,Aplicocion: Proceso rrultiple
5.3 Caso 3: Grupos generadores con control de máxima demanda 1 Antecedentes.
INSURANCE
Current Law
The cost to an employer of providing health coverage for its employees is generally deductible as an ordinary and necessary business expense for employee compensation. In addition, the value of employer-provided health coverage is not subject to employer-paid Federal Insurance
Contributions Act tax.
Employees are generally not taxed on the value of employer-provided health coverage for themselves, their spouses and their dependents under an accident or health plan. That is, health coverage benefits are excluded from gross income for purposes of income and employment taxes. Active employees may be able to pay for limited amounts of medical care and for their own employee premium contributions on a pre-tax basis through a cafeteria plan.
The Affordable Care Act created a tax credit to help small employers provide health insurance for employees and their families. An employer must make uniform contributions of at least 50 percent of the premium to qualify for the credit. For taxable years beginning in 2010 through 2013, the credit was available for any health insurance coverage purchased from an insurance company licensed under State law. For taxable years beginning after December 31, 2013, the credit is generally available only for the two-consecutive-taxable year period beginning with the first taxable year in which the employer both offers a qualified health plan to its employees through a small business health options program (SHOP) and claims the credit.
For-profit firms may claim the tax credit as a general business credit and may carry the credit back for one year and carry the credit forward for 20 years. The credit is available to offset tax liability under the alternative minimum tax. For tax-exempt organizations, the credit is
refundable and is capped at the amount of income tax withholding for employees and both the employee and employer portion of the health insurance (Medicare) payroll tax.
A qualified employer is an employer with no more than 25 full-time equivalent employees during the taxable year and whose employees have annual full-time equivalent wages that average no more than $50,000 (indexed for inflation beginning in 2014).
During 2010 through 2013, the maximum credit was 35 percent (25 percent for tax-exempt employers) of the employer’s contributions to the premium. For 2014 and later years, the maximum credit percentage is 50 percent (35 percent for tax-exempts). For taxable years 2010 through 2013 eligible employer contributions were limited by the amount the employer would have contributed under the State average premium. For taxable years beginning after 2013, eligible employer contributions are limited by the average premium for the small group market in the rating area in which the employee enrolls for coverage. For example if the average premium in an employee's rating area was $5,000, an employer paying for 60 percent of a single plan costing $5,500 per year could claim no more than 60 percent of $5,000 in qualified employer contributions for purposes of calculating the credit.
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The credit is phased out on a sliding scale between 10 and 25 full-time equivalent employees as well as between an average annual wage of $25,000 (indexed for inflation) and $50,000 (indexed for inflation). Because the reductions are additive, an employer with fewer than 25 full-time employees paying an average wage less than $50,000 might not be eligible for any tax
credit. For example, an employer with 18 full-time equivalent employees and an average annual wage of $37,500 would have its credit reduced first by slightly more than half for the phase-out based on the number of employees and then by an additional half for the phase-out based on the average wage, thereby eliminating the entire credit.
Reasons for Change
Expanding eligibility for the credit and simplifying its operation would increase the utilization of the tax credit, and encourage more small employers to provide health benefits to employees and their families. The credit also provides an incentive for small employers to join a SHOP, thereby broadening the risk pool.
The current law denial of the credit to otherwise eligible small employers due to the additive nature of the credit phase-outs may be perceived to be unfair. In addition, the uniform
contribution requirement and the rating area premium contribution limit add complexity and may discourage some small employers from taking advantage of the credit.
Proposal
The proposal would expand the group of employers who are eligible for the credit to include employers with up to 50 full-time equivalent employees and would begin the phase-out at 20 full-time equivalent employees. In addition, there would be a change in the coordination of the phase-outs based on average wage and the number of employees (using a formula that is multiplicative rather than additive) so as to provide a more gradual combined phase-out. As a result, the proposal would ensure that employers with fewer than 50 employees and an average wage less than $50,000 would be eligible for the credit, even if they are nearing the end of both phase-outs. The proposal would also eliminate the requirement that an employer make a uniform contribution on behalf of each employee (although applicable nondiscrimination laws will still apply), and would eliminate the limit imposed by the rating area average premium.
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