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Covered California Q&A

Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.

Defined Contribution by Small Employer

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Question: In 2014, if I only offer a defined contribution plan will i be penalized?

Answer: The answer is no. There is no penalty for a small business (less than 50 employees) that does not provide a health benefit plan for its employees - either now or in 2014 and beyond. If you offer a “defined contribution” that your employees can use to purchase individual health insurance either through the Exchange or the outside market, you are going beyond what the law requires. We expect this to be a common practice, especially among employers with lower-income workers since these workers will qualify for premium subsidies within the exchange. Tax issues will have to be considered, the defined contribution is not tax deductible to the employer and is taxable income to the employee.

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