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What California Residents Need to Know About the Individual Mandate

September 8, 2020 Robert Sheen Affordable Care Act
What California Residents Need to Know About the Individual Mandate

2 minute read:

As the summer begins to wind down, the events that mark the end of the year draw near. For residents of California, it could be the reality of having to face a penalty for failing to obtain adequate health insurance during the 2020 tax year.

California state residents that fail to obtain adequate health coverage for the entire duration of the 2020 tax year will be subject to a penalty of at least $750 per adult and $375 per child. Remember, the California Individual Mandate penalty is either a flat penalty per household member or 2.5% of gross household income that exceeds California’s filing threshold, whichever is higher.

State residents interested in seeing their estimated penalty for the 2020 tax year should review the Individual Shared Responsibility Penalty Estimator.

Some California residents will be exempt from penalty assessments, including individuals whose income is below the tax filing threshold, who are members of a health care sharing ministry, or who are incarcerated. A full list of residents exempt from an individual penalty assessment can be found here.

One way the state is identifying individuals who have not complied with California’s Individual Mandate to obtain Minimum Essential Coverage (MEC) is through the issuance of Form 3895C.

Form 3895C, issued by the Franchise Tax Board, requires additional reporting obligations for employers that offer self-insured health plans, specifically on who was enrolled in health coverage. Draft instructions for Form 3895C can be viewed here. The information must be furnished to employees by January 31, 2021 and filed with California’s Franchise Tax Board by March 31, 2021.

Self-insured employers 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.

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 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.

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. You can read about them here.

Employers, as you begin to prepare for year-end filings and reporting processes for years to come, consider outsourcing ACA compliance as the regulatory landscape continues to grow in complexity. Contact us to learn how ACA Complete can help your organization minimize the administrative burden associated with ACA compliance.

To learn more about ACA compliance in 2021, click here.


We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.

Summary
What California Residents Need to Know About the Individual Mandate
Article Name
What California Residents Need to Know About the Individual Mandate
Description
Employers should prepare for the ACA requirements set forth by state jurisdictions as we approach the last quarter of 2020. Read on for more information.
Author
Robert Sheen
Publisher Name
The ACA Times
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The ACA Times
Short URL of this page: https://acatimes.com/vuz
Robert Sheen

Robert Sheen

Robert Sheen, Esq., is editor-in-chief of The ACA Times. He also is founder, president and CEO of Trusaic.

Robert Sheen is Founder and President of Trusaic, Inc. Robert is a graduate of the University of Southern California, in Business Administration with an emphasis in International Finance. He earned his Juris Doctor from Loyola Law School, Los Angeles, concentrating in Tax Law.

View more by Robert Sheen

Related tags to article

ACA CompleteACA ComplianceACA Employer MandateACA ReportingAffordable Care ActApplicable Large EmployersCaliforniaCalifornia Individual MandateCalifornia’s Franchise Tax BoardForm 3895CHealth Care CoverageIndividual MandateIndividual Shared Responsibility PenaltyIndividual Shared Responsibility Penalty EstimatorInternal Revenue Code (IRC) Section 4980H PenaltiesMinimum Essential CoverageMinimum Essential Coverage (MEC)Minimum Value (MV)
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