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Special enrollment period provided for taxpayers making shared responsibility payment

The Centers for Medicare & Medicaid Services (CMS) has announced a special enrollment period for individuals and families who didn’t have health coverage in 2014 and are subject to the shared responsibility payment (employee mandate; fee) when they file their 2014 taxes from states which use the Federally-facilitated Marketplaces (FFM). The special enrollment period is from Mar. 15, 2015 through Apr. 30, 2015.

Background. Under Code Sec. 5000A, which was added by the Affordable Care Act (ACA), beginning in 2014, if a taxpayer or an individual for whom the taxpayer is liable isn’t covered under minimum essential coverage for one or more months, then, unless an exemption applies, the taxpayer is liable for the individual shared responsibility payment on his return. Married individuals who file a joint return for a tax year are jointly liable. The amount of a taxpayer’s shared responsibility payment is based, in part, on the number of individuals a taxpayer is responsible for who do not have minimum essential coverage. (Code Sec. 5000A(c)(3)(B), Reg. § 1.5000A-4)

For each tax year, the individual shared responsibility payment is the lesser of: (1) the sum of the monthly penalty amounts; or (2) the sum of the monthly national average bronze plan premiums for the “shared responsibility family.” (Reg. § 1.5000A-4(a)) Thus, for 2014, the payment amount is the lesser of:

(1) the penalty amount, which is the greater of: (a) 1% of the household income above the taxpayer’s filing threshold, or (b) a dollar amount which in 2014 is $95 per adult, plus $47.50 per child under age 18, limited to a family maximum of $285. (In 2015, the income percentage will be 2% of household income above the taxpayer’s filing threshold, and the dollar amount will be $325 per adult plus $162.50 per child under 18. In 2016, these figures increase to 2.5% and $695 per adult plus $347.50 per child under 18.); or

(2) the national average bronze plan premiums amount, which for 2014 is $2,448 per individual ($204 per month per individual), and $12,240 for a family with five or more members ($1,020 per month for a family with five or more members). (For 2015 the amount is $2,484 per individual ($207 per month per individual), and $12,420 for a family with five or more members ($1,035 per month for a family with five or more members.)

Extended time granted. This special enrollment period will allow those individuals and families who were unaware of, or didn’t understand the implications of, this new requirement, to enroll in 2015 health insurance coverage through the FFM. If taxpayers do not purchase coverage for 2015 during this special enrollment period, they may have to pay a fee when they file their 2015 income taxes.

Taxpayers taking advantage of this special enrollment period will still owe a fee for the months they were uninsured and did not receive an exemption in 2014 and 2015. The special enrollment period is only designed to allow such individuals the opportunity to get covered for the remainder of the year and avoid additional fees for 2015.

The special enrollment period announced today will begin on Mar. 15, 2015 and end at 11:59 PM E.S.T. on April 30, 2015. If a taxpayer enrolls in coverage before the 15th of the month, coverage will be effective on the first day of the following month.

Individuals eligible for the special enrollment period must:

…live in a state with a Federally-facilitated Marketplace;
…currently not be enrolled in coverage through the FFM for 2015;
…attest that, when they filed their 2014 tax return, they paid the penalty for not having health coverage in 2014; and
…attest that they first became aware of, or understood the implications of, the shared responsibility payment after the end of open enrollment (February 15, 2015) in connection with preparing their 2014 taxes.

Percentages of taxpayers who fall into various ACA categories. About three quarters of taxpayer will only have to check a box on their form when they file their taxes to indicate that they had “minimum essential coverage” in 2014, either through their employer, Medicare, Medicaid, veterans care or other qualified health coverage. About 10% to 20% of taxpayers who were uninsured for all or part of 2014 will qualify for an exemption from the requirement to have coverage. About 2% to 4% will have to pay a shared responsibility payment be cause they choose to not obtain coverage and weren’t eligible for an exemption.

References: For the requirement to maintain minimum essential coverage, see FTC 2d/FIN ¶  A-6401  et seq.; United States Tax Reporter ¶  50,00A4  et seq.; TaxDesk ¶  576,151  et seq.; TG ¶  1811  et seq. For the amount of penalty for failure to maintain health insurance coverage, see FTC 2d/FIN ¶  V-3900  et seq.; United States Tax Reporter ¶  50,00A4.2  ; TaxDesk ¶  867,302; TG ¶  71656.

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