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New rules allow one-month orientation period before 90-day health plan waiting period begins

 

By Sally P. Schreiber, J.D.
June 23, 2014

The IRS, the Labor Department, and the Department of Health and Human Services jointly issued final regulations (REG-122706-12) governing the maximum length of time an employee orientation period can last consistent with the 90-day waiting period under the Patient Protection and Affordable Care Act, P.L. 111-148, which prohibits employers from requiring new employees to wait more than 90 days before they are eligible for health insurance coverage.

The final rules permit employers to require new employees to undergo a maximum one-month orientation period before the 90-day period for qualifying for health care coverage begins. As the three departments issuing the regulations noted in the preamble, orientation periods are common and are reasonable business practices to enable employers and employees to determine if they are a good fit. Therefore, if the employer’s health plan conditions eligibility on the employee’s having completed a reasonable and bona fide employment-based orientation period, under the new rules that orientation period will not be considered to be designed to avoid compliance with the 90-day waiting period rules as long as the orientation period lasts no longer than one month and the 90-day period begins the next day.

Under the regulations, the one-month orientation period is determined by adding one calendar month and subtracting one day, measured from the employee’s start date in the position. For example, if an employee starts work on May 3, the last day of the orientation period is June 2, and the 90-day period is counted from the first day after the orientation period ends. For months in which there is not a corresponding day in the next month, the orientation period will end the last day of the next month, e.g., a period beginning on Jan. 31 will end on Feb. 28 (or Feb. 29 if it is a leap year).

The final rules apply to group health plans and health insurance issuers for plan years beginning on or after Jan. 1, 2015.  

Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.

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