June 3, 2019
Beginning on January 1, 2019 the Individual Mandate provision of the Affordable Care Act (ACA) was reduced to $0 (effectively making the Individual Mandate obsolete at the Federal level). To protect against adverse selection, the State of New Jersey enacted its own Individual Mandate beginning in 2019 which mimics the ACA’s Individual Mandate prior to it being reduced to $0. From an employer’s perspective the New Jersey Individual Mandate will create additional reporting requirements in February 2020 for employers who have employees who reside in New Jersey. This article summarizes what employers need to consider with regard to New Jersey’s new reporting requirements in 2020.
The New Jersey Individual Mandate requires New Jersey resident taxpayers to carry minimum essential coverage (MEC) as defined by the ACA. If a New Jersey resident taxpayer is not covered by MEC, he/she could be subject to a penalty from the State of New Jersey. The New Jersey Individual Mandate closely mirrors the ACA with regards to exceptions and penalties for individuals residing in the State of New Jersey. From an employer’s perspective the most important part of the New Jersey Individual Mandate is the new reporting requirement. While more details will be provided in mid-2019, according to the State’s website, we already know some of the details.
First, any employer who withholds or remits New Jersey Gross Income Tax for New Jersey residents will have to file with the State of New Jersey if it is an Applicable Large Employer (ALE). The State plans for employers to submit the Forms 1094-C and 1095-C using the same electronic system it uses for filing the W-2 forms with the State. Yes, all filing will have to be done electronically to the State of New Jersey. Why the Form 1094-C will need to be submitted to enforce the State’s Individual Mandate is confusing, but it appears that it will be required from the literature the State has released to date. Furthermore, all employers who complete a Form 1095-C for a New Jersey resident will have to provide it to the State of New Jersey. Again, this is odd for fully insured employers with New Jersey residents. Fully insured employers only complete Parts I and II of the Form 1095-C which are irrelevant for the enforcement of the Individual Mandate. The State of New Jersey should be able to enforce its Individual Mandate using the Form 1095-B which the insurance company will be required to file with the State. It is our hope that the State realizes this before it finalizes its reporting requirements and only requires self-insured employers (who complete Parts I, II, and III of the Form 1095-C) to file the Form 1095-C with the State of New Jersey.
New Jersey is currently asserting that the due date to report to the State will be February 15, 2020. While this is after the January 31, 2020 current deadline to provide the Forms 1095-B or 1095-C to an individual for the 2019 tax year, a February 15 due date would be prior to the actual deadline the IRS has had in the previous four years of reporting. Each year to date the IRS has provided at a minimum an automatic 30 day extension to employers making the first couple days of March the earliest these Forms have been required to be sent to employees. It is our hope that the State of New Jersey would match such a due date should the IRS provide employers another automatic 30 day extension for 2019 reporting. Additionally, should the State of New Jersey continue to take the position of requiring employers to submit a Form 1094-C with the Forms 1095-C, it is our hope that the State mirrors the IRS due date. That would make the State’s due date March 31, 2020 with an employer eligible to receive an automatic 30 day extension.
Employers who withhold or remit New Jersey Gross Income Tax for New Jersey resident employees need to be aware of the new reporting obligations the State’s Individual Mandate creates. We are closely monitoring the situation at Accord Systems and plan to incorporate the extra State filing for our clients who need the service performed. We will provide an update on the New Jersey reporting requirements as more details are disclosed and remain hopeful that the State minimizes the burden it is creating for employers. Please contact us if you have any questions regarding your employer’s reporting or hourly tracking needs.
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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