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A required written notice by employers to employees addressing coverage options under the FLSA

In accordance with the Fair Labor Standards Act (FLSA), as amended by section 1512 of the Patient Protection and Affordable Care Act, all employers are required to provide a written notice to current employees no later than October 1, 2013. In addition, upon that date, employers will also have to provide this written notice to employees at the time of hire, from that date forward.

The written notice needs to include the following points:

  • Informing the employee of the Marketplace also referred to as the “Exchange”, including a description of services provided by the Marketplace and how the employee may contact the Marketplace to request assistance.
  • If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, then the employee may be eligible for a premium tax credit if the employee purchases a qualified health plan through the Marketplace.
  • And that if the employee purchases this qualified health plan through the Marketplace, the employee may lose the employer contribution 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.

This notice is based on the FLSA definition of employee, which applies to employers that employ one or more employees who are engaged in, or produce goods for interstate commerce, and for most firms, a test of $500,000 or more in annual dollar volume of business applies. Therefore, this notice should be sent to current employees regardless of the size of business and regardless of whether or not you provide health care insurance, or plan on being required to. At this time there is not a specific penalty for noncompliance, although there may be FLSA or PPACA general reporting compliance penalties that apply. It is not entirely clear at this time which may apply.

There are model notices provided by the federal government that you’re able to use, although you can do your own. If you’re an employer that offers a plan you can use this model, or if you’re an employer that does not offer a plan you can use this model. For additional help and information on this notice under the Fair Labor Standards Act, you can go here.

With an approaching effective date for the employer and individual mandate, this is a required preliminary action that needs to be done. In addition to the general points that need be addressed within the letter, it must also be written in laymen’s terms, or a manner that is understood by the average employee, and be provided via first-class mail or electronically, given the intended employee typically has email access as part of their work situation.

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