HRB 96 - Final Rules Address Orientation Period
Released June 26, 2014 I Download as a PDF
June 26, 2014 -- The Affordable Care Act (ACA) requires all health plans to comply with a waiting period that is no longer than 90 calendar days, effective for plan years beginning on or after January 1, 2014. The ACA’s governing agencies (IRS, Labor and HHS) issued final regulations addressing the 90-day waiting period restriction earlier this year, together with a proposed regulation relating to orientation periods (see CBIZ HRB, Final Rules – 90-Day Waiting Period, 2/24/14).
On June 25, 2014, the agencies published final rules implementing orientation periods. As with the proposed rule, the final rules permit the imposition of a one-month orientation period prior to the beginning of a waiting period. The orientation period is a time of assessment to determine whether an individual has the requisite qualifications, licensure, or other standards to perform the job.
The one-month orientation period is measured forward from the employee’s date of hire by adding one calendar month and subtracting one calendar day; after which time, the maximum 90-day waiting period would commence. For example, if an eligible employee’s start date is May 3rd, the orientation period would end on June 2nd. Similarly, if an eligible employee’s start date is October 1st, then the last day of the orientation period would be October 31st.
Applicability date. The final orientation period rules become applicable to both insured and self-funded group health plans for plan years beginning on or after January 1, 2015. In the meantime, the proposed regulations, which mirror the final regulations, can be relied upon.
- If an orientation period is to be implemented, make certain the insurance contract, health plan, reinsurance contract or any other governing document accurately reflect the terms of the orientation period.
- Make certain the orientation period is used for its intended purpose, i.e., to meet requisite qualifications, licensure, or other standards to perform the job, and not used as a subterfuge to delay the waiting period.
- It is important to note that an orientation period followed by a 90-day waiting period could put an employer at risk for the ACA’s shared responsibility penalty under IRC Section 4980H(a) or (b). As a reminder, employers employing 50 or more employees are subject to the employer shared responsibility requirement and could be at risk for a penalty if adequate and affordable coverage is not offered by the first day of the 4th month following the date of hire.
Example: XYZ Company is subject to the ACA’s employer shared responsibility requirement. XYZ Company hires Joe as a full-time employee on January 6th. A one-month orientation period followed by a 90-day waiting period is imposed, making Joe’s coverage date May 6th (give or take a day, depending on leap year status). While this timeframe satisfies the waiting period requirements, it puts XYZ Company at risk for the shared responsibility penalty since coverage was not offered by May 1st (the first day of the 4th month following the hire date).
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.
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