New Premium Tax Credit Proposed Regulations: What Group Health Plan Sponsors Need to Know

By: Angela M. Stockbridge

On October 14, 2026, the Treasury Department and the IRS released proposed regulations which were published in the Federal Register on October 15, 2026, at 91 FR 65494. The proposal amends the rules on eligibility for the premium tax credit (PTC), how the credit is calculated, and how much individuals owe when their advance payments of the credit (APTC) exceed the credit they are actually allowed. It implements the PTC changes made by Public Law 119-21, commonly known as the One, Big, Beautiful Bill Act (OBBBA), which the administration refers to as the “Working Families Tax Cuts.” While the rules mainly govern individuals who buy coverage through a Health Insurance Exchange, employers that sponsor group health plans should still pay attention. PTC eligibility affects employer shared responsibility exposure, employee enrollment decisions, and how Exchanges interact with employers.

What the Proposal Does

The proposed regulations make several significant changes:

• Exchange verification becomes a condition of the credit. For tax years beginning after December 31, 2027, a month generally counts as a “coverage month” only if the Exchange verifies the individual’s eligibility to enroll. If APTC is paid, the Exchange must also verify household income, family size, whether the individual is eligible for other minimum essential coverage, and, where relevant, “eligible alien” status.
• The cap on repaying excess APTC is gone. For tax years beginning after December 31, 2025, including the 2026 tax year that employees will report next filing season, taxpayers must repay the full amount by which their APTC exceeds the credit they are allowed. Treasury estimates that about 3.7 million returns will include an excess APTC repayment in 2028.
• Medicaid community engagement is coordinated with the PTC. An individual who is ineligible for Medicaid solely for failing to meet the new community engagement (work) requirement is treated as eligible for minimum essential coverage, and therefore cannot claim the PTC for those months. Community engagement generally means at least 80 hours a month of work, community service, a work program, half-time enrollment in an educational program, or a combination of these.
• Certain immigrant family members are excluded from the calculation. For tax years beginning after December 31, 2026, premiums attributable to family members who are lawfully present but are not “eligible aliens” are excluded when computing the credit, and Exchanges must exclude those amounts from Form 1095-A reporting.
• Income-based special enrollment is excluded. Coverage enrolled in through a special enrollment period (SEP) based only on household income does not count as a qualified health plan for PTC purposes.

Why This Matters to Plan Sponsors

1. Section 4980H exposure may decrease. Employer shared responsibility penalties are triggered when a full-time employee receives a PTC. Narrower PTC eligibility should mean fewer potential triggers. Employers should still keep their affordability and minimum value positions well documented.
2. Expect more coverage-verification inquiries. For months when APTC is paid, Exchanges would be required to verify whether the individual is eligible for minimum essential coverage other than individual market coverage. Employer-sponsored coverage is the most common example. HHS is expected to issue parallel proposed regulations on the Exchange procedures needed to implement these verification requirements. Sponsors should be ready for more requests to confirm offers of coverage and enrollment status.
3. Employees face more risk if they take APTC while eligible for your plan. Without the repayment cap, an employee who wrongly receives APTC while offered affordable employer coverage could owe the full excess at tax time, starting with 2026 returns. Clear communications about plan eligibility and affordability will matter more than ever.
4. Enrollment in employer plans may increase. Lower-wage, part-time, and variable-hour employees, along with employees whose family members lose subsidy eligibility, may turn to the employer plan. Sponsors should factor this shift into cost and renewal projections.
5. Coordinate mid-year family changes. Beginning with tax years after 2027, the proposal would waive Exchange verification for family-size SEPs, which cover gaining a dependent or spouse, divorce or legal separation, and death. Treasury says the waiver includes newborn, adoption, foster care, and marriage events. As a result, employees may have quick access to subsidized Exchange coverage after these events. The waiver does not, however, make an individual eligible for the credit if they can enroll in affordable employer coverage, and improperly received APTC must now be repaid in full. Sponsors should make sure employees understand how Exchange options compare with their HIPAA special enrollment and cafeteria plan change-in-status rights. Procedures will come from forthcoming CMS regulations.
6. ICHRA and QSEHRA sponsors may want to revisit participant materials. The proposed regulations do not specifically address ICHRAs or QSEHRAs, but several of their general rules are relevant to these arrangements. When APTC is paid, Exchanges would be required to verify whether an individual is eligible for minimum essential coverage other than individual market coverage, so sponsors could see Exchange inquiries about coverage offers. The proposal would also exclude coverage obtained through an income-based special enrollment period from PTC eligibility, and the statute now requires full repayment of excess APTC. In our view, participant notices should clearly explain how the arrangement interacts with the credit and the cost of claiming APTC improperly.
7. No new employer reporting. The IRS states that nothing in the proposal affects employer reporting under Sections 6055 and 6056 on Forms 1095-B and 1095-C. The reporting changes apply only to Exchanges’ Form 1095-A.

Action Items for Plan Sponsors

• Review affordability calculations and offer-of-coverage documentation.
• Set up a process for responding promptly to Exchange verification requests.
• Update open enrollment and new-hire materials to explain the financial risk of improperly claiming APTC, which applies now because the repayment cap no longer applies for 2026.
• Model the potential for increased enrollment in the employer plan.
• Monitor the expected HHS proposed regulations on Exchange verification procedures.
• If you plan to comment, calendar the November 30, 2026 deadline.

Opportunity to Comment

Electronic or written comments must be received by November 30, 2026. A telephonic public hearing is scheduled for December 8, 2026, at 10 a.m. ET. Requests to speak and outlines of topics must be received by November 30, 2026, and the hearing will be canceled if no outlines are received. Requests to attend must be received by 5 p.m. ET on December 4, 2026. Plan sponsors may want to comment on how Exchanges will verify employer coverage offers and on related administrative burdens.

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