Top ACA Stories You Should Follow in 2020
Changes to the Affordable Care Act (ACA) in 2020 will continue to require focused attention by organizations to keep up with changing, eliminated, or new requirements.
Below are the top ACA issues we’re tracking and what you need to know:
The lawsuit challenging the ACA’s constitutionality
When Congress passed the Tax Cuts and Jobs Act in December 2017, the individual mandate penalty reduced to $0 and a lawsuit was filed questioning the overall constitutionality of the ACA without the individual mandate in effect. On December 14, 2018 a lower court judge ruled that without the individual mandate, all of ACA is unconstitutional. The fifth circuit court of appeals agreed the individual mandate was unconstitutional but remanded the lower court to carefully consider which parts of the massive law are intertwined with the individual mandate and should go away. As of January 1, 2019, the individual mandate is no longer in effect. The defendants of the lawsuit asked the Supreme Court to hear the case on an expedited basis, but the Supreme Court declined in January 2020. On March 2, 20202, the Supreme Court announced they would take up the case in their next term, which would see arguments held in the fall and a decision landing in spring or summer 2021.
Bottom Line: It is unlikely this ACA case will be decided by the Supreme Court until after the 2020 election cycle.
Removal of the Individual Mandate from Tax forms
Tax forms for 2019 no longer require taxpayers to attest they and their tax family had health insurance since there no longer is a penalty. This is a small change that may go unnoticed by most. However, the IRS still requires 1095-C forms to uphold the employer mandate which remains in place and has not been challenged specifically in court.
Bottom Line: Taxpayers who had someone in their household receiving Premium Tax Credits for enrollment through the healthcare Marketplace will still need to report those amounts and employers must continue to print and file 1095-Cs.
Individual state mandate ACA stories
Employer individual mandate reporting to New Jersey and the District of Columbia
Five states now have laws in effect that require residents to have insurance coverage as an effort to keep Marketplace premium prices stable. The requirement for New Jersey and District of Columbia residents went into effect on January 1, 2019. In order to correctly validate that taxpayers had coverage, the states will receive reporting from insurers, the marketplace, and are also requiring employers of all sizes to provide data directly to them. New Jersey is attempting to limit the burden by requesting employers provide the same file format the IRS uses, although non-New Jersey residents should be removed to reduce data privacy issues. The District of Columbia will specify a format, but is already two months delayed with no word on when the format will actually go out.
Bottom Line: Employers need to be prepared to quickly turn around files to New Jersey by March 31, 2020 and District of Columbia by June 30, 2020.
Employer individual mandate reporting to California, Rhode Island, and Vermont
For California, Rhode Island, and Vermont residents the individual mandate began January 1, 2020. While employer reporting to these states won’t come until 2021, many employers have large footprints in California and there is a penalty — $50 per covered individual – for not reporting data to the state.
Bottom Line: Employers (or their ACA vendors) should monitor developments closely to ensure there are no delays in reporting data to these states, especially California, in 2021.
IRS penalties continue to hit employers
The IRS has progressively issued penalties to a subset of employers who failed to issue forms to employees and the IRS, as well as those who failed to offer coverage to full time employees. The IRS worked slowly through the 2015 tax year first, but sped through both 2016 and 2017 tax years. As of January 2020, the IRS continues to issue new letters for the 2017 tax year. Most employers paid little attention to the addresses listed for their EINs and it’s common for the Letter 226J (or others from the IRS) to take weeks to reach the team responsible for ACA. While good faith effort still applies, the penalties can be staggering and surprising to company finance teams.
Bottom Line: Be prepared to respond quickly and timely to any 2017 or 2018 tax year penalty notices; the IRS will likely move on to 2018 over the summer.
Originally posted Jan. 29, 2020
Categorized in: ACA