Mass. lays aside enforcement of Section 125 health plan rule
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Massachusetts regulators say they no longer will enforce a 2007 rule that had required employers to provide access to so-called Section 125 plans to employees who work at least 64 hours a month.
In a Section 125 plan, employees pay for health care premiums with pretax dollars.
The requirement was intended to address situations in which employees not eligible for group coverage could use those pretax contributions to buy individual policies through Massachusetts' health insurance exchange.
Guidance issued earlier this year by the U.S. Department of Labor and the Internal Revenue Service made clear that the health care reform law, effective next year, bars employers from offering Section 125 plans to employees to purchase non-group health insurance without an employer contribution.
That federal regulatory agency language, says a bulletin issued earlier this week by the Connector Authority — the Massachusetts agency that runs the state's health insurance exchange — is “incompatible” with Massachusetts' Section 125 plan offering requirement.
For now, the Connector says, employers that now permit “non-benefits-eligible employees to use Section 125 plans to purchase individual plans may leave those plans in place until the expiration of the employee's plans in 2014.”
Massachusetts Gov. Deval Patrick will propose legislation to repeal the Section 125 requirement, the Connector Authority said. In the meantime, employers will not face penalties if they do not offer a Section 125 plan.
For employers that currently have Section 125 plans offered to non-group-eligible employees, “They should begin developing action steps, perhaps drafting communications to steer benefits-ineligible employees toward obtaining Connector coverage on their own,” according to a Mercer L.L.C. bulletin.
