Yes, this lens should communicate its aperture setting to the camera. Since this is coupled to the aperture ring, it will overexpose if you forget and leave the preset button out when it's stopped down.
You can still use this on an AI-capable camera as you would any preset lens, and it will meter to the aperture that is set, but only by the change in light, not through any mechanical communication with the meter. A preset lens has no meter connection, and no automatic aperture lever. So if you're using this lens in manual mode, you must remember to meter it while stopped down to whatever aperture you're using.
If you're using this without tilt or shift, it will expose quite OK in A mode, as will, for example, any preset or manual lens with no electronics. If shifting or tilting, you must either set a manual exposure first without the movement, or learn by experience what exposure compensation is needed. But that's true with the electronics working too, so there's really not a whole lot gained from the chip.
In normal use, I find little difference between this lens and the old 35/2.8 PC I use as my "normal" DX lens, except that that lens never returns correct EXIF information, whereas the 85 will if the chip is working.
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My first guess on this would be that perhaps the ribbon cable has been disconnected or broken. If you undo some screws, it's possible to change the orientation of the lens, so that it both tilts and shifts on the same axis, but the supplied cable is apparently a bit too short for this, and must be replaced with a longer one. I have read that sometimes it's just possible to do it with the original cable. I have never felt the need to try it on mine, but I would not be too surprised if someone tested the theory to the detriment of the cable.
