Seeley & Berglass


855 Main Street                             3695 Post Road
Bridgeport, CT 06604                     Southport, CT 06890
New Haven, CT 06510
Tel (203) 562-5888
(203) 366-3939                             (203) 256-3252



The Affordable Care Act and Small Business

Bill Seeley

Everyone seems to have a question about the Affordable Care Act (ACA) and how it affects them. If you are a small business owner there are many issues to be aware of:

Requirement to Offer Coverage depends on Number of Full-time Employees (FTEs). A Small Business is not legally required to offer health insurance to its employees if it has fewer than 50 full-time employees. Under the new law, a full time employee is considered one who works an average of 30 hours a week or at least 130 hours a month.

Employees and Independent Contractors. A small business must be extremely careful if it wishes to slide under the 50 full-time employee threshold by classifying anyone as an independent contractor. The IRS rules are very stringent, designed to classify as non-employees only those persons who are truly "independent", i.e., given a task to perform with no control from the small (or any) business owner, and accountable to the small business only at specified times during the engagement and at the end of the engagement. A written agreement is strongly advised and the business should consult with its attorney and accountant if it is thinking about pursuing planning in this area.

Start date for the ACA. The Affordable Care Act employer mandates for businesses with more than 50 full time employees have been delayed to 2015. Small business owners need to keep detailed payroll records in order to demonstrate that they have fewer than 50 full time employees. Payroll services have geared up for any reporting required and you should check with your payroll service.

SHOP. The ACA creates “SHOP” (small business health options program) which is a marketplace designed to help small business owners find the best premium pricing and coverage for their employee insurance programs. To qualify the small business owner has to have an office within the service area of the SHOP [no problem in Connecticut] and offer the plan to all full-time employees.

In Connecticut the SHOP website is and to find the program in any other state one can go to the federal site,

Note. If a small business owner decides to offer a plan to its full time employees the insurance providers cannot turn down the application based on any covered employee's health status, including any pre-existing condition, nor can they charge higher premiums for women or employees with high medical needs. These limitations do not apply to grandfathered plans (those created before March 10, 2010, that satisfy certain additional criteria).

Any licensed insurance broker or agent in Connecticut can help a small business owner set up a "marketplace plan", and the broker or agency fee is often paid by the insurance provider (but check up front).

Notification of Employees. Irrespective of whether the small business owner will choose to provide a medical plan for its employees, if its business was covered by the US Fair Labor Standards Act as of 10.01.13 it had to notify all of its employees about the basic provisions of the Affordable Care Act, and all hires after that had/have to be notified.

Waiting Period to be included in a Plan. The waiting period for a new employee to receive employer-sponsored health insurance cannot exceed 90 days.

Tax Credits for Small Business Owners. If a small business owner has fewer than 25 full time employees and purchases employee insurance for them through a marketplace, it may qualify for the "small business health care tax credit", if the following applies:

- the employees average annual wages are less than $50,000
- small business owner pays at least 50% of its employees health insurance premiums.

If this credit applies the credit can cover as much as 50% of the small business owner contribution to the Plan, 35% for non profits [against their unrelated 
business income]

Medical Loss Rebates to Small Business Owners. Beginning in 2015 insurance providers will be required to spend at least 80% of the premium dollars on medical care and if they do not, there is a provision for policyholders. If a small business owner receives a rebate it must determine if the rebate is a "plan asset" and if so it must determine a reasonable and fair allocation of the rebate.

Employee flexibility Spending Account Contributions. These employee contributions are limited to $2,500 a year beginning in 2015, but do not apply to employer contributions. This limit will be subject to COLAs.

New Health Insurance Reporting Requirements. Beginning in 2015 Small Business Owners with self-insured plans will be subjected to new reporting requirements as to who is covered and other information about the covered employees and the medical benefits. As of this writing Treasury Regulations are not yet final as to the disclosures required.