On October 1, 2013, the health insurance marketplaces created by the Affordable Care Act will open. Under the law, it is required that employers provide notice to their employees about these marketplaces, also known as exchanges.
According to the Affordable Care Act, small employers (those with fewer than 50 employees) will not be required to offer health insurance coverage. Larger employers (50+ employees) will be required to provide health insurance or pay penalties—although this provision of the law has been delayed until 2015.
Although this provision of the law has been delayed, all employers who are required to comply with the Fair Labor Standards Act should issue a notice to all of their employees by October 1st. The purpose of the notification is to inform the employees of the new exchanges and the related subsidies that will be available beginning January 1st, 2014.
Employers should provide notice about the establishment of the health insurance exchanges to their existing employees by October 1, 2013, and should provide notice to new employees hired on or after October 1, 2013.
Each employee should receive notice, regardless of the employee's health plan enrollment status and part- or full-time employment status. Notice may be provided in writing or electronically under the Department of Labor's electronic disclosure rules.
The notice should inform the employee:
- Of the existence of the exchange, the services provided by the exchange, and contact information for the exchange.
- That he or she may be eligible for a premium tax credit under the Internal Revenue Code if (a) the employer pays less than 60 percent of the cost of health insurance offered by the employee; and (b) the employee purchases health insurance through the exchange.
- That an employee who purchases health insurance through an exchange may lose the employer's (tax-free) contribution to the cost of health insurance offered by the employer.
To satisfy this notice requirement, the Department of Labor has provided model notices on its website, click here.
The website provides one model for employers who offer a health plan to some or all of their employees, and another model for employers who do not offer a health plan. Employers may modify the notice, as long as it meets the content requirements described above.
Despite some news reports to the contrary, there is no fine or penalty under the law for failure to provide this notification. For more information from the Department of Labor on this issue click here.
Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.
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