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Eligibility
NJ Small Employer Health Benefits Program Buyer's Guide
 
What is a Small Employer?

An employer that satisfies the requirements of either part one or part two of the definition below is a small employer in New Jersey. 

"Small employer" means:

  1. Any person, firm, corporation, partnership, or political subdivision that is actively engaged in business that employed an average of at least one but not more than 50 eligible employees on business days during the preceding calendar year and who employs at least one eligible employee on the first day of the plan year;  or
  2. An employer with a business location in the state of New Jersey who employed an average of at least one but not more than 50 employees on business days during the preceding calendar year; and who employs at least one employee on the first day of the plan year. 

With respect to parts one and two of the definition above, any person treated as a single employer under subsection (b), (c), (m) or (o) of section 414 of the Internal Revenue Code of 1986 (26 U.S.C. § 414) shall be treated as one employer.
Note the emphasis to eligible employees in part one of the definition and to employees in part two the definition. 

 
What is an Eligible Employee?

The term “eligible employee” is used in part one of the definition of small employer. 

Eligible employee means a full-time, bona fide employee who works a normal work week of 25 or more hours. The term excludes a sole proprietor, a partner of a partnership, or an independent contractor.  Eligible employee excludes both the husband and the wife in a husband and wife business.   Eligible employee also excludes employees who work less than 25 hours a week, employees who work on a temporary or substitute basis and employees participating in an employee welfare arrangement pursuant to a collective bargaining agreement.

How to Count

When counting eligible employees, first identify all bona-fide employees who work a normal work week of 25 hours or more.  A bona-fide employee is an employee who is paid at least the minimum wage.  Each such employee counts as 1.  From the total number of employees working 25 or more hours per week subtract the number of employees who work 25 or more hours per week but who work on a temporary or substitute basis.  Also subtract any employees working 25 or more hours per week who belong to a labor union and who are covered under the plan provided by the labor union.  If the result is at least one but not more than 50, the employer is a small employer under part one of the definition of small employer. 

Although eligible employee excludes sole proprietors, partners of partnerships, as well as husbands and wives in husband-wife businesses such persons may nevertheless be covered under a small employer plan provided the employer has at least one but not more than 50 eligible employees.   Note that independent contractors, employees working fewer than 25 hours per week, employees working on a temporary or substitute basis or participating in an employee welfare arrangement pursuant to a collective bargaining agreement cannot be covered under a small employer plan. 
 
What is an Employee?

The term “employee” is used in part two of the definition of small employer.  Employee means an individual who is an employee under the common law standard as described in 26CFR 31.3401(c)-1(b).  Employee excludes a sole proprietor, a partner in a partnership and more than a two percent shareholder in a Subchapter S corporation as well as immediate family members of such individuals.  Employee also excludes a leased employee.

How to Count

When counting employees first count the number of employees who work 30 or more hours per week.  These employees are considered full-time employees.  Each full-time employee counts as one.  Next consider employees who work fewer than 30 hours per week.  These employees are considered part-time employees.  To count part time employees add the number of hours each of the part time employees work then multiply that sum by four.  Next, divide that product by 120 and round the result down to the nearest whole number.  That number is the number of part time employees used in the determination of whether the employer is a small employer.  Add the number of full-time employees to the number that results from the part-time employee calculation, and if the sum is at least one but not more than 50, the employer shall be considered to be a small employer under part two of the definition of small employer. 

Although employee excludes sole proprietors, partners of partnerships, and more than a two percent shareholder in a Subchapter S corporation as well as immediate family members of such individuals, such persons may be covered under a small employer plan provided the employer has at least one but not more than 50 employees.  A leased employee cannot be covered under a small employer plan. 
 
What Happens if the Employer is Just Starting in Business?

If an employer was not in existence during the preceding calendar year, the determination of whether the employer is a small or large employer shall be based on:
  1. the average number of eligible employees that it is reasonably expected that the employer will employ on business days in the current calendar year  with respect to small employers that meet part one of the definition of small employer; or
  2. the average number of employees that it is reasonably expected that the employer will employ on business days in the current calendar year with respect to small employers that meet part two of the definition of small employer.

Refer to the definitions of eligible employee and employee when considering the average number of eligible employees or employees the employer is expected to employ.

 
Redetermination of Eligibility

Once a health benefits plan has been issued to a small employer the size of a small employer shall be determined annually. Except as otherwise specifically provided, an employer shall continue to be treated as a small employer until the plan anniversary following the date the small employer no longer meets the requirements of the small employer definition.
   
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