ERC Credit FAQ #65. May An Eligible Employer That Averaged More Than 100 Full-Time Employees In 2019 Treat Its Health Plan Expenses As Qualified Wages For Purposes Of The Employee Retention Credit?

September 26, 2022

Frequently asked question #65 “May an Eligible Employer that averaged more than 100 full-time employees in 2019 treat its health plan expenses as qualified wages for purposes of the Employee Retention Credit?” under the Determining the Amount of Allocable Qualified Health Plan Expenses section of FAQs: Employee Retention Credit under the CARES Act, provided by the IRS.gov to help business owners understand the ERC program. Information is below for the question #65 May an Eligible Employer that averaged more than 100 full-time employees in 2019 treat its health plan expenses as qualified wages for purposes of the Employee Retention Credit?

ERC Credit Frequently Asked Question #65:

Amount of Allocable Qualified Health Plan Expenses FAQs

65. May an Eligible Employer that averaged more than 100 full-time employees in 2019 treat its health plan expenses as qualified wages for purposes of the Employee Retention Credit?

Yes. An Eligible Employer that averaged more than 100 full-time employees in 2019 may treat its health plan expenses paid or incurred, after March 12, 2020, and before January 1, 2021, allocable to the time that the employees are not providing services during any period in a calendar quarter in which the employer’s business operations are fully or partially suspended due to a governmental order or a calendar quarter in which the employer experiences a significant decline in gross receipts as qualified wages, subject to the maximum of $10,000 per employee for all calendar quarters for all qualified wages.

However, an Eligible Employer may not treat health plan expenses allocable to the time for which the employees are receiving wages for providing services as qualified wages; only the portion of health plan expenses allocable to the time that the employees are not providing services are treated as qualified wages.

Example 1: Employer A averaged more than 100 full-time employees in 2019.  Employer A is subject to a governmental order that partially suspends the operation of its trade or business.  

In response to the governmental order, Employer A reduces all employees’ hours by 50 percent and pays wages to its employees only for the time that the employees are providing services, but Employer A continues to provide the employees with full health care coverage.

Employer A’s health plan expenses allocable to the time that employees are not providing services may be treated as qualified wages.  However, Employer A may not treat health plan expenses allocable to the time for which the employees are receiving wages for providing services as qualified wages.

Example 2: Employer B averaged more than 100 full-time employees in 2019.  Employer B is subject to a governmental order that partially suspends the operations of its trade or business. 

In response to the governmental order, Employer B reduces its employees’ hours by 50 percent, but it reduces its employees’ wages by only 40 percent, so that the employees receive 60 percent of their wages for 50 percent of their normal hours.

Employer B continues to cover 100 percent of the employees’ health plan expenses.  In this case, Employer B may treat as qualified wages: (i) the 10 percent of the wages that it pays employees for time the employees are not providing services, plus (ii) 50 percent of the health plan expenses, because the health plan expenses are allocable to the time that employees were not providing services. 

Example 3: Employer C is subject to a governmental order that fully suspends the operations of its trade or business.

Employer C lays off or furloughs its employees and does not pay wages to the employees, but does continue to cover 100 percent of the employees’ health plan expenses.

In this case, Employer C may treat as qualified wages the health plan expenses that are allocable to the time that the employees are not providing services. 

For more Internal Revenue Service (IRS) Department of the Treasury Employee Retention Credit (ERC) Amount of Allocable Qualified Health Plan Expenses FAQs, visit the official IRS.gov tax website.

Conclusion and Summary on ERC Credit FAQ #65. May an Eligible Employer that averaged more than 100 full-time employees in 2019 treat its health plan expenses as qualified wages for purposes of the Employee Retention Credit?

The “May an Eligible Employer that averaged more than 100 full-time employees in 2019 treat its health plan expenses as qualified wages for purposes of the Employee Retention Credit?” is Frequently Asked Question #65 of many commonly asked questions small business owners are wondering about how to file the Employee Retention Tax Credit (ERTC). The IRS ERC Tax Credit program is a confusing and complex process to determine the correct ERC calculations your business qualifies for. Answers to “May an Eligible Employer that averaged more than 100 full-time employees in 2019 treat its health plan expenses as qualified wages for purposes of the Employee Retention Credit?” and filling out form 941-X may change slightly from frequently updated rules and regulations from the IRS. Leave a comment below if you have further questions on ERC Credit FAQ #65.

Help Completing / Filing / Claiming the Employee Retention Credit (ERC)

Receive Up to a $26,000 ERC Credit from the IRS Per Employee

Disaster Loan Advisors can assist your business with the complex and confusing Employee Retention Credit (ERC), Form 941-X, and the Employee Retention Tax Credit (ERTC) program. 

Depending on eligibility, business owners and companies can receive up to $26,000 per employee based on the number of W2 employees you had on the payroll in 2020 and 2021.

The ERC / ERTC Tax Credit Program is a valuable IRS tax credit you can claim. This is money you have already paid to the IRS in payroll taxes for your W2 employees.

We DO NOT charge a percentage (%) of your ERC Refund like some companies are charging. Some ERC firms out there are charging upwards of 15% to 35% of your ERC refund!

Our professional ERC fee and pricing structure is very reasonable in comparison.

If you are looking for an ERC Company that believes in providing professional ERC Services and value, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors is a good fit for you. 

Schedule Your Free Employee Retention Credit Consultation to see what amount of employee retention tax credit your company qualifies for.

Cover Image Credit: Irs.gov / ERC FAQ / Disaster Loan Advisors

Mark Monroe
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