Massachusetts to Repeal Components of State Health Care Reform Law

The Massachusetts Health Connector just issued Administrative Bulletin 03-13, which contains important guidance regarding the following components of the Massachusetts Health Care Reform law:

  1. the State’s Section 125 Plan requirement, which provides that employers with 11 or more full-time equivalent employees must offer Section 125 plans under which employees can purchase non-group health insurance coverage on a pre-tax basis without any employer contribution;
  2. the Employer Health Insurance Responsibility Disclosure (“Employer HIRD”) requirement;
  3. the Free Rider Surcharge; and
  4. the recently-created Section 125 Plan Notification requirement.

The Bulletin, which is effective as of October 28, 2013, states that recent federal guidance issued by the Department of Labor and the IRS in Technical Release 2013-03 and IRS Notice 2013-54 appears incompatible with the State’s Section 125 Plan requirement.  Since the Employer HIRD requirement, the Free Rider Surcharge, and the Section 125 Plan Notification requirement were designed to support and enforce the Section 125 Plan requirement, officials in Governor Patrick’s administration plan to pursue legislation to repeal all four components of the Massachusetts Health Care Reform law.  During the interim period, the Health Connector has indicated that it will not enforce the Free Rider Surcharge.  Additionally, the Health Connector has indicated that it will not take any further steps with respect to the Section 125 notification requirement or to developing the Employer HIRD filing application.

Employers that currently provide a calendar-year Section 125 plan to allow part-time employees who are not eligible for “full-time” benefits to purchase non-group health insurance coverage on a pre-tax basis may continue to offer such plans until December 31, 2013.  For those employers that provide non-calendar year plans, federal guidance states that employees may continue to utilize such plans into 2014, through the last day of the plan year that commenced in 2013.

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About John McMorrow

John has 30 years of experience counseling public- and private-sector for-profit and not-for-profit employers and their affiliated business entities, management, human resources professionals, third-party administrators and fiduciaries with respect to the laws that apply to executive compensation arrangements and workforce benefit programs and policies. He works comfortably with HR professionals, general counsel and boards of directors. In 1998, John received a National Performance Review Award from Vice President Al Gore for his assistance in developing and writing the regulations under Section 2043 of ERISA for the Pension Benefit Guaranty Corporation.
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