Minnesota has amended the law imposing a reporting requirement on employers with respect to pre-tax premium payments. In addition, the Minnesota Department of Commerce has released an opt-out form for the cafeteria plan law enacted last year. Below is an update regarding both developments.

Reporting Requirement for Pre-Tax Premium Payments

To encourage a limited group of low-income taxpayers with no health insurance, Minnesota enacted a law providing a 20% tax credit for the first year of coverage if the taxpayer has not had health insurance for at least 12 months. To determine the amount of the credit, Minnesota enacted a law requiring an employer to provide each employee with a statement listing the amount of pre-tax premiums paid by the employee on a month-by-month basis. See Minnesota Statute section 290.0678 (S.F. 49, enacted February 17, 2009). This provision was estimated to potentially aid 1,500 taxpayers but would have required employers to provide more than 2 million statements, an especially difficult requirement because employer payroll systems are not set up to generate such statements.

Legislators and the Governor reconsidered this requirement and, just prior to the end of the session, amended the law to provide that an employer needs only to provide the statement on request. See Minnesota Statute section 290.0678 (as amended by H.F. 1298, Art. 12, Sec. 4, enacted May 16, 2009). In addition, the employer only needs to provide one statement per year. These changes relieve employers of what would have been a very burdensome and expensive requirement that would have resulted in little benefit.

Cafeteria Plan Requirement

To encourage employees to take advantage of paying premiums for health insurance on a pre-tax basis (which effectively reduces the cost of health insurance), Minnesota adopted a law effective July 1, 2009 that requires an employer with 11 or more full-time equivalent employees to offer a cafeteria plan to employees. (The law uses the term “Section 125 Plans” which is another term for cafeteria plans, which are also referred to as pre-tax premium payment plans.) The law exempts employers that offer a group health plan (either insured or self-insured). See Minnesota Statute section 62U.07. Minnesota also adopted a law that would have provided a credit for employers adopting such plans (Minnesota Statute section 62U.071) but subsequently repealed that provision.

The law requiring the adoption of a cafeteria plan does allow employers to opt out of this requirement by filing a form with the Minnesota Department of Commerce. The form is available here. If an employer is affected by this change in the law, it may wish to consider opting out to avoid the expense of maintaining a cafeteria plan and the potential expense of the reporting requirement noted above.