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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.
Under 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.