Last week we posted an article from Forbes highlighting a major pitfall of the Affordable Care Act (ACA) that impacts small businesses significantly… To recap, small businesses with less than 50 employees are not required to provide health insurance to their employees, but if they reimburse these employees or pay stipends for their individual health insurance plans thenthey can be penalized up to $100/day per employee. Although this sounds bizarre, ACA, or ObamaCare actually implements an initiative with benefits that far outweigh this pitfall.

Small businesses with less than 25 full-time equivalent employee (FTE)’s that provide group health plans for their employees are eligible to receive a general business tax credit up to 50% of the amounts paid towards their employees’ insurance premiums. Yes, that is a dollar for dollar credit, not just a deduction. Any expense over the allowable credit can be used as deduction. In order to qualify, the business must have fewer than 25 FTE’s with average annual wages below $50k, pay at least 50% of employees premiums, and the group plan must be purchased through the Small Business Health Options Program (SHOP Exchanges through your state’s health insurance marketplace).

Well you might be thinking, why do I HAVE to purchase through the SHOP Exchange? Well, this is actually a benefit, not a disadvantage. Before the SHOP Exchange, larger businesses often received better deals from insurance companies due to their buying power. With the SHOP, the same insurance programs and prices are offered to large and small employers. This results in lower insurance premiums for small businesses, most of which can be offset from the small business tax credit explained above. With the appropriate tax planning, you can now offer healthcare to your employees for a fraction of the costs before ObamaCare.

Feel free to contact us in regards to this topic and ways to implement this initiative within your business.