Certain provisions of the Affordable Care Act, most notably the employer “play or pay” penalties, have been delayed. However, the Health Insurance Marketplace, also known as the public exchanges, is still scheduled to begin operation on January 1, 2014, with open enrollment beginning on October 1, 2013. The purposes of this post are to remind you of the required notice that employers must provide to their employees by October 1 and to discuss a few practical considerations relative to this notice.
Section 1512 of the Affordable Care Act added Section 18B to the Fair Labor Standards Act (FLSA), which requires that almost all employers (but see below) must provide to their employees a written notice:
- Informing the employee of the existence of the Marketplace, including a description of the services provided by the Marketplace, and the manner in which the employee may contact the Marketplace to request assistance;
- If the employer offers a health plan and the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code of 1986 and a cost sharing reduction under section 18071 of Title 42 if the employee purchases a qualified health plan through the Marketplace; and
- If the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.
In Technical Release 2013-02, the Department of Labor stated that the due date for providing this notice is October 1, 2013. The DOL also indicated that it would issue model notices and that, while the use of these notices is not mandatory, employers could use these model notices to satisfy the requirement. Subsequently, the DOL issued two model notices, one for employers who offer a health plan and another for employers who do not offer a health plan.
These model notices provide more information than the statute requires. In general, Part A of the model notices sets forth the three items required above, and Part B provides information regarding the employer’s plan which is not required to be provided as part of this notice. The purpose of Part B appears to be to inform the employee whether the employer offers affordable coverage that meets the minimum value standards required by the ACA, thus making the employee ineligible for premium credits for insurance purchased through the Marketplace. However, Part B presents this information in an indirect and perhaps confusing manner, and, if the employer wishes to convey this information through this notice, it should consider expressing the information more directly and clearly.
The notice can be provided electronically if the DOL’s electronic notice safe harbor requirements are met.
The notice requirement applies to all employers that are subject to the Fair Labor Standards Act. While the FLSA covers almost all employers, there are a few employers that are exempt, for example certain employers with less than $500,000 of annual gross receipts and certain nonprofit organizations. The DOL has an online tool which can be useful in assessing whether an organization is subject to the FLSA.
Finally, the DOL indicated on September 11 that, while the notice is required, it will not assess a fine or penalty for failure to provide the notice by October 1.