Navigating the Affordable Care Act — What Small-Business Owners Need to Know

Read other posts from our Navigating the Affordable Care Act series.

Small business owners, are you ready for the changes brought on by the Affordable Care Act (ACA)?

If you are, well done! If not, do not despair. The WSBA’s Law Office Management Assistance Program is rolling out short articles that break out key points of the law for you in bite-size pieces. Look for a related article in an upcoming issue of NWLawyer and a webinar in early 2014.

How to determine if you are a small or large employer

Large employers have 50 or more full-time employees or the equivalent (e.g., 25 full-time employees and 50 at 50% part-time). Use the reported number of employees for the last calendar year, or for a new business, as the projected number you will report next year.

Small employers generally have fewer than 50 full-time employees or the equivalent. As a small firm or solo owner, you are probably not a large employer. This is good news! Large employers have more reporting obligations and healthcare offering obligations to coordinate.

So I’m “Small.” Am I going to have to pay?

No. For purposes of the employer penalty, if you have fewer than 50 full-time employees, you do not have an employer penalty for not providing health insurance.

Am I going to have to give notices and report to the IRS?

Yes. You should have given notice to every employee of the exchange by Oct. 1, 2013. Don’t panic if you didn’t give notice. There is no penalty for not giving this notice, but you should do it soon.

You may need to report certain healthcare insurance information on employee W-2 forms in the future, but that reporting requirement has been delayed until further guidance from the Internal Revenue Service is issued.

Beginning Jan. 1, 2013, employers must withhold an additional 0.9% from employee wages or compensation exceeding $200,000 a year and report it to the IRS as the Additional Medicare Tax. If you fall into this category, consult a certified public accountant before the end of the year.

Is there help?

The Small Business Health Care Tax Credit is for small employers who pay at least half of the premiums for employee health insurance coverage. You may be eligible if your business has 25 or fewer full-time employees making $50,000 or less on average.

But wait! The good news is that you do not count owners and family members of owners in that calculation of who makes up the 25 or fewer full-time employees making $50,000 or less. Partners are owners. Count the staff and the associates up and divide the total of their wages by the total number of people to get an average.

It is important to note that the smaller the number of employees and the more under $50,000 the salary average is, the greater the tax benefit. In other words, the two-person firm will have a greater credit than the 20-person firm, and an average staff salary of $30,000 will result in a larger tax benefit than an average staff salary of $49,000. Obviously, this takes some work to figure out, but now you have the basics of what your CPA will want.

The bad news: The Small Business Health Care Tax Credit requires you to have purchased the plan on The Small Business Health Options Program (SHOP) Marketplace, which has been delayed until 2015 in Washington state (unless you are in Clark County). You can still get insurance for your employees through brokers or by contacting the providers directly, but at this point you will not be eligible for the tax credit unless you purchase insurance from SHOP.

What if you are a “true solo”?

Your treatment is different. Stay tuned for next week’s post, which will address navigating the ACA for the solo attorney.