November 10, 2017 Massachusetts Labor Department releases draft proposed regulations on the new second tier Employer Medical Assistance Contribution that applies effective January 1, 2018 The Massachusetts Department of Unemployment Assistance (DUA) has released draft proposed regulations regarding the new second tier Employer Medical Assistance Contribution (EMAC) (referred to in the regulations and here as the EMAC Supplemental contribution) that applies to covered employers for 2018 and 2019. In this two-year period, the Commonwealth is expecting to generate employer contributions of $125 million. The proposed regulations provide details on how the EMAC Supplemental contribution will be administered by the DUA. Businesses will want to begin preparing now for this new tax. EMAC Supplemental contribution As we've reported previously, for 2018 and 2019, an EMAC Supplemental contribution is created that is payable by applicable employers at 5% of a covered employee's unemployment insurance (UI) taxable wages (up to the $15,000 per year) and applies to each nondisabled employee who 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 maximum EMAC Supplemental contribution for the year is $750 per covered employee ($15,000 times 5%). Details on the draft proposed regulations Covered employer Under the proposed regulations, beginning January 1, 2018, an employer with six or more employees in any quarter is potentially liable for the EMAC Supplemental contribution. — The number of employees for these purposes is calculated by dividing the sum of the employer's three monthly employment levels for the quarter by three. — An employer's employment level for each month of the quarter is the number of employees who worked or received wages for any part of the pay period that includes the 12th of the month as reported on the Massachusetts UI return. — Non-profit organizations and government entities, whether they have chosen the reimbursement or contributory method of financing UI benefit charges, are covered for purposes of potential liability for the EMAC Supplemental contribution. Liable employers A covered employer is liable for payment of the EMAC Supplemental contribution if one or more of the employer's employees received health insurance coverage through either MassHealth or ConnectorCare for a continuous period of at least 14 days. However, the employer is not liable if the employee who received the state health insurance coverage is permanently and totally disabled (as defined by state law or Title XVI of the Social Security Act) or if the state is used by the employee as a secondary insurer because he/she is enrolled in the employer-sponsored insurance plan. Employers will also not be liable for the EMAC Supplemental contribution for employees only enrolled in MassHealth's Premium Assistance Program (details included in this Alert). Successor employers Successor employers involved in a change in ownership, including but not limited to an acquisition, consolidation, or a partial or total transfer, during a calendar quarter are liable for the EMAC Supplemental contribution for any applicable employee during that quarter and is not allowed credit for any EMAC Supplemental contribution paid by the predecessor employer. EMAC Supplemental contribution is not an unemployment insurance contribution Note that although employers pay the EMAC Supplemental contribution to the DUA and wages are defined in reference to the Massachusetts UI law, EMAC Supplemental contributions are not considered UI contributions for purposes of receiving credit under the Federal Unemployment Insurance Contribution Act (FUTA) and are not reported on the Form 940 worksheet as UI contributions for Massachusetts. Furthermore, the EMAC Supplemental contribution is not taken into account for purposes of determining the employer's Massachusetts UI contribution rate. Determination of amount of employer liability The Division of Medical Assistance and ConnectorCare will provide the DUA with the necessary employee information to determine employer liability for the EMAC Supplemental contribution. The DUA will then issue a notice of determination of liability and the amount of the liability. After it has calculated the EMAC Supplemental contribution, the DUA will post that information to the employer's DUA online reporting account. Any required EMAC Supplement contribution owed will be added to the statement that shows the employer's UI liability. Employers will have 10 days from receipt of the information to appeal the DUA's determination of liability for the EMAC Supplemental contribution. (See appeals in this Alert). Employer payment of the EMAC Supplemental contribution is required to be paid quarterly, and is due and payable on or before the last day of the month succeeding the quarter in which wages were paid and reported to the DUA. Interest and penalties will apply to any EMAC Supplemental contribution not remitted to the DUA and will be charged in the same fashion as for delinquent UI contributions. An employer is also subject to penalties, including fines and imprisonment if it: — Willfully attempts to evade or defeat any contribution, interest or penalty payment — Knowingly makes any false statement or misrepresentation to avoid or reduce any financial liabilities — Knowingly fails or refuses to pay any such contribution, interest charge or penalty — Attempts to coerce workers to misrepresent their circumstances so that the employer may evade payment of contributions Verification and appeal of liability determination After the employer signs a confidentiality agreement, the DUA may provide it with access to the applicable employee information for purposes of reviewing and/or appealing the liability determined by the DUA. An employer may request a hearing to appeal a determination that it is liable for the EMAC Supplemental contribution or the amount of contribution owed. The request for a hearing must be filed not more than 10 days after the employer's receipt of notice of the determination. A request is deemed filed on the postmark date if sent by U.S. Mail and otherwise when actually received by DUA. A request received after 5:00 p.m. is deemed filed on the next business day. The DUA Director will issue a written decision affirming, modifying, or revoking its initial determination. Premium Assistance Program available to employees unable to afford employer-sponsored health insurance The MassHealth Premium Assistance Program can help employees remain on or join their employer-sponsored health plan through direct premium assistance payments. More information for employers and employees who are interested in utilizing this program can be found here or by calling the Premium Assistance Hotline at +1 800 862 4840 Health Connector for Business The Massachusetts Health Connector has launched a new shopping platform for businesses with fewer than 50 employees making it easier for small businesses to offer health insurance to their employees. For more information, go here. Interested parties can comment on the draft proposed regulations Listening sessions on the draft proposed regulations have been scheduled for the following dates: Monday, November 13, 2017 Tuesday, November 14, 2017 Wednesday, November 15, 2017 2:00 p.m. to 4:00 p.m. Thursday, November 16, 2017 Comments may also be submitted to the following email address to EMACSupplement@massmail.state.ma.us For more information, see the Department's website for the draft proposed regulations and Frequently Asked Questions on the EMAC changes or call +1 617 626 5075 Ernst & Young LLP insights Employers will need to establish general ledger codes to account for the liability and payment of this new payroll tax and to coordinate with their payroll service providers to confirm compliance starting next year. As with their unemployment insurance contribution rate determinations, employers will also need to begin to proactively consider how they will go about verifying the accuracy of EMAC Supplemental contribution determinations they might receive. Verification of the EMAC Supplemental contribution will require a coordinated effort with those responsible for health coverage information (e.g., your Affordable Care Act service provider) and, if applicable, the third-party provider handling UI claims and rate reviews. ———————————————
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