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CMS Releases New Tools for SHOP: Small Business Health Care Tax Credit Estimator and FTE Employee Calculator

May 2, 2014

HHS Blog Announcement: How Much Is Your Small Business Health Care Tax Credit Worth? (April 23, 2014); SHOP Tax Credit Estimator; Full-time Equivalent (FTE) Employee Calculator


Tax Credit Estimator

SHOP FTE Employee Calculator

CMS has announced the availability of two new tools for employers using SHOP Exchanges: A small business health care tax credit estimator and a full-time equivalent (FTE) employee calculator. Certain small employers that offer health insurance to their employees and pay at least 50% of the premiums have been eligible for a tax credit since 2010, but some important changes went into effect in 2014, including an increase in the maximum credit amount from 35% to 50% of employer-paid premiums (from 25% to 35% for eligible small tax-exempt employers). Also starting in 2014, the coverage generally must be offered through a SHOP Exchange (unless transitional relief is available) and the credit can be claimed for only two consecutive years. The announcement reminds employers of these changes and that SHOP is available to them year-round if they had 50 or fewer FTE employees (using 30 hours per week to calculate the equivalency) during the preceding calendar year, although the tax credit is only available if they have fewer than 25 FTE employees (using 40 hours per week to calculate the equivalency) and average wages of less than $50,000 (adjusted for inflation). (For more on the changes in the tax credit for 2014 and calculating FTE employees for purposes of the tax credit, see our article.)

The interactive tax credit estimator assesses an employer’s eligibility for the tax credit and estimates the amount of the credit based on information about tax-exempt status, number of full-time employees, part-time employee hours, total employee wages, total premiums, and employer contributions to premiums. The SHOP FTE employee calculator assesses whether an employer qualifies for the SHOP Exchange by counting the number of FTE employees based on the number of full-time employees and the hours worked by part-time employees.


EBIA Comment: Employers are cautioned that the results derived from these tools are only estimates. This is good advice considering, for instance, an apparent discrepancy between the SHOP FTE employee calculator—which allows the user to estimate the number of FTE employees based on part-time employee hours worked per week, month, or year—and the regulations, which follow the employer shared responsibility rules for calculating FTE employees (i.e., monthly determinations, with 120 hours equating to one FTE employee, that are summed and then divided by 12 to obtain the average for the year). The calculator also cautions that some state-based SHOP Exchanges count SHOP FTE employees differently. For more information, see EBIA’s Health Care Reform manual at Sections XXI.D (“Small Business Health Option Program (SHOP)”), XXVI (“Small Business Health Care Tax Credit”), and XXVIII.B (“Large Employers Are Potentially Subject to an Assessable Payment (Penalty Tax)”).

Contributing Editors: EBIA Staff.

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