Since 2010, the Affordable Care Act (ACA) has allowed a credit for
small employers to offset the cost of offering health insurance to its employees
under §45R. This credit is allowed regardless if the taxpayer is for-profit or
tax-exempt. In order to qualify, the employer must purchase health insurance
coverage under a qualifying arrangement. This arrangement must be one where the
employer pays the premium and must:
- Be based on non-elective contributions.
- Meet the uniform percentage requirement.
The non-elective contribution simply means the employer cannot base the
credit on the amount the employee pays. Second, the employer generally must pay
at least half of the actual premiums for the employee’s coverage to meet the
uniform percentage requirement. For most small employers this is simple to
calculate when there is only one plan and tier, an arrangement that allows the
employee to select self, self plus one, and family. However, complications arise
when there is more than one tier and the employer pays less than 50% because
under certain circumstances, the employer can still qualify. Although employers
may not be required to offer insurance under the employer mandate, they can
attract new talent by offering health insurance and at the same time, getting a
credit in doing so.
Featured in TAXPRO Weekly - September 5, 2013