If you run a small business, you’ve likely heard of the
Small Business Health Options Program, known as SHOP. As a subset of the affordable care act, the
SHOP was created to attempt to assist small businesses in acquiring affordable
health care for their employees. While
the intentions are good, many small businesses might find it difficult to
participate in the SHOP and receive the tax credits that are part of the
program.
Here are a few details that are important to know regarding
the SHOP in Illinois for 2015:
·
In order to participate in the SHOP, you must
have fewer than 50 Full time equivalent (FTE) employees.
·
For 2015, the employer can only offer one
qualified SHOP plan to its employees.[1]
·
In order to take advantage of the tax credit
that is available, the following criteria must be met:
o
You must have less than 25 FTE
employees.
o
Average earnings for each employee must be less than $50,800.[2]
o
The employer must pay at least 50% of the Employee Only portion of the premium.
o
70%
of the employees must participate.
o
Coverage must be made available to all employees.[3]
o
The tax credit requires SHOP Marketplace
coverage.
o
If a tax credit is qualified for, it is
available for 2 consecutive years and can be up to 50% for for-profit companies
and 35% for not-for-profit entities.
As you might conclude from the requirements, there are many
small businesses that don’t qualify for a tax credit or for participating in
the SHOP at all. If you’re a very small
company with two owners operating the entity and no other employees, the SHOP
is really not an option.
You will be hearing a lot about the SHOP in the coming weeks
as we approach Open Enrollment. While
the SHOP might provide a solution for some companies, unfortunately, the hype
will disappoint far more as they realize the caveats that come with qualifying
for the tax credits. They are not realistic for their circumstance.
Therefore, before you get too excited about the SHOP, it
might be wise for you to shop around. The market, while inflated as a result of new
coverage requirements and taxes, provides other alternatives for those that
don’t fall into the mold required by SHOP.
And, at least company paid premiums for group coverage are still tax deductible
expenses.[4]
[1] In
2016, it is projected that there will be more choice available for each
employee.
[2]
The following persons would not be included in computing the number of
employees and used in the earnings computation:
Owner, Partner, Shareholder of an S Corp., Owner of more than 5% of
another business, family. The income
qualification limit is subject to cost of living adjustments on an annual
basis. The limit was $50,000 in 2014.
[3]
This is a requirement to participate in the SHOP, notwithstanding the
eligibility for a tax credit.
[4]
Company paid premiums for Individual coverage (Not part of a group plan) are NOT
tax deductible.
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