ACA Marketplace Notices Due Oct. 1
Many provisions of the Patient Protection and Affordable Care Act (ACA) (also known as “Obamacare”) are designed to expand access to affordable health coverage. These include provisions for coverage to be offered through a Health Insurance Marketplace (Marketplace), premium tax credits to assist individuals in purchasing such coverage, employer notice to employees of coverage options available through the Marketplace, and other related provisions.
Currently, there are 16 states operating their own Health Insurance Marketplaces, while the federal government is singly or jointly operating marketplaces in the other 34 states. Regardless of the type of marketplace in a specific state, the notification requirements remain the same.
Notice to Inform Employees of Coverage Options Under the FLSA
Beginning January 1, 2014, individuals and employees of small businesses will have access to coverage through the Health Insurance Marketplace. The Marketplace offers “one-stop shopping” to find and compare private health insurance options. Open enrollment for health insurance coverage through the Marketplace begins October 1, 2013 which means that a notice to employees must be delivered on or before that date. The Fair Labor Standards Act (FLSA) considers the following items as being in compliance with FLSA section 18B, and this guidance will remain in effect until the Department promulgates regulations or other guidance. Future regulations or other guidance on these issues will provide adequate time to comply with any additional or modified requirements.
Employers Subject to the Notice Requirement
The FLSA section 18B requirement to provide a notice to employees of coverage options applies to employers to which the FLSA applies. In general, the FLSA applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. For most firms, a test of not less than $500,000 in annual dollar volume of business applies. The FLSA also specifically covers the following entities: hospitals; institutions primarily engaged in the care of the sick, the aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state and local government agencies.
Providing Notice to Employees
Employers must provide a notice of coverage options to each employee, regardless of plan enrollment status (if applicable) or of part-time or full-time status. Employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees.
Form and Content of the Notice
Pursuant to the statute, the notice to inform employees of coverage options must include information regarding the existence of a new Marketplace as well as contact information and description of the services provided by a Marketplace. The notice must also inform the employee that the employee may be eligible for a premium tax credit under section 36B of the Code if the employee purchases a qualified health plan through the Marketplace; and a statement informing the employee that if the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) 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.
Timing and Delivery of Notice
Employers are required to provide the notice to each new employee at the time of hiring beginning October 1, 2013. For 2014, the Department will consider a notice to be provided at the time of hiring if the notice is provided within 14 days of an employee’s start date.
With respect to employees who are current employees before October 1, 2013, employers are required to provide the notice not later than October 1, 2013. The notice is required to be provided automatically, free of charge.
The notice must be provided in writing in a manner calculated to be understood by the average employee. It may be provided by first-class mail. Alternately, it may be provided electronically if the requirements of the Department of Labor’s electronic disclosure safe harbor at 29 CFR 2520.104b-1(c) are met.
Failure to Provide Notice
Even if your company is covered by the Fair Labor Standards Act, and should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, there is no fine or penalty under the law for failing to provide the notice.
If an employer plans to maintain a "grandfathered" plan under the ACA, the employer must send certain notices about the grandfathered plan when distributing plan materials, known as a "Grandfathered Notice." An important distinction is that the Exchange Notice described above is different than a Grandfathered Notice.
To maintain status as a grandfathered health plan, a plan or health insurance coverage must include a statement, in any plan materials provided to a participant or beneficiary describing the benefits provided under the plan or health insurance coverage, that the plan or coverage believes it is a grandfathered health plan within the meaning of section 1251 of the Patient Protection and Affordable Care Act and must provide contact information for questions and complaints.
Failing to distribute the required grandfathered notice will cause a plan to lose its grandfathered status. Regulators have clarified that the status is lost on the date any related amendment becomes effective, rather than the date the amendment is adopted (i.e., if an amendment is effective midyear, there is a midyear loss of grandfathered status; if the amendment is effective at the beginning of the next year, the status is lost for that next plan year).
As an employer, to comply with the ACA notice requirement, you should:
1) Provide a written notice:
► Informing the employee of the existence of state insurance exchanges, including a description of the services provided by the exchanges and the manner in which the employee may contact exchanges to request assistance;
► Outlining that if the employer’s health plan share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, the employee may be eligible for a premium tax credit if the employee purchases a qualified health plan through an exchange; and
► Stating that if the employee purchases a qualified health plan through an exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer, and all or a portion of such contribution may be excludable from income for federal income tax purposes.
2) Deliver the notice to all current employees by October 1, 2013, and to each new employee at the time of hiring beginning October 1. For 2014, a notice will be considered provided at the time of hiring if the notice is provided within 14 days of an employee’s start date. The notice must be provided automatically, free of charge, and can be mailed or emailed to the employee.
Note: The details in this white paper are provided for informational purposes solely. All answers are general in nature, not legal advice and not warranted or guaranteed. Readers are cautioned not to rely on this information. Because laws change over time and in different jurisdictions, it is imperative that you consult an attorney in your area regarding legal matters and an accountant regarding tax matters.