Certain small employers that offer insured health coverage to their employees are eligible for a tax credit. To be eligible for the credit, the employer must have no more than 25 full-time equivalent (FTE) employees for the taxable year, and the employees must have average annual wages of no more than $50,000 per FTE. The employer must also have an arrangement that requires it to pay a uniform percentage (not less than 50%) of the premium cost of a qualified health plan offered through the SHOP Exchange.
Beginning in 2014, the maximum credit for a small employer is 50% of the employer’s premium payments. The maximum credit is 35% of premiums for a tax-exempt small employer. The credit may be further limited by the average premium in the SHOP group market.
Small employers should review their options for offering health coverage and take into account potential credits if coverage is offered through the SHOP Exchange.