Small Business Tax Credits – Part 3 of Our 3 Part Obamacare Series


This is the last post in our Three Part Series on Obamacare . You can read the other posts here and here .

If your business meets all three conditions below , you may qualify for a small business tax credit of up to 35% (up to 25% for non-profits) to offset the costs of providing health insurance to employees. This credit increases to up to 50% (up to 35% for non-profits) in 2014.

  1. You employ fewer than 25 employees and
  2. The average annual wage you pay to employees is less than $50,000 and
  3. You provide health insurance to your employees

Under the Early Retiree Reinsurance Program ( ERRP ) , employer-sponsored health insurance plans that provide coverage to retirees aged 55-64 and their dependents can now receive reimbursement for a portion of the cost. The ERRP came about to provide financial assistance to employers to help them maintain coverage for retirees who are at least 55 but not yet eligible for Medicare. Employers can use the reimbursement they receive from the government to offset their own health care costs, reduce premium costs to participating employees by contributing more or some combination of the two options.

Action Timeline for Small Business Owners

Now – Take a look at the federal government’s Checklist for Small Businesses to make sure you are doing everything you can in advance to be prepared for the 2014 deadlines. Start shopping for health insurance coverage by visiting the federal government’s Insurance Finder Tool . This tool makes it easy for you to shop by state. Walking through this process is a great way to get educated on what types of health insurance options are out there and what each option will cost.

September 2013 – Finalize your health insurance coverage choice so you are ready to go when open enrollment begins. Make sure you have decided how much of your employees’ premiums your business will be able to cover and how much the employees will need to pay for.

October 1, 2013 – Deadline for employers that are subject to the Fair Labor Standards Act ( FLSA ) to provide a notice to employees of coverage options available through the Health Insurance Marketplace (aka “Exchange”) . For more information on “open enrollment” visit http://finder.healthcare.gov/ .

Get enrolled! If you are using an outside payroll processor, make sure you talk to them about setting up the appropriate payroll codes to start tracking health insurance deductions and contributions so you’re ready when your health insurance plan goes live.

January 1, 2014 – You should have all of your health insurance coverage in place by now with an effective date of January 1, 2014 or earlier.

Whether or not you are an Obama supporter or an Affordable Care Act advocate, if you are a small business owner and you don’t currently offer health insurance coverage to your employees, you need to get moving! If you have fewer than 50 FTE employees, you won’t be obligated to offer health insurance coverage, but you should at least educate yourself on what health insurance options are out there and how it might benefit your business to consider offering coverage.

Offering health insurance coverage as an employee benefit, even if you are only able to cover some percentage of the premiums, is still a great way to make your company attractive to new recruits. It can also reduce your FICA payroll matching tax expense by enabling employees to use pre-tax dollars to cover their portion of their health insurance costs, thereby reducing their taxable income and the amount subject to FICA matching. Cost savings are always a win-win.

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