The final waiting period regulations issued June 20, 2014 by the Department of Labor, Internal Revenue Service, and the Department of Health and Human Services confirmed that employers can require new employees to complete a one-month “orientation period” before the eligibility waiting period begins for the employer’s group health plan. These regulations also clarify the interaction between the 90-day waiting period provision and the employer shared responsibility provisions that provide for an offer of coverage by the first day of the fourth month of employment. The final regulations become effective for plan years beginning on or after January 1, 2015.
The main clarifying points include:
- The one-month orientation period is calculated by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. For example, if the employee start date is July 11, then the last allowed day of orientation would be August 10.
- The orientation period does not require a particular training be conducted during that period (although it appears to be designed to allow employers time to train new employees and ensure that both parties believe that the employment relationship is a satisfactory one).
- Interaction with the employer shared responsibility mandate: This orientation period (coupled with the 90-day waiting period under ACA) differs from the rule under the employer shared responsibility mandate relating to beginning coverage on or before the first day of the fourth month. An applicable large employer that complies with these final regulations relating to orientation periods and waiting periods still could be subject to a penalty under IRC section 4980H if it fails to offer affordable minimum value coverage to newly-hired full-time employees by the first day of the fourth calendar month of employment. There are several examples in the final rules that illustrate this point that can be found here.
- Employers using the final rule and starting the 90-day waiting period immediately after the last day of the orientation period should amend plan documents, summary plan documents (SPDs), policy manuals, and other employee communications containing waiting period rules and outline the classification of employees who will not be eligible for coverage until they have satisfied both the orientation period and the waiting period.
- Applicable large employers (100+ employees) must determine whether they will meet the employer shared responsibility requirements in order to avoid the penalty if they require all full-time employees to satisfy both the orientation period and a 90-day waiting period before being offered coverage.
- Other smaller employers must comply with the waiting period and orientation period limits only. For 2015, employers with fewer than 100 full-time employees or full-time equivalents are not subject to penalties under the employer shared responsibility mandate. After 2015, employers with 50 – 99 employees must comply with the shared responsibility mandate; those employers with fewer than 50 full-time employees and full-time equivalents must comply with the waiting period and orientation period limits.
This summary of the final waiting period regulations is provided for your general information as you consider your policies regarding benefits plan waiting periods. Please consult with your benefits broker and other expert advisors relating to these regulations when designing your plans.