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Businesses and Obamacare: one-year delay in the employer mandate

Business owners in Texas and across the nation who were becoming bewildered over their new obligations under the Affordable Care Act (ACA) are breathing a sigh of relief this week. Businesses with more than 50 full-time employees have been bracing for the mandate to offer health insurance for those workers.

That mandate was due to take effect in 2014. Last night, however, the Obama Administration announced that it would be delayed a year. Concerns among businesses about the complexity of the new law’s requirements prompted the postponement. More details about it will be coming soon.

In the meantime, opponents of the law were quick to criticize. Senator Ted Cruz asked rhetorically in a Twitter post whether it could be delayed indefinitely — as in forever.

But this post is not about the political tug-of-war surrounding the law. Our interest is in the tax aspects, such as the individual and business tax credits that are involved.

These tax credits affect individuals as well as businesses. Many people know that individuals who are not offered health coverage by their employers are eligible for tax credits to purchase health insurance. The ACA requires that this insurance be available in every state through online brokerages known as “exchanges.”

It is not as well known, though, that tax credits may be available even to individuals who are offered insurance from their employers. If the employer coverage has specified limitations, federal tax credits may still be available.

What are those limitations? One is that the employer coverage costs more than a certain percentage of an employee’s household income. That percentage is set at 9.5 percent.

The ACA also makes tax credits available to individuals if the employer coverage is too limited in scope. If the insurance offered by the employer does not cover at least 60 percent of healthcare costs, tax credits can help the individual make other insurance arrangements.

These few details are only the tip of the iceberg of an immensely important law that has very significant tax implications for both individuals and businesses. To be sure, the ACA employer mandate has now been delayed a year. But barring political changes, that mandate is still coming.

Source: Bloomberg Businessweek, "More Smoke Than Light Over the Obamacare Delay," Patrick Clark, July 3, 2013

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