The family glitch fix changed who can leave your plan for a subsidy. It did not change your penalty test.
Since tax year 2023, whether an employee’s family members can get premium tax credits depends on the cost of family coverage, not self-only coverage. Employers feel it as a shift in enrollment, not as a new penalty.
Two affordability tests now sit side by side.
The final rule changed one of them and left the other alone.
The Employee Test Stays the Same
The employer mandate still measures affordability using the employee’s cost for self-only coverage. The fix did not change the penalty analysis. See 26 CFR 54.4980H-5.
The Family Member Test Changed
For a family member’s premium tax credit, affordability uses the cost of the family coverage the employer offers. See 26 CFR 1.36B-2.
Effective for Tax Year 2023
The change took effect for tax years beginning with 2023, so it already shapes current enrollment decisions.
What employers actually feel.
The effect is on who enrolls and how you contribute to family coverage.
Some Families May Leave Your Plan
If your family coverage costs more than the affordability threshold, an employee’s spouse and children may qualify for a subsidized marketplace plan instead.
Your Penalty Exposure Is Unchanged
The employer mandate penalty is triggered by an employee, not a family member, receiving a premium tax credit. A family member’s credit does not trigger it.
Contribution Strategy Gets a New Variable
How much you contribute toward dependents now affects whether families stay on the plan or move to the marketplace.
Reporting Does Not Change
The fix is a tax credit rule for individuals, so it does not create a new employer filing. See affordability safe harbors for the tests employers do use.
We model the family-coverage decision against your own census.
This sits beside our affordability calculator and our work on contribution strategy.
Check Both Tests
We test the employee affordability result and the family coverage cost against the current threshold for your plan year.
Model Dependent Contributions
We compare what you would pay for dependent coverage against the likelihood that families leave for the marketplace.
Plan the Message
We help you explain the options to employees so families can choose with the full cost in front of them.
The questions employers ask about the family glitch.
Six short answers. This is general information, not tax advice.
What was the family glitch?
Before the fix, a family member could not get a premium tax credit if the employee’s own self-only coverage was affordable, even when family coverage was not.
Does the fix change the employer mandate penalty?
No. The employer mandate continues to use the employee’s self-only cost. See 26 CFR 54.4980H-5.
When did it take effect?
For tax years beginning with 2023.
Can an employee’s family now get a subsidy?
Possibly, if the cost of family coverage is above the affordability threshold and they meet the other tax credit rules, such as income.
Do we have to change what we contribute to dependents?
Not by law. It is a business decision about cost, enrollment and whether families stay on the plan.
Where do the rules come from?
The Treasury final rule revised 26 CFR 1.36B-2. Check the current text, because tax rules can change.
Where the rules and figures come from.
Each rule on this page links to the law or agency page it comes from. This is general information, not legal or tax advice.
26 CFR 1.36B-2
Premium tax credit eligibility and affordability for related individuals.
Send us your renewal.
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The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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