February 6, 2020 Employers and employees have new requirements for showing qualifying health care coverage in states with individual mandates Beginning with the 2019 tax year, employers with employees who are residents of the District of Columbia or New Jersey must provide employees and the jurisdictions with details of employees' health coverage to comply with new state individual mandates. Employers must also continue reporting similar information in Massachusetts and complying with federal Affordable Care Act (ACA) requirements. Residents in these three jurisdictions — Massachusetts, District of Columbia and New Jersey — must demonstrate they have minimum essential coverage, as defined by the state, or pay a penalty. Background In 2019, the penalty for failure to have individual health coverage under the Affordable Care Act (ACA) decreased to zero, effectively eliminating the individual mandate at the federal level. Employers, however, must still send employees and the IRS Form 1095-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, by March 2, 2020. While federal tax forms no longer require individuals to demonstrate they have qualifying health coverage, residents of jurisdictions with individual mandates still need to show compliance on their state tax forms. The District of Columbia and New Jersey, which now have individual mandates, require employers to inform the applicable state agencies of their employees' health coverage so shared responsibility payments can be determined. Employers may submit the same federal Forms 1095-C that they file with the IRS. New Jersey employers must submit forms for those employees who resided in the state at any point during the year, while District of Columbia employers must submit forms for anyone for whom they withheld income taxes to the District of Columbia, in addition to anyone who had a mailing address within the District during the calendar year. Massachusetts, which had an individual mandate before the ACA, requires its own state form reporting on a basis that slightly differs from the federal Form 1095-C. For more information on filing and furnishing requirements, see the chart below. Individual mandates become effective in California, Rhode Island, and Vermont beginning January 1, 2020. Each of those states will also incorporate employer furnishing requirements using the current federal Forms 1095-C. Practitioners are awaiting guidance on the filing requirements for calendar year 2020 forms to be filed in 2021 from California and Rhode Island. Vermont will not have a filing requirement — it will rely on taxpayers producing the forms they receive under the federal furnishing requirement if necessary upon examination. District of Columbia For the 2019 tax year, coverage providers and employers of more than 50 employees, with at least one employee in the District of Columbia, must send the Form 1095-C to employees and file with the DC Office of Tax and Revenue the federal 1095 and 1094 forms. The forms must be filed by June 30, 2020. The DC 2019 Form D-40 requires individuals to specify on Line 28 their DC health care shared responsibility payment, if any. Beginning in 2019, individuals with health coverage for the entire year enter $0 on line 28. Individuals without coverage for any part of the year must complete Schedule HSR, DC Health Care Shared Responsibility, and accompanying worksheets to determine the amount of the health care shared responsibility payment. The amount of the payment must be entered on Line 28. The formula for the payment amount is complicated but could be as high as $15,360 for a household of five or more individuals for failure to obtain coverage in 2019. Massachusetts Massachusetts had an individual mandate before enactment of the ACA and coordinated it with the federal requirements. After elimination of the federal individual mandate, the state mandate resurfaces. Employers must send Form 1099-HC, Individual Mandate Massachusetts Health Care Coverage, to employees by January 31, 2020, and to the Massachusetts Department of Revenue by March 31, 2020. Individuals must specify on Line 35 of Massachusetts 2019 Form 1 the amount of their health care penalty, if applicable. Individuals who had "minimum creditable coverage" (as defined by Massachusetts) for the entire year avoid the penalty. The penalty is determined from Schedule HC and accompanying worksheets. All full-year and certain part-year residents must file Schedule HC with their return. The maximum penalty for adults without coverage in 2019 in Massachusetts is $1,524. New Jersey By March 31, 2020, employers must transmit to the New Jersey Division of Taxation the federal 1095 forms, which is the same as the federal filing deadline for electronic filers. While the federal filing deadline can be automatically extended 30 days by filing an extension request, New Jersey's filing deadline cannot be extended. The forms must also be sent to each employee who was a New Jersey resident (full-year and those who lived in New Jersey at least 15 days in any month) and received minimum essential coverage in 2019. New Jersey Form NJ-1040 requires individuals to specify on Line 52 the amount of their shared responsibility payment, if applicable. Beginning in 2019, New Jersey residents and members of their household who are required to file a return must have minimum essential health coverage for the entire year unless they qualify for an exemption. Part-year residents must have coverage or qualify for an exemption for each month they live in New Jersey. Individuals who have minimum essential coverage for the entire year enter $0 on Line 52. Individuals who do not have the required healthcare coverage must calculate their shared responsibility payment on the Form NJ-1040 worksheets or use the online calculator at NJ Taxation. Individuals entering an amount on Line 52 must attach the Schedule NJ-HCC, showing the months of coverage, to their return. The formula for the payment amount is complicated but could be as high as $15,060 for a household of five or more individuals for failure to obtain coverage in 2019. Implications The adoption of individual mandates by various jurisdictions across country poses an increased compliance burden for multistate employers. While employers may have hoped that the effective elimination of the federal mandate on the federal level would decrease their administrative burdens, it has made for a more complicated playing field. It can be expected that other states may adopt their own mandates if health coverage costs prove to be lower in jurisdictions with mandates. Affordable Care Act — individual state mandates Employer furnishing and filing requirements for 2019 tax year
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