Affordable Care Act Confusion: Health Care Exchange Notice Due but No Penalty for Noncompliance

Smith Anderson

The Affordable Care Act and subsequent guidance require all employers subject to the Fair Labor Standards Act to provide notice of health care coverage options available through a health care exchange to all current employees no later than October 1, 2013.  The notice is required to be provided to all individuals employed as of September 30, 2013 and starting October 1, 2013, this notice must also be provided to new employees within fourteen days of hiring. All employees (including full and part time employees) must receive the notice, whether or not they are enrolled in or eligible for an employer health plan, but dependents and other individuals are not required to be given the notice.

The notice must include certain information about the existence of health exchanges and their operation, including information about the availability of a premium tax credit and the loss of an employer contribution (if any) to health benefits if an employee purchases coverage through an exchange. The notice must be written in a manner calculated to be understood by an average employee and provided free of charge, and it may be provided by first class mail or electronically if the DOL requirements for electronic disclosure are met.

The DOL has provided two model notices that employers can use to meet these requirements (one is for employers who offer health coverage for some or all employees and the other is for employers who do not offer any health coverage).  The model notices and other general information are available from the DOL website at under the heading “Notice to Employees of Coverage Options.”

The applicable statute and the DOL’s formal guidance require the notice to be provided, but in online “FAQ” information, the DOL indicates that there is no penalty for failure to supply the notice at this time.  However, since the model notices make compliance relatively easy and it is difficult to determine whether the DOL might change its position as to a compliance penalty in the future, the prudent course is for employers to make a good faith effort to timely comply.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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