Paylocity : Massachusetts Proposed EMAC Regulations Released

Massachusetts Department of Unemployment Assistance (DUA) released a draft version of the proposed regulations for the new Employer Medical Assistance Contribution (EMAC); this is a second tier contribution called the EMAC Supplemental Contribution.

Background

Massachusetts Governor signed into law H. 3822, 'An Act Further Regulating Employer Contributions to Health Care,' on August 1, 2017. The Act temporarily increases current employer fees and impose new second tier penalty fees on employers, which will help finance the Commonwealth's Medicaid and CHIP Programs, known as MassHealth. The Act is applicable to covered employers for 2018 and 2019 and will sunset on December 31, 2019.

The Act will have a significant effect on Massachusetts employers with more than five employees. The Act:

Increases the required Employer Medical Assistance Contribution (EMAC) to annual maximum of $77 per employee from $51 per employee. Employers with an average of six or more employees per quarter are required to make EMAC contributions. Newly eligible employers follow a phased-in schedule.

Imposes employer penalty assessments up to $750 (5% of annual wages) for each non-disabled employee who receives health coverage through MassHealth or opts out of employer coverage and receives subsidized coverage through the Marketplace (Massachusetts Health Connector.)

The taxable wage base for both the increased EMAC contribution and the new penalty fees for the EMAC Supplemental contribution remain at $15,000. The Act's new fees will be offset by a two-year decrease in employer state unemployment insurance (SUI) rates in the future.

The Act replaces the SUI automatic increase by three levels, going from Rate Schedule F (originally proposed for 2018) to Rate Schedule D for calendar year 2018 and to Rate Schedule E for 2019.

Employer SUI tax rates for calendar year 2017 are currently assigned under Rate Schedule C, ranging from 0.73% to 11.13%.

Draft Proposed Regulations for the EMAC Supplemental contribution

Under the proposed regulations, the EMAC Supplemental contribution is not considered an unemployment insurance contribution; does not receive credit under FUTA, will not be reported as a state unemployment insurance contribution on Form 940 and is not used in the employer's SUI rate determine.

The employer's liability for the EMAC Supplemental contribution will be determined by the DUA who will use information provided by the Division of Medical Assistance and ConnectorCare. The employer will receive a determination letter from the DUA, which will include the assessed liability amount. This information will be included on the employer's online DUA account and the amount owed will be added to the employer's statement. Employers, who want to appeal, must do so within 10 days of receipt. EMAC Supplemental contributions must be paid quarterly to avoid interest and penalties.

Who is a Covered Employer?

Employers with at least six employees in any quarter may be liable for an EMAC Supplemental contribution, beginning January 1, 2018. Non-profits and government employers are considered covered employers regardless of how they have chosen to finance unemployment insurance benefit charges. Successor employers will be liable for the EMAC Supplemental contribution, which may apply during the quarter of the ownership change.

If one or more non-disabled employees receives health insurance coverage through MassHealth or ConnectorCare and coverage continues for at least 14 days, the covered employer will be liable for the EMAC Supplemental contribution payment. The employer will not be liable for a payment for employees who only enroll in MassHealth Premium Assistance Program.

Employers can find the draft proposed regulations here: https://www.mass.gov/files/documents/2017/11/06/Draft%20EMAC%20Supplement%20regulations%2011-6_0.pdf.

DUA recently updated FAQs: https://www.mass.gov/files/documents/2017/10/24/FAQ%27s%20Updates%20in%20Employer%20Health%20Care%20Contributions%20and%20Experience%20Rates.pdf.

Thank you for choosing Paylocity as your Payroll Tax partner. Should you have any questions please contact your Paylocity Account Manager.

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.