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The Affordable Care Act and Small Businesses

Paper family under a Affordable Care Act umbrella with magnifying glass

The Affordable Care Act (ACA) is a formidable law that is hard to wade through. Healthcare costs have been increasing since 1965, and employer contribution is necessary for most employees to be able to afford health insurance these days. An average employee would have to spend 32 percent of their gross income per month on insurance without some kind of assistance.

Small businesses benefit from offering employees health insurance as well. Glassdoor reported that 79 percent of employees prefer benefits to pay raises. Health insurance is overwhelming for everyone. Simply choosing a plan is hard and confusing. Employers that provide insurance avoid penalties, gain tax credits and breed happier employees.

Pros of Offering Insurance and Benefits

The law does not require employers to provide benefits like pension plans, health insurance or paid vacations, so why do it? Hiring new employees costs a business time and money. It is more beneficial to a company to attract and retain good help especially in competitive fields where individuals have options. Benefits, particularly health insurance, gives an employer a competitive edge.

Furthermore, there is a tax advantage of deducting contributions to plans such as health insurance, pension plans and life insurance. Employers usually receive personal benefits for less than if he or she purchased them privately. Most employees prefer and accept benefits over a higher pay. Health insurance benefits create healthier employees with higher morale.

ACA for Small Businesses There are many pros to offering health insurance benefits, but what is required by law? There are many insurance consulting firms that are wonderful at helping small businesses tackle this behemoth of a law. Before making any big decisions, it is wise to consult a professional. But, here are some basics.

* SHOP Marketplace– The ACA established the SHOP Marketplace to help small businesses with fewer than 50 employees offer insurance to their staff. By purchasing insurance through SHOP Marketplace, you receive tax credits and advice from a broker for selecting plans.

* Payments– Employers that are considered applicable large employers are subject to the employer shared responsibility provisions. If you have 100 or more employees, you could be subject to payment if you do not provide affordable coverage to full-time employees and their dependents.

* Information– You are required to provide information to employees about Marketplace whether you offer coverage or not. All employers must file information returns with the IRS reporting the coverage they offer. Employers must also provide employees with a statement outlining what their health plan covers and what it doesn’t. This is called a Summary of Benefits and Coverage (SBC) form.

* Credits– Businesses with fewer than 50 employees may be eligible for a tax credit. To be eligible, an employer must have fewer than 25 full-time employees with an average annual salary of less than $50,000, cover at least 50 percent or employees’ premium costs and purchase coverage through SHOP Marketplace.

Making decisions about health insurance coverage and other benefits is no easy task. As a small business, you have a lot on your plate. Providing benefits for your employees has many pros attached. Contact a professional to help you make wise decisions about what benefits to offer.

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