Tax Cut & Jobs Act – Individual Mandate Penalty Reduced to Zero

 December 22 2017     Diane Cross

Today, President Trump signed into law the Tax Cut & Jobs Act that was passed by both the House and Senate earlier in the week.  While the Act brings significant change to the individual and corporate tax code, it also effectively repeals the Affordable Care Act’s (ACA) individual mandate.  This begs the question from employers, do we still need to report under the ACA for 2017?  In short – yes, employers are still required to report for 2017 as this Act does not have an impact on employer reporting requirements.

As background, since 2014 taxpayers were required to maintain minimum essential coverage (MEC) for each month or qualify for a coverage exemption.  If not, individuals were subject to a penalty when filing their federal income tax return.  This Act reduces the penalty associated with the individual mandate to zero – effectively repealing the provision as no penalty will be imposed for failing to maintain minimum essential coverage.  In other words, the individual mandate still exists but there will be no penalties for individuals who do not maintain MEC.  

With these changes, employers have begun asking if ACA reporting is still required.  Importantly, this provision is not in effect until 2019 and the individual mandate remains for 2017 and 2018. In addition, while reporting is used in part to verify enrollment in MEC for purposes of the individual mandate, it is also used to determine whether an employer is potentially liable for a payment under the employer mandate.  As such, ACA reporting requirements for 2017 are not impacted by this Act and remain the same. 

Despite the repeal of the individual mandate penalty, employers and individuals must continue to comply with all other ACA provisions.  The Act does not impact any other ACA provisions, including the employer mandate.  HORAN will continue to monitor legislation impacting health and welfare benefits and provide updates accordingly. But for now, employers should continue to comply with the ACA’s reporting requirements for 2017.  Please contact your HORAN representative with questions.