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With the zeroing out of the ACA’s “Individual Mandate,” which required individuals to have minimum essential health coverage through the enactment of the Tax Cuts and Jobs Act of 2017, California passed SB 78 (creating California’s “Minimum Essential Coverage Individual Mandate”) to create a state individual mandate, effective January 1, 2020. The Franchise Tax Board (FTB) is tasked with enforcement of this California Minimum Essential Coverage Individual Mandate. California residents who fail to comply are subject to monetary penalties.
To facilitate the identification of individuals who have not complied with the California Minimum Essential Coverage Individual Mandate, the FTB has imposed state employer reporting obligations. To that end, the FTB released draft instructions for California’s 2020 Form 3895C Instructions. The 3985C Instructions are directed to employers that offer health coverage through a self-insured plan and that are subject to the ACA’s Employer Mandate.
Under the Employer Mandate, an employer with 50 or more full-time employees and full-time equivalent employees) is an Applicable Large Employer (ALE), which is required to offer Minimum Essential Coverage (MEC) to at least 95% of its 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. An ALE must report its status of compliance with the Employer Mandate coverage through the annual filing of Internal Revenue Service (IRS) Forms 1094-C and 1095-C and furnishing to employees of Forms 1095-C. With respect to non-employees (e.g., spouses and dependents), the self-insured ALE has the option of submitting IRS Forms 1094-B and 1095-B or Forms 1094-C and 1095-C with Part III in the 1095-C completed for those non-employees. If the ALE only offers fully-insured plans, the ALE need not complete Part III of the Form 1095-C.
The FTB requires the self-insured ALE has the option of submitting (a) IRS Forms 1094-B and 1095-B or (b) Forms 1094-C and 1095-C with Part III in the 1095-C completed for those non-employees.
Although the previously filed Forms 1094-C and 1095-B may be submitted to satisfy the California 3895C instructions, there are notable variations. On the Form 1094-C, ALE membership information is not required, i.e., Part II (ALE Member Information), III (ALE Member Information – Monthly), and IV (Other ALE Members of the Aggregated ALE Group) of Form 1094-C need not be completed. If completed, the FTB will disregard. Additionally, the “authoritative transmittal” question (line 19) in Form 1094-C need not be answered. All of the information required in Form 1095-C by the IRS will be required by the FTB.
The annual FTB filing deadline is March 31. The FTB furnishing deadline is January 31. The IRS of electronic filings for returns of 250 or more apply but may be subject to a hardship waiver.
Several other jurisdictions, including D.C., Massachusetts, New Jersey, Rhode Island, and Vermont have introduced their own state individual mandates. Many of them have also imposed penalties on employers and residents that fail to comply. You can read about them here.
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