Eligible Small Employer
To be eligible for the tax credit, a small employer must meet three requirements:
- It paid premiums for employee health insurance coverage under a qualifying arrangement. A qualifying arrangement is generally an arrangement that requires you to pay a uniform percentage (not less than 50%) of the premium cost for each enrolled employee’s health insurance coverage. However, an arrangement that requires you to pay a uniform premium for each enrolled employee (composite billing) and offers different tiers of coverage; or, an arrangement that requires you to pay a separate premium for each employee based on age or other factors (list billing) can be a qualifying arrangement even if it requires you to pay a uniform percentage that is less than 50% of the premium.
- It had fewer than 25 full-time equivalent employees (FTEs) for the tax year. Because certain employees are excluded from this count, an employer may be able to meet this requirement even if it had 25 or more employees.
- It paid average annual wages for the tax year of less than $50,000 per FTE.
The maximum credit is a percentage of premiums the employer paid during the tax year for certain health insurance coverage the employer provided to certain employees. But the credit may be reduced by imitations based on the employer’s full-time equivalent employees, average annual wages, state average premiums, and state premium subsidies and tax credits.