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Overview

Health Care is a very important topic. The new health care law is about to be implemented with many aspects of the law becoming effective July 1, 2007. It is very complex, and while the Chamber continues to believe some changes to it are called for, most of the aspects of the law have been agreed to and will become effective soon.

In order to help our members comply with the law, and to make it easier for those members who want to avail themselves, or help their employees take advantage of the new offerings for insurance under the law, we are embarking upon a communications campaign. The following is the second in a series of 8 bulletins that will be issued on a weekly basis to keep you informed about this important piece of legislation.

Health Care Reform #4 – Section 125 Plans

A bulletin from the Affiliated Chambers of Commerce of Greater Springfield, Inc. on the Massachusetts Health Care Reform Law, Ch. 58

Did you know?
that as of July 1, 2007, all businesses with 11 or more full time equivalent employees must have a compliant Section 125 plan in place?

Basically, a Section 125 plan allows employees to pay for health insurance premiums on a pre tax basis. This means that payments are free from state and federal income taxes or federal FICA (social security) tax.

Employers will save on FICA (social security) taxes.

This plan must meet both the Federal Requirements (it is named after the IRS Section 125) AND the Massachusetts Commonwealth Connector requirements. At a minimum, the plan must allow employees to pay for or contribute to the cost of health care on a pre tax basis.

Because Section 125 plans must also meet the requirements of the Connector, those employers currently having these plans should check to see if they are also in compliance with the regulations. For instance, a copy of the plan must be filed with the Connector and details on this requirement should be available soon on their web site.

These plans, while complex, can be set up fairly easily. A great deal of information is available on the Connector web site, www.mass.gov/connector. At the site you will find "An Employers Handbook" as well as a special publication dated April 23, 2007, "Section 125 Handbook".

Other important resources would be your payroll administrator, financial advisor, accountant, attorney, or Insurance Broker. If you do not have one, you can find such businesses in the Member Directory.

This requirement is for all employers of 11 or more full time equivalent employees. Because the Section 125 plans have benefits for both employers and employees, those under the 11 threshold might also want to consider establishing a plan, even though not required.

The penalty for those required to establish the plan, and failing to do so by July 1, 2007 was covered in last weeks bulletin, and is called the "Free Rider Assessment". This assessment can be imposed if any of your employees received free care at a hospital. The surcharge to the employer can range from 10% to 100% of the cost of that care.

These bulletins are not intended as legal or tax advice. You will be offered resources that you should contact for specific advice on how this law will affect your business. This series will attempt to give you several web sites to visit.

If I can help you find answers, contact me at ciuffreda@myonlinechamber.com.

Sincerely,
Jeffrey Ciuffreda
Vice President of Government Affairs