Employer Requirements, Exemptions, and Credits:
Large and Mid-Size Businesses (50 or more full-time employees):
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Must choose to either offer minimum essential coverage for full time employees or be liable for a penalty up to $2,000 per full-time employee.
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Must file information returns with the IRS to report the providing of coverage.
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Coverage requirement begins in 2014.
Employers with more than 200 employees must automatically enroll employees in its health plan. However, employees may opt out of this coverage.
***See below for information on health care tax credit for small businesses.
Health Insurance Exchanges:
Beginning 2014, state-based American Health Benefit Exchanges and the Small Business Health Options Program (SHOP) will offer coverage to individuals and small businesses with up to 100 employees. After 2016, states may permit businesses with more than 100 employees to purchase coverage in the SHOP exchange.
Essential Benefits Package:
All qualified plans are required to offer at least an essential health benefits package. Effective 2014, an essential health benefits package is established that provides a comprehensive set of services, covers at least 60% of the actuarial value of the covered benefits, limits annual cost-sharing and is not more extensive than the typical employer plan.
Dependent Coverage for Adult Children:
Effective on the first day of any new group health plan year beginning on or after September 23, 2010, any group health plan that provides coverage of dependent children, must continue to make dependent coverage available for an adult child until the child turns 26 years of age.
Health Care Accounts:
The annual contribution limit for flexible spending accounts is capped at $2,500 in 2013 (indexed for inflation). Beginning in 2011, over-the-counter medicines cannot be purchased with flexible spending or health savings accounts unless prescribed by a doctor.
Small Business Health Care Tax Credit
What businesses are eligible?
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Small businesses - 25 or fewer employees and average annual wages of less than $50,000
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Tax-exempt organizations (info at end)
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Governmental employers are not eligible unless tax-exempt under section 501(c)
What is the credit?
For 2010 through 2013, up to 35%. The credit is based on the lesser of:
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Amount of non-elective contributions paid on behalf of employees under the arrangement during the tax year.
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Amount of non-elective contributions which would have been paid if each employee were enrolled in a plan that had a premium equal to the average premium for the small group market in the state in which the employer is offering health insurance coverage.
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As determined by the secretary of Health and Human Services (HHS) the amounts for Alabama are $4,441 for employee-only and $11,275 for family coverage.
For 2014 and beyond, the tax credit is for two years of up to 50% of the employee’s premium.
100% credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000.
Tax exempt organizations receive a 25% credit against payroll taxes.
How do you claim the credit?
The credit is claimed on the employer’s annual income tax return. For tax-exempt employers, the IRS will provide further info.
Other BMSS Health Care Reform Resources:
Beware of Making Changes to Your Company Health Care Plan
Download presentation from past BMSS seminar "What Business Owners Need to Know About Health Care Reform"
Read previous article from BMSS about the health care reform.
BMSS is here to help you. Ross Mendheim and our tax professionals are available to discuss what you need to know about health care reform.