Healthy Savings

ACCOUNTING

The Health Insurance Tax Credit could provide a strategic boost and a bottom-line win.

By Janet H. Rapp / GellerRagans

Although the Patient Protection and Affordable Care Act may be under review by the U.S. Supreme Court, there remains a current opportunity for small businesses to benefit. For the qualified employer providing healthcare insurance for employees, the Health Insurance Tax Credit returns 35 percent of insurance premiums to the business. This allows more businesses to be strategic in their benefit packages while keeping costs in line with budgets.

The seemingly low qualification limits have prevented some companies from investigating the credit. However, the exclusion of business owners and their family from the equation allows the tax credit for more businesses than may be expected. The healthcare tax credit is available to small businesses with:

• Fewer than 25 full-time equivalent employees;

• Average wage below $50,000 per year; and

• Employer pays at least 50 percent of the health insurance premium for the employee.

The mechanics can appear daunting, but the basic qualification test is relatively simple.

A full-time equivalent employee (FTE) is determined based on a work year of 2,080 hours, which is 40 hours per week for 52 weeks. Therefore, a business’s FTEs are determined by total hours worked by employees divided by 2,080. For example, two workers with 1,000 hours each of work per year, resulting in one FTE (2000/2080 = .96).

Average wages are total wages paid by the business, excluding the owner and any family on payroll, divided by the number of FTEs as determined above.

Once qualification is determined, the actual credit is up to 35 percent of premiums paid, although not more than 35 percent of the State Average Premium for Small Group Markets. The 2011 amount for Florida is $5,218 for individual coverage and $12,550 for family coverage.

When computing the amount of the credit, insurance premiums paid for vision, dental and medical care can be included in the calculation. The insurance plan must be a “qualified arrangement,” meaning the employer pays a uniform percentage of the premium cost for covered employees. The employer is not required to pay 50 percent of the premium for employees who elect additional coverage, such as dependent coverage. The only requirement is for the employee premium.

The future of healthcare reform may be under scrutiny, but because of the significant tax credit benefit currently available, businesses should review the ability to provide insurance to employees and how they structure the benefit.

This credit is essentially a discount to provide insurance of up to 35 percent of premiums paid. If an employer is paying less than 50 percent of the premium, now is the time to evaluate that decision. Increasing the employer paid portion to half may provide a better tax break through the credit.

In 2014, with the credit increasing to 50 percent of employer paid premiums, and with market competition driving down costs, employers will increasingly be able to expand their employee benefit packages while staying within their budget.

As in any tax planning matter, consulting your professional advisor is necessary to be certain your business is taking the best advantage of opportunities available.

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FINANCES

The Fundamental Five

What’s your 2012 financial outlook? It's never too late to take stock of your own personal financial stability.

 By Richard Schram / CredAbility

Every day in our workplaces, we talk about strategic plans, where we are in meeting goals, doing benchmarks and analyses, and comparing where we are this year compared to last year.

As we hope for a better 2012—yes, it's only February so there's still hope—it’s time to use those same workplace practices to improve our own personal financial health. And the upside is that five easy steps can get you going in the right direction.

1. Don’t raise your personal debt ceiling. CredAbility’s quarterly Consumer Distress Index shows that Florida continues to be one of the most consumer-financially distressed states, though people are slowly increasing their net worth. We must proceed with caution. With U.S. consumer credit card debt nearing $800 billion, people are turning to their credit cards, borrowing against their home or withdrawing from retirement accounts to keep things afloat. Consumers must continue to look at reducing expenses instead. Making a few small changes can add up to big savings. For those struggling with credit card debt, debt management plans are a sound option to pay down debt and work out reduced payment programs with creditors.

2. Think like a CEO. Set goals, priorities and a budget. Successful money management is a process. Get your financial house in order by writing down what you want to accomplish with your finances this year. Bankruptcy filers often site an “unforeseen” event as the cause of their financial downfall, so consider starting an emergency savings account and setting aside three to six months of living expenses. Incorporate your goals into a savings and spending plan. Track what you spend for a month to analyze savings opportunities. Start small—put 10 percent of take-home from each pay check into an interest-bearing account. At the end of a year, you’ll have a little more than one month’s salary as your emergency money.

3. Increase your knowledge and understanding. Obtain a credit report. Your credit reports can provide a snapshot of your overall financial situation. Reviewing your credit reports for accuracy can also help you to identify errors or fraudulent activity. Also, sign up for free workshops or webinars that can enhance your knowledge.

4. See the big picture. Know where you stand. Determine your net worth. Having your credit report and financial statements will help you know what you owe (liabilities) and what you own (assets).

5. Seek expert counsel. You don’t have to solve your financial problems alone. Seek out a reputable and accredited agency with certified credit counselors.

Tags: Finance