Small Business Protection Act

What Does Small Business Protection Act Mean?

The Small Business Protection Act, also known as the Small Business Job Protection Law, is legislation passed in the United States in 1995. It mandated an increase in the minimum wage and introduced changes to pension and retirement plans for employees working in companies with 100 or fewer employees.

Insuranceopedia Explains Small Business Protection Act

The companies most affected by this act were the so-called S corporations in the United States. S corporations are domestic business entities that are not taxed like larger, regular corporations. An S corporation is limited to no more than 100 shareholders, whereas prior to this act, the law allowed for only 35 shareholders. Because the law applies specifically to companies with 100 or fewer employees, owners at this size should also weigh their small business insurance costs when budgeting for benefits and payroll-related obligations.

The act also safeguarded employees’ retirement benefits through its provision for the SIMPLE Retirement Plan. This plan collects annual contributions from both employees and employers to fund employees’ retirement pay. Employers who fail to contribute are subject to penalties imposed by the state. The act sits alongside other federal and state rules that affect how small employers handle staff, including workers’ compensation requirements that vary by state, which most S corporation owners need to carry in addition to their general business insurance.