Health Coverage Tax Credit: Resources for the Pension Benefit Guaranty Corporation, the Department of Labor and State Workforce Agencies

 

Find resources you need to help affected individuals claim the Health Coverage Tax Credit (HCTC) or enroll in the Advance Monthly Payment (AMP) program. 

The Health Coverage Tax Credit is a tax credit that pays 72.5 percent of qualified health insurance premiums for eligible individuals and their families.

Help Affected Individuals Claim the Health Coverage Tax Credit or Enroll in the 2020 Advance Monthly Payment Program

Individuals who qualify can choose to have 72.5 percent of qualified health insurance premiums paid monthly in advance directly to their insurance company on their behalf in 2020 to lower out-of-pocket costs for monthly premiums.

Individuals who choose not to get advance monthly payments and pay 100 percent of their health insurance premiums in 2020 can claim the HCTC when they file their federal tax return in 2021. 

Help Affected Individuals Determine their Eligibility for the HCTC

Eligible for the HCTC if they are:

  • An eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, or reemployment TAA (RTAA) recipient
  • An eligible Pension Benefit Guaranty Corporation payee
  • The family member of an eligible TAA, ATAA, or RTAA recipient or PBGC pension payee who is Medicare eligible, deceased, or who finalized a divorce with you.

Not eligible for the HCTC if they:

  • Can be claimed as a dependent on another person’s federal income tax return; or,
  • Are enrolled in benefits under Medicare, Medicaid, the Children’s Health Insurance Program, the Federal Employees Health Benefits Program or eligible to receive benefits under the U.S. military health system.

Ensure Health Insurance Plans Qualify for the HCTC

The HCTC program does not provide health coverage. Individuals will need to have or obtain qualified health coverage. Qualified HCTC plans include COBRA or spousal coverage if the employer, or former employer, did not pay 50 percent or more of the cost of coverage. Individual (private and non-group) health insurance that you purchase for yourself or your family from an insurance company, agent, or broker are also included. A qualified health plan offered through a Health Insurance Marketplace is not qualified coverage for the HCTC after December 31, 2015.

Affected individuals should review the Instructions for  Form 8885, Health Coverage Tax Credit, for information about qualified health insurance plans that are eligible for the HCTC.

Keep Health Insurance Records and Eligibility Documentation

Encourage individuals to keep the documents and records related to their eligibility to claim the credit.  

  • For trade certified individuals demonstrating TAA, alternative TAA, or reemployment TAA eligibility—a copy of the official letter from the Department of Labor, state workforce agency, or employment office stating they are eligible for trade adjustment benefits
  • For PBGC eligibility—a copy of the official letter from the PBGC stating they received a benefit paid by the PBGC or a  copy of Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, from the PBGC showing they received a benefit paid by the PBGC

Affected individuals should also keep copies of their proof of insurance and payment information for insurance premiums.

Claim the HCTC

Eligible taxpayers can claim the HCTC for months that they met all eligibility requirements and made payments directly to a qualified health plan on their federal income tax return. They will follow special instructions and file Form 8885, Health Coverage Tax Credit (PDF), when they file their federal tax return.

Eligible through the Department of Labor State Workforce Agencies

Transmission of Eligible Individuals to the IRS

Effective January 2020, SWAs will identify and transmit to the IRS, via the Interstate Connection Network (ICON), the information on all individuals who meet the designation of “eligible TAA or ATAA/RTAA recipients.” ICON will remain as the communications vehicle through which states will transmit information to the IRS for HCTC purposes.

ICON will remain as the communications vehicle through which states will transmit information to the IRS for HCTC purposes.

Notices of Eligibility to Participants

States provide proof of eligible TAA or ATAA/RTAA recipient status to taxpayers needing such proof for submission with their tax returns.  A notice of proof of eligible TAA or ATAA/RTAA recipient status must be provided separately for each year of eligibility. States need to confirm only that the individual received a payment for any one day/week in any one month during the calendar year.  States may utilize the sample letter previously used during the original implementation of the HCTC.

Provision of Rapid Response Services

The provision of early and intensive Rapid Response services is vital to the success of jobseekers in obtaining timely reemployment. Rapid Response and appropriate career services must be provided to all worker groups that file a Petition for Trade Adjustment Assistance. If the petition has already been certified when the Rapid Response services are provided, information on HCTC should be provided at that time. If the Petition is still pending at the point of the initial services, additional Trade-specific sessions should be provided when the Petition is certified.

Eligible through the Pension Benefit Guaranty Corporation

Transmission of Eligible Individuals to the IRS

On the 25th of each month, PBGC will identify and transmit to the IRS, the information on all individuals who meet the designation of PBGC Payee and who is in "pay status". 

Notices of Eligibility to Participants

  • PBGC uses the internet and social media to increase awareness of the HCTC program. In addition to PBGC’s HCTC webpage, its outreach efforts also include:
    • Email alerts on HCTC updates
    • Social media posts about significant HCTC updates
  • PBGC’s payees and people in PBGC-trusteed plans interested in the HCTC should be aware that:
    • IRS will accept a copy of Form 1099-R as proof of PBGC payee status for the year for which a taxpayer is claiming HCTC.
    • If an individual wishes to enroll for the Advanced Monthly Program (AMP) they should include the most recent Form 1099-R. If an individual does not have this, they can include the trusteeship letter.

Resources

For more information about HCTC, including frequently asked questions, eligibility and instructions, visit IRS.gov/HCTC.