Article Highlights:

  • Small Employer Health Insurance Credit
  • Credit Qualifications
  • Administration Delays Availability from Government Marketplace until 2015

Beginning in 2010, the federal government offered small employers a tax credit as an incentive to provide health insurance to their employees. This credit was up to 35% of the employer’s contribution toward the cost of the employees’ health insurance for 2010 through 2013, with an increase to 50% starting in 2014, and then available only for two consecutive years after 2013. For non-profit employers, the credit percentages are 25% and 35%, respectively.

A small employer is one that employs 25 or fewer equivalent full-time employees with average full-time wages of $50,000 or less. That definition is misleading, since the maximum credit is only available to employers with 10 or fewer employees with average full-time wages of $25,000 or less; the credit begins to phase out as the number of employees and average full-time wages increase.

Prior to the startup of health insurance marketplaces, a small employer would qualify for the credit by purchasing group insurance on the open market and paying at least 50% of the employees’ premiums. Beginning in 2014, the credit was only supposed to be available if the insurance was purchased through the federal or state government-run marketplaces.

However, because of the problems with making the federal marketplace website functional, the Administration has announced a one-year delay to 2015 for the requirement that the insurance be acquired through a government-run insurance marketplace. This will allow small businesses to continue with their existing plans for another year, and still qualify for the credit if the insurance otherwise meets the required criteria.

If you have questions related to the small employer health insurance credit or any of the tax provisions of the Affordable Care Act being implemented in 2013 and 2014, please give this office a call.

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