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Massachusetts Employers Not Required To Offer Section 125 Plans

[November 25, 2013]  The Massachusetts Health Connector has announced that it will no longer enforce several of Massachusetts’ health reform requirements, including the law requiring employers to provide a Section 125 Cafeteria Plan or pay a surcharge.

According to the Connector, the Section 125 requirement is incompatible with recent guidance from the Department of Labor (“DOL”) about the Affordable Care Act.  Governor Deval Patrick will pursue legislation to repeal the state’s Section 125 requirement, the Employer Health Insurance Responsibility Disclosure (Employer HIRD) form, the Free Rider Surcharge, and the recently created Section 125 Notification Requirement.  In the interim, the Connector will not enforce these requirements.

Pursuant to the DOL’s guidance, Massachusetts employers may no longer offer Section 125 plans that allow non-benefits eligible employees to purchase their own non-group health insurance using pre-tax income.  Employers may, however, leave such plans in place until the expiration of the employees’ health plans in 2014.  Employers should discuss with benefits counsel any necessary amendments to their Section 125 plan documents.

This change does not affect Section 125 plans for benefits-eligible employees:  employers may continue to offer such plans and may continue to allow employees to pay their group health insurance premiums on a pre-tax basis.