United States: Small Business Health Care Credit Qualifications

Note to readers: As of this writing, efforts are underway in Washington to repeal the Affordable Care Act. Both the Republican-majority House and Senate have approved a resolution to begin repeal proceedings, while President Trump has issued an Executive Order calling for the law's "prompt repeal." Please bear this in mind as you read the article below, and consult your benefits advisor for the latest developments.

IRS Form 8941, "Credit for Small Employer Health Insurance Premiums," is used by eligible employers to calculate the small business health care credit. If you own or manage a small business and think your company may qualify for the tax break, be sure to familiarize yourself with the latest version of this important form.

General Qualifications

The small business health care credit generally is available to employers that:

  • Have 10 or fewer full-time equivalent employees (FTEs)
  • Pay average annual wages of less than $25,000 (indexed for inflation)
  • Contribute a uniform percentage of at least 50% of the premium costs for employee health insurance coverage obtained through the Small Business Health Options Program (SHOP) Marketplace

The maximum tax credit is generally 50% of premiums paid (35% for tax-exempt eligible small employers). A partial credit is available for qualifying employers that meet the SHOP premium contribution requirement and:

  • Have fewer than 25 FTEs
  • Pay average annual wages of less than $50,000 (indexed for inflation)

Once calculated, the tax credit is claimed as a general business credit on Form 3800 (or, by tax-exempt small employers, as a refundable credit on Form 990-T).

New Lines

The 2016 form adds a new Line C that implements the two-consecutive-year limitation for the credit that became effective in 2014. If the taxpayer confirms on line C that it claimed a credit in 2014, a Form 8941 cannot be filed in 2016. References to the filing year have been updated, but the applicable maximum annual wages amount remains unchanged at $52,000. (Although the inflation-adjusted threshold for 2016 is $51,800, the rounding rule required for calculating average wages results in $52,000 remaining the effective limit for purposes of the 2016 Form 8941.)

The instructions identify the information needed to calculate the tax credit and include worksheets to determine the number of employees, average wages and average premium for the small group health insurance market for each state where the employer has employees.

In addition, the instructions have been updated to incorporate Notice 2016-75 transition relief for the three Wisconsin counties in which no SHOP coverage was available in 2016. They also include the transition relief for employers in certain Iowa counties without 2015 SHOP coverage (created by IRS Notice 2015-08), because eligible employers with non–calendar-year plans can claim a tax credit for the portion of their 2015 plan year that wraps into 2016.

Finally, the list of average premiums, by county, for all 50 states plus the District of Columbia has been updated for 2016 (An employer's credit may be reduced if the employer pays premiums greater than the average for the small group market for the state in which its employees work.)

Opportunity to Save

The small business health care credit has had trouble taking hold. In its early years, agencies tried outreach to small employers that may not have realized the credit was available. Changes effective in 2014 brought in the requirement of SHOP participation (other than for employers in the identified counties where such coverage isn't available) and the two-consecutive-year limitation for claiming the credit — both of which are likely to see use drop even further.

Nevertheless, there may be tax savings here for eligible employers. Work with your tax advisor to determine whether your company qualifies for 2016 and, if so, how to complete the necessary forms and worksheets.

Agencies Issue Implementation FAQs

Late last year, the Department of Labor, Department of Health and Human Services and IRS jointly issued three new FAQs related to compliance with the Affordable Care Act. Here are summaries of the major topics covered:

Special enrollment. The FAQs confirm that, if employees and their dependents lose eligibility in individual market coverage (including coverage from a Health Insurance Marketplace), they're entitled to midyear special enrollment in an employer-sponsored group health plan for which they're otherwise eligible and had previously declined to enroll in. This special enrollment opportunity applies if the loss of eligibility is for reasons other than failure to timely pay premiums or termination of coverage for cause (such as making a fraudulent claim or an intentional misrepresentation of a material fact).

Individuals are entitled to special enrollment in group health plan coverage regardless of whether they may enroll in other individual market coverage inside or outside a Marketplace. In addition, under the Health Insurance Portability and Accountability Act, a special enrollment right applies to a loss of eligibility for health insurance coverage regardless of whether the health insurance coverage is sponsored by an employer. This is because the act's definition of "health insurance coverage" isn't limited to employer-sponsored coverage.

Preventive services. Noting that the Health Resources and Services Administration (HRSA) updated its Women's Preventive Services Guidelines on December 20, 2016, the FAQs explain that the updated guidelines apply for plan years beginning on or after December 20, 2017. Until the new guidelines become applicable, nongrandfathered group health plans and insurers are required to provide coverage without cost-sharing consistent with the previous HRSA guidelines for any items or services that continue to be recommended.

The updated guidelines address a number of specific items and services — including breast cancer screening, breastfeeding services and supplies, contraceptives, and well-woman preventive visits.

Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). The FAQs affirm that previous guidance on the application of the Affordable Care Act to Health Reimbursement Arrangements (HRAs) and Employer Payment Plans (EPPs) remains in effect. The guidance generally prohibits HRAs and EPPs from being used to buy individual health insurance coverage unless that coverage is limited to excepted benefits or the arrangement is offered only to retirees.

The previous guidance doesn't, however, apply to QSEHRAs because these arrangements, as defined by the 21st Century Cures Act for years beginning after December 31, 2016, aren't group health plans. The FAQs clarify that the act's retroactive extension of the Notice 2015-17 reporting and excise tax relief for EPPs is limited to EPPs that pay or reimburse only individual health insurance premiums or premiums for Medicare Part B or Part D.

EPPs that qualify for the relief (applicable to plan years beginning on or before December 31, 2016) will be considered minimum essential coverage that precludes covered individuals from qualifying for premium tax credits under Internal Revenue Code Section 36B. The FAQs also explain that the extension has no effect on the relief in Notice 2015-17 for certain S corporation health care arrangements for 2% shareholder-employees.

If you have questions about health care credit qualifications, please contact Ron Present, Partner and Health Care Industry Group Leader, at rpresent@bswllc.com or 314.983.1358.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Ron M. Present, CALA, CNHA, LNHA, FACHCA
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions