October 2007 Vol. X, No. 3

This Newsletter reports the 2008 index limits for Social Security benefits, the Internal Revenue Service (“IRS”) limits for qualified retirement plans, the Pension Benefit Guaranty Corporation (“PBGC”) guarantee limit and the Medicare rates, and discusses updates to Massachusetts health care law.

We proudly announce that The Wagner Law Group has received the extraordinary honor of being named in the 2007 Bar Register of Preeminent Lawyers

, in which Martindale-Hubbell lists only the most distinguished law practices, achieving its coveted AV rating; the “A” signifies the highest level of legal ability, while the “V” denotes very high adherence to professional standards of conduct, ethics, reliability and diligence.

Marcia S. Wagner continues to write and lecture extensively, and has received the honor of being named as one of the “Best Lawyers in America” for 2008 after an extensive peer review and evaluation process.

In the event you desire legal advice or consultation, please feel free to contact any member of The Wagner Law Group.










Maximum annual payout from a defined benefit plan at or after age 62 (plan year ending in stated calendar year)



Maximum annual contribution to an individual's defined contribution account (plan year ending in stated calendar year)



Maximum Section 401(k), 403(b) and 457(b) elective deferrals



Section 414(v)(2)(B)(i) catch-up limit for individuals aged 50 and older



Maximum amount of annual compensation that can be taken into account for determining benefits or contributions under a qualified plan (plan year beginning in stated calendar year)



Test to identify highly compensated employees, based on compensation in preceding year (plan year beginning in stated year determines “highly compensated” status for next plan year)



Wage Base For Social Security Tax



Wage Base For Medicare

  No Limit

  No Limit

Amount of compensation to be a “key” employee



Maximum Social Security Benefit at Social Security Normal Retirement Age



Earnings Test – Early Retirement (Age 62)
(Amounts that Can Be Earned before Benefits Are Cut)



PBGC maximum monthly guaranteed life annuity at age 65



*  There are late-retirement adjustments for benefits starting after age 65.
** Plus "catch-up" contributions.
*** These are calendar year limitations.


The Commonwealth has issued several recent, additional explanations and clarifications on the procedures required by employers under the Massachusetts Health Care Reform Act (“the Act”).  The new rules cover:


Submission of Premium Conversion Plan Documents

As we mentioned in our Client Newsletter of September, 2007, the Commonwealth Health Insurance Connector Authority (the “Connector”) has issued an Administrative Information Bulletin stating that employers are not required to submit cafeteria plan documents to the Connector unless specifically requested to do so.  If an employer receives such a request, it will have seven business days in which to submit the document. 

This represents a significant shift in the filing requirements for cafeteria plans.  Previously, the Connector had stated that all cafeteria plans had to be filed by October 1.

Procedures for Establishing a Voluntary Plan

The Connector has released a booklet entitled the “Commonwealth Choice Voluntary Plan Employer Guide” (the “Guide”) which describes the steps that employers and eligible employees must take to allow the eligible employees to make pre-tax contributions to the Commonwealth Choice program.

Basically, the employer must:


An employer should not set up an account with the Connector until it has at least one employee eligible for coverage under the Commonwealth Choice program whose premiums can be paid through a premium conversion plan. 

Following the establishment of the employer account, each eligible employee may:

The employer will then receive monthly invoices based on the selections made by its eligible employees.  The Guide notes, however, that coverage generally will not be effective until the first day of the second month following the date of the first invoice on which the employee’s name appears.  For example, an employee who enrolls by October 10 and appears on an employer’s October 15 invoice will typically not be covered through pre-tax contributions until December 1.  Prior to that time, employees will have the option of purchasing coverage directly from the Connector on an after tax basis.

The Guide may be accessed through: 




It is good news that the Connector has finally established procedures that will allow employees to contribute to the Commonwealth Choice program on a pre-tax basis.

New Testing Procedure for Fair Share Contribution

The Massachusetts Division of Health Care Finance and Policy (the “Division”) has issued an Administrative Bulletin on the information that must be provided by Massachusetts employers with 11 or more employees to demonstrate that they are in compliance with the “Fair Share Contribution” requirements.  Under current rules, an employer must pay a Fair Share Contribution of $295 per employee unless its group health insurance plan:  1) covers at least 25% of the employer’s Massachusetts full time employees; or, 2) if the first test is not met, it pays at least 33% of the premium cost.

The Fair Share rules became effective October 1, 2006, and the initial reporting obligation is for the determination period ending on September 30, 2007. 

Employers must electronically file information with the DUA between October 1 and November 15 of each year to demonstrate that they have passed one of the Fair Share Contribution tests

.  The Employer HIRD information is to be submitted in the same electronic report.

Initially, the 25% test was to be based on the number of payroll hours that full time employees were covered by the employer’s group health plan, divided by the total number of payroll hours for full time employees.  Employers complained that this would be impossible to calculate, so the Division and the DUA have changed the method of calculating compliance.

Now, rather than calculating hours, employers must determine the number of full time employees, and the number of full time employees who are enrolled in the employer’s health plan, as of the last day of each calendar quarter (December 31, March 31, June 30 and September 30).  The numbers for these quarters must be averaged to see if the 25% test is met.

Although the new method of demonstrating compliance may be somewhat easier than the original hours-of-coverage method, it still may be difficult to determine the number of full time employees and coverage of full time employees for past quarters.  Therefore, employers should act now to collect the information needed for the required calculations.