Under the requirements of ACA, employers of all sizes who are subject to the FLSA must provide a notice to all employees regarding the availability of coverage on the insurance exchange, or marketplace. The notice must be sent to all active employees, including part-time employees. It must be distributed no later than October 1, 2013. New employees hired on or afterOctober 1, 2013 must receive the notices within 14 days of their date of hire.
The question of who, exactly, is an employee is an important one. The Act’s exchange notice requirement amends the FLSA. Thus, while the Internal Revenue Code and ERISA look to the “common law” standard, applicable court precedent interpreting the FLSA’s use of the term “employee” relies on the broader, “economic realities” test. Accordingly, an individual is an “employee” for FLSA purposes if he or she is economically dependent on the business for which he or she performs personal services. Thus, individuals properly classified as independent contractors for tax purposes may nevertheless be employees (to whom notice must be provided) for FLSA purposes.
Notices may be delivered by first-class mail. They may also be delivered electronically if the employee can effectively access electronic documents at his worksite and the use of the employer’s electronic information system is an integral part of his job.
The notice requirement applies to all employers who are subject to 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. For most firms, a test of not less than $500,000 in annual dollar volume of business applies. The FLSA also specifically covers the following entities, regardless of dollar volume of business: hospitals; institutions primarily engaged in the care of the sick, the aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state and local government agencies. (For more information on the FLSA, see http://www.dol.gov/elaws/esa/
Attached to this letter is the Model Notice. Part A of the notice tracks the requirement of the statute. Note that you must enter a contact name and phone number under the “How Can I Get More Information” portion of Part A.
Part B solicits information about your group health plan coverage that is intended to assist employees who apply for subsidized coverage under a group health plan product offered through the exchange. Part B includes an optional section that asks the employer to disclose whether the health care coverage offered meets the minimum value standard, and whether the cost of coverage is intended to be affordable. While not required, employers may decide to complete this part of the notice in order to avoid having to respond to inquiries from exchanges seeking to process an individual’s application.
With respect to the questions on Part B:
“As your employer, we offer a health plan to:”: – most of you will answer with “some employees” and then you should use the definition of Eligible Employee that is in your plan. For example, your notice might state: “Eligible Employees are all full-time employees who work at least 24 hours per week.” And most of you will answer that with respect to dependents: “we do offer coverage” and again use the definition of Eligible Dependents that is in your plan (for example, your notice might state “Eligible Dependents are the Eligible Employee’s spouse, unless divorced, and all children from birth to the end of the month in which they attain twenty-six (26) years of age. The term “children” will include only natural children; stepchildren; legally adopted children (including children Placed with the adopting parents during the period before the adoption becomes final); or children for whom the Eligible Employee is the child’s legal guardian).”
If checked, this coverage meets the minimum value… you need to determine if your plan meets the minimum value standard AND if it is affordable. Your plan meets the minimum value standard. You will also need to determine if your plan is considered to be affordable. If an employee’s share of the premium (for single coverage) for employer-provided coverage would cost the employee more than 9.5% of that employee’s annual household income, the coverage is not considered affordable for that employee. If an employer offers multiple healthcare coverage options, the affordability test applies to the lowest-cost option available to the employee that also meets the minimum value requirement.
Items 13 through 16 on Part B are optional for you to complete.
Because employers generally will not know their employees’ household incomes, employers can take advantage of one of the affordability safe harbors set forth in the proposed regulations. Under the safe harbors, an employer can avoid a payment if the cost of the coverage to the employee for single coverage would not exceed 9.5% of the wages the employer pays the employee that year, as reported in Box 1 of Form W-2, or if the coverage satisfies either of two other design-based affordability safe harbors.
The DOL Technical Release on this issue can be found at http://www.dol.gov/ebsa/