California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 4 - Individual Shared Responsibility Penalty › Section 26000.61020 - Exemptions

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) A responsible
				individual shall not be liable for a penalty for any applicable household
				member for a month that includes a day on which the applicable household member
				is an exempt individual.
(b) A
				penalty will not be imposed on an applicable individual who lacks affordable
				coverage.
(1) An applicable individual lacks
				affordable coverage in a month if the applicable individual's required
				contribution (determined on an annual basis) for minimum essential coverage for
				the month exceeds the required contribution percentage 8.3 percent of the
				applicable household income. For purposes of this section, an applicable
				individual's household income is increased by any amount of the required
				contribution made through a salary reduction arrangement that is excluded from
				gross income.
(2) For plan years
				beginning in any calendar year after 2019, the required contribution percentage
				is the percentage determined by the United States Department of Health and
				Human Services that reflects the excess of the rate of premium growth between
				the preceding calendar year and 2013 over the rate of income growth for the
				period.
(3) Eligible
				employer-sponsored plans
(A) A responsible
				individual or applicable spouse or applicable dependent of the responsible
				individual is treated as eligible for coverage under an eligible
				employer-sponsored plan for a month during a plan year if the responsible
				individual or applicable spouse or applicable dependent of the responsible
				individual could have enrolled in the plan for any day in that month during an
				open or special enrollment period, regardless of whether the responsible
				individual or their applicable spouse or applicable dependent is eligible for
				any other type of minimum essential coverage.
(B) An applicable individual eligible for
				coverage under an eligible employer-sponsored plan offered by the applicable
				individual's employer is not treated as eligible for coverage as an applicable
				dependent or applicable spouse of another applicable individual under an
				eligible employer-sponsored plan (for example, an eligible employer-sponsored
				plan offered by the employer of the applicable individual's spouse) for any
				month included in the plan year of the eligible employer-sponsored plan offered
				by the applicable individual's employer.
(C) An applicable individual who was formerly
				employed or a formerly employed applicable individual's applicable dependent or
				applicable spouse, who may enroll in continuation coverage required under
				Federal law or a state law that provides comparable continuation coverage, or
				in retiree coverage under an eligible employer-sponsored plan, is eligible for
				coverage under an eligible employer-sponsored plan only if the applicable
				individual enrolls in the coverage.
(D) In the case of an applicable individual
				who is eligible to purchase coverage under an eligible employer-sponsored plan
				sponsored by the applicable individual's employer, the required contribution is
				the portion of the annual premium that the applicable individual would pay
				(whether through salary reduction or otherwise) for the lowest cost self-only
				coverage.
1. In the case of an applicable
				household member who is eligible for coverage under an eligible
				employer-sponsored plan because of a relationship to a responsible individual,
				the required contribution is the portion of the annual premium that the
				responsible individual would pay (whether through salary reduction or
				otherwise) for the lowest cost family coverage that would cover the responsible
				individual and the responsible individual's applicable household members who
				are not otherwise exempt individuals.
2. For each responsible individual and
				applicable household member described in this subsection, affordability is
				determined separately for each employment period that is less than a full
				calendar year or for the portions of an employer's plan year that fall in
				different taxable years of the responsible individual. Coverage under an
				eligible employer-sponsored plan is affordable for a part-year period if the
				annualized required contribution for self-only coverage (in the case of the
				responsible individual) or family coverage (in the case of an applicable
				household member) under the plan for the part-year period does not exceed the
				required contribution percentage of the responsible individual's applicable
				household income for the taxable year.
3. Amounts newly made available for the
				current plan year under a health reimbursement arrangement that a responsible
				individual may use to pay premiums, or may use to pay cost-sharing or benefits
				not covered by the primary plan in addition to premiums, are counted toward the
				responsible individual's required contribution if the health reimbursement
				arrangement would be integrated, as that term is used in Internal Revenue
				Service Notice 2013-54 (2013-40 IRB 287), with an eligible employer-sponsored
				plan for a responsible individual enrolled in the plan. The eligible
				employer-sponsored plan and the health reimbursement arrangement must be
				offered by the same employer. Employer contributions to a health reimbursement
				arrangement count toward a responsible individual's required contribution only
				to the extent the amount of the annual contribution is required under the terms
				of the plan or otherwise determinable within a reasonable time before the
				responsible individual must decide whether to enroll in the eligible
				employer-sponsored plan.
4. Amounts
				made available for the current plan year under a cafeteria plan, within the
				meaning of Internal Revenue Code section
				125, are taken into account in
				determining a responsible individual's or their applicable household members'
				required contribution if all of the following apply:
a. The responsible individual may not opt to
				receive the amount as a taxable benefit;
b. The responsible individual may use the
				amount to pay for minimum essential coverage; and
c. The responsible individual may use the
				amount exclusively to pay for medical care, within the meaning of Internal
				Revenue Code section
				213.
5. Nondiscriminatory wellness program
				incentives, within the meaning of section
				54.9802-1(f) of
				Title 26 of the Code of Federal Regulations, as it reads as of December 15,
				2017, offered by an eligible employer-sponsored plan that affect premiums are
				treated as earned in determining a responsible individual's required
				contribution for purposes of affordability of an eligible employer-sponsored
				plan to the extent the incentives relate exclusively to tobacco use. Wellness
				program incentives that do not relate to tobacco use or that include a
				component unrelated to tobacco use are treated as not earned for this
				purpose.
(4) A
				responsible individual is treated as ineligible for coverage under an eligible
				employer-sponsored plan for a month that is not described in this subparagraph.
(A) The required contribution for an
				applicable individual who is only eligible to purchase minimum essential
				coverage in the individual market is the annual premium for the lowest cost
				bronze plan available in the individual market through the Exchange serving the
				rating area in which the applicable individual resides (without regard to
				whether the applicable individual purchased a qualified health plan though the
				Exchange), reduced by the maximum amount of any credit or subsidy allowable
				under Internal Revenue Code section
				36 B and Title 25 of the
				Government Code for the taxable year determined as if the individual was
				covered for the entire taxable year by a qualified health plan offered through
				the Exchange. All applicable household members who have not otherwise been
				granted an exemption through the Exchange and who are not treated as eligible
				to purchase coverage under an eligible employer-sponsored plan shall be
				included to determine the required contribution.
(B) For each applicable household member,
				affordability under this subsection is determined separately for each period
				that is less than a 12-month period. Coverage under a plan is affordable for a
				part-year period if the annualized required contribution for coverage under the
				plan for the part-year period does not exceed the required contribution
				percentage of the responsible individual's applicable household income for the
				taxable year.