Patient Protection and Affordable Care Act—does it apply to your company?

published July, 2013

PPACA, also known as “Obamacare” has different rules depending on your company size.

There are two classes: “Large” and “Small.” Large employers have more than fifty full-time employees for Full Time Equivalents (FTEs) on average for the previous year.

Owners, partners, greater than 2% shareholders and their family do not count.

If you are a small employer, there is potentially a tax credit available through the end of this year if you’re voluntarily providing health care insurance for your employees. BUT, the owners don’t count for the credit, family of owners don’t count, and average annual wage has to be less than $50,000 per FTE. I ran some calculations for a couple of my clients last year, and no one qualified, and it just made me cranky to have spent several hours calculating for no benefit. (I suppose the benefit is that we know for sure there is no credit available.) I hold little hope for most of my clients. (The cost of living is generally too high in the Bay Area, or my clients just pay too much in payroll!) Oh, and if you were eligible for the credit, the amount of the credit is also reduced by 8.7% due to sequestration.

This Act is also the one that put in the extra 0.9 Medicare Tax on wage and self-employment income for individuals with income higher than $200,000 or married filing jointly couples with incomes higher than $250,000. If you’re paying someone more than $200k, your payroll service or software should do this calculation correctly. If both spouses make $199k, they’ll have an extra tax to pay on the joint return (MFS is $125k each—so no magic relief is available by filing separately).

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