Healthcare Reform: Required Notice to Employees Regarding "Marketplace" Exchanges

Schneider Downs|Tax

By Kathleen Petrucci

On May 8, 2013, the United States Department of Labor (DOL) issued guidance about the required notice that employers must distribute to employees during 2013 regarding the existence of health insurance exchanges or “Marketplaces”.

The notice requirement applies to all employers that are subject to the Fair Labor Standards Act (FSLA), as amended by the Affordable Care Act (ACA). In general, the FLSA applies to employers that employ one or more employees and have annual sales or receipts of $500,000 or more. The FLSA also covers the following entities:

  • Hospitals 
  • Institutions that care for the sick, the aged, mentally ill or disabled who reside on the premises 
  • Schools for children who are mentally or physically disabled or gifted 
  • Preschools, elementary and secondary schools 
  • Institutions of higher learning
  • Federal, state and local governments and governmental agencies

It would be unusual for an employer to be excluded from the FLSA. However, if you are unsure whether the FSLA rules apply to you, DOL information about exclusions can be found here.

The Marketplace notice must be issued to all full-time and part-time employees by October 1, 2013, regardless of whether the employee is currently enrolled in the employer’s health coverage. For employees hired on or after October 1, 2013, the notice must be provided within 14 days of the date of hire. The notice may be distributed electronically in accordance with the DOL’s safe harbor rules.

The notice should include information on:

  • Existence of the Marketplace
  • Description of the services provided by the Marketplace
  • How employees may contact the Marketplace for assistance 
  • Whether the employer’s share of total costs of provided benefits is less than 60 percent (i.e., whether it offers minimum value) 
  • The possibility of being eligible for a premium tax credit under the Marketplace 
  • The loss of the employer’s contribution (if any) for health benefits and 
  • All or a portion of the contribution that may be excludable from income for federal tax purposes 

The DOL guidance includes two model notices, which may be used by employers to satisfy the notice requirement. There is a model notice for employers who offer a health plan to some or all employees and a model plan for employers who do not offer a health plan. Employers can also use a modified version of the notice as long as the content requirements are met.

In addition to the model notices, the DOL also updated the model COBRA election form by adding language to inform COBRA-qualified beneficiaries of their option to secure health coverage through one of the new state marketplaces beginning in 2014.

Businesses should start thinking now about the best process for distributing these notices to employees by October 1, 2013. If you need help with the process or have any other questions regarding this or any other healthcare reform requirement, please contact Kathy Petrucci, Tax Shareholder.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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