There are a number of important changes for both employers and individuals included in the new 2010 Health Care Act (as amended by the Health Care Reconciliation Act) that are effective immediately. These changes confer a real benefit on small businesses as well as individuals with young adult children.
Individuals with children who have not yet reached the age of 27 have been extended health insurance coverage under an employer provided health insurance plan. Because of the economy, many young adults have been unable to find employment or, if employed, have been unable to find employers who will provide health insurance. This permits such young adults to continue their health insurance coverage under their parent’s plan. This change is effective immediately.
For tax years beginning after December 31, 2009, the Health Care Act provides a special tax credit to small employers who purchase health insurance for their employees under certain circumstances. An eligible small employer generally is an employer with no more than 25 full-time equivalent employees employed during the employer’s tax year and whose employees have annual full-time equivalent wages that average no more than $50,000. The full amount of the credit is available only to an employer with 10 or fewer full-time employees and whose employees have average annual full-time equivalent wages less than $25,000. The credit is reduced for employers with more employees and higher wages. The wages are indexed for inflation.
The credit is only available to offset actual tax liability and is claimed on the employer’s tax return. The employer must pay the employees’ premiums during the year and claim the credit at the end of the year on its income tax return. The credit is a general business credit and can be carried back for one year and carried forward for twenty (20) years. After 2013, the rules change to reflect the implementation of the state by state Health Benefit Exchange program.