There are a number of penalties associated with the Affordable Care Act.

Until recently, one of the more draconian ones facing small businesses was thought to be the Oct. 1, 2013, deadline for notifying employees about the individual health insurance mandate that is scheduled for Jan. 1, 2014, and the health care exchanges. A business with at least one employee and $500,000 in revenue is required to notify its employees under the notification mandate. Satisfying the requirement is relatively painless, but the penalty for failing to do so, it was thought, is not.

A number of news organizations reported that failure to provide these notices to employees by the October 1 deadline could result in a $100-per-day fine, which is imposed by the general penalty provision in the ACA. Thankfully, such is not the case, according to Barbara Weltman, author of J.K. Lasser’s Small Business Taxes.

“There is no penalty for failure to comply with the notification requirement,” she said.

Two notices are provided by the Department of Labor to provide some basic information about the new marketplace,” to assist the employees as they evaluate options for themselves and their families.

A recently added  FAQ on the Department of Labor’s Web site addresses the issue: “Can an employer be fined for failing to provide employees with notice about the Affordable Care Act’s new Health Insurance Marketplace?”

The DOL response is “No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by Oct. 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.”

The DOL says that the notice should inform employees:

  • About the Health Insurance Marketplace;
  • That, depending on their income and what coverage may be offered by the employer, they may be able to get lower-cost private insurance in the Marketplace; and,
  • That if they buy insurance through the Marketplace, they may lose the employer contribution (if any) to their health benefits.

The DOL provides two model notices, one for employers who do offer health care coverage to some or all of their employees, and one for those who don’t offer health care coverage.  Even though they’re not liable for a penalty for failing to notify, it may be a good idea to remind smaller employers who are not fully aware of the requirements.

Meanwhile, the IRS has delayed information reporting required by Sections 6055 and 6056, and postponed implementation of the employer’ s shared responsibility penalties under Section 4980H of the code by one year.

As a result, “Employers largely believe that they have no reporting requirements for 2014 -- which is technically true,” said Brian Haile, senior vice president for health care policy at Jackson Hewitt. “However, employers face the potential deluge of employee requests to complete the ‘Appendix A’ of the application form for the insurance affordability programs. Employees that apply for coverage on the insurance exchanges will have to complete this appendix if they work for a company and have an offer of coverage. So that employers won’t get swamped with requests by employees for the employer to complete this form, some employers are going ahead and printing a few of these pre-populated forms to have handy, or have a PDF version that they can distribute via e-mail as requested,” he explained.

“To be clear, employers are not legally required to provide employees with Appendix A -- but most companies are planning to comply because it’s easier than trying to explain to employees why they are not doing so,” Haile said.

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access