The ACA's 60-day notice of material modification

As an employer, it’s important to stay informed about federal regulations—including those created by the Affordable Care Act (ACA)—to ensure compliance. A critical aspect of the ACA that employers should be aware of is the 60-day notice of material modification requirement.

The 60-day notice of material modification refers to the provision in the ACA that requires employers to provide employees with at least 60 days advanced notice before making any material modifications to their health plans. Material modifications can include changes to coverage, cost-sharing, network providers, or any other plan terms that may impact the employees' benefits.

In this article, we'll go over what employers need to know about the 60-day notice of material modification.

The 60-day notice of material modification

Often mistaken for summary plan descriptions (SPDs), summaries of benefits and coverage (SBC)s are short documents that describe a health benefit in plain language. An SBC should help employees compare insurance coverage at a glance. If you make any plan changes that affect the content of the SBC, it triggers the 60-day notice requirement.

According to section 102 of the Employee Retirement Income Security Act of 1974¹ (ERISA), a material modification includes:

1. 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.”
2. An enhancement of covered benefits, services, or other more general plan or policy terms. This can include coverage of previously excluded benefits or reduced cost-sharing.
3. A “material reduction in covered services or benefits” including:
   1. Changes or modifications that reduce or eliminate benefits
   2. Increases in cost-sharing

Six things to know about the 60-day notice of material modification

By understanding and adhering to these regulations, employers can protect themselves and their employees' rights under the ACA.

1. Compliance is mandatory

Employers are legally obligated to provide a 60-day notice of material modification to their employees. Failure to comply with this requirement can result in penalties and fines.

2. The time frame is crucial

Employers must provide the notice at least 60 days before the effective date of the material modification. This means that employers need to plan ahead and ensure they have all the necessary information and approvals in place well in advance. Plan sponsors or plan administrators who fail to provide adequate notice are subject to a fine of up to $1,000 for each failure. The federal government counts each covered individual you didn’t notify as a separate offense.

3. Clear and concise communication

The notice should clearly explain the changes you’re making to the employee benefit plan and how they will impact the average plan participant. It should include information about any potential cost increases, changes in coverage, or any other relevant details that employees need to know.

4. Delivery methods

Employers have several options for delivering the notice to employees within the time period. They can provide it in paper format, electronically if the employees have given their consent, or through an online portal if one is available. Employers must ensure that the notice is delivered in a manner that is easily accessible and understandable for all employees.

5. Exceptions to the notice requirement

There are certain circumstances where the 60-day notice of material modification may not be required. For example, the requirement doesn't apply² to renewals or carrier-issued modifications made as part of a planned renewal. However, employers should consult with legal counsel to determine if they qualify for any exceptions.

6. Record-keeping

Employers should maintain records of all notices provided to employees, including proof of delivery. These records will serve as evidence of compliance in case of an audit or investigation.

Conclusion

The ACA's 60-day notice of material modification is an important regulation that employers need to be aware of. By understanding the provisions and taking the necessary steps to comply, employers can ensure that they are meeting their obligations and providing their employees with the information they need to make informed decisions about their health plans.

This blog article was originally published on September 16, 2013. It was last updated on October 31, 2023.

1. https://www.govinfo.gov/content/pkg/COMPS-896/pdf/COMPS-896.pdf
2. https://www.wordandbrown.com/Landing-Pages/Broker-Resources/Compliance/ACA-Compliance-Collateral-References/60-Day-Notice