ACA reporting is complex and the process has only grown more challenging as states continue to enact additional state-level ACA reporting requirements as a function of their Individual Mandates. But what exactly must employers in these jurisdictions do? Let’s find out.
First, it’s important to understand the state Individual Mandates. Essentially, the mandates require residents to purchase qualifying health coverage or pay a tax penalty, unless they qualify for an exemption. The mandates encourage residents who might otherwise not buy health insurance to obtain coverage to offset higher premium costs for a pool that would consist of just sick individuals.
The Individual Mandates require additional ACA reporting to determine which residents obtained coverage, and for what time frame. The reporting requirements imposed on employers essentially identify which state residents should be assessed a penalty. Employers too can face penalties for failing to complete their additional state ACA reporting requirements, but more on that later.
Currently, California, Massachusetts, New Jersey, Rhode Island, Vermont, and the District of Columbia have Individual Mandates in place and require employers to report their ACA information on a state level.
Below is a breakdown of the statewide ACA reporting requirements and deadlines for employers by state:
The state of New Jersey requires Applicable Large Employers – companies with 50 or more employees – to use IRS forms 1094-C and 1095-C, (1095-B, and 1094-B if self-insured) to communicate health insurance information to the state, in addition to their federal responsibilities for annually furnishing these forms to full-time employees and to the IRS. The annual deadline is March 31 of the following reporting year.
California has adopted a similar approach to New Jersey. Beginning 2020, self-funded employers in California must report on the employees and their dependents that had health coverage throughout the year.
The information must be furnished to employees by January 31 and filed with California’s Franchise Tax Board (FTB) by March 31. The penalty for employers that fail to report timely is $50 per covered individual who was provided health coverage.
The D.C. law requires every “applicable entity that provides Minimum Essential Coverage to an individual during a calendar year” to submit an information return regarding such coverage to the Office of Tax and Revenue (OTR). It also requires the applicable entity to submit a statement about the individual’s type of coverage.
These filing requirements, while similar to federal filing requirements under the ACA, are not the same. All information returns are required by OTR to be filed electronically through MyTaxDC, as paper filings will not be accepted. The new tax guidance requirements for annual reports are due 30 days after the federal IRS electronic filing deadline.
Employers with operations should note that their filings on the state level do not need to contain employee-level details like they do in annual ACA submissions to the IRS and are generally completed by insurance carriers on behalf of individual employers. Massachusetts’s mandate has been in place since 2006 and requires employers to file by December 15th of the reporting year.
In addition to reporting to the state, Massachusetts employers must issue Form 1099-HC to their employees and report information to the state Department of Revenue. Organizations that fail to comply with 1099-HC requirements could be subject to a penalty of $50 per employee, going up to a maximum of $50,000.
Rhode Island’s individual penalty went into effect in January 2020. For the 2020 tax year, the penalty was calculated at a rate of $695 per adult and $347.50 for each child under the age of 18, or 2.5% of gross income for people above the Rhode Island tax filing threshold, whichever is higher. Employers of the state must offer minimum essential coverage to residents and submit state-level reporting to track compliance with the state’s shared responsibility provisions. Organizations must furnish the applicable 1095-Cs to their employees and file the returns to the state’s Division of Taxation (DOT). Reporting to the DOT is in addition to the federal IRS filing requirements but the IRS furnishing requirement will satisfy the state mandate to provide a return to residents.
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Currently, in Vermont, there are no additional ACA reporting requirements for employers. Employers will have new coverage reporting obligations to the state only if the federal ACA reporting requirements are eliminated.
Ultimately, the patchwork of state-level ACA reporting creates a myriad of complexities for employers handling their ACA compliance in-house. This is especially true for employers who have operations in multiple states. These state-level ACA reporting requirements are in addition to the annual ACA reporting filed with the IRS as required under the Employer Mandate.
As a reminder to employers, the ACA’s Employer Mandate requires employers with 50 or more full-time employees and full-time equivalent employees, known as Applicable Large Employers (ALEs) to:
- Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees (and their dependents) whereby such coverage meets Minimum Value (MV); and
- Ensure that the coverage for the full-time employee is deemed affordable based on one of the IRS-approved methods for calculating affordability.
Failure to adhere to these two requirements could subject ALEs to Internal Revenue Code (IRC) Section 4980H penalties.
With the IRS ramping ACA enforcement, employers should ensure they are complying to avoid penalty assessments from the federal agency and their state governments. Employers struggling to comply with all of the statewide reporting requirements in addition to federal filing are encouraged to contact us to learn about our ACA Complete and stand-alone state ACA filing solutions.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.