In case you did not hear, adding to the maximum 90 day wait for eligibility for new hires now the IRS & HHS has decided employers can implement a 30 day Orientation Period before the 90 day period starts.
My clients have all implemented a 60 day waiting period so that a plan becoming effective the first of the next month never exceeds the 90 days.
Full details follow. Also, many employers are searching for ways to help their employees meet the new ACA out of pocket expenses and/or offer additional benefits if they drop health insurance. The attached flyer discusses some options.
Beginning in 2014, a group health plan or health insurance issuer offering group health insurance coverage may not apply any “waiting period” that exceeds 90 days “including weekends”. A group health plan that exceeds the 90-day waiting period limit (even by one day) is generally subject to an excise tax of $100 per day per failure, which must be self-reported on IRS Form 8928.
Final regulations implementing the requirement were issued February 24 of this year. The final regulations define “waiting period” as the period that must pass before coverage for an employee or dependent (who is otherwise eligible to enroll under the terms of a group health plan) can become effective.
The Orientation Period Final Regulations
At the same time as the publication of the final regulations, the Departments published proposed regulations dealing with “orientation periods” under the 90-day waiting period limitation.
The proposed regulations provided that one month would be the maximum allowed length of any reasonable and bona fide employment-based orientation period. An orientation period was envisioned as a period of time during which “an employer and employee could evaluate whether the employment situation was satisfactory for each party, and standard orientation and training processes would begin.”
Under the proposed regulations, if a group health plan conditions eligibility on an employee’s having completed a “reasonable and bona fide employment-based orientation period,” the eligibility condition would not be considered to be designed to avoid compliance with the 90-day waiting period limitation.
The final regulations follow the proposed rule by permitting a one-month orientation period, which is determined by adding one calendar month and subtracting one calendar day, starting with the date that an employee is in a position that is otherwise eligible for coverage.
If, for example, an employee’s start date in an otherwise eligible position is May 3, the last permitted day of the orientation period is June 2. If there is no corresponding date in the next calendar month upon adding a calendar month, then the last permitted day of the orientation period is the last day of the next calendar month. For example, if the employee’s start date is January 30, the last permitted day of the orientation period is February 28 (or February 29 in a leap year).
According to the final regulations, if a group health plan conditions eligibility on an employee’s having completed a reasonable and bona fide employment-based orientation period, the eligibility condition is not considered to be designed to avoid compliance with the 90-day waiting period limitation if the orientation period does not exceed one month and the maximum 90-day waiting period begins on the first day after the orientation period.