On November 27, the White House released a statement delaying online enrollment for the S.H.O.P. portion of the Affordable Care Act (ACA, also known as Obamacare) for one year. Eligible small businesses, particularly those with fewer than 25 employees should review what this means to them.
Here are things you will want to know:
1. You can still buy insurance through S.H.O.P.
Even though the ability to enroll online has been delayed, you can still enroll. There are several options. You can enroll directly with a paper application. Or you can enroll directly with an agent, broker, or insurance company.
2. You can still view and compare plans online, even though you are not enrolling there.
Kentucky employers should go through www.KYnect.gov.
3. You can qualify for the 50% small business health care credit ONLY if you buy your health plan insurance through S.H.O.P.
Yes, the credit is up from 35% to 50% (with exception for the non-profit employer). Basically, if a qualifying small employer pays at least 50% of the cost of health care insurance acquired through S.H.O.P., the small employer will get ½ of that cost back in the form of a credit that is used to reduce taxes. If the employer does not owe sufficient tax to obtain full benefit of the credit in the current year, the credit can be carried back or forward to other tax years to offset tax in those years.
4. You may not have to change anything.
If you offered a group health plan that purchases group health insurance for all applicable employees and you are satisfied with the health insurance you were buying insurance through an agent, broker or insurance company, you can keep that plan as long as that plan qualifies through the ACA. You should be notified by the insurance company if your plan does not qualify. However, you will NOT qualify for the small business health care credit.
5. Nothing has changed in the tax law making employer payment of health insurance premiums under a group health plan taxable to the employee.
There is a lot of misinformation on this point. Yes, it is true that the value of the health care coverage is included on the W-2. But this is for information only. It is not included in the employee’s wages. It is not only excluded for income tax purposes, it is also excluded for Social Security and Medicare tax purposes. There is an exception for S-corporation owner/employees.
There have also been other changes, such as the requirement that plans be non-discriminatory. And there are now additional rules for other types of health plans, such as for code section 125 plans (also known as cafeteria plans or pretax plans).
All of these are reasons that you should be working with your CPA and your insurance agent to find the best qualifying mix for your company and BEFORE 2014 begins.
CIRCULAR 230 DISCLOSURE: To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent this communication addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein. Likewise, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS.
Certain terms used in this post have specific meaning under the law. You should talk with your tax advisor to insure you understand this meaning.
Resources:
.Health Insurance Enrollment delayed for Small Busineses, Chicago Tribune, November 27, 2013, http://www.chicagotribune.com/news/politics/sns-rt-us-usa-healthcare-shop-20131127,0,2195000.story
.Small Employer? Get the credit you deserve., Internal Revenue Service, Publication 4862 (Rev. 3-2012) http://www.irs.gov/pub/irs-pdf/p4862.pdf Note: This publication has not yet been updated with the enhanced 50% credit for 2014.
.Application of Market Reform and other Provisions of the ACA to HRAs, Health FSAs and Certain other Employer Healthcare Arrangements, Technical Release No. 2013-03, U.S. Department of Labor, 9-13-13 http://www.dol.gov/ebsa/pdf/shop.pdf