Many provisions of the Patient Protection and Affordable Care Act (Affordable Care Act) that become effective beginning in 2014 are designed to expand access to affordable health coverage. These include provisions for coverage to be offered through a Health Insurance Marketplace (Marketplace), premium tax credits to assist individuals in purchasing such coverage, employer notice to employees of coverage options available through the Marketplace, and other related provisions.
The Notice Requirement
Beginning January 1, 2014, individuals and employees of small businesses will have access to affordable coverage through a new competitive private health insurance market—the Health Insurance Marketplace. The Marketplace offers “one-stop shopping” to find and compare private health insurance options. Open enrollment for health insurance coverage through the Marketplace begins October 1, 2013. Section 1512 of the Affordable Care Act creates a new Fair Labor Standards Act (FLSA) section 18B requiring a notice to employees of coverage options available through the Marketplace. This section requires “applicable employers” to provide each employee at the time of hiring (or with respect to current employees, not later than March 1, 2013), a written notice:
Informing the employee of the existence of the Marketplace (referred to in the statute as the Exchange) including a description of the services provided by the Marketplace, and the manner in which 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, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through the Marketplace; and
If the employee purchases a qualified health plan through the Marketplace, 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.
The Department of Labor has stated that the notice requirement will be postponed until October 1, 2013. The Department of Labor has issued a model notice that employers can use (see below).
Application to Churches
The new notice requirement applies to employers covered under the FLSA. Does the FLSA apply to churches? That is a complex question. The FLSA initially covered only employees “engaged in commerce or in the production of goods for commerce.” Congress expanded the Act’s coverage in 1961 to include “enterprises” as well as individual employees. The Act now applies not only to employees actually engaged in commerce or in the production of goods for commerce, but also to any employee “employed in an enterprise engaged in commerce or in the production of goods for commerce.”
Enterprise Coverage
Employees who work for certain businesses or organizations (“enterprises”) are covered by the FLSA. The Act defines the term enterprise to include an organization that:
“has employees engaged in commerce or in the production of goods for commerce, or that has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person, and is an enterprise whose annual gross volume of sales made or business done is not less than $500,000”; or
“is engaged in the operation of a … preschool, elementary or secondary school, or an institution of higher education (regardless of whether or not such … institution or school is public or private or operated for profit or not for profit).”
According to this language, church-operated schools and preschools are “enterprises engaged in commerce or in the production of goods for commerce” regardless of their annual income. Churches and other religious organizations generally will be deemed to be an “enterprise” subject to FLSA only if they are engaged in commercial or business activities with revenue of at least $500,000.
A “fact sheet” published by the Department of Labor states:
The amendments to the FLSA specifically extended FLSA coverage to preschools as covered “enterprises,” regardless of whether public or private or operated for profit or not for profit, and without regard to the annual dollar volume of the business. As a result, all such enterprises are required to comply with applicable provisions of the FLSA.
Daycare centers and preschools provide custodial, educational, or developmental services to preschool age children to prepare them to enter elementary school grades. This includes nursery schools, kindergartens, head start programs, and any similar facility primarily engaged in the care and protection of preschool age children. Individuals who care for children in their home are not considered daycare centers unless they have employees to assist them with the care of the children.
This language leaves no doubt that the Department of Labor interprets the term preschool to include a church-operated child care facility, even if the facility is primarily a custodial institution, rather than an educational one.
Individual Coverage
Even when there is no enterprise coverage, employees are protected by the FLSA if their work regularly involves them in interstate commerce. The FLSA covers individual workers who are “engaged in commerce or in the production of goods for commerce.”
Examples of employees who are involved in interstate commerce include those who: produce goods (such as a worker assembling components in a factory or a secretary typing letters in an office) that will be sent out of state, regularly make telephone calls to persons located in other states, handle records of interstate transactions, travel to other states on their jobs, and do janitorial work in buildings where goods are produced for shipment outside the state.
Also, domestic service workers (such as housekeepers, full-time babysitters, and cooks) are normally covered by the law.
Timing and Delivery of Notice
Covered employers are required to provide the notice to each new employee at the time of hiring beginning October 1, 2013. For 2014, the Department of Labor 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.
With respect to employees who are current employees before October 1, 2013, covered employers are required to provide the notice not later than October 1, 2013. The notice is required to be provided automatically, free of charge.
The notice must be provided in writing in a manner calculated to be understood by the average employee. It may be provided by first-class mail. Alternatively, it may be provided electronically.
Model Notice
A model notice has been prepared by the Department of Labor. Churches that meet the definition of an “applicable employer” may use this form to satisfy the notice requirement.
“Play or Pay” Provision Delayed
By Michael E. Batts
The Obama Administration announced on July 2, 2013, a one-year delay in the effective date of a major component of the Affordable Care Act requiring employers with at least 50 workers to offer health coverage or be exposed to a penalty. The provision, commonly known as the “play or pay” penalty, or employer mandate, will now become effective on January 1, 2015. The delay removes the pressure to redesign plan coverage in the next few months to maximize the cost benefit of avoiding (or paying) the penalties. Employers now have an extra year to vet the pros and cons of their plan designs and to implement the Act’s requirements on coverage.
As of now, the Act’s other two major provisions, expanding Medicaid and requiring individuals to obtain coverage or pay a penalty, are still scheduled to become effective on January 1, 2014.
