August 8, 2013

Repeal of Massachusetts Fair Share Contribution Requirement and Employer HIRD Reporting

On July 12, 2013, Massachusetts Governor Patrick signed a law (H3538) that repeals the so-called fair shared contribution requirement.  As background, the Commonwealth enacted a universal health care coverage law in 2006. This law provides for an individual mandate, as well as four employer mandates including the fair share contribution requirement, a health insurance disclosure obligation, the maintenance of a Section 125 cafeteria plan, and a free rider surcharge. 

Of the four employer mandates, H3538 repeals the fair share contribution requirement and the Employer HIRD disclosure requirement. 

  • Fair Share Contribution Requirement.  The fair share contribution provision required employers with 11 or more full-time employees to either pay a fair and reasonable premium contribution toward health coverage for their employees in the Commonwealth, or the employer would be subject to an annual penalty of $295 per employee. This provision has been repealed, effective July 1, 2013.  It is important to note, however, that the Department of Unemployment Assistance will continue to collect fair share employer liabilities through June 30, 2013 (see Effect of the Repeal of Fair Share Contribution Program).  Contributions for the Q3 period (4/1/13 – 6/30/13), due August 15, 2013, will be the last filing period for the program.
  • Health Insurance Responsibility Disclosure (HIRD) Obligation.  The Employer HIRD requirement has been repealed.  In its place, the law imposes a notice requirement on employers employing 11 or more employees in the Commonwealth.  This annual notice will advise the employees about the availability of the employer’s Section 125 cafeteria plan, and about the ability to enroll in the employer’s health plan.  This notice, presumably, will be developed by the Connector.  Watch for additional details.

Certain Health Care Reform Provisions Remain in Effect.  While the Fair Share Contribution mandate and Employer HIRD form requirement were repealed, other components of the Commonwealth’s health care reform law remain in place, including:

  • An individual mandate which requires all Massachusetts residents aged 18 and over to obtain and maintain a minimum level of health coverage, or lose their personal income tax exemption when filing their income tax returns.  For the 2013 tax year, penalties range from $240 to $1,272. 
  • A Cafeteria Plan mandate wherein the employer is required to offer an IRC Section 125 cafeteria plan.  An outstanding issue remains to be resolved between the federally-mandated exchanges which do not allow pre-tax premium payment through an IRC Section 125 plan and the Connector, which does.
  • A Free Rider Surcharge is imposed on employers who do not establish a cafeteria plan. The surcharge is based on the number of the employer’s uninsured employees or their dependents who use more than $50,000 in public health services in one year. The surcharge is triggered when an employee receives ‘free care’ more than three times a year, or a company has five or more instances of employees receiving ‘free care’ in a year, and range from 10 to 100% of the Commonwealth’s cost of care provided.

New Medical Assistance Contribution Requirement 

Beginning January 1, 2014, employers will be subject to a medical assistance contribution payable through their unemployment taxes.  Affected employers are those subject to the Massachusetts unemployment insurance provisions, including state and local government agencies and non-profit entities, who employ 5 or more employees.  The collected employer medical assistance contributions will then be used to support subsidized health care services funded by the Commonwealth Care Trust, the Health Safety Net Trust and the Catastrophic Illness in Children Relief Fund. 

The contribution is calculated by multiplying the wages the employer pays it employees (based on the Massachusetts unemployment taxable wage base of $14,000) by the medical assistance contribution rate of 0.12% for the first calendar year; the rate increases to 0.36% thereafter.  A new employer would not be required to make medical assistance contributions during its first 12 months of business in the Commonwealth; however, the medical assistance contribution rate of 0.24% would be imposed beginning the second calendar year.

The law authorizes the establishment of an employer medical assistance contribution rate review board who will determine, on an annual basis, whether the employer medical assistance contributions rate will adequately provide for the estimated costs of subsidized health care to low-income residents of the Commonwealth.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.



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