Department of Labor Releases Exchange Notice and
New Model COBRA Notice
The Affordable Care Act requires that employers must provide each employee a written notice at the time of hiring that explains their rights to enroll in the Exchanges/Marketplace. In response to employer requests for timely distribution of the form, the Department of Labor Employee Benefits Security Administration (EBSA) issued Technical Release 2013-02 on May 8, 2013 covering the model Exchange notice and an updated model COBRA election notice for group health plans. Copies of the model form and COBRA notice are available on the EBSA website at www.dol.gov/ebsa.
The ACA originally required that the Exchange/Marketplace be provided by March 1, 2013, but delayed the notice until late Spring or early Summer. Since then, the DOL explained that the notice should be coordinated with Health and Human Services’ (HHS) educational efforts and the Internal Revenue Service (IRS) guidance on minimum value.
The Department of Labor (DOL) issued this temporary guidance and model notice in advance of the timeframe to allow employers the opportunity to inform their employees about upcoming coverage options through the Exchange/Marketplace. According to DOL, employers are permitted to use the model notice or they can rely on guidance as provided in Frequently Asked Questions about the Affordable Care Act (notably FAQ, Part XI Question 1).
Employers must provide a notice of coverage options 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 as non-employees.
The written notice must be provided by employers at the time of hiring or for current employees before Oct. 1, 2013 and it must be provided free of charge. It states the following:
- Informing the employee of the existence of the Exchange/Marketplace including a description of the services provided by the Exchange/Marketplace, and the manner in which the employee may contact the Exchange/Marketplace to request assistance.
- If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs, 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 Exchange/Marketplace;
- If the employee purchases a qualified health plan through the Exchange/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.
According to the DOL notice, employers subject to the notice requirement include:
- employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. For most firms, a test of not less than $500,000 in annual dollar volume of business;
- hospitals;
- institutions primarily engaged in the care of the sick, the aged, mentally ill, or disabled;
- 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.
New Model COBRA Notice
We wanted to bring to your attention the changes to the Model COBRA Notice as it will inform Qualified Beneficiaries about options that they have in the Exchange/Marketplace. This notice is important because some qualified beneficiaries may prefer to enroll in the Exchange/Marketplace rather than select COBRA coverage.
BCC will be making the appropriate updates to our COBRA election notices to comply with the changes set forth in the newly released Model COBRA Notice.
The temporary guidance will remain in effect until the DOL promulgates regulations or other guidance.
This summary is for informational purposes and does not contain or convey legal advice, and should not be used or relied upon in regard to any particular facts or circumstances without first consulting a tax or legal professional.
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