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  Business Owner's Responsibilities Under the Massachusetts Health Reform Act
Q 1.

What are my obligations as an employer with 11 or more full-time equivalent employees?

A
Your company MUST offer a Section 125 Cafeteria Plan that meets Health Connector regulations.
  • A Section 125 or Cafeteria Plan lets employees save money through pre-tax payments for health coverage. To establish your Section 125 Cafeteria Plan, contact your broker, benefits lawyer, payroll vender, and accountant and provide them with the same documents and forms provided below. Your employees can enroll in a Section 125 Cafeteria Plan during an open enrollment period, within a specific period of time following their date of hire, or on the date an employee first becomes eligible for a plan. To pay for the Section 125 Cafeteria Plan, an employee must enter into a salary reduction agreement with their employer, confirming they wish to pay for health care on a pre-tax basis.

Section 125 Cafeteria Plan Handbook

Section 125 Cafeteria Plan Waiver/Election/Compensation Form

Customizable Section 125 Cafeteria Plan Document

Section 125 Cafeteria Plan Agreement Form

Section 125 Cafeteria Plan Implementation Checklist

Accept/Decline Section 125 Cafeteria Plan

Your company MUST pay the Free Rider Surcharge if employees or their dependents receive medical care that is paid by the state’s Free Care Pool for the uninsured. 
  • Employers that do not offer health benefits to their employees are charged the Free Rider Surcharge . Employees who are not offered health insurance through work often go without it.  Therefore using the state maintains a Free Care Pool to pay for care when uninsured people need medical attention. The amount of the Free Rider Surcharge will vary from employer to employer.  It will be based on the number of employees, whether or not they obtain Free Care Pool medical attention, and the percentage of employees enrolled in the employer’s health plan.
MUST make a “fair and reasonable” contribution to their employees’ health insurance or pay a
Fair Share Contribution
of up to $295 per employee.
  • Employers of 11 or more full-time-equivalent employees will pay an annual Fair Share Contribution of up to $295 per employee if they do not make a “fair and reasonable” contribution to an employee health plan.  The funds will help pay for health plans for people who do not have the option of employer-sponsored health insurance.
MUST complete and collect Employer Health Insurance Responsibility Disclosure (HIRD) Form to report if they offer a Section 125 Plan that complies with Health Connector regulations.

Updated 2008 HIRD Form

 
Q 2.
Who is considered a full-time employee?
A

Someone who works 35 hours or more per week at a Massachusetts location (even if they live in another state).  This definition applies to the employees who are offered health plan benefits under the tests for a "fair and reasonable" contribution. 

 
Q 3.
What is a Fair Share Reasonable Contribution?
A

A Fair Share Reasonable Contribution is 25% of full-time employees participating in the employer’s group health plan. Or an employer contribution of at least 33% toward a health plan premium for all full-time employees who are employed more than 90 days.

 
Q 4.
Who must complete the Employer Health Insurance Responsibility Disclosure (HIRD) Form?
A
  • All employers with 11 or more full-time equivalent employees must complete the HIRD Form.
  • Individuals who are one of 11 or more full time employees must complete the HIRD Form.
  • An employee who declines an employer-sponsored health plan or a section 125 Cafeteria Plan, including individuals that decline your company’s plan and accept their spouses.
  • An employee who has other health coverage.

Updated 2008 HIRD Form

Accept/Decline Section 125 Cafeteria Plan

 
Q 5.
How Do You Know If You Have 11 or More Full-Time-Equivalent Employees?
A
  • Count up the payroll hours for all who worked for at least one month during the period from October 1, 2006 through September 30, 2007.
  • For any single employee who worked more than 2000 hours, count 2000 hours only.
  • Divide the total by 2000 hours to get the number of full-time-equivalent employees.
Q 6.
Who is exempt?
A
  • Independent contractors.
  • Employees under the age of 18.
  • Part time employees averaging fewer than 64 hours per month.
  • Waitstaff, service employees or bartenders who earn, on average, less than $400 in monthly payroll wages (tips not included).
  • Students who are employed as interns or cooperative education.
  • Seasonal employees.
  • Temporary employees are not considered full-time employees.
  • Workers from temp agencies (they are the temp agency’s employees).
Q 7.
What is a Section 125 Cafeteria Plan?
A
A cafeteria plan, also known as a Section 125 plan, is a written plan that allows participating employees to select qualifying benefits from a "menu" of choices. The participant can direct a portion of their salary to the plan and use pre-tax dollars to pay for benefits. This enables both an employee and employer to save on federal income taxes, FICA taxes, and state and local taxes.
 
Q 8.
How do I set up a Section 125 Cafeteria Plan?
A
To establish your Cafeteria Plan (Section 125), contact your broker, benefits lawyer, payroll vender and accountant and provide them with the sample documents and forms available below. Your employees can enroll in a Cafeteria Plan during an open enrollment period, within a specific period of time following their date of hire, or on the date an employee first becomes eligible for a plan. To pay for the Section 125 Cafeteria Plan, an employee must enter into a salary reduction agreement with their employer, confirming they wish to pay for health care on a pre-tax basis.
 
Q 9.
If my company has less than 11 employees can I purchase health insurance through the Health Connector?
A
Yes, Voluntary and Contributor Plans are available.
  • Under a Voluntary Plan, employees buy health insurance on a “voluntary” or employee-pay-all basis. Your company can create a Section 125 Cafeteria Plan to allow employees to make payments with pre-tax dollars.
  • Contributor Plan or Premium Only Plan also are available. You should select a “benchmark” benefits plan and an insurance carrier. Next you need to decide the contribution that you wish to make towards a “benchmark” health insurance plan for your employees.
   

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