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Two Key Differences in California ACA Reporting Compared to ACA Reporting to the IRS

January 7, 2021


A new year brings new Affordable Care Act reporting responsibilities to some lucky employers with residents in the State of California. For the first time in 2021, employers who have employees who are residents of the State of California may have reporting responsibilities as a result of the State’s individual mandate which went into effect in 2020. In this article, we explore two critical differences employers must be aware of before reporting to California’s Franchise Tax Board.

Who needs to file with the State of California?

Only employers who sponsor a self-insured health plan must submit the Forms 1094-C and 1095-C to the State of California. Furthermore, the latest iteration of the draft instructions make it clear that an employer does not need to submit a Form 1095-C for employees who declined coverage.

Importantly, an employer who sponsors an insured health plan or is part of a multiemployer health plan will not need to report to the State of California. The State will be gathering the necessary information to enforce the State’s individual mandate from these types of plans through the Form 1095-B which will be provided by the insurer. However, and critically, employers who sponsor an insured health plan or participate in a multiemployer health plan will still have to furnish the Forms 1095-C to the requisite employees and report the Forms 1094-C and 1095-C to the IRS so long as the employer is an applicable large employer (ALE).

It is possible that an employer may not have an office in the State of California but it could have employees who reside in the State. In that situation the non-California employer should still file the Forms 1094-C and 1095-C with the State of California. The legality of this will likely be challenged in the years to come although not too many employers will fall into this position given the layout of California’s population centers. The State of New Jersey took a similar position but given New Jersey’s proximity to New York City the issue is much more prevalent in that region. We would highly recommend employers take the conservative approach and file with the State if it has any California residents and the criteria discussed above is satisfied.

When must an employer furnish the Form 1095-C to the requisite employees and file the Forms 1094-C and 1095-C with the State of California?

Another large difference for California reporting compared to Federal reporting is when the Form 1095-C must be furnished to the requisite employees. While the State did a fantastic job making California reporting mirror the Federal process, it fell short with regard to the deadline to furnish the Form 1095-C to the requisite California residents. The Federal deadline to furnish the Form 1095-C to the requisite employees was extended to March 2, 2021 from January 31, 2021 by Notice 2020-76. However, the State of California has continued to hold firm on the January 31, 2021 deadline. As a result of January 31, 2021 falling on a Sunday, employers will have until February 1, 2021 to furnish the Form 1095-C to the requisite California employees.

It should be noted that an employer needs to only send one Form 1095-C to California residents. An employer does not need to furnish an employee one Form 1095-C to satisfy the California reporting requirement and a separate Form 1095-C to satisfy the Federal reporting requirement. ALEs with California residents must comply with the stricter February 1, 2021 deadline for furnishing the requisite employees the Form 1095-C.

The deadline to file the Forms 1094-C and 1095-C with the State of California is March 31, 2021 for all filers. The California deadline mirrors the Federal electronic filing deadline of March 31, 2021 and is more generous than the Federal deadline of February 28, 2021 if filing via paper. The latest iteration of the draft instructions generously state that no penalty will be imposed for employers who file with the State of California by May 31, 2021.

Conclusion

ALEs who employed California residents in 2020 must be aware of the new California individual mandate reporting responsibilities. We are quickly approaching the middle of January which means employers are running out of time to furnish the Forms 1095-C to the requisite employees by the February 1, 2021 deadline. Accord Systems is prepared to electronically file the Forms 1094-C and 1095-C with the State of California for its clients. Please contact us if you need assistance with your ACA reporting.


About the author – Ryan Moulder serves as General Counsel at Accord Systems, LLC and is a Partner at Health Care Attorneys P.C. Ryan received his LL.M. from Georgetown University Law Center and his J.D. from Saint Louis University School of Law. He has distinguished himself as a leader in the Affordable Care Act arena and has written and spoken on a variety of ACA topics as it relates to compliance for companies.


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The information contained on this site is not, nor is it intended to be, legal advice. An attorney should be consulted for advice regarding your situation. Copyright © 2021 by Accord Systems, LLC. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.