One Spouse on Employer Plan, Other on Marketplace: The Family Glitch Fix Explained

For the first decade of the ACA, a perverse rule known as the "family glitch" locked millions of spouses and children out of marketplace subsidies. The statute at IRC § 36B(c)(2)(C) provides that an employee is ineligible for PTC if offered "affordable" employer coverage. Early IRS regulations defined affordability solely based on the cost of the employee's self-only coverage — not the cost of covering the family. So even if adding a spouse to an employer plan cost $1,500 per month, and even if the family could buy silver marketplace coverage for $400 after subsidies, the family was deemed "covered" by an affordable employer plan and blocked from PTC. The glitch affected an estimated 5 million people and was widely criticized as contrary to congressional intent.

In October 2022, the IRS finalized REG-114339-21 (published 87 Fed. Reg. 62004), amending Treas. Reg. § 1.36B-2(c)(3)(v) effective for plan years beginning on or after January 1, 2023. The rule change created a dual affordability test. The employee's eligibility for PTC is still determined by the self-only premium (unchanged). But family member eligibility for PTC is now determined by the family coverage premium offered by the employer. Under the amended regulation, an eligible employer-sponsored plan is affordable for a related individual "if the employee's required contribution for family coverage under the plan does not exceed the required contribution percentage of the applicable taxpayer's household income."

The practical result: a two-earner household where Spouse A's employer offers individual coverage at $200/month (affordable at 9.02% of $80,000 household income = $600/month limit) but family coverage at $1,100/month (not affordable — $1,100 > $600) can now split coverage. Spouse A stays on the employer plan. Spouse B and the children enroll in a marketplace silver plan and qualify for PTC based on the household's combined income. The two plans coexist. Spouse A's employer-plan affordability test uses self-only premium; the family's marketplace affordability test uses family premium. The engine at acacliff.com models this split by allowing `employerCoverageOffer: true` for the employee member while leaving other members on marketplace.

The affordability threshold itself changes annually. For 2025 it was 9.02% of household income, as published by the IRS in Rev. Proc. 2025-25. For 2026, the threshold is set in the same Rev. Proc.; the 9.02% figure is the current best reference pending the updated publication. The threshold applies to the employee's required contribution — not the portion the employer pays. If the employer pays $800 and the employee pays $300 for self-only coverage, the employee's required contribution is $300, tested against 9.02% × household income.

Families navigating this split scenario face two practical challenges. First, they must correctly identify which household members belong on which plan for Form 8962. Members enrolled on the employer plan do not generate marketplace PTC; members on marketplace plans do, calculated against the family's total household income. Second, if the employer's plan year does not align with the calendar year, partial-year splits can occur. The family glitch fix applies prospectively from the employer plan year start date — a plan year beginning July 1, 2023, would apply the new rule starting July 1, but the old rule governed January through June. For most calendar-year employer plans, the transition was clean at January 1, 2023. Run the calculator with the full household income and only the marketplace-enrolled members to see the accurate PTC.

The family glitch fix is the most consequential ACA regulatory change since the law's passage for households where one spouse has employer coverage. Before 2023, approximately 5 million people were locked out of marketplace subsidies because the affordability test used the employee's self-only premium — even if family coverage cost five times as much. The fix in Treas. Reg. § 1.36B-2(c)(3)(v) created a bifurcated test: the employee's PTC eligibility uses the self-only premium; the family's PTC eligibility uses the family premium.

The split-coverage arrangement that results — employee on employer plan, spouse and children on marketplace — is administratively straightforward at tax time. The marketplace-enrolled family members generate a Form 1095-A. Only those members appear on the PTC calculation lines of Form 8962. The employee does not generate a marketplace 1095-A and is excluded from the PTC math. The household income denominator is unchanged — the full combined income is used even though only some members are on the marketplace plan.

Households near the 400% FPL cliff face the same cliff dynamics as any marketplace enrollee: if combined household income crosses the threshold, the family members on the marketplace plan lose their PTC entirely (in cliff-regime years like 2026). The employee's employer coverage is unaffected — that is governed by the employer plan's premium and the employer's contributions, not ACA PTC rules. This asymmetry is important: the employee has stable employer-subsidized coverage even in cliff years, while the spouse/children face the full PTC cliff.

For 2026, the 400% FPL threshold for a family of 4 is approximately $131,600 (based on 2025 federal poverty guidelines applied to 2026 coverage; verify with updated guidelines when filing). A household at $130,000 combined wages is just under the cliff; a year-end bonus of $5,000 could eliminate all PTC for the marketplace-enrolled family members and trigger unlimited APTC repayment.