What is the definition of a Small Employer under Health Care Reform?
(1) “Small employer”
(A) … any person, firm, proprietary or nonprofit corporation, partnership, public agency, or association that is actively engaged in business or service, that, on at least 50 percent of its working days during the preceding calendar quarter or preceding calendar year, employed at least one, but no more than 100, eligible employees, HR 1624 Info the majority of whom were employed within this state, that was not formed primarily for purposes of buying health benefit plans, and in which a bona fide employer-employee relationship [Common law employee * Spouses don’t count] exists.
In determining the number of eligible employees, companies that are affiliated companies and that are eligible to file a combined tax return for purposes of state taxation shall be considered one employer. Insurance Code §10753
Self employed owners of a small business must have at least one non spousal, w-2 employee to qualify as a group.
If you do have a non spousal employee on payroll, click here to get an Individual & Family quote. Under ACA/Obamacare your coverage is STILL guaranteed issue with no pre-existing condition clause.
The premiums for self employed are still deductible, line 29 of your 1040, learn more, whether you have an Individual Plan or a Group Health Premiums under Section §106 IRC. As long as the plan is for employees and if you have them, you’ll have to cover them to get the tax deduction.
Schedule C – Line 12 Biz Income or Loss,
Line 29 Health Insurance Premiums,
Line 37 Adjusted Gross Income,
Self-employed health insurance deduction.
You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for you and your family.
How to figure the deduction. Generally, you can use the worksheet in the Instructions for Forms 1040 and 1040-SR to figure your deduction. However, if any of the following apply, you must use the worksheet in chapter 6 of Publication #535.
• You have more than one source of income subject to SE tax.
• You file Form 2555 (relating to foreign earned income).
• You are using amounts paid for qualified long-term care insurance to figure the deduction.
Use Publication #974 Premium Tax Credit instead of the worksheet in the Instructions for Forms 1040 and 1040-SR if the insurance plan established, or considered to be established, under your business was obtained through Covered CA - no extra charge to use an agent and you are claiming the premium tax credit. Publication 334 *
- Self-Employed Health Insurance Deduction
Art Gallagher Health Care Reform FAQ's
Health Care Reform Explained
Insurance Deduction is on Page 34 of 2019 edition
How to fill out a Schedule C Profit or Loss from Business VIDEO
Our webpages on
- IRC §106 Health Insurance Deduction for Employers & Employees
- Section §105 -HRA Health Reimbursement
- Section 125 – POP Plan Employee Contributions are Tax Deductible
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A new law requires companies to include full-time and full-time-equivalent employees when determining group size
On January 1, 2016, California state law went into effect which redefined “small employer” to include groups of up to 100 employees. The determination of employer group size must be made annually and groups must adhere to the method for counting full-time employees and full time equivalent employees outlined in Section 4980H(c)(2) of the Internal Revenue Code. The definition of large group requires the group to have a combined total of at least 101 full-time and full-time-equivalent employees.
An example of how to determine whether a company is a small group for the purpose of purchasing group coverage is provided below. The methodology considers both full-time employees and full-time-equivalent employees.
- Company Y has 40 full-time employees for each calendar month during 2015.
- Company Y also has 20 part-time employees for each calendar month during 2015, each of whom has 60 hours of service per month.
- Now, combine the hours of service of the part-time employees for a month: [20 x 60 = 1,200].
- Dividing the combined hours of service of the part-time employees by 120* equals 10 [1,200/120 = 10]. This number, 10, represents the number of Company Y’s full-time equivalent employees for each month during 2015.
- Company Y adds up the total number of full-time employees for each calendar month of 2015, which is 480 [40 x 12 = 480].
- Company Y adds up the total number of full-time equivalent employees for each calendar month of 2015, which is 120 [10 x 12 = 120].
- Company Y adds those two numbers together and divides the total by 12, which equals 50 [(480 + 120 = 600)/12 = 50].
In this example company Y meets the size criteria for a small group because the total number of full-time and full-time equivalent employees for at least 50 percent of the preceding calendar year equals 50. Groups must consider additional IRS rules in making their final determination of whether the group is large or small, and some exceptions may apply.
On the Master Group Application for Small Business be sure to fill in Section 2, #8f. (In the scenario above, the number to fill in is 50 FTE and FTE Equivalent.) See the highlighted areas of section 2, page 2 of the application below.
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* The number of 120 is stipulated by Internal Revenue Code 4980H(c)(2): “. . . in addition to the number of full-time employees for any month otherwise determined, include for such month a number of full-time employees determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120”.
ORIGINAL…. 18) Permits a self-employed individual with specified income to, at his or her discretion, enroll in the Exchange as an individual rather than a small employer. [This is the 1st of 18 or so bill analysis posted on http://leginfo.legislature.ca.gov ]
Amendment to 10700 w —- (3) On or after January 1, 2014, a self-employed individual who obtains at least 50 percent of annual income from self-employment as demonstrated through personal income tax filings for the current or prior year. To the extent permitted under the federal Patient Protection and Affordable Care Act (Public Law 111-148) and any rules or guidance issued consistent with that law, a self-employed individual whose modified annual gross income is anticipated to be less than 400 percent of the federal poverty level may at his or her discretion seek to enroll as an individual rather than a small employer through the California Health Benefit Exchange.
Child & Related Pages
AB 1672 – (1992 to 2013) Small Group Health Rules prior to Obamacare
Health Insurance Deduction Line 29 for self employed
Schedule C – Line 12 Biz Income or Loss, Line 29 Health Insurance Premiums, Line 37 Adjusted Gross Income, MAGI Income
- EmployEE Definition
Here’s what they were under AB 1672 – 1992 – 2014
- AB 1672 Small Group Guaranteed Issue Health Insurance – Proof in Business Requirements
More on definition
This subparagraph shall be implemented to the extent consistent with PPACA, except that the minimum requirement of one employee shall be implemented only to the extent required by PPACA.
(2) For plan years commencing on or after January 1, 2014, the definition of an employer, for purposes of determining whether an employer with one employee shall include sole proprietors, certain owners of “S” corporations, or other individuals, shall be consistent with Section 1304 of PPACA.
The term “small employer” means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 100 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year.] [42.usc.18024.b 2 def.employER (1304
The definition of Small Employer no longer includes self employed, Partners, Sole Proprietors & S Corps unless there is at least one common law employee. Since everything will be guaranteed issue for 1.1.2014 it’s OK as the one man shop or husband & wife group can get coverage as individuals regardless of health status. It should also be a tax write off. If the business isn’t making that much $$$ there are Tax Subsidies. Health Care Reform — Non Grandfathered Plans * AB 1083 * Insurance Code §10753
51 to 100 yes or no?
NOPE – See HR 1624 Below!!! However, CA could do it on their own
For plan years commencing on or after January 1, 2016, any person, firm, proprietary or nonprofit corporation, partnership, public agency, or association that is actively engaged in business or service, that, on at least 50 percent of its working days during the preceding calendar quarter or preceding calendar year, employed at least one, but no more than 100, eligible employees,[Blue Cross FAQ’s 4.14.2015] There might be large premium increases as these groups go into the Small Group Market – where rating factors are limited and may lose large group purchasing power, discounts and group’s experience. Blue Shield Bulletin 7.9.2015 Click here for our Excel census form for your FREE Quote in CA or enter it ONLINE. [email protected] for a specific answer in your situation. See Participation Requirements]
Legislation might be coming to change this CA Healthline 9.21.2015
HR 1624 just passed – President Obama just signed it CA Healthline 10.8.2015 Background CA Health Line 9.21.2015