FAQ Obamacare Letters due October 1st

We have had a few clients ask about the “Obamacare Letters” that are due October 1, 2013. I am providing you the following information to assist you in determining whether or not you need to comply with this notification requirement.

Even if your businesses has fewer than 50 full-time employees and you most likely will not be required to offer employee health insurance coverage under the Affordable Care Act, you may still have a requirement to notify your employees about the Affordable Care Act’s health-care exchanges. This notification requirement is what many are referring to as the “Obamacare Letters”.

Here is a link to the US Department of Labor’s technical release on this notification requirement: http://www.dol.gov/ebsa/newsroom/tr13-02.html

Who must make these notifications? Companies with at least one employee and $500,000 in annual revenue. Even if your gross revenue has not been this high in the past, consider your company’s growth and whether or not you may meet this condition for 2013.

What is the purpose of these letters? So that all employees are aware of the new public health insurance exchanges, whether or not they have a benefits plan in place.

What should the letters include? Here is a summary of the things that should be disclosed in your notification:

. – Notification that the new Health Insurance Marketplace “exchange” exists,

. – Description of the services provided by the Marketplace,

. – Information on how to contact the exchange to request assistance,

. – The employee’s potential eligibility for premium tax credit on the exchange if your company’s group health plan doesn’t provide “minimum value”, and

. – If the employee chooses to purchase individual coverage on the exchange, they may lose the employer contribution (if any) toward health insurance coverage.

Example letters? Rather than make your own letter, I recommend that you use the examples provided by the US Department of Labor. They have two model letters (make sure you complete the form information in these model letters):

. – Model letter for companies with health coverage: http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf

. – Model letter for companies with out health coverage: http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf

Deadline for the letters? No later than October 1, 2013 for existing full-time and part-time employees, and within 14 days of a new employee’s start date if hired on, or after, October 1, 2013. Note that companies are not required to provide the notice to dependents or other non-employees who might otherwise be eligible for coverage.

Delivery methods? The technical release says first-class mail and electronic delivery is allowed (if the electronic delivery meets the safe guards established for other benefit plan disclosure requirements). I’ve seen quite a bit of discussion about making sure you get some kind of “proof”. I haven’t been able to determine how important this is, but it is sure easier to get the proof now than try to demonstrate compliance later.

Any penalties for non-compliance? There have been several reports that the possible fines are “$100 per day” if you do not comply with this notification requirement. Some say penalty is “$100 per day per employee”. The SBA posted on their blog on September 12th that “there is no fine or penalty under the law for failing to provide the notice”, but laws generally provide authority to the overseeing departments to levy penalties for non-compliance. I would assume that there probably will be a significant penalty.

What should you do about this requirement? If you have any employees (even one), and your annual revenue may be $500,000 or more, I strongly advise that you provide existing and new employees with “Obamacare Letters”.

I hope this information is helpful. Please let me know if you have any questions.

RICK

Richard A. Howard, CMA, CPA

 

Circular 230 Disclosure: This is to advise you that, unless expressly stated, nothing in this communication (including any attachment or other accompanying materials) was intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding any federal tax penalties, or for promoting, marketing, or recommending a partnership or other entity, investment plan or arrangement to anyone.

 

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