New Jersey State Individual Mandate
What is the New Jersey State Individual Mandate?
In an effort to help keep the New Jersey health insurance market stable and provide more affordable rates for coverage, New Jersey enacted its own individual mandate, the Insurance Market Preservation Act. New Jersey’s State Individual Mandate passed on May 30, 2018 and went into effect January 1, 2019.
New Jersey’s State Individual Mandate requires New Jersey taxpayers to have minimum essential coverage throughout the year (or qualify for coverage exemption). Exemptions can be obtained if there is a short gap in coverage, if coverage is deemed unaffordable, or other reasons. If a person fails to have health coverage or does not qualify for an exemption, they will be required to make a Shared Responsibility Payment on their 2019 New Jersey Income Tax return. Individual penalties are equal to 2.5% of salary or $695 per taxpayer. If a person is not required to file a tax return with New Jersey, they are considered exempt.
Thankfully, most basic health coverage satisfies the minimum essential coverage (MEC) requirement. These plans can be found through employers, Medicare, Medicaid, NJ FamilyCare, Children’s Health Insurance Program (CHIP), or another company that provides minimal essential coverage. New Jersey taxpayers need to ensure they have enrolled in coverage during open enrollment so they are not forced to pay a penalty.
Employer Obligations & Filing Process
Not only do employers have to follow Federal ACA reporting requirements to the IRS, employers with New Jersey employees will need to submit separate reporting with state-level reporting requirements.
New Jersey is requiring Applicable Large Employers to use IRS forms 1094-C and 1095-C, (1095-B, and 1094-B if fully-insured) to communicate health insurance information to the state. If the 1094-C and 1095-C requirements are repealed by the federal government, the state will issue similar forms to employers for reporting purposes to ensure compliance. The instructions note that out-of-state employers that withhold and remit New Jersey Gross Income Tax for New Jersey residents have the same filing requirements as businesses located in New Jersey.
The standard Federal filing to the IRS remains the same. However, if an employer employs non-New Jersey residents, to avoid privacy concerns, the file should be edited to remove those records. The file format requires Social Security Numbers or birth dates for employees and dependents, along with full names and addresses. Additionally, since dependents can be covered on their parent’s insurance until they are 26, the dependent may be a resident of New Jersey while their parents are non-residents. The state advises employers to notify employees in this situation to ensure their dependent receives a copy of the 1095-C instead.
Employers will have to submit their state-level ACA reporting information by March 31, 2020, using New Jersey’s system (MFT SecureTransport service) for filing W-2 forms. The IRS deadline for reporting ACA information electronically (paper filing is not available) for the 2019 tax year is also March 31, 2020. A submission receipt will be sent (to the email associated with the MFT SecureTransport Account) upon a successful transmission.
New Jersey strongly recommends participating in their testing period, which runs initially through October 31, 2019. Click here to find more information on joining the testing program.
Learn more about the others states that have passed individual mandates or are considering individual mandates by checking out the Complete Guide to State Individual Mandates or watch short (less than 20 minute) webinar where our CEO, Scott Van Horn, discusses each state mandate and what changes are on the horizon.
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