50-plus FTE employees does not go into effect until January 1, 2016. Employers that fail to offer insurance or that offer insurance that is “inadequate” or “unaffordable” while exceeding the FTE threshold will be subject to the penalties. If the employer does not offer coverage, the penalty is $2,000 per full-time employee, not counting the first 30 employees. If the employer does offer coverage, but it is deemed to be unaffordable (self-only coverage exceeds 9.5 percent of an employee’s W-2 wages from the employer) and any full-time employee is certified to receive a premium tax credit or subsidy, then the employer penalty will be $3,000 per full-time employee who receives assistance in the form of the credit or subsidy. The penalty is the lesser of the $3,000 per employee mentioned above or $2,000 for each full-time employee (not counting the first 30 employees). The penalties will be calculated and paid via the business tax return and are nondeductible. One of the single most misunderstood aspects of the penalties is that employers are not required to pay for the health insurance to avoid the penalty. They are
only required to offer affordable and adequate coverage.
Employer Health Care Tax Credits Certain employers may qualify for employer health care tax credits if they have fewer than 25 full-time equivalent employees making an average of $50,000 a year or less. To qualify for the Small Business Health Care Tax Credit, the employer must pay at least 50 percent of the full-time employees’ premium costs. The employer does not need to offer coverage to its part-time employees or to dependents. The tax credit is worth up to 50 percent of the employer contribution toward employees’ premium costs.
In order to make it easier for small businesses to comply, the marketplace also contains the Small Business Health Options Program (SHOP). The SHOP Marketplace works similarly to the individual marketplace and allows employers to choose different levels of coverage and how much they wish to N E W J E R S E Y C P A • j u ly • a u g u s t 2 0 1 4
pay toward employee premiums. For 2014, the SHOP Marketplace is open to employers with 50 or fewer FTEs. You can start coverage any time. Enroll by the 15th of the month, and coverage can begin on the first of the following month. You can use your current licensed agent or broker to buy health insurance in the SHOP, provided your agent or broker signs an agreement with the SHOP Marketplace. The fundamental questions that small business employers must answer were, are and will continue to be: Should we offer health care coverage to workers to attract and retain the employees we need? And, if we do, how benefit-rich should the plan be, and how do we pay for it? William J. McDevitt, CPA, shareholder, and Karolis Matulis, are with Wilkin & Guttenplan, P.C. McDevitt is a member of the New Jersey Society of CPAs Business Valuation Forensic Litigation Services and Federal Taxation interest Groups. Matulis is a CPA Candidate member. Contact the authors at 732846-3000.