Update on ObamaCare Letters: Oct. 1 Deadline Stands, But No Fines or Penalties for Not Sending Letter

Sept. 12 Update: The below report was originally published on Sept. 9. On Sept. 12, the SBA posted a blog stating “there is no fine or penalty under the law for failing to provide the notice.” But also said the letter deadline stands, meaning if “your company is covered by the Fair Labor Standards Act, you must provide a written notice to your employees about the Health Insurance Marketplace by October 1, 2013.”

On Sept. 6, the White House and Labor Department declined requests for comment on the potential $100-per-day fine.  Also on Sept. 6, three days before the original report below ran, the SBA, when asked point blank “how do you plan to implement that $100-penalty per day for not sending out the notice?” replied with information regarding weekly webinar sessions (called “ACA 101”) which launched in July and aim to teach Small Business owners how to comply with the new rules and regulations. But at that time the SBA didn’t comment on the $100-fee portion of the question.

Small business owners who thought they were off the hook for ObamaCare regulations until 2015 may be in for an expensive wake-up call next month.

Beginning Oct. 1, any business with at least one employee and $500,000 in annual revenue must notify all employees by letter about the Affordable Care Act’s health-care exchanges, or face up to a $100-per-day fine. The requirement applies to any business regulated under the Fair Labor Standards Act, regardless of size. Going forward, letters are to be distributed to any new hires within 14 days of their starting date, according to the Department of Labor.

Earlier this summer, the employer mandate, which states that every business with at least 50 or more full-time employees must offer workers acceptable coverage or face a $2,000 penalty per-worker, per-year, was pushed back until 2015. But the Oct. 1 employee-notification deadline stands. Keith McMurdy, partner at FOX Rothschild LLP, says the $100 per-day fine has been “unfortunately overlooked” by many small businesses, and the dollar amount on the penalty comes from the general per-day penalty under the ACA.

“The PPACA has a general $100-a-day penalty for non-compliance. Since this requirement is in the FLSA there are also penalties there. So the general consensus is that some penalty applies and probably the general provision,” McMurdy tells FOXBusiness.com.

Joeseph Dutra, president and CEO of Kimmie Candy Co., has 30 employees and brings in more than $500,000 in revenue annually, which means he has to notify workers of the exchanges by Oct. 1. He had no idea.

“My understanding is that a lot of businesses don’t know what the requirements are under the law,” Dutra says. “So many businesses don’t have a designated HR department.”

Joe’s “HR department” is his son, John Dutra. John says the business was aware of the Oct. 1 deadline for notifying workers about the exchanges, but did not know about the $100 penalty. He says while the company will continue to offer benefits to its employees as it currently does, the costs it will pay for coverage overall will increase by 4%, thanks to ACA regulations.

Ray Keating, chief economist for the Small Business & Entrepreneurship Council, says many businesses are likely unaware of this potential fine coming down the pike for failure to comply, and that it’s unclear how the government will be implementing the $100-per-day penalty.

“It’s a steep fine—when you start tallying up all of the costs, businesses need to start figuring out ‘am I better off just not offering coverage and paying the penalty?’” he says. “And there is no easy answer. With this, you are dealing with the threat of a $100-a-day penalty fine, but you also have to go through the process of notifying everyone, so on and so forth, so there are no easy ways out for business owners.”

Keating says it’s simply another example of how the law will cost both businesses -- and government -- more cash.

“Government costs are what so many ObamaCare supporters have glossed over,” he says. “In general, the overall costs of subsidies and expanded programs like these things are what small business owners are concerned about, and the Obama folks are avoiding it.”

The White House declined to comment on how the fine would be implemented, but deferred to the U.S. Small Business Administration, which says education on this FLSA requirement has been part of “any and all outreach that SBA does with small business owners.” The agency says it has participated in more than 750 ACA-related events with more than 30,000 small business owners and community stakeholders since February 2013.