New Jersey Governor Phil Murphy signed the “New Jersey Health Insurance Market Preservation Act” on May 30, 2018; which will require individuals without minimum essential coverage (MEC) health insurance to pay a State shared responsibility tax. Effective January 1, 2019, all New Jersey taxpayers and their dependents who are applicable individuals will be required to have MEC for each month.
The New Jersey Health Insurance Market Preservation Act is similar to the individual shared responsibility provisions under the Affordable Care Act (ACA). Section 5000A of the Internal Revenue Code (IRC) of 1986 requires individuals to have MEC health coverage or pay a penalty; this is commonly known as the ACA “individual mandate”. The Tax Cuts and Jobs Act of 2017 (TCJA) amended Section 5000A of the IRC of 1986 and reduced the penalty for the ACA individual mandate to $0 effective for months beginning in 2019. This change in the federal individual mandate prompted New Jersey to enact a state-level individual mandate that would help encourage younger and healthier individuals to maintain health coverage. Other states are considering similar mandates.
Penalties, Reporting and Exemptions
Under the Act, the penalty for not maintaining MEC health coverage will be the same as the penalty under Section 5000A prior to the TCJA amendment.
The Act states that information reporting is required and this requirement may be satisfied by providing the same information, which is currently reported under the IRC Section 6055. The agency has not yet made available reporting requirement guidance, however we anticipate that self-funded employers will be required to report MEC coverage that they offer to employees. Paylocity will provide more details when the agency releases additional guidance.
An “applicable individual” are individuals subject to the mandate, however those with religious exemptions, not lawfully present or incarcerated are excluded from complying with the Act.
Thank you for choosing Paylocity as your Payroll Tax partner. Should you have any questions please contact your Paylocity Account Manager.
This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.