Massachusetts Makes Cafeteria Plans Mandatory

Updated September 11, 2007

In a move toward more affordable health care, recent Massachusetts legislation requires all employers with more than ten full time employees to offer a Section 125 Cafeteria Plan.  At minimum the employer must offer a Premium Only Plan.  The effective date is July 1, 2007. 

Other requirements of the legislation include:

  • Employers must adopt a written Plan Document on or before the effective date of the Plan.
  • UPDATE: It was previously stated that "Employers must file their Plan Document with the Massachusetts Health Connector by October 1, 2007."  However, as of September 10, 2007, this statement has been reversed.  Massachusetts will NOT require employers to file their Plan Documents.  They only need do so upon request from the state.
  • It will not be necessary to amend Plan Documents under this new ruling.

Certain classes of employees may be excluded under this ruling (from the Massachusetts Health Insurance Connector Authority):

  • Employees under age 18
  • Temporary employees
  • Part-time employees who average fewer than 64 hours per month
  • Wait staff, service employees or service bartenders (as defined in M.G.L. c. 149, Section 152A) who earn, on average, less than $400 in monthly payroll wages (tips not included.)
  • Students who are employed as interns or as cooperative education student workers.
  • Seasonal employees under a U.S. J-1 student visa or a U.S. H2B visa, and who are enrolled in travel health insurance.

Employers with more than ten employees who do not comply with the new Section 125 Plan requirement risk being assessed a Free Rider Surcharge.  The amount of the surcharge will vary by employer based on certain criteria.

In addition, employers who do not make a "fair and reasonable" contribution to an employee health plan will be required to pay a Fair Share Contribution amount up to $295 per full-time employee.

No additional form filing will be necessary, rather the Fair Share Contribution (FSC) filing will be amended to accommodate the change.  The employer filing under the FSC program will begin October 1st and end November 15th, 2007.  At this time, we understand this to be an annual filing.

The employee is required to complete the Health Insurance Responsibility Disclosure (HIRD) Form if they choose to decline participation in the Cafeteria Plan.  This form is maintained with the employer and should be completed every three years.

The new Employer HIRD form, as well as detailed information about the new regulations including the Free Rider Surcharge and the Fair Share Contribution is available at the Commonwealth Connector's Section 125 website.

TASC is prepared to assist Massachusetts employers who must comply with the new Section 125 regulations.  Contact us at 1-800-422-4661 or via email for more information.