Employers—regardless of size—need to prepare to notify all current employees, part-time and full-time, of the availability of health insurance coverage from the new health insurance exchanges (the “Marketplace”) created by the Affordable Care Act (“ACA”). The Marketplace will offer individuals an opportunity to compare and arrange to purchase health insurance policies. Marketplace health insurance options offer alternatives to employer-sponsored group health plans to employees.
The notice requirements apply to all employers subject to the Fair Labor Standards Act (“FLSA”). FLSA generally applies to all employers that engage in or produce goods for interstate commerce. For most firms, a threshold of at least one employee and $500,000 in annual revenue triggers FLSA’s application. FLSA also covers certain other businesses and employees that do not meet the $500,000 annual revenue test.1 This means that employers with 50 or fewer full-time equivalent employees, who are not subject to the ACA’s employer mandate (the “shared responsibility” obligation to offer employer-sponsored group health plans) are still obligated to provide this notice.
The Marketplace notice must provide:
- Information about the Marketplace, including its existence, the services it provides, and the manner in which the employee may contact the Marketplace;
- Notice that if the employer plan’s share is less than 60% of the total allowed costs of benefits, the employee may be eligible for a tax credit if the employee purchases a qualified health plan through the Marketplace; and
- Notice that if the employee purchases a qualified health plan through the Marketplace, the employee may lose any employer contribution to any health benefits plan the employer offers and that all or a portion of any contribution may be excludable from income for Federal income tax purposes.
DOL Model Notice is Available
The U.S. Department of Labor (“DOL”) has posted guidance on its website to assist employers in satisfying this notice requirement. The DOL has also provided two model notices that employers may use, which are guaranteed to satisfy the FLSA notice requirement. One model notice is designed for employers that offer an employer-sponsored group health benefit plan to their employees. The other model notice is designed for employers that do not offer an employer-sponsored group health benefit plan to their employees.
Employers are not required to use these model notices. Because the model notices contain information that goes beyond the minimum notice requirements added by the ACA, employers may elect to tailor the DOL’s model notices to their circumstances, as long as the resulting notice document meets the applicable requirements.
Employers may send the notice through first class mail or may distribute the notice electronically, as long as the distribution method complies with the DOL’s electronic disclosure safe harbor provision, 29 CFR 2520.104b-1(c). In general, this means that notices can be distributed electronically to (a) employees who use a computer as part of their normal job function or (b) employees who have consented to electronic delivery in a manner that demonstrates they can effectively receive the electronic delivery.
Employers are required to provide notice by October 1, 2013 for all current employees and must provide notice to employees hired on or after October 1, 2013 within 14 days of the start of their employment.
Never Too Late to Ask
We advise employers to seek counsel for clarity in individual situations. Lack of compliance with the Marketplace notice requirements is one potential risk for employers as the ACA implementation continues. Using the model notice without evaluating an employer’s likely plans for ACA compliance may also prove to be an undesirable choice. Companies of all sizes need to be aware of the short and long-term ramifications of the ACA, and how it may impact their business moving forward. Employers that take a proactive approach to implementation will almost certainly be at an advantage. For more information about the Marketplace or other ACA requirements, visit us here.