8788 / What credit is available for small employers who contribute to employee health insurance costs?
An eligible small employer is defined as an employer that has no more than 25 full time employees, the average annual wages of whom do not exceed $64,800 (in 2024, $61,400 in 2023, $57,400 for 2022, $55,600 for 2021 and $55,200 for 2020).2
In order to qualify, the employer must have a contribution arrangement for each employee who enrolls in the health plan offered by the employer through an exchange that requires that the employer make a non-elective contribution in an amount equal to a uniform percentage, not less than 50 percent, of the premium cost.3
Subject to phase-out4 based on the number of employees and average wages, the amount of the credit is equal to 50 percent, and 35 percent in the case of tax-exempt organizations, of the lesser of:
(1) the aggregate amount of non-elective contributions made by the employer on behalf of its employees for health insurance premiums for health plans offered by the employer to employees through an exchange; or(2) the aggregate amount of non-elective contributions the employer would have made if each employee had been enrolled in a health plan that had a premium equal to the average premium for the small group market in the ratings area.5