The information on this page may change. Please check back often with the Commonwealth Connector.
There are 5. One applies to employers of all sizes. The rest apply to employers of 11 or more full-time-equivalent employees.
Fair Share Contribution – Employers with 11 or more full-time-equivalent employees have a choice: make a “fair and reasonable” premium contribution toward a health insurance plan for their employees or pay up to $295 per-employee, per-year into the state's Safety Net Trust Fund.
Section 125 Plan – Employers with 11 or more full-time-equivalent employees must adopt and maintain a Section 125 Plan that meets Health Connector regulations. If they do not, they may be charged for part of the “free care” used by their employees or their employees’ dependents at hospitals and health centers. This is called the “Free Rider Surcharge.”
Employer Fair Share Contribution (FSC) Report – Employers with 11 or more full-time-equivalent employees must report whether they offer a Section 125 Plan and health benefits. This report should be filed online with the Massachusetts Division of Unemployment Assistance by November 15 of each year.
Health Insurance Responsibility Disclosure (HIRD) for Employees – Employers of 11 or more full-time-equivalent employees collect this form when an employee declines to use a Section 125 Plan or enroll in employer-subsidized health insurance. The Employee HIRD Form is available from the Mass. Division of Health Care Finance and Policy.
For employers of any size:
Non-discrimination – Insurance companies are not permitted to contract with employers who discriminate against lower-wage employees by contributing less toward their health insurance benefits. All full time employees must have the option of enrolling in any of the health plans offered by the employer. NOTE: This rule does not apply to self-insured employers.
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How do I know if I have 11 or more full-time-equivalent employees?
- Take the payroll year from October 1 to September 30. Include all paid hours such as paid leave, sick time, vacation time, jury duty time, etc.
- Only count the payroll hours of employees who worked at least one calender month.
- Count a maximum of 2000 hours for any one employee.
- Divide the total by 2000 to get your number of full-time-equivalent employees for the Fair Share Contribution. If you get 11 or more, this rule applies to you.
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What is a “fair and reasonable” contribution to health insurance benefits?
There are 2 tests under the “fair and reasonable” contribution rules under the “Fair Share Assessment.” The tests are based on a 12-month period from October 1 to September 30:
- Primary Test: At least 25% of full-time employees are enrolled in the employer’s health insurance plan and the employer is making a financial contribution to that plan. [NOTE: full-time = at least 35 hours per week. Temporary and seasonal employees are not included.]
- Secondary Test: The employer offers to pay at least 33% of the premium cost of an individual health insurance plan that is offered to all full-time employees. The rule applies for employees who are employed for at least 90 days during the 12-month period. [NOTE: for the Secondary Test, full-time employees are defined by an employer’s contract with a health insurer.]
An employer of 11 or more full-time-equivalent employees must pass at least one of these tests or pay up to $295 per employee (including temporary and seasonal employees) into the state's Safety Net Trust Fund.
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How do I establish a Section 125 Plan?
The Health Connector has a special area on our website to help employers with Section 125 Plans.
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Can my employees enroll in Commonwealth Care?
Commonwealth Care is not a replacement for employer-sponsored insurance. It is a subsidized health insurance program available to uninsured Massachusetts adults and families who meet certain income and eligibility guidelines.
Employees are not eligible for Commonwealth Care if they have access to your health plan and you offer to contribute at least 33% toward the cost of the individual premium and at least 20% toward the premium for a family plan.
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Can my employees enroll in Commonwealth Choice?
Yes, in many (but not all) cases.
Commonwealth Choice is not subsidized. It offers commercial insurance plans from 6 major carriers. Through Commonwealth Choice, the public gets new choices and the power to compare.
For all employers:
Your employees may purchase a Commonwealth Choice plan:
- If they are in a waiting period for your health insurance benefits. OR,
- if you do not contribute at least 33% toward the cost of the premium for an individual health insurance policy for your employees. OR,
- if you do not offer employer-subsidized health insurance that meets the minimum standards established by the Health Connector
You may establish a Section 125 Plan so that employees who are ineligible for your employer-subsidized health insurance benefits can buy health insurance using pre-tax dollars. Any employee who is ineligible for your subsidized health insurance benefits may enroll on their own in a Commonwealth Choice health plan using after-tax dollars.
For employers of 50 or fewer full-time employees:
Even if you offer subsidized health insurance benefits, your employees may decline them and enroll on their own in a Commonwealth Choice health plan using after-tax dollars
In 2008, you will have the option of offering health plans to your employees through the Health Connector. These plans from 6 major insurance companies all carry the Health Connector’s Seal of Approval. You will be able to choose a “benchmark” health plan from the Health Connector’s many offerings. You will then base your employer contribution toward health benefits on the premium of that “benchmark” plan.
Your employees may then shop for any of the plans that are available within the benefit level of your benchmark plan. The Health Connector provides you with uniform billing and handles payments to your employees’ health insurance plans.
For employers of 51 or more full-time employees:
Employees are not allowed to purchase Commonwealth Choice health plans if:
- they work for employers with 51 or more full-time employees, AND
- are eligible for employer-subsidized health insurance benefits.
The Health Care Reform Law does not permit employers of 51 or more full-time employees to offer employer-subsidized health plans through the Health Connector.
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What happens to my employees if they don't get health insurance?
- Most adults who did not obtain insurance by December 31, 2007 will lose their 2007 state personal tax exemption. The personal exemption is worth appoximately $219.
- The penalty can be appealed on the state tax form. The penalty will not be collected while an appeal is pending.
- The penalties have increased for 2008. Uninsured adults will now be fined for each month that they do not have health insurance. The penalties can be up to 1/2 of the monthly premium cost of a health plan, as certified by the Health Connector. The maximum penalty for 2008 is $76 per month or $912 for the year. There is a 63-day grace period when people can be uninsured without incurring penalties.
- People who believe that they cannot afford insurance may apply to the Health Connector for a portlet.endCacheTok=com.vignette.cachetoken">Certificate of Exemption. They may also wait until they file their taxes to see if they might be exempt from the mandate because they lack a health insurance option that is affordable to them.
- People who do not get health insurance because of sincerely-held religious beliefs can receive an exemption when they file their state tax return.
- NOTE: People with Medicare Part A or B, MassHealth (Medicaid), TRICARE or a health services card from the U.S. Veterans Administration meet the mandate.
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Will employers be penalized if their employees refuse health insurance?
No. If employees refuse health insurance, the employer is not responsible.
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How is the Individual Mandate enforced?
The Massachusetts Department of Revenue enforces the mandate through the process of collecting state personal income taxes.
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What impact will the Individual Mandate have on my business?
There is no direct impact. The Individual Mandate to carry health insurance applies to Massachusetts adults, as tax filers. The plans that an individual needs to avoid a penalty must carry benefits that meet the state's 'Minimum Creditable Coverage" standards. An employer will not be penalized if an employee decides to be uninsured.
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What is Minimum Creditable Coverage?
Minimum Creditable Coverage is the set of benefits that an individual needs to meet the mandate to be insured. The law does not require employers to offer benefits that meet Minimum Creditable Coverage. Employees who take your health insurance benefit may hope that it will meet the Minimum Creditable Coverage standards and protect them form a penalty, however.
Under rules adopted by the Health Connector, any plan that is licensed for sale in Massachusetts qualifies as Minimum Creditable Coverage. The standards go up on January 1, 2009. Starting on that date, a plan will need to:
- Cover prescription drugs;
- Cover regular doctor visits and check-ups before an deductible;
- Cap the deductible at $2,000 for an individual or $4,000 for a family each year;
- Cap out-of-pocket spending for health services at $5,000 for an individual or $10,000 for a family each year if you have a deductible or co-insurance;
- Have no cap on total benefits for a sickness or for each year;
Employers with plan years that begin as soon as February 1, 2008 may want to consider the Minimum Creditable Coverage standards that begin on January 1, 2009.
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What do I do when one of my employees declines to participate in my health benefits or my Section 125 Plan?
Employers with 11 or more full-time-equivalent employees collect the Employee Health Insurance Responsibility Disclosure (HIRD) Form for each employee who declines to participate in the employer-sponsored health plan and/or Section 125 Plan. Employers retain this form for 3 years. The Employee HIRD Form is available from the Mass. Division of Health Care Finance and Policy (DHCFP).
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Focus on Section 125 Plans
What is a Section 125 Plan?
It is a benefit plan that employers may offer under federal tax law that allows employees to pay for health care coverage (and other qualified benefits) on a pre-tax basis. Participating employees’ premium contributions are not subject to state, federal or federal FICA withholding taxes. The resulting tax savings could be as much as 41% of the cost of the monthly premium for a health plan. Employers also save on FICA taxes.
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Am I required to offer a Section 125 Plan?
Under the Massachusetts Health Care Reform Law, employers with 11 or more full-time equivalent employees must offer one. Section 125 Plan Regulations.
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What types of employers may establish a Section 125 Plan?
Section 125 Plans are available to:
- C Corporations
- Partnerships
- S Corporations
- Limited Liability Corporations
- Sole Proprietorships
- Professional Corporations
- Non Profit Organizations
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What is a Premium-Only Plan?
Under federal law, a range of benefits may be offered through a Section 125 Plan. A premium-only plan is a very basic cafeteria plan option. It allows eligible employees to contribute to the cost of health care coverage on a pre-tax basis. A premium-only plan provides no other benefits to employees, and is the minimum plan allowed under Health Care Reform regulations.
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How do employers establish Section 125 Plans?
Employers should consult their broker, benefits lawyer, payroll vendor and/or accountant and are encouraged to use the sample documents, forms and tools offered by the Health Connector.
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Can I exclude any employees from the Section 125 Plan?
Yes. The Health Reform Law allows employers to exclude one or more of the following classes of employees:
- Employees under age 18;
- Temporary employees;
- Part-time employees who average fewer than 64 hours per month;
- Wait staff, service employees or service bartenders (as defined in M.G.L. c. 149, Section 152A) who earn, on average, less than $400 in monthly payroll wages;
- Students who are employed as interns or as cooperative education student workers;
- Seasonal Employees under a U.S. J-1 student visa or a U.S. H2B visa, and who are enrolled in travel health insurance.
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How do employees elect to pay for health care coverage on a pre-tax basis?
An employee must enter into a salary reduction agreement with their employer, confirming that they wish to pay for health care coverage on a pre-tax basis.
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When do employees enroll in the Section 125 Plan?
Federal regulations say that employee elections must be made:
- during an annual open enrollment period;
- within a specified period of time following date of hire; or
- the date an employee first becomes eligible under the plan.
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Is an employee required to participate in his/her employer’s Section 125 Plan?
No. But if you are an employer of 11 or more full-time-equivalent employees you must collect an Employee HIRD Form when the employee declines to participate.
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Are employers required to contribute toward the coverage offered through its Section 125 Plan?
No. But employers may want to see if it makes sense to offer a contribution toward a health insurance benefit, based on other requirements of the Health Reform Law.
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What happens if an eligible employee works for two or more employers?
Employees may only participate in one Section 125 Plan. Employees working for two or more employers must select one employer’s plan.
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I already offer a Section 125 Plan. Do I need to open a new one for those employees who must have access to pre-tax savings under the law?
A separate plan for new classes of employees may make administrative or legal sense for some employers. Employers should consult with their tax or legal advisor.
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My company participates in the Section 125 Plan of a parent, subsidiary or affiliated company. Do I need to set up a new plan?
No. The Massachusetts law allows plans to cover employees of two or more employers if those employers are affiliated or related. The Plan Document should clearly identify all participating employers.
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Do I file my company's Section 125 Plan Documents with the IRS?
No.
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Do I file Section 125 Plan Documents with the Commonwealth?
No. Under the law, the Health Connector may request the documents, but there is no requirement for you to file them with us routinely. If you choose to offer the Health Connector's Commonwealth Choice health plans through you Section 125 Plan, you will need to provide us with the information we need to establish and maintain your account, however.
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Does my Section 125 Plan have to follow a particular plan year?
No.
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How are premiums collected from employees who use the Section 125 Plan to purchase a Health Connector plan?
Employers will withhold contributions from employee paychecks and remit contributions monthly to the Health Connector. The Health Connector tracks those employees through a census of participating employees submitted by the employer.
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Which employees should be listed on the census?
Only those employees who are eligible to purchase coverage through the Connector should be included.
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What if an employee’s earnings can’t cover a premium payment?
The employer is not responsible for any shortfall amount. The employee must make immediate arrangements to pay any shortfall on an after-tax basis in accordance with procedures specified by the employer. For example, some employers may choose to take the shortfall from the employee and submit it to the Health Connector. Others may direct the employee to send a personal check directly to the Health Connector to cover the amount owed.
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