The Affordable Care Act added section 18B to the Fair Labor Standards Act (FLSA), which requires certain employers to send out notices to employees regarding the availability of the state-based Health Insurance Exchanges ("Exchange Notice").
Executive Summary: The Affordable Care Act added section 18B to the Fair Labor Standards Act (FLSA), which requires certain employers to send out notices to employees regarding the availability of the state-based Health Insurance Exchanges ("Exchange Notice"). Under the FLSA, these Exchange Notices were supposed to be provided to employees no later than March 1, 2013. However, on January 24, 2013, the Department of Labor (DOL) issued guidance delaying the Exchange Notice requirement until the summer or fall of 2013.
On May 8, 2013, the DOL released temporary guidance on the Exchange Notice requirement, including a model Exchange Notice that employers may use to satisfy the notice requirements. The new temporary guidance provides that Exchange Notices must be sent to employees by October 1, 2013, and within 14 days of hire for new employees hired on or after October 1, 2013.
Practical Impact
- Employers subject to the FLSA must provide an Exchange Notice to each employee, regardless of plan enrollment status 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 Exchange Notice must include information regarding the existence of the new state-based Health Exchanges, as well as contact information and a description of the services provided by the Exchange. The notice must inform the employee that he or she 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 Exchange, and contain a statement informing the employee that if he or she purchases a qualified health plan through the 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.
- Employers are required to provide the notice to each new employee at the time of hiring beginning October 1, 2013. For 2014, the Department will consider a notice to be provided at the time of hiring if the notice is provided within 14 days of an employee's start date.
- With respect to 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.
- 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 at 29 CFR § 2520.104b-1(c) are met.
- To satisfy the Exchange Notice requirements, model language is available.
- The DOL is also revising its model COBRA election notice to help make qualified beneficiaries aware of other coverage options available in the Exchange.
The Bottom Line: Employers must provide employees with an Exchange Notice, which contains specific information about the state-based Health Insurance Exchanges, by October 1, 2013 for existing employees, and within 14 days of the date of hire for employees hired on or after October 1, 2013. Model Notices are available for use.
If you have any questions regarding this Alert or other employee benefits issues, please contact the authors, Tiffany Downs, tdowns@fordharrison.com or Scott Wagner, swagner@fordharrison.com, both of whom are members of FordHarrison's Employee Benefits practice group, or the FordHarrison attorney with whom you usually work.