DOL Issues Model Exchange Notices, Updated COBRA Election Notice and Related Guidance | Practical Law

DOL Issues Model Exchange Notices, Updated COBRA Election Notice and Related Guidance | Practical Law

The Department of Labor (DOL) issued Technical Release 2013-02, which provides temporary guidance and model notices addressing the Affordable Care Act's (ACA's) notice of exchange requirement under Section 18B of the Fair Labor Standards Act (FLSA), which requires most employers to inform employees of coverage options available through the health insurance exchanges. The guidance also provides an updated model election notice under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The election notice is revised to include, among other changes, additional information regarding coverage alternatives offered through the exchanges.

DOL Issues Model Exchange Notices, Updated COBRA Election Notice and Related Guidance

by PLC Employee Benefits & Executive Compensation
Published on 10 May 2013 • USA (National/Federal)
The Department of Labor (DOL) issued Technical Release 2013-02, which provides temporary guidance and model notices addressing the Affordable Care Act's (ACA's) notice of exchange requirement under Section 18B of the Fair Labor Standards Act (FLSA), which requires most employers to inform employees of coverage options available through the health insurance exchanges. The guidance also provides an updated model election notice under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The election notice is revised to include, among other changes, additional information regarding coverage alternatives offered through the exchanges.
On May 8, 2013, the DOL issued Technical Release 2013-02, which provides:
  • Temporary guidance on the requirement under Section 18B of the FLSA, added by the Affordable Care Act (ACA), for most employers to notify employees of coverage options available through the health insurance exchanges (see Practice Note, Health Insurance Exchange and Related Requirements under the ACA), including a link to model notices that employers may use to satisfy the requirement. Notices must be provided to current employees by October 1, 2013. New employees must generally be provided notices beginning October 1, 2013. (Open enrollment for exchange-related coverage begins on October 1, 2013.)
  • A link to an updated COBRA model election notice for group health plans, which has been revised to include additional information regarding coverage alternatives offered through the exchanges.
Technical Release 2013-02 will remain in effect until the DOL issues subsequent regulations or other guidance.

Notice of Coverage under the Exchanges

Technical Release 2013-02 provides temporary guidance regarding the notice requirement under FLSA Section 18B. In conjunction with the Technical Release, the DOL issued two model notices that employers may use to satisfy the requirement, including:
  • A model notice for employers who do not offer a health plan.
  • A model notice for employers who offer a health plan to some or all employees.
Although the ACA required that notice of exchanges be provided by March 1, 2013, the DOL indicated earlier in the year that the notice requirement would not take effect on March 1. The Technical Release generally delays the distribution deadline until October 1, 2013 (see Notice Content, Timing and Delivery).
Employers may use the model notices and rely on the Technical Release to inform employees, even before October 1, 2013, of exchange-related coverage options.

Model Notice: Employers Who Do Not Offer a Health Plan

This notice (one page, front and back) includes high-level questions and answers for employees about the exchanges, including:
  • How employees can qualify for the premium tax credit.
  • How employer-provided health coverage affects an employee's eligibility for the credit.
The form provides employees basic information about their employer, including employer name, address, EIN, address and personnel contact information. Employees will be asked to provide this information in applying for coverage under the exchanges.

Model Notice: Employers Who Offer a Health Plan to Some or All Employees

This notice (one page, front and back, and an additional page with optional information) also provides general information about the exchanges. The notice includes spaces in which basic information about an employer is provided, and includes questions about the employer's coverage, including whether:
  • The coverage is offered to all or some employees and, if the latter, which employees are eligible.
  • Dependent coverage is provided.
  • The coverage meets minimum value and is intended to be affordable, based on employee wages.

Required Notice Recipients

Employers must provide written exchange notices to both current and newly-hired employees. The notices must inform these individuals of coverage options available through the health insurance exchanges, which go into operation in 2014. Employers must provide the notice to each employee, regardless of either:
  • Plan enrollment status (if applicable).
  • Part-time or full-time employment status.
However, employers need not provide a separate notice to dependents or other individuals who are or may become eligible for coverage but who are not employees.

Employers Subject to the Notice Requirement

The notice requirement applies to employers covered by the FLSA. In general, the FLSA applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce (see Practice Note, Wage and Hour Law: Overview: Covered Employers and Employees). For most firms, a test of not less than $500,000 in annual dollar volume of business applies.
The FLSA also specifically covers certain other entities, including:
  • Hospitals.
  • Schools for children who are mentally or physically disabled or gifted.
  • Preschools, elementary and secondary schools, and higher education institutions.
  • Federal, state and local government agencies.
The DOL offers a compliance assistance tool to determine applicability of the FLSA.

Notice Content, Timing and Delivery

Exchange notices must:
  • Include information addressing the exchanges' existence, contact information for the exchanges and a description of the services provided by the exchanges.
  • Inform employees that if they purchase a qualified health plan through an exchange, they may:
    • be eligible for a premium tax credit under Section 36B of the IRC; and
    • lose any employer contribution for employer-provided health benefits, and that some or all of the employer contribution may be excludable for federal income tax purposes.
Employers must provide exchange notices to each new employee, upon hire, beginning October 1, 2013. For 2014, the DOL will consider a notice to be provided upon hire if it is provided within 14 days of an employee's start date. For employees who are current employees before October 1, 2013, employers must provide the notice on or before October 1, 2013.
The notice may be provided either:
Also, the notice must be:
  • Provided automatically and free of charge.
  • Written in a manner calculated to be understood by the average employee.

Updated COBRA Election Notice

Technical Release 2013-02 also includes a link to an updated model COBRA election notice for group health plans (see generally Practice Note, COBRA Overview). According to the Technical Release, some COBRA qualified beneficiaries may:
  • Want to consider health coverage alternatives to COBRA that are available through the exchanges.
  • Be eligible for a premium tax credit.
As revised, the election notice:
The revised COBRA election notice also:
  • Deletes a paragraph describing the Trade Act of 2002 tax credit.
  • Updates a section of the notice addressing EBSA contact information.
  • Adds to the notice a two-paragraph Paperwork Reduction Act Statement and OMB control number.
The DOL will consider use of the revised COBRA election notice, appropriately completed, as good faith compliance with COBRA's election notice content requirements.
Complete changes to the model notice can be viewed in a redline version provided by the DOL.

Practical Impact

Given the upcoming October 1, 2013 distribution date, employers subject to the FLSA will want to begin preparing to timely comply with this new notice of exchange requirement. The DOL indicates in its Technical Release that many employers asked to have a model notice before October 1, 2013, so they could inform employees of their exchange-related coverage options before that date.
On top of the new notice requirement, the Technical Release also impacts COBRA administration. Although employers are not required to use the DOL's model election notice, they may wish to do so to take advantage of the good faith compliance with the content requirements of the DOL's COBRA regulations available under the Technical Release.