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California, New Jersey, Massachusetts, Vermont and Washington D.C. have passed individual mandates, which require their residents to maintain minimum essential health care coverage or pay a tax penalty. States began passing individual mandates after Congress reduced the federal individual mandate under the Affordable Care Act (ACA) to $0, which went into effect in 2019.

As a part of the individual mandates, certain states require employers to submit reports on employee coverage and distribute statements to covered employees, similar to the federal reporting requirements under the ACA (IRC section 6055). Below is a brief summary of the employer requirements under the different individual mandates.

Compliance Snapshot

  • California: Individual Mandate begins January 1, 2020. Employers must distribute to California employees by January 31, 2021 and submit returns to the state by March 31, 2020.
  • Massachusetts: Certain employers must distribute MA 1099-HCs to employees and submit MA 1099-HC information to the state through MassTaxConnect by January 31st following the plan year.
  • Vermont: Individual Mandate begins January 1, 2020. Currently, there are no employer submission or distribution requirements.
  • New Jersey: Individual Mandate began January 1, 2019. Employers must submit copies of their ACA reporting forms to the state and distribute copies of their ACA forms to New Jersey employees. First report is due on March 31, 2020.
  • Washington, D.C.: Individual Mandate began January 1, 2019. Employers must submit returns to the state and distribute statements to D.C. employees (additional regulations will be forthcoming).

California

Beginning January 1, 2020, the California Minimum Essential Coverage Individual Mandate (“individual mandate”) requires California residents to maintain “minimum essential coverage” or pay a penalty. Minimum essential coverage (MEC) is defined under California Health and Safety Code Section 1345.5, which includes employer-sponsored coverage bought through the California small or large group insurance market and coverage that meets MEC under the Affordable Care Act (ACA).

Employers who provide MEC to California residents must submit state returns and distribute written statements to employees. Employers are not subject to submission and distribution obligations if the carrier performs these obligations.

  • Submit Returns to the State: Employers must submit returns to the California Franchise Tax Board by March 31st following the end of the plan year. These returns must contain demographic information of covered individuals, the dates of coverage, and any other information that the Franchise Tax Board prescribes. Employers can satisfy this requirement by submitting information required under the ACA Internal Revenue Code (IRC) Section 6055. IRC Section 6055 requires carriers and employers with self-insured plans to submit IRS Forms 1094-B/C and 1095 B/C to the IRS. It is unclear how employers not subject to IRC Section 6055 (such as fully insured employers) can utilize their ACA reporting forms to comply with this submission requirement.
  • Distribute Statements to Employees: Employers must provide written statements to employees (and former employees covered during the plan year) by January 31st following the end of the plan year. The statement must contain information on the returns submitted to the state. Employers can satisfy this requirement by providing statements to individuals, as required under ACA IRC Section 6055. Under IRC Section 6055, carriers and employers with self-insured plans must provide a copy of IRS Form 1095-B/C to employees. It is unclear whether employers not subject to IRC Section 6055 (such as fully insured employers) can satisfy this requirement by distributing their ACA reporting.

Employers may contract with third party service providers, including carriers, to provide these returns and statements. Employers who fail to submit returns as required, will be subject to $50 penalty per individual.

The Franchise Tax Board will prescribe additional guidance on the requirements for the returns and written statements.

Massachusetts

The Massachusetts Health Reform Law (“individual mandate”) requires most residents over the age of 18 to have minimum credible coverage (MCC) or pay a penalty through their tax returns. MCC means that the coverage must provide a list of certain benefits and services, as defined by the state of Massachusetts (MA). MA carriers must indicate on their plan documents whether their plans meet MCC. Most coverage sold in MA meets MCC.

Insurance carriers and certain employers are required to issue a Form MA 1099-HC to individuals, which are used to complete their tax returns.

For employers with fully insured plans, most carriers will distribute MA 1099-HCs on behalf of employers and submit reporting to the state. If a carrier does not do this, employers have the below submission and distribution requirements.

For employers with self-insured plans and plans sitused outside of Massachusetts, employers must annually distribute MA 1099-HCs to employees and report to the state by January 31st following the plan year.

  • Submit Reporting to the State: Employers must submit the MA 1099-HC information to the Department of Revenue (DOR) electronically through MassTaxConnect.
  • Distribute Statements to Employees: Employers can obtain draft copies of the Form MA 1099-HC on the DOR website to distribute to employees.

Some vendors distribute the MA 1099-HC forms and report to the DOR; however, it is ultimately the employer’s responsibility to fulfill these obligations. Employers who fail to issue a Form MA 1099-HC may be subject to a $50 penalty per individual, up to a maximum of $50,000.

Vermont

In 2018, Vermont enacted H.696 a state-wide individual mandate that requires Vermont residents to have “minimum essential coverage” starting January 1, 2020. “Minimum essential coverage” (MEC) has the same definition as that under the Affordable Care Act, which requires coverage to provide ten categories of essential health benefits and services. An enforcement mechanism for this individual mandate was to be decided in the 2019 legislative session. However, the 2019 major health care policy bill H.524 did not include the tax penalty for the individual mandate, leaving no means for Vermont to enforce the law.

The law does require individuals filing Vermont income tax returns to indicate whether they maintained MEC in accordance with the individual mandate or was exempt from the coverage requirements. Currently, there are no employer submission or distribution requirements.

New Jersey

UPDATED August 8, 2019 with changes to the employer reporting deadline. The prior reporting deadline of February 15, 2020 was changed to March 31, 2020.

Beginning January 1, 2019, New Jersey Health Insurance Market Preservation Act (“individual mandate”) requires all New Jersey residents to have “minimum essential coverage” or pay a tax penalty. Minimum essential coverage (MEC) has the same definition as that under the Affordable Care Act (ACA) , which requires coverage to provide ten categories of essential health benefits and services. For more on the New Jersey individual mandate, see our blog article.

New Jersey employers and out-of-state employers that withhold and remit New Jersey Gross Income Tax for New Jersey residents must submit returns to the state and distribute statements to employees.

  • Submit ACA Reporting to the State: Employers must submit the same ACA reporting forms that they provide to the IRS by March 31st following the close of the calendar year. Employers will submit forms through the New Jersey system for filing W-2 forms. The forms that must be submitted (IRS Forms 1094 B/C and 1095 B/C) depend on whether an employer is an Applicable Large Employer (those with 50+ full time and full-time equivalent employees in the prior calendar year) and whether they are fully or self-insured. For more on ACA Reporting requirements, see our blog article.
  • Distribute Statements to Employees: Employers must distribute copies of their ACA reporting forms (IRS Forms 1094 B/C and 1095 B/C) to New Jersey residents. Currently, it is unclear when the deadline is to distribute these forms.

The first report will be due March 31, 2020.  For more on reporting requirements, see the state’s webpage for employers, or our blog article.

Washington D.C.

For tax years after December 31, 2018, the Washington D.C. individual mandate requires all D.C. residents to have minimum essential health insurance coverage, get an exemption, or pay a tax penalty on their D.C. tax returns. “Minimum essential coverage” (MEC) under the mandate has the same definition as that under the Affordable Care Act (ACA), which requires coverage to provide ten categories of essential health benefits and services.

Employers that provide MEC to D.C. residents must submit returns to the state and distribute written statements to employees

  • Submit Returns to the State: Employers must submit returns to the state, which includes information contained on ACA Reporting Forms, as required under Internal Revenue Code (IRC) Section 6055. IRC Section 6055 requires carriers and employers with self-insured plans to federally file IRS Forms 1094-B/C and 1095-B/C with the IRS. It is unclear how employers not subject to IRC Section 6055 (such as fully insured employers) can utilize their ACA reporting to comply with this submission requirement.
  • Distribute Statements to Employees: Employers must distribute written statements to individuals whose name appear on the above submitted returns. The written statements must contain certain information prescribed by the state. Employers also can satisfy this requirement by providing statements to individuals, as required in IRC Section 6055. Under IRC Section 6055, carriers and employers with self-insured plans must provide a copy of IRS Form 1095-B/C to employees by January 31st following the end of the plan year. It is unclear whether employers not subject to IRC Section 6055 (such as fully insured employers) can satisfy this requirement by distributing their ACA reporting.

At the time of this publication, the deadline to submit returns and distribute statements have not been determined.

Individual Mandate Employer Obligations Grid

Individual Mandate Submission to State (and D.C.) Distribution to Employees Subject to Individual Mandates
California Submit: State-specific return or return with information required under ACA Reporting, IRC Section 6055 (IRS Forms 1094-B/C and 1095 B/C)

Due: March 31

Distribute: State-specific statement or statement required under ACA Reporting, IRC Section 6055 (IRS Forms 1095-B/C)

Due: January 21

Massachusetts Submit: MA 1099-HC forms

Due: January 31

Distribute: MA 1099-HC forms

Due: January 31

Vermont None at this time.

 

None at this time.

 

New Jersey Submit: ACA reporting, IRC Section 6055 and 6056 (Forms 1094-B/C and 1095-B/C)

Due: February 15

Distribute: ACA reporting, IRC Section 6055 and 6056 (Forms 1094-B/C and 1095-B/C)

Due: TBD

Washington D.C Submit: Return with information required under ACA Reporting, IRC Section 6055 (IRS Forms 1094-B/C and 1095 B/C)

Due: TBD

Distribute: State-specific statement or statement required under ACA Reporting, IRC Section 6055 (IRS Forms 1095 B/C)

Due: TBD

Employer Action Items:

  • Employers should assess whether their employees are subject to a state (or regional) individual mandate.
  • Employers should determine whether they have state-specific submission and distribution requirements and comply accordingly.
  • Most individual mandates are still developing law. Employers should watch for additional guidance on the various employer requirements.

Additional Resources

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.

Emerald Law – Emerald is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music and writing non-fiction.