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HCR Updates: Tax Credit Extended to Dental & Vision, Change to Cafeteria Plans, etc

May 24, 2010

Health Care Reform Update

New this week: You now have a new tool, as well as some good news to pass along to your clients. Read about: 

  • A new brochure that gets to the bottom of health care costs
  • The small group tax credit that is expanding to include dental and vision benefits
  • Changes to cafeteria plans and flexible spending accounts


New brochure: Getting to the bottom of health care costs  

The U.S. spends over $2 trillion on health care each year, according to the Centers for Medicare and Medicaid Services. And because health care spending and premiums go hand in hand, it's important to help your clients understand where these dollars are going. Getting to the bottom of health care costs takes a look at where our premium dollars go, what's driving health care costs and what we're doing to help reduce these costs.  

To request copies of the comprehensive brochure, talk with your sales representative.  

Just released: Small group tax credit extends to dental and vision benefits  

The small group tax credit, which will benefit millions of small businesses, has just become more attractive. That's because the IRS has just released new details clarifying that the tax credit also applies to premiums for dental and vision benefits - not just health benefits. And there's more good news: 

  •  Eligible companies that already get state tax breaks to help pay premiums can also claim the federal assistance.
  • A business owner's salary won't be taken into account when figuring out the company's average wages - helping more firms stay below the cutoff for the federal credit. To qualify for the credit, companies must not employ more than 25 employees and the average annual compensation of those employees cannot exceed $50,000.  
  • Nonprofits - including churches and other religious congregations - are eligible to claim a partial credit. 

See the latest information at


Changes to Simple Cafeteria Plans are effective January 1, 2011 

The Patient Protection and Affordable Care Act makes broad changes to the rules and mechanisms affecting certain types of health policies, including significant changes to cafeteria plans and health flexible spending accounts (FSA).

Under the new rules, a sponsor of a "simple cafeteria plan" is not required to perform nondiscrimination testing. Thus, the administrative burden of offering a cafeteria plan is lessened, making it is easier for small employers to offer a cafeteria plan to their employees.

Effective January 1, 2011, certain employers that establish "simple cafeteria plans" are exempt from the Code Section 125 non-discrimination requirements, as well as the non-discrimination requirements applicable to the plans offered through the cafeteria plan (for example, Code Section 129 non-discrimination testing for dependent care FSAs, Code Section 105(h) non-discrimination testing for self-insured medical plans, etc). The act defines a simple cafeteria plan as a plan "which is established and maintained by an eligible employer," and for which certain contribution, eligibility and participation requirements are met. In general, an eligible employer is an employer that employed an average of 100 or fewer employees for either of the prior two years. Plans that qualify as a simple cafeteria plan for any given year are treated as meeting applicable non-discrimination requirements for that year (that is, non-discrimination testing is not required for these plans).

For more details, please see the attached information. 

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