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Employers should be aware that data concerning non-compliance with California’s Individual Mandate will be publicly reported and published annually by the California Franchise Tax Board (FTB) on its website.
In June 2019, California passed SB 78 to create a Minimum Essential Coverage Individual Mandate, also known as California’s health care mandate. The FTB is tasked with enforcement of the health care mandate. California residents who fail to obtain qualifying healthcare coverage or claim an exemption are subject to a monetary penalty known as the “Individual Shared Responsibility Penalty.” The penalty amount for the 2020 year for California adults that fail to obtain adequate coverage is $750 multiplied by a cost of living adjustment and is $375 per child.
To help facilitate the identification of individuals who must pay an Individual Shared Responsibility Penalty, the FTB has imposed state reporting obligations for self-insured employers and fully insured employers whose carriers do not distribute and report on health care coverage on the employers’ behalf. Employers offering health coverage through self-insured plans or employer-sponsored plans must generally report individual enrollment information to the FTB through the reporting of Form 3895C unless that information is reported to the FTB by an insurer via Form 1095-B.
Employers that fail to comply with California’s Individual Mandate reporting requirements will be faced with a $50 penalty per individual who was provided health coverage. Non-compliance information will subsequently be published on the FTB’s website as required by the statute. The deadline for employers having to report on their enrollees for the 2020 tax year is tomorrow, March 31, 2021.
The FTB is unlikely to identify non-reporting employers by name, however, the format of this public-facing data is yet to be seen. At the very least, this data will give employers a measure of how aggressive the FTB is in its enforcement. If enforcement of the health care mandate tracks the IRS enforcement of the ACA, the FTB will become more efficient with each reporting year.
It should be noted that on an annual basis the FTB will also make available the following information on its website:
- The number of applicable households paying the penalty and the average penalty amount by applicable household income level
- The number of applicable households paying the penalty in each county and statewide.
- The total penalty amount collected.
- The number and type of most commonly claimed exemptions.
- The number and total penalty amounts collected
The FTB states that the information will be reported “on or before March 1, 2022, and annually on or before March 1 thereafter.”
California ACA reporting for employers went into effect in January 2020 and was introduced as part of the state’s Individual Mandate.
Employers with self-insured plans should take note of California’s Form 3895C and the reporting requirements associated with it as these reporting requirements are in addition to those required by the ACA’s Employer Mandate.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs), employers 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.
If your organization is unsure of how to comply with California’s Individual Mandate reporting requirements, or any other state that requires additional reporting, download; The ACA Essential Guide for 2021 to get a better understanding and timeline of what is expected from your organization for state reporting.
Self-funded employers of California that need assistance in meeting the state filing deadline for the Individual Mandate should contact us to learn about how ACA Complete can deliver everything you need to track, prepare, furnish, file, and defend your ACA reporting. State filing is included with ACA Complete, or you can add it to ACA Basic or ACA Free e-file.
We can minimize your IRS penalty risk and guide you in the event of an IRS or state audit. And with our fast implementation and seamless integrations, you can get started quickly to start minimizing your risk today.
Undertaking an ACA Penalty Risk Assessment can tell you if your organization is at risk of receiving ACA penalties from the IRS.