On April 23, 2014, the Department of Health and Human Services (HHS) released two new tools for small employers purchasing coverage through a Small Business Health Options Program (SHOP) Exchange.
- The SHOP Tax Credit Estimator can help determine the potential amount of any Small Business Health Care Tax Credit an employer may be eligible for.
- The SHOP Full-time Equivalent Calculator can help determine whether an employer meets the definition of a small business for participation in the federal SHOP, based on its number of employees.
HHS’ two new SHOP tools can help estimate whether an employer is eligible to participate in the SHOP and whether the employer can receive tax credits for premium contributions.
Overview of the SHOP Exchange
The Small Business Health Options Program (SHOP) is the Exchange component for small businesses to purchase health insurance coverage for their employees. In general, employers that have 50 or fewer full-time equivalent employees (FTEs) can enroll through a SHOP Exchange at any time during the year.
For purposes of SHOP eligibility, FTEs are calculated using the most recent year, and excluding seasonal employees (those working fewer than 120 days per year).
Employers will:
- Count the number of people who worked an average of 30 or more hours per week; and
- Add to this amount the number of hours worked per week by non-full-time employees, divided by 30.
SHOP Full-time Equivalent Calculator
The new SHOP Full-time Equivalent Calculator can use an employer’s number of employees to help determine whether the employer meets the definition of a small business and may participate in the federal SHOP.
To use the SHOP FTE Calculator, employers will need to enter:
- Their number of full-time employees (those who work 30 or more hours per week); and
- The hours worked per week by part-time employees.
Please visit the Exchange website for more information on federal SHOP eligibility. In states that run their own SHOP Exchange, employers should contact the state Exchange for information on how to calculate FTEs.
Overview of the Small Business Health Care Tax Credit
Certain small employers that purchase health coverage for employees through the SHOP Exchange may also qualify for a tax credit. To qualify for the Small Business Health Care Tax Credit, an employer must:
- Have fewer than 25 FTEs;
- Pay average annual wages of less than $50,000 ($50,800 for 2014) per FTE; and
- Pay at least half of employee health insurance premiums.
For 2014 and later years, the tax credit may be worth up to 50 percent of the employer’s premium contributions (or up to 35 percent, for small tax-exempt employers). This credit can be claimed for any two consecutive taxable years beginning in 2014 (or beginning in a later year) through the SHOP.
SHOP Tax Credit Estimator
HHS’ SHOP Tax Credit Estimator can help determine whether an employer will qualify for the Small Business Health Care Tax Credit and the potential amount of the tax credit.
To use the SHOP Tax Credit Estimator, employers will need to enter their:
- Tax status (exempt or non-exempt);
- Number of full-time employees;
- Hours worked by part-time employees;
- Total employee wages;
- Total premiums; and
- Employer contributions.
For this purpose, full-time employees are those who worked (or are expected to work) the equivalent of 40 hours per week for 52 weeks (for a total of 2,080 hours each).
More Information
The results produced by these tools are only estimates, based on current IRS guidance. They will be updated to reflect any changes to IRS guidance or regulations.
Please visit HealthCare.gov or contact one of our licensed agents at (941) 497-7737 for more information