o Many small businesses are eligible for new breaks on 2010 taxes.
o Companies that make major changes to health plans will have to meet stricter insurance standards, but small changes can be made without triggering these rules.
o Some details of health reform will continue to take shape, as regulators interpret the law and politicians seek to change or dismantle it.
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The changing landscape of the challenges our small-business owners face has taken yet another sharp turn. It has never been more important for owners of small businesses to become educated on the gritty details embedded in the continuing onslaught of federal regulations, in particular the 900-plus page Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010.
o Many small businesses are eligible for new breaks on 2010 taxes.
o Companies that make major changes to health plans will have to meet stricter insurance standards, but small changes can be made without triggering these rules.
o Some details of health reform will continue to take shape, as regulators interpret the law and politicians seek to change or dismantle it.
The health care reform act was designed to phase in certain provisions related to consumer protections, business incentives and insurer reforms over a five-year period. The most significant provision that impacts small business owners is the Health Insurance Tax Credit provision. This tax credit provision is two-part, with the first phase effective in 2010 and the second phase effective Jan. 1, 2014.
The first phase of this provision effective for the 2010 tax-year provides a credit worth up to 35 percent of the employer’s contribution to employees’ health insurance premiums. Small nonprofit organizations may receive up to a 25 percent credit. In order for a business to qualify, an employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the employee-only rate. A qualifying employer must have less than the equivalent of 25 full-time employees — for example, an employer with fewer than 50 half-time employees may be eligible. A qualifying employer must pay average annual wages below $50,000 per employee.
On Jan. 1, 2014, the second phase of this provision increases the tax credit to 50 percent of the employer’s contribution to the employees’ health insurance premiums, and to 35 percent for tax-exempt employers.
The credit phases out gradually for firms with average wages between $25,000 and $50,000 and the equivalent of between 10 and 25 full-time workers.
Grandfathered status
Tax credit incentives are not the only provision directly impacting small business.
“Grandfathering” is a buzz word floating around that has significant meaning to employer-sponsors of health insurance plans.
Prior to Nov. 15, 2010, if a sponsor of a health plan simply changed carriers or plans, that simple and very common act would have caused the plan to lose its grandfathered status, making it subject to all provisions of the act. As of Nov. 15, 2010, this provision has been reversed, allowing a plan sponsor to change carriers or purchase similar policies without the plan losing its grandfathered status.
Still in effect: Should you make major plan changes in employer contribution, deductible, co-pay, co-insurance, etc., your plan will lose grandfathered status and will be subject to all provisions of the act.
All in all, the good news is that it’s not all bad news. The bad news is that we’re not sure how much of the good news we’re going to be able to keep.
While the act was signed into law, its components continue to be reshaped, clarified and even reversed. The various agencies overseeing the effort to implement the act regularly release new guidance, sometimes on a weekly basis.
That, coupled with a freshman class of eager politicians determined to drastically alter or even dismantle the act, certainly creates a challenge for business owners who are trying to stay on top of regulations that affect them and their business.
Now, more than ever, it is critical for the small business owner to align themselves with a trusted advisor who can ensure that they are reaping every benefit of, and remaining fully compliant with, the ever changing array of regulations that affect them.
