If there is a silver lining to the recent health reform, it appears to be in the form of a Small Employer Tax Credit. Per the Obama Administration, the credit is designed “to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.” The subsidy is available for the entire 2010 year even though the legislation was enacted in March of this year. To qualify for the subsidy, employers should have no more than 25 full time equivalent employees with average annual wages of no more than $50K.

The amount of the credit is dependent upon the number of employees and the average salary with the maximum credit being 35% of the lesser of the employer's non-elective contributions toward employees’ health premiums and the non-elective contributions the employer would have made if each such employee had been enrolled in a plan with a premium equal to the average small group market premium in the employer’s state.

For a list of average premiums by state, click here.

The credit begins to phase out for employers with more than 10 full-time equivalent employees and/or average annual wages of more than $25K, phasing completely out at exactly 25 employees or $50K in average wages. The IRS has provided guidance to clarify that small businesses receiving state health care tax credits can still qualify for the full federal health care tax credit, that the credit will not be reduced by any state health care tax credits or subsidies, and that tax credit is also available for add-on dental and vision coverage.

To read more information on the employer tax credit, click here.