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Tuesday, April 6, 2010

Health Care Reform & The Small Business Owner

Health care reform as envisioned in current draft legislation would reduce the current burdens on small firms and their workers.

  • Tax credits for small businesses. For the 2010 tax year up until the 2013 tax year, the credit will gradually be phased in. Businesses with fewer than 26 employees and average annual wages under $50,000 will eventually be eligible for credit in an amount up to 50% of nonelective contributions that the business makes, on behalf of its employees, for insurance premiums. Here's the good news for tax exempt nonprofit organizations: They would get a 35% credit against payroll taxes!

  • Premium Cost Eligibility. To avoid an incentive to choose a high-cost plan, an employer’s eligible contribution is limited to the average cost of health insurance in that state.

  • Employers with ten or fewer employees and average wages below $25,000 fair very well with the new reform. They will benefit from a 100% credit. Leased employees will be counted as employees, however 2% S corporation shareholders will not be included in the definition of employee.

  • New reporting requirements. If an employer self-insures its employees, the employer must report certain information, including details on each individual obtaining the coverage, their coverage dates and various other information. These reporting requirements will become effective after 2013.

  • Starting in January 2011, employers will be required to disclose, on each employee's Form W2, the value of the individual employee's health insurance coverage, sponsored by the employer.

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