Employee Benefits Compliance, Exchanges / Marketplaces / Subsidies, Laws, Regulations & FAQs, Reporting Requirements

DOL Issues Model Exchange Notice and also updated Model COBRA Notice

On May 8, 2013, the Department of Labor (DOL) issued Technical Release  2013-02, which provides temporary guidance regarding the Notice of Coverage Options (“Exchange Notice“) requirement under FLSA section 18B.  The Affordable Care Act (ACA) requires employers to notify employees and new-hires of their options under the new Health Insurance Marketplaces that will open January 1, 2014.  Originally employers were required to provide the notice by March 1, 2013, but DOL guidance issued in January delayed the effective date until late summer or early fall of 2013.  Today’s Technical Release sets the effective date as October 1, 2013, but employers can send the Notices earlier.

The DOL also posted two Model Notices to Employees of Coverage Options (Model Exchange Notices), as well as an updated model COBRA election notice. 

Background

The Affordable Care Act (ACA) amended the Fair Labor Standards Act (FLSA) to require that employers subject to FLSA provide all new hires and current employees with a written notice about the health benefit Exchange (which HHS has recently re-named the Health Insurance Marketplace).  The notice was originally required to be provided by March 1, 2013, but on January 24, 2013 the DOL issued guidance delaying the effective date of the notice requirement.  The DOL is issuing this temporary guidance and model notice in advance of the expected timeframe announced in the prior guidance because, since the issuance of the guidance, the DOL has received several requests from employers for a model notice on an earlier timeframe so that they may be able to inform their employees now about the upcoming coverage options through the Marketplace. Therefore, employers are permitted to use the model notice and/or rely on this temporary guidance prior to the general applicability date (October 1, 2013) stated in the Technical Release, in order  to inform their employees earlier.

Guidance on the Exchange Notice

Today’s guidance will remain in effect until the DOL issues regulations or other guidance. Future regulations or other guidance on these issues will provide adequate time to comply with any additional or modified requirements.  Tech. Rel. 2013-02 addresses the  following items:

A.  Employers Subject to the FLSA Must Provide the Required Exchange 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 employers, 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, and institutions of higher education; and federal, state and local government agencies.

B. Providing Notice to Employees

Employers must provide an Exchange Notice to each employee, whether or not they are enrolled in or eligible to enroll in the group health plan, and whether they are part-time or full-time employees  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.

C. Form and Content of the Notice 

As required by the ACA, the Exchange Notice to inform employees of coverage options must include information regarding the existence of a new Marketplace as well as contact information and description of the services provided by a Marketplace. The notice must also inform the employee that the employee may be eligible for a premium tax credit under section 36B of the Code if the employee purchases a qualified health plan through the Marketplace; and a statement informing the employee that if the employee purchases a qualified health plan (QHP) 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.

D. Timing and Delivery of Notice 

Beginning October 1, 2013, employers are required to provide the Exchange Notice to each new employee at the time of hiring . For 2014, an employer will be deemed to be in compliance if the Notice is provided within 14 days of an employee’s start date.

For employees who are current employees before October 1, 2013, employers are required to provide the notice not later than October 1, 2013. The notice is required to be provided automatically, free of charge.

This is a one-time notice requirement: by October 1, 2013 to current employees, and at time of hire for future new-hires.  It is not an annual notice requirement.

The Notice is subject to the regular ERISA notice requirements. That is, 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 it may be provided electronically if the requirements of the Department of Labor’s electronic disclosure safe harbor are met (these are at 29 CFR 2520.104b-1(c)).

E. Model Exchange Notice

There are actually two model Exchange Notices:  one model for employers who do not offer a health plan and another model for employers who offer a health plan to or some or all employees. The notice provisions are the same in both, but the information (on the second page) about the employer plan (or lack of it) varies. Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements described above.

For example, an employer that does not currently provide a group health plan (or will not as of October 1), but will as of January 1, 2014, may want to add language to that effect on the Notice to be used by employers who do offer coverage.

Revised Model COBRA Notice

DOL also issued a revised model COBRA Notice, which includes information about the new Exchanges/Marketplaces, so that individuals who lose regular group health plan coverage and would be eligible for COBRA coverage will be aware of their option to buy coverage in the Marketplace in lieu of electing COBRA continuation coverage.  The ACA does not repeal COBRA, so individuals who lose group health coverage have the option of obtaining coverage either in the Marketplace or under COBRA.

The redlined version of the DOL model COBRA notice shows the DOL’s changes to the prior version of the model notice.

Links to the model Notices are provided at the beginning of this article.