A Massachusetts Employer’s Obligations Related to the Employer Medical Assistance Contribution (“EMAC”)
December 19, 2017 | foleyfoleypc
A few months ago, “An Act Further Regulating Employer Contributions to Health Care,” was signed into law without associated regulations, leaving employers in the difficult spot of trying to interpret the vague and confusing language. Recently, the Massachusetts Department of Unemployment Assistance published draft regulations that help to clarify the law. Because the effective date is looming (1/1/18), it is important to examine the draft regulations for guidance and assume these regulations will be finalized as currently written. We will, of course, update you if there are any changes.
In 2018, employers will be responsible for two types of contributions related to healthcare:
- The Employer Medical Assistance Contribution (“EMAC”) – requires that an employer with 6 or more employees provide a contribution, per employee, to support the Commonwealth Care Trust Fund.
- The EMAC supplement, sometimes referred to as the penalty portion of the law, requires that an employer with 6 or more employees pay a contribution for each employee who receives health insurance coverage through the MassHealth Agency or ConnectorCare.
Which Employees are Covered?
The EMAC relies on the definition of “employee” set out in Massachusetts’ unemployment insurance laws. This means that any regular employee, regardless of full or part-time status, contributes to an employer’s count. Depending on the length of employment, temporary/seasonal workers may also need to be included. To be clear, an employee should be included in an employer’s count, and may subject the employer to an EMAC penalty, even where the employee is not qualified for employer-provided benefits under the Affordable Care Act.
An employee is considered to work in Massachusetts if he/she: a) performs work entirely in Massachusetts; b) performs work in and out of Massachusetts, but the work out of state is incidental to the work within the state.
Which Employers are Covered?
Any Massachusetts employer, including a not-for-profit employer, with 6 or more employees working in Massachusetts, is subject to the EMAC and the EMAC supplement.
The employee count is determined each quarter by calculating the average number of employees who worked during or received wages for the pay period that includes the twelfth day of each month of the applicable quarter. For smaller employers, this means that you may be subject to the law in some quarters and exempt in other quarters.
The EMAC Contribution Increase
The EMAC contribution itself is not new. Beginning 1/1/18 however, the amount employers must contribute will change:
- For an established business, the contribution will increase from .34% of wages to .51% of wages.
- For a new business:
- Not required to provide EMAC contributions until 12 months after they have been provided an unemployment insurance contribution rate. This means that an employer will generally not have to pay an EMAC contribution for years 1, 2, or 3 of business operations.
- Responsible for .18% of wages the first year of contribution (4th year of business)
- Responsible for .36% of wages the second year of contribution (5th year of business)
- By the third year of contribution (6th year of business), the business follows the rules for established businesses.
- “Wages” for the purposes of EMAC means the unemployment insurance taxable wage base.
- Wages are capped at $15,000. So, if an employee’s wages exceed $15,000, you multiply the contribution rate times $15,000, rather than the actual wages. This means that, in 2018, an established business will pay a maximum of $77/employee/year (.0051 x 15000)
The EMAC Supplement/Penalty
A covered employer will pay a 5% penalty for each employee who receives health insurance through either the MassHealth agency (the Office of Medicaid) or ConnectorCare (available where the household income is less than 300% of the FPL) for fourteen or more consecutive days in the quarter. Here, too, wages are capped at $15,000. This means that a business will pay a maximum of $750/employee/year (.05 x 15000).
However, the penalty does not apply for any employee who receives coverage through the MassHealth agency either: a) on the basis of permanent and total disability, or b) as a secondary payer where the employee is enrolled in the company-sponsored insurance. Premium assistance does not trigger the penalty.
Note, too, that most individuals who are otherwise eligible for MassHealth will be required to take their employer’s plan if the plan meets the basic coverage criteria and the employer pays at least 50% of the premium. Therefore, if your company pays at least 50% of premiums, you will generally not be subject to the fines.
How Does an Employer Calculate the EMAC and the EMAC Supplement?
The employer is not responsible for calculating either amount. All employers, including new businesses in the first three years, must submit a quarterly “Employment and Wage Detail Report” to the Department of Unemployment Assistance (DUA), which will be used as the basis for the DUA’s calculation. The form can be submitted online. Once submitted, the required EMAC and EMAC supplement payments will be automatically calculated. The DUA will also receive information from the MassHealth Agency and the Connector to aid in its determination of liability related to the EMAC supplement.
The quarterly employer reports are due at the end of April (Q1), July (Q2), October (Q3), and January (Q4). Payments are due by the end of the first month following the end of each quarter.
The report must include:
- For each employee: name, social security number, wages paid, hours worked, total amount of taxes withheld, amount of wages upon which the withholding was based, the identification number assigned the employer by the DUI, the corresponding federal employer identification number, and the identification number the employer is required to include on a withholding tax return.
- The report also should include the count of all employees who worked during or received wages for the pay period that includes the twelfth day of each month of the applicable quarter. Because the state can estimate your employee count if the number is not provided, we suggest that all employers provide this data, even if they have fewer than six employees.
We hope this has answered some of the lingering questions since this bill passed. Please reach out with any questions or for further information on the law.
We can help! Reach out to us at firstname.lastname@example.org or (508) 548-4888.
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