Understanding Your EMAC Supplement Determination
Now that the first quarter of 2018 has concluded, employers are receiving "EMAC Supplement Determination" notifications from the Massachusetts Department of Unemployment Assistance (DUA). Many employers have been unpleasantly surprised by the size of the penalty and want to understand their options.
To help you evaluate your options, we offer the following today: a refresher on the law, and an explanation of the reasons an employer may elect to appeal. Detail on what to expect if you choose to appeal will be addressed in a second document next week.
A Summary of the Employer Medical Assistance Contribution ("EMAC") Supplement*
The EMAC Supplement, which went into effect on January 1, 2018, requires that an employer with 6 or more employees working in Massachusetts pay a contribution for each employee who receives health insurance coverage through the MassHealth Agency or ConnectorCare.
The EMAC relies on the definition of "employee" set out in Massachusetts' unemployment insurance laws. This means that any regular employee, regardless of full or part-time status, contributes to an employer's count. Depending on the length of employment, temporary/seasonal workers may also need to be included. To be clear, an employee should be included in an employer's count, and may subject the employer to an EMAC penalty, even where the employee is not qualified for employer-provided benefits under the Affordable Care Act.
The employer will pay a penalty for each employee who receives health insurance through either the MassHealth agency (the Office of Medicaid) or ConnectorCare (available where the household income is less than 300% of the federal poverty line) for fourteen or more consecutive days in the quarter. The contribution is 5% of annual wages for each non-disabled employee. Wages are capped at $15,000, rather than actual wages, making the maximum penalty $750 per affected employee per year.
The penalty does not apply for any employee who receives coverage through the MassHealth agency either: a) on the basis of permanent and total disability, or b) as a secondary payer where the employee is enrolled in the company-sponsored insurance. Premium assistance does not trigger the penalty.
Note, too, that most individuals who are otherwise eligible for MassHealth will be required to take their employer's plan if the plan meets the basic coverage criteria and the employer pays at least 50% of the premium. Therefore, if your company pays at least 50% of premiums, you will generally not be subject to the fines.
What We Believe Are Appropriate Bases for an Appeal
At the outset, please note that although we believe that an appeal is appropriate in the circumstances outlined below; this is based on our legal interpretation of the statute and guidance published to date by DUA. We do not know how DUA will handle these appeals, and cannot make any guarantees related to the success of an appeal on any of the grounds set forth below. What we do know is that this is the first opportunity employers have to challenge the way in which DUA is assessing these penalties, and appealing is the only avenue employers have to contest these assessments.
When considering an appeal, an employer may want to challenge (1) the correctness of the DUA's decision to find the employer liable for a supplemental payment; and/or (2) the amount of the supplemental payment. Below, we review a variety of legitimate bases for appeal and also discuss bases we believe will be unsuccessful.
The Employer Should Not be Liable Because...
...The employer is not subject to the law. A Massachusetts employer, including a not-for-profit employer, with 6 or more employees working in Massachusetts, is subject to the EMAC supplement. Any regular employee, regardless of full or part-time status, contributes to an employer's count. Depending on the length of employment, temporary/seasonal workers may also need to be included. The employee count is determined each quarter by calculating the average number of employees who worked during or received wages for the pay period that includes the twelfth day of each month of the applicable quarter. If the employer had fewer than 6 employees for the first quarter of 2018, the employer should not be subject to any EMAC penalties for that quarter.
...The employee does not work in Massachusetts. An employee is considered to work in Massachusetts if he/she: a) performs work entirely in Massachusetts; b) performs work in and out of Massachusetts, but the work out of state is incidental to the work within the state. If the employer's EMAC Supplement Determination includes employees who do not work within Massachusetts, the employer may wish to appeal the penalties for the out of state employees.
...The employee did not have MassHealth coverage for the required minimum period. To subject the employer to a penalty, the employee must have received his/her insurance coverage from MassHealth for a continuous period of at least 56 days in the quarter. If an employee enrolled in or unenrolled from the employer's coverage during the quarter, this basis for appeal may be considered.
...The employee receives coverage through MassHealth either: a) on the basis of permanent and total disability, or b) as a secondary payer where the employee is enrolled in the company-sponsored insurance.
...The employer provides affordable coverage. Employers that offer affordable coverage to their employees should not be assessed an EMAC penalty for any benefit-eligible employee. MassHealth/Affordable Care Act rules makes these employees ineligible for subsidized coverage.
The Amount of the Penalty is Incorrect
Assuming employer liability is appropriate, you may appeal based on incorrect calculations of the penalty. The penalty is 5% of annual wages for each non-disabled employee. Wages are capped at $15,000, rather than actual wages, making the maximum penalty $750 per affected employee per year.
We have learned from this first round of determination notices that, for employees whose actual wages exceed the wage cap, the DUA appears to be front-loading the penalty rather than spreading it evenly among the quarters. For example, for an employee with $10,000 of actual taxable wages in Q1, the employer was assessed $500. Hypothetically, the employer would incur a $250 penalty in Q2 and $0 in Q3 and Q4.
Inappropriate Bases for an Appeal
While certainly frustrating and costly, many of the penalties assessed are likely to be valid. Before you spend time, effort, and money filing an appeal, be sure you're contesting for one of the reasons recognized by the law, as listed above.
Many employers (logically) believe that they are not subject to the penalty for an employee who is not eligible for company benefits based on hours worked or tenure. Unfortunately, an employer is subject to the penalty for any part or full-time regular employee who works in Massachusetts regardless of the rules of company benefit eligibility.
Similarly, employers believe that they are not subject to the penalty for an employee who was eligible for benefits, but declined them. The employee's rejection of employer coverage does not, in and of itself, provide a basis for appeal. As explained above, there may be a basis for appeal if the offered coverage was affordable.
Considering an Appeal? You Must Act Fast and Pay on Time.
First and foremost, the employer must request a hearing in writing delivered to the DUA. The request should identify the reasons for the appeal, setting forth the reasons why the employer claims the determination is erroneous.
The request for a hearing must be filed not more than ten calendar (not business) days after the employer's "receipt of notice" of the determination. Most employers receive DUA communications through UI Online. For these employers, the "Date of Determination" listed on the bill is the date the DUA will presume the employer received the notice. There are limited exceptions to this, which include communications posted after 5pm, on weekends, or state or federal holidays. If the employer receives communications via regular mail, the date of receipt is assumed to be three days after the determination notice was mailed. If the third day falls on a state or federal holiday, Saturday, or Sunday, the notice will be presumed to have been received on the next business day.
The DUA has taken the position that employers who appeal must still make a timely EMAC Supplement to avoid a 12 % interest penalty per quarter. The DUA will refund the monies if the employee wins the appeal.
Despite the fact that the penalty and appeal process is new for both the DUA and employers, the DUA has indicated that it will not make exceptions and will not consider appeals submitted outside this 10-day timeframe.
To begin the appeal process, an employer should deliver its request to:
EMAC Supplement Program - Appeals
Department of Unemployment Assistance
Charles F. Hurley Building
19 Staniford Street
Boston, MA 02114
You Filed Your Request for an Appeal. Now What?
As noted above, be aware that your payment obligations are not suspended while the appeal is pending. Employers who appeal are still responsible to submitting payments in a timely manner to avoid interest.
Second, begin preparation for the hearing. Our next communication will help you do this by answering the many questions you may have, including:
- What will the hearing process entail?
- When will the hearing occur?
- Who will preside over the hearing?
- Who has the burden of proof?
- Will witnesses be called?
- What rules of evidence are followed?
- Must the employer be represented by an attorney?
What Should Employers Do?
Because this law and this process are new, it's impossible for us to know how the DUA will respond to appeals. We certainly hope the DUA will give due consideration to all legitimate and timely filed appeals; but we cannot know for certain. However, if employers don't appeal, the DUA will go unchallenged and will have no reason to ensure its enforcement aligns with the law. This is employers' first opportunity to assert influence.
If you're questioning whether to appeal, we can help you weigh your options. If you have already appealed, or plan to appeal, we can assist in generating your appeal or preparing for your hearing. You can reach us at firstname.lastname@example.org or (508) 548-4888.
*Review our prior detailed description of the law here.