HCW Benefits Blog

Contributor:
Steve Byrd, Consultant
Hill, Chesson & Woody 

Questions on the Small Employer Tax Credit:

A) What part of the premium is used to calculate the credit, the total premium paid or only the employer's portion?

When calculating your available credit you will include only the portion the employer contributes to their eligible health plans, not employee contributions.

B) Is it possible to be eligible to receive a credit but actually receive no credit after the calculation is made? 

Yes.  It is possible that you could meet the eligibility requirements for either the full-time equivalency test or the earnings test and still not receive a credit.  The closer you get to the 25 full-time employee limit or the $50,000 average salary limit, the lower your available credit.  As each test is run independently, it is possible that the resulting combination could equate to a $0 credit.

C) What is the impact of this credit to small employers?

This credit will only make a significant impact to the micro-employers, with less than 10 employees, and an average salary around $25,000.  This credit will not offer much impact until 2014, when the credit increases up to 50%, and only if your group purchases coverage through one of the newly created insurance exchanges.