What do I have to do if I have 11 or more full-time equivalent employees but less than 50 full time equivalent employees? (this page was updated:1/28/09)

(IF you are filing for periods pre-January 2009, and you have 50 or more full time equivalent employees -you only have to follow the rules that Employers who have 11 to 49 full time equivalent employees now have to follow for those time periods)

 

IMPORTANT BACKGROUND INFORMATION-

Those employers who do OR have owed Fair Share Contribution (FSC) fines in the past, will be required to file quarterly. The Department of Unemployment Assistance (DUA) is the state agency that is enforcing, auditing, and monitoring the Fair Share Contribution requirement.

We strongly recommend that all businesses file quarterly. Why you ask? This will limit the amount of money you owe if you are fined and this way as an employer you will find out early on if you are making mistakes on how to file, etc.

A word of warning: If you have hired an outside company or person to make sure your company is compliant with the new health care reform business regulations (ie they are filing all of the appropriate paper work/forms for the MA health care reform law) and if that entity doesn't file or files wrong, you are still liable for ANY fine -not the company/person you hired. In other words buyer beware as the risk stays with you!

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The Free Rider Surcharge- an important word of caution:

Any employer who has 11 or more full time equivalent employees is required to set up a Section 125 Plan that meets specific Massachusetts requirements. If an employer does not set up a Section 125 plan or if they set up a plan that does not fully meet the State's requirements, the employer will be liable for the Free Rider Surcharge if their employees or the employee's dependents get medical care that is paid by the state's Health Safety Net -for the uninsured (formerly known as the Free Care Pool).

From the Connector's website: "The amount of the Free Rider Surcharge will vary from employer to employer.  It will be based on the number of employees, the amount of "free" or "safety net" care used, total state-funded costs, and the percentage of employees enrolled in the employerıs health plan. Health care can be expensive.  Offer a Section 125 Plan.  If you don't, you may face large, unplanned charges when your employers or their dependents use a large amount of state free care. ... The Free Rider Surcharge applies to employers who: 1. Have 11 or more full-time-equivalent employees. 2. Do not offer a qualified Section 125 Plan to their employees. 3. Have employees who use a total of $50,000 of state-funded "Free Care" for themselves or their dependents in a 12-month period...... The Free Rider Surcharge does not apply to employers when: a) Certain collective bargaining agreements are in place. b) Employees participate in the Massachusetts Insurance Partnership." 

Please review our page on Section 125 plans as there are key details you need to know about as an employer.

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How to calculate the number of full time equivalent employees: (NOTE-you are counting hours worked, not people!)

For filing annually:

Take the payroll year as defined by DUA (Department of Unemployment Assistance)

Include all paid hours such as paid leave, sick time, paid vacation time, jury duty time, etc. (do not include non W-2 wages-ie independent contractors)

Only count the payroll hours of employees who worked at least one calendar month.

Count a maximum of 2000 hours for any one employee.

Remember to include the hours for the owner(s) of the business even if they are not paid for their work (2000 per owner)

Divide the total hours by 2000 to get your number of full-time-equivalent employees for the Fair Share Contribution.

If you get 11 or more the rules on this page apply to you.

For filing quarterly:

Take the payroll quarter(s) as defined by DUA (Department of Unemployment Assistance)

Include all paid hours such as paid leave, sick time, vacation time, jury duty time, etc. (do not include non W-2 wages-ie independent contractors)

Only count the payroll hours of employees who worked at least one calendar month.

Count a maximum of 500 hours for any one employee.

Remember to include the hours for the owner(s) of the business even if they are not paid for their work (500 per owner)

Divide the total hours by 500 to get your number of full-time-equivalent employees for the Fair Share Contribution.

If you get 11 or more the rules on this page apply to you.

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If you do have 11 or more full-time equivalent employees-but less than 50 full-time equivalent employees you have do the below:

1) You must offer a Section 125 cafeteria plan that meets Health Connector regulations.  Section 125 Plans let employees save money through pre-tax payments for health coverage. If you don't offer a Section 125 cafeteria plan, you will pay the Free Rider Surcharge if your employees or their dependents get medical care that is paid by the state's Free Care Pool- now called the Health Safety Net -for the uninsured. 

From the Connector's website: "The amount of the Free Rider Surcharge will vary from employer to employer.  It will be based on the number of employees, the amount of "free" or "safety net" care used, total state-funded costs, and the percentage of employees enrolled in the employerıs health plan. Health care can be expensive.  Offer a Section 125 Plan.  If you don't, you may face large, unplanned charges when your employers or their dependents use a large amount of state free care. ... The Free Rider Surcharge applies to employers who: 1. Have 11 or more full-time-equivalent employees. 2. Do not offer a qualified Section 125 Plan to their employees. 3. Have employees who use a total of $50,000 of state-funded "Free Care" for themselves or their dependents in a 12-month period. ..... The Free Rider Surcharge does not apply to employers when: a) Certain collective bargaining agreements are in place. b) Employees participate in the Massachusetts Insurance Partnership." 

2) You must make a "fair and reasonable" contribution to your employees'** health insurance or pay a Fair Share Contribution (FSC) or fine of up to $295 per full-time-equivalent employee per year.

From the Connector's website: "As of July 1, 2007...Employers with 11 or more full-time-equivalent employees will pay an annual Fair Share Contribution of up to $295 per employee if they do not make a "fair and reasonable" contribution to an employee health plan. The funds will help pay for health plans for people who do not have the option of employer-sponsored health insurance....

A "fair and reasonable" contribution by an employer is:

(i) 25% of an employer's full-time employees* are participating in the employer's group health plan.

OR

(ii) an employer's contribution of at least 33% toward a health plan premium for all full-time employees* who are employed more than 90 days. (Note there is no requirement to offer a family plan or to contribute to a family plan offered)*

An employer who meets either (i) OR (ii) will not be subject to the Fair Share Contribution of up to $295 per full-time-equivalent employee

3) You must complete an Employer Health Insurance Responsibility Disclosure (HIRD) Form/Report which must be filed on-line, to report if you offer a Section 125 Plan that complies with Health Connector regulations.

4) You must collect a HIRD Employee Form* from employees who decline your employer sponsored health insurance and/or your employer sponsored Section 125 Plan. The Employee HIRD form is also available in Spanish* and Portuguese*. For general information on the HIRD forms see the State's general information page. You will need to keep these forms on file for at least three years.*

*A full-time employee is: Someone who works "35 hours or more per week" at a Massachusetts location (even if they live in another state). Please note the following- a full-time employee will be defined for the purposes of the FSC Test- by using the employer's own definition of the hours per week employees have to work to be considered eligible for full time benefits, but only if the employer's definition is less than "35 hours per week or more" definition (ie the employer's definition will be used by the state for defining who is a full time employee in that company rather than the 35 per hours per week definition). A full-time employee is not: 1) Independent contractors 2) Seasonal employees. 3) Temporary employees are not considered full-time employees. 4) Workers from temp agencies (they are the temp agencyıs employees)."

**If you now need to offer health insurance to your employees because of this new law and need help navigating how to do so, we have some suggestions: 1) First contact the Insurance Partnership (see below), they can direct you to a broker and/or association or membership organization. 2) You can also purchase insurance from the Connector and/or set up a Section 125 Plan through the Connector: www.mahealthconnector.org 3) A third option is to join your local chamber of commerce, Associated Industries of Massachusetts, the Massachusetts Business Association, the Small Business Association, or another trade group as most offer ways to purchase health insurance plans and Section 125 Plans (note the expense to set up a Section 125 Plan should be Free or at a very low cost).