Affordable Care Act Tax Provisions For Small Employers

The health care law, also known as the Affordable Care Act, includes certain regulations that specifically target small employers, typically those with less than 50 full-time employees, including full-time equivalent employees.

If you belong to a group with 50 or more full-time employees, including full-time equivalent employees, and have less than 50 employees yourself, but possess a certain level of common or related ownership, you are bound by the regulations that apply to large employers.

Under the health care law, small employers are required to fulfill certain responsibilities and are entitled to certain benefits.

Coverage

To learn more about purchasing insurance via the Small Business Health Options Program (SHOP), visit HealthCare.gov.

Reporting

You must withhold and report an additional 0.9 percent on employee wages or compensation that exceeds $200,000.
You may be required to report the value of the health insurance coverage you provided to each employee on his or her Form W-2.
If you provide self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover.

Payments & Credits

You may be eligible for the Small Business Health Care Tax Credit if you cover at least 50 percent of your full-time employee’s premium costs and you have fewer than 25 full-time equivalent employees.
If you self-insure, you may be required to pay a fee to help fund the Patient-centered Outcomes Research Trust Fund.

Small Business Health Insurance Requirements

Small business owners often have to fulfill various roles, including that of insurance specialists. Nevertheless, a significant challenge arises when business executives responsible for assessing benefit packages lack knowledge about the numerous compliance obligations related to health insurance coverage.

In the event that your company intends to offer health insurance to its employees, it is crucial for you to comprehend the available options and the corresponding legal regulations.

Small businesses with fewer than 50 full-time employees don’t have to provide health insurance under the ACA (Affordable Care Act).
Companies with more than 50 full-time employees (or full-time equivalent employees) in the previously reported calendar year may be subject to the employer-shared responsibility provisions of the ACA. This means that the employer must provide essential coverage to their employees (and families) or make a comparable payment to the IRS.
Employers are required to provide employees with a summary of benefits and coverage explaining health plan coverage and costs.
Coverage costs of an employer-sponsored group health insurance plan must be reported by employers on their employee’s W-2.
Small businesses offering health insurance must offer it to all eligible employees when they become eligible for coverage, and that eligibility period should not extend beyond 90 days.

5 Health Insurance Options To Consider In 2023

Even if a small business does not directly provide employees with a healthcare coverage plan, the business owner still has multiple alternative methods to support employees with their healthcare requirements.

QSEHRA – A Qualified Small Employer Health Reimbursement Arrangement or QSEHRA (pronounced Q-Sara) is a benefits option that has been beneficial for the small businesses that are aware it even exists. Small business owners can put aside a set amount of money each month to be used for employee premiums and medical expenses. Employees are responsible for paying their own medical bills or insurance premiums, but the employer then reimburses the submitted expenses with those saved pre-tax dollars.
ICHRA – An ICHRA or Individual Coverage Health Reimbursement Arrangement allows employers to provide a monthly tax-free allowance to their employees for individual health coverage expenses. This enables employees to shop for insurance outside of an employer’s group health plan or when an employer does not offer health insurance at all.
Traditional Group Health Insurance – This is the standard group health coverage that everyone’s familiar with. Businesses either work with an insurance company directly or use an insurance broker to purchase group health plan coverage for all of their employees.
Group Coverage HRA – Often known as a GCHRA, this is an employer-funded medical expense reimbursement plan. It allows a business to reimburse its employees tax-free for eligible out-of-pocket expenses and health insurance premiums. It’s most often paired with a high-deductible health plan (HDHP).
Association Health Plan – This plan shows that there is strength in numbers. Several small businesses (those that are either in geographic proximity or in the same industry) can band together and gain the purchasing power needed to buy large group coverage.

Rule Changes For Larger Businesses In 2023

If your company has a staff of fifty or more, it is important for you to be informed about the recent modifications to health plan cost-sharing limits. To meet the ACA affordability requirements for the year 2023, the employer-provided health coverage must not exceed 9.12% of an employee’s income.

This percentage has decreased from 9.61% in 2022. Take note of this change to ensure that your plan is still considered affordable and has not crossed into unaffordable territory.

State Health Insurance Laws

Businesses with 50 or more employees must not only consider federal laws related to health programs but also familiarize themselves with state laws that apply to the states they operate in, when it comes to compliance in offering insurance.

It is recommended to acquaint yourself with the Department of Insurance in your state to ensure adherence to regulations.