Employer-Sponsored Plans: Premium Tax Credit (2025 IRS Guide)

This guide covers “Employer-Sponsored Plans” within premium tax credit. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 974 (2025), Premium Tax Credit (PTC), published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

Under the health care law, certain health coverage is called MEC. You generally cannot take the PTC for an individual in your tax family for any month that the individual is eligible for MEC, except for individual market coverage (defined below). MEC includes the following.

• Individual market coverage (including qualified health plans).

• Most coverage through government-sponsored programs (including Medicaid coverage, Medicare Part A or C, the Children’s Health Insurance Program (CHIP), certain benefits for veterans and their families, TRICARE, and health coverage for Peace Corps volunteers).

• Most types of employer-sponsored coverage.

• Grandfathered health plans.

• Other health coverage designated by the Department of Health and Human Services (HHS) as MEC.

Employer-Sponsored Plans

The following employer-sponsored plans are MEC.

1. Group health insurance coverage for employees under:

   1. An insured plan or coverage offered in the small or large group market within a state;

   2. A governmental plan, such as the Federal Employees Health Benefits Program; or

   3. A grandfathered health plan offered in a group market.

2. A self-insured group health plan for employees.

3. Coverage under certain expatriate health plans for employees (discussed earlier).

4. The Nonappropriated Fund Health Benefits Program of the Department of Defense.

In general, these employer-sponsored plans may also include retiree or COBRA coverage.

Employer-sponsored plans that are MEC are also referred to as “eligible employer-sponsored plans.”

Exceptions.

The following paragraphs discuss when employer-sponsored plans are not considered MEC and the circumstances in which you may be eligible for the PTC even if you have an offer of coverage under an employer-sponsored plan.

Excepted benefits not treated as MEC.

Employer-sponsored health coverage that is limited to excepted benefits is not MEC. Excepted benefits include stand-alone vision and dental plans, workers’ compensation coverage, and coverage limited to a specified disease or illness.

Affordability and minimum value.

Even if you had the opportunity to enroll in coverage offered by your employer that qualifies as MEC, you are considered eligible for an employer-sponsored plan (and cannot get the PTC for your coverage in a qualified health plan) only if the employer-sponsored coverage is affordable (defined later) and the coverage provides minimum value (defined later). Your tax family members may also be unable to get the PTC for coverage in a qualified health plan for months they were eligible to enroll in employer-sponsored coverage offered to them by your employer but only if the coverage qualifies as MEC and was affordable and provided minimum value. In addition, if you or your family member enrolls in the employer coverage that qualifies as MEC, the individual enrolled cannot get the PTC for coverage in a qualified health plan, even if the employer coverage is not affordable or does not provide minimum value.

Waiting periods and other periods without access to benefits.

You are not considered eligible for employer coverage, and can get the PTC for your coverage in a qualified health plan if you are otherwise eligible, for a month when you cannot receive benefits under the employer coverage (for example, you are in a waiting period before the employer coverage becomes effective). However, if you could have enrolled in employer coverage that is MEC and is affordable and provides minimum value and you did not enroll during an enrollment period, you cannot get the PTC for your coverage in a qualified health plan for the remainder of the plan year to which the enrollment period related. If the enrollment period related to coverage for more than 1 plan year, and you do not have another opportunity to enroll in the employer coverage for plan years following the initial plan year, you can take the PTC for your coverage in a qualified health plan during those later plan years, if you are otherwise eligible.

Coverage after employment ends.

If your employment with an employer ends and you are offered employer coverage by your former employer (for example, COBRA or retiree coverage), you are considered eligible for that employer coverage for PTC purposes only for the months that you are enrolled in the employer coverage. This same rule applies to an individual who may enroll in the coverage by reason of a relationship to a former employee.

Individual not in your tax family.

An individual who can enroll in your employer coverage who is not a member of your tax family (for example, an adult non-dependent child under age 26) is considered eligible for the employer coverage for PTC purposes only for the months the individual is enrolled in the employer coverage.

How to determine if the plan is affordable.

Your employer coverage is generally considered affordable for you if your share of the annual cost for self-only coverage, which is sometimes referred to as the “employee required contribution,” is not more than 9.02% of your tax family’s household income for 2025. Your employer coverage is generally considered affordable for the other members of your tax family eligible to enroll in the coverage if your share of the annual cost for coverage for you and your other tax family members is not more than 9.02% of your family’s household income for 2025. If your employer coverage is affordable for you but not affordable for your other family members, you may be able to take the PTC for your other family members if they enroll in a Marketplace qualified health plan. For 2026, this annual cost threshold will increase to 9.96%. However, employer-sponsored coverage is not considered affordable if, when you or a family member enrolled in a qualified health plan, you gave accurate information about the availability of employer coverage to the Marketplace, and the Marketplace determined that you were eligible for APTC for the individual’s coverage in the qualified health plan. See Determining affordability at the time of enrollment, later, for more information on this rule.

Certain employer arrangements.

An employee’s required contribution for employer-sponsored coverage may be affected by various arrangements offered by the employer.

Wellness program incentives.

If the employer that offered you (or your spouse) employer-sponsored coverage for 2025 also offered a wellness incentive that potentially affected the amount that you had to pay toward coverage, the following rules apply: If the condition for satisfying the wellness incentive (in other words, the condition the employee must meet to pay the smaller amount for coverage) relates exclusively to tobacco use, your required contribution is based on the amount you would have paid for coverage if you had satisfied the condition for the wellness incentive. Wellness incentives relating exclusively to tobacco use are treated as satisfied in determining your required contribution regardless of whether you would have actually earned the incentive had you enrolled in the coverage. If factors other than tobacco use are part of the condition for satisfying the wellness incentive, your required contribution is based on the amount you would have paid for coverage had you not satisfied the wellness incentive.

Example.

George can enroll in employer coverage. George’s monthly premiums for self-only coverage are $450. If George, who is a smoker, attends a smoking cessation class, his monthly premiums will be reduced by $100. If George completes a cholesterol screening, his monthly premiums will be reduced by $50. Whether or not George actually completes either of these wellness program incentives, for purposes of determining whether the coverage is affordable for George, his required contribution will be considered to be the amount reduced by the $100 incentive for attending a smoking cessation class but not reduced by the $50 incentive for completing a cholesterol screening. Therefore, for purposes of determining whether his coverage is considered affordable, George’s required contribution is $350.

Health reimbursement arrangements (HRAs).

If the employer that offered you employer-sponsored coverage for 2025 also contributed (or offered to contribute) to an HRA that may be used to pay premiums for the employer-sponsored coverage, your required contribution for the employer-sponsored coverage is reduced by the amount the employer contributed (or offered to contribute) to the HRA for 2025, as long as you were informed of the HRA contribution offer by a reasonable time before you had to decide whether to enroll in the coverage. Employers may offer you alternative or additional HRA coverage. See Individual coverage HRAs next.

Individual coverage HRAs.

Starting in 2020, employers can offer individual coverage HRAs to help employees and their families with their medical expenses. Under an individual coverage HRA, employers can reimburse eligible employees for medical expenses, including premiums for Marketplace health insurance.

If you were covered under an individual coverage HRA for 2025, you are not allowed a PTC for your 2025 Marketplace health insurance. Also, if another member of your tax family was covered under an individual coverage HRA for 2025, you are not allowed a PTC for the family member’s 2025 Marketplace health insurance. If you or a family member could have been covered by an individual coverage HRA for 2025, but you opted out of receiving reimbursements under the individual coverage HRA, you may be allowed a PTC for your, and your family member’s, Marketplace health insurance if the individual coverage HRA is considered unaffordable.

Qualified small employer health reimbursement arrangements (QSEHRAs).

If your employer provided you with a QSEHRA, special rules apply. See Qualified Small Employer Health Reimbursement Arrangement, later, for more details.

Health flex contributions.

If the employer that offered you (or your spouse) employer-sponsored coverage for 2025 also made (or offered to make) a health flex contribution for 2025, your required contribution for the employer-sponsored coverage is reduced by the amount of the health flex contribution (or offer). A health flex contribution is an employer contribution to a cafeteria plan that may be used only to pay for medical care (and not taken as cash or other taxable benefits) and is available for use toward the purchase of MEC. Cafeteria plan contributions that may be used for expenses other than medical care are not health flex contributions and so do not reduce your required contribution.

Opt-out payments.

If the employer that offered you (or your spouse) employer-sponsored coverage for 2025 offered you an additional payment if you declined to enroll in the coverage (an “opt-out payment”), your required contribution for employer-sponsored coverage is increased by amounts that the employer offered to pay you for declining the coverage. In some cases, an employer may make this opt-out payment only if the employee both declines the coverage and also satisfies another condition (such as enrolling in coverage offered by the employee’s spouse). If your employer imposed other conditions on receiving the opt-out payment (in addition to declining the employer’s health coverage), you may treat the opt-out payment as increasing the employee’s required contribution only if you can demonstrate that you met the conditions (such as enrolling in coverage offered by your spouse’s employer).

More information about employer arrangements.

You should contact your employer if you have questions about the effect of the employer arrangements described above on your required contribution.

Caution:

If your employer or the employer of a family member offered MEC providing minimum value and, upon your request, provided you with Form 1095-C, and if the employer also offered a non-health flex contribution or an opt-out payment, the amount reported on line 15 of Form 1095-C may not accurately reflect the amount of your required contribution for purposes of the PTC. If you have questions about the amount reported on line 15, contact your employer using the contact number provided on the Form 1095-C.

Determining affordability at the time of enrollment.

Your employer coverage is not considered affordable if, when you enroll in a qualified health plan, the Marketplace determines that your required contribution for employer coverage will be more than 9.02% of what the Marketplace estimates will be your household income and therefore that you are eligible for APTC for coverage in the qualified health plan. Eligibility for employer coverage in this situation does not disqualify you from taking the PTC when you file your tax return, even if your required contribution for coverage was not more than 9.02% of the household income on your return. However, you will be treated as eligible for affordable employer coverage based on the household income on your tax return if:

• You did not provide current information to the Marketplace relating to your household income and the required contribution for your employer coverage during each annual re-enrollment period, or

• You provided incorrect information to the Marketplace about your required contribution with intentional or reckless disregard for the facts.

You provide information with intentional disregard for the facts if you know that the information provided is inaccurate. You provide information with a reckless disregard for the facts if you make little or no effort to determine whether the information provided is accurate and your lack of effort to provide accurate information is substantially different from what a reasonable person would do under the circumstances.

The employer coverage offered by the various employers in the following examples qualifies as MEC.

Example 1.

Celia is single and has no dependents. Her household income for 2025 was $47,000. Celia’s employer offered its employees a health insurance plan that provided minimum value and for which the required contribution was $3,450 for self-only coverage for 2025 (7.34% of Celia’s household income). Because Celia’s required contribution for self-only coverage did not exceed 8.39% of household income, her employer’s plan is considered affordable for Celia, and Celia is considered eligible for the employer coverage for all months in 2025. Celia cannot get the PTC for coverage in a qualified health plan.

Example 2.

The facts are the same as in Example 1, except that Celia is married to Jon, they file a joint return for 2025, and the employer’s plan required Celia to contribute $5,300 for coverage for Celia and Jon for 2025 (11.28% of Celia’s household income). Because Celia’s required contribution for coverage for herself and Jon exceeds 9.02% of household income, her employer’s plan is considered not affordable for Jon and Jon is considered not eligible for the employer coverage. Celia is, however, considered eligible for the employer coverage for all months in 2025 and cannot get the PTC for coverage in a qualified health plan because her cost to enroll in the coverage does not exceed 9.02% of their household income. Jon is allowed a PTC if he does not enroll in the employer coverage, enrolls in a qualified health plan through the Marketplace for 1 or more months in 2025, and is otherwise allowed a PTC.

Example 3.

Don was eligible to enroll in employer coverage in 2025. Don’s required contribution for self-only coverage that provided minimum value was $3,550. Don applied for coverage in a qualified health plan through the Marketplace. The Marketplace projected that Don’s 2025 household income would be $37,000 and determined that Don’s employer coverage was unaffordable because Don’s required contribution was more than 9.02% of Don’s household income. Don enrolled in a qualified health plan through the Marketplace with APTC and not in the employer coverage. In December, Don received an unexpected $6,500 bonus, which increased his 2025 household income to $43,500. Although Don’s required contribution for the employer coverage was not more than 8.39% of the household income on Don’s tax return, Don is considered not eligible for the employer coverage for 2025 because the Marketplace estimated that the employer coverage would cost more than 9.02% of Don’s household income. Don can get the PTC if he otherwise qualifies.

Example 4.

Hal was eligible for employer coverage for 2025. His required contribution for self-only coverage was $3,400, and Hal enrolled in the coverage. His household income for 2025 was $33,000, which means that his required contribution was more than 9.02% of his household income. Even though the employer coverage was not affordable, Hal cannot get the PTC for coverage in a qualified health plan because he enrolled in the employer coverage.

Example 5.

Elsa is married and has two dependent children. Her household income for 2025 was $39,000. Elsa’s employer offered only self-only coverage to employees. No family coverage was offered. The plan had a required contribution of $3,000 for self-only coverage for 2025 (7.69% of Elsa’s household income) and provided minimum value. Because Elsa’s required contribution for self-only coverage was not more than 9.02% of household income, her employer’s plan is considered affordable for Elsa. Thus, Elsa is considered eligible for the employer coverage for 2025 and cannot get the PTC for coverage in a qualified health plan. However, because Elsa’s employer did not offer coverage to Elsa’s spouse and children, Elsa could take the PTC for her spouse and two children if they enrolled in a qualified health plan and otherwise qualify.

Determining affordability for part-year period.

If you are employed for part of a year or employed by different employers during the year, you determine whether your coverage is affordable by looking separately at each coverage period that is less than a full calendar year. For each period, the coverage is affordable if your required contribution for the entire year would not be more than 9.02% of your household income for the year.

Example.

Elvis was enrolled in a qualified health plan without APTC beginning in January 2025. He began working for a new employer in May that offers health insurance coverage with a calendar-year plan year. Elvis’ required contribution for the employer coverage for the remainder of the year was $200/month, which would be $2,400 for the full plan year. Elvis does not enroll in the employer coverage or inform the Marketplace of the offer of employer coverage. Elvis’ household income for the year is $20,000. Elvis’ employer coverage is considered unaffordable for the period May through December because his required contribution for the full plan year, $2,400, is more than 9.02% of his household income. As a result, Elvis could take the PTC for January through December if he otherwise qualifies.

Coverage year not a calendar year.

If your employer’s plan year is not the calendar year and you are a calendar-year taxpayer, you determine whether your coverage is affordable by looking separately at the portion of the calendar year in each plan year. A coverage period in 2025 that falls in a plan year beginning in 2024 is considered affordable if your required contribution for the entire plan year is not more than 8.39% of your household income for 2025. A coverage period in 2025 that falls in a plan year beginning in 2025 is considered affordable if your required contribution for the entire plan year is not more than 9.02% of your household income for 2025.

The employer coverage offered by the various employers in the following examples qualifies as MEC.

Example 1.

Tim’s employer offers health insurance coverage with a plan year of July 1 through June 30. His required contribution for the plan year that began on July 1, 2024, was $250 per month ($3,000 for the entire plan year). Tim enrolled in a qualified health plan on January 1, 2025, and did not apply for APTC. Tim’s household income for 2025 is $30,000. Tim’s required contribution for the plan year, $3,000, is 10% of his household income for 2025. Because 10% is more than 8.39% (the required contribution percentage for the plan year beginning in 2024), Tim’s employer coverage for January 1, 2025, through June 30, 2025, is not considered affordable, and Tim can take the PTC for those months if he is otherwise eligible.

For the plan year that began on July 1, 2025, Tim’s required contribution was reduced to $200 per month (or $2,400 for the entire plan year). Tim’s required contribution of $2,400 is 8% of his 2025 household income. Because 8% is not more than 9.02% (the required contribution percentage for the plan year beginning in 2025), Tim’s employer coverage for July 1, 2025, through December 31, 2025, is considered affordable and he is not eligible for the PTC for those months.

Example 2.

Maria’s employer offers health insurance coverage with a plan year of September 1 through August 31. Maria’s required contribution for the employer coverage for the plan year September 1, 2025, through August 31, 2026, is $3,700. Maria’s household income for 2025 is $37,000. Maria’s employer coverage is considered unaffordable for the period September 1 through December 31, 2025, because her required contribution for the plan year, $3,700, is more than 9.02% of her 2025 household income. If Maria enrolls in a qualified health plan for 2026 and requests APTC, the Marketplace will determine whether the employer coverage is considered affordable for the period January 1, 2026, through August 31, 2026, by comparing Maria’s required contribution for the plan year beginning in 2025, $3,700, to her estimated 2026 household income.

How to determine if a plan provides minimum value.

An employer-sponsored plan provides minimum value only if the plan pays at least 60% of the total allowed costs of benefits for a standard population and provides substantial coverage of inpatient hospitalization services and physician services. A plan meets the 60% rule only if an employee’s expected cost-sharing (deductibles, co-pays, co-insurance, and out-of-pocket maximums) under the plan is no more than 40% of the cost of the benefits. This percentage is based on actuarial principles using benefits provided to a standard population and is not based on what you actually pay for cost sharing.

Your employer must provide you with a summary of benefits and coverage (SBC) on or before the first day of the open enrollment period for the plan you are enrolled in for the current coverage period. The employer must also provide you with SBCs you request for other plans in which you can enroll. If you are not enrolled in a plan, the employer must provide you with the SBCs for all plans in which you can enroll. The SBC will tell you whether an employer-sponsored plan provides minimum value. If you requested Form 1095-C from your employer and they provided it, line 14 of that form will include an indicator code telling you if your employer offered you a health plan in the previous year that provided minimum value.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 974 (2025), Premium Tax Credit (PTC): Minimum Essential Coverage (MEC) — Employer-Sponsored Plans — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.