The fourth quarter is the time for small businesses to plan for the coming year, particularly with respect to payroll and benefits. The transition from 2017 to 2018 will be marked by some important changes in health care benefits. Small businesses should prepare for these changes and the deadlines associated with them. The following are some of the most important health care reform updates for 2018.
Tax Credit Available
According to the IRS, for certain qualifying businesses with fewer than 25 full-time employees, the government organization provides a tax credit of up to 50 percent of the employer’s share of the premiums. For tax-exempt small businesses, the credit is up to 35 percent. To qualify, the average employee salary can be no more than $52,000 per year, and the employer must pay at least half of employee premium costs. As with most of the provisions in the Affordable Care Act (ACA), these benefits accrue only to businesses that participate in plans qualified under the ACA. The federal government provides a resource for small businesses to explore their options.
Health Insurance Tax Could Be Reinstated in 2018
As originally written, the ACA contained a provision imposing a tax on health insurance providers for income earned as premiums. In 2015, a one-year moratorium was placed on the tax, saving the health insurance industry approximately $13.9 billion, according to consulting firm Oliver Wyman. This moratorium is likely to be lifted in 2018. As a result of this action alone, the firm projected that health insurance premiums will increase 2.6 percent in 2018 and between 2.5 percent and 2.7 percent going forward. For small group plans, this translates to $500 per family.
Penalties Still in Effect
The IRS explained that an employer with more than 50 full-time employees is considered an applicable large employer (ALE), subject to reporting requirements under the ACA. In 2018, failure to offer coverage, as well as failure to comply with reporting requirements, will result in substantial penalties, Insurance Is Boring noted. If an ALE doesn’t offer health plans to at least 95 percent of its full-time workforce, the employer may be subject to a penalty of up to $2,260 per employee. The penalty is even stiffer if the employer fails to offer health plans considered by the ACA to provide “minimum coverage,” and at least one of their employees is receiving a tax credit to buy health insurance. For this infraction, the penalty may be as high as $3,390 per employee.
The IRS explained that it must receive Form 1094-C and 1095-C from ALEs by Feb. 28, 2018 — or by April 2, 2018, if the employer files electronically. Full-time employees must receive their Form 1095-C by Jan. 31, 2018. Forms 1094-B and 1095-B must be filed by non-ALE self-insuring employers by Feb. 28, 2018 — or by April 2, 2018, if they file electronically. These employers must also supply Form 1095-Bs to “responsible individuals” no later than Jan. 31, 2018. A responsible individual is defined as the primary insured individual, an employee, a former employee or any other related person named on the application.
As of the beginning of the fourth quarter of 2017, health care reform updates in the form of legislative changes don’t appear to be imminent. Therefore, small business owners are making payroll decisions based on ACA rules as currently written. Penalties will be enforced for failure to comply with reporting requirements.
Keeping up with these changes can help business leaders avoid penalties and provide the necessary coverage to employees.
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