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Don't Inadvertently Leave Money on the Table

Small businesses are not required to obtain health insurance for their employees under the Patient Protection and Affordable Care Act. However, many small businesses have decided that it is in their best interests to do so. Perhaps because they believe that by offering quality benefits to employees they will attract and retain a more capable, qualified and incentivized work force. Or perhaps because they think it is simply the right thing to do. 

Whatever your reasons may be, if you are one of those small business owners in California who currently provides or who intends to provide health insurance to your employees, you owe it to yourself and your business to consider the federal tax credits that may be available to you only if you purchase your insurance plan through Covered California, the California market place for health insurance created under the Patient Protection and Affordable Care Act. 

The amount of tax credit available to you will depend upon the number of full time employees you have, their average salaries, and the portion of premiums that your business commits to pay. In general, your business will be eligible for credits if you have fewer than 25 full-time equivalent employees with an average annual salary per employee of $50,000 or less, and you will be eligible for the maximum amount of tax credits if you have ten or fewer full-time equivalent employees with an average annual salary of $25,000 or less. In all cases, the employer must commit to pay at least one half of the premium costs, based upon a targeted plan selected by the employer. The maximum tax credit is one half of the cost of the premium expenses paid by the employer in the tax year and is available for two years.

The employer gets to control its costs -- a critical factor for any small business owner -- by designating a target plan and so locking down its costs at one half of the premium for that plan for each participating employee for the applicable year. (The employer may elect to pay more than one half of the premium, but it will not be eligible for the credit if it elects to pay less than half). Each employee may then select the particular insurance plan (within the metal tier elected by the employer) that most suits his or her requirements, with each covered employee paying the portion of the premium not covered by the employer as well as any co-pay, co-insurance or deductible expenses. In a new feature offered beginning in 2016, the Dual Tier program, the employer may give employees the right to choose from insurance plans within two adjacent metal tiers. 

As we all know, small business owners are expected to be knowledgable in many fields -- your own specialty, human psychology, customer relations, business law, accounting, taxation. The list goes on. If you don't feel you have the time to add the intricacies of employee health insurance programs to your many existing areas of expertise, but those tax credits sound like they are worth thinking about, please consider contacting Pfeifer Insurance Brokers. We can help you think through the many relevant factors, choose the program best suited to your needs, and work through the application process. Don't leave valuable tax credits on the table!

Alex Pfeifer
Pfeifer Insurance Brokers
650 762-8070
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