DOL Issues Guidance on the Exchange Notice Requirement

Posted in: Employee Benefits

On May 8, 2013 the Department of Labor (DOL) issues Technical Release 2013-02 providing temporary guidance and templates for the Exchange Notice requirement under the Affordable Care Act (ACA). While this guidance is temporary, it may be relied upon until future guidance and regulations are issued.

Employers Subject to the Notice Requirement
The notice requirement applies to all employers subject to the Fair Labor Standards Act (FLSA) whether or not a health plan is offered. The FLSA generally applies to employers with one or more employees who are engaged in interstate commerce and generate revenue of more than $500,000 annually. It also specifically covers healthcare institutions, schools, and federal, state and local government agencies.

Providing the Notice to Employees
Employers must provide the notice to all employees (full time and part time) regardless of whether enrolled in the plan or eligible for coverage. There is no requirement to provide a separate notice to dependents. For current employees, the notice must be provided by October 1, 2013. Thereafter, new employees should receive the notice within fourteen days of their start date.

The notice must be provided automatically and free of charge. It may be delivered in person, via first class mail or electronically, in accordance with the DOL’s requirements for electronic distribution. This means the notice may be sent electronically to employees who have routine access to electronic media as part of their job function. Otherwise, affirmative electronic consent is required before sending the notice electronically.

The notice may be included with other materials (such as open enrollment information or new hire packets) as long as these other materials are provided in accordance with the notice distribution requirements and within the proper timeframe.

Notice Form and Consent
The DOL has provided two versions of the notice template: one for employers that do not offer a health plan and one for employers that do offer a plan. Employers may modify the template, as long as the modified notice includes all of the required content. Each employer will need to customize the template to reflect specific employer/health plan information.

The notice contains standard information including a description of Exchange services and Exchange contact information, the availability of a premium subsidy if employer-sponsored coverage does not provide minimum value and/or is not affordable at the employee-only coverage level, and an explanation that employees who purchase a qualified health plan through the Exchange may lose the employer contribution and tax advantages of an employer-sponsored health plan.

For employers that offer a plan, the following information must be included:

  • employer name, EIN, address and phone number;
  • contact name, phone number and email address to obtain information about the plan;
  • whether coverage is offered to all employees or some employees (if some employees, eligible classes must be listed);
  • whether coverage is offered to dependents and description of eligible dependents; and
  • whether the coverage provides minimum value and is intended to be affordable, based on employee wages.

The optional section is specific to each employee and mirrors information requested in the Exchange Application, including:

  • date an employee will be eligible for coverage;
  • whether the plan provides minimum value;
  • the employee-only payroll deduction for lowest cost plan that provides minimum value (including frequency of deduction); and
  • payroll deduction for the upcoming year (if already known) and effective date of change.

Update to COBRA Election Notice
In addition, the DOL has provided an updated COBRA election notice which explains being eligible for COBRA does not limit eligibility for premium subsidy if an Exchange plan is purchased instead of COBRA. The revised COBRA election notice also eliminates references to pre-existing condition exclusions since such exclusions are already limited and will be prohibited completely for plan years beginning in 2014. The DOL guidance does not include a specific deadline to begin using the updated COBRA election notice; however, the timing should correspond with the availability of Exchange coverage.

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