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Now that it is 2020, several state-wide Individual Mandates have gone into effect, including California’s.
As of January 1, California residents, including domestic partners and their dependents, must enroll in qualified health insurance coverage for each month of the calendar year or face a penalty. The penalty state residents will face for failing to comply is calculated at a rate of $695 per adult and $347.50 per child or 2.5% of gross income above the filing threshold, whichever is higher.
Covered California has released an Individual Shared Responsibility Penalty calculator for individuals interested in determining the penalty amount that could be imposed on them for failing to obtain adequate coverage. It can be viewed here.
Some California residents will be exempt from penalty assessments, including individuals whose income is below the tax filing threshold, are a member of a health care sharing ministry, or are incarceration. A full list of exemptions can be found here.
Employers also have new responsibilities under California’s new health care law.
For the 2020 tax year, self-funded employers will need to report on the employees that had health coverage throughout the year. The information must be furnished to employees by January 31, 2021 and filed with California’s Franchise Tax Board by March 31, 2021.
Another component of the mandate is the expansion of subsidies available to individuals and families with incomes between 400% and 600% of the federal poverty level. Employers should pay close attention to this as more individuals will now qualify for a Premium Tax Credit (PTC), the trigger for letting the IRS know whether or not an organization is in compliance with the ACA’s Employer Mandate.
As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA’s Employer Mandate, Applicable Large Employers (ALEs) (organizations with 50 or more full-time employees and full-time equivalent employees) are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties. The IRS is issuing these penalties through Letter 226J.
Several other states including the District of Columbia, Massachusetts, New Jersey, Rhode Island, and Vermont have also written into law statewide Individual Mandates. Many of them also have penalties in place for employers and residents that fail to comply.
In addition to the state-wide penalties, employers should know that the IRS is continuing to issue penalty assessments to employers identified as having failed to comply with the ACA such as, Letters 226J for the 2017 tax year. They are expected to begin penalty assessments for the 2018 tax year soon.
Organizations should elect to undergo an ACA Penalty Risk Assessment to learn their penalty exposure and implement course-correction to avoid any future exposure.
