Since it was enacted, the Affordable Care Act (ACA) has been an important part of employer reporting. ACA reporting compliance has become a fixture of the tax filing season with forms such as the 1095-C. The passage of the Tax Cuts and Jobs Act of 2017 triggered an important change in ACA, namely the removal of the penalty for not having health insurance.
In response, states have begun implementing their own individual mandates to control healthcare costs. Rhode Island, New Jersey, California, Massachusetts, Vermont and the District of Columbia have enacted state-level ACA reporting, with more on the way. This development leaves employers needing to monitor state-level ACA developments like they do for state and local tax withholding regulations today.
Here’s a run-down of what you need to know by state for ACA reporting compliance.
Employers were required to report coverage information for their employees residing in Rhode Island annually beginning in 2021, unless the employer’s insurer completes the reporting requirement.
- The federal forms are sufficient to meet the Rhode Island reporting requirement.
- The Division of Taxation provides a webpage where employers will be able to upload file(s). A link to this webpage is available on the Division of Taxation’s website: http://www.tax.ri.gov/healthcoveragemandate/.
- The state reporting deadline for Rhode Island is January 31st.
New Jersey’s individual mandate law took effect on January 1, 2019. Like the original ACA mandate, it requires that everyone in the state maintain qualifying coverage (officially known as minimum essential coverage) or face a tax penalty. For adults, the penalty started at either $695 or 2.5% of annual income, whichever is higher.
Employers with 50 or more employees who employ NJ residents now must electronically report on their compliance with the New Jersey Health Insurance Market Preservation Act by:
- Submitting 1095 forms through the MFT Secure Services in a file based on the IRS XML schemas, paper filing will not be accepted.
- Deferring to New Jersey’s own forms if those federal forms are ever discontinued.
- Completing their electronic filings by March 31st.
Employers with less than 50 forms must file using the Form NJ-1095.
These are new requirements, on top of existing reporting responsibilities to the federal government.
Both New Jersey-based and out-of-state employers with employees in New Jersey must comply with the state mandate. According to the state’s official guidance, the provisions of the New Jersey Health Insurance Market Preservation Act are not limited only to those employers who withhold New Jersey payroll taxes.
California passed an individual mandate (California Mandate) that required residents to maintain minimum essential coverage (MEC) starting January 1, 2020.
- To complete the California Mandate reporting, self-insured employers, regardless of their Applicable Large Employer (ALE) status, are required to transmit 1094/5-B and C forms to the California Franchise Tax Board (FTB) by March 31st. However, CA has stated a penalty will not apply if the return is filed on or before May 31st.
- If an employer has 250 or less forms to report to CA, employers can print and mail the same1094/5-B or C forms that they transmitted to the IRS for ACA reporting to complete their California Mandate reporting.
- If an organization files more 250 forms, then they are required to file electronically. You can register at any time to submit reporting electronically.
- In order to electronically transmit forms to the state of California, besides registering, you have to go through a testing cycle before being approved for transmission of your final data. For TY2022, transmitters who have already tested with California do not need to retest again to obtain a new production code for transmitting data. California production codes will automatically be extended.
- Fully insured employers are not required to submit California Mandate reporting as long as their insurer reports to the FTB, which they are required to do.
- All employers must provide 1095-B and C forms to their employees by January 31st following the end of the plan year, which is already required under ACA. While the federal ACA deadline is frequently extended past January 31st,the California Mandate distribution deadline will not automatically be extended to mirror the federal deadline.
It is important that you work closely with your ACA reporting vendor to ensure that forms are distributed in the right format, on time. Employers who fail to submit reporting as required, are subject to $50 penalty per individual.
Employers with operations do not need employee-level details in their state level filings like is necessary in annual ACA submissions to the IRS. Massachusetts’s mandate requires employers to file by December 15th of the reporting year. Employers must also issue Form 1099-HC to their employees and report information to the state Department of Revenue. Failing to comply with 1099-HC requirements could be subject to a penalty of $50 per employee, with a maximum of $50,o00.
As of 2021, Vermont will only have new coverage reporting obligations to the state if federal ACA reporting requirements are eliminated.
The District of Columbia
The District of Columbia (D.C.) has enacted legislation similar to New Jersey’s, requiring its residents to carry a minimum level of coverage (or obtain an exemption) or face a penalty. The law in question, the Individual Taxpayer Health Insurance Responsibility Requirement Amendment Act of 2018, is effective for tax years ending on or after Dec. 31, 2019.
- All “applicable entities’ under this statute must report their compliance information to the district’s Office of Tax and Revenue (OTR). The definition of an applicable entity includes any employer or employment-based health plan sponsor with at least 50 employees. Plus, one or more employees must be of based in D.C. Providers of minimum essential coverage and insurance carriers/issuers are also applicable entities.
- For purposes of determining someone’s residency in D.C., the OTR considers any employee who had taxes withheld and remitted to D.C. during the applicable calendar year a resident. Minimum essential coverage providers should also consider any individual who had a home or mailing address in D.C. a resident.
- The OTR accepts the same IRS forms but instead of an XML format the electronic file must be a piped delimited text (.txt) file, with submissions going exclusively through the MyTax.DC.gov domain.
- Like NJ, D.C. will also not be accepting paper filing. All forms must be filed electronically.
- The D.C. deadline for tax year 2023 is May 1st, since April 30thfalls on a weekend.
Where is state-level ACA reporting headed in the future?
These states and the District of Columbia are participants in a larger movement toward state-level reporting on health insurance. More states will likely follow suit eventually, and employers need to be prepared.
Effectively managing these ongoing changes requires automated and scalable ACA reporting for compliance. Since laws are being passed and updated by state legislatures all the time, it can be costly and time-consuming to keep up with everything that’s going on.
Experian Employer Services provides automatic monitoring and updating of state-level reporting requirements, so employers are never in the dark about their compliance obligations. We incorporated Rhode Island, New Jersey, D.C. and California reporting requirements into our service for the 2021 tax year and have made it easy to add more states in the future.
Stay tuned to our blogfor the latest news and updates.