In a single FAQ posted to its website this week, the DOL acknowledged that "there is no fine or penalty under the law" for failing to provide the notice to employees describing the public insurance exchanges (or "Marketplaces"). Many of us had come to this conclusion already, so it was not entirely a new development. But at a minimum it provides some further comfort that there will not be a serious consequence to employers who might foot-fault on the requirement (e.g., overlook an employee when distributing the notice).
Does this lack of a penalty give employers license to willfully ignore the notice requirement? It could be interpreted that way. After all, if the police said they would no longer issue speeding tickets, would anyone feel compelled to pay attention to the signs?
But I don't recommend taking it too far. Here are at least three reasons complying with the requirement may be important even in the absence of an express penalty.
- The DOL will still be looking for evidence of compliance with the requirement. We won't know this for sure until after October 1, but I suspect when the EBSA folks at DOL open an audit and send out their standard (and quite lengthy) list of documents to be reviewed in connection with the audit, the exchange notice will be on the list. If you can't produce evidence that you distributed it, you are likely to receive a stern talking-to. Worse still, if the failure appears to be willful or egregious, the DOL may be less willing to exercise its discretion to be lenient on other compliance issues that may be discovered in the audit.
- The notice contains information that employees may need. Part B of the model notice, as well as the "employer coverage tool" information on the model notice for employers who offer a health plan, provides employees with information they will need to complete an application for exchange-based coverage. If you have employees who may be considering obtaining coverage through the exchange, you may be able to preempt future information requests by providing them with a completed notice now.
- ERISA fiduciaries are held to a high standard. Let's say the employer obligated to distribute the notice is also a plan fiduciary - maybe the "plan administrator" for purposes of ERISA. The failure to comply with a legal obligation (even one for which there is no direct penalty) might be deemed a per se breach of fiduciary duty. Whether any damage would result from that breach is debatable. But do you want to be the test case for that theory?
As a reminder, the exchange notice is required to be distributed to existing employees by October 1.
For additional information on the notice requirement, see our prior coverage here.