In recent years, there have been small business employers who have opted to reimburse their employees for the cost of health insurance instead of offering health insurance. While you are not required to offer health insurance to employees if you have less than 50 full time employees, you may want to consider doing so.

Reimbursement for Individual Health Plans

If you reimburse your employees currently, there is a huge reason to stop doing that immediately. With the Obamacare mandate, you may be fined up to $100 per day, up to $36,500 per year, if you reimburse employees for medical care and have more than 50 full time employees. As a small time business owner, this is not a fine you have to worry about with 2-50 full time employees but if your company is growing, you may want to stop offering this before you do run the risk of paying a yearly fine. However, it is a viable option for a small business employer, which is called a Healthcare Reimbursement Plan (HRP), but not in the long run.

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Offering A Sponsored Health Plan

Another option is offering an employer sponsored health plan to your employees. Not only will they have an option for health insurance that is often better than the general marketplace, but as a small business employer, you are also eligible for a tax credit by offering a plan instead of reimbursing. There are specific requirements for this tax credit, though, so not every small employer is eligible for the tax credit. The requirements are as follows:

 

  • You must have less than 25 full time employees
  • On average, you must pay less than $50,000 per year in wages per employee
  • You must pay at least half of the employee health insurance premiums of the plan you are offering

 

Tablet on a desk - Health and Medical
Tablet on a desk – Health and Medical

Tax Credit Benefits to Expect

The tax credit you will get back is 50% of the premium you paid for as the employer portion. If you are a small tax-exempt employer, then the credit is only for 35% of the amount you paid. The tax credit is also only available for two consecutive tax years.

If you would like to learn more about the tax credit and how it can benefit you as a small business employer, please contact us for more information.

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