Open enrollment for health insurance coverage through the Health Insurance Marketplace (Marketplace) begins October 1, 2013. Section 1512 of the Affordable Care Act (ACA) creates a new Fair Labor Standards Act (FLSA) section 18B requiring a notice to employees of coverage options available through the Marketplace. Despite all the buzz about an imminent government shutdown, employers covered by the FLSA and the ACA will be subject to new notice requirements beginning October 1. The following is a step by step approach to the notice requirements becoming effective October 1. This alert is meant to provide temporary guidance on what the Department of Labor will consider as compliance with FLSA section 18B, and this guidance will remain in effect until the Department promulgates regulations or other guidance.
Step 1: Is the employer subject to the FLSA?
Section 18B requires that covered employers provide a notice to employees of health care coverage options. Beginning October 1, this notice must contain information about the ACA. The notice requirements only apply to those employers covered by the FLSA. 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, which is easy to meet and applies to most businesses. The FLSA also specifically covers the following entities, regardless of the annual dollar volume: 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. You should consult with your counsel about whether your company is covered under the FLSA.
Step 2: Who must receive notice?
Employers must provide a notice of coverage options to each employee, regardless of plan enrollment status 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.
Step 3: What must the notice contain?
Pursuant to the statute, the notice to inform employees of coverage options must include the following information:
- Informing the employee of the existence of the Marketplace (referred to in the statute as the Exchange) 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 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 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 (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.
Step 4: When and how must the notice be delivered?
Employers are required to provide current employees the notice not later than October 1, 2013. Employers are required to provide the notice to each new employee at the time of hiring. For 2014, the Department of Labor has stated that it 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.
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, hand delivery, or with an employee’s paycheck. Alternatively, it may be provided electronically if the requirements of the Department of Labor’s electronic disclosure requirements are met, which can be found at 29 CFR 2520.104b-1(c).
The Department of Labor has issued a “model notice” for all employers. That notice is available here. While it is unclear whether the Department of Labor will be policing the notice requirement immediately, it has stated that it expects all employers to comply with the regulations beginning October 1, 2013. However, the Department of Labor stated on September 11, 2013 that there is no fine or penalty under the law for failing to provide the notice, which means that as a practical matter the notice is at least temporarily optional.