Employee Benefits-DOL Issues Guidance/Model Notices For Notice To Employees on Health Insurance Marketplace

In Technical Release No. 2013-02, the U.S. Department of Labor (the “DOL”) provided guidance on the requirement in the Affordable Care Act that a notice must be provided to employees about the Health Insurance Marketplace (the “Marketplace”) that will be available in 2014. The DOL has also made available a model notice to help employers meet this requirement, and a revised COBRA election notice to reflect Marketplace options. Here is what the Technical Release says.

Background. Section 18B of the Fair Labor Standard Act (the “FLSA”), as added by section 1512 of the Affordable Care Act, generally provides that, in accordance with regulations promulgated by the Secretary of Labor, an employer subject to the FLSA must provide each employee at the time of hiring (or with respect to current employees, not later than March 1, 2013), a written notice:
1. informing the employee of the existence of the Marketplace, including a description of the services provided by the Marketplace, and the manner in which the employee may contact the Marketplace to request assistance;
2. if the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the “Code’) if the employee purchases a qualified health plan through the Marketplace; and 3. if the employee purchases a qualified health plan 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.

On January 24, 2013, the DOL postponed the March 1, 2013 deadline. The reqired written notice is referred to below as the “Notice of Coverage Options” or the “NCO”.

Effect of the Guidance under the Technical Release. The DOL will consider an employer that follows the Technical Release as being in compliance with FLSA section 18B. The guidance provided by the Technical Release will remain in effect until the DOL promulgates regulations or other subsequent guidance.

Providing the NCO to Employees. Employers must provide the NCO 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 employer’s health care plan but who are not employees.

Form and Content of the NCO. The NCO must include items 1, 2 and 3 above in “Background”.

Timing and Delivery of NCO. Employers are required to provide the NCO to each new employee at the time of hiring beginning October 1, 2013. For 2014, the DOL will consider an NCO to be provided at the time of hiring if the notice is provided within 14 days of an employee’s start date. As to employees who are current employees before October 1, 2013, employers are required to provide the NCO not later than October 1, 2013. The NCO is required to be provided automatically, free of charge. The NCO 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, it may be provided electronically if the requirements of the DOL’s electronic disclosure safe harbor at 29 CFR 2520.104b-1(c) are met.

Model NCO. Model language for the NCO is available at www.dol.gov/ebsa/healthreform. There is one model for employers who do not offer a health plan and another model for employers who offer a health plan for some or all employees. Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements described above.

COBRA Election Notice. Some COBRA beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through the Marketplace. COBRA beneficiaries may also be eligible for a premium tax credit (a tax credit to help pay for some or all of the cost of coverage in plans offered through the Marketplace). The DOL has revised its model COBRA election notice to reflect these concerns. The revised model notice is found at www.dol.gov/ebsa/cobra.html. A clean copy is available, as is a redline from the prior model notice to help employers identify the changes.