What is a Small Employer?
New Jersey brokers: Keep in mind these guidelines for new business quotes
A Small Employer
The Small Employer Health (SEH) Program Act states that there are three measures a company must meet in order to be considered a small employer.
The company must:
• Employ an average of at least two but no more than 50 eligible employees* on business days during the preceding calendar year;
• Employ at least two eligible employees on the first day of the plan year; and
• Have a majority of the eligible employees working at a location in New Jersey
Not a Small Employer
Associations, Employer Associations, Purchasing Groups, Alliances, MEWAs and Affinity groups are not eligible to be a small employer.
These types of groups include:
Employer Associations
Purchasing Groups
Affinity Groups
Franchises
Trade Associations
Cooperatives
Alliances
Coalitions
MEWAs
VEBAs
Professional Associations
Financial Institutions
Alumni
In addition, groups can’t be banded together to be written as one, especially separate companies that have different tax ID numbers, even if they have a common purpose or common ownership.
For example, ABC Group of X County, DEF Group of Y County, and GHI of Z County cannot be banded together and written as one group. They can, however, be written as separate groups as long as they meet the guidelines of a small employer.
Remember, in New Jersey, small group coverage is mandated by the State of New Jersey.
*Eligible Employees
For purposes of the SEH Program, an eligible employee is a bona fide employee who works for an employer 25 or more hours per week every week. Eligible employees may include the owner(s) (partners and proprietors) of a business if the owner is a bona fide employee of the business. Independent contractors may also be covered. However, the independent contractor must meet the SEH Program Act’s definition of an eligible employee, and they must meet all of the requirements for being an independent contractor under state, federal, tax, and employment laws.
Eligible employees do not include employees who are covered as members under a union’s collectively bargained welfare arrangement. But if the employee’s union has not collectively-bargained for health coverage, or the employee has decided not to participate in the collectively-bargained health coverage even though eligible, and he or she also works 25 or more hours per week on a regular basis, then you must include the union employee in the count of eligible employees.
Eligible employees do not include employees hired on a temporary or substitute basis, or seasonal employees, regardless of the number of hours worked. Carriers have underwriting guidelines that define whether employees are temporary, seasonal or otherwise bona fide employees.
When a company is affiliated with one or more other companies, all of the companies in the affiliation are treated as one company, and all eligible employees of all affiliated companies – including employees of out-of-state affiliates – are considered in determining small employer status for purposes of the SEH Program. If, when combined, the number of eligible employees of affiliated companies is more than 50, none of the affiliated companies is eligible for small group coverage.
Affiliated Companies
Whether companies are affiliated for purposes of the SEH Program depends upon whether the companies are considered a single employer pursuant to paragraphs (b), (c), (m) or (o) of section 414 of the Internal Revenue Code of 1986 (26 U.S.C. § 414(b), (c), (m) or (o)). An employer will need to obtain a statement from a tax accountant or tax attorney as to whether multiple companies are considered affiliated for federal tax purposes.**
**http://www.state.nj.us/dobi/division_insurance/ihcseh/sehguide/whatis.html