In addition, under the HHS MEC regulations, a hardship exemption is available for an individual who lacks access to affordable minimum essential coverage based on projected household income. An individual seeking this exemption must adjust projected household income by the amount paid through a salary reduction arrangement for minimum essential coverage that is excluded in the prior year. Accordingly, the final regulations do not adopt this recommendation. A commentator questioned whether coverage offered by issuers located in territories of the United States is minimum essential coverage. Insured plans must be offered within a state to be treated as an eligible employer-sponsored plan or as a plan in the individual market. Section 1304(d) of the Affordable Care Act (42 U.S.C. 18024(d)) and the final regulations provide that the term state means each of the 50 states and the District of Columbia.

  • Self-only coverage means health insurance that covers one individual.
  • The premium for the applicable plan takes into account rating factors (for example, an individual’s age or tobacco use) that an Exchange would use to determine the cost of coverage.
  • Tax preparation software can also help you calculate your payment when filing electronically.
  • Other states do not provide full Medicaid coverage as pregnancy-related Medicaid.
  • Finally, the penalty will not be imposed if the applicable individual did not have coverage for a continuous period of three months or less.

For each non-exempt family member who doesn’t have coverage, the taxpayer will owe a payment. The constitutionality of the individual mandate was challenged by Obamacare opponents arguing that the government doesn’t have the right to penalize its citizens for not buying something. But the mandate was upheld by the Supreme Court on June 28, 2012. The court found that the shared responsibility payment was actually a type of tax, and determined the individual mandate was constitutional because the government has the right to tax its citizens.

Health Industry Washington Watch

Section 5000A applies its coverage requirement and exemptions on an individual basis, which is inconsistent with the commentators’ recommendation. Commentators requested excluding Medicaid coverage provided to medically needy individuals from the definition of minimum essential coverage because the benefits available may be limited. In addition, treating Medicaid coverage for the medically needy as minimum essential coverage can lead those individuals to experience multiple changes in premium tax credit eligibility throughout a year, creating administrative complexity. However, individuals who are eligible for pregnancy-related Medicaid may not know at open enrollment for the 2014 coverage year that such coverage is not minimum essential coverage. Accordingly, the Treasury Department and the IRS anticipate issuing guidance providing that women covered with pregnancy-related Medicaid for a month in 2014 will not be liable for the shared responsibility payment for that month. Businesses with 50 or more full-time equivalent (FTE) employees are required to offer comprehensive, affordable health insurance coverage or they risk a penalty.

The Individual Shared Responsibility Payment Under The Aca

(ii) A nonexempt individual for whom the taxpayer is liable under paragraph (c)(2) or (c)(3) of this section does not have minimum essential coverage. § 1.5000A-1 Maintenance of minimum essential coverage and liability for the shared responsibility payment. The final regulations reserve on whether Medicaid https://turbo-tax.org/ coverage provided to a medically needy individual is minimum essential coverage. It is anticipated that future regulations that will be effective starting in 2014 will provide that Medicaid coverage provided to a medically needy individual is not government-sponsored minimum essential coverage.

Minimal Essential Health Insurance Coverage

If an individual has not attained the age of 18 before the first day of a month, the applicable dollar amount for the individual is equal to one-half of the applicable dollar amount (as expressed in paragraph (b)(2)(ii) of this section) for the calendar year in which the month Start Printed Page 53663occurs. For purposes of this paragraph (b)(2)(iii), an individual attains the age of 18 on the anniversary of the date when the individual was born. For example, an individual born on March 1, 1999, attains the age of 18 on March 1, 2017. An individual is an exempt individual for a month that includes a day on which the individual has in effect a religious conscience exemption certification described in paragraph (a)(2) of this section. (2) Government-sponsored program generally not an eligible employer-sponsored plan. Except for the program identified in paragraph (b)(7) of this section, a government-sponsored program described in paragraph (b) of this section is not an eligible employer-sponsored plan.

The shared responsibility payment is not subject to deficiency procedures of subchapter B of chapter 63 of the Internal Revenue Code. Interest on this payment accrues in accordance with the rules in section 6601. (iv) The sum of the monthly penalty amounts is $1,911.24 (($144.79 × 6) + ($173.75 × 6)).


The payment is set per criteria in the New Jersey Health Insurance Market Protection Act of 2018. The law states that your payment amount is capped at the cost of the statewide average annual premium for Bronze Health Plans in New Jersey. The amount of the SRP is generally based on your income and family size and is capped at the statewide average annual premium for Bronze Health Plans in New Jersey. An exemption that’s needed when applying for Catastrophic coverage for people 30 and older who faced a “hardship” that prevented them from getting insurance. Hardship exemptions are one type of exemption that someone can claim to qualify for Catastrophic coverage, along with affordability exemptions. If you go uninsured for only part of a year, you must pay only a partial penalty, which is pro-rated for the amount of time you were without coverage.

  • The proposed regulations provide a method to employers for determining in advance whether or not an employee is to be treated as a full-time employee, based on the hours of service credited to the employee during a previous period.
  • Grandfathered health plan means any group health plan or group health insurance coverage to which section 1251 of the Affordable Care Act (42 U.S.C. 18011) applies.
  • If you qualify for an exemption, you will attach a form to your tax return to claim that exemption.
  • If you answered yes to line 11, you would be paying a percentage fee instead of a flat amount.

The final regulations do not specifically address these arrangements. It is anticipated that future guidance will address the application of section 5000A and the ACA’s insurance market reforms to these types of arrangements. Estimated annual burden hours per respondent varies from .1 to .5 hours, depending on individual circumstances, with an estimated average of .21 hours. It’s worth noting that although the IRS has been dealing with an historic backlog in recent years, they appear to be catching up. As of late 2022, the IRS was sending employer mandate penalty letters (Letter 226J) for 2020 and previous years.


However, certain coverage of this type may be recognized as minimum essential coverage by the HHS Secretary, in Start Printed Page 53650consultation with the Treasury Secretary, under section 5000A(f)(1)(E). The proposed regulations do not specifically address whether Section 1115 demonstration projects constitute Medicaid coverage under Title XIX of the Social Security Act for purposes of section 5000A. A number of commentators recommended against considering as minimum essential coverage Section 1115 demonstration projects that provide a specific and narrow set of benefits. An exemption that’s needed when applying for Catastrophic coverage for people 30 years or older whose coverage is unaffordable.

So although the federal individual mandate penalty no longer applies, the rest of the ACA remains intact, including the shared responsibility provision that goes along with the employer mandate. The penalty calculations remained unchanged for 2017 and 2018, although the maximum penalty amounts (which are based on the average cost of a bronze plan) grew each year as health insurance premiums increased. Through 2018, if you have an exemption, you don’t have to pay the shared responsibility penalty even if you don’t buy health insurance.

III. Exempt Individuals

In addition, commentators asked whether a plan offered to an employer’s employees by a third party, such as a professional employer organization or leasing company, is an eligible employer-sponsored plan for the employees eligible to participate in the plan. The final regulations are revised to provide that a plan offered by an employer to an employee includes a plan offered to an employee on behalf of an employer. No inference is intended from this treatment that the third party is the employer for this or any other provision of the Code or related laws. As of 2023, the penalty for not offering coverage to at least 95% of full-time employees is $2,880 per full-time employee, after subtracting the first 30 full-time employees.

  • For instance, coverage offered through the Exchange in a rating area might not cover a family member living in different rating area or a single policy might not cover all the members in a taxpayer’s household.
  • One commentator suggested that certain arrangements of this type be treated as eligible employer-sponsored plans, arguing that treating these arrangements as eligible employer-sponsored plans would increase flexibility for employers and employees in satisfying their respective shared responsibility requirements.
  • The accuracy-related penalty of section 6662(a) applies only to underpayments of tax, defined in section 6664.

The proposed regulations provide that the determination of whether a family member is required to file a return is made without regard to section 1(g)(7). Under section 1(g)(7), a parent may, if certain requirements are met, elect to include in the parent’s gross income, the gross income of his or her child. If the parent makes the election, the child is treated as having no gross income for the taxable year. The final regulations remove “without regard to section 1(g)(7).” The proposed https://turbo-tax.org/the-individual-shared-responsibility-payment-under/ regulations’ use of the phrase “without regard to section 1(g)(7)” implies that the child’s gross income is included in both the parent’s adjusted gross income and the child’s adjusted gross income in determining household income. The final regulations remove the phrase to clarify that if a parent makes an election under section 1(g)(7), household income includes the child’s gross income included on the parent’s return and the child is treated as having no gross income.

Change or cancel plans

You’ll report a marketplace-granted exemption when you file your tax return. If you have to make a payment, you can use that year’s version of Form 8965 to figure the shared responsibility payment amount due. Filing electronically is the easiest way to file a complete and accurate tax return. Tax preparation software can also help you calculate your payment when filing electronically. When you are figuring out your shared responsibility payment, make sure you use the correct percentage amount to calculate the payment. IRS assistors cannot calculate the shared responsibility payment for you.

(ii) Under paragraph (c)(2) of this section, E and F are not liable for a shared responsibility payment attributable to G for January through May of 2016, but are liable for a shared responsibility payment attributable to G, if any, for June through December of 2016. H is not liable for a shared responsibility payment attributable to G for any month in 2016, because G is not H’s dependent for 2016 under section 152. A number of commentators proposed that the IRS adopt additional hardship exemptions to address specific situations. Authority to define circumstances giving rise to a hardship exemption, as well as authority to grant hardship exemptions in individual cases, resides with HHS. HHS has provided guidance on the hardship exemption in the HHS MEC regulations.