Small Business Owners and the Affordable Care Act in 2017

Find out the impact of Obamacare on your small business in 2017.

Congress is in the process of dismantling the Affordable Care Act (ACA), popularly known as Obamacare. However, the ACA remains in full effect for 2017. If you’re a small business owner, here's how Obamacare affects you during 2017.

No Employer Mandate if You Had 50 or Fewer Employees During 2016

First of all, the ACA’s employer mandate, requiring employers to provide their employees with minimum health coverage or face stiff penalties, only applies to businesses with 50 or more full-time or full-time equivalent employees during the previous calendar year. If you had less than this number of employees during 2016, you need not provide your employees with any health insurance coverage during 2017.

IRS Information Reporting If You Provided Health Insurance In 2016

If you provided your employees with employer-sponsored self-insured health coverage during 2016, you must file Form 1095-B, Health Coverage Information Return to report to the IRS information about each person enrolled in the coverage. The deadline for filing this form with the IRS is February 28, 2017, or March 31, 2017 if you file electronically. The deadline for furnishing this form to your covered employees is March 2, 2017—this is a 30-day extension from the original due date of January 31.

Tax Credit if You Provided Health Insurance In 2016

If you provided your employees with health insurance during 2016, you may be eligible for a very generous tax credit, equal to 50% of the health care premiums you paid during the year. To be eligible for the small business health care tax credit during 2016 you must have:

  • covered at least 50% of your employees’ premium costs
  • had fewer than 25 full-time equivalent employees
  • paid average annual wages per full-time equivalent employee of less than $52,000, and
  • purchased your coverage through the SHOP Marketplace.

This credit may only be taken for two consecutive years so if you took it in 2014 and 2015 you won’t be eligible for 2016. To claim the credit, file IRS Form 8941, Credit for Small Employer Health Insurance Premiums with your 2016 tax return.

If you provide your employees with health coverage during 2017 and meet the requirements outlined above, you'll be eligible for the credit for 2017, which you'll be able to claim on your 2017 return. It's unclear whether this, or a similar credit, will be available during 2018 or later.

You May Reimburse Employees for Health Care Costs During 2017

The ACA was amended, effective 2017, to allow small employers (those with less than 50 full-time employees) to reimburse their employees for their health costs, including health insurance, up to annual limits of $4,950 per year for an individual and up to $10,000 for a family. Such reimbursements are tax free to the employee and tax deductible by the employer.

Only employees who obtain their own health insurance coverage through an Obamacare health exchange are eligible to benefit from such a health reimbursement arrangement (HRA). Thus, if you don’t want to go to the trouble of providing your employees with group health coverage, you can tell them to obtain their own coverage through your state health insurance exchange and then reimburse them for the cost, up to the annual limit. If you want to establish an HRA for 2017, you must provide notice to your employees by March 12, 2017.

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