The IRS has released proposed regulations for the Sec. 45R credit for small employers that offer health insurance coverage for employees (REG-113792-13). These regulations include the statutory changes that were scheduled to take place in 2014. 

The Patient Protection and Affordable Care Act set in place the gradual availability of credits for contributions that small employers make on behalf of their employees for insurance premiums. From 2010 to 2013, small businesses with 25 or fewer employees and average annual wages of less than $50,000 were eligible for credits of up to 35% of nonelective contributions the businesses made on behalf of their employees for insurance premiums. In 2014, the maximum credit has increased to 50%.

The credit amount available to a given employer is calculated based on a percentage of either the amount of nonelective contributions that the eligible small employer has paid on behalf of employees during the tax year, or the amount of nonelective contributions the employer would have paid if each employee had been enrolled in a plan with a premium equal to the average premium for the small group market in the rating area (whichever is lesser).

The proposed regulations also state that in 2014 employers must obtain health insurance through a Small Business Health Options Program (SHOP) exchange. They also provide a transitional rule for employers with non-calendar-year insurance plans.

If you’d like to talk to see if your business is eligible for the credit and what your expected credit would be, give me a call at 864-836-3136.