Last summer, California joined the growing list of states enacting their own individual mandates. The mandate that was signed into law took effect Jan. 1, 2020. On March 23, 2020, the California Franchise Tax Board released additional specifics on requirements for employers who employ California residents. And the state followed that by publishing additional draft guidance April 17.
In many ways the law is similar to the mandates passed in other states, including New Jersey. But there is one clause all employers with employees who reside in California certainly will want to be mindful of.
Let’s take a look.
Basic components of the California Individual Mandate Employer Reporting
To start, let’s look at how the California mandate affects employers’ compliance requirements.
- California will require employers with self-insured enrolled individuals and their dependents who have resided in the state at any time during the year to provide information on insurance coverage. Similar to IRS federal requirements, employers will be required to submit Form 1095-C to the state. For Form 1094-C, part one (except for line 19) must be submitted to both the state and the IRS. Parts two, three and four are required by the IRS and optional for state submission. Only one Form 1095-B or 1095-C needs to be provided to an individual. There is no need to send one form for federal and one for state.
- Forms 1095-B and 1095-C must also be distributed to California residents by January 31, 2021, with no extension.
- Forms must be submitted in XML format. The state is currently developing a new File Exchange System for submission, with final details to come.
- The deadline to submit to the state of California is March 31, 2021.
- Any corrections sent to the IRS should be sent to California as well.
Employer penalty risk
While many aspects of California’s individual mandate mirror those of New Jersey and Washington, D.C., there is one important difference that employers need to be aware of: Expect the Golden State to be active in enforcing applicable employer penalties.
Employers will be fined $50 per unreported individual, and these fines will grow on a case-by-case basis without a maximum ceiling. This makes California the second state (Massachusetts was the first) to enforce both an individual and employer filing penalty.
More information surrounding requirements is expected to be flushed out, but given the size of the state economy and the potential for associated penalties, the California individual mandate is certainly one that companies across the country will be keeping a close eye on.
Keeping up with individual mandate changes
As the expectations surrounding compliance change from state to state, companies need a dependable partner they can count on to guide them toward their plan goals.
Health e(fx) can help. Offering a leading compliance, analytics and workforce solution, Health e(fx) allows companies to track their compliance considerations and coverage options no matter where they do business.
We can help companies trying to navigate the California state mandate with:
- State configuration and setup
- Form audit and approval
- Employer filing and submission
- Corrections process
- State ledger reports