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Massachusetts tax assessment letters

Massachusetts has started mailing employer letters explaining the operation of a new tax assessment that will apply beginning on April 30. Unfortunately, the letter is confusing and could lead some employers to erroneously conclude they must designate their medical plan’s third-party administrator (TPA) or insurer to handle this process.

Beginning this year, a new tax applies to some Massachusetts employers to help fund the commonwealth’s combined Medicaid and Children’s Health Insurance Program, known as MassHealth. Employer medical assistance contributions (EMAC) included in unemployment insurance payments include a new $750 maximum supplemental employer assessment for each employee who meets the following conditions:

  • Is not disabled.
  • Declines employer-sponsored health insurance.
  • Enrolls instead in MassHealth or buys coverage on Massachusetts’ health insurance marketplace, known as the Health Connector, for a continuous period of at least 56 days (eight weeks).

The supplemental assessment applies for calendar years 2018 and 2019, unless extended. See our prior blog post.

Lockton comment: The penalty can apply with respect to both full-time and part-time employees who enroll in MassHealth or buy coverage through the Health Connector. However, an exception applies for employees covered under an employer’s plan who receive premium assistance from Massachusetts to offset their premium costs. As noted in our prior blog post, the supplemental employer assessment applies to employers with more than five employees in Massachusetts.

Employers can begin submitting unemployment insurance wage filings with the commonwealth for the first calendar quarter beginning on April 1. From that information, Massachusetts will determine if any of the employees triggered a supplemental employer assessment. Any such amount will be added to the employer’s unemployment insurance liability and identified as “EMAC Supplemental Liability Determination” on the employer’s online payment statement. The first quarterly employer payment is due one month after the end of each quarter, so April 30 is the deadline for the first calendar quarter.

Massachusetts has started mailing letters to employers explaining the operation of the new assessment and the employer’s appeal rights. The online system allows employers to designate other entities – TPAs – to view the employer’s liability and even make appeals to the commonwealth on behalf of the employer. The letter explains a multistep process that allows the employer to designate its TPA to address these functions.

Lockton comment: The commonwealth’s reference to TPAs is not intended to refer to the claims administrator of a self-insured ERISA medical plan. Rather, “TPA” means the entity who files and pays the state unemployment insurance tax filings on behalf of the employer. Typically, this is the employer’s payroll service that handles the employer’s state and federal tax filings.

What does an employer need to do that if it is potentially subject to the new tax assessment? First, the employer should determine if it wants to handle payment and appeals or outsource that function to its TPA. If outsourcing is desired, the employer should check with its payroll administrator to ensure it will support that function. The Department of Unemployment Insurance has a website where the employer can assign the TPA role to the selected firm.

Based on an informal survey, not all payroll administrators will agree to take on the payment and appeals function. Regardless of who is responsible for this function, the employer or its TPA has only 10 days to appeal any supplemental assessment. The 10 days begins to run after the “employer’s receipt of notice of determination,” which could be before the quarterly payment deadline of one month after the calendar quarter ends.

Lockton comment: For this reason, employers with more than five employees in Massachusetts are advised to make inquiries in advance and to assign the TPA soon so they do not have to scramble upon learning of any assessment.