While some elements of the ACA have already become effective, the obligations imposed on large employers (those with 50 or more full-time employees) to either provide full-time employees with affordable, minimum essential health coverage or pay a penalty will become effective January 1, 2014. Beginning January 1, 2014, individuals are also required to have or obtain health coverage (either from an employer or from another source) or pay a penalty. That other source may be one of the health care exchanges established or being established under the ACA (referred to as the “Marketplace” in the DOL’s guidance).
The ACA also requires employers to provide notice to employees of coverage options available through the Marketplace. The following sections of this Alert outline what the notices must include, who must provide them, when they must be provided and how they can be provided.
What Must Be Included in the Notice
The notice must:
- Inform the employee of the existence of the Marketplace, including a description of the services provided by the Marketplace and how the employee can contact the Marketplace to seek assistance;
- Advise the employee that if the employer plan’s share of the total allowed costs of benefits under the plan is less than 60% of such costs, he or she may be eligible for a premium tax credit if the employee purchases qualified coverage through the Marketplace; and
- Advise the employee that if qualified coverage is purchased through the Marketplace, any payments made for coverage through the Marketplace would be on an after-tax basis, in contrast to any employer contribution that might have been made on his or her behalf under the employer’s health benefits plan (which would generally be excludable from income for federal income tax purposes).
Two forms of model notices were provided. One is for use by employers that do not offer a health plan, and the other is for use by employers that offer a health plan to some or all employees. The model forms can be obtained at the DOL’s website at www.dol.gov/ebsa/healthreform.
Who Must Provide the Notice
Even though only “large employers” are subject to the obligation to provide qualifying health coverage to employees or pay a penalty, the ACA enlists almost all employers in the effort to inform individuals about the ACA. Accordingly, all employers that are subject to the Fair Labor Standards Act (FLSA) are required to provide the notice. 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; institutions of higher education; and federal, state and local government agencies.
When Must the Notice Be Provided
Effective October 1, 2013, the notice must be provided to employees at or within 14 days of an employee’s date of hire. For current employees, the notice must be provided by October 1, 2013. All employees are required to be provided the notice, regardless 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.
How May the Notice Be Provided
The notice is required to be provided in writing, automatically and free of charge. It may be provided directly, by first-class mail, or electronically (if the DOL’s electronic disclosure safe harbor rules are followed).
The DOL also revised the model COBRA notice that employers may use to meet the election notice content requirements of COBRA.
The revised COBRA notice, which may be obtained at the website noted above, advises COBRA beneficiaries to consider and compare COBRA with alternatives available through the Marketplace. The revised notice also advises COBRA beneficiaries that they may be eligible for a tax credit to help pay for some or all of the cost of coverage obtained through the Marketplace. Use of the model election notice will be treated as good-faith compliance with the election notice content requirements of COBRA.
Though not specified by the DOL, presumably the new information must be provided to individuals who go on COBRA on and after October 1, 2013. The DOL has not indicated if notice is required to be provided to those already on COBRA.
A Final Word
Although the model notices are helpful and timely use of them will fulfill an employer’s obligation under the ACA, employees could find them confusing. Accordingly, employers should consider adapting the notices to best suit their particular workforces, based on the health care coverage made available to employees. Employers should begin preparing for distribution and/or electronic posting of the notices as soon as possible to meet the October 1, 2013 deadline.