As you may have heard in the news recently, the Patient Protection and Affordable Care Act (“PPACA”) requires employers to provide a notice to employees regarding the new health benefit exchange (“Exchange”) by October 1, 2013. This deadline is important for employers to avoid paying costly penalties.
A. EMPLOYERS SUBJECT TO THE NOTICE REQUIREMENT
Employers subject to the Fair Labor Standards Act (FLSA) are required to provide the Exchange notice. In general, the FLSA applies to employers whose annual sales total $500,000 or more or who employ one or more employees who are engaged in, or produce goods for, interstate commerce. For all practical purposes, this applies to all employers.
B. PROVIDING NOTICE TO EMPLOYEES
Employers must provide the notice of coverage options to all employees, regardless of the employee's plan enrollment status (if applicable) or the employee's part-time or full-time status. There is no requirement to provide notice to spouses, dependents, retirees, or any other individuals who are not employees.
C. FORM AND CONTENT OF THE NOTICE
In general, the Exchange notice must:
- Inform employees about the existence of the Exchange;
- Describe the services provided by the Exchange;
- Inform employees how to contact the Exchange to request assistance;
- Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer plan does not meet certain requirements and the employee purchases a qualified health plan through the Exchange; and
- Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage and that all or a portion of this employer contribution may be excludable for federal tax income purposes.
D. TIMING AND DELIVERY OF NOTICE
Employers must provide the notice by October 1, 2013 for all current employees and new employees hired before that date.
Beginning October 1, 2013, employers must provide the notice to each new employee within 14 days of the 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. Alternatively, the notice may be provided electronically if the requirements of the DOL's electronic disclosure safe harbor at 29 CFR 2520.104b-1© are met. The notice must be provided automatically and free of charge.
E. MODEL NOTICE
The Department of Labor (DOL) provided two model Exchange notices: one for employers that do not offer a health plan and another for employers that offer a health plan to some or all of their employees. A copy of the model notices may be found at the websites listed below. Employers may use one of these models, as applicable, or a modified version provided the notice meets the content requirements described above. We can help you if desired to create your own custom notice to employees.
F. PENALTY FOR NONCOMPLIANCE
The regulations do not identify a specific penalty for failing to comply with the notice requirement. However, the general PPACA noncompliance penalty would likely apply in this situation. This general penalty requires employers to correct compliance failures within 30 days of discovery. Employers also are required to self-report the violation on IRS Form 8928 and pay a civil penalty of $100 for each day the employer failed to comply with a PPACA mandate. In addition, the DOL or plan participants may bring a civil action against the employer for failure to comply.
Please contact us if you have any questions or concerns regarding the notice requirements.