The Massachusetts Department of Labor and Workforce Development posted additional information on the changes to the Employer Medical Assistance Contribution (EMAC) effective January 1, 2018.

As we reported, recently enacted legislation (HB 3822) increases the EMAC for two years and adds a new second tier tax to partially fund the $600 million MassHealth shortfall. These added taxes will be offset by a two-year decrease in future employer state unemployment insurance (SUI) rates.?These changes were part of a proposed compromiseplan sent by the governor and the business community to the state legislature to replace the previously proposed $2,000 per employer fair-share contribution.

2018 EMAC rates

According to the Department, the 2018 EMAC rates will be assigned as follows:

— New employers. New employers subject to unemployment contributions for their first time will be exempt for the first three years.

— Year 4. Employers in their fourth year of being subject to EMAC will pay at a rate of 0.18% (up from 0.12% for 2017)

— Year 5. Employers in their fifth year of being subject to EMAC will pay at a rate of 0.36% (up from 0.24% for 2017)

— Year 6 and over. Employers in their sixth year or more of being subject to EMAC will pay at a rate of 0.51% (up from 0.34% for 2017)

Employers are exempt from the EMAC in a quarter in which they have less than six employees (and when they are in the first three years of being "newly subject" to the unemployment insurance law).

Employers of six or more employees pay EMAC contributions on the first $15,000 of each employee's wages paid during the calendar year.

Second tier EMAC information

For 2018 and 2019, a second tier EMAC is created to require applicable employers to pay an additional 5% on the employee's taxable wages if the nondisabled employee receives health insurance coverage through the Massachusetts Division of Medical Assistance (MassHealth) or subsidized insurance through the Massachusetts Health Insurance Connector Authority (ConnectorCare) rather than through the employer's plan. ?

The taxable wage base for the second tier EMAC is also $15,000 (5% times $15,000 = a maximum of $750 per employee).

For more information on the EMAC changes, see the Department's website or call +1 617 626 5075. See also the Massachusetts Department of Health and Human Services fact sheet.

Ernst & Young LLP insights

It is anticipated that guidance will be forthcoming concerning how the new second tier EMAC assessment will be determined and enforced pursuant to nondisabled employees who have elected public health care rather than the employer's plan.?

One possibility being discussed is the renewal of employer reporting on employer sponsored insurance (ESI) through a revised Employee Health Insurance Responsibility Disclosure (HIRD) form (originally instituted in 2006 and discontinued when the Fair-Share contribution ended in 2013).

In the meantime, employers can prepare by determining how best they will identify Massachusetts employees who have enrolled in the state's public health plan or otherwise receive state-subsidized coverage.?

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