On May 8, 2013, the Department of Labor (DOL) issued long-awaited temporary guidance and a model notice to be provided to employees about upcoming coverage options through the health care exchange, known as the Marketplace, established as a part of the health care reform legislation. This notice was originally supposed to be provided to employees by employers on March 1, 2013, but the DOL delayed the effective date until October 1, 2013 to coordinate with IRS guidance on minimum value.
Section 18B of the Fair Labor Standards Act (FLSA), added by section 1512 of the Patient Protection and Affordable Care Act, generally provides that an applicable employer must provide each employee at the time of hiring (or with respect to current employees, not later than October 1, 2013) with a written notice about the Marketplace.
Applicable employer. The Marketplace notice requirement applies to employers to which the FLSA applies – in general, employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. For most companies/organizations, a test of not less than $500,000 in annual dollar volume of business applies. The FLSA also specifically covers hospitals; institutions primarily engaged in care of the sick, 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.
The Wage and Hour Division of the DOL has a tool to determine applicability of the FLSA.
Notice must be provided to all employees of an applicable employer. Employers must provide the notice to each employee, regardless of health plan enrollment status or part- or full-time status. Employers are not required to provide a separate notice to dependents or others who may become eligible for coverage under the health plan but who are not employees.
Notice Requirements. The notice must:
Include information about the existence of the Marketplace,
Include contact information and a description of the services provided by a Marketplace,
Include information about the manner in which the employee may contact the Marketplace to request assistance,
Inform the employee that he or she may be eligible for a premium tax credit if the employee purchases a qualified health plan through the Marketplace, and
Include 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.
Model language is available on the DOL’s website.
The DOL provides a model notice for employers who do not offer a health plan, and another model notice for employers who offer a health plan to some or all employees. Employers may use one of these models, as applicable, or a modified version, as long as the notice meets the content requirements listed above.
Providing the notice to new hires. Employers are required to provide the notice to each new employee at the time of hiring beginning October 1, 2013 (or within 14 days of an employee’s start date).
Providing the notice to current employees. For employees who are employed before October 1, 2013, the employer is required to provide the notice not later than October 1, 2013. The notice is required to be provided automatically, free of charge.
Manner of providing the notice. 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 or electronically if the requirements of the DOL’s electronic disclosure safe harbor are met – that safe harbor generally requires an employee to access a computer as part of the employee’s job duties.
Model COBRA election notices. The DOL also updated its model COBRA notices that health plans may use to satisfy the requirement to provide an election notice under COBRA. Among other reasons, the notice was revised to help make qualified beneficiaries aware of other coverage options available in the Marketplace. The plan administrator can complete this notice by filling in the blanks with appropriate health plan information.