As part of the Patient Protection and Affordable Care Act (Health Care Reform), small businesses have a new tool available to them.
Previously, businesses could set up cafeteria plans for their employees, that allowed them to choose between getting certain benefits, but you had to dodge a number of bullets to make sure that the plan was not discriminatory. Thus, it was easier for many small businesses to simply not offer these types of plans. This new plan eases the rules governing traditional cafeteria plans so that small businesses can more easily provide tax-free benefits to their employees.
The new plans provide for a “safe harbor” from the nondiscrimination requirements for cafeteria plans for small employers beginning January 1, 2011.
To be eligible, the business would employ an average of 100 or fewer employees during each of the preceding 2 years, allow employees who had at least 1,000 hours of service for the preceding plan year to participate, and allow all participating employees to elect any benefit available under the plan.
An employer could contribute no less than 2% of all eligible employee’s compensation for the plan year and know they are in compliance. Alternatively, they could contribute the lesser of 6% of the participating employee’s compensation for the plan year, or twice the amount of the salary reduction contributions of each participating employee.
Should your small New Hampshire business be considering this? Well, if you have a 125 plan, and meet the eligibility rules, I’d seriously consider switching to the newer plan to avoid the testing that was previously required.
If you’d like to be able to offer your employees some more benefits in a simpler manner, please call me, I’d be happy to discuss this with you and how we can help.
Steven A Feinberg, CPA of Appletree Business Services LLC, located in Londonderry, New Hampshire, has more than twenty five years experience in Federal and New Hampshire issues, specializing in small business general, tax and payroll matters. For additional information on these and other current business and tax issues, email Steve at info@appletreebusiness.com or call (603) 434-2775.
Steven A. Feinberg – www.AppletreeBusiness.com – Get Appletree Blog via Email!
Filed under: Uncategorized Tagged: | fringe benefits, Health Care Reform, Small Business
