Tax Act Repeals the Penalties for the Individual Mandate

July 31, 2018
Posted in ACA 101
July 31, 2018 Associated HCM

Tax Act Repeals the Penalties for the Individual Mandate

The employer mandate (aka employer shared responsibility payment) has not been modified by the Tax Act, but the individual mandate penalty has been reduced to zero for years after 2018.  Thus, effective for years after December 31, 2018, the Tax Act effectively eliminates the individual mandate penalties.  Accordingly, beginning in 2019, the government will no longer attempt to collect the individual mandate penalties if an individual or family does not obtain healthcare coverage in 2019 and thereafter.  The elimination of the penalties does not technically remove the requirement to obtain healthcare coverage.  But without penalties there will be no enforcement and, in effect, no practical mandate to obtain coverage for 2019 and later years.


The IRS requires an employer or insurance company to report on Form 1095 whether an individual had ACA compliant coverage for the tax year.  Employer reporting on Form 1095 was not eliminated by the new Tax Act. For 2018, nothing has changed with respect to the ACA individual mandate or reporting on IRS Form 1095.  Employers that fall above the threshold of 50 full-time and full-time equivalents should still report for the 2018 year.

Definitions for Health Plans

  • Self-Funded Plan: Employer pays fixed costs (administrative fees and stop-loss premium) and claims costs incurred by covered persons and receives reimbursements if claims costs exceed levels set in the policy.
  • Fully Insured Plan: (traditional insurance plan) Company pays premiums, insurer collects premiums and pays health care claims based on policy purchased by employer.
  • Grandfathered Plan: plan in existence on March 23, 2010 that has not been changed in ways that substantially cut benefits or increase costs for consumers as long as employers notify employers that the plan is grandfathered and they have continuously covered at least one person continuously since March 23, 2010.

Notification to employees of existence of Health Marketplace:

Effective October 1, 2013.  Notify new hires within 14 days of their employment. Template available on DOL website here.

Waiting Periods

Can’t be more than 90 days after employee becomes eligible. Can condition eligibility on completion of specified number of hours (no more than 1,200), completion of orientation period (not more than 30 days) or attaining job-specific certification/licensure.

Comply with W-2 Reporting Requirements

Employers must report cost of health coverage on employees’ W-2 forms, beginning Jan 2012 for large employers (those filing 250 or more W-2’s), optional for anyone with fewer than 250 employees until further guidance comes from the IRS.

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