The 50% Tax Credit, Where Are You?

[Ann H]

Everyone who posted so far hit the nail on the head about why few businesses have taken that tax credit so far, and won't do so when the hard-to-qualify-for 35% goes up to 50%, and only if you buy a group plan from the SHOP where employees won't get subsidies, and where multi-choice has been eliminated (oops, delayed to 2015).

Here's a great article about it. Small Business Health Insurance Tax Credit: Cashews on the Hindenburg | HealthWorks Collective

One paragraph sums up the reasons for the failure, but the whole article is a canvas painting why other "tax credits" might fail too....

The real reasons for the credit's failure were obvious from the start. It was terribly designed, relatively few businesses qualified, and many who did only qualified for a pittance. The 35 percent credit shrinks to nothing as a business grows beyond 10 employees, raises wages beyond $25,000, employs the owner's relatives, uses part-time labor, or offers more-generous-than-average insurance. Once the exchanges open in 2014, the credit expires within two years. Some accountants have told business owners to forget about claiming the credit—that it costs more to calculate than it will pay out. (For the record, NFIB always suggested that employers take advantage of the credit if it were in their financial interests.)​

 

[LGilmore]

"why are the majority of small business owners currently offering benefits "

They are? Are you certain or are you talking out of your backside? Can you provide a link?

Hey most here have looked at this situation and made the value decision about it. It doesn't pencil out as valuable. Should you be spending a lot of time on it? I've never found employers who pay their employees crap wages to be all that generous with the bennies. If they're going to pay s hit wages, are you sure they'll be the type to offer good bennies?

 

[somarco]

your position that ALL business owners who look at the above

Did I say all?

looking for an extra nudge for them to stay with coverage

Tax credits, especially the way these are structured, won't do much to nudge an employer except those with high paid employees . . . and they would probably keep coverage any way.

 

[TXINSURANCE]

Everyone who posted so far hit the nail on the head about why few businesses have taken that tax credit so far, and won't do so when the hard-to-qualify-for 35% goes up to 50%, and only if you buy a group plan from the SHOP where employees won't get subsidies, and where multi-choice has been eliminated (oops, delayed to 2015).

Here's a great article about it. Small Business Health Insurance Tax Credit: Cashews on the Hindenburg | HealthWorks Collective

One paragraph sums up the reasons for the failure, but the whole article is a canvas painting why other "tax credits" might fail too....

The real reasons for the credit's failure were obvious from the start. It was terribly designed, relatively few businesses qualified, and many who did only qualified for a pittance. The 35 percent credit shrinks to nothing as a business grows beyond 10 employees, raises wages beyond $25,000, employs the owner's relatives, uses part-time labor, or offers more-generous-than-average insurance. Once the exchanges open in 2014, the credit expires within two years. Some accountants have told business owners to forget about claiming the credit—that it costs more to calculate than it will pay out. (For the record, NFIB always suggested that employers take advantage of the credit if it were in their financial interests.)​

The IRS has a work sheet you can use to see credit eligibility. Last time I filled it out our agency was eligible for the 35% credit. I sent it to my CPA to review, but it appears we will be qualified at initial glance.

I do not understand how the 50% credit will work if SHOP is delayed, I supposed we have to await further clarification?

I renewed our group 12/1 last year, which was looking like a smart move

 

[somarco]

Just a wag, but I doubt you have many EE earning less than $20k or so.

If you have high earners, group makes sense regardless of the credit.

Otherwise, no

 

[Ann H]

The IRS has a work sheet you can use to see credit eligibility. Last time I filled it out our agency was eligible for the 35% credit. I sent it to my CPA to review, but it appears we will be qualified at initial glance.

I do not understand how the 50% credit will work if SHOP is delayed, I supposed we have to await further clarification?

I renewed our group 12/1 last year, which was looking like a smart move

The multi choice option of the exchange was delayed. The SHOP is supposed to go live Oct 1.

 

[kahlestyle]

why are the majority of small business owners currently offering benefits "

They are? Are you certain or are you talking out of your backside? Can you provide a link?

didn't dig too hard to find more current but probably similar
guess it would depend too on where you draw the line with amount of ee's

In 2009, 55 percent of U.S. private sector establishments offered health insurance to their employees. For firms with 100-999 employees, 94.3 percent of establishments offered health insurance to their employees and for firms with 1,000 or more employees, 99.2 percent of establishments offered health insurance to their employees. By contrast, for firms with fewer than 10 employees, only 33.1 percent of establishments offered health insurance to employees and for firms with 10 to 24 employees, the establishment access rate was 62.5 percent.


the link you requested from said backside

http://www.sba.gov/sites/default/files/386tot.pdf

 

[LGilmore]

"By contrast, for firms with fewer than 10 employees, only 33.1 percent of establishments offered health insurance to employees and for firms with 10 to 24 employees"

So are groups with 100 + employees "small"? how many 1000 life groups do you have? Maybe you're one of the alphabet houses and 1000 is a small group to you?

Under 10 is small group. under 50 is small group. Above 50 are creditable groups who tend to be experienced rated in most places.

Plus your data is almost 5 years old, which is a lifetime in group. Anything fresher than 5?
- - - - - - - - - - - - - - - - - -
"As Table 3 shows, small firms and firms with predominantly low-wage workers are significantly less likely to offer health insurance to employees. While 99.2 percent of establishments for firms with 1,000 or more employees offered health insurance to their employees in 2009, the establishment access rate was only 33.6 percent for firms with fewer than 10 employees."

table 3 page 18 of your link. And look at the % of business offering insurance where greater than 50% are low wage employees.... The same people this concept is directed at don't offer coverage now or 5 years ago.

 

[Post Quartermaster]

Just a wag, but I doubt you have many EE earning less than $20k or so.

That sounds a lot like the response I got from the last accountant I spoke to who does the books for a couple of my small groups...........he was very , very wrong, BTW.....


I would recommend reading the actual IRS guidelines for the credit. IRS.gov has some great info on it. Alot of small details in there that most brokers and alot of CPA's tend to miss...........the sort of details that can save your small group clients $$$'s......

 

[stuy119]

That sounds a lot like the response I got from the last accountant I spoke to who does the books for a couple of my small groups...........he was very , very wrong, BTW.....


I would recommend reading the actual IRS guidelines for the credit. IRS.gov has some great info on it. Alot of small details in there that most brokers and alot of CPA's tend to miss...........the sort of details that can save your small group clients $$$'s......

Such as? Most of us in the forum don't compete against each other. Help us out here ...