A. Employer Reporting Requirements
As of January 2009 changes to the Fair Share Contribution requirement of Chapter 58, require employers with more than 50 employees to pass both parts of the Fair Share testing. Previously employers were required to pass only one of either the Primary test, showing that at least 25% of full-time workers participated in the employer’s group health plan, or the Secondary test which required at least a 33% employer contribution to the individual coverage to avoid paying an assessment of up to $295 per employee. For 2009 however, an employer is considered a contributing employer when both the Primary and Secondary test are passed. In addition, the Division of Health Care Finance and Policy has changed the frequency of the Fair Share Contribution reporting and payment by employers who fail, from an annual schedule to a quarterly schedule. Please read on for further clarification.
Employers with 50 or fewer full-time equivalents however will still only have to pass one of the two tests. For employers with more than 50 full- time equivalents who have a 75% employee participation rate there is a “safe harbor” provision which allows them to avoid the penalty assessment even if they fail the secondary test.
All employers are required to complete their on-line Fair Share testing for the first quarter ending December 31, 2008, no later than February 15, 2009. If the results indicate a passing of both tests employers will not be required to report or complete a Fair Share on-line test until December 31, 2009. If however an employer fails both tests or passes only one test, the Division of Unemployment Assistance (DUA) will require those employers to continue to complete quarterly test in April, June, September and December of 2009. Employers will need to have their DUA employer id number in order to complete the on-line reporting (For filing: https://fsc.detma.org).
Additionally the DUA had implemented new fines for employers who fail at the end of the year. We recommend you visit http://www.mass.gov/?pageID=elwdtopic&L=3&L0=Home&L1=Businesses&L2=Fair+Share+Contribution+(FSC)&sid=Elwd for a detailed explanation of these fees and filing procedures.
B. 2009 Employee HIRD Form
For your convenience we have attached the recently published 2009 Employee HIRD form which you should use going forward.
C. Minimum Creditable Coverage (MCC) Reminder
As you know, Massachusetts residents need to have health coverage that meets the Minimum Creditable Coverage (MCC) requirements established by the Commonwealth Health Insurance Connector.
Under the MCC regulations which are effective January 1, 2009, a health plan must provide coverage for a broad range of medical benefits including preventive and primary care, emergency services, hospitalization benefits, ambulatory patient service, mental health services and prescription drug coverage. Health plans cannot impose an overall annual or per illness annual maximum benefit or a fee schedule of indemnity benefits for certain in-network covered benefits.
The revised regulations clarify that the ban on annual benefit caps only applies to core services such as in-patient acute care services, physician services, day surgery, and diagnostic procedures and tests. Maximum out-of-pocket spending for in-network core services is capped at $5,000 for an individual and $10,000 for a family when there is an annual deductible or co-insurance for certain services. The deductible must be capped at $2,000 for individuals and $4,000 for families. Provided that there is separate drug coverage deductible, it may not exceed $250 for individuals and $500 for families. Regulations allow employer contributions to a Health Reimbursement Arrangement (HRA) to be combined with a high-deductible plan to meet the deductible maximum standard. Please remember this section of the law is considered an individual –resident mandate. It is not the employers’ requirement to provide employees with a health plan that meets MCC levels.
D. Student Dependent Certification
Recent clarification to the extended dependent coverage provision of the law stipulates that an eligible dependent under the law does not have to be a claimant on the parents’ federal tax return in order to qualify for extended coverage. The law specifies that the coverage extension is available for 2 years after the dependent qualifies under Section 106 of the IRS code. Section 106 defines this dependent as a child who receives at least 50% support from his/her parent(s). Therefore, as long as the child is under 26 and receiving at least 50% support from his/her parent(s) for the calendar year, they are eligible for coverage.
Annual dependent student status and re-certification procedures by health insurers have changed. Prior to the passage of Massachusetts Healthcare Reform legislation, health insurers conducted an annual recertification of dependent students in order to determine continuation or termination of health insurance coverage. Since the passage of this legislation, which now allows for extended coverage of a dependent up to the lesser of age 26 or for 2 calendar years following the loss of their dependent status as defined under IRS sec.106. Health insurers no longer conduct annual certification of a dependent’s status. Therefore the responsibility of verifying an over-age dependent’s ability to remain on the plan or terminate from the plan has shifted to the employer.
To assist our clients with this monitoring activity, Yozell Associates has developed the attached “Over-age Dependent Status” tracking form. We suggest you capture the information requested on this form from each employee enrolled in your company’s group health plan with an over-age dependent each calendar year (see attached form with instructions).
Since Massachusetts Health Care Reform allows for continued coverage of dependents after they are considered tax dependents, there is also the possibility that the value of this continued coverage needs to be added to an employee’s W-2 as imputed income. If the dependent is a full-time student less than 24 years of age or a “qualifying relative” who receives more than 50% of his/her support from the employee, then no imputed income is warranted for federal or state tax purposes. If however, the employee is subject to imputed income, then the “the fair market value” of the benefit must be added to the employee’s income for federal tax purposes. There is no imputed income for Massachusetts tax purposes. The fair market value of the benefit is equal to the full cost of an individual health insurance policy for each month the dependent is enrolled during the calendar year. This is a similar calculation that is required for calculating imputed income for domestic partner coverage.
E. 2008 1099 Forms
Massachusetts law now requires residents age 18 and over to report proof of their health insurance coverage when filing their Massachusetts state income taxes. All Massachusetts based health insurers will be mailing 2008 1099-HC forms to their insured subscribers by January 31, 2009. Information contained on the 1099-HC forms will indicate the coverage level the subscriber had in 2008 and the months during the year coverage was in place. If an employee was insured with more than one health carrier during 2008 they should expect to receive a separate 1099-HC form from each carrier. Tax related questions from your employees may be directed to the Massachusetts Department of Revenue via www.mass.gov/dor
