On September 11th in its online FAQ, the Department of Labor confirmed the fact that currently there will be no penalties for employers surrounding a failure to issue Marketplace Notices (also known as “Notice of Exchange Coverage”) to employees. Some may have interpreted the new FAQ statement as being new guidance. In fact, the absence of penalties under the ACA surrounding the Exchange Notices, is not news, and has been a known under Fair Labor Standards Act (FLSA) §18b.
Employers subject to FLSA are still required to distribute a Marketplace Notice to all current employees by October 1, 2013, and new hires going forward.
As precautionary and to be completely clear: despite the fact that there is no statutory penalty, there could be ERISA fiduciary issues under case law related to the failure to communicate to participants in the absence of the employer communication. In general, employers that sponsor ERISA plans have a duty to be straightforward with participants. Therefore, we recommend that you comply with this requirement and we would not advise that an employer could safely disregard this obligation.
Below are some additional questions and answers surrounding the Exchange Notice requirement. If you have any additional questions on this, or any compliance issue, please contact us at your earliest convenience.
Question: If there is no penalty, if the notice is not sent out, and there is no “proof” of delivery requirement, what would the employer face if they did not send out the Exchange Notice and saved all that cost?
Answer: If the exchange has the employer’s contact information, it may establish a dialogue with an employer whose employee is applying for a subsidy, which at least notifies the employer that its employee may be getting a subsidy. Failure to provide the notice could also potentially be viewed as interfering with an employee’s ability to get a subsidy, which is generally prohibited under ACA.
Question: Regarding the model Notice of Exchanges that is required to be customized by employers, the notice itself does not include any required information in regards to payroll contribution for 2014 – there is a section on the second page that addresses this and it is marked as optional.
However, the data form on employer coverage (link to the Marketplace Application Checklist document is below) does provide a block where information must be provided on the payroll contributions for the plan.
The question is, what if the employer has not set their 2014 payroll contributions by October 1? If this has not been determined, how should an employer answer this item? Is there any employer penalty (or other ramifications) for not establishing the 2014 payroll contribution by October 1?
Marketplace Application checklist link – http://marketplace.cms.gov/getofficialresources/publications-and-articles/marketplace-application-checklist.pdf
Answer: There could be ramifications under ERISA.
An employer that is presented with a copy of the Employer Coverage Tool by an employee who is applying for Exchange coverage should complete it to the best of their ability.
The form notes that with respect to the question you reference about premiums (#16), an employer would only complete that section if the plan year is about to end and the employer knows the premium and other information for the upcoming year.
Question: We know the Exchange Notices need to be delivered by 10/1/13 to all current employees, and starting 10/1/13 on an ongoing basis to all new employees, but what is the frequency that this notice needs to be distributed going forward? Must an employer distribute it each year at their company’s renewal, each year prior to a set date or only when there is a change to the notice?
Answer: It is not an annual requirement based on current guidance.
Question: Does the notice need to be distributed only to those employees who work more than 30 hours per week? Or can an employer deliver one notice to those who work more than 30 hours and another notice to those who work less?
Answer: The notice should go to all employees regardless of hours or other status.
Question: Page 2 of the Notice outlines the eligibility requirements for the plan – can the employer provide a different notice to Seasonal, Variable Hour and Regular Employees since there are different eligibility requirements for each class?
Answer: The notice should go to all employees regardless of hours or other status. The notice is designed to be able to be provided to all employees without tailoring it to specific classes; however, it should generally be permissible for an employer to do so.
Question: If an employer is meant to use only one notice for all employees, how does an employer determine whether to check the box for whether the coverage meets the affordability requirements, IF the coverage provided is expected to be affordable for some employees, but not all (which may be the case, especially if the notice must be provided to those working less than 30 hours who are still eligible for benefits, Minimum Value coverage may still be offered to Part Time 20 hour/week employees, but for those employees that coverage may not be affordable)
Answer: An employer should consider the relevant facts and circumstances when deciding whether to check the box regarding affordability.
Question: If an employer’s plan is affordable and adequate, can they write a cover letter when sending out the exchange notice to notify their employees that they wouldn’t qualify for subsidies?
Answer: Yes, that would be fine. Note that the first page of the exchange notice also states that employees who are eligible for affordable, minimum value employer coverage will not be eligible for a subsidy.