In California, an employer with 25 or fewer employees that wants to qualify for the federal small business health care tax credit must purchase its employees' coverage through:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The federal small business health care tax credit rewards small employers that contribute to their employees' health coverage. In California, the credit is available only when coverage is purchased through Covered California for Small Business (CCSB), the state's Small Business Health Options Program exchange. CCSB serves employers with 50 or fewer employees, and the tax credit itself is limited to eligible employers with 25 or fewer full-time equivalent employees and modest average wages. This requirement, that the credit runs through CCSB, is a CA-specific rule and a frequent exam point.
Why the other options are wrong
- B) Self-funded association plans are generally not the vehicle for the state exchange credit, and California restricts self-funded association arrangements.
- C) Medicare Advantage employer plans are retiree or group Medicare products, not the small business exchange products that trigger the federal credit.
- D) The credit requires purchase through the California exchange; a direct out-of-state contract does not qualify for the credit.
Memory hook
Small employers collect the credit only inside the CCSB storefront; buying outside means no credit.