News & Knowledge
DOL Issues Guidance on Exchange Notice That Must Be Provided to Employees
Evelyn Small Traub
Jonathan A. Kenter
This is the twenty-third in a series of advisories on Health Care Reform and other recent developments in health care.
On May 8, 2013, the Department of Labor (“DOL”) issued Technical Release 2013-02, which provides temporary guidance and a temporary model notice to employees of coverage options under the government-run health care exchanges. The guidance also includes an updated model election notice that health care plans must provide to certain individuals about continued health care coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”).
Model Exchange Notice
The Patient Protection and Affordable Care Act (“PPACA”) requires employers that are subject to the Fair Labor Standards Act (generally, employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce and that have $500,000 in annual dollar volume of business) to provide to each of their employees, and to all new employees at the time of hiring, a written notice informing the employees of the following:
- The existence of the government-run health care exchanges, which the DOL is referring to collectively as the “Marketplace,” including a description of the services provided and the manner in which employees may contact an exchange to request assistance.
- If the employer’s group health plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, employees may be eligible for a premium tax credit if they purchase a qualified health plan through an exchange.
- If employees purchase a qualified health plan through an exchange, they may lose the employer contribution (if any) to any group health plan the employer offers. All or a portion of this contribution may be excluded from income for federal income tax purposes.
To satisfy these content requirements, model language is available on the DOL’s Affordable Care Act webpage. There is one model notice for employers that offer a health plan to some or all employees (available here) and another model notice for those that do not offer a health plan (available here).
Employers may use one of these models or a modified version, provided the notice meets the content requirements described above. The notice must be provided to each employee, regardless of plan-enrollment status or 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.
Employers are required to provide the exchange notice to current employees by October 1, 2013. For employees hired on or after October 1, 2013, the exchange notice must be provided at the time of hiring. For 2014, the DOL will consider an exchange notice to have been timely delivered if it is provided within 14 days after an employee’s start date. The exchange notice requirement was initially set to take effect on March 1, 2013, but the effective date was delayed by the DOL so it could issue a model notice.
The notice must be provided automatically, free of charge, and written in language that the average employee can understand. It may be provided by first-class mail or electronically if the requirements of the DOL's electronic disclosure safe harbor are met. Employers may use the temporary model notice or rely on the temporary guidance prior to October 1, 2013.
Model COBRA Notice
Under COBRA, a “qualified beneficiary” who was covered by a group health plan on the day before a qualifying event occurred (such as a termination of the employee’s employment other than for gross misconduct) must be able to elect COBRA continuation coverage. A group health plan must provide qualified beneficiaries with an election notice, which describes their rights to COBRA continuation coverage and how to make an election within 14 days after the plan administrator receives notice of a qualifying event.
The DOL revised the COBRA model election notice to inform qualified beneficiaries of coverage options available through government-run health care exchanges under PPACA. A copy of the revised model election notice can be found here.
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