HCTC: Frequently Asked Questions
Scroll down to view the answers to the most frequently asked questions about the following HCTC-related topics:
Overview
Individuals
Partners - PBGC
Partners - State and Local
Partners - Tax Professionals
Partners - Health Plan Administrators
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1. What is the HCTC and who is eligible?
The Health Coverage Tax Credit (HCTC) pays 72.5% of qualified health insurance premiums for eligible individuals and their families. The HCTC is a unique tax credit administered by the Internal Revenue Service (IRS) that individuals can receive either monthly as their health plan premium becomes due, or yearly as a credit on their federal tax return. The following individuals are candidates for the tax credit:
1. Pension Benefit Guaranty Corporation (PBGC) payees 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 general requirements and have a qualified health plan to receive the HCTC. Learn more by visiting the HCTC Eligibility Requirements page.
2. 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). Learn more by visiting the Latest News and Background page.
3. What government agency administers the HCTC?
The Department of the Treasury (Internal Revenue Service) administers the HCTC in partnership with other federal agencies, the states, and the private health industry.
4. 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.
5. 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) at 1-877-US-2JOBS or visit the DOLETA website for more information.
1. How will I find out if I am a candidate for the HCTC?
You will receive an HCTC Eligibility Kit in the mail once the HCTC Program is notified by your state workforce agency or the PBGC that you may be able to receive the tax credit.
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. Visit the Service Locator website to find the closest local employment office to you. 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 need to transmit your eligibility record to the HCTC, after which we will mail you an HCTC Eligibility Kit.
2. 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.
3. 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.
4. 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:
- The PBGC became the trustee of your plan on or before the date you received your lump sum payment.
- 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.
5. 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. Learn more by visiting the Qualified Health Plans page.
6. 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 family members if they meet all HCTC general requirements and are enrolled in a qualified health plan. Any of your family members who would like to receive the HCTC must be your spouse or claimed as a dependent on your federal income tax return. Learn more about eligibility requirements for your family members by visiting the General Requirements page.
7. What can I do if I have trouble paying for 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 eligible for and enrolling in the HCTC. See the NEG Contact List 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.
8. How long can I receive the HCTC for?
The HCTC is available until January 1, 2014, when the tax credit will expire. Until then, you can receive the HCTC for as long as you continue to receive TAA or PBGC benefits, meet the general requirements, and are enrolled in a qualified health plan. Learn more by visiting the HCTC Eligibility Requirements page.
9. 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. For each month an individual receives the credit, whether monthly or yearly, he or she must also be a TAA (including ATAA or RTAA) recipient or a PBGC payee and enrolled in a qualified health plan.
- If you are looking for information on registering for the Monthly HCTC, go to the Monthly HCTC page.
- If you are looking for information on receiving the Yearly HCTC, go to the Yearly HCTC page.
- If you are a monthly HCTC participant and would like information on making payments or updating your account, go to the HCTC Information for Monthly Participants page.
1. 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. Learn more on the PBGC page.
2. How soon after a pension plan is assumed by the PBGC can an individual claim the Yearly HCTC or receive the Monthly HCTC?
As long as the individual is enrolled in a qualified health plan, they can claim the Yearly HCTC on their federal income tax return for 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 in the monthly HCTC program as soon as he or she receives an HCTC Eligibility 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 income tax return.
1. How does an individual enroll in the HCTC?
An individual must first be eligible to receive the tax credit. Once eligible, they will receive an HCTC Eligibility Kit in the mail. An individual can receive the HCTC for as long as they receive benefits through the TAA program or the PBGC, and continue to meet HCTC eligibility requirements. For detailed information on the requirements, visit the HCTC Eligibility Requirements page.
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 an HCTC Eligibility Kit to that individual. The individual should go through the Kit and enclosed Eligibility Guide to confirm their TAA/ATAA/RTAA eligibility and ensure they are enrolled in a qualified health plan. The individual must fill out an HCTC Monthly 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.
2. Are there 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 eligible for and 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. See the NEG Contact List which shows the states that offer the program.
3. In addition to being trade-certified, do TAA recipients need to be receiving TRA payments to qualify for the HCTC?
Yes. TAA recipients must be receiving money from their state (either TRA or unemployment insurance while otherwise eligible for TRA), and attend TAA-approved training (or be in a break in training) or have a waiver saying they do not need training. The HCTC is also available to Alternative and Reemployment TAA recipients. Learn more on the TAA, ATAA, and RTAA Recipients page.
4. How do states transmit files to the HCTC Program?
States must transmit their files via the ICON (Interstate Connection Network) system. See the Transmit Eligibility Records page for more information on how to transmit files.
5. 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 eligibility information to newly eligible candidates immediately, allowing the candidates to receive the credit as soon as possible.
6. Is there support material available for Rapid Response and One Stop teams?
Yes! Please visit the Partners page to download information guides and other valuable program material. You can also call our Customer Contact Center at: 1-866-628-4282 or contact us to request a virtual training session for your staff or HCTC Brochures to distribute.
1. 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.
2. 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.
3. What IRS publications can I use to help individuals receive the Yearly HCTC on their federal income 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).
4. What IRS tax form should be used to claim the Yearly HCTC on a federal income tax return?
Eligible individuals should use IRS Form 8885, Health Coverage Tax Credit, to claim the Yearly HCTC on their federal income tax returns. This form helps them determine if they are eligible and provides instructions for claiming 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). Learn more about how to claim the Yearly HCTC by visiting the Tax Professionals page.
5. What supporting documents should be submitted for the Yearly HCTC on a federal income 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.
6. 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.
Partners - Health Plan Administrators
1. 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.
2. Will the HCTC Program charge HPAs any fees for participation?
No. The HCTC Program does not charge HPAs any fees.
3. 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.
4. 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. Learn more on the Health Plan Administrators page.
5. 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 HCTC program. If the HPA will not accept monthly payments, then the enrollee must claim the Yearly HCTC when they file their federal income tax return.
