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ACA Tax Considerations for Small Employers


Are you a small employer with less than 50 employees? If yes, this is for you.

While most of the tax provisions of the Affordable Care Act (ACA) are geared toward what are defined as "applicable large employers," there are some ACA tax provisions that apply only to employers with fewer than 50 full-time or full-time equivalent (FTE) employees. Generally, under the ACA a "small employer" is any employer with fewer than 50 full-time or FTE employees. 

Some of the ACA provisions unique to small employers include:

  • Employers with fewer than 50 full-time or FTE employees are not subject to the employer shared responsibility ("pay or play") provisions. Therefore, the excise taxes under these laws do not apply. 
  • As has been the case for the past two years, if an employer has 50 or fewer FTEs, it can purchase health insurance coverage for its employees through the Small Business Health Options Program (SHOP).
  • Employers that have close to 50 full-time or FTE employees or whose workforce fluctuates throughout the year must carefully calculate the number of full-time employees. These employers must use a consistent measurement period when making this critical calculation.
  • Best practices in case of audit would include tracking and maintaining of records of these employee counts, particularly when your total FTE count is hovering near 50. 
  • Employers that have fewer than 25 FTE employees with average annual wages not exceeding $50,000 ($51,800 for tax year 2016, as adjusted for inflation) may be eligible for the small business health care tax credit. Employers are eligible for this credit if they cover at least 50% of their full-time employees' premium costs, and the coverage is purchased through the SHOP (for tax years beginning in 2014 or later). 
  • Self-insured small employers are still subject to all of the ACA large employer tax provisions. All self-insured employers must annually file information returns with the IRS and furnish statements to covered individuals. The first returns for calendar year 2015 are due to be filed no later than May 31, 2016 (or June 30, 2016, if filed electronically), while the first individual statements must be furnished on or before March 31, 2016. Please note these are new deadline dates recently extended per IRS Notice 2016-4, and these extensions apply only for the 2015 filing year. 

If you have any questions or concerns regarding any of the small employer ACA tax provisions or how to properly determine how many full-time or FTE employees you have, contact your HNI representative for assistance. 

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