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Small Business Employee Benefits and HR Blog

The ACA's 60-Day Notice of Material Modification

The Affordable Care Act (ACA) requires certain employers to provide 60 days advance notice to participants when making material modifications to their employer-sponsored health plan. This article provides general information to employers about the 60-day notice of material modification.notice material modification

Background on the 60-Day Notice of Material Modification

On February 9, 2012, the Department of Health & Human Services (HHS) released the revised Summary of Benefits and Coverage (SBC) regulation. The SBC regulation included the notice of material modification rule, which states that a
notice of modification should be provided when:

  • Changes to the health plan occur at a time other than renewal of coverage
  • A change to the health benefits affects the content of the SBC
  • Information is not reflected in the most recent SBC

In the situations above, the notice is required to be provided to participants at least 60 days prior to the date that the health plan change will become effective.

6 Things to Know About the 60-Day Notice of Material Modification

Here are six key things to know about the 60-day notice of material modification:

  1. The requirement took effect for health plan years beginning on or after September 23, 2012. 
  2. The requirement only applies to changes made during the plan year. It does not apply to renewals of coverage or any modifications made as part of the renewal. 
  3. The requirement can be met by providing an updated Summary of Benefits and Coverage (SBC) if the change is reflected on the SBC, or by sending a separate written notice describing the material modification. 
  4. Before a material change can be effective, all impacted participants must receive at least 60 days advance written notice of the change. The rule’s definition of “material modification” is listed below.
  5. Plan issuers or sponsors that intentionally fail to provide the notice of material modification are subject to a fine of up to $1,000 for each failure. Each covered individual equates to a separate offense. 
  6. According to section 102 of the Employee Retirement Income Security Act of 1974 (ERISA), a material modification includes: 
    • Any coverage modification that alone or combined with other changes made at the same time would be considered by “an average participant” to be “an important change in covered benefits or other terms of coverage under the plan or policy.” 
    • An enhancement of covered benefits, services or other more general, plan or policy terms. Such as, coverage of previously excluded benefits or reduced cost-sharing. 
    • A “material reduction in covered services or benefits,” including: 
      • Changes or modifications that reduce or eliminate benefits
      • Increases in cost-sharing 

Read the full rule via the Federal Register here (see section B).

What questions do you have about the ACA requirement to provide 60-day notice of material modification? Leave a comment below.

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