When friends talk about health policy problems, sometimes solutions tend to happen! To respond to the needs of affected employers, the State of New Jersey updated its guidance and reporting methodology on February 11, 2020. The state is still requiring all affected applicable large employers, carriers and self-funded plans to submit their 1095 B and 1095 C statements to the state using the DORES MFT Secure Transport system via strictly defined XML files. However, to accommodate entities that need to report on only a few individuals, New Jersey just created this Fillable Form NJ-1095.
Entities who cover 50 or fewer individuals may use this free method to file their forms manually with the state, one form at a time. The NJ-1095 form is valid for federal filers of either 1095-B or 1095-C forms. Larger coverage providers and employers may still need to utilize the help of a vendor to meet New Jersey’s unique data formatting and transmission requirements and also comply with state and federal privacy requirements. However, entities with smaller NJ reporting needs that do not mind doing the work themselves might find the new option helpful.
Employers Not Prepared for New Jersey Reporting Requirements Face Legal Risk
Many national ACA reporting providers are not planning to file health coverage information with the state of New Jersey on behalf of their employer clients for 2019. So lots of businesses that need to provide coverage information to the state of New Jersey for the first time to comply with the state’s new individual mandate may need to self-report using data from their federal reporting vendor. The problem is, due to New Jersey’s unique data formatting and transmission requirements, many affected employers will not be able to file independently. Even if an individual business is prepared to comply with the New Jersey reporting requirements on their own, federal and state privacy requirements may significantly impede the ability to file as planned, putting many employers at legal risk.
In 2018, the State of New Jersey enacted an individual mandate requiring state residents to maintain health insurance coverage beginning in 2019. To help enforce it, New Jersey requires all applicable large employers (ALEs) that employ New Jersey residents and all businesses that sponsor self-funded plans that cover New Jersey residents to file coverage information with the state. ALEs that offer fully-insured coverage may rely on their carrier to send 1095 B statements to the state for their covered employees, but the state is clear that the ALE cannot fully transfer their compliance liability to their insurance carrier. The New Jersey reporting requirement is separate from federal employer reporting obligations, and it doesn’t just impact New-Jersey-based businesses. According to New Jersey officials, “If you are an out-of-state employer who provides health coverage, you must ensure we receive any required 1095 document for each New Jersey resident you employ.”
Unfortunately, New Jersey requires employers to use the state’s Division of Revenue and Enterprise Services’ (DORES) MFT SecureTransport service to send Form 1095 B and C files to the state. Unlike with federal employer reporting, there is no paper filing option in New Jersey. The DORES MFT SecureTransport system is the only option business owners have. But to use it, business owners must obtain credentials, and it is not easy to meet its technical specifications for use.
If a business owner does obtain DORES MFT SecureTransport credentials, there is still another hurdle to face. New Jersey requires affected businesses to submit their IRS Forms 1095 B or C to the state using strictly defined XML format files. Employers who are using one of the many national reporting vendors that have elected to not file state reports for business owners will probably be able to obtain an XML file of all 1095 reporting statements. However, this file will most likely include all reporting statements for every employee, no matter where the employee lives. In theory, New Jersey will accept a combined XML file from an employer, even if it includes protected health and financial data about individuals who are not residents of New Jersey. Unfortunately, this type of transmission will involve social security numbers and protected health information covered by the Health Insurance Portability and Accountability Act (HIPAA) and Health Information Technology for Economic and Clinical Health (HITECH) privacy and data security rules. Sending data about non-residents could also violate many state privacy statutes. Even the state acknowledges that employers complying with the New Jersey reporting requirements could face privacy and legal concerns.
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Coverage providers can send 1095 files containing data pertaining only to part-year and full-year residents of New Jersey, or, for ease of filing, New Jersey will accept the exact same 1095 data files sent to the federal Internal Revenue Service, even if the files include data about individuals who are not residents of New Jersey. Filers who provide information on non-residents of New Jersey should consult privacy and other laws pertaining to residents of other States before sending any sensitive or personal data to New Jersey.
The only way an employer, or their reporting vendor, can meet both the New Jersey reporting requirements and ensure compliance with privacy obligations, is to separate all 1095 statements by the employee’s state of residency. Then the employer must only transmit the statements that pertain to New Jersey resident taxpayers by the state’s March 31, 2020 reporting deadline. Unfortunately, it will be tough, if not impossible, for most employers to extract out just the New Jersey data from the mass XML file they may get from a vendor. Beyond that, the employer will then need to send a scrubbed file back to the New Jersey Division of Revenue and Enterprise using the state-prescribed and strictly defined XML data file formatting requirements.
The District of Columbia has similar requirements to the State of New Jersey. However, the District appears to have a more user-friendly data transmission system, they will accept simpler data file formats, and their filing deadline is June 30, 2020. We anticipate these broader standards will all make it easier for employers who have to self-file in that jurisdiction.
So, if you represent a business with that needs to comply with the New Jersey reporting requirements for 2019, here’s what you need to do, as soon as you can: