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Life Health > Health Insurance

Small group tax credit users may get wiggle room

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Some users of the small employer health insurance tax credit could get extra time to start buying coverage through the exchanges.

The Internal Revenue Service is trying to give the employer tax credit users a little flexibility in a new draft regulation.

The draft regulation could affect employers with 25 or fewer “full-time equivalent,” modestly paid employees.

The Patient Protection and Affordable Care Act created a health insurance subsidy for those employers by adding the tax credit provision, Section 45R, to the Internal Revenue Code.

Once the PPACA Small Business Health Options Program exchanges open, small employers must use a SHOP plan to qualify for the tax credit.

Some employers have plan years out of sync with their taxable years, IRS officials noted in the preamble to the draft regulations.

If an employer has a plan year and a taxable year that start on different dates, “it may not be practical or possible for the employer to offer insurance to its employees through a SHOP exchange at the beginning of its first taxable year beginning in 2014,” officials said.

The transition rules would help an employer that would qualify for the Section 45R tax credit, except that the employer waits until the first day of its first plan year — rather than its first taxable year — in 2014 to begin offering SHOP coverage. 

If that causes the employer to begin offering SHOP coverage after the start of the taxable year, the IRS will treat the employer as if it had offered SHOP coverage for the entire 2014 taxable year, officials said.

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