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Alden Bianchi is the Practice Group Leader of the firm’s Employee Benefits & Executive Compensation Practice. He advises corporate, not-for-profit, governmental, and individual clients on a broad range of executive compensation and employee benefits issues, including qualified and nonqualified retirement plans, stock and stock-based compensation arrangements, ERISA fiduciary and prohibited transaction issues, benefit-related aspects of mergers and acquisitions, and health and welfare plans.

Massachusetts employers with 6 or more employees will soon be required to prepare and file a new health care reporting form referred to as the “healthcare coverage form.” While reminiscent of the now repealed “Health Insurance Responsibility Disclosure” or “HIRD” form requirement, the new form differs significantly. This post explains this new reporting rule.

Continue Reading Massachusetts to (Again) Require Health Care Reporting by Employers

On January 3, 2018, the Department of Labor issued proposed regulations that will make it easier for small employers to band together to form “association health plans” (“AHPs”), thereby providing access to more liberal underwriting and other rules governing large groups. This post provides context for, and summarizes the changes made by, these proposed regulations.

Continue Reading The Department of Labor’s Newly Issued Association Health Plan Proposed Regulations Include Welcome Changes for Employers But Would Present State Regulatory Challenges

After a long delay, the IRS has begun enforcing the Affordable Care Act’s rules governing shared employer responsibility  (a/k/a the “employer mandate”). This mandate imposes “assessable payments” on Applicable Large Employers (i.e. those with 50 or more full-time and full-time equivalent employees in the prior calendar year) that either fail to offer coverage, or offer unaffordable or insufficiently robust coverage, and where at least one employee qualifies for subsidized coverage from an ACA exchange/marketplace. Demand letters have been issued for 2015 to a number of employers, and in many instances, the assessable payment amounts are substantial. But as Alden Bianchi and Christopher Condeluci argue in Why the IRS May Be Unable to Assess ACA Employer Shared Responsibility Penalties for 2015, a recently published article by Bloomberg/BNA, the IRS may be on shaky ground as it endeavors to assessable payments for 2015, due to the Department of Health and Human Services’ failure to provide notices required by the statute. To read the full article, please click here.

As we reported in a previous post, Massachusetts Governor Charlie Baker in August 2017 signed into law H. 3822, “An Act Further Regulating Employer Contributions to Health Care” (the “Act”). Among other things, the law increases the Employer Medical Assistance Contribution (“EMAC”) and also imposes a tax penalty—or “EMAC supplement”—on Massachusetts employers with more than five employees. The supplement is 5% of a covered employee’s unemployment insurance taxable wages up to the $15,000 per year (i.e., a cap of $750 per covered employee) for each nondisabled employee who receives health insurance coverage through the Massachusetts Division of Medical Assistance (i.e., MassHealth) or subsidized insurance through the Massachusetts Health Insurance Connector Authority (i.e., ConnectorCare).

The EMAC supplement take effect as of January 1, 2018. The Massachusetts Division of Unemployment Assistance (DUA) previously issued a draft regulation, which we discussed in our post of November 20, 2017. The DUA has now issued a final regulation, which is the subject of this post.

Continue Reading Massachusetts Division of Unemployment Assistance Issues Final Regulations Implementing the EMAC Supplemental

The “intermediate sanctions” rules under Section 4958 of the Internal Revenue Code have long governed the payment of compensation to executives of public charities. While these rules are highly prescriptive, if followed, they offer taxpayers a significant advantage in the form or a rebuttable presumption of reasonableness. While there was concern among tax-exempts that the tax bill might reduce or even eliminate the presumption of reasonableness, that turned out not to be the case. But the final version of the legislation for the first time imposed a tax on certain excess compensation and excess parachute payments, which we discuss in more detail below.

Continue Reading New Tax Law Brings Penalties for Top Paid Non-Profit Executives

In a November 20, 2017 post, we reported on Massachusetts’ passage of H. 3822, “An Act Further Regulating Employer Contributions to Health Care,” (the “Act”), the purpose of which is to shore up the finances of the Commonwealth’s Medicaid program and its Children’s Health Insurance Program (CHIP). The law has two components or tiers.

  • Tier 1 increases the Employer Medical Assistance Contribution (“EMAC”) from an annual maximum fee of $51 per employee to $77 per employee; and
  • Tier 2 imposes a tax penalty— or “EMAC supplement”— on employers with more than 5 employees. The penalty is 5% of a covered employee’s unemployment insurance taxable wages up to the $15,000 per year (i.e., a cap of $750 per covered employee) for each nondisabled employee who receives health insurance coverage through the Massachusetts Division of Medical Assistance (i.e., MassHealth) or subsidized insurance through the Massachusetts Health Insurance Connector Authority (i.e., ConnectorCare). Employers are not, however, liable for the Tier 2 EMAC supplement in the case of employees who enroll in MassHealth’s Premium Assistance Program.

The Act directs the Commonwealth’s Department of Unemployment Assistance (DUA) to promulgate regulations implementing the new Tier 2 penalty. Employers pay EMAC supplemental contributions quarterly. The DUA recently issued draft rules regulations along with useful set of FAQs on the subject. As we explained previously:

[T]he draft regulations implementing the tier 2 EMAC supplement follow the statute while providing additional details. . . .The rules governing which employers are affected generally follow existing rules governing unemployment insurance in the Commonwealth. Identifying which employers are affected, and how assessments—or “contributions”—are assessed and collected closely track existing law.

Two features of the draft regulations are worth noting.

  • What data is use to determine, and who determines the Tier 2 EMAC supplement payments?

First, the principal responsibly for determining which employees trigger assessments by reason of qualifying for and receiving health insurance coverage from MassHealth or subsidized insurance from ConnectorCare rests with the DUA. Thus the EMAC rules operate in a manner that is fundamentally different from the now repealed “fair share employer contribution” requirement under the 2006 Massachusetts health care reform law. (The Commonwealth’s fair share employer contribution requirement was the precursor, and roughly analogous to the employer shared responsibility provisions of the Affordable Care Act.) Under the fair share employer contribution requirements, employers were obligated to obtain signed forms—referred to as Health Insurance Responsibility Disclosure (or “HIRD”) forms. The Tier 2 EMAC rules don’t operate this way. Rather, the DUA determines and assesses the penalty. Any required EMAC supplement payments that an employer owes are simply added to the statement showing the employer’s Unemployment Insurance.

Subject to the execution of a confidentiality agreement, the DUA will provide the employer employee information for purposes of reviewing and/or appealing the EMAC. An employer may request a hearing to appeal a determination. The request for a hearing must be filed within 10 days of the employer’s receipt of notice of the determination, and the Director issue a written decision affirming, modifying, or revoking its initial determination.

Based on our direct experience with clients and the reports of other benefits practitioners, we understand that some employers are asking employees to voluntarily tell their employees whether they qualify for and are receiving health insurance coverage from MassHealth or subsidized insurance from ConnectorCare. We think this is a bad idea.

We note at the outset that, despite the claim made by some, such a request does not raise HIPAA privacy concerns. While the fact that a person’s enrollment in a particular health plan is PHI in the hands of the health plan or other covered entity, that same employee is free to tell anyone that he or she is enrolled in MassHealth or subsidized insurance from ConnectorCare, or any other group health plan. Rather, the problem is that if an employee is dismissed after disclosing that he or she might be the cause of an EMAC assessment, the employee may claim they have been unlawfully terminated in violation of public policy.

  • Impact on Employers—Redux

We concluded our post of November 20 with the following claim:

If an employee chooses to voluntarily forgo an employer’s offer of coverage and instead applies and qualifies for MassHealth (excluding the premium assistance program) or subsidized ConnectorCare, the employer is penalized irrespective of the quality or affordability of the coverage that it offers. There is no exemption similar to that provided under the Affordable Care Act’s employer shared responsibility rules under which an applicable large employer can escape excise tax exposure by offering coverage that is affordable and provides minimum value.

Where an employer offers coverage that is both affordable and provides minimum value, that employee would not be eligible for subsidized ConnectorCare coverage. So the above statement is misleading in part. Where an employer offers coverage that is both affordable and provides minimum value, it will not be liable for the EMAC supplement with respect to employees who don’t qualify for MassHealth. (Special thanks to Kathryn Wilber, Senior Counsel, Health Policy, at the American Benefits Council for calling this item to our attention.)

In an earlier post, we reported on the passage of H. 3822, “An Act Further Regulating Employer Contributions to Health Care,” (the “Act”), the purpose of which is to shore up the finances of the Commonwealth’s Medicaid program and its Children’s Health Insurance Program (CHIP). The law, which is a temporary measure, has two components or tiers.

Continue Reading Proposed Regulations Issued Implementing Massachusetts Employer Medical Assistance Contribution (EMAC) Supplemental Contribution

The Internal Revenue Service has for some time made available a comprehensive set of Questions & Answers covering the Affordable Care Act’s (ACA) employer shared responsibility rules. (These are the rules that are codified in Section 4980H of the Internal Revenue Code, the compliance with which is reported on IRS Forms 1094-C and 1095-C, etc.) Entitled, “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act,” this web-based resource provided generally useful information about how the rules worked. Until recently, however, the IRS’ Questions and Answers merely said that the IRS “expects to publish guidance of general applicability describing the employer shared responsibility payment procedures in the Internal Revenue Bulletin before sending any letters to ALEs [Applicable Large Employers] regarding the 2015 calendar year” (Q&A 57). On November 2, that changed. This post explains what happened, and what it means for employers.

Continue Reading IRS (Quietly) Announces Procedures for the Assessment and Payment of Excise Taxes under the Affordable Care Act’s Employer Shared Responsibility Rules

On October 13th, President Trump signed an Executive Order directing various federal agencies to consider how to achieve three administration health reform objectives: (1) expand access to Association Health Plans (AHPs); (2) increase the current limits on short-term health insurance; and (3) allow wider use of employer health reimbursement arrangements so employees can buy coverage on their own in the individual market. This post considers what regulatory actions are necessary to accomplish the first objective—expanded access to AHPs.

Continue Reading Expanding Association Health Plans—Which Agencies Need to do What