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3 Methods How To Offer Health Insurance As A Small Business

( How To Offer Health Insurance As A Small Business - Employees value health insurance very highly - perhaps more than any other benefit. If you own a small business, chances are you have a fairly close relationship with your employees and want them to stay healthy and productive. But even small businesses tend to have tight budgets, and providing quality health insurance for your employees can get expensive. You have options, including those made available by the Affordable Care Act (ACA, aka Obamacare) to offer health insurance as a small business without breaking the bank.

  • How To Use of Tax Credits

3 Ways to Offer Health Coverage As a Small Business Life

Add up your employees in full-time equivalents (FTE). Tax credits are available for small businesses with fewer than 25 FTE employees. The amount of the credit decreases based in part on the number of your FTE employees.

Count the number of people, excluding seasonal workers, who worked an average of 30 hours or more for you in the past year. These are your full-time employees.

When determining the number of FTE employees working for you, it doesn't matter how those employees are classified. Instead, you should look at the number of hours each employee has worked.

For example, you may have three employees who are classified as part-time employees, but worked an average of 32 hours per week over the past year. These employees are considered full-time employees.

Add up the number of hours worked per week by part-time employees and divide by 30. If you get a decimal, round it down to the nearest whole number.

Add this number to the number of full-time employees you need to get your full-time employee count.

For example, suppose you have three full-time employees and three part-time employees, each working an average of 15 hours per week: (15+15+15) ÷ 30 = 1.5 or 1. You have four full-time employees.

3 Ways to Offer Health Coverage As a Small Business Life

Calculate the average annual salary of your FTE employees. The small business tax credit is designed to primarily benefit businesses with low- and middle-income workers. To qualify for a loan, your RTD employees must earn an average annual wage of less than $50,000.

Add up the total wages you paid to all employees, and then divide that number by the number of FTE employees you have. The result is your average annual salary.

For example, if you have four FTE employees and paid a combined wage of $100,000 this year, your average annual wage is $25,000.

When determining the number of FTE employees and the average annual salary, make sure that you use the last operating year of the previous year.

3 Ways to Offer Health Coverage As a Small Business Life

Purchase coverage through the Small Business Health Options Program (SHOP) marketplace and pay at least 50 percent of your employees' premiums. If you qualify for the tax credit, you also qualify to use the SHOP marketplace at Insurance coverage for your employees must be purchased through the marketplace in order to claim the tax credit.

The plans available on the SHOP Marketplace are organized by metal level: Bronze, Silver, Gold, and Platinum. Each level corresponds to a different percentage of the healthcare costs covered by the plan.

For example, at the Bronze level, the insurance company covers about 60 percent of the employee's healthcare costs, with the employee paying about 40 percent of those costs.

You are free to choose which plan to offer your employees, or you can offer them a choice of plans within the same metal tier.

You must cover at least half of each worker's insurance premium to qualify for the tax credit. This applies only to the care of the employee, not to spouses or dependents who can add employees.

3 Ways to Offer Health Coverage As a Small Business Life

Request the credit on your trade tax return. If you have met all of the conditions for the tax credit and wish to claim it on your corporate tax return, you must complete IRS Form 8941, Credit for Small Employer Health Insurance Premiums.

If you operate a tax-exempt organization, you are still eligible for this credit provided you meet all of the conditions. Simply report the amount you paid for employee health insurance premiums on line 44f of the Form 990-T, Exempt Business Income Tax Return.

The credit is refundable and can be carried forward or backward to apply to past or future taxes owed.

You can also deduct the health insurance premiums you have paid that exceed the loan amount as ordinary business expenses.

The amount of credit you are entitled to depends on the number of FTE employees you have. You can receive a maximum credit of 50 percent of the premiums you have paid.

The maximum credit for non-profit organizations is 35 percent of the premiums paid.

  • How to Use of the SHOP marketplace

3 Ways to Offer Health Coverage As a Small Business Life

Confirm that your company is eligible. Utilization of the SHOP marketplace is based on the number of your FTE employees. While you must have fewer than 25 FTE employees to qualify for the tax credit, you can still use the SHOP Marketplace if you have up to 50 FTE employees.

You must have either a primary place of business in the state where you are purchasing coverage or at least one eligible employee whose primary place of work is in that state.

If you purchase a plan on the SHOP marketplace, you must offer coverage to all full-time employees. Whether an employee is considered a full-time employee does not depend on your internal designation, but on whether that employee works an average of 30 hours or more per week.

You can use the FTE calculator available on to calculate your FTE headcount if you have not already done this calculation to determine if your company qualifies for the tax credit.

For a complete list of eligibility requirements and tools to help you determine if your organization meets these requirements, visit the SHOP Marketplace section of

3 Ways to Offer Health Coverage As a Small Business Life

Choose a plan. There are four categories of plans available in the SHOP Marketplace, organized into metal tiers of Bronze, Silver, Gold, and Platinum. Each tier corresponds to a different percentage of the healthcare costs covered by policies in that category.

All plans cover the same essential insurance coverage, e.g. B. for routine doctor visits, prescriptions and hospital stays. Any additional specific benefits offered vary between plans as well as between states.

To offer a health insurance plan, select the specific category, insurance company, and plan. Some companies may offer more than one plan in each category.

You also have the option to select a category and then give your employees the option to select the insurance company and plan they prefer from the available plans in that category.

Which category you choose determines the proportion of their medical bills that your employees have to pay. The more costs are covered by the insurance, the higher the premium.

3 Ways to Offer Health Coverage As a Small Business Life

Consider adding dental care. In addition to health tariffs, the SHOP marketplace also offers dental tariffs that you can offer your employees individually or in conjunction with a health tariff.

There are two categories of dental plans, low and high. These categories reflect the level of dental expenses covered by the insurance company.

The category you choose will affect the amount your employees spend on dental benefits each year.

You can offer a dental plan without offering a health plan.

If an employee wants to add a family member to the dental plan, they must first register themselves.

Employees enrolled in health and dentistry can only enroll their dependents in dentistry.

3 Ways to Offer Health Coverage As a Small Business Life

Decide how you will contribute. The SHOP marketplace gives you a range of options to decide how much to contribute to your employees' bonuses and whether to pay for dependents' insurance, allowing you to set a fixed contribution that fits your budget.

If you have decided to only offer one plan, you choose a fixed percentage of that plan premium that you pay for each employee.

If you've decided to give your employees a choice of plans within a single category, you can choose a fixed percentage to contribute. The amount varies depending on the plan each employee chooses, as the plans in each category have different rewards.

You also have the option to contribute a fixed percentage based on a single reference plan in this category. While your employees can still choose between the plans available in this category, the amount of premium they pay will vary depending on whether they chose the reference plan, a cheaper plan, or a more expensive plan.

For example, if the reference plan you choose has a $100 bonus and you want to pay 50 percent of your employees' bonuses based on that reference plan, you would pay $50 of each employee's bonus.

If one of your employees opted into a plan in the same category with a $150 bonus, you would still contribute $50 and the employee would be responsible for the other $100 of the bonus.

Bonus amounts will still vary between your employees, even if they're all on the same plan, based on their age.

Keep in mind that you must pay at least 50 percent of your employees' premiums if you are eligible and want to claim the tax credit.

3 Ways to Offer Health Coverage As a Small Business Life

Meet employee ownership requirements. Eligibility requirements vary from state to state, but most require that at least 70 percent of your employees who are offered insurance are either enrolled in your plan or are already insured from another source, such as their spouse's plan.

You can use the SHOP Minimum Participation Rate Calculator on the website to determine how many of your employees need to enroll.

If you do not meet the minimum participation requirements, you still have the opportunity to enroll between November 15th and December 15th of each year when the minimum participation requirement is lifted.

3 Ways to Offer Health Coverage As a Small Business Life

Sign up for your plan. Once you have met the applicable minimum employee ownership requirements, you can opt-in at any time. As long as you enroll by the 15th of any month, coverage for your employees begins on the 1st of the next month.

To submit your application, you must create an employer account on You use this account to manage your plans and pay your premiums each month.

The first monthly fee must be paid immediately upon registration. Payment is made via the SHOP marketplace, not directly to the insurer.

If insurance begins on the 1st, the premium payment must be received by the 20th of the previous month at the latest, otherwise you will be deregistered.

While you can use an agent or broker to enroll for SHOP Marketplace policies, an agent or broker cannot make your premium payments for you.

  • How To Providing a Healthcare Reimbursement Plan

3 Ways to Offer Health Coverage As a Small Business Life

Confirm that your company meets the tax relief criteria. Health care reimbursement plans are considered group health insurance plans, but they do not meet the needs of the market. Employers who offer reimbursement plans in lieu of insurance coverage are penalized with an excise tax of $100 per applicable employee per day.

That consumption tax works out to $36,500 per year per employee—enough to blow even the most robust small business budget.

However, there are tax breaks for small businesses with fewer than 50 full-time employees. Essentially, small businesses are not charged the excise tax if they offer a plan that doesn't meet the needs of the market.

Keep in mind that this relief is temporary, so you should check the latest IRS publications on the subject or contact an accountant before relying on it.

Offering an ACA-approved group health plan is generally the best way to avoid significant penalties.

3 Ways to Offer Health Coverage As a Small Business Life

Consider a Section 105 reimbursement plan. Named for the section of the IRS that created these plans and gave them preferential tax status, Section 105 plans are a type of group sickness plan that provides tax-free reimbursement of employee medical and insurance expenses.

In some cases, your employees may be able to earn lower premiums for purchasing an individual policy themselves through the consumer marketplace than what is offered to your company.

Before you decide to go down the reimbursement route instead of offering group health insurance, spend some time in the individual consumer marketplace and compare plans to see if your employees really would be better off.

You should also look at what would work for your budget. Assess all options and consider a reimbursement account as a last resort, especially given their dubious legal nature under the Court of Auditors.

3 Ways to Offer Health Coverage As a Small Business Life

Draft a plan consistent with the ACA. A health care reimbursement plan meets the definition of a group health insurance plan under the ACA and therefore must comply with the rules that the law sets for group health insurance plans.

Your plan cannot include an annual or lifetime cap on essential health care benefits for an employee and must cover 100 percent of basic preventative benefits, such as annual physical exams.

The ACA also has administrative and reporting requirements that all group health plans must meet.

To ensure your plan complies with these regulations, you should consider having your plan administered by a meritocracy. Third-party reimbursement software is also available, designed to meet the Court of Auditors' administration and reporting rules.

3 Ways to Offer Health Coverage As a Small Business Life

Make sure your plan complies with other federal laws. In addition to meeting ACA requirements, your reimbursement plan must also comply with federal physician privacy and nondiscrimination laws to fall under Section 105.

The Employee Retirement Income Security Act (ERISA) sets minimum standards for information and disclosures provided to employees regarding health care plans. You must also establish a formal complaints and appeals policy and establish that plan administrators have fiduciary duties.

Independent benefits or healthcare administration companies are usually already set up to comply with ERISA standards.

Your reimbursement plan must also comply with the Health Insurance Portability and Accountability Act (HIPAA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA), which include important changes to ERISA related to employee privacy and their right to continue health insurance.

3 Ways to Offer Health Coverage As a Small Business Life

Set up your reimbursement plan. Your reimbursement plan must conform to the IRS guidelines set forth in Section 105 of the IRS Code. You must complete and archive written IRS plan documents for each employee enrolled in the plan to meet IRS audit requirements.

The plan document defines the eligible expenses, how much you contribute to the plan each month, and other procedural details for your employees to claim reimbursements.

There are specific language that must be included in your plan document to demonstrate compliance with the IRS antidiscrimination rules. See Section 105 of the IRS Code for details of what should be included.

Claims plan software typically comes with plan documents that already have all the required languages ​​included.

You may also consider having a benefits company create your reimbursement plan. This way you can ensure that the plan complies with all federal laws and regulations.

3 Ways to Offer Health Coverage As a Small Business Life

Check for health insurance reimbursements.

Employees must submit documentation to support their entitlement to reimbursement, such as an award notice or an invoice from a hospital or doctor's office.

Receipts must be kept for ten years from the date of the employee's claim for reimbursement.

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