I am a retired airline employee collecting my PBGC pension and paying for COBRA benefits. Do I have to pay my entire premium?

            No. For all American Airlines and US Airways flight attendants and other eligible airline personel between the ages of 55 and 65 years old who are collecting their pensions through the Pension Benefit Guarantee Corporation (PBGC), they can take advantage of the Health Coverage Tax Credit (HCTC), which pays 72.5 percent of qualified health insurance premiums for eligible individuals and their families. 

            This is how it works.  If you are collecting your PBGC pension and you are paying premiums for your health insurance coverage, you will be required to pay 27.5 percent of the premium and the IRS will give you a tax credit equal to 72.5 percent of the cost of your premiums.  If, for example, your health insurance premiums are $20,000.00 a year, you would get an IRS tax credit equal to $14,500.00, which is deducted dollar for dollar from any federal taxes you owe.  

            The credit can be taken only if you are receiving your PBGC pension or you are a qualifying family member of a PBGC pension payee who passed away or finalized a divorce with you.  

            The health insurance plans that qualify for the HCTC include coverage under a COBRA continuation provision, coverage under a group health plan available through the employment of your spouse, coverage obtained in the non-group (individual) health insurance market other than coverage offered through the health insurance marketplace, and coverage under certain state-qualified health plans established prior to January 1, 2014.  It does not include any insurance marketplace coverage.  

            As a practical matter, this means that flight attendants who are receiving COBRA coverage and are collecting their PBGC pensions may take advantage of this credit for as long as they are receiving COBRA coverage.  They may be able to do so after COBRA expires, but only if they are then covered under a qualifying health insurance plan for the HCTC. For more information concerning the health coverage tax credit, click here.  

Greg Boles
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Partner at The Boles Firm | Experience Matters