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Myth vs. Fact: Myth #3: Business Owners Will Be Fined If They Don’t Notify Their Employees About the New Health Insurance Marketplace

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Myth vs. Fact: Myth #3: Business Owners Will Be Fined If They Don’t Notify Their Employees About the New Health Insurance Marketplace

By Meredith K. Olafson, SBA Official
Published: September 12, 2013 Updated: September 12, 2013

As a business owner, it's important to understand how the Affordable Care Act may affect your business. However, with so many misconceptions about how the Affordable Care Act works, this can be difficult. 

As part of our ongoing blog series, "Myth vs. Fact: The Affordable Care Act and Small Business," this week we're debunking another common myth: Business owners will be fined if they don't provide notification to their employees about the new Health Insurance Marketplace.

Fact: If your company is covered by the Fair Labor Standards Act, you must provide a written notice to your employees about the Health Insurance Marketplace by October 1, 2013.  However, there is no fine or penalty under the law for failing to provide the notice.

Which Employers Must Provide This Notification?

Under the Affordable Care Act, all employers covered by the Fair Labor Standards Act (generally, those firms that have at least one employee and at least $500,000 in annual dollar volume of business), must notify their employees about the new Health Insurance Marketplace, whether or not the employer currently provides health coverage to its employees. 

The Marketplace opens for enrollment in all states on October 1, 2013 and offers individuals and small business owners an online portal to find and compare private health insurance options.

What Information Do I Need to Include in the Notice to My Employees?

The notice should inform employees:

  • About what the new Health Insurance Marketplace is and that open enrollment begins on October 1, 2013;
  • That, depending on their income and what coverage may be offered by the employer, employees may be able to purchase lower cost private insurance in the individual Marketplace; and
  • If employees buy insurance through the individual Marketplace, they may lose the employer contribution (if any) to their health benefits.

Employers are required to provide this notice to all current employees by October 1, 2013, and to each new employee at the time of hire beginning on that same date.  This requirement applies regardless of an employee's plan enrollment status (if applicable) or their part-time or full-time status.

The Department of Labor (DOL) will consider a notice to be provided at the time of hiring if the notice is provided within 14 days of an employee's start date.

Where Can I Get More Information?

DOL has provided employers with two sample notices they may use to help comply with this rule. There is one model for employers who do not offer a health plan and another model for employers who offer a health plan to some or all employees:

Access Spanish and MS Word versions of the model notices on the DOL Affordable Care Act page.

For more information about this notice requirement, see this Technical Release issued by the Department of Labor.  You can also visit DOL's website for additional Q&A on this topic.

DOL's Wage and Hour Division also provides guidance relating to the applicability of the FLSA in general, including a compliance assistance tool to determine applicability of the FLSA.

About the Author:

Meredith K. Olafson

SBA Official

Meredith K. Olafson is Senior Policy Advisor for the U.S. Small Business Administration where she oversees the agency's education and outreach efforts around health care and the Affordable Care Act.

Comments:

I have to say the ACA has not been easy to prepare for as a business owner. We try to do everything by the book but with such sweeping changes, its been tough to keep up with all of it. I have talked with my attorney a couple of times and done lots of reading on articles like this. I believe we are ready for it but only time will tell.
Most people do not currently have health insurance because they cannot afford it...but now they are being told that they HAVE to buy health insurance? So where are they going to get the money for the FORCED insurance? If they didn't have the money before...where are they going to get it now? Regards.. Sirena Alexander
Not only is the ACA as it stands going to hurt a lot of individuals, it's going to hurt a lot of businesses as well. I heard many business owners claim it is already hurting them.
How does an employer know if they are covered by the fair labor standards act, is it just by the dollar volume of business. Our business does around $400,000 with 6 employees ?
The lack of penalties does not translate into a lack of consequences. Plan sponsors still have a fiduciary obligation to be forthcoming with plan participants and beneficiaries. Employees can sue employer and claim damages if they miss the open enrollment period just because employer failed to provide the notice on time.
Folks The monetary penalty has been waved off but notifying is still a requirement – so – there is very much a possibility of some penalty (whether monetary or other) in case of non-compliance. However, the requirements to send the notification electronically are not so clear. Luckily I googled and found this free tool This post was edited to remove a link. Please review our Community Best Practices for more information about how best to participate in our online discussions. Thank you. and fired the notification to all my employees in minutes! Government should provide us tools like this if they enforce such requirements.
Thank you, its good to know that providing the notice is required by law. I wonder if the absence of the penalty is universal or changes state by state ?
Hi Seppi, the absence of penalty is universal per federal law. 
I wish the writer would be more informative and not make the AFC look good...Prior to 9/11/13 there WAS a $100 per day per employee fine for not informing employee....That day the "powers" woke up and realized the impossibility of tracking the penalty and then waived penalty...but it did exist prior to 9/11/13....let's be fair with full disclosures
This part of the law was modified on September 11th, 2013. The fine will not be imposed. Like everything about this law, it's like wrapping your arms around jello...just when you think you understand, the rules change...all the while businesses are racking up costs. Thanks for clarifying that the fine is no longer imposed this year...but you should disclose that it is only a Myth as of Sept. 12th, 2013 after the rule was changed. It should also be noted the fine does go into effect in subsequent years.

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