On October 28, 2013, the Massachusetts Health Connector announced that the Patrick Administration will introduce legislation to repeal the Section 125 requirement, the Employer HIRD reporting, the Free Rider Surcharge and the Section 125 notification requirement.

The Section 125 requirement, a provision in Massachusetts Healthcare Reform, mandates employers with 11 or more full-time equivalent employees to offer a way for non-eligible employees to purchase non-group health insurance pre-tax. However, recent IRS guidance prohibits employers from offering such a plan since it will not comply with certain provisions of the Patient Protection and Affordable Care Act (PPACA).

Until the legislation is passed, the Health Connector plans to pursue a path of non-enforcement. There is transitional relief for those employers that may have a Section 125 plan already in place:

  • Employers that currently permit non-benefits eligible employees to use Section 125 plans to purchase individual plans on a pre-tax basis may leave those plans in place until the expiration of the employee’s plans in 2014. The federal guidance states that individuals may use Section 125 plans to continue paying for plans with a plan year that commenced in 2013.
  • For plan years starting in 2014, under the federal guidance, employers may no longer offer Section 125 plans that permit their non-benefits eligible employees to purchase their own non-group health insurance policies using pre-tax income.
  • Section 125 plans can continue to be offered to employees for other purposes, such as the purchase of group health insurance or other benefits.


Employers should review their Section 125 plan document and ensure that no Section 125 plan is in place for non-benefits eligible employees in 2014.

To view Health Connector Administrative Bulletin 03-13: Click Here.