The Massachusetts Department of Unemployment Assistance (DUA) released final regulations regarding the new second tier Employer Medical Assistance Contribution (EMAC) (referred to in the regulations and below as the EMAC Supplemental contribution) that applies to covered employers for 2018 and 2019.

Following are the few changes made from the proposed regulations that we reported on previously.

The definition of liable employer is changed

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 56 days (previously 14 days).

As stipulated in the proposed guidelines, employers are 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 employees as a secondary insurer because they enrolled in the employer-sponsored insurance plan. Employers will also not be liable for the EMAC Supplemental contribution for employees enrolled only in the MassHealth's Premium Assistance Program.

Governmental entities are not automatically subject to the EMAC Supplemental contribution

As we previously reported, 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.

The final regulations add that Massachusetts cities, towns, regional school districts, and educational collaboratives are not subject to, or liable for, the EMAC Supplemental contribution unless they have accepted liability under M.G.L. c. 29, Section 27C.

Appeal of liability determination

It continues to be true that 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 within 10 days after the employer's receipt of notice of the determination.

A request is deemed filed on the postmark date if sent by US 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.

Added to the appeal section of the final regulations is a provision that provides how to determine the date of receipt when a notice of determination is transmitted electronically. When a DUA notice of a determination is transmitted electronically, it will be presumed the employer received it on the date sent, except that any notice transmitted after 5:00 P.M. or on a state or federal holiday, Saturday, or Sunday, will be presumed received on the next business day. When notice of a determination is sent by regular mail, it will be presumed to have been received three days after it is mailed, except that if the third day falls on a state or federal holiday, Saturday, or Sunday, the notice will be presumed received on the next business day. However the notice is transmitted, the presumption may be rebutted by substantial and credible evidence satisfactory to the DUA Director that the notice actually was received on an earlier or later date.

Also clarified is that an employer will have 30 days following the receipt of the DUA's hearing decision to appeal the decision to the superior county court.

See Tax Alert 2017-1898 for more information on the provisions of the final regulations that remained the same as proposed.

2018 normal EMAC rates

As we reported previously, the normal 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 normal and supplemental contributions on the first $15,000 of each employee's wages paid during the calendar year.

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

For more information, see the Department's website 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.

As with unemployment insurance (UI) contribution rate determinations, employers will also need to 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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