Well, 2021 is off to a contentious start politically, and coronavirus infections are surging again, but we have good news from California! The state’s taxing authority, the Franchise Tax Board (FTB), has extended or effectively extended the deadlines in 2021 for insurers and self-insured employers with covered employees and dependents in California to provide them with proof of their coverage in 2020, and to file that proof with the FTB.
Back in 2019, we issued an alert laying out the requirements of the California mandate requiring most California residents to have medical insurance beginning in 2020. To enforce the mandate, and to help residents prove they had the required coverage for the prior year, California requires insurers and self-insured employers to provide to insured Californians proof of their coverage for that prior year by the following Jan. 31, and to file that proof with the FTB by the following March 31.
The FTB permits insurers and self-funded employers to submit the same federal forms 1094-B/1095-B or 1094-C/1095-C the insurers and employers file with the IRS.
Lockton comment: The FTB’s March 31, 2021, filing deadline matches up with the IRS’s March 31 filing deadline, but the Jan. 31 deadline to furnish a copy of the Form 1095-B or -C to the covered individual is several weeks in advance of the March 2 deadline imposed by the IRS. Employers hoped the FTB would extend at least the Jan. 31 furnishing deadline or adopt a nonenforcement policy with respect to that deadline, but also hoped the FTB would extend its filing deadline, due to 2021 being the first year in which such forms would be filed with the FTB. As noted below, the FTB came through on both counts.
The good news
Extended filing deadline: Updated FTB filing instructions reflect that the FTB will not penalize insurers and self-funded employers for missing the March 31, 2021, deadline to file with the FTB as long as the filing is made within the following two months (that is, by May 31, 2021). The state can impose a $50 per form penalty for filings received after that date.
No penalty for missing the Jan. 31 furnishing deadline: Better yet, the FTB told us in a telephone conversation that there is no penalty for missing the Jan. 31, 2021, deadline for insurers to furnish proof of insured coverage (and self-insured employers to furnish proof of self-insured coverage) for 2020 to California employees and dependents who had coverage during that year. Of course, insurers and self-funded employers will want to meet the IRS’s March 2, 2021, deadline for that.
Lockton comment: The IRS deadline for furnishing Forms 1095-B or -C for a given year to covered individuals is normally Jan. 31 of the following year, but the IRS has always extended that deadline. Presumably, one day it will hold fast to the Jan. 31 deadline – the same deadline employers have for furnishing Forms W-2 to employees. But until then, we expect the FTB to simply allow insurers and employers to provide those forms to Californians by the federal deadline for furnishing the forms.
We expect the FTB to issue additional guidance, including confirmation of the filing deadline extension, and the nonenforcement policy, with respect to the furnishing requirement, in the coming weeks.
Note that Under California law, the insurer has the obligation (for insured plans) to get Forms 1095-B into the hands of covered employees in California, and to file its Forms 1094-B and 1095-B with the FTB. The FTB says, however, that if the insurer fails fulfill those obligations, the duty falls on the fully insured employer.
If you have questions about the California filing requirements, please reach out to your Lockton account service team.