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New Guidance from IRS: Does Your Employer-Sponsored Health Plan Provide Minimum Value?



Individual taxpayers earning less than 400 percent of the federal poverty limit who purchase health insurance through an exchange typically qualify for a healthcare premium tax credit. This applies if they are not eligible for affordable employer-provided coverage that provides “minimum value.” A plan provides minimum value if it covers at least 60 percent of the total allowed costs of the benefits it provides.

The IRS has released proposed regulations with methods to determine whether a benefit plan provides minimum value, along with related guidance. These regulations will be a useful tool to help determine whether an employer’s plan provides minimum value.


Background: Beginning in 2014, if an individual purchases coverage through an insurance exchange as part of the Patient Protection and Affordable Care Act (PPACA), that individual can claim a healthcare premium tax credit. If the individual is eligible for affordable coverage under an eligible employer-sponsored plan that provides “minimum value,” though, the individual cannot claim the credit.

Minimum Value: The newly proposed regulations provide a number of methods to determine whether a plan provides minimum value. Generally, a taxpayer must use the minimum value calculator provided by the IRS and the Department of Health and Human Services (HHS) to determine whether a plan qualifies. If a plan has nonstandard features, the calculator method does not apply and the “actuarial certification” method must be used to determine minimum value. This method involves an actuarial analysis of the plan, its benefits, and its costs to determine whether the 60 percent cost threshold is met.

The proposed regulations provide a “safe harbor” for minimum value. If a plan fits one of these safe harbors, the plan will be deemed to have minimum value.  As published, the proposed regulations do not define the specific safe harbors that will be included in later guidance. However, three plan design specifications that could serve as safe harbors are suggested in the proposed regulations. The IRS has requested comments from the public regarding these suggestions, as well as other design specifications that could apply.

Other Highlights: The regulations also provide commentary regarding health savings accounts, health reimbursement accounts, wellness programs and other aspects of employer-sponsored programs. Additionally, the regulations define terms related to credit eligibility and provide filing requirements.

The regulations would take effect for tax years ending after December 31, 2013. Taxpayers may apply the rules in the regulations for tax years ending before January 1, 2015. The full text of the proposed regulations may be found here. The IRS is currently accepting comments on these regulations for a hearing to be held later this summer.

Suggested Action:

Contact Mathew Krukoski, Partner, at 860-368-5222 to learn how these proposed regulations could help you.

For more information on CohnReznick’s employee benefit plan services, visit our webpage.

Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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