Under Internal Revenue Code Section 45E(f), businesses with 50 or fewer employees may qualify for tax credits for employer contributions for eligible employees (i.e., those who make $100,000 or less). In the first two years of the plan, the credit is 100% of the employer contribution capped at $1,000 per eligible employee; in year three of the plan, it is 75% of the employer contribution capped at $1,000 per eligible employee; in year four of the plan, it is 50% of the employer contribution capped at $1,000 per eligible employee; and in year five of the plan, it is 25% of the employer contribution capped at $1,000 per eligible employee. This credit is phased out for employers with 51–100 employees. Specifically, the amount of the credit will be reduced by an amount equal to 2% for each employee in excess of 50.
