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ACA credits: Status quo for now

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in Office Management,Payroll Management

The IRS isn’t planning on changing how it administers the Affordable Care Act’s (ACA) premium tax credit, said IRS Commissioner John Koskinen.

Koskinen was reacting to dueling federal appellate court decisions on eligibility for the credit, both issued on July 22.

The District of Columbia Circuit in Halbig v. Burwell ruled that only individuals who live in states that established their own health insurance exchanges are eligible for the credit. Almost simultaneously, the 4th Circuit’s opinion in King v. Burwell held that the credit is available to all eligible individuals, regardless of whether they purchased insurance through a state or federal exchange.

THE TAKEAWAY: It will take many more months before this issue is settled by the federal appellate courts; an appeal to the U.S. Supreme Court is also possible. The employer free-rider penalties depend on whether even one full-time employee who buys coverage on the individual exchange receives a tax credit.

These decisions don’t affect employees who are currently receiving the advance credit. Likewise, you should continue to plan for the ACA’s implementation and continue to distribute exchange notices to new hires.

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