New Law Increases EMAC Contribution In Connection with Employer Contributions to Health Care

On Aug. 1, 2017, Gov. Baker signed into law HB 3822, creating Chapter 63 of the Acts of 2017. In early 2017, Gov. Baker, in his budget proposal for 2018, suggested a type of employer mandate for Massachusetts employers, whereby employers would have to make a qualified offer of coverage to all employees working 35 hour per week and maintain an uptake (participation) rate of 80 percent or more. The penalty for failing to make the offer or maintain the uptake rate would have been around $2,000 per employee. The Governor’s proposed employer requirement and penalty were designed to raise money to satisfy a budget shortfall. However, after hearing much feedback from employers regarding the proposal’s financial and administrative burdens, Gov. Baker and his administration withdrew the proposal. Rather than impose a new type of state employer mandate, the administration instead proposed an increase in the employer medical assistance contribution (EMAC) — a tax that is already imposed on most employers. Although the EMAC increase still represents a financial burden on employers, it avoids the administrative difficulties associated with the proposed state employer mandate and is limited in its application (the increase phases out after two years). Chapter 63 formalizes the proposed EMAC increase.

The EMAC applies generally to all employers who are subject to unemployment contributions. Employers pay a percent of employee wages (up to the first $15,000 in wages), and that percentage varies based on the number of years the company has been in business and subject to the EMAC. The maximum contribution per employee is subject to a cap, which is currently $51 per employee per year. Chapter 63 increases that maximum to $77 per employee per year.

In addition, under Chapter 63, a second assessment will be applied to employers whose non-disabled employees receive their health insurance coverage through the division of medical assistance (which includes Medicaid and Massachusetts Health) or subsidized insurance through the Commonwealth Health Insurance Connector. This second assessment is equal to 5 percent of the wages paid by the employer to the employee receiving the assistance, with ‘wages’ defined as the unemployment insurance taxable wage base. The assessment is also capped at $750 per employee. The second assessment could potentially be applied to the same employee as the first assessment — the two are not mutually exclusive.

The new law takes effect Aug. 1, 2018. Massachusetts employers should work with outside counsel, their payroll partner, and their CPA to make the necessary adjustments relating to the increase in EMAC contributions and potential contributions relating to the second assessment. We will continue to monitor the situation and report on additional developments or guidance released on this new law.

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