Small Business Tax Credit Under the New Heathcare Legislation

Many people over the last few weeks have been asking me how the new legislation is going to effect small businesses (Under 25 employees) and how the Tax Credit will work. So I decided to dedicate this week’s column to better illustrate how this Credit will be administered and who will benefit.

Small Businesses and Tax Exempt Organizations that have fewer then 25 full-time employees with an average wage of less then $50,000 per employee are eligible for a new federal tax credit. (www.IRS.gov) This credit is designed to act as an incentive for small business owners to offer health insurance to their employees, or to maintain coverage they currently offer.

The credit will be in effect for small businesses owners who pay AT-LEAST half the cost of individual coverage for their employees in 2010 and will be applied on their 2010 income tax return. The Maximum credit is 35% of the premiums paid by the business for the prior year’s coverage, with the amount reaching 50% by 2014.

Here’s an example

The single rate for an employee is $4,000.00 per year, and the business pays 50% ($2,000.00). At the end of the year the business would receive a Federal Tax Credit of 35% of the $2000.00 it paid which would be $700.00.

As I receive more information I’ll post more about any additional updates to the credit.

If you have any questions or concerns please contact me at (631) 338-9917.

Related Post: Healthcare Reform Has Arrived

Related Post: Grandfathered plans under the new legislation

Related Post: Should I hire someone to manage my benefits?

Related Post: Benchmarking and why its important for your business

Grandfathered Plans under the new Healthcare Legislation (Union & Non Union Employees)

Everyone's been asking me how their current plans will be effected by this new legislation. They want to know what will happen to their plan if they have standard employees or union employees. This was covered in the new legislation, under Grandfathered plans.

The term Grandfathered applies to any plan in existence before the legislation was passed. Grandfathered plans DO NOT have to conform to the new law until the plans renewal date. So as long as the plan was in effect on March 23rd, 2010 it is not subject to the new rules until the plan renews. Any new employees will NOT alter the grandfathered status, so employer can feel free to hire new employees without the threat of penalties or restrictions.

Companies that have union employees where a Collective Bargaining Agreement is present are not subject to the new legislation (Due to the reconciled Bill) until the Agreement reaches its conclusion. Once the agreement is renegotiated, it will then have to be within compliance with the new legislation.

This helps to clear up a few misconceptions as to how businesses and unions will be effected by the new legislation. Next Week I'll cover what changes Grandfathered plans must make by Jan 1st, 2011 & Jan 1st, 2014.

If you have any questions you can reach me at (631) 338-9917.

Related Posts: Healthcare Reform Has Arrived

Related Posts: Should I hire someone to manage my benefits?

Related Posts: Should my company have an employee advocacy program?

Related Posts: Benchmarking and why its important for your business