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The Washington D.C. (“D.C.”) Office of Tax and Revenue recently released guidance on the employer reporting requirements under the D.C. Individual Mandate. Employers who provide healthcare to at least 50 full-time employees, including at least one D.C. resident, must annually submit their Affordable Care Act (ACA) reporting to the D.C. Office of Tax and Revenue. The first submission is due June 30, 2020.

 

Compliance Snapshot:

  • The 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;
  • Employers who provide coverage to at least 50 full-time employees, including at least one D.C. resident, must annually submit their ACA reporting to the D.C. Office of Tax and Revenue (the first submission is due by June 30, 2020);
  • For tax years beginning after December 31, 2019, the deadline to submit returns is 30 days after the IRS deadline for submitting ACA reporting, including any extensions granted by the IRS.

 

Timeline:

January 1, 2019 Individual Mandate Begins
June 30, 2020 First Reporting Due

 

What is the D.C. Individual Mandate?

For tax years after December 31, 2018, the Washington D.C. Individual Mandate (“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” under the Mandate has the same definition as that under the ACA, which requires coverage to provide ten categories of essential health benefits and services.

 

Who is subject to the D.C. Individual Mandate?

D.C. residents are subject to the Mandate. The Mandate does not apply to individuals who work in D.C. but do not live in D.C.

D.C. residents who do not comply with the Mandate may be subject to a penalty, which is equal to 2.5% of their household income or a per person charge ($695 per adult and $375.50 per child), whichever is higher. The maximum penalty is the average premium for bronze level plans in D.C for the applicable year.

 

Are there employer obligations under the Mandate?

Yes, applicable entities that provide health care to D.C. residents must submit information returns to the D.C. Office of Tax and Revenue (OTR) and furnish statements about the coverage to covered individuals.

Employers who sponsor an employer-based health plan that covered at least 50 full-time employees, including at least one D.C. resident, during the applicable plan year must submit their ACA reporting to OTR. An individual is deemed a D.C. resident if their employer withholds wages and pays taxes to D.C. for any period during the applicable calendar year.

 

What are the employer reporting obligations?

Employers must submit their ACA reporting (Form 1094/5-B and 1094/5-C) to the D.C. OTR. The information returns must be filed electronically through MyTax.DC.gov, using the layouts and file formats prescribed by OTR.

Employers must submit returns beginning June 30, 2020 (for the tax year ending December 31, 2019). For tax years beginning after December 31, 2019, the deadline to submit the returns is 30 days after the IRS deadline for submitting ACA reporting, including any extensions granted by the IRS.

Employers can contract with third-party service providers to file information returns on their behalf.

 

What are the employer distribution obligations?

Employers must furnish written statements to D.C. residents whose name appear on returns submitted to OTR. Employers who already furnish a Form 1095-B or Form 1095-C to employees pursuant to their federal obligation under the ACA are deemed to satisfy this requirement under the Mandate.

 

Are there penalties for employers who fail to satisfy the reporting and distribution obligations under the Mandate?

Additional guidance on the submission and distribution requirements will be forthcoming. As of the publication of this article, it is unclear whether there are any employer penalties for failure to fulfill these obligations.

 

Employer Action Items:

  • Employers must determine whether they cover any D.C. residents (employers should check with their payroll team to see whether they withheld wages and paid taxes to D.C.);
  • Employers who cover more than 50 employees and at least one D.C. resident must submit their ACA reporting to the D.C. OTR 30 days after submitting it to the IRS (the first submission is due by June 30, 2020); and
  • Employers must furnish Form 1095-B or Form 1095-C to employees who are D.C. residents if they haven’t done so pursuant to an obligation under the ACA.

 

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.