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September 4, 2012

HRB 55 - Guidance Issued Relating to 90-day Waiting Period and Defining Full-time Employee

Released September 4, 2012I Download as a PDF

September 4, 2012 -- On the eve of the Labor Day holiday, the Agencies issued some health care reform guidance specifically relating to the 90-day waiting period and the definition of full-time employee for purposes of the shared responsibility provision. This guidance, while not in the form of final regulation, can be relied upon through 2014.  The guidance makes it clear that plans are not obligated but may rely on this guidance, and any future guidance will be prospective in nature. 

90-day Waiting Period

As background, the Affordable Care Act (ACA) requires beginning with the first plan year commencing on or after January 1, 2014, the maximum waiting period that can be imposed by any plan, grandfathered or not, insured or self-funded, is 90 days.  The guidance issued by the Agencies (IRS Notice 2012-59, DOL Technical Release 2012-02, and CCIIO Guidance) provide that the 90-day period begins at the point that the individual has “met the plan’s substantive eligibility conditions (such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms)”.

If, for example, an individual is part-time, and if part-time people are not eligible for health benefits, and the individual moves to a full-time classification for which benefits are available, the 90-day wait begins at that point. 

For individuals hired with a variable work schedule and for whom it is not possible to determine whether the individual will qualify, a measurement period of anywhere from 3 to 12 months, as defined by the employer, can be used to determine whether the individual qualifies under the terms and conditions of the employer plan.  This measurement period is similar to the measurement period described below.

The guidance makes it clear that the employer cannot impose qualification standards as a way to avoid commencement of the 90-day wait.  In other words, employment classifications must have a legitimate business purpose. 

Defining Full-time Employee – Shared Responsibility

In conjunction with the 90-day waiting period guidance, the Department of Treasury issued Notice 2012-58, which particularly addresses how to determine whether an individual is regularly scheduled to work 30 or more hours per week for purposes of the shared responsibility requirement.

As background, the law provides that an employer employing 50 or more employees who fails to offer health coverage that meets a minimum value and is affordable will be subject to an excise tax if one or more of its employees qualify for premium assistance through the exchange.  The guidance states that working 130 hours per month is deemed to equate to 30 hours per week.  Further, for purposes of determining affordability, this guidance affirms that W-2 earnings can be used.

As proposed in prior releases (see FAQs: 90-day Waiting Period Limitation and Shared Responsibility Requirement in this CBIZ Health Reform Bulletin), this guidance allows the use of a look-back period, which can be as much as 12 months.  If an individual is deemed to work an average of 30 hours per week during the look-back period, the individual qualifies for health coverage during the stability period (look-forward period). 

The guidance specifically addresses “variable hour” employees. This should be particularly useful in industries that have a significant portion of their workforce whose hours are not consistent, such as construction and retail industries.  A new employee would be considered a variable hour employee if, based on the facts and circumstances at the time of hiring, he/she is not expected to work an average of 30 hours per week during the initial measurement period.  For example, a retail worker hired to work at least 30 hours during a holiday period may not be expected to continue working 30 hours per week once the holiday season ends.   Once a variable employee is deemed to qualify as a full-time employee, the individual must be tested under the guidance to determine whether the individual meets the full-time employee criteria.

The guidance gives many examples of various scenarios that should be reviewed in any instance in which the look-back and stability periods are anticipated to be used.  The employer can define different measuring periods for varying classification of employees such as union and non-union employees, salaried and hourly employees, employees of different entities, and employees located in different states. 

This guidance also discusses seasonal employees, and states that the government continues to look at how seasonal employee should be defined.

During any waiting period or other qualification period, an employee who otherwise qualifies for premium assistance or cost-share through the exchange will not be denied these benefits.  Further, the employer will not be penalized for failing to offer coverage during these qualification periods.


This guidance should be consulted by any employer that has questions about how to comply with the 90-day waiting period, and the definition of full-time employee, both of which take effect in 2014.


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.


The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation.

The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.


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