Payroll and Benefits: Opting In or Out of Healthcare Coverage: What Does it Mean for Me?

Healthcare reform is a hot topic for any business owner. However, not many understand the implications of opting in or out of the legislation’s requirements. Although there is no actual mandate for employers to offer health insurance, there are financial repercussions for both small and large employers that include the following potential tax credits and penalties.

Employers with less than 25 fulltime equivalent (FTE) employees

Small employers with less than 25 fulltime equivalent (FTE) employees (30 hours a week will be considered fulltime) may receive two years of tax credits for offering health insurance, assuming annual wages average less than $50,000. Through 2013, the maximum credit is 35% for small businesses and 25% for small tax-exempt employers, increasing in 2014 to 50% and 35%, respectively.

Employers with at least 50 FTE employees

In 2014, employers with at least 50 FTE employees must offer at least the “minimum value” health coverage (per each individual state to define this, not to be less than 60% of the plan’s total allowed costs) AND make it affordable, meaning employee-only coverage must cost less than 9.5% of the employee’s income. If not, these employers will face a penalty if any employee purchases coverage through the health exchange and receives a subsidy. The employer penalty, which will be treated as an excise tax and cannot be written off, will be the lesser of:

  • $3000 per employee receiving a subsidy to purchase coverage on the exchange, OR
  • $2000 per full-time employee, excluding the first 30 employees.

There are no tax credits for large employers to offer health insurance. For more information or assistance, contact us.

Posted in: HRvest
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