Client Alert: “Marketplace” Notice Deadline Is October 1, 2013...Maybe...
What Should Employers Do Now?
Given that the Marketplace notice requirement becomes effective on
October 1, 2013, and the Department of Labor’s “no penalty” position
will likely expire at some point in the future, employers who want to
avoid any risk of future violations should comply with the deadline
and implement procedures now to ensure that new employees
receive the necessary notice.
The Patient Protection and Affordable Care Act (aka, “Obamacare”), in part, amended the Fair Labor Standards Act (“FLSA”) to require employers to furnish employees a notice of the availability of coverage through public health insurance exchanges (i.e., the “Marketplace”). In Technical Release 2013-02, the Department of Labor set an October 1, 2013 deadline for employers to provide the notice to employees. However, just last week, the Department of Labor indicated through an FAQ posted on its website that “there is no fine or penalty under the law for failing to provide the notice.” As such, even though the clear language of the FLSA requires employers to provide the Marketplace notice, there is apparently no penalty for failing to do so.
Employers Subject to the Notice Requirements
The Marketplace notice requirement applies to virtually all employers with annual sales or receipts of $500,000 or more, and 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.
Providing Notice to Employees
Employers must provide a notice of coverage options to each employee, regardless of plan enrollment status (if applicable) or of part-time or full-time status. 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.
The Technical Release provides that existing employees must receive the notice on or before October 1, 2013. Employees hired on or after October 1, 2013 must receive the notice within 14 days of commencing employment.
The notice may be provided by first-class mail or electronically (if the Department of Labor’s electronic disclosure safe harbor is satisfied).
Form and Content of the Notice
The Marketplace notice must be in writing and must include information regarding the existence of the new public health insurance exchanges and contact information and a description of the services provided by the health insurance exchange. The notice must also inform the employee that the employee may be eligible for a premium tax credit under Section 36B of the Internal Revenue Code if the employee purchases a qualified health plan through the health insurance exchange. Finally, the notice must include a statement informing the employee that if the employee purchases a qualified health plan through the health insurance exchange, 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.
The Department of Labor has issued two model notices – one for employers who do not offer a health plan and another model for employers who offer a health plan for some or all employees. Use of the model is not required, but may simplify the process for employers. The model language is available at: http://www.dol.gov/ebsa/healthreform
Penalties for Noncompliance
The Patient Protection and Affordable Care Act includes a $100 per day penalty for noncompliance with its provisions. It had generally been assumed that this penalty would apply to employers who failed to distribute the Marketplace notice. It was further assumed that additional penalties might be imposed under the FLSA for failure to comply with its provisions. However, the penalty provisions had not been made explicit in any previous guidance. As noted above, the Department of Labor has now indicated that no fine or penalty will apply to a failure to provide the Marketplace notice.