, if you are receiving Medicare or Medicaid benefits when you are disabled, then you are not eligible for the HCTC.

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.

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:

1. The PBGC became the trustee of your plan on or before the date you received your lump sum payment
2. You received your payment after August 5, 2002. This is the effective date of the Trade Act of 2002. If these conditions are met, you will become an HCTC-eligible recipient once you reach the age of 55.

If I become employed will I stop receiving the HCTC?
Going back to work does not prevent you from receiving the tax credit. However, you must continue to meet all eligibility requirements to continue receiving the HCTC.

Qualified Health Plans

What are the types of qualifying health plans for the HCTC?

• COBRA: Extended job-based health coverage. You must pay more than 50% of your COBRA premium to receive the HCTC.
• State-Qualified Health Plan: Health plans approved by a State's Department of Insurance. Click here to learn more about the qualified health plans in your state.
• Spousal coverage: Coverage under your spouse's health plan. Your spouse must pay more than 50% of the total monthly premium in order for the plan to qualify.
• Non-group/Individual Health Plan: An individual policy for a single person or family. You must have enrolled in this type of plan at least 30 days prior to your last day of paid work in order for this plan to qualify.
• VEBA: Only certain VEBA provided health plans are qualified for the HCTC. If you are unsure if your VEBA qualifies, please call the HCTC Customer Contact Center at 1-866-628-HCTC (4282) for assistance.

I do not currently have health insurance. Can I enroll in a qualified health plan?
Yes. However, if you have not had health coverage for more than 62 days, a health insurer can deny coverage or impose special restrictions.

As a general rule, it is a good idea when you purchase a new health plan policy to make sure that its coverage starts as your current coverage ends so there is no lapse in coverage. For TAA-qualified individuals, this 63-day lapse does not include the period of time that begins when a TAA-eligible individual has a TAA-related loss of coverage and ends seven days after the date printed on his or her HCTC eligibility certificate (i.e. the Candidate Letter mailed with the HCTC Program Kit). By not calculating this period of time, individuals may be able to avoid a 63-day lapse in creditable coverage when they enroll in a qualified health plan for the HCTC.

Will the HCTC cover the premium for my vision and dental plans as well as my medical?
It depends. If you purchase dental or vision benefits separately - that is, in addition to your basic plan or without a comprehensive health benefit plan - then the HCTC will not apply to your premiums. If vision or dental benefits are a part of a comprehensive package, the benefit is covered by the HCTC because it is not considered a separate plan.

How the HCTC Works

How can I receive the HCTC?
You can receive the HCTC one of two ways:

1. Register for the monthly HCTC and receive the tax credit each month to help pay for your health insurance as you go. You can start saving now, when you need it, not just at the end of the year.
2. Claim the yearly HCTC on your federal tax return. With the yearly option, you pay your health insurance premiums in full and then claim the credit on your tax return. The credit will be applied to your taxes due or, if it is more than the taxes you owe, will be issued as a refund.

The Monthly HCTC
What is the monthly HCTC and how does it work?
The monthly HCTC allows you to receive monthly assistance in paying health insurance premiums.

To enroll in the monthly HCTC, you must first complete the registration form that is included with your Program Kit and then mail the form along with any required documentation back to the HCTC Program. Once the HCTC processes your registration form, we will send you your first invoice. This signals you are registered in the program.

Once registered, you'll pay 20% of your health insurance premium, we'll pay 80%, and then we'll send the full 100% of the premium to your health plan for you.

Newly enrolled monthly participants can receive a credit on their HCTC accounts for qualified health insurance premiums they paid during enrollment in the monthly HCTC Program. To find out more, click here for the reimbursement request page.

Please note that on time payments are a must. If we do not receive a payment by the due date on your invoice, the HCTC will return the payment and you will unfortunately have to pay 100% of your health plan premium for that month directly to your health plan.

Can a participant reside in a foreign or U.S. territory and receive the monthly HCTC?
Beginning January 2010, individuals in U.S. territories will be able to participate in the monthly program as long as they meet all HCTC eligibility requirements and maintain qualified health coverage. U.S. citizens living in foreign territories may receive the yearly HCTC on their federal tax return provided they meet the eligibility requirements and maintain qualified health coverage.

Can I receive both the monthly and yearly HCTC?
Yes. If you paid 100% of your health insurance premium and were eligible for the HCTC, you can claim 80% of this amount on your federal tax return. However, you cannot receive the yearly HCTC for any amount that was already covered by the monthly HCTC or reimbursement credit.

The Yearly HCTC
What is the yearly HCTC and how does it work?
If you received the HCTC Program Kit and decided that you would prefer to pay your premium in full throughout the year, you can file for the tax credit on your annual tax return.

To claim the yearly HCTC, you must meet all eligibility requirements outlined in the Program Kit. You pay 100% of your premium each month to your health plan. Then, at the end of the year, you complete and submit your Federal tax return along with IRS Form 8885. You will receive the HCTC as either a refund or credit against taxes you owe for all months that you met eligibility.

Along with your Federal tax return and the IRS Form 8885, you must submit additional required documentation, such as proof of payment for your qualified health plan (which can be in the form of cancelled checks). For a full list of required documentation, please consult IRS Form 8885.

Do I need to register with the HCTC Program before I claim the HCTC on my tax return?
No, you do not need to register with the HCTC Program to receive the HCTC at the end of the year; just make sure you submit IRS Form 8885 and supporting documents with your Federal tax return. If you're the qualified family member of an HCTC-eligible individual who enrolled in Medicare, divorced, or passed away, you need to contact the HCTC Program before claiming the yearly HCTC. Please call the HCTC Customer Contact Center at 1-866-628-HCTC (4282).

Where can I obtain IRS Form 8885?
Click here to download IRS Form 8885, or call the IRS at 1-800-TAX-FORM (1-800-829-3676).

Do I have to itemize deductions in order to claim the HCTC?
No. The HCTC is claimed as a tax credit for full payments made towards qualified coverage. For more information on itemizing deductions, call the IRS at 1-800-829-1040, or consult your tax professional.

Legislative Changes that Help

What are some of the changes to the HCTC included in the 2009 American Recovery and Reinvestment Act (ARRA)?
The American Recovery and Reinvestment Act of 2009, also known as the Stimulus Bill, recently expanded the HCTC.  The following are some of the key changes:

• The HCTC now pays for 80% of qualified health plan premiums.
• Participants can request reimbursement for qualified health insurance payments made while enrolling in the monthly program. For more information about reimbursement requests, click here.
• If you are eligible for the HCTC and your health plan is COBRA, you are entitled to have your COBRA benefits extended.  You should work with your former employer or COBRA administrator to have these benefits extended. 
• If you are eligible for the HCTC but receive a 65% COBRA Premium Reduction through your former employer or COBRA administrator- a new program also established by the stimulus legislation - you are not eligible to receive the HCTC during that same month.
• Beginning in January 2010, qualified family members will be able to continue receiving the HCTC after the primary eligible individual’s enrollment in Medicare, divorce, or death.

HCTC vs. COBRA Premium Reduction

Can I receive both the HCTC and the new 65% COBRA Premium Reduction?
No.  You cannot receive both the 65% COBRA Premium Reduction and the 80% HCTC in the same month.

If I become HCTC eligible, can I switch from the new 65% COBRA Premium Reduction to the HCTC?
Yes.  Before you switch from the COBRA Premium Reduction to the HCTC, please review the HCTC Program Kit to confirm your eligibility.  Next steps once you've confirmed your HCTC eligibility are as follows:

• If you are a TAA recipient, you should go into your local One-Stop or Career Center and file for trade benefits and unemployment.  Please note that you must be TAA-eligible to be eligible for the HCTC.
• If your 65% COBRA Premium Reduction eligibility (typically fifteen months) has not yet expired, notify your employer that you would like to opt out of the COBRA Premium Reduction program (please note that the deadline for eligibility for the COBRA Premium Reduction was extended from December 31, 2009 to February 28, 2010).  Be sure to keep your COBRA-provided health coverage as your qualified health plan for the HCTC.
• Once the HCTC Program receives your eligibility record from the state, the HCTC Program will automatically send you a Program Kit and a Registration Form in the mail.
• You must fill out the Registration Form and send it back to the HCTC Program, along with the following supporting documentation: 1) A copy of your COBRA election letter and 2) An invoice from your COBRA administrator.
• Once the HCTC Program processes this information, you will receive an invoice from the HCTC Program for a 20% payment.  By the time you receive this first invoice, you must have stopped receiving the COBRA Premium Reduction.

Please note that you can request reimbursement credit for any full payments you made to your health plan while switching from the COBRA Premium Reduction to the HCTC.

Payment Asssistance while Registering for the monthly HCTC

What can I do if I have trouble paying for my health insurance before I start receiving the HCTC?
Some states offer the National Emergency Grant (NEG) Bridge Program to help you pay for your health plan premiums while enrolling in the HCTC.  Click here to see a list of states that offer this program.  If you are interested in applying for a NEG Bridge Grant, please read the U.S. Department of Labor's Training and Employment Guide Letter 20-02.

How does the new reimbursement credit work?
You can request reimbursement for any full payments you made directly to your health plan while you were eligible and enrolling in the monthly HCTC Program.  If you are receiving TAA benefits, reimbursement credit is available beginning with the month of the date printed on your HCTC Eligibility Certificate (the letter sent with your Program Kit).  If you are a PBGC payee, reimbursement credit is available beginning the month following the date printed on your HCTC Eligibility Certificate.  Only coverage within the current calendar year can be riembursed.  Months in a previous calendar year can be claimed on your federal tax return using IRS Form 8885.

For more information on reimbursement requests and to access the reimbursement request form, click here.  

Once your reimbursement request is processed, you will receive a credit on your monthly HCTC account.  You may keep this as a credit on your account to count toward future payments, or you may request to have it returned to you.  When filing your tax return, you should not file for any months for which you received the reimbursement credit.

In which situations may I not receive the reimbursement credit?
Reimbursement credit will not be processed for the following situations:

• For insurance coverage in a previous calendar year.
• For months you paid your health plan directly because you failed to pay your monthly HCTC invoice on time (this is not applicable if it was your very first HCTC invoice).
• For months in which your health plan premium increased, and you paid the difference between your old and new premium directly to your plan because the HCTC Program was not notified in time.
• For insurance coverage paid for in the months prior to your HCTC Eligibility Certificate.

Payments made directly to your health plan in these situations can be claimed on your federal tax return.

Managing Your Account

How do I make changes to my monthly HCTC account?
Once you are enrolled in the monthly HCTC program, notify the HCTC Program of any changes to your HCTC account via an HCTC Registration Update Form.  This form is used for a variety of reasons, including change of address and/or phone number; adding or removing a family member from your account; changing information about your health insurance (e.g. premium change); changing to new HCTC-qualified health insurance; or switching eligibility types.

Who should I notify if I have a change of address?
You should notify: 1) your insurance provider 2) the HCTC Program by filling out the HCTC Registration Update Form, and 3) your State Workforce Agency unemployment office (if you receive TAA benefits) or the PBGC (if you are a PBGC payee). 

Where do I sent in my payments if I do not have a pre-printed envelope?
You can send your payment in a regular envelope to:

U.S. Treasury - HCTC
P.O. Box 970023
St. Louis, MO 63197-0023

What do I do if I need to make an additional payment to the HCTC Program or if I lost my original payment coupon?
You can download, complete, and print a blank HCTC payment coupon.  Follow the instructions on the coupon to complete and mail your payment to the HCTC Program.

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Partners - PBGC

Does a regional or local PBGC office notify the HCTC Program of an individual's receipt of a PBGC pension payment?
The national PBGC office notifies the HCTC Program of an individual's PBGC eligibility via eligibility file transmission.

How soon after a pension plan is assumed by the PBGC can an individual claim the monthly or yearly HCTC?
As long as the individual is enrolled in a qualified health plan for that month, the first month an individual can claim the yearly HCTC on his or her federal tax return is 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 register for the monthly HCTC as soon as he or she receives the HCTC Program Kit in the mail, which is after the PBGC sends eligibility records to the HCTC Program via a secure electronic file transfer. If the individual is enrolled in a qualified health plan for months prior to receiving the first monthly credit for the HCTC, the individual can claim the yearly HCTC for those months on his or her federal tax return.

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State and Local Partners

What is the HCTC? How does it work?
The HCTC, or Health Coverage Tax Credit, is a federal program administered through the IRS. It was created by the 2002 Trade Adjustment Assistance Reform Act to help cover the cost of health care of workers who lose their jobs due to foreign trade, and retirees whose pensions are taken over by the Pension Benefit Guaranty Corporation (PBGC).  Since its inception, the HCTC has assisted tens of thousands of individuals by paying for a large portion of their health insurance premiums.

An individual can claim the tax credit on a monthly basis or at the end of the year. As a monthly participant, individuals only pay 20% of their qualified health insurance premium each month to the HCTC Program. The HCTC Program adds the 80% tax credit and sends a 100% payment to the health plan administrator. As a yearly participant, an individual pays 100% of their health insurance premium each month and files for the 80% HCTC as a refund or credit against taxes they owe.

I’ve heard that the HCTC has been affected by 2009 the American Recovery and Reinvestment Act (ARRA), also known as the stimulus bill. What are some of the changes?
The American Recovery and Reinvestment Act of 2009, also known as the stimulus bill, recently improved the HCTC.  The following are some of the key changes:

• The HCTC now pays for 80% of qualified health plan premiums.
• Newly enrolled participants can  request reimbursement for qualified health insurance payments they made while enrolling in the monthly program. You can download a Reimbursement Request Form.
• If you are eligible for the HCTC and your health plan is COBRA, you are entitled to have your COBRA benefits extended.  You should confirm this change with your former employer or COBRA administrator.
• If you are eligible for the HCTC but receive a 65% COBRA Premium Reduction through your former employer or COBRA administrator- a new program also established by the stimulus legislation - you are not eligible to receive the HCTC during that same month.
• Trade Adjustment Assistance, or TAA, training requirements have changed, making it easier to be eligible for the HCTC.
• Beginning in January 2010, qualified family members will be able to continue receiving the HCTC even after the primary eligible individual’s enrollment in Medicare, divorce, or death.

How does an individual enroll in the HCTC?
An individual must first qualify to receive the tax credit. For detailed information on the three steps for qualifying, click here. An individual may receive the HCTC for as long as they continue to meet the eligibility requirements.

If a trade-affected individual is interested in enrolling in the HCTC Program, the individual should work with his or her local One Stop or Career Services Office to file for trade benefits. The state will determine the individual’s TAA-eligibility and if the individual is deemed eligible, the state will send a record for that individual to the HCTC Program. Once the HCTC Program receives the individual’s eligibility record, we will send a program kit to that individual. The individual should utilize the program kit to confirm their TAA/ATAA/RTAA eligibility and ensure they are enrolled in a qualified health plan. The individual must fill out the registration form and return it  to the HCTC Program along with any required documentation. Once the individual’s registration form is processed, he or she will receive an invoice from the HCTC Program. This signals that the individual is enrolled.

Are their programs available to help pay for individuals’ health plan premiums while they are in the process of enrolling for the HCTC?
Yes. The NEG Bridge/Gap Filler Program is available in some states to help individuals pay their health plan premiums while they are enrolling in the monthly HCTC. This program provides temporary assistance and ends when individuals receive their first invoice from the HCTC Program. 

The state, not the HCTC Program, is responsible for distributing NEG Bridge Grant payments to individuals.

In addition to being trade-certified, do TAA, ATAA and RTAA eligible individuals need to be receiving TRA payments to qualify for the HCTC?
Yes.  They must be receiving money from their state (either unemployment insurance or TRA), and attend TAA-approved training or have a waiver saying they do not need training.  However, as of March 2009, individuals who are approved in breaks in training are still eligible to receive the HCTC. Individuals who are in breaks in training might not necessarily be issued a check, but states should still continue to transmit records on their behalf so they don’t lose eligibility. This new legislation applies to all TAA, ATAA, and RTAA recipients, regardless of their petition date.

How do states transmit files to the HCTC Program?
States must transmit their files via the ICON (Interstate Connection Network) system. Click here for more information on how to transmit files.

Why do states have to send HCTC candidate files daily?
An individual may become HCTC-eligible any day of the month. With the daily file transmission, the HCTC Program can send registration information to newly eligible candidates immediately, allowing the candidates to claim the credit as soon as possible.

Once the HCTC Program receives an eligibility record for an individual through ICON, what is the average turn around time before a program kit is mailed out to participant?
The HCTC Program immediately sends a program kit to an eligible individual once we receive their record from the state. It takes an average of 2-3 weeks before it gets to an individual’s mailbox.

If an individual enrolls in the 65% COBRA Premium Reduction Program, would they have the option of switching to the HCTC Program?
Yes. However, for any month an individual receives a 65% COBRA Premium Reduction through his or her former employer, he or she will not be eligible to receive the HCTC. If the individual wishes to receive the HCTC and is already receiving the COBRA Premium Reduction, he or she can switch by opting out of the COBRA Premium Reduction program prior to registering for the monthly HCTC Program. The individual must:

• Notify his or her employer that he or she would like to opt out of the COBRA subsidy (65%). However, the individual MUST keep COBRA coverage in order to be eligible for HCTC.
• Go into his or her local One-Stop or career center and file for trade benefits and unemployment. Please note that an individual must be TAA-eligible to be eligible for the HCTC (80%).
• Once the HCTC Program receives an eligibility record from the state for the individual, the HCTC Program will automatically send him or her a Program kit and a registration form in the mail.
• The individual must fill out the registration form and send it back to the HCTC Program along with the following supporting documentation: 1) A copy of their COBRA election letter and 2) Invoice from their COBRA administrator.
• Once the HCTC Program processes this information, the individual will receive an invoice from the HCTC Program for a 20% payment.

Again, the individual cannot receive the COBRA Subsidy (65%) and HCTC in the same month.

What are the actions a TAA-eligible individual/HCTC participant needs to take in order to extend their COBRA coverage?
The HCTC Program will send participants with COBRA a letter three months before their coverage is set to expire notifying them that they are eligible for the COBRA extension. The individual would then need to work with their former employer and/or Third Party Administrator to extend their COBRA benefits. Often the agency administering COBRA benefits will request proof from the HCTC that the individual is eligible for the extension, so please advise participants to make copies of the letter they receive from our program to use as verification. Please note that states must continue to send an eligibility record each month for an individual to prevent him or her from being cancelled out of the program.

Our program has been working hard to notify employers of the COBRA extension. However, sometimes individuals are unable to get in touch with their former employer to get their COBRA benefits extended. If an individual with COBRA does lose his or her coverage and gets cancelled out of the program, the HCTC can help the individual enroll in another qualified health plan, such as a state-qualified health plan, and re-register for the tax credit.

How does the reimbursement credit work?
An individual may request reimbursement for full payments made directly to their health plan while enrolling in the monthly HCTC Program. Reimbursement credit is available for the months on or after the month printed on the individual’s HCTC Eligibility Certificate (the letter sent with his or her original HCTC Program Kit), as long as the individual was also eligible and receiving TAA/ATAA/RTAA or PBGC benefits. Only coverage within the current calendar year can be reimbursed. For each month requested, an individual must confirm that he or she 1) met all eligibility requirements for the HCTC and 2) made payments directly to a qualified health plan.

To request reimbursement, an individual must complete the reimbursement request form. This form is contained within the HCTC Program Kit, and is also available here.

Once an individual’s reimbursement request is processed, the individual will receive a credit on his or her monthly HCTC account. For months and individual receives the reimbursement credit, the individual should not file for these months on his or her federal tax return.  If a participant reaches the end of his or her eligibility for the HCTC and leaves the program, he or she will receive any additional funds or credit left on their account in the form of a check. 

In which situations may an individual not receive the reimbursement credit?
Reimbursement credit will not be processed for the following situations:

• Coverage in the previous calendar year
• Months an individual paid his or her health plan directly because the individual failed to pay his or her monthly HCTC invoice on time (not applicable if it was his or her very first HCTC invoice)
• Months in which the individual’s health plan premium increased, and the individual paid the difference between his or her old and new premium directly to his or her health plan because the HCTC program was not notified in time
• Months prior to the individual’s HCTC Eligibility Certificate date

Payments made directly to an individual’s health plan in these situations can be claimed on the individual’s federal tax return.

Is there support material available for Rapid Response and One Stop teams?
Yes! Please click here to download job aids and other valuable program material. You can also call our Customer Contact Center to request HCTC Brochures to distribute: 1-866-626-4282

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Partners - Tax Professionals

Can I get a list of companies whose employees have been recently certified for TAA benefits?
Yes. You should refer to the U.S. Department of Labor Employee and Training Administration website for this information.

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.

Do I need a power of attorney to call the HCTC Customer Contact Center on behalf of my client?
No. However, as your client’s tax preparer, you must be authorized by him or her to discuss his or her HCTC account. The eligible individual may authorize the tax preparer on the HCTC Registration Form or call the HCTC Customer Contact Center to request that the tax preparer be set up as a third party designee.

If the IRS Form 8885 is filed electronically, how should I provide the required supporting documents?
When filing electronically, please be sure to attach required supporting documents to Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return.

What IRS publications can I use to help individuals receive the yearly HCTC on their 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).

What IRS tax form should be used to receive the yearly HCTC on a federal tax return?
Eligible individuals should use IRS Form 8885, Health Coverage Tax Credit, to receive the yearly HCTC on their federal tax returns. This form helps them determine if they are eligible and provides instructions for receiving 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).

What supporting documents should be submitted for the yearly HCTC on a federal 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.

Why, as a tax professional, do I have to become a Third Party Designee (TPD) for a monthly HCTC participant if I already have a Power of Attorney (POA) on file with the IRS?
The HCTC Program's Customer Contact Center is separate from the IRS call center and it does not have access to the Central Authorization File (CAF) to verify POA status. Therefore, you must become a TPD to access your client's account.

How can I begin to determine if an individual is eligible for the HCTC? 
Ask the individual if he or she is now, or was during any part of the tax year:

1. Receiving benefits under the Trade Adjustment Assistance (TAA) or the Alternative Trade Adjustment Assistance (ATAA) / Remployment Trade Adjustment Assistance (RTAA) programs?
2. Receiving payments from the Pension Benefit Guaranty Corporation (PBGC) and is at least 55 years old?

If the individual answers yes to one of these questions, then he or she is potentially eligible to receive the HCTC.

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Health Plan Administrators

Can an individual receive the HCTC and the new 65% COBRA Premium Reduction?
No; electing to receive the COBRA Premium Reduction will disqualify an individual from receiving the HCTC during any same month.  If an individual is eligible for the HCTC Program, which could be more valuable than the COBRA Premium Reduction, that individual will have received a notification from the IRS stating they are eligible for the HCTC, along with registration procedures.

Can an individual switch from the new 65% COBRA Premium Reduction to the HCTC?
Yes; if an individual is eligible for the HCTC Program they may switch from the COBRA Premium Reduction to the HCTC Program.  An individual cannot receive both the COBRA Premium Reduction and the HCTC during any same month.

If an individual would like to switch, they should review the HCTC Program Kit to make certain that they meet all the eligibility requirements for the HCTC.  Then, if the individual decides to take the HCTC, they should request to stop enrollment in the COBRA Premium Reduction program.  The individual should find out how long it will take to stop the COBRA Premium Reduction.  By the time the individual receives their first invoice from the HCTC, the COBRA Premium Reduction must have stopped.

Individuals should make certain that they are only opting out of the COBRA Premium Reduction Program, and NOT opting out of their COBRA coverage.  If they have to make any direct payments to their health plan while they’re enrolling in the monthly HCTC Program, they can request to receive credit for the federal portion (80%) of payments made during the enrollment period.

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.

Will the HCTC Program charge HPAs any fees for participation?
No. The HCTC Program does not charge HPAs any fees.

Can the HCTC Program endorse one health plan above another?
No.

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.

How will the HCTC Program send us individuals' premium payments?
The U.S. Department of the Treasury will send payments on behalf of individuals directly to health plan administrators. The payment will be sent as one Electronic Fund Transfer (EFT) transaction per policy per payment period. Payment is made via an Automated Clearing House credit transaction using a CCD+ format.

How do I know I will receive payments on time?
The HCTC Program processes payments monthly and in advance. Generally, payment processing occurs during the last week of each month, and the payments are made with a due date to the HPAs of the first of the following month (e.g., payments processed the last week of January are for a February 1 due date). In addition, you will also receive a payment report specifying the payments made by the HCTC Program.

What if the payment from the HCTC Program is late?
This situation would only arise if individuals pay their 20% portion late or miss their payment.  If an individual sends a payment late to the HCTC Program, the HCTC Program notifies the individual to make a payment directly to the health plan administrator for any premium amount due.  The HCTC Program will not make payments to individuals’ health plans if individuals send their payment past the HCTC due date.

If an HCTC participant overpays, why can it not be applied to the customer’s health plan account to avoid extra paperwork on both ends?
The 80% monthly HCTC payment must be made only in months in which the participant is eligible for the HCTC Program. Overpayments cannot remain on the customer’s health plan account because the HCTC Program cannot foresee a participant’s future eligibility. However, HCTC participants can pay several months at a time to the HCTC Program. These funds are paid out monthly from their HCTC account until they are exhausted.

We do not bill an individual monthly.  Is this an issue?
The HCTC Program is only able to send monthly payments to HPAs.  HPAs must be able to accept monthly payments for their enrollees who are participating in the monthly credit program.  If the HPA will not accept monthly payments, then the enrollee must claim the yearly HCTC when they file their tax return.

If a participant drops off the HCTC eligibility list, are there any rules about how I may terminate their enrollment in our health plan?
Since the individual is no longer eligible to receive the tax credit, the HCTC Program will no longer process payments for him or her. You should follow your normal business practices.

If participants change health plans and their payment went to the previous HPA, can that HPA forward the payment to the new one? Or must the previous HPA return the funds to the HCTC Program?
Should this situation arise, contact your Finance & Accounting representative immediately to determine the best way to handle the situation. It is critical to the HCTC Program that these funds are moved as quickly as possible to the proper HPA to avoid a loss of coverage.

Are HPAs required to create an IRS Form 1099-H for HCTC participants?
No. HPAs will not be required to create IRS Forms 1099-H for participants or report this information to the IRS. The HCTC Program will generate the IRS Form 1099-H and provide these statements to the taxpayers detailing the amount of monthly credit they received for each month of participation.

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