Affordable healthcare has long been a sought after benefit for small business owners to offer employees. , affordable dental and healthcare could be the deciding factor in attracting a highly talented and skilled workforce.
Yet, selecting the right healthcare for your employees can be a confusing process. Here are four considerations every small business owner should take to heart before offering healthcare to employees.
For eligible small businesses, the maximum credit is 50% of insurance premiums paid by small business employers.
To be eligible for the credit, a small business employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace. The credit is available to eligible employers for two consecutive taxable years.
Here are additional details about the health care tax credit according to the IRS:
- You have fewer than 25 full-time employees.
- You pay average wages of less than $52,000 a year per full-time employee.
- You pay at least half of employee health insurance premiums.
- You offer coverage to your full-time employees through the SHOP Marketplace. Note: you don’t have to offer coverage to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.
2. Consider using an insurance broker
Small business owners have the option to enroll their company and employees into a health insurance plan directly, or they can use an insurance broker. An insurance broker can help simplify the process of enrollment.
There are many small business health insurance plans available. As such, it can be an overwhelming process without proper guidance. While an insurance broker earn a commission selling health insurance, he or she will likely save your business money in the future. The last thing you want is to inadvertently choose the wrong insurance for you and your employees. Before you speak with a broker, you should have the following information about your business on hand:
- Employer name
- Business start date
- List of employees (full time and part time)
- FEIN (Federal Employer Identification Number or Tax ID)
- Payroll records from your payroll processing provider
- NAICS or Industry code
3. Look at your business’s bottom line
How much can you afford to spend on health insurance for your employees?
As a CPA, I encourage all small businesses to hire an external or internal accountant whose primary role is to manage the financials of their business. In my experience, employers have based their health care costs on a percentage of payroll for each employee.
The advantage of this method is that you can identify true labor and healthcare costs per employee to determine salaries.
Deciding how much you can comfortably afford to spend on employee health insurance will help narrow your plan choices in the marketplace.
4. Visit the SHOP Marketplace
The Small Business Health Options Program Marketplace (SHOP) on the Healthcare.gov website is for small business owners who want to provide health and dental insurance to their employees. You can use the SHOP Marketplace if you have 50 employees or fewer.
According to Healthcare.gov, SHOP Marketplace offers the following insurance plans: Bronze, Silver, Gold, Platinum. The categories represent how the insurance company and your employees will split the costs of care.
- Bronze: The health plan covers about 60% of the total costs of care. The employee pays about 40%.
- Silver: The health plan covers about 70% of the total costs of care. The employee pays about 30%.
- Gold: The health plan covers about 80% of the total costs of care. The employee pays about 20%.
- Platinum: The health plan covers about 90% of the total costs of care. The employee pays about 10%.
As a small business owner, offering affordable healthcare options to your employees does not have to be a confusing experience. With the right guidance, you can maximize your tax credits and deductions while providing your employees excellent benefits.
Ebong Eka is no stranger to the world of personal finance. As a certified public accountant and former professional basketball player he offers a fresh perspective to small business planning and executing. With over fifteen years of accounting, tax & small business experience with firms like PricewaterhouseCoopers, Deloitte & Touche and CohnReznick, Ebong provides practical money solutions tailored to the everyday person, the aspiring entrepreneur or the small business owner.
Ebong is the founder of EKAnomics, a sales, pricing and leadership firm. He is also the founder of Ericorp Consulting, Inc., a tax and management consulting firm. Ebong is the author of “Start Me Up! The-No-Business-Plan, Business Plan.”
Bank of America, N.A. engages with Ebong Eka to provide informational materials for your discussion or review purposes only. Ebong Eka is a registered trademark, used pursuant to license. The third parties within articles are used under license from Ebong Eka. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.
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