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Health Care Reform Part 6

Today we are continuing our installment on issues covering health care reform legislation and related tax changes. Specifically, we are going to take a detailed look at the required employer notice on health care coverage options.

Beginning January 1, 2014, individuals and employees of small businesses will have access to affordable health care coverage through a new competitive private health insurance market called the Health Insurance Marketplace.

Certain employers must provide written notice to employees about health insurance coverage options available through the Marketplace. A government agency has provided the following information on the notice requirement and has issued model notices:

  • Who must provide notices: Notices must be provided by any employers to whom the Fair Labor Standards Act applies. Generally, this means an employer who has one or more employees who are engaged in or produce goods for interstate commerce. For most firms, this rule doesn't apply if they have less than $500,000 in annual dollar volume of business.

  • Who should get notices: Employers must provide a notice to each employee, regardless of plan enrollment status (if applicable) or of part-time or full-time status. Employers do not have to provide a separate notice to dependents or other individuals who are, or may become, eligible for coverage under any available plan, but who are not employees.

  • What forms and content are in the notice: The notice must be provided in writing in a manner that the average employee can understand. The notice must include information regarding the existence of a new Marketplace, as well as contact information and a description of the services provided by the Marketplace. In addition, the notice must:

  • (1) Inform the employee that the employee may be eligible for a premium tax credit if the employee purchases a qualified health plan (QHP) through the Marketplace.

  • (2) Include a statement informing the employee that if the employee purchases a QHP, 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.

  • When the notice should be delivered: Employers must provide the notice to each new employee at the time of hiring beginning Oct. 1, 2013. For 2014, a notice is considered to be provided at the time of hiring if it is provided within 14 days of an employee's start date. For employees who are current employees before Oct. 1, 2013, employers must provide the notice no later than Oct 1, 2013.

There is model language for the notice on EBSA's website. 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. Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements in ERISA Technical Release 2013-02.

It is very possible that your current provider of health insurance will provide you with the correct notice.

Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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