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New COBRA Notice and “Coverage Options Notice” For Obamacare Released by DOL

By Anthony Kaylin   May 15, 2013 | Categories:

On May 8, the Department of Labor released a temporary “Model Notice to Employees of Coverage Options” about the soon-to-launch Healthcare Exchanges, as required under Fair Labor Standards Act (FLSA) Section 18B. It also released new guidance on COBRA elections under Obamacare. The Coverage Options Notice was originally targeted to be finalized and available for all employers by March 1, 2013, but for a variety of reasons was not.  The new target date is October 1, 2013.

Under the Section 18B notice, employers need to let employees know the following:

  1. The existence of the “Marketplace” (referred to in the statute as the “Exchange”) including a description of the services provided by the Marketplace, and the manner in which the employee may contact the Marketplace to request assistance;
     
  2. That the employee may be eligible for a premium tax credit for purchasing a qualified health plan through the Marketplace (if the employer’s  share of the total cost of benefits provided under the employer’s plan is less than 60% of total cost of those benefits).
     
  3. That if the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer; and that all or a portion of such contribution may be excludable from income for federal income tax purposes.

The notice must be provided in writing in a manner calculated to be understood by the average employee.   A sample of the model notice for employers who provide and do not provide health care can be found here.

Employers are required to provide the notice to each new employee at the time of hire, beginning October 1, 2013. For 2014, the DOL will consider a notice to be “provided at the time of hire” if the notice is provided within 14 days of an employee’s start date.  With respect to employees who are current employees before October 1, 2013, employers are required to provide the notice not later than October 1, 2013. It may be provided by first-class mail. Alternatively, it may be provided electronically if the requirements of the Department of Labor’s electronic disclosure safe harbor at 29 CFR 2520.104b-1(c) are met.

Employers must provide a notice of coverage options to each employee, regardless of plan enrollment status (if applicable) or of part-time or full-time status. Employers are not required to provide a separate notice to dependents, or to other individuals who are not employees but who are, or may become, eligible for coverage under the plan.

The DOL has also provided an “Updated Model Election Notice” for COBRA. In general, under COBRA, an individual who was covered by a group health plan on the day before a qualifying event occurred may be able to elect COBRA continuation coverage upon a qualifying event (such as termination of employment or reduction in hours that causes loss of coverage under the plan). A group health plan must provide to these “qualified beneficiaries” an election notice, which describes their rights to continuation coverage and how to make an election. The election notice must be provided to them within 14 days after the plan administrator receives the notice of a qualifying event.

The COBRA notice was revised to help make qualified beneficiaries aware of other coverage options available in the Marketplace. In order to use this model election notice properly, the plan administrator must complete it by filling in the blanks with the appropriate plan information. 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.

A copy of the revised Election Notice can be found here.

Source: U.S. Department of Labor May 8, 2013; SHRM May 14, 2013

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