Notice of Exchange: Must becomes Should

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The Department of Labor (DOL) has stated in an FAQ that no fine or penalty will be given to an employer that fails to timely provide the Notice of Exchange to all employees.  Previously, an employer was required to mail a Notice of Exchange to the home of all employees informing them of new health insurance options available on the Exchange.  This delay causes more harm than good, as the October 1 deadline is less than a month away and many employers have already prepared to comply with this requirement.

Now, the Notice of Exchange “should” be mailed to employees by October 1, 2013.

However, the Affordable Care Act (ACA) amended the Fair Labor Standards Act (FLSA) to require employers to distribute the Notice of Exchange.  The FLSA imposes penalties on employers that violate its mandates, but no penalty is described for failing to timely provide the Notice of Exchange.  Adding to the inconsistency, employers still have a fiduciary duty to inform plan participants and beneficiaries; thus it could be a required disclosure.

In sum, mailing the Notice of Exchange is one of the easiest compliance obligations in the ACA.  Employers should plan to mail the Notice regardless of the lack of penalty.  Why take a risk on an easy one?

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