Massachusetts Fair Share Law Has July 1 Deadline for Employers
June 20, 2007
Most employers, insurance agents and brokers in Massachusetts are aware of the state's so-called "fair share" law that becomes effective on July 1, 2007. What may not be as clear is what employers need to do in advance of that date to comply with the law.
The law applies to employers with 11 or more full-time equivalent employees located in Massachusetts. The test involves simply calculating total payroll hours for all Massachusetts employees from April 1, 2006, through March 31, 2007, and dividing by 2,000.
Such employers must confirm that they offer health care coverage through a Section 125 cafeteria plan or pay a Fair Share Contribution of up to $295 per employee, per year. Employers must file plan documents with the Massachusetts Commonwealth Connector by July 1, 2007.
Applicable employers must ensure that their cafeteria plans meet these minimum requirements:
- Eligibility. Plans may not exclude those who should be eligible. Those who may be excluded from eligibility are:
- Employees under 18 years of age
- Temporary employees
- Part-time employees who work on average fewer than 64 hours per month
- Certain service employees who earn less than $400 per month
- Certain student employees and interns
- Certain seasonal international employees
- Waiting Periods. Eligibility waiting periods may not exceed two months
- Benefits. The cafeteria plan cannot operate merely as a Health FSA or a Premium Reimbursement Arrangement.
Two tests exist for determining whether the employer’s health plan is covering its fair share of health care costs. An employer need only satisfy one of the two tests to avoid the Fair Share Contribution and a separate Free Rider Surcharge for those full-time employees who have other coverage through state-funded services. The tests are based on the number of full-time employees enrolled in the plan from October 1, 2006, through September 30, 2007:
- Primary test: At least 25 percent of full-time employees are enrolled in the plan and the employer contributes to the cost of it
- Secondary test: The employer contributes at least 33 percent of the plan premium cost for all full-time employees employed at least 90 days during the above period.
Compliance with either of these tests will be documented via a Health Insurance Responsibility Disclosure (HIRD) form that employers must submit after September 30, 2007.
The law's benefit mandates arguably should be preempted by ERISA. To date, no court has restricted or eliminated the fair share requirements. Until that occurs, employers should comply with the law.
More information on the law is available at www.MAhealthconnector.org. You can find two helpful handbooks at that web location by clicking on the employer link.
Infinisource, of course, offers plan document services that include a Plan Information Worksheet whereby employers can design their cafeteria plan documents to comply with the fair share law. For more information, please contact our POP Department at 866-350-3040, extension 1514.