Phaseout of health coverage tax credit data

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                  UI – TRA/HCTC
               ADVISORY SYSTEM                             CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                         OUI/DUIO
             Washington, D.C. 20210                        DATE
                                                            February 5, 2014


ADVISORY:        UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 7-14

TO:              STATE WORKFORCE AGENCIES

FROM:            ERIC M. SELEZNOW /s/
                 Acting Assistant Secretary

SUBJECT:         Expiration of the Health Coverage Tax Credit (HCTC) for Eligible Trade
                 Adjustment Assistance (TAA) Recipients

1. Purpose. To further advise states of the expiration of the HCTC program and provide
   guidance regarding the phase out of the state data transmittals on eligible TAA recipients to
   the Internal Revenue Service (IRS) for HCTC purposes.

2. References.
    The Trade Adjustment Assistance Extension Act of 2011 (Public Law (Pub. L.) No. 112-
      40), enacted October 21, 2011;
    The Omnibus Trade Act of 2010 (Pub. L. No. 111-344), enacted December 29, 2010;
    Sections 1899A, 1899B, 1899C of Division B of the American Recovery and
      Reinvestment Act of 2009 (Pub. L. No. 111-5), enacted February 17, 2009;
    The Trade Adjustment Assistance Reform Act of 2002 (Pub. L. No. 107-210), enacted
      August 6, 2002;
    Section 35 of the Internal Revenue Code (IRC) of 1986, (26 U.S.C. 35);
    Training and Employment Guidance Letter (TEGL) No. 11-02, Operating Instructions for
      Implementing the Amendments to the Trade Act of 1974 Enacted by the Trade Act of 2002
      and Changes 1, 2, and 3;
    Unemployment Insurance Program Letter (UIPL) No. 02-03, Health Insurance Tax Credit
      for Eligible Trade Adjustment Assistance/Trade Readjustment Allowances (TAA/TRA)
      Recipients;
    UIPL No. 05-03, Health Insurance Tax Credit for Eligible Trade Adjustment
      Assistance/Trade Readjustment Allowances (TAA/TRA) Recipients;
    UIPL No. 33-03, Questions and Answers About Implementation of the Advance Health
      Coverage Tax Credit;
    TEGL 22-08, Operating Instructions for Implementing the Amendments to the Trade Act
      of 1974 Enacted by the Trade and Globalization Adjustment Assistance Act of 2009, and
      Change 1;
    UIPL No. 21-09, Health Coverage Tax Credit (HCTC) for Eligible Trade Adjustment
      Assistance (TAA) Recipients;

 RESCISSIONS                                              EXPIRATION DATE
 None                                                     Continuing

      TEGL No. 16-10, Instructions for Phasing Out Changes to the Trade Act of 1974
       Enacted by the Trade and Globalization Adjustment Assistance Act of 2009, and Changes
       1 and 2;
      TEGL No. 10-11, Operating Instructions for Implementing the Amendments to the Trade
       Act of 1974 Enacted by the Trade Adjustment Assistance Extension Act of 2011 (TAAEA),
       and Changes 1 and 2; and
      Training and Employment Notice (TEN) No. 15-13, Expiration of the Health Coverage
       Tax Credit (HCTC) Program for Eligible Trade Adjustment Assistance (TAA) Recipients
       and Eligible Alternative TAA (ATAA/RTAA) Recipients or Eligible Pension Benefit
       Guaranty Corporation (PBGC) Recipients.

3. Background. The Trade Adjustment Assistance Reform Act of 2002 (Trade Act) created a
   Federal income tax credit, the HCTC, administered by the IRS. The HCTC subsidizes
   private health insurance coverage for individuals in the TAA program identified as “eligible
   TAA recipients” and “eligible alternative TAA (ATAA) recipients.” (See UIPL Nos. 02-03,
   05-03, and 33-03.)

   An “eligible TAA recipient” is defined as an individual who receives Trade Readjustment
   Allowances (TRA) for any day of the month (and the next month following the last month
   the individual meets the definition) or who would be eligible to receive TRA but for the fact
   that s/he has not exhausted his or her unemployment compensation (UC) entitlement. An
   “eligible alternative TAA (ATAA) recipient” is defined as an individual who is a worker
   under section 246(a)(3)(B) of the Trade Act and who is participating in the program
   established under paragraph (a)(1) of that section for a month and is receiving a benefit for
   that month.

   The American Recovery and Reinvestment Act of 2009 (Recovery Act) changed the name of
   ATAA to “reemployment training adjustment assistance” (RTAA) and changed the
   substantive requirements for the benefit available under section 246(a)(3)(B) of the Trade
   Act. As explained in Section J of TEGL No. 22-08, the category of individuals known as the
   “eligible alternative TAA recipients” includes both ATAA/RTAA recipients. The Recovery
   Act also provided a Special Rule to amend the definition of an “eligible TAA recipient” for
   purposes of the HCTC.

   The Special Rule allowed coverage for an individual who:

          Is in a break in approved training that exceeds 30 days, and the break falls within the
           eligibility period for receipt of TRA provided under the Trade Act, or

          Is receiving unemployment compensation (UC) (which includes regular UC,
           Extended Benefits (EB), and Emergency Unemployment Compensation (EUC)) for
           any day of such month and who would be eligible to receive TRA (except that s/he
           has not exhausted UC) for such month, without regard to the enrollment in training
           requirements.




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   Subtitle B of the Trade Adjustment Assistance Extension Act of 2011 extended the HCTC
   program as provided by the Recovery Act amendments to January 1, 2014.

   States transmit records of eligible TAA recipients and eligible ATAA/RTAA recipients to the
   IRS via the UC Interstate Connection (ICON) network. The IRS uses the states’ information
   to determine whether the eligible TAA (or ATAA/RTAA) recipients are eligible for HCTC.

4. Expiration of HCTC. The HCTC program expired on January 1, 2014, and the tax credit is
   no longer available. The last HCTC payment was made in December 2013. Beginning
   January 1, 2014, individuals who were determined to be eligible TAA recipients or
   ATAA/RTAA recipients are responsible for paying their full health coverage premiums.

   States should plan to discontinue transmitting HCTC eligibility records for months occurring
   in 2014 and later; however, any backdated records or other program updates including
   deletions for 2013 continue to be required for the proper administration of the annual HCTC
   during the 2013 tax year filing season. The 2013 eligibility records will be used to verify
   individuals’ eligibility to claim the HCTC on their Federal income tax returns.

   Information about the expiration of the HCTC program has been included in the HCTC
   Newsletter and the IRS conducted a Webinar for states on December 18, 2013. For more
   information, please visit the IRS Web site at: http://www.irs.gov/Individuals/The-Health-
   Coverage-Tax-Credit-(HCTC)-Program. The Employment and Training Administration also
   issued TEN No. 15-13 on December 12, 2013, to provide information on this subject.

5. HCTC Guidance for States. States must continue to transmit individual HCTC eligibility
   records for eligible TAA recipients and ATAA/RTAA recipients to the IRS via the ICON
   network through April 15, 2014, in situations where an individual’s HCTC eligibility status
   for one or more months before January 2014, has changed. For example, if an individual was
   denied UC/TRA benefits or ATAA/RTAA for a period before January 2014 and such denial
   is reversed, the state should transmit an individual HCTC record for the period for which the
   state determines that the individual was eligible for HCTC. Additionally, if an individual’s
   eligibility for the income support benefit award is reversed for the period before January 1,
   2014, the state should transmit an individual HCTC record for the entire month(s) before
   January 2014 for which the state determines that the individual should not have been
   determined to be an “eligible TAA recipient” or “eligible ATAA/RTAA recipient.”

   States are advised that effective April 15, 2014, the HCTC application and supporting
   infrastructure within the ICON network will no longer be available. The IRS will no longer
   accept electronically submitted individual HCTC eligibility records. HCTC data
   transmissions will no longer be needed after April 15, 2014, since the tax credit will no
   longer be available for months beginning with January 2014. A manual submission process
   must be followed to submit any outstanding 2013 eligibility records after April 15, 2014, to
   correct individuals’ HCTC eligibility status for months before January 2014, as described
   above.




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   States may continue to direct individuals to the HCTC Customer Contact Center (CCC) and
   encourage them to reach out, if needed, before February 28, 2014. States should advise
   individuals that the CCC will be permanently closed after February 27, 2014. The CCC
   contact numbers until that date are: 1-866-628-HCTC (1-866-628-4282) and 1-866-626-4282
   (TDD/TTY).

6. Action Requested. State Administrators are to provide this information to appropriate staff.

7. Inquiries. Please direct all inquiries to the appropriate Regional Office.




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