It’s Time to Comply with the Health Insurance Marketplace Notice Requirements
When the government delayed the effective date of the Affordable Care Act (ACA) for employer reporting requirements and related employer mandate until January 1, 2015, many wondered if the individual mandate and health insurance marketplace (aka Exchange) effective dates would also be delayed. Additionally, people have been anxiously waiting to see if the health insurance marketplaces will indeed open on October 1 as originally scheduled.
To date, no guidance has been issued delaying the individual mandate or health insurance marketplace effective dates, and we have not heard any rumblings that those provisions of the ACA will be delayed. This means most employers must issue a Marketplace Notice to all employees regarding the Health Insurance Marketplace by October 1.
Which employers are required to issue the Notice?
Any employer subject to the Fair Labor Standards Act (FLSA) must comply with the Notice requirements. In general, the FLSA applies to:
- Employers that employ one or more employees engaged in or producing goods for interstate commerce and who have annual revenue of at least $500,000
- Most not-for-profit, educational, and governmental organizations, regardless of revenue
For those employers who must issue a Notice, the Department of Labor (DOL) has issued two model notices. One applies to employers who do not offer employer-sponsored health benefits. The other applies to employers who do offer health benefits to eligible employees. Considering most notices for qualified retirement plans (e.g., 401(k) or 403(b) plans) are five pages or more, it is refreshing that the model notices are no more than three pages long.
All Marketplace notices must include:
- Information regarding the existence of the new Marketplace
- Contact information for the Marketplace
- A description of the services provided by the Marketplace
- Information that employees may be eligible for a premium tax credit if the employee purchases a qualified health plan (QHP) through the Marketplace
- A statement that if the employee purchases a QHP through the Marketplace, the employee may lose the employer contribution, if any, to any health benefit plans offered by the employer and that all or a portion of such contribution may be excluded from income for federal tax purposes
Draw attention to possible after-tax consequences
The model notice goes further by stating that if an employee purchases coverage through the Marketplace, the payments for coverage will be made on an after-tax basis. Currently, most employees pay for employer-sponsored coverage with pre-tax contributions through a Section 125 plan. This point cannot be overlooked by employees. If an employer offers health benefits, employees generally pay their share of the premiums pre-tax (for income and employment taxes) through payroll deduction. If an employee forgoes employer-sponsored health benefits and purchases health coverage through the Marketplace, the premiums paid will be made with after-tax dollars and will not be made through payroll deductions.
Decide which optional information you want to include
The model notices identify the employer, including the employer’s name, address, phone number, and Employer Identification Number (EIN). They also include the name, phone number, and email address of the person an employee can contact to receive more information about health coverage. This information is not required to be reported under the rules so it does not have to be completed by the employer. However, an employee who considers purchasing health benefits through the Marketplace will need this information. Providing the information upfront may eliminate some unnecessary phone calls from employees.
For employers that offer health insurance coverage, the remainder of the Notice is optional. The optional information includes basic information regarding the employer’s health coverage and a page of information specific to each employee. The information reported on this is intended to help ensure employees understand their coverage choices. Completing these portions of the model notice will add time to the preparation and distribution of the notices. It can be ignored, if desired.
What should an employer be doing now?
First, go to the DOL’s Employee Benefit Security Administration website and download a model notice. Complete the applicable notice to the extent required and desired (keeping in mind that portions are optional) and distribute it to all employees on or before October 1. An employer will also need to distribute the Notice to any newly hired employee within 14 days of the employee’s date of hire. The Notices can be issued in either hard copy or, if certain rules are met, electronically.
The DOL is expected to release proposed regulations related to future Marketplace notices this fall. We will update our website and provide further communication as information changes.
The Employee Benefit consultants at BerryDunn will continue to review and analyze ACA-related items, including the Marketplace notice requirements, so that you can gain a better understanding of how the ACA affects your company, allowing you to be prepared to comply with confidence. Please contact Bill Enck or Roger Prince if you have any questions or want additional information.