Employee Benefit Plans have become a greater area of concern for the Massachusetts Division of Unemployment Assistance, especially with regard to the “fair share contribution” (FSC) requirement of the Massachusetts Healthcare Reform Act.  Employee Benefit News published a comprehensive piece on how the increase in audits is showing that many employers are coming up short despite their efforts and intentions.

The article is worth a read in its entirety, but I wanted to call out one section that summarizes the test to help guide compliance of FSC:

(1) Threshold coverage: Does the employer employ 11 or more full-time equivalent employees in the Commonwealth for the relevant testing period? If the answer is no, then the employer is not subject to the FSC requirement and need not pay an annual fair share employer contribution to the Commonwealth.

(2) FSC testing: If the answer to Part 1 is yes, then the following tests are applied:

- Primary/percentage contribution test: (i) Does the employer offer a group health plan to which the employer makes some (any) contribution and (ii) do 25% or more of the employer’s full-time employees participate? (This test was originally referred as the “primary” test, and it was later re-named the “percentage contribution” test. The terms are used interchangeably.)

- Secondary/premium contribution test: Does the employer offer to make a premium contribution of at least 33% of the cost of individual coverage under an employer-sponsored group health plan offered that is available to all of its full-time employees no more than 90 days after the date of hire?

(3) Calculation and payment: If an employer passes the percentage and/or premium contribution tests described above, then it has no obligations to make any payments.

Otherwise it must make a per employee fair share contribution not to exceed $295.00, prorated for full-time equivalent status based on a 2,000 hour year for years commencing before Oct. 1, 2008, and based on a 500 hour quarter for years commencing after Sept. 30, 2008.

For small to mid-sized companies, being fully prepared for an FSC audit can be more challenging than business leaders might believe. We at MFA would like to stay apprised of this issue. If your business has had an FSC audit or if you are finding yourself knee-deep in preparation for an audit, we’d love to hear from you…please comment or email us your story or questions!

This entry was posted on Tuesday, April 13th, 2010 at 9:00 am and is filed under Accounting, General Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.