Are They Helping You?
Silkin Management Group clients are small businesses and, as such, they all theoretically may be eligible for the “Obama-Care” tax credits. Over the last year we’ve presented many articles on our various Silkin Management Group blog sites concerning the different ramifications of the health care legislation on small businesses. One of the supposed benefits of this legislation for small business owners is the use of a 35% tax credit for the cost of health insurance paid for employees. But a recent survey showed that only 7% of small businesses were actually taking advantage of this credit and I don’t know of any Silkin Management Group clients who are using it.
Why? The restrictions on qualifying are numerous.
Through 2013 only employers with less than ten employees AND who have average salaries of less than $25,000 a year can use the full 35% credit. It seems to me these stipulations eliminate the majority of small businesses using the full 35% credit. And, as an employer’s number of employees increases beyond 10, and as the average annual salary increases above $25,000, the value of the credit decreases correspondingly.
Here’s more: if the business has more than 25 employees, or their annual salaries average more then $50,000, the business is completely ineligible for the credit.
Although in 2014 the maximum credit will increase to 50%, the salary limits remain the same. And, should you be lucky enough to qualify for the credit, you can only use it for the plans purchased on the government approved insurance exchanges. And, in 2016 the credits disappear. No more, gone!
You can add to that the disincentive for a company to grow and create jobs and increase salaries as, the more employees and the higher the salaries the business has, the smaller the credits.
Given all of this information, is it any wonder only 7% of small businesses are using the credit in present time and that the Congressional Budget Office estimates that the credits will only impact 12% of small businesses?
It doesn’t seem to me that the rising cost of health care and its impact on all businesses, small and large, and as felt by all of us whether Silkin Management Group clients or not, is not being effectively handled through this legislation. The statistics on the use of the tax credits and estimates by the Congressional Budget Office clearly show that.
Eric Korb
Silkin Management Group Consultant
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