EBSA Issues Guidance On Notices For Health Care Coverage Options And COBRA Elections

The Employee Benefits Security Administration (EBSA) has issued Technical Release 2013-02, pending future issuance of regulations or other guidance, on a requirement under Sec. 1512 of the Patient Protection and Affordable Care Act (ACA) that notice be given to employees regarding coverage options available through the new state health care exchanges, also known as the health insurance marketplaces. The guidance also includes information on model COBRA election notices.

ACA Sec. 1512 created a new Fair Labor Standards Act (FLSA) Sec. 18B to provide that a written notice including the following information must be given by applicable employers to employees, regardless of enrollment status or part-time or full-time status:

• Information on the existence of the marketplace, its services, and contact information;

• An explanation that, in instances in which an employee purchases coverage through the marketplace, he or she may be eligible for a premium tax credit under Code Sec. 36B (if the employer plan’s share of total allowed costs of benefits under the plan is less than 60 percent of those costs); and

• Advice that any employer contribution to a health benefits plan may be lost if the employee purchases coverage through the marketplace, and that the employer contribution may have been excludable from federal income tax.

Originally, the notices were to be provided to employees by March 1, 2013, but the Department of Labor (DOL) stated on Jan. 14, 2013, that, in order to facilitate a smooth implementation process and give employers time to comply, the timing for distribution was expected to be late summer or fall of 2013.

The guidance and associated new model notices (one for employers who offer health coverage to some or all employees (http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf), and one for employers who do not offer coverage (http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf)) are being issued by the EBSA in response to requests from employers, and employers may use the model notices now to inform employees about upcoming coverage options that will be available via the marketplace, although notices do not have to be provided to employees until Oct. 1, 2013. Employers may use a modified form of the notices, but all of the content requirements listed above must be included.

Additionally, notices must be provided automatically, free of charge, and must be in writing in a manner calculated to be understood by the average employee, and they may be provided either by first-class mail, or electronically, as long as the DOL’s electronic disclosure safe harbor requirements are met (see ERISA Reg. Sec. 2520.104b-1(c)).

COBRA election notice requirements. In this latest guidance, the EBSA reminds employers that an election notice must be provided by a group health plan to qualified beneficiaries (individuals with a right to continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, due to a qualifying event) within 14 days after the plan administrator receives notice of the qualifying event. Information on COBRA continuation requirements applicable to group health plans is available at http://www.dol.gov/ebsa/publications/cobraemployer.html.

In addition to the information required to be included in the COBRA election notice, there may be information on marketplace health coverage alternatives that qualified beneficiaries may want to consider, the EBSA noted. Without specifically saying that employers must include this information in the COBRA election notice, the EBSA is providing a new model COBRA election notice that includes information on marketplace alternatives (available at http://www.dol.gov/ebsa/modelelectionnotice.doc).

The EBSA then further stated that use of this new model notice will be considered to be good faith compliance with COBRA’s election notice requirements. Those who wish to have further information are advised to contact the EBSA at (202) 693-8335.

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