ACA News & Publications

Health Care Reform Update: DOL Issues Model Exchange Notice and Updates Cobra Election Notice

May 2013

Beginning Jan. 1, 2014, individuals and employees of small businesses will have access to insurance coverage through the Affordable Care Act's (ACA) health insurance exchanges (Exchanges). Open enrollment under the Exchanges will begin on Oct. 1, 2013. ACA requires employers to provide all new hires and current employees with a written notice about ACA's Exchanges.

On May 8, 2013, the Department of Labor (DOL) released Technical Release 2013-02 to provide temporary guidance on the Exchange notice requirement. This temporary guidance will remain in effect until the DOL issues regulations or other guidance. According to the DOL, future regulations or other guidance will provide employers with adequate time to comply with any additional or modified requirements.

In connection with the temporary guidance, the DOL announced the availability of model Exchange notices for employers to use to satisfy the Exchange notice requirement and set a compliance deadline of Oct. 1, 2013 for providing the notice. In addition, the DOL's temporary guidance includes a new COBRA model election notice, which has been updated to include information regarding health coverage alternatives offered through the Exchanges.

Exchange Notice

Affected Employers
ACA's Exchange notice requirement applies to employers that are subject to the Fair Labor Standards Act (FLSA), which consists of most employer groups, including hospitals, educational institutions, as well as federal, state and local government agencies.
The DOL's Wage and Hour Division provides guidance relating to the applicability of the FLSA in general, including a compliance assistance tool to determine applicability of the FLSA.

Required Content
In general, the Exchange notice must:

  • Inform employees about the existence of the Exchange and describe the services provided by the Exchange and the manner in which the employee may contact the Marketplace to request assistance;
  • Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer's plan does not meet certain requirements;
  • Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of this employer contribution may be excludable for federal income tax purposes; and
  • Include contact information for the Exchange and an explanation of appeal rights.

Model Notices
The DOL provided the following model Exchange notices:

Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements described above.

Providing the Notice
Who Must Receive a Notice?
Employers must provide the Exchange notice to each employee, regardless of plan enrollment status or of 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 but who are not employees.

What Is the Deadline for Providing the Notice?
The DOL's temporary guidance sets a compliance deadline for providing the Exchange notices that matches up with the start of the first open enrollment period under the Exchanges.

Employers must provide the Exchange notice to both new hires and current employees as follows:

  • New HiresEmployers must provide thenotice to each new employee at the time of hiring beginning Oct. 1, 2013. For 2014, the DOLwill consider a notice to be provided at the time of hiring if the noticeis provided within 14 days ofan employee's start date.
  • Current Employees With respect to employees whoare current employees before Oct. 1, 2013, employers are required toprovide the notice no later than Oct.1, 2013.

Employers that decide to inform their employees about the Exchanges earlier than the Oct. 1, 2013, deadline are permitted to use the model notices and rely on the DOL's temporary guidance.

Method of Providing Notice
The notice is required to be provided in writing, automatically, free of charge, and in a manner calculated to be understood by the average employee. It may be provided by first-class mail. Alternatively, it may be provided electronically if the requirements of the DOL's electronic disclosure safe harbor are met. However, merely placing a disclosure on a company website available to employees will not by itself satisfy this disclosure requirement.

COBRA Election Notice

To help make qualified beneficiaries aware of other coverage options available in the Exchanges, the DOL has updated its model election notice that plans may use to satisfy the requirement to provide the election notice under COBRA. (The election notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event.)

The updated COBRA model election notice is available by accessing the following link: model COBRA election notice. It is also available on the DOL website at www.dol.gov/ebsa/cobra.html. Use of the model election notice, appropriately completed, will be considered by the DOL to be good faith compliance with the election notice content requirements of COBRA.

Next Steps for Employers

  • Coordinate with your benefits consultant to ensure the Exchange notices are appropriately drafted and timely distributed. 
  • If you sponsor plans with off-calendar year plan years and will be holding open enrollment prior to October 1, 2013 (for example, plans with plan years beginning on or after July 1, 2013), consider distributing the notices with open enrollment materials sent to the employees.
  • If the Exchange notice will be distributed electronically, ensure their delivery method complies with DOL safe harbor requirements.
  • Work with your COBRA administrators to update your COBRA election notices to reflect the changes included in the model notice.
  • Work with your benefits consultant (benefits professional?) to assess potential cost impact of terminating employees waiving COBRA coverage in favor of coverage through the Exchanges.

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits
949.833.2983
inquiries@burnhambenefits.com


This ACA Pathways is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

The information contained in this ACA Pathways includes emerging health care news from a limited perspective and does not encompass all views. The information was selected from a wide range of sources selected on the basis of their potential impact on employers and/or their employee benefit plans. For more information, please contact Burnham Benefits.

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