What Employers Need to Know About State Reporting & Penalties 

January, 2026

Tony R. Nelson, Jr., Compliance Specialist

A number of states have established their own individual health insurance mandates, which require state residents to have minimum essential coverage (“MEC”). Although these requirements are directed at individuals, they also create state level reporting and furnishing requirements for employers, insurance companies, and other benefit providers. The following is a state-by-state summary of current individual mandates and their implications for employers, including information about when to report, penalties, and how to file.

California

California adopted an individual mandate taking effect on January 1, 2020, requiring residents to maintain MEC or potentially owe a state tax penalty. The mandate was enacted following the elimination of the federal individual mandate under the Affordable Care Act (“ACA”) and was paired with state-level MEC reporting requirement administered by the California Franchise Tax Board (FTB).

Important Dates:

• Entities are required to furnish information statements to individuals receiving MEC by January 31, 2026 (no extensions are available).
• Entities are required to file the applicable federal information returns (Forms 1094-B, 1095-B, 1094-C, and 1095-C) with the California FTB by March 31, 2026 following the applicable coverage year. However, an automatic extension until May 31 applies, and penalties are not enforced if filing is completed by that date. The FTB can only impose a $50 penalty per individual who was provided health coverage if returns are filed after May 31.

Employer Obligations:

California requires entities that provide MEC to an individual during a calendar year to report health coverage information to the state using the applicable federal Forms 1094 and 1095 through the FTB reporting process. Self-insured employers, which include level-funded plans, are responsible for reporting enrolled coverage directly to the state. Fully insured employers typically rely on their insurance company to complete state reporting; however, employers should confirm reporting responsibility with the insurance company each year to ensure compliance.

California Individual Mandate Penalties:

California residents who do not maintain MEC for the year and who do not qualify for an exemption may be subject to a state individual mandate penalty, which is assessed and paid when filing the California personal income tax return. In addition, the FTB may impose penalties on reporting entities for non-compliance with MEC reporting requirements, including a $50 penalty per covered individual for late, incomplete, or missing filings submitted after the automatic extension deadline.

Process for Filing:

State filing is completed through the FTB’s electronic filing system (separate from IRS submission). Employers with 250 or more information returns must file electronically.

District of Columbia

The District of Columbia implemented its individual mandate beginning with 2019, requiring residents to maintain qualifying health coverage or potentially owe a penalty through the D.C. income tax system.

Important Dates:

• The individual furnishing deadline for required coverage statements in Washington, D.C. aligns with the federal IRS furnishing deadline: March 2, 2026.
• Separately, the District of Columbia filing deadline for submitting coverage information to the Office of Tax and Revenue Office of Tax and Revenue (“OTR”) is 30 days after the applicable IRS electronic filing deadline (including any approved federal extensions):  April 30, 2026.

Employer Obligations:

Washington, D.C. requires both in-state and out-of-state employers/groups that offer MEC plans to District residents, including self-insured group health plans and fully insured applicable large employers that cover at least one employee who was a D.C. resident during the applicable calendar year, to furnish and file coverage information.

District of Columbia Individual Mandate Penalties:

D.C. residents who go without qualifying coverage for the year and who are not exempt from the mandate will be assessed an individual mandate penalty on their D.C. individual income tax return.

Process for Filing:

DC coverage reporting is filed through MyTax.DC.gov as a pipe-delimited (.txt) format file, not the IRS XML format. Only include coverage information for individuals that are District residents. Make sure that the information reported to D.C. matches what you reported to the IRS.

Massachusetts

Enacted in 2006, Massachusetts residents were required to have qualifying health insurance prior to the federal ACA. Insurance coverage must qualify as Minimum Creditable Coverage (“MCC”) meaning that it meets certain standards mandated by the state.

Important Dates:

• The Massachusetts Form 1099-HC furnishing deadline is February 2, 2026 (due to January 31 falling on a weekend in 2026) requiring coverage providers to deliver the form to covered individuals to support compliance with the state’s individual mandate.

• Separately, employers subject to the Health Insurance Responsibility Disclosure (“HIRD”) must file during the annual HIRD reporting window, which generally runs from November 15th through December 15th each year.

Employer Obligations:

Although MA Form 1099-HC is most commonly furnished and filed by the carrier, employers should confirm whether they retain responsibility for issuing the form in situations involving self-insured plans or non-standard insurance plans. In addition, certain employers are required to complete the HIRD, which discloses information about the health insurance offered to employees and allows MassHealth to assess eligibility for state premium assistance programs.

Massachusetts Individual Mandate Penalties:

Individuals who fail to have MCC and are not exempt from the mandate may be subject to a state penalty assessed on their Massachusetts tax return.

Process for Filing:

Employers will report (and file) MA Form 1099-HC, as well as submit their HIRD Forms, electronically through MassTaxConnect. Follow the state’s instructions for formatting and uploading your forms.

New Jersey

New Jersey’s individual health insurance mandate took effect on January 1, 2019, under the Health Insurance Market Preservation Act, requiring state residents to maintain qualifying health coverage for themselves and their dependents or potentially owe a Shared Responsibility Payment, which is assessed and paid through the New Jersey state income tax return.

Important Dates:

• The employee Form 1095-C mail deadline to primary enrollees who are New Jersey residents: March 2, 2026.

• Employers are required to transmit coverage forms to the NJ Division of Taxation: March 31, 2026.

Employer Obligations:

Applicable to in-state and out-of-state employers who employ New Jersey residents, even if the employer does not withhold New Jersey payroll taxes. The employer reporting obligation varies based on the employer’s size and whether the employer offers self- insured or fully-insured coverage. See here for those details: https://nj.gov/treasury/njhealthinsurancemandate/employers.shtml.

Note that the state’s 1095-B and 1095-C requirements differ from federal requirements. The state currently expects to accept NJ-1095, fully completed federal 1095-A, 1095-B and 1095-C forms, and/or 1095-C forms with parts I and III completed. The state does not require coverage providers to transmit Forms 1094, although it will accept them if a coverage provider sends them as part of a larger file that includes Forms 1095.

New Jersey Individual Mandate Penalties:

If a person fails to have health coverage or does not qualify for an exemption, they will be required to make a Shared Responsibility Payment. To find more information about how to calculate an Estimated Shared Responsibility Payment, click here.

Process for Filing:

New Jersey uses the same secure transport system that an employer or vendor would use to submit W-2 forms. Known as “MFT SecureTransport” or “Axway”, vendors/employers will need to register for an account to become approved to submit forms.

NJ requests files in the same XML format as the IRS. Employers who have workers that are not New Jersey residents will need to modify the file to eliminate those employees. XML format requires employees and dependents to list full SSN or date of birth with name and address. Another issue employers may encounter is that dependents can remain on their parent’s plan until age 26, and they may be living in NJ while their parents are not residents. The state recommends informing employees of this so they can make sure their dependent also receives a copy of their 1095 containing coverage information.

No paper filing option is available.

Rhode Island

The State of Rhode Island’s individual mandate, requiring residents to have qualifying coverage throughout the year, went into effect on January 1, 2020. Rhode Island issued proposed regulations outlining the employer reporting obligation and current requirements can be viewed on their website, click here.

Important Dates:

• The employee Form 1095-C mail deadline is also the same as the federal deadline:  March 2, 2026.

• Employers are required to report annually by the federal deadline:  March 31, 2026.

Employer Obligations:

Employers must submit a report of covered residents to the state.

Rhode Island Individual Mandate Penalties:

Rhode Island residents who do not have MEC, for themselves or family members, at any time during the year and do not qualify for an exemption may be required to make a Shared Responsibility Payment when filing their Rhode Island return with their personal income tax return.

Process for Filing:

Files may be submitted on the state’s Division of Taxation website using one of two options: IRS Reporting Format (AIRS) or a flat file (CSV file) containing the same information as Form 1095.

Vermont

The State of Vermont individual mandate, requiring residents to have qualifying coverage throughout the year, went into effect on January 1, 2020. However, Vermont has indicated that employer reporting is not required so long as the federal requirement to distribute 1095-C forms remains.

Employer Action Items

Confirm and Document Reporting Responsibility

• Verify Annually: Clarify whether the employer, insurance company, TPA, or plan sponsor is responsible for state-level 1095 reporting.
• Document Accountability: Keep a record of proof of responsibility in case of any state inquiries.

Track State Residency and Coverage Accurately

• Maintain Residency Data: Ensure employee and dependent residency information is accurate and up to date.
• Validate Coverage Records: Verify that complete coverage information is available for everyone that is required to comply with state mandates.

Manage Deadlines and Filing Requirements Proactively

• Separate Deadlines: Keep track of federal deadlines for furnishing and state deadlines for transmission separately.
• Verify technical specifications: Double check required file type and where to submit for acceptance.