In December of 2017, Congress passed the Tax Cuts and Reform Act of 2017.
One of the provisions of this law was repealing the individual mandate by making the penalty for failing to purchase health insurance $0. In reaction to this, two states and the District of Columbia immediately enacted individual mandates driven by the concern that healthier individuals would drop health insurance coverage without an individual mandate in place, and that the remaining individuals whose health was not as healthy in the marketplace would cause health insurance premiums to rise.
As of last year, New Jersey became the second state in the nation following Massachusetts as the first in 2006 to legislate an individual health insurance mandate. Revenue collected from New Jersey’s individual mandate penalty will help fund a state-based reinsurance program established under separate legislation. The New Jersey individual mandate closely mirrors the now repealed ACA individual mandate in terms of the amount of the penalty and exemptions from the mandate and became effective January 1, 2019.
Under this new law, New Jersey taxpayers who are subject to the individual mandate (and their dependents) must have minimum essential coverage (MEC) during each month of the year. Those without MEC may be subject to a penalty that is equal to the amount they would have paid if the ACA’s mandate had not been repealed: $695 for adults ($347.50 per child) or 2.5 percent of a taxpayer’s income, whichever is greater. This amount is adjusted for inflation each year.
New Jersey has provided the following initial guidance on the employer reporting requirements on its New Jersey Health insurance mandate website:
- The State expects that employers will use the current IRS ACA Forms 1095-C, 1094-C, 1095-B and 1094-B for reporting to New Jersey for employees and former employees such as retirees and COBRA beneficiaries enrolled in self-insured coverage. If the IRS discontinues or substantially changes the ACA Forms, New Jersey will use similar forms.
- Employers must file the forms through New Jersey’s W 2 filing system.
- Out-of-state employers that withhold and remit New Jersey Gross Income Tax for New Jersey residents have the same reporting requirements as employers located in New Jersey.
- Filing instructions are expected to be posted in mid-2019.
- 2019 coverage information must be filed electronically by February 15, 2020. The website does not specify a date for providing the forms to employees, but the deadline would presumably be on or before February 15.
Following New Jersey later in 2018 with an individual mandate was Washington, D.C. They have not provided any guidance on their website for employer reporting requirements or forms. Vermont also enacted an individual mandate that will be effective in 2020. The details of how the mandate would operate, including penalties, was left to a working group that has not finalized a recommendation yet. No information is available to date on its ACA exchange website yet.
It is currently not clear whether ERISA would preempt the New Jersey employer reporting requirements. In general state and local laws that might conflict with ERISA plans are preempted by ERISA. Employer reporting requirements have been in place in Massachusetts for its individual mandate requirements for over ten years, but no employer has decided to test Massachusetts’ requirements in the courts. It does not seem these mandate will be preempted by ERISA so employers in the states of New Jersey, Washington, D.C. and Vermont should monitor the websites for additional guidance and discuss with their ACA reporting vendor the actions needed to comply with these new requirements. There has been talking among other states that are also considering and may implement similar individual mandate requirements in the future.