ACA 1095 Rules in 2021 - Zupnick Associates

(by Andres Rojas)

Since it was created back in 2010, ACA has been surrounded by political controversy and administrative changes. To make matters worse, the passing of the Tax Cuts and Jobs Act of 2017 – which, among other changes, zeroed the federal individual mandate penalty – has further added to the confusion.

It’s no wonder, then, that so many employers and HR executives are confused. Don’t worry, though, because in this article we’ll clear any doubts you have about ACA 1095 Rules in 2021.

What Is IRS Form 1095-C?

A form 1095 is a type of tax form that healthcare insurance providers must submit both to the IRS and their insured.

There are three types of 1095 forms:

  • Form 1095-A (Health Insurance Marketplace Statement): This is the form submitted by a health insurance marketplace plan provider.

  • Form 1095-B (Health Coverage): This is the form submitted by small businesses with less than 50 full-time employees.

  • Form 1095-C (Employer-Provided Health Insurance Offer and Coverage): This is the form submitted by Applicable Large Employers (ALE) with at least 50 full-time equivalent employees.

Filing 1095 in 2020 proves an ALE complied with ACA’s Employer Shared Responsibilities Provisions by providing the minimum requirements for ACA compliance during the past year.

Is the IRS Form 1095-C Still Required?

Yes. Despite the ongoing debate in Congress, ACA is still the law and employers must fully comply with all of its provisions.

Even if the federal tax penalty for the individual mandate is $0, you are still legally obliged to serve your employees their 1095-C form by January 31.

Furthermore, if your employees live in a state with an individual mandate, not providing adequate health insurance would make you liable to both federal and state penalties.

How ACA Changed in 2020?

At a state level, many legislators were worried that the repeal of the federal individual mandate penalty would destabilize their local insurance markets.

That’s why – to prevent healthy taxpayers from fleeing the system, leaving only the sick and needy to pay the bills – some states have created individual mandates of their own. Starting in 2020, employers located in a state with an individual mandate will face a penalty if they don’t prove they provided minimum essential coverage to their employees.

Which States Have an Individual Mandate?

To date, only a few states have passed their own individual mandates:

  • California: Became effective starting January 1, 2020.

  • District of Columbia: Became effective starting June 30, 2020.

  • Massachusetts: Became effective starting 2006.

  • New Jersey: Became effective starting March 31, 2020.

  • Rhode Island: Became effective starting January 1, 2020.

  • Vermont: Became effective starting January 1, 2020 but has no defined penalties for non-compliance yet.

States considering setting individual mandates in the future include:

  • Connecticut

  • Hawaii

  • Maryland

  • Minnesota

  • Washington

What if My State Has an Individual Mandate?

Before 2019, big employers only needed to give one copy of their 1095-C forms (along with the 1094-C cover sheet) to the IRS and one to their employees for tax-filing purposes. However, now that more states are setting individual mandates, employers must report both to the federal government and each state in which their employees reside. 

Since many of the details are being decided, not all states have a clear 1095-C filing process yet. To date, this is a brief outline of how the process looks by state:

  • California: Employers must file their 1095-C and 1094-forms to the Franchise Tax Board (FTB) by March 31 or pay a fine of $50 for every unreported employee. However, fines can be much higher since they are reviewed on a case-by-case basis and have no set ceiling.

  • District of Columbia: Employers must file their ACA 1095 forms through the DC Office of Tax and Revenue by April 30. At the moment there are no individual mandate penalties for employers, but they are expected to be developed in the future.

  • Massachusetts: Employers who must submit a Massachusetts MA 1099-HC form to the Massachusetts Department of Revenue must do so by March 31 or pay a $50 fine per every unreported employee.

  • New Jersey: Employers must file their 1095-C and 1094-C forms by March 31.

  • Rhode Island: Though currently the process is still being defined, employers must report all covered individuals to the Rhode Island Division of Taxation by March 31.

  • Vermont: At the moment, there are no individual mandate penalties for employers.

Need Help Filing 1095 for 2020?

As you can see, Obamacare is neither ‘dead’ nor set in stone. On the contrary, ACA will more than likely keep evolving in the future.

So, if you feel overwhelmed by the constant changes, contact us and let us help you navigate ACA’s changing landscape.

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